Ponencias of J. Caguioa in COMMERCIAL LAW 2022

Case Digests
Ponencias of J. Caguioa in Commercial Law

By: USTFCL Dean’s Circle for AY 21-22
UNIVERSITY OF SANTO TOMAS

Case Digests
STO. NIÑO VILLAGE HOMEOWNERS’ ASSOCIATION, INC. v. LINTAG

G.R. No. 228135, June 16, 2021, First Division (Caguioa, J.)
DOCTRINE
Section 10 of RA 9904 enumerates the rights and powers of homeowners' associations.
It states that “An association shall have the following rights and shall exercise the following
powers: xxx Subject to consultation and with the approval of a simple majority of the members,
adopt and amend the articles of incorporation and by[-]laws, rules and regulations, pursuant
to existing laws and regulations; xxx Regulate the use, maintenance, repair, replacement and
modification of common areas and cause additional improvements to be made part of the
common areas.
FACTS
On August 23, 2010, petitioner-directors, as Board of Directors of SNVHAI passed
Resolution No. 3 declaring all streets inside the Sto. Niño Village as a no parking zone, subject
to exceptions, and imposed fines for the violation thereof. Lintag was affected by said
Resolution because his son owned a fleet of taxicabs which he parks along Eagle and Maya
streets within Sto. Niño Village. Lintag refused to pay the parking fine imposed by SNVHAI
as he found it unreasonable. Moreover, he asserted that he was authorized by Anastacio
Antonio O. Arias, Jr. to park the vehicles on the roads adjoining their property. Anastacio is
an heir of the registered owner of the property traversed by the subdivision roads where the
taxicabs were parked. Lintag stressed that these roads are not owned by SNVHAI as the title
to these roads still belonged to the Arias, Ouano and Cusi families.
Likewise, Lintag assailed the validity of Resolution No. 5, moving for the increase of
water rates, and Resolution No. 6 imposing a special assessment for a drainage fund. Lintag
claimed that these resolutions were issued without consultation and approval of the
majority of the association members in violation of Section 12(b) of Republic Act No. 9904
or the Magna Carta for Homeowners and Homeowners' Associations.
The HLURB-BOC held that under Section 10(c) of Republic Act No. (RA) 9904, SNVHAI
is empowered to regulate the use of common areas and/or open spaces, which undoubtedly
include subdivision roads. This power under Section 10(c) may be exercised without need
of prior consultation and/or approval of its members. Hence, the HLURB-BOC upheld the
validity of Resolution No. 3. The HLURB-BOC further ruled that while Resolutions Nos. 5 and
6 were issued without the required approval of the majority of SNVHAI's members as
required by Section 10(a) of RA 9904, the issue of their validity had been rendered moot and
academic in view of the subsequent ratification of these resolutions by majority of the
members of SNVHAI in a referendum held on November 24, 2012.
ISSUE
Whether the disputed board resolutions null and void.
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RULING
NO. Section 10 of RA 9904 enumerates the rights and powers of homeowners'
associations. It states that “An association shall have the following rights and shall exercise
the following powers: xxx Subject to consultation and with the approval of a simple majority
of the members, adopt and amend the articles of incorporation and by[-]laws, rules and
regulations, pursuant to existing laws and regulations; xxx Regulate the use, maintenance,
repair, replacement and modification of common areas and cause additional improvements
to be made part of the common areas.
As correctly observed by the HLURB-BOC, the aforesaid resolution merely regulates

the use of subdivision roads. Under Section 10(c) of RA 9904, SNVHAI, through its Board of
Directors, may regulate the use of common areas, including subdivision roads without prior
consultation and/or approval by the majority of the members of the homeowners'
association.
Lintag assails the validity of Resolution No. 3 by insisting that the roads along Eagle
and Maya streets are not owned by SNVHAI, but by individual lot owners who merely
granted the residential lots within Sto. Niño Village right of way. As basis, Lintag cites an
"Easement of Right of Way" dated October 19, 1972 (1972 Easement) executed by one
Victorino Cusi (as attorney-in-fact of Asuncion Arias) and Paterno Ouano (as attorney-in-fact
of Francisco Ouano). Under the 1972 Easement, a perpetual easement of right of way was
constituted over "eight (8) parcels of road lots" identified therein, in favor of the residential
lots within Sto. Niño Village. In this connection, Lintag claims that he and his son had been
duly authorized by the lot owners to park along the subdivision roads in dispute. Lintag's
opposition does not hold water.
Foremost, Lintag failed to establish that the lots identified in the 1972 Easement are
indeed the very same ones traversed by the subdivision roads in question. Moreover,
assuming arguendo that the subdivisions roads in question are indeed owned by the Arias
and Ouano families, Lintag failed to present any proof to support his allegation that he and
his son had been authorized to park along these roads.
In any event, it bears stressing that under RA 9904, SNVHAI's power to regulate the
use of common areas spans "property owned or otherwise maintained, repaired or
administered in whole or in part by the association including, but not limited to, roads, parks,
playgrounds and open spaces x x x[.]" Here, the fact that all subdivision roads within Sto.
Niño Village are under the administration of SNVHAI is not in dispute.
On the other hand, Resolutions No. 5 and 6, imposing increased water rates and a
special assessment for a drainage fund have been subsequently ratified by the general
membership in a referendum conducted on November 24, 2012. Hence, as correctly found
by the HLURB-BOC, Lintag's challenge against the validity of these resolutions has become
moot and academic.
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Case Digests
YON MITORI INTERNATIONAL INDUSTRIES v. UNION BANK OF THE PHILIPPINES

G.R. No. 225538, October 14, 2020, First Division (Caguioa, J.)
DOCTRINE
As a single proprietorship, Yon Mitori has no juridical personality separate and distinct
from its owner and operator Tan. Accordingly, the Petition should have been filed in Tan's
name, the latter being the real party in interest who possesses the legal standing to file this
Petition. Nevertheless, the Court permits the substitution of Tan as petitioner.
Article 22 of the Civil Code states that “every person who through an act of performance
by another, or any other means, acquires or comes into possession of something at the expense
of the latter without just or legal ground, shall return the same to him.
FACTS
Rodriguez Tan, doing business under the name and style of Yon Mitori, is a depositor
maintaining a Current Account with Union Bank. Tan deposited in his Union Bank account
the amount of P420,000 through the Bank of the Philippine Islands (BPI) Check, which was
drawn against the account of Angli Lumber & Hardware, Inc, one of Tan’s clients. The BPI
Check was entered in Tan’s bank records increasing his balance to P513,700.60. Tan
withdrew from said account the amount of P480,000.00. Later that day, however, the BPI
Check was returned to Union Bank as the account against which it was drawn had been
closed. Union Bank discovered that Tan’s account had been mistakenly credited so their
branch manager immediately called Tan to recover the funds mistakenly released but Tan
refused claiming that the BPI Check proceeded from a valid transaction between Angli
Lumber and Yon Mituri.
During Union Bank’s investigation, it was discovered that Tan previously deposited
five BPI checks drawn by Angli Lumber against the same BPI account, and these checks were
all previously dishonored. Hence, Union Bank sent Tan a letter demanding the
reimbursement of P420,000 by reason of the fact that the funds against said deposit which
was not yet clear on withdrawal date, it appearing that the BPI Check was dishonored by BPI
for being drawn against a closed account. Tan refused. Union Bank then debited the available
balance in Tan’s account as a set-off, and thereafter instituted a Complaint for Sum of Money
for the recovery of the remaining balance of P385,299.40 plus consequential damages. Tan
alleged that he should not be faulted for withdrawing the value of said check from his account
since Union Bank made the corresponding funds available by updating his account to reflect
his new balance. He also alleges that the proximate cause of Union Bank’s loss is its own gross
negligence, thus, it is barred from recovering damages. In addition, he reiterates that under
the principle of solutio indebiti, there can be no reimbursement under this principle if
payment is made as a result of one’s negligence. In an appeal before the CA, Tan named Yon
Mitori as co-appellant.
ISSUES:
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1. Whether Yon Mitori is the real party in interest.

2. Whether Tan should return the value of the BPI Check with legal interest
RULING
1. NO. Yon Mitori has no separate juridical personality. A single proprietorship is not
considered a separate juridical person under the Civil Code. The Petition was filed solely in
the name of Yon Mitori. As a single proprietorship, Yon Mitori has no juridical personality
separate and distinct from its owner and operator Tan. Accordingly, the Petition should have
been filed in Tan's name, the latter being the real party in interest who possesses the legal
standing to file this Petition. Nevertheless, the Court permits the substitution of Tan as
petitioner. Section 4, Rule 10 of the Rules of Court provides that “a defect in the designation
of the parties and other clearly clerical or typographical errors may be summarily corrected
by the court at any stage of the action, at its initiative or on motion, provided no prejudice is
caused thereby to the adverse party.” No prejudice will result from Yon Mitori’s substitution.
Tan has been consistently named as owner and operator of Yon Mitori.
2. YES. Tan is bound to return the proceeds of the dishonored BPI Check based on the
principle of unjust enrichment. The principle of unjust enrichment is codified under Article
22 of the Civil Code which states that “every person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the expense
of the latter without just or legal ground, shall return the same to him. There is unjust
enrichment when a person unjustly retains a benefit to the loss of another, or when a person
retains money or property of another against the fundamental principles of justice, equity,
and good conscience.” For the principle to apply, the following requisites must concur: (i) a
person is unjustly benefited; and (ii) such benefit is derived at the expense of or with
damages to another. Unjust enrichment claims do not lie simply because one party benefits
from the efforts or obligations of others, but instead it must be shown that a party was
unjustly enriched in the sense that the term unjustly could mean illegally or unlawfully.
The requisites for the application of the principle of unjust enrichment are clearly
present in this case. Here, it was unequivocally established that Tan withdrew and utilized
the proceeds of the BPI Check fully knowing that he was not entitled thereto. To note, Tan's
transaction records show that prior to the deposit of the BPI Check subject of the present
case, Tan had deposited five other checks drawn against the same account. He was fully
aware that Angli Lumber's account with BPI had been closed. So he could not have expected
that the BPI Check in question would be honored. That Tan withdrew the proceeds of the BPI
Check soon after discovering that the corresponding funds had been credited to his account
despite his knowledge that the account from which the BPI Check was issued had been closed
for some time smacks of bad faith if not fraud.
Tan argues that Union Bank should not be allowed to recover the amount erroneously
deposited in his account because of Union Bank’s own gross negligence. However, he failed
to cite the specific provision of law, banking regulation, or internal rule which had been
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violated by Union Bank. What is clear from the evidence on record is that due to a technical
error in Union Bank's system, the funds corresponding to the value of the BPI Check were
credited to Tan's account before actual return and clearance. Tan failed to substantiate his
imputation of gross negligence. Tan’s remedy, if any, lies not against Union Bank, but against
the drawer of the BPI Check Angli Lumber. All told, Tan’s obligation to return the erroneously
credited funds to Union Bank stands.
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Case Digests
JOSE M. ROY III v. CHAIRPERSON HERBOSA, SEC, and

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
G.R. No. 207246, April 18, 2017, En Banc (Caguioa, J.)
DOCTRINE
The Gamboa Decision already held, in no uncertain terms, that what the Constitution
requires is "full and legal beneficial ownership of 60 percent of the outstanding capital stock,
coupled with 60 percent of the voting rights must rest in the hands of Filipino nationals." And,
precisely that is what SEC-MC No. 8 provides, viz.: “For purposes of determining compliance
with the constitutional or statutory ownership, the required percentage of Filipino ownership
shall be applied to BOTH (a) the total number of outstanding shares of stock entitled to vote in
the election of directors; AND (b) the total number of outstanding shares of stock, whether or
not entitled to vote."
FACTS
Petitioner Roy filed this Motion for Reconsideration (MR) seeking the reversal and
setting aside of the Decision which denied his petition and declared that the Securities and
Exchange Commission (SEC) did not commit grave abuse of discretion in issuing
Memorandum Circular No. 8, Series of 2013 (SEC-MC No. 8) as it was the same and in
compliance and in fealty to the decision of the Court in Gamboa v. Finance Secretary Teves
(Gamboa Decision) and the resolution denying the MR therein (Gamboa Resolution).
The grounds raised by Roy are (1) he has the requisite standing because this is one of
transcendental importance; (2) the Court has the constitutional duty to exercise judicial
review over any grave abuse of discretion by any instrumentality of government; (3) he did
not rely on an obiter dictum; and (4) the Court should have treated the petition as the
appropriate device to explain the Gamboa Decision.
ISSUE
Whether the SEC gravely abused its discretion in ruling that PLDT is compliant with
the limitation on foreign ownership under the Constitution and other relevant laws.
RULING
NO. The Court finds SEC-MC No. 8 to have been issued in fealty to the Gamboa
Decision and Resolution. The Decision has painstakingly explained why it considered as
obiter dictim that pronouncement in the Gamboa Resolution. The fallo or
decretal/dispositive portions of both the Gamboa Decision and Resolution are definite, clear
and unequivocal. While there is a passage in the body of the Gamboa Resolution that might
have appeared contrary to the fallo of the Gamboa Decision, the definiteness and clarity of
the fallo of the Gamboa Decision must control over the obiter dictum in the Gamboa
Resolution regarding the application of the 60-40 Filipino-foreign ownership requirement
to "each class of shares, regardless of differences in voting rights, privileges and restrictions."
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The dispositive portion of the Gamboa Decision was in no way modified by the
Gamboa Resolution. The heart of the controversy is the interpretation of Section 11, Article
XII of the Constitution, which provides: "No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of the Philippines at
least sixty per centum of whose capital is owned by such citizens x x x."
The Gamboa Decision already held, in no uncertain terms, that what the Constitution
requires is "full and legal beneficial ownership of 60 percent of the outstanding capital stock,
coupled with 60 percent of the voting rights must rest in the hands of Filipino nationals."
And, precisely that is what SEC-MC No. 8 provides, viz.: “For purposes of determining
compliance with the constitutional or statutory ownership, the required percentage of
Filipino ownership shall be applied to BOTH (a) the total number of outstanding shares of
stock entitled to vote in the election of directors; AND (b) the total number of outstanding
shares of stock, whether or not entitled to vote."
The definition of “beneficial owner or beneficial ownership” in the SRC- IRR, which is
in consonance with the concept of "full beneficial ownership” in the IRR of the FIA (FIA-IRR)
is, as stressed in the Decision, relevant in resolving who is the beneficial owner of each
“specific stock” of the public utility company whose stocks are under review.
If the Filipino has the voting power of the "specific stock", i.e., he can vote the stock or
direct another to vote for him, or the Filipino has the investment power over the "specific
stock", i.e., he can dispose of the stock or direct another to dispose of it for him, or both, i.e.,
he can vote and dispose of that "specific stock" or direct another to vote or dispose it for him,
then such Filipino is the "beneficial owner" of that "specific stock." Being considered Filipino,
that "specific stock" is then to be counted as part of the 60% Filipino ownership requirement
under the Constitution.
The right to the dividends, jus fruendi - a right emanating from ownership of that
"specific stock" necessarily accrues to its Filipino "beneficial owner." In this regard, it would
be apropos to state that since Filipinos own at least 60% of the outstanding shares of stock
entitled to vote directors, which is what the Constitution precisely requires, then the Filipino
stockholders control the corporation, i.e., they dictate corporate actions and decisions, and
they have all the rights of ownership including, but not limited to, offering certain preferred
shares that may have greater economic interest to foreign investors - as the need for capital
for corporate pursuits (such as expansion), may be good for the corporation that they own.
As to whether respondent PLDT is currently in compliance with the Constitutional

provision regarding public utility entities, the Court must likewise await the SEC's
determination thereof applying SEC-MC No. 8. After all, as stated in the Decision, it is the SEC
which is the government agency with the competent expertise and the mandate of law to
make such determination.
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Case Digests
ALLAN CU v. SMALL BUSINESS GUARANTEE AND FINANCE CORPORATION

G.R. No. 211222, August 7, 2017, First Division (Caguioa, J.)
DOCTRINE
In Gidwani v. People, considering that there was a lawful Order from the SEC, the
contract is deemed suspended. When a contract is suspended, it temporarily ceases to be
operative; and it again becomes operative when a condition occurs or a situation arises
warranting the termination of the suspension of the contract.
The closure of G7 Bank by the Monetary Board, the appointment of PDIC as receiver and
its takeover of G7 Bank, and the filing by PDIC of a petition for assistance in the liquidation of
G7 Bank, had the similar effect of suspending or staying the demandability of the loan
obligation of G7 Bank to SB Corp. with the concomitant cessation of the former's obligation to
pay interest to the latter upon G7 Bank's closure.
FACTS
An Omnibus Credit Line Agreement was executed between Small Business Guarantee
and Finance Corporation (SB Corp.) and Golden 7 Bank (G7 Bank), whereby the latter was
granted a credit line of P90,000,000.00 by the former for re-lending to qualified micro, small
and medium enterprises (MSMEs) as sub-borrowers. In line with this, the Board of G7 Bank
authorized any of its two officers, one of which is Petitioner Allan Cu, as signatories to loan
documents including postdated checks. Cu and his co-signatory Pascual (deceased) issued
more than a hundred postdated checks as payment to various drawdowns made on the credit
line, including five (5) checks subject of the criminal cases filed against them.
Bangko Sentral ng Pilipinas placed G7 Bank under receivership in July 2008. The
Philippine Deposit Insurance Corporation (PDIC) took over the bank, issued a cease and
desist order, closed all of its deposit accounts with other banks including its checking account
with the Land Bank of the Philippines (LBP) against which the disputed checks were issued.
Upon maturity of the postdated checks in October 2008, SB Corp. deposited the same
to its account but all were dishonored for reason of “Account Closed”. Hence, demand letters
were sent to Cu and Pascual but were unheeded. This prompted SB Corp. to file a Complaint-
Affidavit for violation of BP 22. Meantime, PDIC filed a Petition for Assistance in the
Liquidation of G7 Bank with the RTC of Naga City to which SB Corp. filed its Notice of
Appearance with Notice of Claims with the liquidation court. Before arraignment, Cu and
Pascual filed an Omnibus Motion alleging that they cannot be made liable for violation of the
BP 22 as the funding of the checks could not be validly done because G7 Bank was placed
under receivership, and that they did not receive the notice of dishonor and in the meantime,
there is already a petition for liquidation assistance to which the liquidation court has the
original exclusive jurisdiction. SB Corp. countered that the only issue being determined in a
prosecution for BP 22 case is whether the accessed issued the worthless check, the defense
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Case Digests
that they were precluded from fulfilling their obligation by reason of the receivership is a
mere afterthought.
Both the MeTC and RTC dismissed the BP 22 cases stating that the appointment of a
receiver operates to suspend the authority of the bank and its directors and officers over its
property and effects, such authority being reposed in the receiver, and in this respect, the
receivership is equivalent to an injunction to restrain the bank officers from intermeddling
with the property of the bank in any way.
ISSUE
Whether the dismissal of the BP 22 cases against Cu is proper as G7 Bank was placed
under receivership.
RULING
YES. In Gidwani v. People, considering that there was a lawful Order from the SEC, the
contract is deemed suspended. When a contract is suspended, it temporarily ceases to be
operative; and it again becomes operative when a condition occurs or a situation arises
warranting the termination of the suspension of the contract. The SEC Order created a
suspensive condition. When a contract is subject to a suspensive condition, its birth takes
place or its effectivity commences only if and when the event that constitutes the condition
happens or is fulfilled.
In Gidwani, the SEC order of suspension of payments preceded the presentment for
encashment of the subject checks therein. Here, the subject postdated checks were deposited
by SB Corp. in October 2008, and dishonored for reason of "Account Closed," after the closure
of G7 Bank and after the PDIC, through its Deputy Receiver, had taken over G7 Bank, its
premises, assets and records on August 2008 and had issued a cease and desist order against
the members of the Board of Directors and officers of G7 Bank and closed all its deposit
accounts with other banks, including its checking account with the LBP against which the
five disputed checks were issued. Significantly, when PDIC filed a Petition for Assistance in
the Liquidation of G7 Bank, SB Corp. thereafter filed in said liquidation court its Notice of
Appearance with Notice of Claims.
The closure of G7 Bank by the Monetary Board, the appointment of PDIC as receiver
and its takeover of G7 Bank, and the filing by PDIC of a petition for assistance in the
liquidation of G7 Bank, had the similar effect of suspending or staying the demandability of
the loan obligation of G7 Bank to SB Corp. with the concomitant cessation of the former's
obligation to pay interest to the latter upon G7 Bank's closure.
Applying Gidwani by analogy, at the time SB Corp. presented the subject checks for
deposit/encashment in October 2008, it had no right to demand payment because the
underlying obligation was not yet due and demandable from Cu and he could not be held
liable for the civil obligations of G7 Bank covered by the subject dishonored checks on
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account of the Monetary Board's closure of G7 Bank and the takeover thereof by PDIC. Even
payment of interest on G7 Bank's loan ceased upon its closure. Given the invocation in
Gidwani of the definition of an obligation subject to a suspensive obligation, what is
suspended here is not the birth of the loan obligation since the debtor had availed of the loan
proceeds. What is subject to a suspensive condition is the right of the creditor to demand the
payment or performance of the loan — the exact amount due not having been determined
or liquidated as the same is subject to PDIC's distribution plan. In the same vein, until then
the debtor's obligation to pay or perform is likewise suspended.
SB Corp. knew at the time it deposited in October 2008 the subject postdated checks
that G7 Bank was already under receivership and PDIC had already taken over the bank by
virtue of the Monetary Board's closure thereof. SB Corp. acted in clear bad faith because with
G7 Bank's closure and PDIC taking over its assets and closing all of its deposit and checking
accounts, including that with LBP, there was no way that Cu or any officer of the bank could
fund the said checks. Stated otherwise, it was legally impossible for Cu to fund those checks
on the dates indicated therein, which were all past G7 Bank's closure because all the bank
accounts of G7 Bank were closed by PDIC.
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Case Digests
JOSE SANICO and VICENTE CASTRO v. WERHELINA P. COLIPANO

G.R. No. 209969, September 27, 2017, SECOND DIVISION (Caguioa, J.)
DOCTRINE
A complaint for breach of a contract of carriage is dismissible as against the employee
who was driving the bus because the parties to the contract of carriage are only the passenger,
the bus owner, and the operator.
Since the cause of action is based on a breach of a contract of carriage, the liability of
Sanico is direct as the contract is between him and Colipano. Castro, being merely the driver of
Sanico's jeepney, cannot be made liable as he is not a party to the contract of carriage. Although
he was driving the jeepney, he was a mere employee of Sanico, who was the operator and owner
of the jeepney. The obligation to carry Colipano safely to her destination was with Sanico. In
fact, the elements of a contract of carriage existed between Colipano and Sanico: consent, as
shown when Castro, as employee of Sanico, accepted Colipano as a passenger when he allowed
Colipano to board the jeepney, and as to Colipano, when she boarded the jeepney; cause or
consideration, when Colipano, for her part, paid her fare; and, object, the transportation of
Colipano from the place of departure to the place of destination.
FACTS
On Christmas Day, Colipano and her daughters were paying passengers in the jeepney
operated by Sanico, which was driven by Castro. Colipano was made to sit on an empty beer
case at the edge of the rear entrance/exit of the jeepney with her sleeping child on her
lap. And, at an uphill incline in the road to Natimao-an, Carmen, Cebu, the jeepney slid
backwards because it did not have the power to reach the top. Colipano pushed both her
feet against the step board to prevent herself and her child from being thrown out of the exit,
but because the step board was wet, her left foot slipped and got crushed between the step
board and a coconut tree which the jeepney bumped, causing the jeepney to stop its
backward movement. Colipano's leg was badly injured and was eventually
amputated. Colipano prayed for actual damages, loss of income, moral damages, exemplary
damages, and attorney's fees.
Sanico and Castro admitted that Colipano's leg was crushed and amputated but
claimed that it was Colipano's fault that her leg was crushed. They admitted that the jeepney
slid backwards because the jeepney lost power. The conductor then instructed everyone not
to panic but Colipano tried to disembark and her foot got caught in between the step board
and the coconut tree.
Sanico claimed that he paid for all the hospital and medical expenses of Colipano, and
that Colipano eventually freely and voluntarily executed an Affidavit of Desistance and
Release of Claim.
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The RTC found that Sanico and Castro breached the contract of carriage between
them and Colipano but only awarded actual damages amounting to P2,098.80 and
compensatory damages amounting to P360,000 in favor of Colipano. The CA affirmed the
ruling of the RTC, but reduced the compensatory damages to P200,000
ISSUE/S
1. Are Sanico and Castro are guilty of breach of contract of carriage?
2. Is the Affidavit of Desistance and Release of Claim binding on Colipano?
3. Is the modification of the compensatory damages by the CA proper?
RULING
1. Only Sanico breached the contract of carriage.
A complaint for breach of a contract of carriage is dismissible as against the employee

who was driving the bus because the parties to the contract of carriage are only the
passenger, the bus owner, and the operator.
Since the cause of action is based on a breach of a contract of carriage, the liability of
Sanico is direct as the contract is between him and Colipano. Castro, being merely the driver
of Sanico's jeepney, cannot be made liable as he is not a party to the contract of carriage.
Although he was driving the jeepney, he was a mere employee of Sanico, who was the
operator and owner of the jeepney. The obligation to carry Colipano safely to her destination
was with Sanico. In fact, the elements of a contract of carriage existed between Colipano and
Sanico: consent, as shown when Castro, as employee of Sanico, accepted Colipano as a
passenger when he allowed Colipano to board the jeepney, and as to Colipano, when she
boarded the jeepney; cause or consideration, when Colipano, for her part, paid her fare; and,
object, the transportation of Colipano from the place of departure to the place of destination.
Specific to a contract of carriage, the Civil Code requires common carriers to observe
extraordinary diligence in safely transporting their passengers. This extraordinary diligence,
means that common carriers have the obligation to carry passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances. In case of death of or injury to their passengers, Article 1756
of the Civil Code provides that common carriers are presumed to have been at fault or
negligent, and this presumption can be overcome only by proof of the extraordinary
diligence exercised to ensure the safety of the passengers.
Being an operator and owner of a common carrier, Sanico was required to observe
extraordinary diligence in safely transporting Colipano. When Colipano's leg was injured
while she was a passenger in Sanico's jeepney, the presumption of fault or negligence on
Sanico's part arose and he had the burden to prove that he exercised the extraordinary
diligence required of him. He failed to do this.
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Moreover, in Calalas v. Court of Appeals, the Court found that allowing the respondent
in that case to be seated in an extension seat, which was a wooden stool at the rear of the
jeepney, "placed [the respondent] in a peril greater than that to which the other passengers
were exposed." The Court further ruled that the petitioner in Calalas was not only "unable to
overcome the presumption of negligence imposed on him for the injury sustained by [the
respondent], but also, the evidence shows he was actually negligent in transporting
passengers."
Calalas squarely applies here. Sanico failed to rebut the presumption of fault or
negligence under the Civil Code. More than this, the evidence indubitably established
Sanico's negligence when Castro made Colipano sit on an empty beer case at the edge of the
rear entrance/exit of the jeepney with her sleeping child on her lap, which put her and her
child in greater peril than the other passengers.
Further, common carriers may also be liable for damages when they contravene the
tenor of their obligations. There is no question here that making Colipano sit on the empty
beer case was a clear showing of how Sanico contravened the tenor of his obligation to safely
transport Colipano from the place of departure to the place of destination as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, and with
due regard for all the circumstances.
2. NO, the Affidavit of Desistance and Release of Claim is void.
The RTC and the CA ruled that the Affidavit of Desistance and Release of Claim is not
binding on Colipano in the absence of proof that the contents thereof were sufficiently
translated and explained to her.
For there to be a valid waiver, the following requisites are essential: (1) that the
person making the waiver possesses the right, (2) that he has the capacity and power to
dispose of the right, (3) that the waiver must be clear and unequivocal although it may be
made expressly or impliedly, and (4) that the waiver is not contrary to law, public policy,
public order, morals, good customs or prejudicial to a third person with a right recognized
by law.
In this case, while the first two requirements can be said to exist in this case, the third
and fourth requirements are, however, lacking. For the waiver to be clear and unequivocal,
the person waiving the right should understand what she is waiving and the effect of such
waiver. Both the CA and RTC made the factual determination that Colipano was not able to
understand English and that there was no proof that the documents and their contents and
effects were explained to her. Colipano could not have clearly and unequivocally waived her
right to claim damages when she had no understanding of the right she was waiving and the
extent of that right. Worse, she was made to sign a document written in a language she did
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not understand. The fourth requirement for a valid waiver is also lacking as the waiver, based
on the attendant facts, can only be construed as contrary to public policy.
3. NO, the amount of compensatory damages granted is incorrect.
Sanico argues that Colipano failed to present documentary evidence to support her
age and her income, so that her testimony is self-serving and that there was no basis for the
award of compensatory damages in her favor.
A party's testimony in court is sworn and subject to cross-examination by the other

party, and therefore, not susceptible to an objection on the ground that it is self-serving. In
this case, Colipano was subjected to cross-examination and both the RTC and CA believed
her testimony on her age and annual income. In fact, as these are questions of facts, these
findings of the RTC and CA are likewise binding on the Court.
Further, although as a general rule, documentary evidence is required to prove loss

of earning capacity, Colipano's testimony on her annual earnings of P12,000.00 is an allowed
exception. There are two exceptions to the general rule and Colipano's testimonial evidence
falls under the second exception, viz.:
By way of exception, damages for loss of earning capacity may be awarded
despite the absence of documentary evidence when (1) the deceased is self-
employed earning less than the minimum wage under current labor laws, and
judicial notice may be taken of the fact that in the deceased's line of work no
documentary evidence is available; or (2) the deceased is employed as a daily
wage worker earning less than the minimum wage under current labor laws.
The CA applied the correct formula for computing the loss of Colipano's earning
capacity:
Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses
(50% of gross annual income)], where life expectancy = 2/3 (80 - the age of the
deceased).
However, the CA erred when it used Colipano's age at the time she testified as basis for
computing the loss of earning capacity. The loss of earning capacity commenced when
Colipano's leg was crushed on December 25, 1993. Given that Colipano was 30 years old
when she testified on October 14, 1997, she was roughly 27 years old on December 25, 1993
when the injury was sustained. Following the foregoing formula, the net earning capacity of
Colipano is P212,000.00.
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SYMEX SECURITY SERVICES, INC. v. MAGDALINO O. RIVERA, JR.

G.R. No. 202613, November 08, 2017, Second Division (Caguioa, J.)
DOCTRINE
A corporation is a juridical entity with a legal personality separate and distinct from
those acting for and in its behalf and, in general, from the people comprising it. Thus, as a
general rule, an officer may not be held liable for the corporation's labor obligations unless he
acted with evident malice and/or bad faith in dismissing an employee.
FACTS
Respondents alleged that they had been employed as security guards by petitioner
Symex sometime in May 1999. Petitioner Symex is engaged in the business of investigation
and security services. Its President and Chairman of the Board is petitioner Arcega.
Their tour of duty was from Monday to Saturday, from 6:00AM to 6:00PM, a twelve-
hour duty, but they were not paid their overtime pay. Respondents were likewise not given
a rest day, and not paid their five-day service incentive leave pay, and 13th month pay.
Respondents filed a complaint for nonpayment of holiday pay, premium for rest day, 13th
month pay, illegal deductions and damages.
Respondents went to the head office where Capt. Cura told them that they would be
relieved from the post because Guevent reduced the number of guards on duty. Capt. Cura
told them to go back on March 17, 2003 for their reassignment.
On March 17, 2003, Capt. Cura told respondents that they would not be given a duty
assignment unless they withdrew the complaint they filed before the LA. Respondents were
made to choose between resignation or forcible leave. Capt. Cura gave them a sample
affidavit of desistance for them to use as a guide. Respondents both refused to obey Capt.
Cura, who then told them that they were dismissed.
Respondents amended their complaint15 before the LA to include illegal dismissal.
In their defense, petitioners Symex and Arcega maintained that they did not illegally
dismiss respondents. They claimed that respondents are still included in petitioner Symex's
roll of security guards. They shifted the blame to respondents, arguing that respondents
refused to accept available postings.
ISSUE
Whether or not petitioner Arcega should be held solidarily liable with petitioner
Symex for respondents' monetary awards.
RULING
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NO. Petitioner Arcega is not liable for obligations of petitioner Symex absent showing
of gross negligence or bad faith on his part.
As to petitioner Arcega's liability for the obligations of Symex to respondents, the

Court notes that there was no showing that Arcega, as President of Symex, willingly and
knowingly voted or assented to the unlawful acts of the company.
In Guillermo v. Uson, the Court resolved the twin doctrines of piercing the veil of corporate
fiction and personal liability of company officers in labor cases. According to the Court:
The common thread running among the aforementioned cases, however, is that the
veil of corporate fiction can be pierced, and responsible corporate directors and officers or
even a separate but related corporation, may be impleaded and held answerable solidarily
in a labor case, even after final judgment and on execution, so long as it is established that
such persons have deliberately used the corporate vehicle to unjustly evade the judgment
obligation, or have resorted to fraud, bad faith or malice in doing so. When the shield of a
separate corporate identity is used to commit wrongdoing and opprobriously elude
responsibility, the courts and the legal authorities in a labor case have not hesitated to step
in and shatter the said shield and deny the usual protections to the offending party, even
after final judgment. The key element is the presence of fraud, malice or bad faith. Bad faith,
in this instance, does not connote bad judgment or negligence but imparts a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a known
duty through some motive or interest or ill will; it partakes of the nature of fraud.
As the foregoing implies, there is no hard and fast rule on when corporate fiction may
be disregarded; instead, each case must be evaluated according to its peculiar circumstances.
For the case at bar, applying the above criteria, a finding of personal and solidary liability
against a corporate officer like Guillermo must be rooted on a satisfactory showing of fraud,
bad faith or malice, or the presence of any of the justifications for disregarding the corporate
fiction.
Section 31 of the Corporation Code is the governing law on personal liability of

officers for the debts of the corporation. To hold a director or officer personally liable for
corporate obligations, two requisites must concur: (1) it must be alleged 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) there must be proof that the officer
acted in bad faith.
Based on the records, respondents failed to specifically allege either in their

complaint or position paper that Arcega, as an officer of Symex, willfully and knowingly
assented to the acts of Capt. Cura, or that Arcega had been guilty of gross negligence or bad
faith in directing the affairs of the corporation. In fact, there was no evidence at all to show
Arcega's participation in the illegal dismissal of respondents. Clearly, the twin requisites of
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allegation and proof of bad faith, necessary to hold Arcega personally liable for the monetary
awards to the respondents, are lacking.
Arcega is merely one of the officers of Symex and to single him out and require him
to personally answer for the liabilities of Symex are without basis. The Court has repeatedly
emphasized that the piercing of the veil of corporate fiction is frowned upon and can only be
done if it has been clearly established that the separate and distinct personality of the
corporation is used to justify a wrong, protect fraud, or perpetrate a deception. To disregard
the separate juridical personality of a corporation, the wrongdoing must be established
clearly and convincingly. It cannot be presumed.
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TEE LING KIAT v. AYALA CORPORATION (Substituted herein by its

Assignee and Successor-in-Interest, BIENVENIDO B.M. AMORA, JR.)
G.R. No. 192530, March 7, 2018, En Banc (Caguioa, J.)
DOCTRINE
Section 63 of the Corporation Code of the Philippines provides that: "No transfer, x x x
shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation showing the names of the parties to the transaction, the date of the transfer, the
number of the certificate or certificates and the number of shares transferred." Here, the
records show that the purported transaction between Tee Ling Kiat and Dewey Dee has never
been recorded in VIP's corporate books. Thus, the transfer, not having been recorded in the
corporate books in accordance with law, is not valid or binding as to the corporation or as to
third persons.
FACTS
Ayala Investment and Development Corporation (AIDC) granted in favor of CMC a
money market line in the maximum amount of P2,000,000.00. With Dewey Dee as the
President of CMC then, the Spouses Dee executed a Surety Agreement on the same date, as
guarantee for the money market line. One of CMC's availment under the money market line
was evinced by a Promissory Note for P800,000 due on January 16, 1981. AIDC subsequently
endorsed the Promissory Note to Ayala Corporation. CMC defaulted on its obligation under
the promissory note, leading Ayala Corporation to institute a claim for sum of money against
CMC and the Spouses Dee.
The RTC ordered the Spouses Dee to pay Ayala Corporation. Upon finality, the RTC
issued a Writ of execution against the Spouses Dee commanding the sheriff to "cause the
execution of the aforesaid judgment against Sps. Dewey and Lily Dee, including payment in full
of your lawful fees for the service of this writ."
Thereafter, a Notice of Levy on Execution was issued and addressed to the Register of
Deeds of Antipolo City, to levy upon "the rights, claims, shares, interest, title and
participation" that the Spouses Dee may have in parcels of land covered by TCT Nos. R-
24038, R-24039, and R-24040 and any improvements thereon. The parcels of land were
registered in the name of Vonnel Industrial Park, Inc. (VIP). According to the Sheriff's Return,
the titles over the subject properties are registered in the name of VIP, in which Dewey Dee
was an incorporator.
Before the scheduled sale on execution, Tee Ling Kiat filed a Third-Party Claim
alleging that the Sheriff, in causing the levy, made the assumption that Dewey Dee, as an
incorporator of VIP is also a stockholder of the same which gives him that rights, claims,
shares, intersts, title, and participation in the real property of VIP. However, while Dewey
Dee was indeed one of the incorporators of VIP, he is no longer a stockholder since Dewer
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Dee already sold to Tee Ling Kiat all his stocks in VIP as evidenced by a cancelled check which
he issued in favor of Tee Ling Kiat.
The RTC disallowed the third-party claim because the alleged shares of stock from
Dewey Dee to Tee Ling Kiat was not proven.
Tee Ling Kiat failed to adduce evidence to prove that the sale of shares of stock from
Dewey Dee to Tee Ling Kiat had taken place in accordance with the law. The purported Deed
of Sale of Shares of Stock was not recorded in the stock and transfer books of VIP, as required
by Section 63 of the Corporation Code. Thus, there was no valid transfer of shares as against
third persons. The RTC observed that in support of the purported sale of shares of stock, Tee
Ling Kiat merely submitted a cancelled check issued by Dewey Dee in favor of Tee Ling Kiat
and a photocopy of the Deed of Sale of Shares of Stock.
The CA held that it is not sufficient to attach photocopies of the deed or payment of
checks to the motion, Tee Ling Kiat needed to submit evidence to prove that the transaction
took place." Before the CA, Tee Ling Kiat also raised, for the first time, that he can be properly
considered a trustee of VIP, entitled to hold properties on the latter's behalf. The CA
observed, however, that there was no evidence produced to show that Tee Ling Kiat is a
trustee of the corporation.
ISSUE
Was the sale of the shares of stock by Dewey Dee to Tee ling Kiat duly proven?
RULING
NO. Suffice it to state that the only evidence adduced by Tee Ling Kiat to support his
claim that Dewey Dee's shares in VIP have been sold to him are a cancelled check issued by
Tee Ling Kiat in favor of Dewey Dee and a photocopy of the Deed of Sale of Shares of Stock.
A photocopy of a document has no probative value and is inadmissible in evidence. The
records likewise do not show that Tee Ling Kiat offered any explanation as to why the
original Deed of Sale of Shares of Stock could not be produced, instead alleging that because
of the disputable presumption "that the ordinary course of business has been followed"
provided in Section 3 (q) of Rule 131 of the Rules of Court, then the burden is not on him to
prove that he is a stockholder, but on Amora, to prove that he is not a stockholder.
This argument is off tangent. Meaning, even if it could be assumed that the sale of
shares of stock contained in the photocopies had indeed transpired, such transfer is only
valid as to the parties thereto, but is not binding on the corporation if the same is not
recorded in the books of the corporation.
Section 63 of the Corporation Code of the Philippines provides that: "No transfer, x x
x shall be valid, except as between the parties, until the transfer is recorded in the books of
the corporation showing the names of the parties to the transaction, the date of the transfer,
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the number of the certificate or certificates and the number of shares transferred." Here, the
records show that the purported transaction between Tee Ling Kiat and Dewey Dee has
never been recorded in VIP's corporate books. Thus, the transfer, not having been recorded
in the corporate books in accordance with law, is not valid or binding as to the corporation
or as to third persons.
UNITRANS INTERNATIONAL FORWARDERS, INC. v.
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INSURANCE COMPANY OF NORTH AMERICA

G.R. No. 203865, March 13, 2019, Second Division (Caguioa, J.)
DOCTRINE
A common carrier is presumed to have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported. When the goods shipped are either lost
or arrived in damaged condition, a presumption arises against the carrier of its failure to
observe that diligence, and there need not be an express finding of negligence to hold it liable.
To overcome the presumption of negligence, the common carrier must establish by adequate
proof that it exercised extraordinary diligence over the goods. It must do more than merely
show that some other party could be responsible for the damage.
In the instant case, considering that it is undisputed that the subject goods were severely
damaged, the presumption of negligence on the part of the common carrier, i.e., Unitrans, arose.
Hence, it cannot escape liability.
FACTS
South east Asia Container Line(SEACOL), a foreign company, received shipment of
musical instruments from Melbourne, Australia for transportation and delivery at the port
of Manila. The aforesaid shipment was insured with Insurance Company of North
America(ICNA) against all risk in favor of the consignee, San Miguel Foundation for the
Performing Arts(San Miguel)
Upon arriving in Manila, the container van was discharged from the vessel, and was
received by Unitrans International Forwarders,Inc (Unitrans) which delivered the same to
the consignee where it was found that two(2) units of musical instruments were damaged
and could no longer be used. As cargo-insurer of the subject shipment, ICNA paid consignee
the sum of $22,657 and by reason thereof was subrogated to consignee’s rights of recovery
against SEACOL and Unitrans.
ICNA filed a complaint for collection of sum of money arising from marine insurance
coverage on the two(2) musical instruments, against SEACOL and the unknown
owner/charterer of the vessel M/S Buxcrown, both doing business in the Philippines
through its local ship agent Unitrans.
Unitrans, denied being a ship agent of SEACOL, alleging that BTI Logistics PTY LTD.
(BTI Logistics), a foreign freight forwarder, engaged its services as receiving agent in
connection to the subject shipment. As such agent, Unitrans' obligations were limited to
receiving and handling the bill of lading sent to it by BTI Logistics, prepare an inward cargo
manifest, notify the party indicated of the arrival of the subject shipment, and release the bill
of lading upon order of the consignee so that the subject shipment could be withdrawn from
the pier/customs. It further alleged that San Miguel engaged its services as customs broker
for the subject shipment. As such, Unitrans' obligation was limited to paying on behalf of San
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Miguel the necessary duties and kindred fees, file with the Bureau of Customs (BOC) the
Import Entry Internal Revenue Declaration together with other pertinent documents, as well
as to pick up the shipment and then transport and deliver the said shipment to the
consignee's premises in good condition.
The Regional Trial Court(RTC) held Unitrans liable to ICNA for the sum paid to the
consignee. The RTC found that Unitrans itself admitted that it is a non-vessel operating
common carrier, which did not observe the due diligence required by law. The Court of
Appeals(CA) affirmed the RTC’s Decision.
ISSUE
Whether Unitrans was correctly held liable for the damaged shipment?
RULING
YES. Unitrans, as a common carrier, cannot escape liability
Unitrans had expressly admitted that San Miguel also engaged its services as customs
broker for the subject shipment; one of its obligations was to pick up the shipment and then
transport and deliver the same to the consignee's premises in good condition.
It is not disputed by any party that the subject shipment, i.e., musical instruments,
were severely damaged beyond use and did not arrive in good condition at the premises of
the consignee, San Miguel. It is indubitably clear that Unitrans failed to fulfill its obligation to
deliver the subject shipment in good condition.
Emphasis must be placed on the fact that Unitrans itself admitted that in handling the
subject shipment and making sure that it was delivered to the consignee's premises in good
condition as the delivery/forwarding agent, Unitrans was acting as a freight forwarding
entity and an accredited non-vessel operating common carrier.
Article 1735 of the Civil Code states that if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733.
In turn, Article 1733 states that 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.
Hence, jurisprudence holds that a common carrier is presumed to have been

negligent if it fails to prove that it exercised extraordinary vigilance over the goods it
transported. When the goods shipped are either lost or arrived in damaged condition, a
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presumption arises against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable. To overcome the presumption of
negligence, the common carrier must establish by adequate proof that it exercised
extraordinary diligence over the goods. It must do more than merely show that some other
party could be responsible for the damage.
In the instant case, considering that it is undisputed that the subject goods were
severely damaged, the presumption of negligence on the part of the common carrier, i.e.,
Unitrans, arose. Hence, it had to discharge the burden, by way of adequate proof, that it
exercised extraordinary diligence over the goods; it is not enough to show that some other
party might have been responsible for the damage. Unitrans failed to discharge this burden.
Hence, it cannot escape liability.
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TRADE AND INVESTMENT DEVELOPMENT CORPORATION also known as PHILIPPINE

EXPORT-IMPORT CREDIT AGENCY v. PHILIPPINE VERTERANS BANK
G.R. No. 233850, July 1, 2019, Second Division (Caguioa, J.)
DOCTRINE
Section 18 (c) of the FRIA explicitly states that a stay order shall not apply "to the
enforcement of claims against sureties and other persons solidarily liable with the debtor, and
third party or accommodation mortgagors as well as issuers of letters of credit, x x x."
In addition, under Rule 4, Section 6 of A.M. No. 00-8-10-SC or the Interim Rules of
Procedure on Corporate Rehabilitation, a stay order has the effect of staying enforcement
only with respect to claims made against the debtor, its guarantors and persons not solidarily
liable with the debtor.
In accordance with Section 18 (c) of the FRIA, and the Guarantee Agreement, which
states that respondent PVB can claim DIRECTLY from petitioner TIDCORP without the former
having to exhaust all the properties of and without need of prior recourse to PhilPhos, the
issuance of the Stay Order by the Rehabilitation Court clearly did not prevent the RTC from
acquiring jurisdiction over respondent PVB's Complaint.
FACTS
Philippine Veterans Bank(PVB), together with other banking institutions, entered
into a Five-Year Floating Rate Note Facility Agreement(NFA) with debtor Philippine
Phosphate Fertilizer Corporation(PhilPhos) up to the aggregate amount of P5 billion. Under
said NFA, respondent PVB committed the amount of P1 billion.
To secure payment, petitioner Trade and investment Development

Corporatio(TIDCORP), with express conformity of PhilPhos, executed a Guarantee
Agreement whereby TIDCORP agreed to guarantee the payment of the guaranty obligation
to the extent of ninety(90%) of the outstanding Series A notes.
On November 08, 2013, Typhoon Yolanda caused devastation to Leyte, where

PhilPhos’ manufacturing facilities were situated, and as a consequence, PhilPhos failed to
resume its operation.
Thereafter, PhilPhos filed a Petition for Voluntary Rehabilitation under the Financial
Financial Rehabilitation and Insolvency Act of 2010 (FRIA). The Rehabilitation Court issued
a Commencement Order, which included a Stay Order.
Despite several demands made by PVB pursuant to the Guarantee Agreement,

TIDCORP maintained its position to deny PVB’s claim due to the issuance of the Stay Order.
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PVB filed a Complaint for Specific Performance before the Regional Trial Court (RTC)
against TIDCORP asserting that under the Guarantee Agreement, TIDCORP agreed to
guarantee payment to PVB and other banking institutions without the benefit of excussion.
In its Answer, TIDCORP argued that the RTC cannot validly try the case because of the
Rehabilitation Court’s Stay Order, which enjoined the enforcement of all claims, actions and
proceedings against PhilPhos.
ISSUE
Whether the Stay Order issued by the Rehabilitation Court prevented the RTC from
acquiring jurisdiction over PVB’s Complaint?
RULING
NO. The Stay Order of the Rehabilitation court did not divest the RTC’s jurisdiction to
hear and decide PVB’s Complaint.
First and foremost, it must be noted that the Stay Order relied upon by petitioner
TIDCORP merely ordered the staying and suspension of enforcement of all claims and
proceedings against the petitioner PhilPhos and not against all the other persons or entities
solidarily liable with the debtor.
Second, Section 18 (c) of the FRIA explicitly states that a stay order shall not apply
"to the enforcement of claims against sureties and other persons solidarily liable with
the debtor, and third party or accommodation mortgagors as well as issuers of letters
of credit, x x x."
In addition, under Rule 4, Section 6 of A.M. No. 00-8-10-SC or the Interim Rules of
Procedure on Corporate Rehabilitation, a stay order has the effect of staying enforcement
only with respect to claims made against the debtor, its guarantors and persons not solidarily
liable with the debtor.
Upon a simple perusal of the Guarantee Agreement, to which petitioner

TIDCORP readily admitted it is bound, the answer to the aforementioned question becomes
a clear and unmistakable yes. Petitioner TIDCORP indubitably engaged to be solidarily
liable with PhilPhos under the Guarantee Agreement.
Without any shadow of doubt, petitioner TIDCORP had expressly renounced the
benefit of excussion and in no uncertain terms made itself directly and principally liable
without any qualification to the Series A Noteholders and without the need of any prior
recourse to PhilPhos. In effect, the nature of the guarantee obligation assumed by
petitioner TIDCORP under the Guarantee Agreement was transformed into a suretyship.
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Hence, in accordance with Section 18 (c) of the FRIA and the Guarantee Agreement,
which states that respondent PVB can claim DIRECTLY from petitioner TIDCORP without
the former having to exhaust all the properties of and without need of prior recourse to
PhilPhos, the issuance of the Stay Order by the Rehabilitation Court clearly did not prevent
the RTC from acquiring jurisdiction over respondent PVB's Complaint, as correctly held by
the RTC in the assailed Order.
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ENGINEER RICARDO VASQUEZ v. PHILIPPINE NATIONAL BANK

G.R. No. 228355, August 28, 2019, En Banc (Caguioa, J.)
DOCTRINE
There is no mutuality of contracts when the determination or imposition of interest
rates is at the sole discretion of a party to the contract. Further, escalation clauses in contracts
are void when they allow the creditor to unilaterally adjust the interest rates without the
consent of the debtor.
FACTS
Engineer Vasquez applied for and was granted a loan by the PNB in the amount of
600,000 php. He again obtained another loan in the sum of 800,000 pesos. The aforesaid
loans having a total of 1.4 million pesos were secured by 4 parcel of lands by way of a real
estate mortgage agreement.
After three years, he filed a complaint against PNP before the RTC for specific
performance and annulment of foreclosure proceedings among others. He alleges that, the
rate of interest agreed upon by the parties in the loan agreements is only 17% and up to 18%
for 3 years in fact he made partial payments 221,991 but he subsequently suspended further
payment when PNB unilaterally escalated upwardly the interest rate from the stipulated rate
of 17% to 33% to 24% to 34% to 29% to 21.70% and 20.186% even without prior
knowledge and conformity of Vasquez the borrower. He further claimed that due to the
unilateral escalation of interest rates, it resulted to a rapid surge of his actual monetary
obligation, thus, placing him in a situation where he could no longer pay his obligations with
the bank. As he could no longer comply with his mounting monetary obligation, his
properties were being subjected to foreclosure proceedings which might later result to his
ejectment.
Evidence on record shows that according to the Credit Agreement, in a situation

wherein there is a fixed interest rate, PNB still reserves the right to unilaterally modify the
said interest rate at any time depending on whatever policy PNB adopts in the future. Further
it stipulates that the Bank reserves the right to increase or decrease the interest rate should
the Bank's cost of money to fund or maintain such Loans/Availments/Advances/Trust
Receipt/s while outstanding increase or decrease, respectively. The same document likewise
states that "[t]he Bank's determination of the amount of interest payable hereunder shall be
conclusive and binding on the Borrower/s in the absence of manifest error in the
computation.
In its Answer, PNB argues that Vasquez had no cause of action against the bank
because the purported increases in the interest rate in the loan agreements were freely,
voluntarily and mutually agreed upon by the parties.
ISSUE
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Whether the unilateral determination of interest rates of PNB is valid.
RULING
NO. The interest rate scheme imposed upon Vasquez under the loan agreement is
clearly one-sided, unilateral, and violative of one of the fundamental characteristics of
contracts — which is the essential equality of the contracting parties, oftentimes called the
principle of mutuality of contracts. Therefore, the interest rate scheme provided under the
Credit Agreement and the promissory notes is null and void.
The principle of mutuality of contracts is pronounced in Article 1308 of the Civil Code,
which states that a contract "must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them." The principle of mutuality of contracts dictates that
a contract must be rendered void when the execution of its terms is skewed in favor of one
party. As explained by recognized Civil Law Commentator, former CA Justice Eduardo P.
Caguioa, the reason for this principle "is in order to maintain the enforceability of contracts,
for otherwise the same would be illusory."
As applied to the imposition of monetary interest, the Court has held that "[t]here is
no mutuality of contracts when the determination or imposition of interest rates is at the
sole discretion of a party to the contract. Further, escalation clauses in contracts are void
when they allow the creditor to unilaterally adjust the interest rates without the consent of
the debtor." Jurisprudence holds that provisions in a loan agreement that grant lenders
unrestrained power to increase interest rates, penalties and other charges at the latter's sole
discretion and without giving prior notice to and securing the consent of the borrowers reek
of unilateral authority that is anathema to the mutuality of contracts and enable lenders to
take undue advantage of borrowers. The rate of interest is a principal condition, if not the
most important component, of a loan agreement. Thus, "any modification thereof must be
mutually agreed upon; otherwise, it has no binding effect.
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QUINTIN ARTACHO LLORENTE v. STAR CITY PTY LIMITED, REPRESENTED BY THE

JIMENO AND COPE LAW OFFICES AS ATTORNEY-IN-FACT
G.R. No. 212050, January 15, 2020, First Division (Caguioa, J.)
STAR CITY PTY LIMITED, REPRESENTED BY THE JIMENO COPE & DAVID LAW
OFFICES AS ITS ATTORNEY-IN-FACT v. QUINTIN ARTACHO LLORENTE AND
EQUITABLE PCI BANK (NOW BDO UNIBANK, INC.)
G.R. No. 212216, January 15, 2020, First Division (Caguioa, J.)
DOCTRINE
A foreign corporation that is not doing business in the Philippines must disclose such fact
if it desires to sue in Philippine courts under the "isolated transaction rule" because without
such disclosure, the court may choose to deny it the right to sue. The qualifying circumstance
that if it is doing business in the Philippines, it is duly licensed or if it is not, it is suing upon a
singular and isolated transaction, is an essential part of the element of the plaintiffs capacity
to sue and must be affirmatively pleaded.
FACTS
Star City PTY Limited (SCPL) is an Australian corporation which operates the Star City
Casino in Sydney, New South Wales, Australia. Claiming that it is not doing business in the
Philippines and is suing for an isolated transaction, it filed a complaint for collection of sum
of money with prayer for preliminary attachment against Quintin Artacho Llorente
(Llorente), who was a patron of its Star City casino and Equitable PCI Bank (EPCIB).
Llorente is one of the numerous patrons of its casino in Sydney, Australia. As such, he
maintained therein a Patron Account. Llorente negotiated two EPCIB drafts worth US
$150,000.00 each or for the total amount of US $300,000.00 in order to play in the Premium
Programme of the casino. Before upgrading to this programme, SCPL contacted first EPCIB
to check the status of the subject drafts. The latter confirmed that the same were issued on
clear funds without any stop payment orders. Thus, Llorente was allowed to buy in on a
Premium Programme and his front money account in the casino was credited with US
$300,000.00.
SCPL deposited the subject drafts with Thomas Cook Ltd. It received the advice of
Bank of New York about the "Stop Payment Order" prompting it to make several demands
upon Llorente to make good his obligation. However, the latter refused to pay. It likewise
asked EPCIB for a settlement which the latter denied on the ground that it was Llorente who
requested the Stop Payment Order and no notice of dishonor was given.
Llorente alleged that he caused the stoppage of the subject drafts' payment because
SCPL's personnel and representatives committed fraud and unfair gaming practices during
his stay in the casino. He also countered that the case should be dismissed on the ground that
SCPL lacks the legal capacity to sue since the "isolated transaction rule" for which it anchored
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its right to bring action in our courts presupposes that the transaction subject matter of the
complaint must have occurred in the Philippines, which however, is not the situation at bar
since it is clear from the narration that the same occurred in Australia.
EPCIB, in its Answer, not only alleged SCPL's lack of personality to sue before
Philippine courts, but denied also that it unjustifiably and maliciously refused to settle the
obligation since it merely complied with the instructions of Llorente, as payee of the subject
drafts, to stop payment thereon. It further went on saying that SCPL had no cause of action
against it because there was no privity of contract between them. EPCIB likewise filed a
cross-claim against Llorente since it already reimbursed the lace value of the subject drafts,
pursuant to the demand of the latter. For such reason, it should be relieved of any and all
liabilities under the subject drafts.
The RTC ruled that SCPL had the legal capacity to sue. It also held both Llorente and
EPCIB solidarily liable for the value of the subject drafts. When Llorente, as payee of the
subject drafts, signed at the back thereof, he is said to have become an indorser who warrants
that on due presentment, the instruments would be accepted or paid or both, as the case may
be, according to their tenor, and that if they be dishonored and the necessary proceedings
on dishonor be duly taken, they will pay the amount thereof to the holder. The same is also
true for EPCIB, being the drawer of the subject drafts. It is of no moment if the bank was not
a privy to the transaction for its liability as a drawer is not based on direct transaction but
by virtue of the warranties it made within the purview of the Negotiable Instruments Law
(NIL). The RTC even pointed that Llorente and EPCIB could not seek refuge on the alleged
lack of notice of dishonor to them since they were responsible for the dishonor of the subject
drafts aside from the fact that it would be futile to require such notice since it was EPCIB who
countermanded the payment.
The CA ruled that, as to SCPL’s personality to sue, SCPL has pleaded the required
averments in the complaint — it is a foreign corporation not doing business in the
Philippines suing upon a singular and isolated transaction — which sufficiently clothed it the
necessary legal capacity to sue in this jurisdiction. The subject drafts were drawn by EPCIB,
which is a Philippine bank, and since the drawer is a bank organized and existing in the
Philippines then naturally a suit on the draft or check it issued can be filed in any of the places
where the check is drawn, issued, delivered or dishonored, which, in this case, can be either
the Philippines where the drafts were drawn and issued, or Australia where the indorsement
and dishonor happened.
As to the issue of SCPL being a holder in due course, contrary to EPCIB's assertion
that the subject drafts were drawn without any value, the fact that Llorente used them to
"buy in" into the Premium Programme of SCPL's casino is enough to constitute as the "value"
contemplated by the law, making SCPL a holder in due course.
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Lastly, as to EPCIB’s liability, the CA deemed it proper to discharge EPCIB from any
responsibility considering that it already paid Llorente the face amount of the subject drafts
amounting to US $300,000.00 as evidenced by the Quitclaim, Indemnity and Confidentiality
Agreement (Indemnity Agreement). Allowing EPCIB 's solidary liability would sanction
unjust enrichment on Llorente's part who would be allowed to profit or enrich himself
inequitably at EPCIB's expense.
ISSUE/S
1. Does the SCPL have the legal capacity to sue under the isolated transaction rule?
2. Is SCPL a holder in due course?
3. Should EPCIB be held solidarily liable with Llorente?
RULING
1. YES. SCPL has the legal capacity to sue under the isolated transaction rule.
Under Republic Act No. (RA) 1123236 or the Revised Corporation Code of the
Philippines (RCC), the pertinent provision is Section 150, which states:
SEC. 150. Doing Business Without a License. - No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or
proceeded against before Philippine courts or administrative tribunals on any valid
cause of action recognized under Philippine laws.
While the RCC grants to foreign corporations with Philippine license the right to sue in
the Philippines, the Court, however, in a long line of cases under the regime of the
Corporation Code has held that a foreign corporation not engaged in business in the
Philippines may not be denied the right to file an action in the Philippine courts for an
isolated transaction.
A foreign corporation that is not doing business in the Philippines must disclose
such fact if it desires to sue in Philippine courts under the "isolated transaction rule"
because without such disclosure, the court may choose to deny it the right to sue.
The right and capacity to sue, being, to a great extent, matters of pleading and
procedure, depend upon the sufficiency of the allegations in the complaint. Thus, as to a
foreign corporation, the qualifying circumstance that if it is doing business in the
Philippines, it is duly licensed or if it is not, it is suing upon a singular and isolated
transaction, is an essential part of the element of the plaintiffs capacity to sue and
must be affirmatively pleaded.
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A foreign corporation needs no license to sue before Philippine courts on an isolated

transaction. However, to say merely that a foreign corporation not doing business in the
Philippines does not need a license in order to sue in our courts does not completely resolve
the issue. When the allegations in the complaint have a bearing on the plaintiff’s capacity to
sue and merely state that the plaintiff is a foreign corporation existing under the laws of a
country, such averment conjures two alternative possibilities: either the corporation is
engaged in business in the Philippines, or it is not so engaged. In the first, the corporation
must have been duly licensed in order to maintain the suit; in the second, and the transaction
sued upon is singular and isolated, no such license is required. In either case, compliance
with the requirement of license, or the fact that the suing corporation is exempt
therefrom, as the case may be, cannot be inferred from the mere fact that the party
suing is a foreign corporation. The qualifying circumstance being an essential part of the
plaintiff’s capacity to sue must be affirmatively pleaded. Hence, the ultimate fact that a
foreign corporation is not doing business in the Philippines must first be disclosed for
it to be allowed to sue in Philippine courts under the isolated transaction rule. Failing
in his requirement, the complaint filed by plaintiff with the trial court, it must be said,
fails to show its legal capacity to sue.
In the case at bar, SCPL alleged in its complaint that "it is a foreign corporation which
operates its business at the Star City Casino in Sydney, New South Wales, Australia; that it is
not doing business in the Philippines; and that it is suing upon a singular and isolated
transaction".
2. YES. SCPL is a holder in due course.
When the bank, as the drawer of a negotiable check, signs the instrument its
engagement is then as absolute and express as if it were written on the check; and a dual
promise is implied from the issuance of a check: first, that the bank upon which it is drawn
will pay the amount thereof; and second, if such bank should fail to make the payment, the
drawer will pay the same to the holder.
Generally, by drawing a check, the drawer: admits the existence of the payee and his
then capacity to endorse; impliedly represents that he (the payee) has funds or credits
available for its payment in the bank in which it is drawn; engages that if the bill is not paid
by the drawee and due proceedings on dishonor are taken by the holder, he will upon
demand pay the amount of the bill together with the damages and expenses accruing to the
holder by reason of the dishonor of the instrument; and, if the drawee refuses to accept a bill
drawn upon him, becomes liable to pay the instrument according to his original undertaking.
However, the liability of the drawer is not primary but secondary, particularly after
acceptance because it is conditional upon proper presentment and notice of dishonor, and,
in case of a 'foreign bill of exchange, protest, unless such conditions are excused or dispensed
with. Thus, under Section 84 of the NIL, when the instrument is dishonored by non-payment,
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an immediate right of recourse to all parties secondarily liable thereon accrues to the
holder, subject to the provisions of the NIL.
Regarding the effect of countermand or stopping payment, the drawer of a bill,

including a draft or check, as a general rule, may by notice to the drawee prior to acceptance
or payment countermand his order and command the drawee not to pay, in which case the
drawee is obliged to refuse to accept or pay.
The right to stop payment cannot be exercised so as to prejudice the rights of holders
in due course without rendering the drawer liable on the instrument to such holders. Stated
differently, stopping payment does not discharge the liability of the drawer of a check
or other bill to the payee or other holder. However, where payment has been stopped by
the drawer the relation between the drawer and payee becomes the same as if the
instrument had been dishonored and notice thereof given to the drawer. Thus, the drawer's
conditional liability is changed to one free from the condition and his situation is like that of
the maker of a promissory note due on demand; and he is liable on the instrument if he has
no sufficient defense.
The execution of the Stop Payment Order by Llorente did not discharge the
liability of EPCIB, the drawer, to SCPL, the holder of the subject demand/bank drafts.
Given that an SPO was issued, the dishonor and non-payment of the subject
demand/bank drafts were to be expected, triggering the immediate right of recourse
of the holder to all parties secondarily liable, including the drawer, pursuant to the
NIL.
Under Section 57 of the NIL, "a holder in due course holds the instrument free from
any defect in the title of prior parties, and free from defenses available to prior parties among
themselves, and may enforce payment of the instrument for the full amount thereof against
all parties liable thereon." In addition, under Section 51 of the NIL, every holder of a
negotiable in instrument may sue thereon in his own name; and payment to him in due
course discharges the instrument.
3. NO. EPCIB should not be held solidarily liable.
The liability of EPCIB as the drawer cannot be abrogated by virtue of the Indemnity
Agreement because it arises from the subject demand/bank drafts, which are negotiable
instruments, that it issued. Its secondary liability under Section 61 of the NIL became
primary when the payment of the subject demand/bank drafts had been stopped which had
the same effect as if the instruments had been dishonored and notice thereof was given to
the drawer pursuant to Section 84 of the NIL. Given the nature of the liability of the drawer
of a negotiable instrument, EPCIB's argument that it is not liable to SCPL because they have
no privity of contract is utterly without merit.
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While EPCIB is clearly liable as the drawer of the subject drafts, there is no legal basis
to make it solidarily liable with Llorente.
According to Article 1207 of the Civil Code, there is solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires
solidarity. In this case, there is no contract or agreement wherein the solidary liability of
EPCIB is expressly provided. Under the NIL and the nature of the liability of the drawer,
solidary obligation is also not provided Thus, EPCIB's liability is not solidary but primary due
to the SPO that Llorente issued against the subject demand/bank drafts.
Consequently both Llorente and EPCIB are individually and primarily liable as
endorser and drawer of the subject demand/bank drafts. Given the nature of their
liability, SCPL may proceed to collect the damages hereinafter awarded simultaneously
against both Llorente and EPCIB, or alternatively against either Llorente or EPCIB, provided
that in no event can SCPL recover from both more than the damages awarded.
In the event that SCPL is able to collect from EPCIB based on this judgment, any
amount that EPCIB pays to SCPL can be collected by EPCIB from Llorente by virtue of its
cross-claim against Llorente and pursuant to the indemnity clause of the Indemnity
Agreement, which is valid as between Llorente and EPCIB.
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FIRST PHILIPPINE HOLDINGS CORPORATION v. SECURITY AND EXCHANGE

COMMISSION
G.R. No. 206673, July 28, 2020, First Division (Caguioa, J.)
DOCTRINE
While administrative rules are presumed valid and reasonable, said presumption may
be set aside when the invalidity or unreasonableness appears on the face of the administrative
rule itself or is established by proper evidence.
In Securities and Exchange Commission v. GMA Network, Inc., the Court likened the SEC's
authority to prescribe rates to the rate-fixing power of administrative agencies and held that
the only applicable standard to gauge the validity thereof is that the rate prescribed be
reasonable, just, and proportionate to the service for which the fee is being collected. Notably,
the Court, in said case, found the filing fee of P1,212,200.00 for the extension of GMA's corporate
term already unreasonable.
It bears emphasis that the fee of P1,212,200.00 is a far cry from the P24,000,000.00
imposed on FPHC, even after accounting for inflation. Indeed, the amount appears exorbitant
and confiscatory for the mere filing, "processing, examination, and verification" of a single
paragraph of petitioner's articles of incorporation,
FACTS
Petitioner First Philippine Holdings Corporation(FPHC) is a domestic stock
corporation registered with the Security and Exchange Commission(SEC) which term was to
expire on June 30, 2011.
FPHC was charged a substantial amount of P24,000,000.00 for the amendment of its
articles of incorporation to extend its term of corporate existence as a filing fee under SEC
Memorandum Circular No. 9, Series of 2004 (SEC M.C. No. 9, S. 2004).
A few months after its application for extending its corporate term had been granted,
FPHC filed its application for the amendment of its Articles of Incorporation (AOI) by
increasing its authorized capital stock to P32 billion. For this, it was assessed and it paid the
amount of P40 million as filing fee based also on SEC M.C. No. 9, S. 2004 which provides that
the filing fee for [the] increase of capital stock for corporations with par value is, 1/5 of 1%
of the increase in capital stock or the subscription price of the subscribed capital stock
whichever is higher[,] but not less than P1,000.00.
FPHC , in a position paper, questioned the reasonableness and necessity of the

assessed filing fees.
The SEC en banc held the imposition of the filing fee for the extension of a
corporation's term, in the amount of 1/5 of 1% of the authorized capital stock, is a valid
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exercise of the SEC's authority to promulgate administrative regulations. The SEC en banc
also ruled that the filing fee imposed is reasonable to cover the cost of not only issuing the
license but also of the regulatory functions performed by the various departments of the SEC.
The Court of Appeals(CA) upheld the authority of SEC to fix the reasonable rates to be
imposed upon securities-related organizations. The CA further held that SEC M.C. No. 9, S.
2004 prescribing the filing fees for the extension of a corporation's life at the rate of 1/5 of
1% of authorized capital stock was reasonably necessary for the SEC to perform, monitor,
and carry out its duties and functions to protect the investing public from fraudulent
manipulations for the next 50 year.
ISSUE
1. Whether the SEC is authorized to prescribe the rates for incorporation and other fees?
2. Whether the fee for the extension of a corporation’s term in the amount of P24 million
is unreasonable, patently oppressive, and confiscatory?
RULING
1. YES. The SEC was authorized to promulgate rules and regulations prescribing the
rates for incorporation and other fees.
Section 139 of the Corporation Code authorized the SEC to "collect and receive fees
as authorized by law or by rules and regulations promulgated by the Commission." The use of
the term "or" is significant. In statutory construction, the term "or" "is a disjunctive
[conjunction] indicating an alternative. It often connects a series of words or propositions
indicating a choice of either."
Undoubtedly therefore, Congress, by using the term "or," intended to authorize the
SEC to choose to either collect and receive the fees already "authorized by law" or to
promulgate rules and regulations prescribing the rates and fees it will collect and receive. In
other words, while the rates for the filing of articles of incorporation and other fees were
previously specifically provided by law, Section 139 in relation to Section 143 of the
Corporation Code impliedly repealed the same by delegating to the SEC the power to also
promulgate rules prescribing different rates to be collected.
The Court finds that such a construction is more consistent with the declared intent
to infuse the SEC with the power and authority to determine and promulgate such rules and
regulations it deems reasonably necessary for the performance of its duties. More
importantly, any other construction would not only render the phrase "collect and receive
fees as authorized by law" superfluous in light of the existing laws on the matter, but would
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also render the additional phrase, "authorized x x x by rules and regulations promulgated by
the Commission" worthless.
2. YES. The rate prescribed was unreasonable
It is settled that "[t]o be valid, implementing rules and regulations (IRRs) must be
reasonable. Administrative authorities should not act arbitrarily and capriciously in the
issuance of their IRRs, but must ensure that their IRRs are reasonable and fairly adapted to
secure the end in view. If the IRRs are shown to bear no reasonable relation to the purposes
for which they were authorized to be issued, they must be held to be invalid and should be
struck down."
In Securities and Exchange Commission v. GMA Network, Inc., the Court likened the
SEC's authority to prescribe rates to the rate-fixing power of administrative agencies and
held that the only applicable standard to gauge the validity thereof is that the rate prescribed
be reasonable, just, and proportionate to the service for which the fee is being
collected. Notably, the Court, in said case, found the filing fee of P1,212,200.00 for the
extension of GMA's corporate term already unreasonable.
It bears emphasis that the fee of P1,212,200.00 is a far cry from the P24,000,000.00
imposed on FPHC, even after accounting for inflation. Indeed, the amount appears exorbitant
and confiscatory for the mere filing, "processing, examination, and verification" of a single
paragraph of petitioner's articles of incorporation,
Even if the Court were inclined to agree with the SEC that the instant fee was not a
"mere" "processing fee," but rather, a "license fee" for the grant of a fresh period for a
corporation to act as a juridical being for another 50 years, the amount would still be
unreasonable.
The unreasonableness of the instant fee is bolstered by the fact that R.A. 11232 or the
Revised Corporation Code of the Philippines, which took effect on February 23, 2019, now
grants all corporations perpetual existence, unless its articles of incorporation otherwise
provides. Evidently, there is no more basis to impose a "license fee" for the purported grant
of a fresh period for a corporation to act as a juridical being for another 50 years.
While administrative rules are presumed valid and reasonable, said presumption may
be set aside when the invalidity or unreasonableness appears on the face of the
administrative rule itself or is established by proper evidence.
In view of the foregoing discussion, the prescribed rate for extending a corporation's
term under SEC M.C. No. 9, S. 2004 is declared invalid and unreasonable.
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ZUNECA PHARMACEUTICAL, AKRAM ARAIN AND/OR VENUS ARAIN, M.D., AND STYLE
OF ZUNECA PHARMACEUTICAL vs. NATRAPHARM, INC.
G.R. No. 211850, September 08, 2020, En Banc (Caguioa, J.)
DOCTRINE
Section 122 of the IP Code provides that the rights in a mark shall be acquired by means
of its valid registration with the IPO. A certificate of registration of a mark, once issued,
constitutes prima facie evidence of the validity of the registration, of the registrant's ownership
of the mark, and of the registrant's exclusive right to use the same in connection with the goods
or services and those that are related thereto specified in the certificate. Nevertheless, the first-
to-file rule prioritizes the first filer of the trademark application and operates to prevent any
subsequent applicants from registering marks described under Section 123.1(d) of the IP Code.
FACTS
Petitioner Zuneca Pharmaceutical has been engaged in the importation, marketing,
and sale of various kinds of medicines and drugs in the Philippines since 1999. It imports
generic drugs from Pakistan and markets them in the Philippines using different brand
names. Among the products it has been selling is a drug called carbamazepine under the
brand name "ZYNAPS", which is an anti-convulsant used to control all types of seizure
disorders of varied causes like epilepsy.
Natrapharm, on the other hand, is a domestic corporation engaged in the business of

manufacturing, marketing, and distribution of pharmaceutical products for human
relief. One of the products being manufactured and sold by Natrapharm is citicoline under
the trademark "ZYNAPSE", which is indicated for the treatment of cerebrovascular disease
or stroke. The trademark "ZYNAPSE" was registered with the Intellectual Property Office of
the Philippines (IPO) on September 24, 2007 and is covered by Certificate of Trademark
Registration No. 4-2007-005596.
On November 29, 2007, Natrapharm filed with the RTC a Complaint against Zuneca
for Injunction, Trademark Infringement, Damages and Destruction with Prayer for TRO
and/or Preliminary Injunction, alleging that Zuneca's "ZYNAPS" is confusingly similar to its
registered trademark "ZYNAPSE" and the resulting likelihood of confusion is dangerous
because the marks cover medical drugs intended for different types of illnesses.
Zuneca claimed that it has been selling carbamazepine under the mark "ZYNAPS"
since 2004 after securing a Certificate of Product Registration on April 15, 2003 from the
Bureau of Food and Drugs (BFAD, now Food and Drug Administration). It alleged that it was
impossible for Natrapharm not to have known the existence of "ZYNAPS" before the latter's
registration of "ZYNAPSE" because Natrapharm had promoted its products, such as
"Zobrixol" and "Zcure", in the same publications where Zuneca had advertised
"ZYNAPS". Further, Zuneca pointed out that both Natrapharm and Zuneca had advertised
their respective products in identical conventions. Despite its knowledge of prior use by
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Zuneca of "ZYNAPS", Natrapharm had allegedly fraudulently appropriated the "ZYNAPSE"

mark by registering the same with the IPO. As the prior user, Zuneca argued that it is the
owner of "ZYNAPS" and the continued use by Natrapharm of "ZYNAPSE" causes it grave and
irreparable damages.
ISSUE
Whether or not the first-to-file trademark registrant in good faith defeats the right of
the prior user in good faith, hence, Natrapharm has the right to prevent Zuneca from
using/registering the trademark "Zynaps" or marks similar or identical thereto?
RULING
YES. Zuneca, contends that, as the first user, it had already owned the "ZYNAPS" mark
prior to Natrapharm's registration. The Court holds that Zuneca's argument has no merit
because: (i) the language of the IP Code provisions clearly conveys the rule that ownership
of a mark is acquired through registration; (ii) the intention of the lawmakers was to
abandon the rule that ownership of a mark is acquired through use; and (iii) the rule on
ownership used in Berris and E.Y. Industrial Sales, Inc. is inconsistent with the IP Code
regime of acquiring ownership through registration.
SECTION 122. How Marks are Acquired. - The rights in a mark shall be acquired
through registration made validly in accordance with the provisions of this law. (Sec.
2-A, R.A. No. 166a)
Related to this, Section 123. l(d) of the IP Code expresses the first-to-file rule as
follows:
SECTION 123. Registrability. - 123.1. A mark cannot be registered if it:
xxxx
(d) Is identical with a registered mark belonging to a different proprietor or a mark
with an earlier filing or priority date, in respect of:
(i) The same goods or services, or
(ii) Closely related goods or services, or
(iii) If it nearly resembles such a mark as to be likely to deceive or cause
confusion.
To clarify, while it is the fact of registration which confers ownership of the mark and
enables the owner thereof to exercise the rights expressed in Section 147of the IP Code, the
first-to-file rule nevertheless prioritizes the first filer of the trademark application and
operates to prevent any subsequent applicants from registering marks described under
Section 123.1(d) of the IP Code.
Reading together Sections 122 and 123. l(d) of the IP Code, therefore, a registered
mark or a mark with an earlier filing or priority date generally bars the future registration
of- and the future acquisition of rights in - an identical or a confusingly similar mark, in
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respect of the same or closely-related goods or services, if the resemblance will likely deceive
or cause confusion.
In the same vein, the prima facie nature of the certificate of registration is not
indicative of the fact that prior use is still a recognized mode of acquiring ownership under
the IP Code. Rather, it is meant to recognize the instances when the certificate of registration
is not reflective of ownership of the holder thereof, such as when: 1) the first registrant has
acquired ownership of the mark through registration but subsequently lost the same due to
non-use or abandonment (e.g., failure to file the Declaration of Actual Use 1); 2 the
registration was done in bad faith; the mark itself becomes generic; the mark was registered
contrary to the IP Code (e.g., when a generic mark was successfully registered for some
reason); 3 or the registered mark is being used by, or with the permission of, the registrant
so as to misrepresent the source of the goods or services on or in connection with which the
mark is used.
The ownership of a trademark is acquired by its registration and its actual use by the
manufacturer or distributor of the goods made available to the purchasing public. Section
122 of the IP Code provides that the rights in a mark shall be acquired by means of its valid
registration with the IPO. A certificate of registration of a mark, once issued,
constitutes prima facie evidence of the validity of the registration, of the registrant's
ownership of the mark, and of the registrant's exclusive right to use the same in connection
with the goods or services and those that are related thereto specified in the certificate. The
IP Code, however, requires the applicant for registration or the registrant to file a declaration
of actual use (DAU) of the mark, with evidence to that effect, within three (3) years from the
filing of the application for registration; otherwise, the application shall be refused or the
mark shall be removed from the register. In other words, the prima facie presumption
brought about by the registration of a mark may be challenged and overcome, in an
appropriate action, by proof of the nullity of the registration or of non-use of the mark, except
when excused. Moreover, the presumption may likewise be defeated by evidence of prior
use by another person, i.e., it will controvert a claim of legal appropriation or of ownership
based on registration by a subsequent user. This is because a trademark is a creation of use
and belongs to one who first used it in trade or commerce.
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JENNIFER M. ENANO-BOTE, ET AL. vs. JOSE CH. ALVAREZ, CENTENNIAL AIR,

INC. AND SUBIC BAY METROPOLITAN AUTHORITY
G.R. No 223572. November 10, 2020, FIRST DIVISION (Caguioa, J.)
DOCTRINE
The Court recognized two instances when the creditor is allowed to maintain an action
upon any unpaid subscriptions based on the trust fund doctrine: (1) where the debtor
corporation released the subscriber to its capital stock from the obligation of paying for their
shares, in whole or in part, without a valuable consideration, or fraudulently, to the prejudice
of creditors; and (2) where the debtor corporation is insolvent or has been dissolved without
providing for the payment of its creditors.
FACTS
Plaintiff-appellee Subic Bay Metropolitan Authority (SBMA for brevity) entered into
a Lease Agreement with defendant/third-party plaintiff Centennial Air, Inc. (CAIR for
brevity), represented by defendant Roberto Lozada (Lozada for brevity), for the lease of
Building 8324 (subject property for brevity) located at Subic Bay International Airport
(SBIA), Subic Bay Freeport Zone (SBFZ), for a period of five (5) years commencing on
February 1, 1999 until midnight of January 31, 2004.
For the duration of the lease, CAIR became delinquent and was constantly remiss in
the payment of its obligations. Due to the continuous refusal of CAIR to settle its debts, SBMA
was compelled to file a Complaint against the former and its stockholders asking for the
payment. Subsequently, summonses were served on defendants-appellants Jennifer Enano-
Bote (Jennifer for brevity), Virgilio A. Bote (Virgilio for brevity), Amelita G. Simon, Teresita
M. Enano, Jaime M. Matibag, Wilfredo Pimentel, Vicente T. Suazo (hereinafter collectively
referred to as (Enano-Bote, et al.).
On September 3, 2004, Enano-Bote, et al. filed their Answer denying any liability to
SBMA. They argued that they were no longer stockholders of the corporation at the time the
Lease Agreement was executed between CAIR and SBMA on February 3, 1999. Allegedly, on
December I, 1998, they entered into a Deed of Assignment of Subscription Rights (DASR for
brevity) with third-party defendant- appellee Jose Ch. Alvarez (Alvarez for brevity), whereby
they assigned, transferred, and conveyed their aggregate subscription of 400,000 shares,
representing 100% of the outstanding capital stock of CAIR, in favor of Alvarez. Pursuant to
the DASR, Alvarez was obliged to transfer and assign 76,000 and 4,000 of fully paid and non-
assessable shares of the corporation to Jennifer and Virgilio. Furthermore, Alvarez assumed
to pay the unpaid balance of their subscriptions in the amount of 1'30,000,000.00. In effect,
only Jennifer and Virgilio remained as nominal stockholders of the corporation while the rest
of them were totally divested of their corporate shares. Since they ceased to be stockholders
of the corporation, they were no longer parties to the Lease Agreement, thus they cannot be
held liable for any breach thereof.
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ISSUE:
Whether the trust fund doctrine can be applied to make petitioners personally and
solidarily liable with CAIR for the unpaid rentals claimed by SBMA against CAIR because of
their supposedly unpaid subscriptions in CAIR's capital stock?
RULING:
NO. Under the Trust Fund Doctrine, subscriptions to the capital of a corporation
constitute a fund to which creditors have a right to look for satisfaction of their claims and
that the assignee in insolvency can maintain an action upon any unpaid stock subscription
in order to realize assets for the payment of its debts.
In the case of Haley, the Court recognized two instances when the creditor is allowed
to maintain an action upon any unpaid subscriptions based on the trust fund doctrine: (1)
where the debtor corporation released the subscriber to its capital stock from the obligation
of paying for their shares, in whole or in part, without a valuable consideration, or
fraudulently, to the prejudice of creditors; and (2) where the debtor corporation is insolvent
or has been dissolved without providing for the payment of its creditors.
SBMA has not even pleaded either insolvency of CAIR or its dissolution. What is
evident in SBMA's complaint is that it is a simple collection suit. Not only were the allegations
of SBMA's complaint insufficient to justify the invocation and application of the trust fund
doctrine as appreciated in Halley, even the evidence adduced by SBMA was solely to prove
the uncollected rentals.
Page 42 of 61
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AGRO FOOD PROCESSING CORP. vs. VITARICH CORPORATION

G.R. No. 217454. January 11, 2021, En Banc (Caguioa, J.)
DOCTRINE
The Doctrine of 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.”
FACTS
This case involves a corporation officer's authority to amend an original contract
without actual authority from the corporation's board of directors. Agra'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 and Vitarich simultaneously executed two agreements: first, a Memorandum of

Agreement (MOA) under which Vitarich offered to buy Agra's chicken dressing plant located
in Bulacan; and second, a Toll Agreement under which Agro agreed to dress the chickens
supplied by Vitarich for a toll fee. Pursuant to the MOA, Vitarich paid P20 million as deposit
to Agro and was given a period of forty-five (45) days within which to evaluate the dressing
plant facilities. At the end of the period, Vitarich formally made its offer to purchase, but Agro
did not accept the offer. Thus, Agro needed to return the P20 million deposit. Since Vitarich
was obligated to pay toll fees to Agro pursuant to the Toll Agreement, the parties agreed that
the manner of returning the P20 million deposit shall be through deductions of fifteen
percent (15%) of the gross receipts on the weekly billings of the toll fees.
More than two (2) years later, Vitarich filed a complaint for sum of money with
damages against Agro before the RTC: first, P4,770,916.82 plus interest, representing the
balance from the P20 million deposit, and second, 1'4,322,032.36 plus interest, representing
the balance on the sale oflive broiler chickens to Agro. Regarding the first amount, which
is the relevant amount in the Petition Vitarich stated that it was based not only on the
toll fees reflected on the original Toll Agreement, but also on the verbal amendments
to the toll fees made and implemented by the parties thrice from 1996 to 1997. Agro
disputed the computation made by Vitarich. It argued that the amount ofP4,770,916.82 was
inaccurate as it was based on the alleged verbal amendments to the toll fees, which
amendments were not binding on Agro as they were entered into by Vitarich and
Agro's Finance Manager, Chito del Castillo (del Castillo), which allegedly had no
authority to amend the original Toll Agreement from Agro's board of directors.
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RTC ruled that the amendments are not binding to Agro considering the lack of any
signature or conforme to the documentary evidence presented by Vitarich. Consequently,
Vitarich was not entitled to its claim.
CA set aside the ruling of the appellate court and held and held that the verbal
amendments to the toll fees were valid and obligatory on Agro, pursuant to the principle that
contracts are obligatory in whatever form they may have been entered into. It found that
Vitarich was able to establish the existence of the amendments based on the eighty nine (89)
weekly billings reflecting such amendments, which billings were notably prepared by Agro,
as well as from the testimony of Agra's President who admitted that his firm prepared such
billings and de! Castillo's own testimony that he was authorized to implement the
amendments. Further, the appellate court applied the doctrine of apparent authority in
arriving at the conclusion that de! Castillo was clothed with authority by Agra's board of
directors in concurring and implementing the amendments.
Agro argues that the appellate court erroneously applied the doctrine of apparent
authority, which is determined based on the acts of the principal and not by the acts of
the agent. Since the CA relied on the weekly billings prepared by del Castillo and his
testimony that he was authorized to implement the amendments, and not on Agro 's conduct
per se, it erred in applying the doctrine of apparent authority. Further, Vitarich was barred
from proving the existence of the verbal amendments pursuant to the parol evidence rule.
ISSUE
Whether or not CA correctly applied the doctrine of apparent authority?
RULING
YES. 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.
However, after carefully examining the evidence presented by Vitarich and passed
upon by the appellate court in arriving at its ruling, as reflected in the assailed Decision. We
find the appellate court's application of the doctrine of apparent authority well-supported
by the law and the evidence.
Evaluating the evidence presented by Vitarich, the conduct by which Agro clothed de!
Castillo with authority is evident on the following: first, in over a span of two (2) years, with
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over eighty nine (89) billings and three (3) instances of amendments, Agro never contested
the amended toll fees; second, even after receipt of several demand letters from Vitarich,
Agro never made an issue of the amended toll fees, and only raised the same in its Answer;
and third, Agro accepted the benefits arising from the amendments through the extension of
the period for its payment of the P20 million deposit (brought about by the decrease in the
percentage of billings to be deducted from the P20 million deposit), not to mention Agro's
corresponding increase in profits due to the increase or amendment in the price of gallantina
(type of chicken supplied by Agro) in the third amendment.
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 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."
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UNITED COCONUT PLANTERS BANK, VS. SECRETARY OF JUSTICE, OFFICE OF

THE CHIEF PROSECUTOR, TIRSO ANTIPORDA, JR. AND GLORIA CARREON.
G.R. No. 209601, January 12, 2021, En Banc (Caguioa, J.)
DOCTRINE
The Court, applying the rule of lenity, ruled in Ient v Tullet Prebon that any violation of
Section 31 of the Corporation Code was not considered as a violation of any provision of such
Code not otherwise specifically penalized therein pursuant to Section 144. The lack of specific
language imposing criminal liability in Sections 31 and 34 shows legislative intent to limit the
consequences of their violation to the civil liabilities mentioned therein.
FACTS
UCPB, through its Legal Services Division Head, Jose A. Barcelon, filed the Complaint-
Affidavit on July 23, 2007, for violation of Section 31 in relation to Section 144 of the
Corporation Code against Tirso Antiporda Jr. and Gloria Carreon before the DOJ. It alleged
that Antiporda and Carreon were UCPB's former Chairman and CEO, and former President
and COO, respectively. In 1998, Antiporda and Carreon authorized the payment of bonuses
amounting to Php 117,872,269.43 were released. Due to substantial losses, UCPB's Board of
Directors resolved to shorten the corporate existence of UCAP and approved the takeover,
purchase of assets and assumption of liabilities of UCAP by UCPB. When UCAP was absorbed
by UCPB, it had liabilities in the amount of Php 4.4 Billion. Notwithstanding their knowledge
of UCAP's losses, they declared bonuses in 1998 in bad faith, with gross negligence and in
violation of by-laws which requires a board authority prior to declaration of bonuses. Thus,
they are liable under Section 31 of the Corporation Code which provides for the liability of
directors or officers who conduct the affairs of a corporation in bad faith; and, likewise, they
are criminally liable under Section 144 which provides for penalties for violations of the
Corporation Code.
Antiporda filed a Counter-Affidavit and alleged: his actions as Chairman and CEO
were not done in bad faith as he was merely guided by UCPB's audited Financial Statements,
by-laws and policies; and such provides that 10% of UCPB's net profit is allotted as bonuses
to its directors and officers, and, what is subject to Board approval is only the manner by
which UCPB's President distributes the 4% of the net profit to other officers. It had been the
practice of UCPB to pay bonuses without a board resolution and BPI examiners never
questioned the absence of a board resolution in previous grant of bonuses
Carreon filed a Counter-Affidavit and alleged: there was sufficient legal and factual
justification for the grant of bonuses since (a) it was expressly authorized by UCPB's by-laws,
(b) it was the long-established policy and practice, and (c) the financial condition of UCPB
allowed the grant of the bonuses. There is no evidence that UCAP incurred losses of Php 4.4
billion in 1997; assuming that there were losses, she could not have known, because both
the internal auditors and the independent auditors did not attest to the losses. Also, she was
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not involved in the approval or distribution of bonuses since her participation was limited
in evaluating the officers' performance.
UCPB filed a Consolidated Reply-Affidavit and alleged: the release of the bonuses was
surreptitious since there was no board approval. Antiporda and Carreon were aware of the
losses since they participated in the board meeting where UCAP's financial problems were
discussed, particularly, the Php 4 billion worth of UCAP's liabilities
DOJ Secretary ruled Section 144 was not applicable to violations of Section 31 of the
Corporation Code, and the action against them had prescribed. It held: the penalties in
Section 144 of the Corporation Code apply, only when the other provisions of the
Corporation Code, do not provide penalties; since Section 31 provides for the remedy of civil
action for damages, Section 144 does not apply anymore; the act of "gross negligence and
bad faith in directing the affairs of the corporation" can be committed only by the directors
and trustees of the corporation, thus, consistent with the principle of strict construction of
penal laws, Antiporda and Carreon are not liable as the action has prescribed since the
alleged violation, which was committed by the payment of the bonus in early 1998, occurred
more than 9 years ago.
The CA observed that there would be no basis to subject directors, trustees, or

corporate officers liable under Section 31 to the penalties under Section 144 of the
Corporation Case because Section 31 itself provides for the proper remedy, which is civil
sanction for damages rather than criminal sanction under Section 144.12 According to the
CA, by providing the remedy of damages, the legislative intent is clear that Section 31
violations are excluded from the application of Section 144; and to apply Section 144 to acts
committed under Section 31 would unduly extend its application to situations not intended
by the legislature and would also violate the principle of strict construction of penal laws.
ISSUE
1. Whether or not Section 144 of the Corporation Code apply to Section 31 of the RCC?
2. Whether or not the action based on Section 31 of the Corporation Code had
prescribed?
RULING
1. NO. The Court, applying the rule of lenity, ruled in Ient v Tullet Prebon that any
violation of Section 31 of the Corporation Code was not considered as a violation of any
provision of such Code not otherwise specifically penalized therein pursuant to Section 144.
In other words, Section 144 did not apply to or include in its coverage Section 31 of the
Corporation Code.
xxx
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After a meticulous consideration of the arguments presented by both sides, the

Court comes to the conclusion that there is a textual ambiguity in Section 144;
moreover, such ambiguity remains even after an examination of its legislative
history and the use of other aids to statutory construction, necessitating the
application of the rule of lenity in the case at bar.
The lack of specific language imposing criminal liability in Sections 31 and 34

shows legislative intent to limit the consequences of their violation to the civil
liabilities mentioned therein. Had it been the intention of the drafters of the
law to define Sections 31 and 34 as offenses, they could have easily included
similar language as that found in Section 74.
The Corporation Code was intended as a regulatory measure, not primarily as

a penal statute. Sections 31 and 34 in particular were intended to impose
exacting standards of fidelity on corporate officers and directors but without
unduly impeding them in the discharge of their work with concerns of
litigation. Considering the object and policy of the Corporation Code to
encourage the use of the corporate entity as a vehicle for economic growth, we
cannot espouse a strict construction of Sections 31 and 34 as penal offenses in
relation to Section 144 in the absence of unambiguous statutory language and
legislative intent to that effect.
xxx
2. YES.Since Section 144 provided as penalty imprisonment for not less than 30 days
but not more than 5 years, then the period of prescription, according to UCPB, should be 8
years for violations penalized under special laws by imprisonment for 2 years or more, but
less than 6 years pursuant to Act No. 3326.
Citing Section 2 of Act No. 3326, which provides that "[prescription shall begin to run
from the day of the commission of the violation of the law, and if the same be not known at
the time, from the discovery thereof and the institution of judicial proceedings for its
investigation and punishment,"
UCPB posits that at the time of the commission of the alleged violation in 1998, there
was no way that it could have taken action on the undue payment of bonuses because the
recipients of the bonuses comprised the management of the bank with Antiporda and
Carreon being the top two officers, and even when the bank changed administrations, there
was no way the new administration could have taken action against Antiporda and Carreon
until it had evidentiary basis, which came through only with the KPMG report of 2003. To
UCPB, the prescriptive period should have started to run only in 2003 when UCPB allegedly
discovered the undue payment of bonuses from the KPMG report.
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The liability of the erring director, trustee or officer under Section 31 of the
Corporation Code being purely civil, i.e., "all damages resulting [from its violation] suffered
by the corporation, its stockholders or members and other persons," the Court holds that it
is the Civil Code that is the controlling law. The Court thus agrees with the CA that it is Article
1146 of the Civil Code which determines the prescriptive period. It provides:
ART. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict. (n)
Even if the Court were to uphold UCPB's actual discovery theory, the action upon the
injury to its right under Section 31 of the Corporation Code or the damages that it had
suffered by virtue of the alleged unauthorized payment of bonuses had prescribed on July 1,
2007 or four years from June 30, 2003, the purported day of actual discovery by UCPB.
Under Article 1155 of the Civil Code, the prescription of actions is interrupted when
they are filed before the court, when there is a written extrajudicial demand by the creditors,
and when there is any written acknowledgment of the debt by the debtor. The filing of the
Complaint-Affidavit by UCPB with the DOJ did not interrupt the prescription of its action not
only because this was beyond the 48 calendar months prescriptive period based on Section
31 of the Corporation Code, but also because it was not filed before the proper court and
finally because the Complaint-Affidavit cannot even be deemed as an extrajudicial demand
for damages given its prayer.
Given that there is no factual basis from which actual discovery of the payment of the
questioned bonuses by UCPB, assuming the same to have been concealed by Antiporda and
Carreon, can be based and that, according to the CA, said payment had been widely and
publicly known given that UCPB belongs to the heavily-regulated banking industry whose
transactions are documented and audited by the BSP on a regular basis, the filing of the
action for damages based on Section 31 of the Corporation Code had already prescribed 48
calendar months or 4 years from July 31, 1998, the last release date of the 50 manager's
checks, at the latest.
Parenthetically, if the second issue is to be resolved under the aegis of the RCC and
assuming that Section 170 applies to Section 30 of the RCC, prosecution of any violation of
Section 30 prescribes in a year or 12 calendar months pursuant to Section 1, Act No. 3326,
given that the penalty of any Section 30 violation is fine only.
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IRENE G. ANCHETA, ET AL., (RANK-AND-FILE EMPLOYEES OF SUBIC WATER

DISTRICT) vs. COMMISSION ON AUDIT
G.R. No. 195395, September 10, 2013, En Banc (Caguioa, J.)
DOCTRINE
There is no provision in PD No. 198, as amended, which exempts Local Water

Districts (LWD) from RA No. 6758's application. However, it was clarified that only LWD
officers and employees are covered by RA No. 6758. In the landmark case of Baybay Water
District v. Commission on Audit, the Court explained that RA No. 6758 does not apply to LWD
directors because their functions are not those contemplated in the "positions"
described under Sections 4 and 5 of RA No. 6758, and also because of the nature of their
compensation.
FACTS
Subic Water District (SWD) is a government-owned and controlled corporation
organized under Presidential Decree No. 198, as amended. In 2010, it released an aggregate
amount of P3,354,123.50 worth of benefits for its officers and employees; and Christmas
groceries for its Board of Directors. These disbursements were disallowed through a Notice
of Disallowance (ND) because they were granted to persons employed after June 30, 1989,
in violation of Department of Budget and Management (DBM) Corporate Compensation
Circular (CCC) No. 10.
DBM CCC No. 10 provides guidelines in the implementation of RA No. 6758 or the
Salary Standardization Law. The COA Audit Team particularly cited paragraph 5.5 of DBM
CCC No. 10, which enumerated the additional allowances that are not integrated in the
standardized salary rate, and allowed to be continuously given only to incumbent employees,
who are actually receiving such benefits as of June 30, 1989. Considering that the SWD
officers and employees who received the additional benefits in 2010 were employed after
June 30, 1989, the COA Audit Team concluded that the grants were unauthorized.
ISSUE
Is SWD covered by RA No. 6758 when 2010 benefits were granted?
RULING
YES. SWD, as a government-owned and controlled corporation with original charter
is covered by RA No. 6758 insofar as its employees and officers are concerned. However, RA
No. 6758 does not apply insofar as SWD’s directors.
RA No. 6758 took effect on July 1, 1989 to standardize the salary rates of government
officials and employees, amending PD No. 985 and PD No. 1597. Section 12 of RA No. 6758
provides:
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SEC. 12. Consolidation of Allowances and Compensation. — All allowances,

except for representation and transportation allowances; clothing and laundry
allowances; subsistence allowance of marine officers and crew on board
government vessels and hospital personnel; hazard pay; allowances of foreign
service personnel stationed abroad; and such other additional compensation not
otherwise specified herein as may be determined by the DBM, shall be deemed
included in the standardized salary rates herein prescribed. Such other
additional compensation, whether in cash or in kind, being received by incumbents
only as of July 1, 1989 not integrated into the standardized salary rates shall
continue to be authorized.
Hence, at present, the overarching rule is that all allowances are deemed included
in the standardized salary rate, unless excluded by law or by a DBM issuance. This rule
was premised upon the distinct policy to eliminate multiple allowances and other incentive
packages, resulting in differences of compensation among government personnel.
Nonetheless, due to the inequity and injustice that RA No. 6758 may cause to
incumbents, the legislature cushioned its effect and adopted the policy of non-diminution of
pay as embodied under Sections 12 and 17 of RA No. 6758. The second sentence of Section
12 allows government workers to continue receiving non-integrated remuneration and
benefits provided that: (1) they were incumbents when RA No. 6758 took effect on July 1,
1989; (2) they were actually receiving such benefits as of that date; and (3) such additional
compensation is distinct and separate from the specific allowances enumerated in the first
sentence of Section 12. As well, Section 17 states:
SEC. 17. Salaries of Incumbents. — Incumbents of positions presently

receiving salaries and additional compensation/fringe benefits including
those absorbed from local government units and other emoluments, the
aggregate of which exceeds the standardized salary rate as herein prescribed,
shall continue to receive such excess compensation, which shall be referred
as transition allowance. The transition allowance shall be reduced by the
amount of salary adjustment that the incumbent shall receive in the future.
Section 4 of RA No. 6758 provides that its provisions "shall apply to all positions,
appointive or elective, on full or part-time basis, now existing and hereafter created in the
government, including GOCCs and government financial institutions." SWD is a GOCC with
a special charter, created and organized pursuant to PD No. 198, which took effect in 1973.
In Davao City Water District v. Civil Service Commission and Commission on Audit, the Supreme
Court said that water districts are government-owned and controlled corporations
with original charter.
Thus, it is erroneous for petitioners to insist that SWD became a GOCC only on March
12, 1992 or after the finality of the Court's decision in Davao City Water District. The decision
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of the Court merely interpreted PD No. 198 in declaring LWDs as GOCCs. The Court's
interpretation constitutes part of the law, effective from the date it was originally passed,
because it merely established the contemporaneous legislative intent that the interpreted
law carried into effect. Accordingly, upon its creation by PD No. 198, SWD was already a
GOCC covered by RA No. 6758 effective July 1, 1989.
The only exception to the extensive coverage of the Salary Standardization Law is when
the GOCC's charter specifically exempts the corporation from it. In the case of LWDs, there
is no provision in PD No. 198, as amended, which exempts them from RA No. 6758's
application. However, it was clarified that only LWD officers and employees are
covered by RA No. 6758. In the landmark case of Baybay Water District v. Commission on
Audit, the Court explained that RA No. 6758 does not apply to LWD directors because their
functions are not those contemplated in the "positions" described under Sections 4
and 5 of RA No. 6758, and also because of the nature of their compensation.
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KOLIN ELECTRONICS CO., INC., vs. KOLIN PHILIPPINES INTERNATIONAL, INC.,

G.R. No. 228165, February 9, 2021, EN BANC (Caguioa, J.)
DOCTRINE
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.
FACTS
On September 11, 2006 more than a month after the promulgation of the KECI
ownership case — KPII, an affiliate of TKC, filed Trademark Application No. 4-2006-010021
for the mark under Class 9 covering "Televisions and DVD players." On June 12, 2007, KECI
filed an opposition against KPII's Trademark Application No. 4-2006-010021 based on,
among others, the fact that it is the registered owner of the mark and that the registration of
KPII's mark will cause confusion among consumers. In its defense, KPII claimed that its
application for cannot be denied on the basis of the ruling in the KECI ownership case
because it was not a party to said case and the KECI ownership case is not res judicata to the
instant case. Besides, KPII asserted that the KECI ownership case specifically clarified that
KECI's ownership over the mark is limited only in connection with goods specified in KECI's
certificate of registration and those related thereto. KPII insisted that "Televisions and DVD
players" are not related to the goods covered by KECI's registered mark.
In a Decision on IPC No. 14-2007-00167 dated September 9, 2009, the IPO-BLA

sustained KECI's opposition. One of the reasons why KPII's Trademark Application No. 4-
2006-010021 for was rejected was the fact that buyers would be confused as to the origin of
the products being offered by KECI and KPII. The IPO-DG stated that "with the decision of
the [CA in CA-G.R. SP No. 122565] that [TKC's] television sets and DVD players are related to
[KECI's] goods covered by the latter's certificate of registration for , this Office rules in favor
of [KECI]." Accordingly, the CA ruled that KPII may register its mark for television sets and
DVD players and the doctrine of res judicata forbids it from arriving at a contrary conclusion.
ISSUE
Whether KPII should be allowed to register its mark
RULING
No. To summarize the above discussion: (1) there is resemblance between KECI's and
KPII's marks; (2) the goods covered by KECI's are related to the goods covered by KPII's ; (3)
there is evidence of actual confusion between the two marks; (4) the goods covered by KPII's
fall within the normal potential expansion of business of KECI; (5) sophistication of buyers
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is not enough to eliminate confusion; (6) KPII's adoption of KECI's coined and fanciful mark
would greatly contribute to likelihood of confusion; and (7) KPII applied for in bad faith.
Thus, KPII's application for should be denied because it would cause likelihood of confusion
and KECI's rights would be damaged.
It must also be stressed that KECI was already declared as the owner of the mark
under the Trademark Law. Section 236 171 of the IP Code states that nothing in the IP Code
— which, as mentioned, logically includes registrations made pursuant thereto — shall
adversely affect the rights of the enforcement of marks acquired in good faith prior to the
effective date of said law. As seen above, the existence of likelihood of confusion is already
considered as damage that would be sufficient to sustain the opposition and rejection of
KPII's trademark application. More than that, however, the Court is likewise cognizant that,
by granting this registration, KPII would acquire exclusive rights over the stylized version of
KOLIN for a range of goods/services, 172 i.e. , covered goods, related goods/services,
goods/services falling within the normal potential expansion of KPII's business. Owing to the
peculiar circumstances of this case, this will effectively amount to a curtailment of KECI's
right to freely use and enforce the KOLIN word mark, or any stylized version thereof, for its
own range of goods/services, especially against KPII, regardless of the existence of actual
confusion. Thus, based on Section 122 173 vis- -vis Section 236 174 of the IP Code, the Court
cannot give due course to KPII's trademark application for Kolin.
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AGAPITO A. SALIDO, JR. v. ARAMAYWAN METALS DEVELOPMENT CORPORATION,

CERLITO SAN JUAN, CORAZON SAN JUAN, CRISTINA MARIE SAN JUAN
G.R. No. 233857, March 18, 2021, First Division (Caguioa, J.)
DOCTRINE
Apart from reacquiring the shares through some lawful means, the Corporation Code is
also explicit that while a corporation has the power to purchase or acquire its own shares, the
corporation must have unrestricted retained earnings in its books to cover the shares to be
purchased or acquired. In addition, in cases where the reason for reacquiring the shares is
because of the unpaid subscription, the Corporation Code is likewise explicit that the
corporation must purchase the same during a delinquency sale. All the foregoing requirements
were not met in the reduction of San Juan's shares.
FACTS
Cerlito San Juan (San Juan), Ernesto Mangune (Mangune), and Agapito Salido, Jr.
(Salido), along with four other individuals (collectively, Salido faction), agreed to form two
mining corporations, namely Aramaywan and Narra Mining Corporation (Narra Mining).
They entered into an agreement whereby San Juan would advance the paid-up subscription
for Aramaywan amounting to P2,500,000.00 and would assure payment of the subscription
of the capital stock of Narra Mining. In exchange, San Juan would own 55% of the stocks of
Aramaywan and 35% of the stocks of Narra Mining.
San Juan then advanced the P2,500,000.00 paid-up subscription of Aramaywan. This
is evidenced by a Standard Chartered Bank Certificate indicating that the amount of
P2,500,000.00 was deposited in San Juan's name as treasurer, held by him in trust for the
corporation.
On November 25-26, 2005, the Board of Directors of Aramaywan had its first Board
Meeting. In the said meeting, the Salido faction claimed that San Juan delivered only
P932,209.16 in cash during the incorporation process of the corporation. The Salido faction
claimed that the rest of the P2,500,000.00 remained undelivered as it remained under San
Juan's name. Thus, the Salido faction claimed that San Juan was in breach of his undertaking
to advance the payment of Aramaywan's capital stock. As regards the incorporation of Narra
Mining, it is undisputed that San Juan has yet to register the same, although San Juan claimed
that the Salido faction has not yet demanded its registration. Because of these supposed
breaches by San Juan of his obligations under the Agreement, Salido made a proposal to
reduce San Juan's shares in Aramaywan from 55% to 15%. It is not clear whether San Juan
accepted this proposal or not.
San Juan received a Notice of Special Meeting of the Board from a certain Atty. Roland
Pay (Atty. Pay). The San Juan faction wrote Atty. Pay a letter directing him to explain as to
how he became the corporate secretary, but the latter never responded. The special board
meeting was nevertheless conducted wherein resolutions were passed by the Salido faction,
Page 55 of 61
Case Digests
among those were the reduction of the shares of San Juan in Aramaywan from 55% to 15%,
the change of corporate address from Taguig City to Palawan, the non-incorporation of Narra
because of financial reverses, and the appointment of Atty. Pay as corporate secretary.
The San Juan faction filed with the Regional Trial Court of Pasig (RTC) a complaint
which sought to invalidate the acts of the Salido faction. The RTC dismissed the complaint.
The CA affirmed the ruling of the RTC and held that the reduction of San Juan’s shares was
valid. However, on motion for reconsideration filed by the San Juan faction, the CA reversed
its earlier decision and said that San Juan did not consent to the reduction of his shares. It
held that San Juan was able to advance the paid-up subscription as evidenced by the
Standard Chartered Bank Certificate. Further, the CA held as erroneous the RTC's ruling that
San Juan's shares were validly converted into treasury shares. The CA held that there was no
conversion because (1) San Juan's investment was not returned and (2) the corporation did
not have unrestricted retained earnings to pay for the reacquired shares, if it did so intend
to reacquire the same.
ISSUE
1. Whether San Juan’s shares were validly reduced.
2. Whether the resolutions adopted by the Aramaywan’s Board of Directors were valid.
RULING
1. NO. Batas Pambansa Blg. 68, or the Corporation Code, the law applicable at the time
the events in this case occurred, clearly sets out the parameters when a corporation may
reacquire its shares and convert them into treasury shares. According to Section 9 of the
Corporation Code, "treasury shares are shares of stock which have been issued and fully paid
for, but subsequently reacquired by the issuing corporation by purchase, redemption,
donation or through some other lawful means." Apart from reacquiring the shares through
some lawful means, the Corporation Code is also explicit that while a corporation has the
power to purchase or acquire its own shares, the corporation must have unrestricted
retained earnings in its books to cover the shares to be purchased or acquired. In addition,
in cases where the reason for reacquiring the shares is because of the unpaid subscription,
the Corporation Code is likewise explicit that the corporation must purchase the same during
a delinquency sale. All the foregoing requirements were not met in the reduction of San
Juan's shares.
At the outset, the records are bereft of any showing that Aramaywan had unrestricted
retained earnings in its books at the time the reduction of shares was made. During that time,
Aramaywan had just been existing for a few months, and had not in fact been able to perform
mining activities yet. It is thus both highly doubtful and unsupported by the record that
Aramaywan had unrestricted retained earnings to be able to purchase its own shares.
The Court has observed that, "The trust fund doctrine backstops the requirement of
unrestricted retained earnings to fund the payment of the shares of stocks of the
Page 56 of 61
Case Digests
withdrawing stockholders." Under the trust fund doctrine, "the capital stock, property, and
other assets of a corporation are regarded as equity in trust for the payment of corporate
creditors, who are preferred in the distribution of corporate assets." Thus, "the creditors of
a corporation have the right to assume that the board of directors will not use the assets of
the corporation to purchase its own stock for as long as the corporation has outstanding
debts and liabilities. There can be no distribution of assets among the stockholders without
first paying corporate debts."
In this case, there was no showing that, at the time the reduction of San Juan's shares
was made, Aramaywan had unrestricted retained earnings in its books. Neither was it shown
that it did not have creditors or that they were already paid before the agreement to release
San Juan was made.
Moreover, it must be emphasized that San Juan's subscriptions have already been
fully paid by him, and as such, Aramaywan cannot validly reduce his shares without giving a
corresponding return of his investment. As earlier stated, San Juan contributed
P2,500,000.00 evidenced by a Standard Chartered Bank certificate in San Juan's name which
indicates that he holds that money in trust for Aramaywan.
In any event, if it were true that San Juan had unpaid subscriptions, the Corporation
Code has provided a procedure for the demand of such payment and the holding of a
delinquency sale in case of continued non-payment. Thus, even assuming it was true that San
Juan had unpaid subscriptions, simply agreeing in a meeting for their reduction, thereby
releasing the stockholder from his obligation to pay the unpaid subscriptions, cannot be the
mode by which said unpaid subscriptions are settled. To allow corporations to do such an
act would violate the aforementioned trust fund doctrine in corporation law.
Verily, if it were true that San Juan had unpaid subscriptions, it was invalid for the
Board of Directors to waive such payment, for it would amount to a decrease in the
corporation's capital stock which could not be accomplished without the formalities under
Section 38 of the Corporation Code (Section 37 under the Revised Corporation Code) which
includes, among others, the prior approval of the SEC.
In light of the foregoing principles and findings, the Court holds that the reduction of
San Juan's shares was invalid. This remains true even assuming that San Juan had consented
to the said reduction.
2. YES, the resolutions were valid except as to the transfer of the corporate place of
business. The corporation’s by-laws allows meetings called upon the request of the majority
of the directors. The Articles of Incorporation of Aramaywan named nine (9) directors, which
means that the presence of five (5) members is sufficient to constitute a quorum to push
through with the board meeting and in that case, a vote of three (3) directors will be enough
to ratify or approve a corporate act.
Page 57 of 61
Case Digests
The resolution of no longer proceeding with the incorporation of Narra is an ordinary

business affair and it was unanimously approved by the five (5) directors present during the
February 5, 2006 special board meeting. This is also true as regards the appointment of Atty.
Pay as corporate secretary.
However, on the transfer of the corporate place of business, this matter is not an
ordinary business of the company for it would necessarily involve an amendment of the
articles of incorporation. In order for the amendment to be valid, Section 16 of the
Corporation Code requires that there be (1) a majority vote of the board of directors and (2)
a written assent of the stockholders representing at least 2/3 of the outstanding capital
stock, (3) with the corresponding approval by the Securities and Exchange Corporation.
Since we already ruled that the reduction of San Juan's shares was invalid, he remains a
majority stockholder and his presence and written assent to the proposed transfer of
principal place of business is therefore indispensable for the corporate act to be valid. Absent
these requirements, we are constrained to set aside the transfer of Aramaywan principal
office from Taguig City to Palawan.
Page 58 of 61
Case Digests
BANGKO SENTRAL NG PILIPINAS v. OFFICE OF THE OMBUDSMAN

G.R. No. 201069, June 16, 2021, First Division (Caguioa, J.)
DOCTRINE
An arm's-length transaction is defined as follows: "one between two parties, however
closely related they may be, conducted as if the parties were strangers, so that no conflict of
interest arises"; one made "in good faith in the ordinary course of business by parties with
independent interests. . . . The standard under which unrelated parties, each acting in his or her
own best interest, would carry out a particular transaction"; or "dealings between two parties
who are not related or not on close terms and who are presumed to have roughly equal
bargaining power; not involving a confidential relationship.
The timing and the circumstances surrounding the loan transaction indicate that
Jamorabo's position as examiner-in-charge of RBKSI unduly influenced the speedy facilitation
thereof, in violation of the arm's-length principle.
FACTS
Petitioner Bangko Sentral ng Pilipinas (BSP) filed a complaint before the Office of the
Ombudsman against Benjamin Jamorabo(Jamorabo), a former Bank Officer I of BSP
Supervision and Examination Center, for violation of Section 27(d) of R.A. 7653 and BSP
Office Order No.423, series of 2002, for obtaining a loan with the Rural Bank of Kiamba,
Sarangani, Inc.(RBKSI) while he was conducting the regular examination of said bank.
The complaint alleged that Jamorabo took an unsecured loan in the amount of
P200,000 with RBKSI. For a loan of such amount, RBKSI would normally require from the
borrower a collateral, documentary proof of income and credit investigation. Jamorabo’s
loan, however, did not undergo the ordinary processes and was approved without him
offering a collateral. He convinced RBKSI’s manager that he would just issue post-dated
checks payable to RBKSI.
The Ombudsman dismissed the complaint ruling that a violation of R.A. No. 7653,
Section 27 (d) and BSP Office Order No. 423, series of 2002 does not entail criminal liability;
hence Jamorabo can only be held administratively liable. However, since Jamorabo had
already retired from government service before the complaint was filed, he cannot be
sanctioned anymore.
ISSUE
Whether Jamorabo can be held administrative and criminally liable for violation of R.A. No.
7653, Sec.27(d)?
RULING
Page 59 of 61
Case Digests
YES. The absolute and unqualified ban on borrowings by the BSP's supervision and
examination personnel was removed by R.A. No. 11211, which amended Section 27 (d) as
follows:
SEC. 27. Prohibitions. — In addition to the prohibitions found in Republic Act
Nos. 3019 and 6713, personnel of the Bangko Sentral are hereby prohibited
from:
(d) borrowing from any institution subject to supervision or examination by

the Bangko Sentral unless said borrowing is transacted on an arm's length
basis, fully disclosed to the Monetary Board, and shall be subject to such rules
and regulations as the Monetary Board may prescribe.
Nevertheless, the provision, as amended, maintains the general rule in R.A. No. 7653:
BSP personnel cannot borrow loans from entities that are subject to the BSP's supervision
or examination, unless the conditions set forth in the provision are met.
To penalize violations thereof, R.A. No. 7653 contains a general penal clause, which is
essentially retained in R.A. No. 11211, viz:
SEC. 36. Proceedings upon Violation of This Act and Other Banking Laws,
Rules, Regulations, Orders or Instructions. — Whenever a bank, quasi-bank,
including their subsidiaries and affiliates engaged in allied activities or other
entity which under this Act or special laws is subject to Bangko Sentral
supervision or whenever any person or entity willfully violates this Act or
other pertinent banking laws being enforced or implemented by the Bangko
Sentral or any order, instruction, rule or regulation issued by the Monetary
Board, the person or persons responsible for such violation shall unless
otherwise provided in this Act be punished by a fine of not less than Fifty
thousand pesos (P50,000.00) nor more than Two million pesos
(P2,000,000.00) or by imprisonment of not less than two (2) years nor more
than ten (10) years, or both, at the discretion of the court.
Read together, Sections 27 (d) and 36 categorically provide that BSP personnel who
borrow from institutions under BSP supervision or examination without complying with the
requisite former provision shall be penalized by a fine or imprisonment, or both, at the
discretion of the court. Thus, the Ombudsman committed a glaring mistake amounting to
grave abuse of discretion when it ruled that a violation of R.A. No. 7653, Section 27 (d) entails
administrative liability only. A cursory reading of the statute in its entirety clearly shows that
Section 27 (d) is a penal provision, a violation of which gives rise to criminal liability, apart
from the administrative liability imposed by BSP Office Orders No. 423, 25 series of 2002;
Page 60 of 61
Case Digests
To be permissible under Section 27 (d), loans taken out by BSP personnel with
institutions undergoing BSP examination must now satisfy three requisites: 1) conduct of
the transaction on arm's length basis; 2) full disclosure to the Monetary Board; and 3)
compliance with rules and regulations prescribed by the Monetary Board. Jamorabo's
transaction with RBKSI does not meet any of these requisites.
An arm's-length transaction is defined as follows: "one between two parties, however

closely related they may be, conducted as if the parties were strangers, so that no conflict of
interest arises"; one made "in good faith in the ordinary course of business by parties with
independent interests. . . . The standard under which unrelated parties, each acting in his or
her own best interest, would carry out a particular transaction"; or "dealings between two
parties who are not related or not on close terms and who are presumed to have roughly
equal bargaining power; not involving a confidential relationship.
Clearly, the arm's length standard adopted in Section 27 (d) means that BSP
personnel must transact with ESP-examined institutions in such a way that they will not be
able to utilize their position to gain undue influence with, or more favorable terms from, the
target institution. In this case, there is prima facie evidence of Jamorabo's violation of the
arm's-length standard in his dealing with RBKSI. The timing and the circumstances
surrounding the loan transaction indicate that Jamorabo's position as examiner-in-charge of
RBKSI unduly influenced the speedy facilitation thereof, in violation of the arm's-length
principle.
Furthermore, Jamorabo did not disclose the loan to the BSP, in violation of the
express provision of Section 27 (d) and BSP regulations.|| Tellingly, Jamorabo's affidavit
is completely silent on whether he disclosed the loan to the BSP. His complete silence on
the matter betrays his awareness of the illegality of the transaction he entered into with
RBKSI. Had he disclosed the loan in any manner to his superiors, he could have very easily
said so in his affidavit; but he did not, since he knew full well that the transaction was
absolutely prohibited under the then-prevailing law.
The foregoing facts clearly make out a prima facie case for violation of Section 27
(d) in relation to Section 36 of R.A. No. 7653 against Jamorabo; and the Ombudsman
committed grave abuse of discretion in ruling that Jamorabo cannot be held criminally
liable therefor.
Page 61 of 61

Ponencias of J. Caguioa in COMMERCIAL LAW 2022

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Ponencias of J. Caguioa in COMMERCIAL LAW 2022

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Ponencias of J. Caguioa in Commercial Law

UNIVERSITY OF SANTO TOMAS

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YON MITORI INTERNATIONAL INDUSTRIES v. UNION BANK OF THE PHILIPPINES

1. Whether Yon Mitori is the real party in interest.

JOSE M. ROY III v. CHAIRPERSON HERBOSA, SEC, and

As to whether respondent PLDT is currently in compliance with the Constitutional

ALLAN CU v. SMALL BUSINESS GUARANTEE AND FINANCE CORPORATION

JOSE SANICO and VICENTE CASTRO v. WERHELINA P. COLIPANO

1. Only Sanico breached the contract of carriage.

A complaint for breach of a contract of carriage is dismissible as against the employee

2. NO, the Affidavit of Desistance and Release of Claim is void.

3. NO, the amount of compensatory damages granted is incorrect.

A party's testimony in court is sworn and subject to cross-examination by the other

Further, although as a general rule, documentary evidence is required to prove loss

SYMEX SECURITY SERVICES, INC. v. MAGDALINO O. RIVERA, JR.

As to petitioner Arcega's liability for the obligations of Symex to respondents, the

Section 31 of the Corporation Code is the governing law on personal liability of

Based on the records, respondents failed to specifically allege either in their

TEE LING KIAT v. AYALA CORPORATION (Substituted herein by its

UNITRANS INTERNATIONAL FORWARDERS, INC. v.

INSURANCE COMPANY OF NORTH AMERICA

Hence, jurisprudence holds that a common carrier is presumed to have been

TRADE AND INVESTMENT DEVELOPMENT CORPORATION also known as PHILIPPINE

To secure payment, petitioner Trade and investment Development

On November 08, 2013, Typhoon Yolanda caused devastation to Leyte, where

Despite several demands made by PVB pursuant to the Guarantee Agreement,

Upon a simple perusal of the Guarantee Agreement, to which petitioner

ENGINEER RICARDO VASQUEZ v. PHILIPPINE NATIONAL BANK

Evidence on record shows that according to the Credit Agreement, in a situation

Whether the unilateral determination of interest rates of PNB is valid.

QUINTIN ARTACHO LLORENTE v. STAR CITY PTY LIMITED, REPRESENTED BY THE

SEC. 150. Doing Business Without a License. - No foreign corporation transacting

A foreign corporation needs no license to sue before Philippine courts on an isolated

2. YES. SCPL is a holder in due course.

Regarding the effect of countermand or stopping payment, the drawer of a bill,

3. NO. EPCIB should not be held solidarily liable.

FIRST PHILIPPINE HOLDINGS CORPORATION v. SECURITY AND EXCHANGE

FPHC , in a position paper, questioned the reasonableness and necessity of the

2. YES. The rate prescribed was unreasonable

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Zuneca of "ZYNAPS", Natrapharm had allegedly fraudulently appropriated the "ZYNAPSE"

JENNIFER M. ENANO-BOTE, ET AL. vs. JOSE CH. ALVAREZ, CENTENNIAL AIR,

AGRO FOOD PROCESSING CORP. vs. VITARICH CORPORATION

Agro and Vitarich simultaneously executed two agreements: first, a Memorandum of

UNITED COCONUT PLANTERS BANK, VS. SECRETARY OF JUSTICE, OFFICE OF

The CA observed that there would be no basis to subject directors, trustees, or

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The Corporation Code was intended as a regulatory measure, not primarily as

IRENE G. ANCHETA, ET AL., (RANK-AND-FILE EMPLOYEES OF SUBIC WATER

There is no provision in PD No. 198, as amended, which exempts Local Water

SEC. 12. Consolidation of Allowances and Compensation. — All allowances,

SEC. 17. Salaries of Incumbents. — Incumbents of positions presently

KOLIN ELECTRONICS CO., INC., vs. KOLIN PHILIPPINES INTERNATIONAL, INC.,

In a Decision on IPC No. 14-2007-00167 dated September 9, 2009, the IPO-BLA

AGAPITO A. SALIDO, JR. v. ARAMAYWAN METALS DEVELOPMENT CORPORATION,

The resolution of no longer proceeding with the incorporation of Narra is an ordinary

BANGKO SENTRAL NG PILIPINAS v. OFFICE OF THE OMBUDSMAN

(d) borrowing from any institution subject to supervision or examination by

An arm's-length transaction is defined as follows: "one between two parties, however