Question:

Sometime in March 2009, a panel of insurers composed of Standard Insurance

Co., Inc., together with United Coconut Planters Bank General Insurance, Co. Inc.,
Pioneer Insurance and Surety Corporation, Bank of Philippine Islands M/S
Insurance Corporation, and Malayan Insurance Co., Inc., issued Policy No.
HOF09FD-FAR086036 in favor of Integrated Micro Electronics, Inc., insuring all of
its properties against "all risks of physical loss, destruction of, or damage,
including fire" for the period March 31, 2009 to March 31, 2010. On May 24,
2009, a fire broke out at Integrated Micro's building causing damage to its
production equipment and machineries. Thus, on May 25, 2009, Integrated
Micro filed a claim for indemnity from Standard Insurance but was rejected on
February 24, 2010 on the ground that the cause of the loss was an excluded peril.
Aggrieved, Integrated Micro sought reconsideration. Standard Insurance moved
to dismiss the. However, Integrated Micro commenced the complaint on April
11, 2011 seeking claims, about two months after the cause of action was
prescribed. On November 9, 2011, the RTC denied the motion to dismiss and
directed Standard Insurance to file a responsive pleading. Dissatisfied, Standard
Insurance sought reconsideration but was denied. Hence, Standard Insurance
filed a petition for certiorari with the CA. In 2013, the CA granted the petition
and ruled that Integrated Micro's cause of action had been prescribed and that
the summons was improperly served.

1. Has the claim been prescribed? Explain.

2. What is the meaning of final rejection? Explain.

Answer:
1. The claim has been prescribed.
The CA did not err in ruling that Integrated Micro's cause of action had
been prescribed. Integrated Micro received the notice rejecting its claim
on February 24, 2010, but the complaint was filed only on April 11, 2011,
which is beyond the 12-month prescriptive period.

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 It is explicit that if a claim is made and rejected, an action or suit should
be commenced within a period of 12 months. There is neither
qualification nor distinction whether it is the insurer's initial or final
rejection. The parties did not agree that the insurer should first deny any
request for reconsideration before a suit for indemnity may be filed.
Thus, based on the plain and ordinary context of the agreement, the
parties contemplated that the cause of action for loss or damages arising
from the insurance contract shall accrue from rejection of the claim at
the first instance. Thus, to allow the filing of a motion for reconsideration
to suspend the running of the prescriptive period of twelve months, a
whole new body of rules on the matter should be promulgated so as to
avoid any conflict that may be brought by it, such as:
a) whether the mere filing of a plea for reconsideration of a denial is
sufficient or must it be supported by arguments/affidavits/material
evidence;
b) how many petitions for reconsideration should be permitted?

2. The "final rejection" refers to the rejection by the insurance company.

Although the Eagle Star case used the phrase "final rejection," the same
cannot be taken to mean the rejection of a petition for reconsideration.
The rejection referred to should be construed as the rejection, in the first
instance, for if what is being referred to is a reiterated rejection
conveyed in a resolution of a petition for reconsideration, such should
have been expressly stipulated.
We echoed the same reasons in H.H. Hollero Construction, Inc. v. GSIS,
et al., and maintained that "'final rejection' simply means denial by the
insurer of the claims of the insured and not the rejection or denial by the
insurer of the insured's motion or request for reconsideration. The
rejection referred to should be construed as the rejection in the first
instance" (INTEGRATED MICRO ELECTRONICS, INC., PETITIONER, VS.
STANDARD INSURANCE CO., INC., RESPONDENT.)

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Question:
In 2004, Ofelia Ursais purchased from Kaizen Builders, Inc. a house and lot
situated in Baguio City. In 2007, the parties executed a contract to sell where
Kaizen Builders bought back from Ofelia the property for P2,700,000.00 and
swapped it with another house and lot in Kingstone Ville, Camp 1, Baguio City.
They deducted from the price the P300,000.00 unpaid balance of Ofelia in White
Pine property and the P2,200,000.00 value of Kingstone Ville property. The
remaining P200,000.00 shall be paid in cash. Later, the parties replaced the
contract to sell with another agreement where Ofelia invested the P2,200,000.00
in Kaizen Builders' development of the Kingstone Ville project. In 2008, however,
the parties rescinded the investment agreement where Ofelia received
P320,000.00 from Kaizen Builders. The parties then stipulated that the amount
of P380,000.00 will be paid on installment basis while the remaining
P1,500,000.00 shall bear an interest of 1.5% or P22,500.00 per month. Despite
repeated demands, Kaizen Builders stopped remitting the monthly interest
beginning November 2009 and refused to deliver the P380,000.00. In 2011,
Ofelia filed against Kaizen Builders and its chief executive officer Cecille F.
Apostol a complaint for a sum of money before the Regional Trial Court. In May
2013, the RTC in its Decision ordered Kaizen Builders and Cecille solidarity liable
to pay Ofelia the following amounts. Ofelia sought partial reconsideration
claiming that the RTC failed to include the P380,000.00 and the payment of
monthly interest up to the present. Later, Ofelia died and was substituted by her
heirs. In November 2013, the RTC granted the motion and amended its Decision.
Aggrieved, Kaizen Builders and Cecille elevated the case to the CA. Meanwhile,
Kaizen Builders filed before the special commercial court a petition for corporate
rehabilitation. Accordingly, Kaizen Builders and Cecille moved to consolidate the
appealed case with the rehabilitation proceedings. On December 8, 2015,
however, the CA denied the motion and explained that the appeal would not
affect the rehabilitation case since the two proceedings involved different
parties, issues and reliefs. Unsuccessful at a reconsideration, Kaizen Builders and
Cecille filed a Petition for Certiorari and Prohibition under Rule 65 before SC. On
February 14, 2018, the CA resolved to hold in abeyance the proceedings. Yet, the

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resolution was subsequently recalled. On October 1, 2018, the CA rendered a
Decision on the merits of the appeal. Dissatisfied, Kaizen Builders and Cecille filed
a Petition for Review on Certiorari under Rule 45 with SC on the ground that the
CA committed reversible error in holding them liable to pay Ofelia's heirs.

1. What is the effect of the rehabilitation proceeding filed by Kaizen

Builders?
2. Can the claims be enforced? Explain.

Answer:
1. The rehabilitation proceedings shall commence upon the issuance of the
Commencement Order, which shall:
(q) include a Stay or Suspension Order which shall:

(1) suspend all actions or proceedings, in court or otherwise, for

the enforcement of claims against the debtor;
SECTION 17. Effects of the Commencement Order. — Unless otherwise
provided for in this Act, the court's issuance of a Commencement Order
shall, in addition to the effects of a Stay or Suspension Order described
in Section 16 hereof:
(e) consolidate the resolution of all legal proceedings by and against
the debtor to the court: Provided, however, That the court may
allow the continuation of cases in other courts where the debtor
had initiated the suit.

2. The claims can be enforced.

It is undisputed that Kaizen Builders filed a petition for corporate
rehabilitation. Finding the petition sufficient in form and substance, the
rehabilitation court issued a Commencement Order in 2015 or during the
pendency of the appeal in CA-G.R. CV No. 102330. Yet, the CA proceeded
with the case and rendered judgment. On this point we find grave abuse
of discretion. To reiterate, the Commencement Order ipso jure

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 suspended the proceedings in the CA at whatever stage it may be,
considering that the appeal emanated from a money claim against a
distressed corporation which is deemed stayed pending the
rehabilitation case. Moreover, the appeal before the CA is not one of the
instances where a suspension order is inapplicable. The CA should have
abstained from resolving the appeal. Taken together, the CA clearly
defied the effects of a Commencement Order and disregarded the state
policy to encourage debtors and their creditors to collectively and
realistically resolve and adjust competing claims and property rights.
(KAIZEN BUILDERS, INC. (FORMERLY KNOWN AS MEGALOPOLIS
PROPERTIES, INC.) AND CECILLE F. APOSTOL, PETITIONERS, VS. COURT OF
APPEALS AND THE HEIRS OF OFELIA URSAIS, RESPONDENTS.)

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Question:
In 1995, the Regional Trial Court rendered a judgment ordering Traders Royal
Bank and Security Bank and Trust Company to pay actual damages, exemplary
damages, and attorney's fees to Radio Philippines Network, Intercontinental
Broadcasting Corporation, and Banahaw Broadcasting Corporation. RTC’s
judgment is rendered in favor of the plaintiffs. Traders Royal and Security Bank
appealed to the CA. The CA absolved Security Bank from any liability and held
Traders Royal solely liable to RPN, IBC, and BBC for damages and costs of suit.
Aggrieved, Traders Royal elevated the case to SC. Meantime, Traders Royal and
Bank of Commerce entered into a Purchase and Sale Agreement. The Bangko
Sentral ng Pilipinas approved the agreement on the condition that the parties
must set up a P50,000,000.00 escrow fund to be kept for fifteen years. In 2002,
the Supreme Court affirmed with modification the CA's judgment. In April 2003,
the Court's judgment became final and executory. Thereafter, RPN, IBC, and BBC
filed their respective motions before the RTC for the issuance of a writ of
execution and subpoena duces tecum requiring Metrobank to submit a detailed
report of the status of the escrow fund. On March 31, 2004, the RTC granted the
motion for issuance of the subpoena. In August 2005, the RTC granted the
motion for the issuance of a writ of execution on all of Traders Royal's assets, the
escrow fund, and the properties included in the PSA. Metrobank filed a Motion
for Clarification and/or Reconsideration Ad Cautelam and asserted that it is not
a party in the case and that there is nothing that the RTC could execute against
it. Dissatisfied, BankCom and Metrobank filed petitions for certiorari with the CA.
On December 8, 2009, the CA dismissed the petitions and ruled that the RTC did
not act with grave abuse of discretion when it directed the issuance of a writ of
execution against the escrow fund.

1. Can RTC compel Metrobank to account for and be liable for the funds
held in escrow pursuant to its general supervisory control over the
process of execution?

Answer:

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 1. RTC can compel Metrobank to account for and be liable for the funds
held in escrow.
A self-evident feature of this rule is that the court is not required to serve
summons on the garnishee, nor is it necessary to implement the
garnishee in the case in order to hold him liable. As we have consistently
ruled, all that is necessary for the trial court to lawfully bind the person
of the garnishee or any person who has in his possession credits
belonging to the judgment debtor is service upon him of the writ of
garnishment. Through service of this writ, the garnishee becomes a
"virtual party" to or a "forced intervenor" in the case, and the trial court
thereby acquires jurisdiction to bind him to compliance with all orders
and processes of the trial court, with a view to the complete satisfaction
of the judgment of the court. Verily, the RTC cannot require Metrobank
to comply with all its orders and processes absent the service of a writ of
garnishment. Yet, the RTC readily assumed that it had jurisdiction over
Metrobank as Traders Royal's escrow agent. The RTC even ordered
Metrobank to submit a detailed report on the status of the escrow fund
and to bring documents of withdrawals from the escrow account. To be
sure, the RTC has yet to grant RPN, IBC, and BBC's motion for execution
of judgment when it issued the subpoena against Metrobank and
prematurely inquired into the status of the escrow account. The prudent
course of action for the RTC is to deny the request for subpoena and to
issue the order of execution pursuant to Section 9, Rule 39 of the Rules
of Court. Indeed, the procedure for the garnishment of debts and credits
will allow the RTC to seasonably ascertain the status of the escrow
account. The rules require the third person or garnishee to make a
written report to the court within five days from service of the notice of
garnishment stating whether the judgment debtor has sufficient funds
to satisfy the judgment obligation. The written report serves the same
purpose as the documents which the subpoena required Metrobank to
produce. (METROPOLITAN BANK AND TRUST CO., PETITIONER, VS.
RADIO PHILIPPINES NETWORK, INC., INTERCONTINENTAL

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 BROADCASTING CORP., AND BANAHAW BROADCASTING
CORPORATION, THRU THE BOARD OF ADMINISTRATORS,
RESPONDENTS.)

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Question:
Between 2003 and 2007, respondent Standard Chartered Bank, through its
branch in New York, United States of America, and Lehman Brothers Holdings,
Inc., a company organized and existing under the laws of Delaware, USA, entered
into a Group Facilities Agreement, wherein SCB undertook to make available
financial facilities to LBHI and its affiliates in various countries. One of LBHI's
foreign affiliates is Philippine Investment Two (SPV-AMC), Inc. (PI Two). By virtue
of this agreement, PI Two was able to obtain loans from SCB Philippines in the
aggregate amount of P819,000,000.00. As security for the financial obligations
obtained by LBHI and all its affiliates from SCB, LBHI executed a Pledge
Agreement in favor of SCB on September 12, 2008. Under the Pledge Agreement,
LBHI pledged the debt instrument. Unfortunately, on September 15, 2008, LBHI
filed a bankruptcy petition in New York, USA. SCB intervened as LBHI's creditor.
In the Philippines, on September 18, 2008, Metropolitan Bank and Trust
Company, Inc., being one of PI Two's creditors, filed a petition for the corporate
rehabilitation of PI Two before the RTC of Makati City. In January 2011, PI Two
filed an Urgent Motion to Withdraw [SCB's] Appointment to the [ManCom] on
the ground that SBC's representative was not a Filipino citizen in violation of the
Anti-Dummy Law. The Rehabilitation Court denied this motion for lack of merit
in its Resolution dated May 6, 2011. MRM felt aggrieved that SCB was allowed to
remain in the ManCom despite concealment of material information in the
rehabilitation proceedings. Thus, notwithstanding the prohibition to take part in
the affairs and assets of PI Two under the Order dated September 13, 2010, MRM
filed an Omnibus Motion for the removal of SCB from the ManCom for lack of
trustworthiness, and for the suspension of payments to SCB. The Rehabilitation
Court granted MRM's motion in a Resolution dated September 26, 2011. On
August 30, 2013, the Rehabilitation Court issued a Joint Resolution, granting PI
Two's motions to exclude SCB from its list of creditors and to order SCB to return
all the amounts it received as payment under the Rehabilitation Plan. Moreover,
[SCB's] claim against PI Two in this rehabilitation proceedings is now deemed
excluded; and [SCB] is ordered to return the amounts it already received under
the Rehabilitation Plan in the sum of [P]233,629,672.88 to PI Two.

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 1. Was SCB's representation in the ManCom mooted by the dissolution of
the ManCom? Explain.

Answer:
1. SCB's representation in the ManCom was mooted by the dissolution of
the ManCom.
The issue on SCB's representation in the ManCom was obviously mooted
by the dissolution of the ManCom, the removal of SCB as creditor in the
Rehabilitation Plan, and the eventual termination of the rehabilitation
proceedings. Likewise, the issue on the surrender of the collaterals was
mooted by the CA Decision dated May 26, 2014 and Resolution dated
January 27, 2015 in CA-G.R. SP Nos. 131652 and 132088, which
recognized the sale or transfer of the pledged collaterals to LCPI pursuant
to the Stipulation, Agreement and Order, as there is no more collateral
in SCB's possession to surrender. In any case, the surrender and release
of the collaterals from the Pledge Agreement is dependent upon the full
satisfaction of LBHI and its affiliate's obligation with SCB owing to the
accessory character of a pledge; the underlying agreement between LBHI
(pledgor) and the SCB (pledgee) as approved by the US Bankruptcy Court;
and the determination of which party actually has possession of the
collaterals. Notably, these purely factual matters were already threshed
out in the rehabilitation proceedings and in CA-G.R. SP Nos. 131652 and
132088 on appeal. Any subsisting claim that MRM may have over the
collaterals should instead be pursued by it in a separate case through the
appropriate remedy.

Considering the foregoing, we find it appropriate to abstain from passing

upon the merits of the case where legal relief is no longer necessary nor
called for. While the Court may pass upon issues albeit supervening
events had rendered the petition moot and academic, the Court does so
only when there is grave violation of the Constitution; when the
exceptional character of the situation and paramount public interest is
involved; when the constitutional issue raised requires formulation of

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 controlling principles to guide the bench, the bar and the public or when
the case is capable of repetition yet evading review. We do not find such
circumstances in this case. (MRM ASSET HOLDINGS 2, INC., PETITIONER,
VS. STANDARD CHARTERED BANK, RESPONDENT.)

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Question:
On April 21, 2016, Clearwater filed a verified Petition for confirmation,
recognition, and enforcement of the arbitral award before the RTC. Clearwater
alleged in its Petition that on July 1, 1973, it entered into First Surplus Share
Capacity — SK 100 Retrocession Agreement No. 9166 (SK 100 agreement) with
insurance and reinsurance companies (referred to the agreement as
retrocessionaires), one of which was Pioneer. On April 25, 2013, the panel issued
the Final Award, ordering Pioneer to pay Clearwater a total amount of
$344,991.68. In opposing Clearwater's Petition, Pioneer invoked Rule 13.4 of the
Special Rules of Court on Alternative Dispute Resolution, A.M. No. 07-11-08-SC
dated September 1, 2009 (Special ADR Rules), and Article V of the 1958 New York
Convention, and argued that the arbitral award is contrary to public policy or the
Philippine Constitution because Clearwater's claim was not supported by
sufficient evidence. Pioneer also invoked the lack of jurisdiction of the Philippine
courts to confirm the award since the SK 100 agreement required Clearwater to
go to the US District Court. Lastly, Pioneer claimed that the Petition was not
sufficient in form for Clearwater's failure to attach a Secretary's Certificate or
Board Resolution proving the authority of its legal counsel to sign the verification
and certification of non-forum shopping. On September 21, 2016, the RTC
dismissed the procedural issues raised by Pioneer and granted Clearwater's
Petition. Unable to secure a reconsideration, Pioneer filed a Petition for Review
under Rule 19.12 of the Special ADR Rules before the CA. Undeterred, Pioneer
filed a Motion for Reconsideration. Finding the motion to be pro forma, the CA
denied it in a Resolution dated February 24, 2021.

1. Whether Pioneer’s contention is proper that Clearwater only enforced

its claims against Pioneer 16 years after Pioneer rejected Clearwater's
demand, the 6-year prescription period under the New York Civil Practice
Law and Rules had already set in?
2. Can an arbitral award decided in New York, USA participated by
Clearwater and not participated by Pioneer be enforced in our country?
Is it against public policy?

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Answer:
1. Pioneer’s contention is not proper.
The Court's review of the CA decision under the Special ADR Rules is
discretionary and will be granted only when there are special and
important reasons. Particularly, the Special ADR Rules provide the
following specific grounds:
Rule 19.36. Review discretionary. – when the Court of Appeals:
a. Failed to apply the applicable standard or test for judicial review
prescribed in these Special ADR Rules in arriving at its decision
resulting in substantial prejudice to the aggrieved party;
b. Erred in upholding a final order or decision despite the lack of
jurisdiction of the court that rendered such final order or decision;
c. Failed to apply any provision, principle, policy or rule contained in
these Special ADR Rules resulting in substantial prejudice to the
aggrieved party; and
d. Committed an error so egregious and harmful to a party as to
amount to an undeniable excess of jurisdiction.
The mere fact that the petitioner disagrees with the Court of Appeals'
determination of questions of fact, of law or both questions of fact and
law, shall not warrant the exercise of the Supreme Court's discretionary
power. The error imputed to the Court of Appeals must be grounded
upon any of the above prescribed grounds for review or be closely
analogous thereto. Further the scope of the review is limited to errors of
law and does not extend to questions of facts.
Pioneer did not specifically raise any of the above mentioned grounds.
Neither did they explain that the grounds of their Petition are analogous
to any of the grounds under the Special ADR Rules. On this score, the
Court can dismiss the Petition for lack of merit. At any rate, the Court
finds no error in the CA's findings.

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 2. The arbitral award decided in New York, USA participated by Clearwater
can be enforced in our country and is not against public policy.

Rule 13.4(b)(ii) of the Special ADR Rules provides that the Philippine
court may refuse the recognition and enforcement of a foreign arbitral
award when it finds that its recognition and enforcement would be
contrary to public policy.
In Mabuhay Holdings Corporation v. Sembcorp Logistics Limited, the
Court adopted the narrow approach in determining whether the
enforcement of an arbitral award is contrary to public policy. The Court
emphasized that not all violations of law may be deemed contrary to
public policy. The Philippine court may only refuse to recognize or
enforce a foreign arbitral award when its enforcement would be against
the fundamental tenets of justice and morality, or would blatantly be
injurious to the public, or the interests of the society, thus:
In light of the foregoing and pursuant to the State's policy in favor of
arbitration and enforcement of arbitral awards, the Court adopts the
majority and narrow approach in determining whether enforcement of
an award is contrary to Our public policy. Mere errors in the
interpretation of the law or factual findings would not suffice to warrant
refusal of enforcement under the public policy ground. The illegality or
immorality of the award must reach a certain threshold such that
enforcement of the same would be against Our State's fundamental
tenets of justice and morality, or would blatantly be injurious to the
public, or the interests of the society. The final award will significantly
affect Pioneer, but it will not injure the public or compromise the
society's interest. The final award's alleged violation of our policy against
stale claims was not established with certainty. Thus, confirming and
enforcing the final award is not contrary to public policy.
The party raising the ground of violation of public policy in opposing the
recognition and enforcement of a foreign arbitral award must: (a)
identify the State's fundamental tenets of justice and morality; (b) prove
the illegality or immorality of the award; and (c) show the possible injury

Page 14
 to the public or the interests of the society. Pioneer's prescription and
violation of public policy arguments rest on shaky ground. Pioneer
identifies the State's policy against stale claims, but its evidence falls
short in proving the illegality or immorality of the award. It fails to
establish that Clearwater's claims have already been prescribed.
(PIONEER INSURANCE & SURETY CORPORATION, PETITIONER, VS. THE
INSURANCE COMPANY, SUCCESSOR BY MERGER TO CLEARWATER
INSURANCE COMPANY, RESPONDENT.)

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