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CASE DIGESTS IN COMMERCIAL

LAW REVIEW
SUBMITTED BY UNIVERSITY OF BAGUIO SCHOOL OF LAW
STUDENTS
COMREV SECTION JDDA
SCHOOL YEAR 2018-2019

SUBMITTED TO:
ATTY. JULIET SAPLING-IMPERIAL
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TABLE OF CONTENTS
1. Abbott Laboratories, Philippines vs. Alcaraz, 701 SCRA 682, July 23, 2013 .................................... 6
2. Ace Navigation Co., Inc. vs. FGU Insurance Corporation, 674 SCRA 348, June 25, 2012 ................ 6
3. Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA 436, October 02, 2017 . 7
4. Apique vs. Fahnenstich, 765 SCRA 399, August 05, 2015 ................................................................ 8
5. BANK OF THE PHILIPINE ISLANDS VS SARABIA MANOR HOTEL CORPORATION G.R. No. 175844
July 29, 2013 .................................................................................................................................... 9
6. Birkenstock Orthopaedie GMBH and Co. KG (formerly Birkenstock Orthopaedie GMBH) vs.
Philippine Shoe Expo Marketing Corporation, 710 SCRA 474, November 20, 2013 ..................... 10
7. BPI Family Savings Bank, Inc. vs. St. Michael Medical Center, Inc., 754 SCRA 493, March 25, 2015
....................................................................................................................................................... 11
8. Bureau of Internal Revenue vs. Lepanto Ceramics, Inc., 824 SCRA 125, April 24, 2017................ 13
9. Cargill Inc. vs. Intra Strata Assurance Corporation G.R. No. 168266, March 15, 2010 .................. 14
10. Ubas, Sr. vs. Chan, 816 SCRA 659, February 06, 2017 ................................................................... 15
11. Co vs. Yeung, 735 SCRA 66, September 10, 2014 .......................................................................... 16
12. F & S Velasco Company, Inc. vs. Madrid, 774 SCRA 388, November 10, 2015 .............................. 17
13. Gonzales vs. GJH Land, Inc. (formerly S.J. Land, Inc.), 774 SCRA 242, November 10, 2015 .......... 20
14. Gotesco Properties Incorporated vs Spouses Fajardo; Gr. No. 201167; Feb. 27, 2013................. 21
15. Great White Shark Enterprises, Inc. vs. Caralde, Jr., 686 SCRA 201, November 21, 2012............. 22
16. H.H. Hollero Construction, Inc. vs. Government Service Insurance System, 736 SCRA 303,
September 24, 2014....................................................................................................................... 22
17. Paz vs. New International Environmental Universality, Inc., 756 SCRA 284, April 20, 2015 ......... 23
18. Philippine Asset Growth Two, Inc. vs. Fastech Synergy Philippines, Inc. (formerly First Asia
System Technology, Inc.), 794 SCRA 625, June 28, 2016 ............................................................... 25
19. Shang Properties Realty Corporation (formerly The Shang Grand Tower Corporation) vs. St.
Francis Development Corporation, 730 SCRA 275, July 21, 2014.................................................. 26
20. Sumifru (Philippines) Corporation vs. Baya, 822 SCRA 564, April 17, 2017 ................................... 27
21. Tom vs. Rodriguez, 761 SCRA 679, July 06, 2015........................................................................... 29
22. W Land Holdings, Inc. vs. Starwood Hotels and Resorts Worldwide, Inc., 847 SCRA 403,
December 04, 2017 ........................................................................................................................ 30
23. Roman, Jr. vs. Securities and Exchange Commission, 791 SCRA 638, June 01, 2016 .................... 32
24. Roy III vs. Herbosa, 823 SCRA 133, April 18, 2017FACTS: .............................................................. 34
25. Dy Teban Trading, Inc. vs. Dy, 832 SCRA 533, July 26, 2017 .......................................................... 34
26. Securities and Exchange Commission vs. Price Richardson Corporation, 832 SCRA 560, July 26,
2017 ............................................................................................................................................... 35
27. G.R. No. 180064 September 16, 2013 JOSE U. PUA and BENJAMIN HANBEN U. PUA, Petitioners,
vs. CITIBANK, N. A., Respondent. ................................................................................................... 37
28. G.R. No. 198444 September 4, 2013 CITIBANK N.A. AND THE CITIGROUP PRIVATE BANK,
Petitioners, vs. ESTER H. TANCO-GABALDON, ARSENIO TANCO & THE HEIRS OF KU TIONG LAM,
Respondents. G.R. No, 198469-70 CAROL LIM, Petitioner, vs. ESTER H. TANCO-GABALDON,
ARSENIO TANCO & THE HEIRS OF KU TIONG LAM, Respondents. ................................................ 38
29. G.R. No. 195542 SECURITIES AND EXCHANGE COMMISSION, Petitioner, vs. OUDINE SANTOS,
Respondent. ................................................................................................................................... 39
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30. G.R. No. 187702 October 22, 2014 SECURITIES AND EXCHANGE COMMISSION, Petitioner, vs.
THE HONORABLE COURT OF APPEALS, OMICO CORPORATION, EMILIO S. TENG AND TOMMY KIN
HING TIA, Respondents. G.R. No. 189014 ASTRA SECURITIES CORPORATION, Petitioner, vs.
OMICO CORPORATION, EMILIO S. TENG AND TOMMY KIN HING TIA, Respondents. ................... 39
31. G.R. No. 193791 August 6, 2014 PRIMANILA PLANS, INC., herein REPRESENTED by EDUARDO S.
MADRID, Petitioner, vs. SECURITIES AND EXCHANGE COMMISSION, Respondent. ..................... 40
32. G.R. No. 181381 July 20, 2015 SECURITIES and EXCHANGE COMMISSION, Petitioner, vs.
UNIVERSAL RIGHTFIELD PROPERTY HOLDINGS, INC., Respondent. .............................................. 41
33. G.R. No. 191995 August 3, 2011 PHILIPPINE VETERANS BANK, Petitioner, vs. JUSTINA
CALLANGAN, in her capacity as Director of the Corporation Finance Department of the Securities
and Exchange Commission and/or the SECURITIES AND EXCHANGE COMMISSION, Respondent.
....................................................................................................................................................... 43
34. G.R. No. 199028 November 12, 2014 COSMOS BOTTLING CORPORATION, Petitioner, vs.
COMMISSION EN BANC of the SECURITIES AND EXCHANGE COMMISSION (SEC) and JUSTINA F.
CALLANGAN, in her capacity as Director of the Corporation Finance Department of the SEC,
Respondents. ................................................................................................................................. 43
35. G.R. No. 188639 SECURITIES AND EXCHANGE COMMISSION, Petitioner, vs. HON. REYNALDO M.
LAIGO, in his capacity as Presiding Judge of the Regional Trial Court, National Capital Judicial
Region, Makati City, Branch 56, GLICERIA AYAD, SAHLEE DELOS REYES and ANTONIO P. HUETE,
JR., Respondents. ........................................................................................................................... 44
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CASE NAME
1. Abbott Laboratories, Philippines vs. Alcaraz, 701 SCRA 682, July 23, 2013 ABATEN

2. Ace Navigation Co., Inc. vs. FGU Insurance Corporation, 674 SCRA 348, BUGATAN
June 25, 2012

3. Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA CAYATOC
436, October 02, 2017

4. Apique vs. Fahnenstich, 765 SCRA 399, August 05, 2015 ESPIQUE

5. Bank of the Philippine Islands vs. Sarabia Manor Hotel Corporation, 702 GANGA
SCRA 432, July 29, 2013

6. Birkenstock Orthopaedie GMBH and Co. KG (formerly Birkenstock KINGAD

Orthopaedie GMBH) vs. Philippine Shoe Expo Marketing Corporation, 710
SCRA 474, November 20, 2013

7. BPI Family Savings Bank, Inc. vs. St. Michael Medical Center, Inc., 754 SCRA MANALO
493, March 25, 2015

8. Bureau of Internal Revenue vs. Lepanto Ceramics, Inc., 824 SCRA 125, April RIOS
24, 2017

9. Cargill Philippines, Inc. vs. Commissioner of Internal Revenue, 753 SCRA 124, TABANGIN
March 11, 2015

10. CASE Ubas, Sr. vs. Chan, 816 SCRA 659, February 06, 2017 TAN

11. Co vs. Yeung, 735 SCRA 66, September 10, 2014 ATOLMON

12. F & S Velasco Company, Inc. vs. Madrid, 774 SCRA 388, November 10, 2015 CARIASO

13. Gonzales vs. GJH Land, Inc. (formerly S.J. Land, Inc.), 774 SCRA 242, CARPIO
November 10, 2015

14. Gotesco Properties, Inc. vs. Fajardo, 692 SCRA 319, February 27, 2013 COLOBONG

15. Great White Shark Enterprises, Inc. vs. Caralde, Jr., 686 SCRA 201, November DOMINGUEZ
21, 2012

16. H.H. Hollero Construction, Inc. vs. Government Service Insurance System, FUENTES
736 SCRA 303, September 24, 2014

17. Paz vs. New International Environmental Universality, Inc., 756 SCRA 284, LEAL
April 20, 2015

18. Philippine Asset Growth Two, Inc. vs. Fastech Synergy Philippines, Inc. MARIANO
(formerly First Asia System Technology, Inc.), 794 SCRA 625, June 28, 2016

19. Shang Properties Realty Corporation (formerly The Shang Grand Tower RIVAMONTE
Corporation) vs. St. Francis Development Corporation, 730 SCRA 275, July
21, 2014

20. Sumifru (Philippines) Corporation vs. Baya, 822 SCRA 564, April 17, 2017 SANQUI

21. Tom vs. Rodriguez, 761 SCRA 679, July 06, 2015 VALDEZ

22. W Land Holdings, Inc. vs. Starwood Hotels and Resorts Worldwide, Inc., 847 VENIEGAS
SCRA 403, December 04, 2017
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23. Roman, Jr. vs. Securities and Exchange Commission, 791 SCRA 638, June 01, BALUSDAN
2016
24. Roy III vs. Herbosa, 823 SCRA 133, April 18, 2017 LOZANO
25. Dy Teban Trading, Inc. vs. Dy, 832 SCRA 533, July 26, 2017 DINOS
26. Securities and Exchange Commission vs. Price Richardson Corporation, 832 NEAD
SCRA 560, July 26, 2017
27. G.R. No. 180064 September 16, 2013 JOSE U. PUA and BENJAMIN ARZADON
HANBEN U. PUA, Petitioners, vs. CITIBANK, N. A., Respondent.
28. G.R. No. 198444 September 4, 2013 CITIBANK N.A. AND THE BANDAO
CITIGROUP PRIVATE BANK, Petitioners, vs. ESTER H. TANCO-
GABALDON, ARSENIO TANCO & THE HEIRS OF KU TIONG LAM,
Respondents. G.R. No, 198469-70 CAROL LIM, Petitioner, vs. ESTER H.
TANCO-GABALDON, ARSENIO TANCO & THE HEIRS OF KU
TIONG LAM, Respondents.
29. G.R. No. 195542 SECURITIES AND EXCHANGE COMMISSION, BERTING
Petitioner, vs. OUDINE SANTOS, Respondent.
30. G.R. No. 187702 October 22, 2014 SECURITIES AND EXCHANGE GANDEZA
COMMISSION, Petitioner, vs. THE HONORABLE COURT OF
APPEALS, OMICO CORPORATION, EMILIO S. TENG AND TOMMY
KIN HING TIA, Respondents.
31. G.R. No. 189014 ASTRA SECURITIES CORPORATION, Petitioner, vs.
OMICO CORPORATION, EMILIO S. TENG AND TOMMY KIN HING
TIA, Respondents.
32. G.R. No. 193791 August 6, 2014 PRIMANILA PLANS, INC., herein GANON
REPRESENTED by EDUARDO S. MADRID, Petitioner, vs. SECURITIES
AND EXCHANGE COMMISSION, Respondent.
33. G.R. No. 181381 July 20, 2015 SECURITIES and EXCHANGE JOSE
COMMISSION, Petitioner, vs. UNIVERSAL RIGHTFIELD PROPERTY
HOLDINGS, INC., Respondent.
34. G.R. No. 191995 August 3, 2011 PHILIPPINE VETERANS BANK, MANUEL
Petitioner, vs. JUSTINA CALLANGAN, in her capacity as Director of the BAHUL
Corporation Finance Department of the Securities and Exchange Commission
and/or the SECURITIES AND EXCHANGE COMMISSION, Respondent.
35. G.R. No. 199028 November 12, 2014 COSMOS BOTTLING MASLAG
CORPORATION, Petitioner, vs. COMMISSION EN BANC of the
SECURITIES AND EXCHANGE COMMISSION (SEC) and JUSTINA F.
CALLANGAN, in her capacity as Director of the Corporation Finance
Department of the SEC, Respondents.
36. G.R. No. 188639 SECURITIES AND EXCHANGE COMMISSION, SANCHEZ
Petitioner, vs. HON. REYNALDO M. LAIGO, in his capacity as Presiding
Judge of the Regional Trial Court, National Capital Judicial Region, Makati
City, Branch 56, GLICERIA AYAD, SAHLEE DELOS REYES and
ANTONIO P. HUETE, JR., Respondents.
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Abbott Laboratories, Philippines vs. Alcaraz, 701 SCRA 682, July 23, 2013
Facts:
Respondent Alcaraz submitted her application for Regulatory Affairs Manager with petitioner Abbot
Laboratories in October 4, 2004. Subsequently, in December 7, 2004, Abbot formally offered respondent the
said position but in a probationary status for which Alcaraz accepted so that an employment contract between
them was signed. During Alcaraz’s pre-employment orientation, she was briefed of her duties and
responsibilities as Regulatory Affairs Manager including the implementation of the company’s Code of Conduct
and ensure that Abbot will hire people who are fit in the organizational discipline.
During the course of her employment, Alcaraz noticed that some of the staff had disciplinary problems. Thus,
she would reprimand them for their unprofessional behavior such as non-observance of dress code,
moonlighting, and disrespect of Abbot officers. However, her method of management was considered by some
of her superior officers to be too strict. In a meeting with her superiors she was informed that she failed to
meet the regularization standards for the position of Regulatory Affairs Manager. Thereafter, her superiors
requested her to tender her resignation, else they be forced to terminate her services. She was also told that
regardless of her choice, she should no longer report for work and was asked to surreder her office identification
cards. She requested to be given one week to decide on the same, but to no avail.
Alcaraz felt that she was unjustly terminated from her employment, thus, she filed a complaint for illegal
dismissal and damages against Abbot and its officers. She averred that she should have been considered a
regular employee and not just probationary given Abbott’s failure to inform her of the reasonable standards for
regularization upon her engagement. She further averred that the individual petitioners, her superiors,
maliciously connived to illegally dismiss her when they threatened her with termination, ordered not to enter
company premises even if she was still an employee thereof, and they publicly announced that she already
resigned in order to humiliate her.
Issue:
Whether the individual petitioners, corporate officers of Abbot Laboratories, are liable to respondent for the
complained acts.
Ruling:
No, Abbot Laboratories’ corporate officers are not liable to respondent for the complained acts.
Personal liability of corporate directors, trustees, or officers attaches only when:
1. they assent to a patently unlawful act of a corporation, or guilty of bad faith or gross negligence in
directing its affairs, or when there is conflict of interest resulting in damages to the corporation, its stockholders,
or other persons;
2. they consent with the issuance of watered down stocks or when, having knowledge of such issuance, do not
forthwith file with the corporate secretary their written objection;
3. they agree to hold themselves personally and solidarily liable with the corporation; or
4. they are made by specific provision of law personally answerable for their corporate action.

In this case, Alcaraz alleges that the individual petitioners acted in bad faith with regard to the supposed crude
manner by which her probationary employment was terminated, and thus, should be held liable together with
Abbot. However, other than her unfounded assertions on the matter, there is no evidence to support the fact
that the individual petitioners herein, in their capacity as Abbott’s officers and employees, acted in bad faith or
were motivated by ill will in terminating her services. The fact that she was made to resign and not allowed to
enter the workplace does not necessarily indicate bad faith on Abbott’s part since a sufficient ground existed
for the latter to actually proceed with her termination. Bad faith cannot be presumed and he who alleges bad
faith has the onus of proving it.

Ace Navigation Co., Inc. vs. FGU Insurance Corporation, 674 SCRA 348, June
25, 2012
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Facts:
Cardia Limited shipped on board the vessel M/V Pakarti Tiga at Shanghai Port, China, 8260 metric tons (or
165,200 bags) of Grey Portland Cement to be discharged at the Port of Manila and delivered to its consignee,
Heindrich Trading Corp. The subject shipment was insured with respondents FGU Insurance Corp. and
Pioneer Insurance and Surety Corp. against all risks for the amount of Php 18,048,421.00. Regency Express
Lines S.A., chartered by Sky International, Inc. having entered into a contract with Shinwa Kaiun Kaisha Ltd.
to which the subject vessel was chartered by the owner Pakarti Tata, was the one which directly dealt with
Heindrich and accordingly issued Clean Bill of Lading No. SM-1.
The vessel arrived at the Port of Manila and the shipment was discharged. Upon inspection by Heindrich and
Ace Navigation Co. Inc, agent of Cardia Limited, it was found that out of the 165,200 bags of cement, 43,905
bags were in bad order and condition. The respondents, unable to collect the sustained damages from Cardia
Limited and Regency Express Lines S.A., each paid Heindrich separately totaling to Php 711,727.34 and became
sub rated to all the rights and causes of action accruing to Heindrich. Respondents filed a complaint for
damages. Ace Navigation Co. Inc. claimed it was not a real party-in-interest from whom the respondents can
demand compensation. The respondents maintain that Ace Navigation Co. Inc is a ship agent and not a mere
agent of Cardia, as found by both the CA and the RTC.
ISSUE:
Whether or not Ace Navigation Co. Inc. is a ship agent and can held be civilly liable for damages sought by
FGU Insurance Corporation and Pioneer Insurance and Surety Corporation.
HELD
No. ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that
the amount claimed was invested therein.
By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents her in
the port in which she may be found.
Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the
arrival of the vessel in order for the latter to immediately take possession of the goods. No evidence was offered
to establish that ACENAV had a hand in the provisioning of the vessel or that it represented the carrier, its
charterers, or the vessel at any time during the unloading of the goods. Clearly, ACENAV's participation was
simply to assume responsibility over the cargo when they were unloaded from the vessel. Hence, no reversible
error was committed by the courts a quo in holding that ACENAV was not a ship agent within the meaning
and context of Article 586 of the Code of Commerce, but a mere agent of CARDIA, the shipper.

Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA
436, October 02, 2017
Facts:
Export and Industry Bank (EIB) entered into a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp
Investments, Inc. (UII) in an attempt to rehabilitate UBI which was then under receivership. EIB encountered
financial difficulties which prompted respondent the Philippine Deposit Insurance Corporation (PDIC) to
extend financial assistance to it. However, EIB still failed to overcome its financial problems, thereby causing
PDIC to release in May 2005 additional financial assistance to it.
Banco de Oro (BDO) expressed interest in acquiring EIB. However, certain issues derailed the acquisition,
including BDO's unwillingness to assume certain liabilities of EIB, particularly the claim of the Pacific Rehouse
Group against it. In the end, BDO's acquisition of EIB did not proceed and the latter's financial condition
worsened.
The BSP, through the Monetary Board, issued Resolution No. 686 prohibiting EIB from doing business in the
Philippines and placing it under the receivership of PDIC, in accordance with Section 30 of Republic Act No.
(RA) 7653, otherwise known as "The New Central Bank Act." Accordingly, PDIC took over EIB.
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PDIC informed BSP that EIB can hardly be rehabilitated. Based on PDIC's report that EIB was insolvent, the
Monetary Board passed Resolution No. 571 on April 4, 2013 directing PDIC to proceed with the liquidation
of EIB. Petitioners, who are stockholders representing the majority stock of EIB, filed a petition for certiorari
before the CA challenging Resolution No. 571. The CA dismissed the petition for lack of merit. It ruled that
the Monetary Board did not gravely abuse its discretion in ordering the liquidation of EIB pursuant to the
PDIC's findings that the rehabilitation of the bank is no longer feasible.
Issue:
Whether or not the CA correctly ruled that the Monetary Board did not gravely abuse its discretion in issuing
Resolution No. 571 which directed the PDIC to proceed with the liquidation of EIB.
Held
No. The Monetary Board's issuance of Resolution No. 571 ordering the liquidation of EIB cannot be
considered to be tainted with grave abuse of discretion as it was amply supported by the factual circumstances
at hand and made in accordance with prevailing law and jurisprudence.
Section 30 of RA 7653 provides that the receiver shall immediately gather and take charge of all the assets and
liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers
of a receiver under the Revised Rules of Court. If the receiver determines that the institution cannot be
rehabilitated or permitted to resume business, the Monetary Board shall notify in writing the board of directors
of its findings and direct the receiver to proceed with the liquidation of the institution.
As correctly held by the CA, nothing in Section 30 of RA 7653 requires the BSP, through the Monetary Board,
to make an· independent determination of whether a bank may still be rehabilitated or not. As expressly stated
in the afore-cited provision, once the receiver determines that rehabilitation is no longer feasible, the Monetary
Board is simply obligated to: (a) notify in writing the bank's board of directors of the same; and (b) direct the
PDIC to proceed with liquidation.
The actions of the Monetary Board in proceedings on insolvency are explicitly declared by law to be final and
executory. They may not be set aside, or restrained, or enjoined by the courts, except upon convincing proof
that the action is plainly arbitrary and made in bad faith, which is absent in this case.

[ G.R. No. 205705, August 05, 2015 ]

Apique vs. Fahnenstich, 765 SCRA 399, August 05, 2015

FACTS:
Dominator and Evangeline are siblings, they were living together with their parents until Evangeline left for
Germany to work. Evangeline executed general and special power of attorney constituting Dominador as her
attorney-in-fact to purchase real property for her, and to manage or supervise her business affairs in the
Philippines.
While in Germany, Evangeline opened a joint savings account with dominador at the Claveria branch of then
PCI bank and presently known as BDO.
Dominador withdrew the amount of P980,000 from the joint account and deposited it to his personal account
claiming that the amount is his and as his compensation. After some time, Evangeline came to know the amount
withdrawn by Dominador and made a demand for the latter to return the said amount but to no avail. Hence,
Evangeline files a complaint for sum of money, damages, and attorney’s fees.
ISSUE:
Whether or not Evangeline is entitled to the return of the amount of P980,000 Dominador withdrew.
HELD:
Yes. Evangeline is entitled to the return of the amount of P980,000 Dominador withdrew.
A joint account is one that is held jointly by two or more natural persons, or by two or more juridical persons
or entities and their share in the deposits shall be presumed equal, unless the contrary is proved.
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In this case, the account opened by Evangeline and Dominador with EPCIB was a joint “OR” account. It is
also admitted that: a) the account was opened for a specific purpose (to facilitate the transfer of needed funds
for Evangeline’s business projects, and (b) Dominador may withdraw funds if there is a need to meet
evangeline’s financial obligations arising from said projects. Admittedly, at the time he withdrew the said
amount from the subject account, there was no project being undertaken for Evangiline.

BANK OF THE PHILIPINE ISLANDS VS SARABIA MANOR HOTEL

CORPORATION G.R. No. 175844 July 29, 2013

FACTS:
Herein Respondent is a corporation duly organized and existing under the Philippine laws, with principal place
of business at Iloilo City, where it was incorporated on February 22, 1982, with an authorized capital stock of
P10,000,000.00.
In 1997, Respondent obtained a Special Loan Package from Far East Bank and Trust Company (FEBTC) in
the amount of P150,000,00.00 in order to finance the construction of a five storey hotel building for the purpose
expanding its hotel business. Further, in the same year, an additional stand by credit line was approved in the
amount of P20,000,000.00.
The two debts were secured by a Real Estate Mortgages over parcels of land that were owned by Sarabia where
a comprehensive surety agreement was also signed and entered by its stockholders. By virtue of a merger, the
Bank of the Philippine Islands (BPI) assumed all of FEBTC’s rights against herein respondent.
Sarabia started to pay interests on its loans as soon as funds were available. However, because of the delayed
completion of the New Building, Sarabia incurred various cash flow problems. It resulted to the filing of a
petition for a corporate rehabilitation with prayer for the issuance of a stay order before the Regional Trial
Court as it foresaw the impossibility to satisfy its obligation to its creditors when they fall due. This was file
despite the fact that the company has more assets than liabilities.
In the said rehabilitation plan, Sarabia pursued for the reorganization of all its outstanding loans, submitting
that the interest payments on the same be arranged at a uniform escalating rate of –
(a) 7% per annum (p.a.) for the years 2002 to 2005;
(b) 8% per annum for the years 2006 to 2010;
(c) 10% per annum for the years 2011 to 2013;
(d) 12% per annum for the years 2014 to 2015; and
(e) 14% per annum for the year 2018.

Moreover, Sarabia promised to make annual payments on the principal loans, also in escalating amounts
depending on cash flow. Additionally, it proposed that it should pay off its outstanding obligations to the
government and its suppliers on their respective due dates, for the sake of its day to day operations.
Concluding that herein petitioner’s rehabilitation petition sufficient in form and substance, the trial court issued
a Stay Order. It appointed Ms. Liberty B. Valderama as rehabilitation receiver. Thereafter, BPI filed its
opposition.
The opposition was elevated to the Court of Appeals, where such Stay order was approved with modification.
ISSUE:
Whether or not the issuance of a Stay Order by the Trial Court is correct and whether the opposition of BPI is
proper.
HELD:
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NO. The rules on corporate rehabilitation have been crafted in order to give companies sufficient leeway to
deal with unbearable financial predicaments in the hope of restoring or reaching a sustainable operating form
in order to best accommodate the various interest of all its stakeholders.
Numerous cases has seen corporate rehabilitation as an attempt to conserve and administer the assets of an
insolvent corporation in the hope that the company would cope up from financial stress to solvency.
Verily the purpose the rehabilitation proceedings is to enable the company to gain new success in life and
thereby allow creditors to be paid their claims from its earnings.
As a conclusion, the court finds that the opposition of BPI on the approved interest rate is unreasonable since
the 6.75% per annum interest rate is considered to be a reasonable rate of interest which is concordant with
the rehabilitation plan projected by Sarabia. We bereft the contention of the proposal of BPI since escalating
interest rates remain attached on the theoretical assumption of future fluctuations in the market, this is
notwithstanding the fact that its interests as a secured creditor will remain as well preserved.

Birkenstock Orthopaedie GMBH and Co. KG (formerly Birkenstock

Orthopaedie GMBH) vs. Philippine Shoe Expo Marketing Corporation, 710
SCRA 474, November 20, 2013
FACTS:
Petitioner, a corporation duly organized and existing under the laws of Germany, applied for various trademark
registrations before the IPO, namely: (a) "BIRKENSTOCK" under Trademark Application Serial No. (TASN)
4-1994-091508 for goods falling under Class 25 of the International Classification of Goods and Services (Nice
Classification) with filing date of March 11, 1994; (b) "BIRKENSTOCK BAD HONNEF -RHEIN &
DEVICE COMPRISING OF ROUND COMPANY SEAL AND REPRESENTATION OF A FOOT,
CROSS AND SUNBEA M" under TASN 4-1994-091509 for goods falling under Class 25 of the Nice
Classification with filing date of March 11, 1994; and (c) "BIRKENSTOCK BAD HONNEF-RHEIN &
DEVICE COMPRISING OF ROUND COMPANY SEAL AND REPRESENTATION OF A FOOT,
CROSS AND SUNBEAM" under TASN 4-1994-095043 for goods falling under Class 10 of the Nice
Classification with filing date of September 5, 1994 (subject applications).
However, registration proceedings of the subject applications were suspended in view of an existing registration
of the mark "BIRKENSTOCK AND DEVICE" under Registration No. 56334 dated October 21, 1993
(Registration No. 56334) in the name of Shoe Town International and Industrial Corporation, the predecessor-
in-interest of respondent Philippine Shoe Expo Marketing Corporation. In this regard, on May 27, 1997
petitioner filed a petition for cancellation of Registration No. 56334 on the ground that it is the lawful and
rightful owner of the Birkenstock marks (Cancellation Case). During its pendency, however, respondent and/or
its predecessor-in-interest failed to file the required 10th Year Declaration of Actual Use (10th Year DAU) for
Registration No. 56334 on or before October 21, 2004, thereby resulting in the cancellation of such mark.
Accordingly, the cancellation case was dismissed for being moot and academic.
ISSUE:
The primordial issue raised for the Court’s resolution is whether or not the subject marks should be allowed
registration in the name of petitioner.
RULING:
The petition is meritorious.
It is well-settled that "the rules of procedure are mere tools aimed at facilitating the attainment of justice, rather
than its frustration. A strict and rigid application of the rules must always be eschewed when it would subvert
the primary objective of the rules, that is, to enhance fair trials and expedite justice. Technicalities should never
be used to defeat the substantive rights of the other party. Every party-litigant must be afforded the amplest
opportunity for the proper and just determination of his cause, free from the constraints of technicalities."
"Indeed, the primordial policy is a faithful observance of [procedural rules], and their relaxation or suspension
should only be for persuasive reasons and only in meritorious cases, to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed." This is
 11

especially true with quasi-judicial and administrative bodies, such as the IPO, which are not bound by technical
rules of procedure. On this score, Section 5 of the Rules on Inter Partes Proceedings provides:
Sec. 5. Rules of Procedure to be followed in the conduct of hearing of Inter Partes cases. – The rules of
procedure herein contained primarily apply in the conduct of hearing of Inter Partes cases. The Rules of Court
may be applied suppletorily. The Bureau shall not be bound by strict technical rules of procedure and evidence
but may adopt, in the absence of any applicable rule herein, such mode of proceedings which is consistent with
the requirements of fair play and conducive to the just, speedy and inexpensive disposition of cases, and which
will give the Bureau the greatest possibility to focus on the contentious issues before it. (Emphasis and
underscoring supplied)
In the case at bar, while petitioner submitted mere photocopies as documentary evidence in the Consolidated
Opposition Cases, it should be noted that the IPO had already obtained the originals of such documentary
evidence in the related Cancellation Case earlier filed before it. Under this circumstance and the merits of the
instant case as will be subsequently discussed, the Court holds that the IPO Director General’s relaxation of
procedure was a valid exercise of his discretion in the interest of substantial justice.
In the instant case, petitioner was able to establish that it is the owner of the mark "BIRKENSTOCK." It
submitted evidence relating to the origin and history of "BIRKENSTOCK" and its use in commerce long
before respondent was able to register the same here in the Philippines. It has sufficiently proven that
"BIRKENSTOCK" was first adopted in Europe in 1774 by its inventor, Johann Birkenstock, a shoemaker, on
his line of quality footwear and thereafter, numerous generations of his kin continuously engaged in the
manufacture and sale of shoes and sandals bearing the mark "BIRKENSTOCK" until it became the entity now
known as the petitioner. Petitioner also submitted various certificates of registration of the mark
"BIRKENSTOCK" in various countries and that it has used such mark in different countries worldwide,
including the Philippines.
On the other hand, aside from Registration No. 56334 which had been cancelled, respondent only presented
copies of sales invoices and advertisements, which are not conclusive evidence of its claim of ownership of the
mark "BIRKENSTOCK" as these merely show the transactions made by respondent involving the same.
In view of the foregoing circumstances, the Court finds the petitioner to be the true and lawful owner of the
mark "BIRKENSTOCK" and entitled to its registration, and that respondent was in bad faith in having it
registered in its name.

BPI Family Savings Bank, Inc. vs. St. Michael Medical Center, Inc., 754 SCRA
493, March 25, 2015

FACTS:
Spouses Virgilio and Yolanda Rodil (Sps. Rodil) are the owners and sole proprietors of St. Michael Diagnostic
and Skin Care Laboratory Services and Hospital (St. Michael Hospital), a 5-storey secondary level hospital built
on their property located in Molino 2, Bacoor, Cavite. With a vision to upgrade St. Michael Hospital into a
modern, well-equipped and full service tertiary 11-storey hospital, Sps. Rodil purchased two (2) parcels of land
adjoining their existing property and, on May 22, 2003, incorporated SMMCI, with which entity they planned
to eventually consolidate St. Michael Hospital’s operations.
In May 2004, construction of a new hospital building on the adjoining properties commenced, with Sps. Rodil
contributing personal funds as initial capital for the project which was estimated to cost at least
P100,000,000.00. To finance the costs of construction, SMMCI applied for a loan with petitioner BPI Family
Savings Bank, Inc. (BPI Family) which gave a credit line of up to P35,000,000.00, secured by a Real Estate
Mortgage (mortgage) over three (3) parcels of land belonging to Sps. Rodil, on a portion of which stands the
hospital building being constructed. SMMCI was able to draw the aggregate amount of P23,700,000.00, with
interest at the rate of 10.25% per annum (p.a.) and a late payment charge of 3% per month accruing on the
overdue amount, for which Sps. Rodil, who agreed to be co-borrowers on the loan, executed and signed a
Promissory Note.
In the meantime, after suffering financial losses due to problems with the first building contractor, Sps. Rodil
temporarily deferred the original construction plans for the 11-storey hospital building and, instead, engaged
 12

the services of another contractor for the completion of the remaining structural works of the unfinished
building up to the 5th floor. In this regard, they spent an additional P25,000,000.00, or a total of P55,000,000.00
for the construction. The lack of funds for the finishing works of the 3rd, 4th and 5th floors, however, kept
the new building from becoming completely functional and, in turn, hampered the plans for the physical
transfer of St. Michael Hospital’s operations to SMMCI. Nevertheless, using hospital-generated revenues, Sps.
Rodil were still able to purchase new equipment and machinery for St. Michael Hospital valued in excess of
P20,000,000.00. Although the finishing works were later resumed and some of the hospital operations were
eventually transferred to the completed first two floors of the new building, as of May 2006, SMMCI was still
neither operational nor earning revenues. Hence, it was only able to pay the interest on its BPI Family loan, or
the amount of P3,000,000.00 over a two-year period, from the income of St. Michael Hospital.
On September 25, 2009, BPI Family demanded immediate payment of the entire loan obligation and, soon
after, filed a petition for extrajudicial foreclosure of the real properties covered by the mortgage. The auction
sale was scheduled on December 11, 2009, which was postponed to February 15, 2010 with the conformity of
BPI Family.
On August 11, 2010, SMMCI filed a Petition for Corporate Rehabilitation (Rehabilitation Petition), docketed
as SEC Case No. 086-10, before the RTC, with prayer for the issuance of a Stay Order as it foresaw the
impossibility of meeting its obligation to BPI Family, its purported sole creditor. In the said petition, SMMCI
claimed that it had to defer the construction of the projected 11-storey hospital building due to the problems
it had with its first contractor as well as the rise of the cost of construction materials. As of date, only two (2)
floors of the new building are functional, in which some of the operations of St. Michael had already been
transferred.
However, since SMMCI was neither operational nor earning revenues, it could only pay interest on the BPI
Family loan, using St. Michael Hospital’s income, over a two-year period. Further, it was averred that while St.
Michael Hospital – whose operations were to be eventually absorbed by SMMCI – was operating profitably, it
was saddled with the burden of paying the loan obligation of SMMCI and Sps. Rodil to BPI Family, which it
cannot service together with its current obligations to other persons and/or entities. The situation became even
more difficult when the bank called the entire loan obligation.
In its proposed Rehabilitation Plan, SMMCI merely sought for BPI Family (a) to defer foreclosing on the
mortgage and (b) to agree to a moratorium of at least two (2) years during which SMMCI – either through St.
Michael Hospital or its successor – will retire all other obligations. After which, SMMCI can then start servicing
its loan obligation to the bank under a mutually acceptable restructuring agreement. SMMCI declared that it
intends to conclude pending negotiations for investments offered by a group of medical doctors whose capital
infusion shall be used (a) to complete the finishing requirements for the 3rd and 5th floors of the new building;
(b) to renovate the old 5-storey building where St. Michael Hospital operates; and (c) to pay, in whole or in
part, the bank loan with the view of finally integrating St. Michael Hospital with SMMCI.
Finding the Rehabilitation Petition to be sufficient in form and substance, the RTC issued a Stay Order. In an
Order dated August 4, 2011, the RTC approved the Rehabilitation Plan with the modifications recommended
by the Rehabilitation Receiver and thus, ordered: (a) a five-year moratorium on SMMCI’s bank loan; (b) a
restructuring and payment of obligations to other creditors such as suppliers and lenders; (c) a programmed
spending of a reasonable part of the hospital’s revenues for the finishing of the 5th floor and the improvement
of hospital facilities in the next two or three years; and (d) use of fresh capital from prospective investors to
partly pay SMMCI’s bank loan and improve St. Michael Hospital’s competitiveness.
Aggrieved, BPI Family elevated the matter before the CA, mainly arguing that the approval of the Rehabilitation
Plan violated its rights as an unpaid creditor/mortgagee and that the same was submitted without prior
consultation with creditors. In a Decision dated August 30, 2012, the CA affirmed the RTC’s approval of the
Rehabilitation Plan.
ISSUE:
Whether or not the CA correctly affirmed SMMCI’s Rehabilitation Plan as approved by the RTC.
HELD:
No. The petition is meritorious. Restoration is the central idea behind the remedy of corporate rehabilitation.
In common parlance, to “restore” means “to bring back to or put back into a former or original state.” Case
law explains that corporate rehabilitation contemplates a continuance of corporate life and activities in an effort
to restore and reinstate the corporation to its former position of successful operation and solvency, the purpose
 13

being to enable the company to gain a new lease on life and allow its creditors to be paid their claims out of its
earnings.Consistent therewith is the term’s statutory definition under Republic Act No. 10142 (Financial
Rehabilitation and Insolvency Act of 2010).
Section 4. Definition of Terms. – As used in this Act, the term: x x x x (gg) Rehabilitation shall refer to the
restoration of the debtor to a condition of successful operation and solvency, if it is shown that its continuance
of operation is economically feasible and its creditors can recover by way of the present value of payments
projected in the plan, more if the debtor continues as a going concern than if it is immediately liquidated.
In other words, rehabilitation assumes that the corporation has been operational but for some reasons like
economic crisis or mismanagement had become distressed or insolvent, i.e., that it is generally unable to pay its
debts as they fall due in the ordinary course of business or has liability that are greater than its assets. Thus, the
basic issues in rehabilitation proceedings concern the viability and desirability of continuing the business
operations of the distressed corporation, all with a view of effectively restoring it to a state of solvency or to its
former healthy financial condition through the adoption of a rehabilitation plan.
In this case, it cannot be said that the petitioning corporation, SMMCI, had been in a position of successful
operation and solvency at the time the Rehabilitation Petition was filed on August 11, 2010. While it had indeed
“commenced business” through the preparatory act of opening a credit line with BPI Family to finance the
construction of a new hospital building for its future operations, SMMCI itself admits that it has not formally
operated nor earned any income since its incorporation. This simply means that there exists no viable business
concern to be restored. Perforce, the remedy of corporate rehabilitation is improper, thus rendering the
dispositions of the courts a quo infirm.
A material financial commitment becomes significant in gauging the resolve, determination, earnestness and
good faith of the distressed corporation in financing the proposed rehabilitation plan. This commitment may
include the voluntary undertakings of the stockholders or... the would-be investors of the debtor-corporation
indicating their readiness, willingness and ability to contribute funds or property to guarantee the continued
successful operation of the debtor corporation during the period of rehabilitation aside from the harped on
merger of St. Michael Hospital with SMMCI, the only proposed source of revenue the Rehabilitation Plan
suggests is the capital which would come from SMMCI's potential investors, which negotiations are merely
pending. Evidently, both... propositions commonly border on the speculative and, hence, hardly fit the
description of a material financial commitment which would inspire confidence that the rehabilitation would
turn out to be successful. SMMCI likewise failed to include any liquidation analysis in its Rehabilitation Plan
with no SMMCI financial statement on record, it is unclear to the Court what assets it possesses in order to
determine the values to be derived if liquidation has to be had thereby. Accordingly, this prevents the Court
from ascertaining if the petitioning debtor's creditors can recover by way of the present value of payments
projected in the plan, more if the debtor continues as a going concern than if it is... immediately liquidated, a
crucial factor in a corporate rehabilitation case. Again, the financial records of St. Michael Hospital, being a
separate and distinct entity whose merger with SMMCI only exists in the realm of probability, cannot be taken
as a substitute to fulfill... the requirement. What remains pertinent are the financial statements of SMMCI for
it solely stands as the debtor to be rehabilitated, or liquidated in this case.
The failure of the Rehabilitation Plan to state any material financial commitment to support rehabilitation, as
well as to include a liquidation analysis, translates to the conclusion that the RTC's stated considerations for
approval... are actually unsubstantiated, and hence, insufficient to decree SMMCI's rehabilitation. It is well to...
emphasize that the remedy of rehabilitation should be denied to corporations that do not qualify under the
Rules. Neither should it be allowed to corporations whose sole purpose is to delay the enforcement of any of
the rights of the creditors, which is rendered obvious by: (a) the absence of a sound and workable business
plan; (b) baseless and unexplained assumptions, targets, and goals; and (c) speculative capital infusion or
complete lack thereof for the execution of the business plan. Unfortunately, these negative indicators have all
surfaced to the fore, much to SMMCI's chagrin.

Bureau of Internal Revenue vs. Lepanto Ceramics, Inc., 824 SCRA 125, April
24, 2017
Facts:
Lepanto Ceramics, Inc. (LCI) filed a petition for corporate rehabilitation under RA 10142 with the RTC in
Calamba City. Aside from financial difficulties, the petition for rehab also alleged LCI's tax liability at 6.3 million
 14

pesos. The Rehabilitation (Rehab Court) issued a Commencement Order (Order). The Order declared LCI
under rehab and suspended all actions or proceedings, in court or otherwise, for the enforcement of claims
against LCI. It also directed the BIR to file and serve on LCI its comment or opposition to the petition, or its
claims against LCI.
Despite this, petitioners, acting as Assistant Commissioner, Group Supervisor, and Examiner, sent LCI a notice
of informal conference, informing the latter of its tax liabilities for the fiscal year ending June 30, 2010. Despite
receiving LCI's letter-reply regarding the pendency of a rehab proceeding, the BIR sent LCI a Formal Letter of
Demand. A petition for indirect contempt of court was filed by LCI against petitioners for defying the Order.
In their defense, petitioners insist that the issue has already become moot and academic because, in the
meantime, LCI was declared rehabilitated. Also, petitioners argue that their acts do not amount to a defiance
of the Commencement Order as it was done merely to toll the prescriptive period in collecting deficiency taxes,
that their acts of sending a Notice of Informal Conference and Formal Letter of Demand do not amount to a
"legal action or other recourse" against LCI outside of the rehabilitation proceedings and that the indirect
contempt proceedings interferes with the exercise of their functions to collect taxes due to the government.
ISSUE:
Are petitioners guilty of indirect contempt for issuing a notice of informal conference despite the fact that they
simple wanted to toll the prescriptive period and considering the lifeblood doctrine?
HELD:
Yes, they are guilty of indirect contempt. According to RA 10142, upon the issuance of a commencement order,
the distressed corporation shall be temporarily immune from the enforcement of all claims against it, including
all claims of the government, whether national or local, including taxes, tariffs and customs duties.
To clarify, however, creditors of the distressed corporation are not without remedy as they may still submit
their claims to the rehabilitation court for proper consideration so that they may participate in the proceedings,
keeping in mind the general policy of the law.
Petitioners' act of issuing a notice of informal conference and later a formal letter of demand, all despite the
written reminder by LCI regarding the pendency of the rehab proceeding, is in clear defiance of the
Commencement Order.
As aptly put by the RTC Br. 35, they could have easily tolled the running of such prescriptive period, and at the
same time, perform their functions as officers of the BIR, without defying the Commencement Order and
without violating the laudable purpose of RA 10142 by simply ventilating their claim before the Rehabilitation
Court.

Cargill Inc. vs. Intra Strata Assurance Corporation G.R. No. 168266, March 15,
2010
FACTS:
Cargill, Inc. (Cargill), a foreign corporation, and Northern Mindanao Corporation (NMC), a domestic
corporation, executed a contract whereby the latter agreed to sell to the former 20,000 to 24,000 metric tons of
molasses. The contract was amended three times on three different dates, namely, on 11 January 1990, 18 June
1990, and 22 August 1990.
In compliance with the terms of the third amendment of the contract, respondent Intra Strata Assurance
Corporation (Strata) issued on 10 October 1990 a performance bond in the sum of ₱11,287,500 to guarantee
NMC’s delivery of the 10,500 tons of molasses, and a surety bond in the sum of ₱9,978,125 to guarantee the
repayment of downpayment as provided in the contract.
NMC failed in its undertaking and only delivered 219.551 metric tons out of the agreed 10,500 metric tons.
Consequently, Cargill demanded payment under the performance and surety bonds. Since its demands went
unheeded, Cargill filed a complaint for sum of money against the respondent and NMC.
Later on, the parties executed a compromise agreement which was approved by the trial court. However, NMC
still failed to comply with its obligations under the compromise agreement and so trial again ensued.
 15

The Regional Trial Court (RTC) ruled in favor of the petitioner and ordered the respondent to solidarily pay
the petitioner the total amount of P16,993,200 with interest at the legal rate from October 10, 1990 and
attorney’s fees of P200,000 and the cost of the suit.
On appeal by the respondent, the Court of Appeals (CA) reversed the RTC’s decision and dismissed the
complaint on the ground that the petitioner does not have the capacity to file suit since it is a foreign corporation
doing business in the Philippines without the requisite license. The Court of Appeals held that petitioner’s
purchases of molasses were in pursuance of its basic business and not just mere isolated and incidental
transactions.
Feeling aggrieved, petitioner filed before the Supreme Court a petition for review on certiorari under Rule 45
of the Rules of Court.
ISSUES:
1)Whether or not the petitioner, under the Corporation Code, is a foreign corporation doing or transacting
business in the Philippines
2)Whether or not the petitioner, an unlicensed foreign corporation, has legal capacity to sue before Philippine
courts
HELD:
1)No, because the transactions entered into by the respondent with the petitioners are not a series of
commercial dealings which signify an intent on the part of the respondent to do business in the Philippines but
constitute an isolated one which does not fall under the category of "doing business." The records show that
the only reason why the NMC and the petitioner amended their contract three times was to give the former a
chance to make good on its obligation considering that NMC already received the minimum price of the
contract. There is no showing that the transactions between petitioner and NMC signify the intent of petitioner
to establish a continuous business or extend its operations in the Philippines.
To be doing or "transacting business in the Philippines" for purposes of Section 133 of the Corporation Code,
the foreign corporation must actually transact business in the Philippines, that is, perform specific business
transactions within the Philippine territory on a continuing basis in its own name and for its own account
2)Yes, petitioner has the legal capacity to sue before Philippine courts even if it is an unlicensed foreign
corporation. Under Section 133 of the Corporation Code, only unlicensed foreign corporations which are
“transacting business in the Philippines” are barred from maintaining an action in Philippine courts.
Respondent failed to prove that petitioner’s activities in the Philippines constitute doing business as would
prevent it from bringing an action before Philippine courts.

Ubas, Sr. vs. Chan, 816 SCRA 659, February 06, 2017
Facts:
In his Complaint for a collection of a sum of money, petitioner alleged that respondent, doing business under
the name and style of UNIMASTER, was indebted to him in the amount of ₱1,500,000.00, representing the
price of boulders, sand, gravel, and other construction materials allegedly purchased by respondent for the
construction of the Macagtas Dam in Barangay Macagtas, Catarman, Northern Samar (Macagtas Dam project).
Petitioner claimed that said obligation has long become due and demandable and yet, respondent refused to
pay the same despite repeated demands. Further, petitioner averred that respondent had issued three (3) bank
checks, payable to CASH in the amount of ₱500,000.00 each, but when presented the subject checks were
dishonored.
Respondent filed an answer seeking the dismissal of the case on the following grounds: (a) the complaint states
no cause of action, considering that the checks do not belong to him but to Unimasters Conglomeration, Inc.;
(b) there is no contract that ever existed between him and petitioner; and (c) if petitioner even had a right of
action at all, the complaint should not have been filed against him but against Unimasters, a duly registered
construction company which has a separate juridical personality from him.
The RTC ruled that petitioner had a cause of action against respondent. However, the CA reversed the RTC's
ruling, dismissing petitioner's complaint on the ground of lack of cause of action.
 16

It held that respondent was not the proper party defendant in the case, considering that the drawer of the
subject checks was Unimasters, which, as a corporate entity, has a separate and distinct personality from
respondent.
Issue:
Whether or not the CA erred in dismissing petitioner's complaint for lack of cause of action?
Held:
Yes, the Court of Appeals erred in dismissing said complaint.
Jurisprudence holds that "in a suit for a recovery of sum of money, the plaintiff-creditor has the burden of
proof to show that defendant had not paid him the amount of the contracted loan. However, it has also been
long established that where the plaintiff-creditor possesses and submits in evidence an instrument showing the
indebtedness, a presumption that the credit has not been satisfied arises in his favor. Thus, the defendant is, in
appropriate instances, required to overcome the said presumption and present evidence to prove the fact of
payment so that no judgment will be entered against him. This presumption stems from Section 24 of the NIL,
which provides that:
Section 24. Presumption of Consideration. - Every negotiable instrument is deemed prima facie to have been
issued for a valuable consideration; and every person whose signature appears thereon to have become a party
thereto for value.
Petitioner had presented in evidence the three (3) dishonored checks which were undeniably signed by
respondent and this fact were admitted during trial by respondent himself.
Hence, the RTC correctly ruled that it is presumed that the subject checks were issued for a valid consideration,
which therefore, dispensed with the necessity of any documentary evidence to support petitioner's monetary
claim. Unless otherwise rebutted, the legal presumption of consideration under Section 24 of the NIL stands.
Respondent was not able to overcome the presumption of consideration under Section 24 of the NIL and
establish any of his affirmative defenses. On the other hand, as the holder of the subject checks which are
presumed to have been issued for a valuable consideration, and having established his privity of contract with
respondent, petitioner has substantiated his cause of action by a preponderance of evidence.

Co vs. Yeung, 735 SCRA 66, September 10, 2014

FACTS:
Ruivivar bought a bottle of Greenstone from Royal Chinese Drug Store in Binondo, Manila, owned by Ling
Na Lau. However, he doubted its authenticity because it had a different smell, and the heat it produced was not
as strong as the original Greenstone he frequently used. He then informed his brother-in-law Yeung, the owner
of Greenstone Pharmaceutical. The latter went to Royal and found 7 bottles of counterfeit Greenstone on
display for sale. He was told by Pinky Lau – the store’s proprietor – that the items came from Co of KiaoAn
Chinese Drug Store. According to Pinky, Co offered the products as “Tienchi Fong Sap Oil Greenstone”
(Tienchi) which she eventually availed from him.
Sps. Yeung filed a civil complaint for trademark infringement and unfair competition before the RTC against
Ling Na Lau, her sister Pinky Lau, and Co for allegedly conspiring in the sale of counterfeit Greenstone
products to the public.
The RTC ruled in favor of Sps. Yeung. It found that the Sps. Yeung had proven by preponderance of evidence
that the Laus and Co committed unfair competition through their conspiracy to sell counterfeit Greenstone
products that resulted in confusion and deception not only to the ordinary purchaser, like Ruivivar, but also to
the public. It, however, did not find the Laus and Co liable for trademark infringement as there was no showing
that the trademark “Greenstone” was registered at the time the acts complained of occurred. CA affirmed the
RTC Decision.
ISSUE:
Whether or not only suit for unfair competition will prosper considering the trademark was not registered.
HELD:
 17

Yes, the defendants cannot be liable for trademark infringement. In the case at bar, the Court defined unfair
competition as the passing off (or palming off) or attempting to pass off upon the public of the goods or
business of one person as the goods or business of another with the end and probable effect of deceiving the
public. This takes place where the defendant gives his goods the general appearance of the goods of his
competitor with the intention of deceiving the public that the goods are those of his competitor.
Here, it has been established that Co conspired with the Laus in the sale/distribution of counterfeit Greenstone
products to the public, which were even packaged in bottles identical to that of the original, thereby giving rise
to the presumption of fraudulent intent.
Although liable for unfair competition, the Court deems it apt to clarify that Co was properly exculpated from
the charge of trademark infringement considering that the registration of the trademark “Greenstone”–
essential as it is in a trademark infringement case – was not proven to have existed during the time the acts
complained of were committed. In this relation, the distinctions between suits for trademark infringement and
unfair competition prove useful: (a) the former is the unauthorized use of a trademark, whereas the latter is the
passing off of one’s goods as those of another; (b) fraudulent intent is unnecessary in the former, while it is
essential in the latter; and (c) in the former, prior registration of the trademark is a pre-requisite to the action,
while it is not necessary in the latter.

F & S Velasco Company, Inc. vs. Madrid, 774 SCRA 388, November 10, 2015
FACTS:
On June 8, 1987, FSVCI was duly organized and registered as a corporation with:
- Francisco O. Velasco (Francisco), - herein respondent Dr. Rommel L. Madrid (Madrid),
- Simona J. Velasco (Simona), - and Petitioner Saturnino O. Velasco (Saturnino)
- Angela V. Madrid (Angela),
as its incorporators.
When Simona and Francisco died on June 12, 1998 and June 22, 1999, respectively, their daughter, Angela,
inherited their shares, thereby giving her control of 70.82% of FSVCI's total shares of stock.
As of May 11, 2009, the distribution of FSVCI's 24,000 total shares of stock is as follows:
(a) Angela with 16,998 shares;
(b) Madrid with 1,000 shares;
(c) petitioner Rosina B. Velasco-Scribner (Scribner) with 6,000 shares; and
(d) petitioners Irwin J. Seva (Seva) and Mercedez Sunico (Sunico) with one (1) share each.
On Sept 20, 2009 and during her tenure as Chairman of the BOD of FSVCI, Angela died intestate and without
issue.
On Oct 8, 2009, Madrid, as Angela's spouse, executed an Affidavit of Self-Adjudication covering the latter's
estate which includes her 70.82% ownership of FSVCI's shares of stock. Believing that he is already the
controlling stockholder of FSVCI by virtue of such self-adjudication, Madrid called for a Special Stockholders'
and Re-Organizational Meeting to be held on Nov 18, 2009.
On Nov 10, 2009 and in preparation for said meeting, Madrid executed separate deeds of assignment
transferring one share each to Vitaliano B. Ricafort and to respondents Peter Paul L. Danao (Danao), Maureen
R. Labalan (Labalan), and Manuel L. Arimado (Arimado; collectively, Madrid Group).
Meanwhile, Seva, in his then-capacity as FSVCI corporate secretary, sent a Notice of an Emergency Meeting
to FSVCI's remaining stockholders for the purpose of electing a new president and vice-president, as well as
the opening of a bank account. Such meeting was held on Nov 6, 2009 which was attended by Saturnino, Seva,
and Sunico, during which, Saturnino was recognized as a member of the FSVCI Board of Directors and
thereafter, as FSVCI President, while Scribner was elected FSVCI Vice-President (Saturnino Group).
 18

Despite the election conducted by the Saturnino Group, the Madrid Group proceeded with the Special
Stockholders' and Re-Organizational Meeting on Nov 18, 2009, wherein:
(a) the current members of FSVCI Board of Directors (save for Madrid)
were ousted and replaced by the members of the Madrid Group; and
(b) Madrid, Danao, Arimado, and Labalan were elected Pres, VP, Corporate Secretary, and Treasurer,
respectively, of FSVCI (Nov 18, 2009 Meeting).
In view of the Nov 18, 2009 Meeting, the Saturnino Group filed a petition for Declaration of Nullity of
Corporate Election with a TRO against the Madrid Group before the RTC
ISSUE:
Whether or not:
1. the Nov 18, 2009 Meeting organized by Madrid is legal and valid; NO
HELD:
The petition is partly meritorious.
xxx xxx xxx
Through Orders dated Dec 29, 2010 and March 29, 2011, the RTC-Makati already recognized Madrid as
Angela's sole heir to the exclusion of others - i.e., Angela's purported biological sister, Lourdita J. Estevez
(Estevez) - and, thus, appointed him as Special Administrator of Angela's estate.
The Court is constrained to view that Madrid is indeed Angela's sole heir and her death caused the immediate
transfer of her properties, including her 70.82% ownership of FSVCI's shares of stock, to Madrid.
As such, Madrid may compel the issuance of certificates of stock in his favor, as well as the registration of
Angela's stocks in his name in FSVCI's Stock and Transfer Book.
Be that as it may, it must be clarified that Madrid's inheritance of Angela's shares of stock does not ipso facto
afford him the rights accorded to such majority ownership of FSVCI's shares of stock. Section 63 of the
Corporation Code governs the rule on transfers of shares of stock. It reads:
SEC. 63. Certificate of stock and transfer of shares. - The capital stock of stock corporations shall be divided
into shares for which certificates signed by the president or vice president, countersigned by the secretary or
assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws.
Shares of stock so issued are personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer.
No transfer, however, 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.
No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of
the corporation.
Verily, all transfers of shares of stock must be registered in the corporate books in order to be binding on the
corporation. Specifically, this refers to the Stock and Transfer Book, which is described in Section 74 of the
same Code as follows:
SEC. 74. Books to be kept; stock transfer agent. - x x x.
xxxx
Stock corporations must also keep a book to be known as the "stock and transfer book", in which must be kept
a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid
on all stock for which subscription has been made, and the date of payment of any installment; a statement of
every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other
entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the
corporation or in the office of its stock transfer agent and shall be open for inspection by any director or
stockholder of the corporation at reasonable hours on business days.
 19

xxxx
In this regard, the case of Batangas Laguna Tayabas Bus Co., Inc. v. Bitanga instructs that an owner of shares
of stock cannot be accorded the rights pertaining to a stockholder - such as the right to call for a meeting and
the right to vote, or be voted for - if his ownership of such shares is not recorded in the Stock and Transfer
Book, viz.:
Indeed, until registration is accomplished, the transfer, though valid between the parties, cannot be effective as
against the corporation. Thus, the unrecorded transferee, the Bitanga group in this case, cannot vote nor be
voted for.
The purpose of registration, therefore, is two-fold: to enable the transferee to exercise all the rights of a
stockholder, including the right to vote and to be voted for, and to inform the corporation of any change in
share ownership so that it can ascertain the persons entitled to the rights and subject to the liabilities of a
stockholder.
Until challenged in a proper proceeding, a stockholder of record has a right to participate in any meeting; his
vote can be properly counted to determine whether a stockholders' resolution was approved, despite the claim
of the alleged transferee. On the other hand, a person who has purchased stock, and who desires to be
recognized as a stockholder for the purpose of voting, must secure such a standing by having the transfer
recorded on the corporate books. Until the transfer is registered, the transferee is not a stockholder but an
outsider.
In the case at bar, records reveal that at the time Madrid called for the Nov 18, 2009 Meeting, as well as the
actual conduct thereof, he was already the owner of 74.98% shares of stock of FSVCI as a result of his
inheritance of Angela's 70.82% ownership thereof.
However, records are bereft of any showing that the transfer of Angela's shares of stock to Madrid had been
registered in FSVCFs Stock and Transfer Book when he made such call and when the Nov 18, 2009 Meeting
was held. Thus, the CA erred in holding that Madrid complied with the required registration of transfers of
shares of stock through mere reliance on FSVCI's GIS dated November 18, 2009.
In this relation, it is noteworthy to point out that the submission of a GIS of a corporation before the SEC is
pursuant to the objective sought by Section 26 of the Corporation Code which is to give the public information,
under sanction of oath of responsible officers, of the nature of business, financial condition, and operational
status of the company, as well as its key officers or managers, so that those dealing and who intend to do
business with it may know or have the means of knowing facts concerning the corporation's financial resources
and business responsibility.
The contents of the GIS, however, should not be deemed conclusive as to the identities of the registered
stockholders of the corporation, as well as their respective ownership of shares of stock, as the controlling
document should be the corporate books, specifically the Stock and Transfer Book. Jurisprudence in Lao v.
Lao is instructive on this matter, to wit:
The mere inclusion as shareholder of petitioners in the General Information Sheet of PFSC is insufficient proof
that they are shareholders of the company.
Petitioners bank heavily on the General Information Sheet submitted by PFSC to the SEC in which they were
named as shareholders of PFSC. They claim that respondent is now estopped from contesting the General
Information Sheet.
While it may be true that petitioners were named as shareholders in the General Information Sheet submitted
to the SEC, that document alone does not conclusively prove that they are shareholders of PFSC. The
information in the document will still have to be correlated with the corporate books of PFSC. As between the
General Information Sheet and the corporate books, it is the latter that is controlling.
The SC agrees with the RTC that mere inclusion in the General Information Sheets as stockholders and officers
does not make one a stockholder of a corporation, for this may have come to pass by mistake, expediency or
negligence. As professed by respondent-appellee, this was done merely to comply with the reportorial
requirements with the SEC.
This maybe against the law but "practice, no matter how long continued, cannot give rise to any vested right."
 20

If a transferee of shares of stock who failed to register such transfer in the Stock and Transfer Book of the
Corporation could not exercise the rights granted unto him by law as stockholder, with more reason that such
rights be denied to a person who is not a stockholder of a corporation. Petitioners-appellants never secured
such a standing as stockholders of PFSC and consequently, their petition should be denied.
In light of the foregoing, Madrid could not have made a valid call of the November 18, 2009 Meeting as his
stock ownership of FSVCI as registered in the Stock and Transfer Book is only 4.16% in view of the
non-registration of Angela's shares of stock in the FSVCI Stock and Transfer Book in his favor. As there was
no showing that he was able to remedy the situation by the time the meeting was held, the conduct of such
meeting, as well as the matters resolved therein, including the reorganization of the FSVCI Board of Directors
and the election of new corporate officers, should all be declared null and void.
Thus, in view of the nullity of the Nov 6, 2009 Meeting conducted by the Saturnino Group which ruling of the
RTC had already attained finality, as well as the November 18, 2009 Meeting conducted by the Madrid Group
- both of which attempted to wrest control of FSVCI by reorganizing the Board of Directors and electing a
new set of corporate officers - the FSVCI Board of Directors at the time of Angela's death (i.e. Madrid, Seva,
Scribner, and Sunico) should be reconstituted, and thereafter, fill the vacant seat left by Angela in accordance
with Section 29 of the Corporation Code. Such Board of Directors shall only act in a hold-over capacity until
their successors are elected and qualified, pursuant to Section 23 of the Corporation Code.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated March 1, 2013 and the Resolution
dated August 7, 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 113279 are hereby REVERSED and
SET ASIDE. The Special Stockholders' and Re-Organizational Meeting of petitioner F & S Velasco Company,
Inc. called by respondent Rommel L. Madrid and held on November 18, 2009 is declared NULL and VOID.
Accordingly, the Board of Directors of petitioner F & S Velasco Company, Inc. prior to the death of Angela
V. Madrid - consisting of the remaining members petitioners Rosina B. Velasco-Scribner, Irwin J. Seva, and
Mercedez Sunico and respondent Dr. Rommel L. Madrid - is hereby ORDERED reconstituted. The Board of
Directors is ORDERED to fill the vacant seat left by Angela V. Madrid and, thereafter, act in a hold-over
capacity until their successors are elected and qualified, in accordance with prevailing laws, rules, and
jurisprudence.

Gonzales vs. GJH Land, Inc. (formerly S.J. Land, Inc.), 774 SCRA 242,
November 10, 2015
FACTS:
According to the Petitioners, they subscribed and paid for shares of stock offered by the Respondent
corporation. GJH Land, Inc., however, offered the shares for sale to the corporation’s stockholders.
Hence, petitioners filed an Injunction with Prayer of Issuance of Status Quo Order against GJH Land, seeking
to enjoin the sale of the subject shares.
The case was filed to the proper Special Commercial court but was raffled later on to RTC Branch 276.
The Respondent filed a motion to dismiss stating that the RTC does not have jurisdiction over the case as the
issue involves an Intra-Corporate dispute and shall be heard by the Special Commercial Court. The Motion to
Dismiss was granted.

ISSUES:
1.Whether the issue involves an Intra-Corporate Dispute
2.Whether Branch 276 of the RTC of Muntinlupa City erred in dismissing the case for lack of jurisdiction over
the subject matter

HELD:
1.YES.
 21

Applying the relationship test and the nature of the controversy test, the suit between the parties is clearly an
intra-corporate relationship and pertains to the enforcement of their obligations under the Corporation Code
and the internal and intra-corporate regulatory rules of the corporation, which under the rules should be heard
by the designated Special Commercial Court.
2.The present controversy lies, however, in the procedure to be followed when a commercial case - such as the
instant intra-corporate dispute -has been properly filed in the official station of the designated Special
Commercial Court but is, however, later wrongly assigned by raffle to a regular branch of that station.
To clarify, the word "or" in Item 5.2, Section 5 of RA 8799 was intentionally used by the legislature to
particularize the fact that the phrase "the Courts of general jurisdiction" is equivalent to the phrase "the
appropriate Regional Trial Court." In other words, the jurisdiction of the SEC over the cases enumerated under
Section 5 of PD 902-A was transferred to the courts of general jurisdiction
Here, petitioners filed a commercial case, i.e., an intra-corporate dispute, with the Office of the Clerk of Court
in the RTC of Muntinlupa City, which is the official station of the designated Special Commercial Court, in
accordance with A.M. No. 03-03-03-SC. It is, therefore, from the time of such filing that the RTC of Muntinlupa
City acquired jurisdiction over the subject matter or the nature of the action. Unfortunately, the commercial
case was wrongly raffled to a regular branch, e.g., Branch 276, instead of being assigned to the sole Special
Commercial Court in the RTC of Muntinlupa City, which is Branch 256.
the Court nonetheless deems that the erroneous raffling to a regular branch instead of to a Special Commercial
Court is only a matter of procedure - that is, an incident related to the exercise of jurisdiction - and, thus, should
not negate the jurisdiction which the RTC of Muntinlupa City had already acquired. In such a scenario, the
proper course of action was not for the commercial case to be dismissed; instead, Branch 276 should have first
referred the case to the Executive Judge for re-docketing as a commercial case; thereafter, the Executive Judge
should then assign said case to the only designated Special Commercial Court in the station, i.e., Branch 256.
In fine, Branch 276's dismissal of Civil Case No. 11-077 is set aside and the transfer of said case to Branch 256,
the designated Special Commercial Court of the same RTC of Muntinlupa City, under the parameters above-
explained, is hereby ordered.

Gotesco Properties Incorporated vs Spouses Fajardo; Gr. No. 201167; Feb. 27,
2013
FACTS:
On January 24, 1995, the Sps. Fajardo entered into a Contract to Sell (contract) with the corporation Gotesco
Properties, Inc. (GPI) for the purchase of a 100-square meter lot identified as Lot No. 13, Block No.6, Phase
No. IV of Evergreen Executive Village, a subdivision project owned and developed by GPI located at Deparo
Road, Novaliches, Caloocan City. The subject lot covered by Transfer Certificate of Title (TCT) No. 2442205
(mother title).

Under the contract, Sps. Fajardo undertook to pay the purchase price of ₱126,000.00 within a 10-year period,
including interest at the rate of nine percent (9%) per annum. GPI, on the other hand, agreed to execute a final
deed of sale (deed) in favor of Sps. Fajardo upon full payment of the stipulated consideration. However, despite
its full payment of the purchase price on January 17, 20006 and subsequent demands, GPI failed to execute the
deed and to deliver the title and physical possession of the subject lot. Thus, on May 3, 2006, Sps. Fajardo filed
before the Housing and Land Use Regulatory Board-Expanded National Capital Region Field Office
(HLURBENCRFO) a complaint for specific performance or rescission of contract with damages against GPI
and the members of its Board of Directors namely, Jose C. Go, Evelyn Go, Lourdes G. Ortiga, George Go,
and Vicente Go (individual petitioners).
The HLURB-ENCRFO found GPI in breach of the contract and gave the spouses Fajardo the option to
recover their money from GPI and its boards of directors.
ISSUE:
Whether or not the Board of directors are solidarily liable with the corporation?
HELD:
 22

The Court finds no basis to hold individual petitioners’ solidarily liable with petitioner GPI for the payment of
damages in favor of Sps. Fajardo since it was not shown that they acted maliciously or dealt with the latter in
bad faith. Settled is the rule that in the absence of malice and bad faith, as in this case, officers of the corporation
cannot be made personally liable for liabilities of the corporation which, by legal fiction, has a personality
separate and distinct from its officers, stockholders, and members.

Great White Shark Enterprises, Inc. vs. Caralde, Jr., 686 SCRA 201, November
21, 2012
FACTS:
On July 31, 2002, Caralde filed before the Bureau of Legal Affairs (BLA), IPO a trademark application seeking
to register the mark "SHARK & LOGO" for his manufactured goods under Class 25, such as slippers, shoes
and sandals. Petitioner Great White Shark Enterprises, Inc. (Great White Shark), a foreign corporation
domiciled in Florida, USA, opposed3 the application claiming to be the owner of the mark consisting of a
representation of a shark in color, known as "GREG NORMAN LOGO" (associated with apparel worn and
promoted by Australian golfer Greg Norman). It alleged that, being a world famous mark which is pending
registration before the BLA since February 19, 2002,4 the confusing similarity between the two (2) marks is
likely to deceive or confuse the purchasing public into believing that Caralde's goods are produced by or
originated from it, or are under its sponsorship, to its damage and prejudice.
In his Answer, Caralde explained that the subject marks are distinctively different from one another and easily
distinguishable. When compared, the only similarity in the marks is in the word "shark" alone, differing in other
factors such as appearance, style, shape, size, format, color, ideas counted by marks, and even in the goods
carried by the parties.
ISSUE:
Whether the subject marks are distinctively different from each other.
HELD:
Section 123.1(d) of the IP Code provides that a mark cannot be registered if it is identical with a registered
mark belonging to a different proprietor with an earlier filing or priority date, with respect to the same or closely
related goods or services, or has a near resemblance to such mark as to likely deceive or cause confusion.
In determining similarity and likelihood of confusion, case law has developed the Dominancy Test and the
Holistic or Totality Test. The Dominancy Test focuses on the similarity of the dominant features of the
competing trademarks that might cause confusion, mistake, and deception in the mind of the ordinary
purchaser, and gives more consideration to the aural and visual impressions created by the marks on the buyers
of goods, giving little weight to factors like prices, quality, sales outlets, and market segments. In contrast, the
Holistic or Totality Test considers the entirety of the marks as applied to the products, including the labels and
packaging, and focuses not only on the predominant words but also on the other features appearing on both
labels to determine whether one is confusingly similar to the other14 as to mislead the ordinary purchaser. The
"ordinary purchaser" refers to one "accustomed to buy, and therefore to some extent familiar with, the goods
in question."
As may be gleaned from the foregoing, the visual dissimilarities between the two (2) marks are evident and
significant, negating the possibility of confusion in the minds of the ordinary purchaser, especially considering
the distinct aural difference between the marks.

H.H. Hollero Construction, Inc. vs. Government Service Insurance System,

736 SCRA 303, September 24, 2014
Facts:
Assailed in this petition for review on certiorari1 are the Decision2 dated March 13, 2001 and the Resolution3
dated February 21, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 63175, which set aside and reversed
the Judgment4 dated February 3, 1999 of the Regional Trial Court of Quezon City, Branch 220 (RTC) in Civil
Case No. 91-10144, and dismissed petitioner H.H. Hollero Construction, Inc.' s (petitioner) Complaint for Sum
 23

of Money and Damages under the insurance policies issued by public respondent, the Government Service
Insurance System (GSIS), on the ground of prescription.
On April 26, 1988, the GSIS and petitioner entered into a Project Agreement (Agreement) whereby the latter
undertook the development of a GSIS housing project known as Modesta Village Section B (Project). Petitioner
obligated itself to insurethe Project, including all the improvements, upon the execution of the Agreement
under a Contractors’ All Risks (CAR) Insurance with the GSIS General Insurance Department for an amount
equal to its cost or sound value, which shall not be subject to any automatic annual reduction. Pursuant to its
undertaking, petitioner secured CAR Policy No. 88/085 in the amount of P development, which was later
increased to P 1,000,000.00 for land 10,000,000.00, effective from May 2, 1988 to May 2, 1989. Petitioner
likewise secured CAR Policy No. 88/086 in the amount of P 1,000,000.00 for the construction of twenty (20)
housing units, which amount was later increased to P 17,750,000.00 from May 2, 1988 to June 1, 1989. to cover
the construction of another 355 new units, effective In turn, the GSIS reinsured CAR Policy No. 88/085 with
respondent Pool of Machinery Insurers (Pool). Under both policies, it was provided that: (a) there must be
prior notice of claim for loss, damage or liability within fourteen (14) days from the occurrence of the loss or
damage; (b) all benefits thereunder shall be forfeited if no action is instituted within twelve(12) months after
the rejection of the claim for loss, damage or liability; and (c) if the sum insured is found to be less than the
amount required to be insured, the amount recoverable shall be reduced tosuch proportion before taking into
account the deductibles stated in the schedule (average clause provision). During the construction, three (3)
typhoons hit the country, namely, Typhoon Biring from June 1 to June 4, 1988, Typhoon Huaning on July 29,
1988, and Typhoon Saling on October 11, 1989, which caused considerable damage to the Project. Accordingly,
petitioner filed several claims for indemnity with the GSIS on June 30, 1988, August 25, 1988, and October 18,
1989, respectively. In a letter dated April 26, 1990, the GSIS rejected petitioner’s indemnity claims for the
damages wrought by Typhoons Biring and Huaning, finding that no amount is recoverable pursuant to the
average clause provision under the policies. In a letter dated June 21, 1990, the GSIS similarly rejected
petitioner’s indemnity claim for damages wrought by Typhoon Saling on a “no loss” basis, it appearing from
its records that the policies were not renewed before the onset of the said typhoon.
Issue:
Whether or not the petitioner is barred from filing a complaint before the courts based on the insurance claim.
Held:
Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the
terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken
and understood in their plain, ordinary, and popular sense
Section 10 of the General Conditions of the subject CAR Policies commonly read:
Section 10. If a claim is in any respect fraudulent, or if any false declaration is made or used in support thereof,
or if any fraudulent means or devices are used by the Insured or anyone acting on his behalf to obtain any
benefit under this Policy, or if a claim is made and rejected and no action or suit is commenced within twelve
months after such rejectionor, in case of arbitration taking place as provided herein, within twelve months after
the Arbitrator or Arbitrators or Umpire have made their award, all benefit under this Policy shall be forfeited.
In this relation, case law illumines that the prescriptive period for the insured’s action for indemnity should be
reckoned from the “final rejection” of the claim. As correctly observed by the CA, “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, as in the two instances above-discussed. The right of the insured to the payment of his loss
accrues from the happening of the loss. However, the cause of action in an insurance contract does not accrue
until the insured’s claim is finally rejected by the insurer. This is because before such final rejection there is no
real necessity for bringing suit.

Paz vs. New International Environmental Universality, Inc., 756 SCRA 284,
April 20, 2015
Facts:
 24

On March 1, 2000, Priscilo Paz, the officer-in-charge of the Aircraft Hangar at the Davao International Airport,
Davao City, entered into a Memorandum of Agreement (MOA) with Captain Allan J. Clarke, President of
International Environmental University for a period of four (4) years, unless pre-terminated by both parties
with six (6) months advance notice, the former shall allow the latter to use the aircraft hangar space at the said
Airport "exclusively for company aircraft/helicopter." Said hangar space was previously leased to Liberty
Aviation Corporation, which assigned the same to petitioner.
On August 19, 2000, petitioner complained in a letter addressed to MR. ALLAN J. CLARKE, International
Environmental Universality, Inc. that the hangar space was being used for different purpose instead of for
company helicopter/aircraft only, and thereby threatened to cancel the MOA if such jobs were not stopped
immediately.
On January 16, 2001, petitioner sent another letter to MR. ALLAN J. CLARKE, International Environmental
Universality, Inc. reiterating that the hangar space must be for aircraft use only, and that he will terminate the
MOA due to the safety of the aircrafts parked nearby. He further offered a vacant space along the airport road
that was available and suitable for Capt. Clarke's operations.
On July 19, 2002, petitioner sent a third letter, this time, addressed to MR. ALLAN JOSEPH CLARKE, CEO,
New International Environmental University, Inc. demanding that the latter vacate the premises due to the
damage caused by an Isuzu van driven by its employee to the left wing of an aircraft parked inside the hangar
space, which Capt. Clarke had supposedly promised to buy, but did not.
On July 23, 2002, petitioner sent a final letter addressed to MR. ALLAN J. CLARKE, Chairman, CEO, New
International Environmental University, Inc. strongly demanding the latter to immediately vacate the hangar
space. He further informed Capt. Clarke that the company will apply for immediate electrical disconnection
with the Davao Light and Power Company (DLPC), so as to compel the latter to desist from continuing with
the works thereon.
On September 4, 2002, respondent New International Environmental Universality, Inc. filed a complaint
against petitioner for breach of contract before the RTC claiming that: (a) petitioner had disconnected its
electric and telephone lines; (b) upon petitioner's instruction, security guards prevented its employees from
entering the leased premises by blocking the hangar space with barbed wire; and (c) petitioner violated the
terms of the MOA when he took over the hangar space without giving respondent the requisite six (6)-month
advance notice of termination.
The petitioner alleged, among others, in his defense that: (a) respondent had no cause of action against him as
the MOA was executed between him and Capt. Clarke in the latter's personal capacity; (b) there was no need
to wait for the expiration of the MOA because Capt. Clarke performed highly risky works in the leased premises
that endangered other aircrafts within the vicinity; and (c) the six (6)-month advance notice of termination was
already given in the letters he sent to Capt. Clarke.
The RTC issued a Writ of Preliminary Injunction ordering petitioner to: (a) immediately remove all his aircrafts
parked within the leased premises; (b) allow entry of respondent by removing the steel gate installed thereat;
and (c) desist and refrain from committing further acts of dispossession and/or interference in respondent's
occupation of the hangar space. For failure of petitioner to comply with the foregoing writ, respondent filed a
petition for indirect contempt before the RTC, which was tried jointly with Civil Case.
After due trial, the RTC rendered a Decision finding petitioner: (a) guilty of indirect contempt for
contumaciously disregarding its Order by not allowing respondent to possess occupy the leased premises
pending final decision in the main case; and (b) liable for breach of contract for illegally terminating the MOA
even before the expiration of the term thereof. On appeal, the Court of Appeals affirmed the RTC's finding of
petitioner's liability for breach of contract.
Petitioner moved for the reconsideration of the foregoing Decision, raising as an additional issue the death of
Capt. Clarke which allegedly warranted the dismissal of the case. However, the motion was denied CA held that
Capt. Clarke was merely an agent of respondent, who is the real party in the case. Thus, Capt. Clarke's death
extinguished only the agency between him and respondent, not the appeal against petitioner.
Issues:
Whether or not the CA should have dismissed the cases against petitioner for (1) lack of jurisdiction of the trial
court in view of the failure to implead Capt. Clarke as an indispensable party;(2) lack of legal capacity and
personality on the part of respondent; and (3) lack of factual and legal bases for the assailed RTC Decision.
 25

Ruling:
No. The Supreme Court dismissed the petition for lack of merit.
The issue as to whether or not Capt. Clarke should have been impleaded as an indispensable party was correctly
resolved by the CA which held that the former was merely an agent of respondent. While Capt. Clarke's name
and signature appeared on the MOA, his participation was, nonetheless, limited to being a representative of
respondent. As a mere representative, Capt. Clarke acquired no rights whatsoever, nor did he incur any
liabilities, arising from the contract between petitioner and respondent. Therefore, he was not an indispensable
party to the case at bar.

The CA had correctly pointed out that, from the very language itself of the MOA entered into by petitioner
whereby he obligated himself to allow the use of the hangar space "for company aircraft/helicopter," petitioner
cannot deny that he contracted with respondent. Petitioner further acknowledged this fact in his final letter
dated July 23, 2002, where he reiterated and strongly demanded the former to immediately vacate the hangar
space his "company is occupying/utilizing."
Section 21 of the Corporation Code explicitly provides that one who assumes an obligation to an ostensible
corporation, as such, cannot resist performance thereof on the ground that there was in fact no corporation.
Clearly, petitioner is bound by his obligation under the MOA not only on estoppel but by express provision of
law. As aptly raised by respondent in its Comment to the instant petition, it is futile to insist that petitioner
issued the receipts for rental payments in respondent's name and not with Capt. Clarke's, whom petitioner
allegedly contracted in the latter's personal capacity, only because it was upon the instruction of an employee.
Indeed, it is disputably presumed that a person takes ordinary care of his concerns, and that all private
transactions have been fair and regular. Hence, it is assumed that petitioner, who is a pilot, knew what he was
doing with respect to his business with respondent.
The Court further said that Petitioner's pleadings abound with clear indications of a business relationship gone
sour. In his third letter dated July 19, 2002, petitioner lamented the fact that Capt. Clarke's alleged promise to
buy an aircraft had not materialized. He likewise insinuated that Capt. Clarke's real motive in staying in the
leased premises was the acquisition of petitioner's right to possess and use the hangar space. Be that as it may,
it is settled that courts have no power to relieve parties from obligations they voluntarily assumed, simply
because their contracts turn out to be disastrous deals or unwise investments.
The Supreme Court finally said that the lower courts, therefore, did not err in finding petitioner liable for breach
of contract for effectively evicting respondent from the leased premises even before the expiration of the term
of the lease. The Court reiterates with approval the ratiocination of the RTC that, if it were true that respondent
was violating the terms and conditions of the lease, "[petitioner] should have gone to court to make the [former]
refrain from its 'illegal' activities or seek rescission of the [MOA], rather than taking the law into his own hands."

Philippine Asset Growth Two, Inc. vs. Fastech Synergy Philippines, Inc.
(formerly First Asia System Technology, Inc.), 794 SCRA 625, June 28, 2016
FACTS:
On April 8, 2011, respondent Fastech Synergy Technology, Inc. (formerly First Asia System Technology, Inc.)
filed a verified Joint Petition for corporate rehabilitation before the Regional Trial Court Makati with prayer for
the issuance of a Stay or Suspension Order.
They claimed that their business operations and daily affairs are being managed by the same individuals; they
share a majority of their common assets; and they have common creditors and common liabilities.
Respondent submitted for the courts approval their proposed Rehabilitation Plan, which sought a) a waiver of
all accrued interests and penalties; b) a grace period of two years to pay the principal amount of respondents
outstanding loans, with the interests accruing during the said period capitalized as part of the principal to have
paid over a twelve year period after the grace period and an interest rate of four creditors whose credits are
secured by real estate ad chattel mortgages, respectively.
On April 19, 2011, the RTC-Makati issued a Commencement Order with Stay Order, and appointed Atty.
Rosario Bernardo as Rehabilitation Receiver which the latter accepted.
 26

The RTC Makati gave due course to said petition and referred it to the court-appointed Rehabilitation Receiver,
opining that respondent may be rehabilitated, considering that their assets appear to be sufficient to cover their
liabilities, but reserved her comment to the Rehabilitation Plans underlying assumptions, financial goals, and
procedure to accomplish said goals after the submission of a revised rehabilitation plan as directed by the RTC-
Makati which was complied.
The court appointed Rehabilitation Receiver opined that respondents may be successfully rehabilitated
considering the sufficiency of their assets to cover their liabilities and the assumption, financial projections and
procedures to accomplish said goals in their Rehabilitation Plan.
The RTC-Makati dismissed the rehabilitation petition despite the favorable recommendation of its appointed
Rehabilitation. Aggrieved, respondent appealed to the court of appeals, with prayer for the issuance of a
temporary restraining order and/or a writ of preliminary injunction.
The court of appeals, reversed the decision of RTC-Makati. It ruled that the RTC-Makati grievously erred in
disregarding the report/opinion of the Rehabilitation Receiver that respondents may be successfully
rehabilitated.
PDB filed a motion for reconsideration which was denied. The respondents filed a Manifestation and Update
before the court, stating that it had achieved the EBITDA requirement of the Rehabilitation Plan and made
quarterly payments in favor of the bank and non-bank creditors. However, PDB did not accept any payment
because it was being held by respondents.
ISSUE:
Whether the Rehabilitation Plan is feasible?
HELD:
Rehabilitation is statutory defined under Republic Act No. 10142, otherwise known as the Financial
Rehabilitation and Insolvency Act of 2010 (FRIA). Rehabilitation refers to the resolution of the debtor to a
condition of successful operation and solvency, if it is shown that its continuance of operation is economically
feasible and its creditors can recover by way of the present value of payments projected in the plan, more if the
debtor continues as a going concern that if it is immediately liquidated.
In the present case, the Rehabilitation Plan failed to comply with the minimum requirements a) material
financial commitments to support the rehabilitation plan; and b) a proper liquidation analysis, under Section
18, Rule 3 of the 2008 Rules of Procedure were in force at the time respondent rehabilitation petition was filed.
In fine, the Rehabilitation Plan and the financial documents submitted in support fail to show the feasibility of
rehabilitating respondents business.
The failure of the Rehabilitation Plan to state any material financial commitment to support rehabilitation, as
well as to include a liquidation analysis, renders the CA’s considerations for approving the same that a)
respondents would be able to meet their obligations to their creditors within their business operations; b) the
Rehabilitation Receiver’s opinion carries great weight; ad c) Rehabilitation will be beneficial for respondent’s
creditors, employees, stockholders, and the economy, as actually unsubstantiated, and hence, insufficient to
decree the feasibility of respondents rehabilitation. It is well to emphasize that the remedy of rehabilitation
should be denied to corporations that do not qualify under the Rules. Neither should it be allowed to
corporations whose sole purpose is to delay the enforcement of any of the rights of the creditors.

Shang Properties Realty Corporation (formerly The Shang Grand Tower

Corporation) vs. St. Francis Development Corporation, 730 SCRA 275, July 21,
2014
FACTS:
In its complaints, respondent (a domestic corporation engaged in the real estate business and the developer of
the St. Francis Square Commercial Center) alleged that it has used the mark "ST. FRANCIS" to identify its
numerous property development projects located at Ortigas Center, such as "St. Francis Square,". Respondent
added that as a result of its continuous use of the mark "ST. FRANCIS" in its real estate business, it has gained
substantial goodwill. Accordingly, respondent claimed that petitioners could not have the mark "THE ST.
 27

FRANCIS TOWERS" registered in their names, and that petitioners’ use of the marks "THE ST. FRANCIS
TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" in their own real estate development projects
constitutes unfair competition as well as false or fraudulent declaration. Petitioners denied the allegation and
maintained that they could register the mark "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS
SHANGRI-LA PLACE" under their names. They contended that respondent is barred from claiming
ownership and exclusive use of the mark "ST. FRANCIS" because the same is geographically descriptive of the
goods or services for which it is intended to be used.
The BLA (Bureau of Legal Affairs) found that petitioners committed acts of unfair competition against
respondent and denying petitioners’ application for registration of the mark "THE ST. FRANCIS TOWERS."
Subsequently, then IPO Director-General affirmed the rulings of the BLA. On appeal, petitioners were guilty
of unfair competition not only with respect to their use of the mark "THE ST. FRANCIS TOWERS" but also
of the mark "THE ST. FRANCIS SHANGRI-LA PLACE." Accordingly, it ordered petitioners to cease and
desist from using "ST. FRANCIS" singly or as part of a composite mark, as well as to jointly and severally pay
respondent a fine in the amount of ₱200,000.00. Dissatisfied, petitioners filed the present petition.
ISSUE:
Whether or not petitioners are guilty of unfair competition in using the marks "THE ST. FRANCIS TOWERS"
and "THE ST. FRANCIS SHANGRI-LA PLACE."
HELD:
No. The Court disagrees with the CA that petitioners committed unfair competition due to the mistaken notion
that petitioner had established goodwill for the mark "ST. FRANCIS". In fact, the records are bereft of any
showing that petitioners gave their goods/services the general appearance that it was respondent which was
offering the same to the public. Neither did petitioners employ any means to induce the public towards a false
belief that it was offering respondent’s goods/services. Nor did petitioners make any false statement or commit
acts tending to discredit the goods/services offered by respondent. Accordingly, the element of fraud which is
the core of unfair competition had not been established.
Moreover, records would reveal that while it is true that respondent had been using the mark "ST. FRANCIS"
since 1992, its use thereof has been merely confined to its realty projects within the Ortigas Center. As its use
of the mark is clearly limited to a certain locality, it cannot be said that there was substantial commercial use of
the same recognized all throughout the country. Neither is there any showing of a mental recognition in buyers’
and potential buyers’ minds that products connected with the mark "ST. FRANCIS" are associated with the
same source35 – that is, the enterprise of respondent. Thus, absent any showing that there exists a clear
goods/service-association between the realty projects located in the aforesaid area and herein respondent as
the developer thereof, the latter cannot be said to have acquired a secondary meaning as to its use of the "ST.
FRANCIS" mark.

Sumifru (Philippines) Corporation vs. Baya, 822 SCRA 564, April 17, 2017
FACTS:
Baya had been employed by AMSFC since February 5, 1985, and from then on, worked his way to a supervisory
rank on September 1, 1997. As a supervisor, Baya joined the union of supervisors, and eventually, formed AMS
Kapalong Agrarian Reform Beneficiaries Multipurpose Cooperative (AMSKARBEMCO), the basic agrarian
reform organization of the regular employees of AMSFC. In June 1999, Baya was reassigned to a series of
supervisory positions in AMSFC's sister company, DFC, where he also became a member of the latter's
supervisory union while at the same time, remaining active at AMSKARBEMCO. Later on and upon
AMSKARBEMCO's petition before the Department of Agrarian Reform (DAR), some 220 hectares of
AMSFC's 513-hectare banana plantation were covered by the Comprehensive Agrarian Reform Law.
Eventually, said portion was transferred to AMSFC's regular employees as Agrarian Reform Beneficiaries
(ARBs), including Baya. Thereafter, the ARBs explored a possible agribusiness venture agreement with
AMSFC, but the talks broke down, prompting the Provincial Agrarian Reform Officer to terminate negotiations
and, consequently, give AMSKARBEMCO freedom to enter into similar agreement with other parties. In
October 2001, the ARBs held a referendum in order to choose as to which group between AMSKARBEMCO
or SAFFPAI, an association of pro-company beneficiaries, they wanted to belong 280 went to
AMSKARBEMCO while 85 joined SAFFPAI.
 28

When AMSFC learned that AMSKARBEMCO entered into an export agreement with another company, it
summoned AMSKARBEMCO officers, including Baya, to lash out at them and even threatened them that the
ARBs' takeover of the lands would not push through. Thereafter, Baya was again summoned, this time by a
DFC manager, who told the former that he would be putting himself in a "difficult situation" if he will not shift
his loyalty to SAFFPAI; this notwithstanding, Baya politely refused to betray his cooperative. A few days later,
Baya received a letter stating that his secondment with DFC has ended, thus, ordering his return to AMSFC.
However, upon Baya's return to AMSFC on August 30, 2002, he was informed that there were no supervisory
positions available; thus, he was assigned to different rank-and-file positions instead. On September 20, 2002,
Baya's written request to be restored to a supervisory position was denied, prompting him to file the instant
complaint. On even date, the DAR went to the farms of AMSFC to effect the ARBs' takeover of their awarded
lands. The following day, all the members of AMSKARBEMCO were no longer allowed to work for AMSFC
"as they have been replaced by newly- hired contract workers"; on the other hand, the SAFFPAI members were
still allowed to do so.
AMSFC and DFC maintained that they did not illegally/constructively dismiss Baya, considering that his
termination from employment was the direct result of the ARBs' takeover of AMSFC's banana plantation
through the government's agrarian reform program. They even shifted the blame to Baya himself, arguing that
he was the one who formed AMSKARBEMCO and, eventually, caused the ARBs' aforesaid takeover.
ISSUES:
Whether or not AMSFC and DFC are liable to Baya for separation pay, moral damages, and attorney's fees;
and whether or not Sumifru should be held solidarily liable with AMSFC's for Baya's monetary awards.
HELD:
In this case, a judicious review of the records reveals that the top management of both AMSFC and DFC,
which were sister companies at the time, were well-aware of the lack of supervisory positions in AMSFC. This
notwithstanding, they still proceeded to order Baya's return therein, thus, forcing him to accept rank-and-file
positions. Notably, AMSFC and DFC failed to refute the allegation that Baya's "end of secondment with DFC"
only occurred after: (a) he and the rest of AMSKARBEMGO officials and members were subjected to
harassment and cooperative busting tactics employed by AMSFC and DFC; and (b) he refused to switch
loyalties from AMSKARBEMCO to SAFFPAI, the pro-company cooperative. In this relation, the Court
cannot lend credence to the contention that Baya's termination was due to the ARBs' takeover of the banana
plantation, because the said takeover only occurred on September 20, 2002, while the acts constitutive of
constructive dismissal were performed as early as August 30, 2002, when Baya returned to AMSFC. Thus,
AMSFC and DFC are guilty of constructively dismissing Baya.
However, in light of the underlying circumstances which led to Baya's constructive dismissal, it is clear that an
atmosphere of animosity and antagonism now exists between Baya on the one hand, and AMSFC and DFC on
the other, which therefore calls for the application of the doctrine of strained relations under the doctrine of
strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when
the latter option is no longer desirable or viable. On one hand, such payment liberates the employee from what
could be a highly oppressive work environment. On the other hand, it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no longer trust. Thus, it is more prudent
that Baya be awarded separation pay, instead of being reinstated, as computed by the CA.
The acts constitutive of Baya's constructive dismissal are clearly tainted with bad faith as they were done to
punish him for the actions of his cooperative, AMSKARBEMCO, and for not switching his loyalty to the pro-
company cooperative, SAFFPAI. This prompted Baya to litigate in order to protect his interest and to recover
what is properly due him. Hence, the award of moral damages and attorney's fees are warranted.
Finally, Sumifru's contention that it should only be held liable for the period when Baya stayed with DFC as it
only merged with the latter and not with AMSFC is untenable. Section 80 of the Corporation Code of the
Philippines clearly states that one of the effects of a merger is that the surviving company shall inherit not only
the assets, but also the liabilities of the corporation it merged with, to wit:
Section 80. Effects of merger or consolidation. - The merger or consolidation shall have the following effects:
1. The constituent corporations shall become a single corporation which, in case of merger, shall be the
surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the consolidated
corporation designated in the plan of consolidation;
 29

2. The separate existence of the constituent corporations shall cease, except that of the surviving or the
consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers
and shall be subject to all the duties and liabilities of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges,
immunities and franchises of each of the constituent corporations; and all property, real or personal, and all
receivables due on whatever account, including subscriptions to shares and other choses in action, and all and
every other interest of, or belonging to, or due to each constituent corporation, shall be deemed transferred to
and vested in such surviving or consolidated corporation without further act or deed; and
5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and obligations
of each of the constituent corporations in the same manner as if such surviving or consolidated corporation
had itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or
against any of such constituent corporations may be prosecuted by or against the surviving or consolidated
corporation. The rights of creditors or liens upon the property of any of such constituent corporations shall
not be impaired by such merger or consolidation.
In this case, it is worthy to stress that both AMSFC and DFC are guilty of acts constitutive of constructive
dismissal performed against Baya. As such, they should be deemed as solidarily liable for the monetary awards
in favor of Baya. Meanwhile, Sumifru, as the surviving entity in its merger with DFC, must be held answerable
for the latter's liabilities, including its solidary liability with AMSFC arising herein. Verily, jurisprudence states
that "in the merger of two existing corporations, one of the corporations survives and continues the business,
while the other is dissolved and all its rights, properties and liabilities are acquired by the surviving corporation,"
as in this case.

Tom vs. Rodriguez, 761 SCRA 679, July 06, 2015

Facts:
Fidel Cu sold as evidenced by a Deed of Conditional Sale his 17,237 share of stock in Golden Dragon
International Terminals, Inc.GDITI, (the exclusive Shore Reception Facility Service Provider of the Philippine
Shore Ports Authority) to Ramos and Basalo. However, due to the latter’s failure to pay the purchase price, Cu
sold the 15,233 of the same shares through a Deed of Sale to Lim, Ong, and Gunnacao, who did not pay the
consideration.
The following were then elected as GDITI officers; Lim as President and Chairman of the Board, Basalo as
Vice President for Visayas and Mindanao, Ong as Treasurer and Vice President for Luzon and Gunnacao as
Director.
A group led by Ramos, who were not elected as officers of GDITI including Tan, forcibly took over the GDITI
offices and performed the functions of its officers. Due to this act, it prompted GDITI through its duly-elected
Chairman and President Lim to file an action for injunction and damages against Ramos and others.
Pending the injunction case, Cu resold his shares of stock in GDITI to Basalo evidenced by an Agreement.
Under said agreement, what was sold is not only the remaining 1,997 shares of stock in GDITI, but also the
shares of stock subject of the previously executed Deed of Conditional Sale and Deed of Sale. Cu, intervenor
in the injunction case claims that as unpaid seller, he was still the legal owner of the shares of stock subject of
the previous contracts he entered into with Ramos, Lim, Ong, and Gunnacao.
The RTC granted Cu’s application for Preliminary Mandatory and Preliminary Prohibitory Injunction. Cu then
executed a Special Power of Attorney in favor of Mancao as his duly authorized representative to exercise the
powers granted to him, and to perform all acts of management and control over GDITI.
In a letter to Mancao, Basalo, and the Board of Directors of GDITI filed before the RTC-Manila, Cu expressly
revoked the authority that he had previously granted to the former under the SPA, effectively reinstating the
power to control and manage the affairs of GDITI unto himself. Mancao and Basalo filed Complaint for
Specific Performance with Prayer for the Issuance of a (TRO) and a Writ of Preliminary Injunction against
Cu, Tom, others with the RTC-Nabunturan, Compostela Valley. Rodriguez filed a Complaint-in-Intervention
alleging that the MOA, Basalo authorized him to take over, manage, and control the operation of GDITI in
the Luzon area, effectively revoked whatever powers Basalo had previously given to Mancao. Rodriguez prayed
 30

for the issuance of a writ of preliminary injuction directing Basalo, his agent, deputies and successors to honor
his obligation.
The RTC-Nabunturan granted Rodriguez’ application for the issuance of a writ of preliminary injunction.
However, the CA denied Tom’s prayer for issuance of TRO and/or writ of preliminary injuction, finding no
extreme urgency on the matter raised by Tom.
Issue:
Whether or not the CA committed grave abuse of discretion in denying Tom’s prayer for the issuance of a
TRO and/or writ of preliminary injunction
Held:
As the existence of grave abuse of discretion in this case relates to the propriety of issuing a TRO and/or writ
of preliminary injunction, which, by nature, are injunctive reliefs and preservative remedies for the protection
of substantive rights and interests, it is important to lay down the issuance’s requisites, namely: (1) there exists
a clear and unmistakable right to be protected; (2) this right is directly threatened by an act sought to be enjoined;
(3) the invasion of the right is material and substantial; and (4) there is an urgent and paramount necessity for
the writ to prevent serious and irreparable damage.
The Court finds that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction
in denying Tom’s prayer for the issuance of a TRO and/or writ of preliminary injunction. The issuance of an
injunctive writ is warranted to enjoin the RTC-Nabunturan from implementing its Orders in the specific
performance case placing the management and control of GDITI to Rodriguez, among other directives. This
pronouncement follows the well-entrenched rule that a corporation exercises its powers through its board of
directors and/or its duly authorized officers and agents, except in instances where the Corporation Code
requires stockholders’ approval for certain specific acts. As statutorily provided for in Section 23 of Batas
Pambansa Bilang 68, otherwise known as "The Corporation Code of the Philippines":
SEC. 23. The board of directors or trustees. – Unless otherwise provided in this Code, the corporate powers
of all corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one
(1) year until their successors are elected and qualified.
Every director must own at least one (1) share of the capital stock of the corporation of which he is a director,
which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner
of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to
be a director. Trustees of non-stock corporations must be members thereof. A majority of the directors or
trustees of all corporations organized under this Code must be residents of the Philippines.
Accordingly, it cannot be doubted that the management and control of GDITI, being a stock corporation, are
vested in its duly elected Board of Directors, the body that: (1) exercises all powers provided for under the
Corporation Code; (2) conducts all business of the corporation; and (3) controls and holds all property of the
corporation. Its members have been characterized as trustees or directors clothed with a fiduciary character.
Thus, by denying Tom's prayer for the issuance of a TRO and/or writ of preliminary injunction, the CA
effectively affirmed the RTC's Order placing the management and control of GDITI to Rodriguez, a mere
intervenor, on the basis of a MOA between the latter and Basalo, in violation of the foregoing provision of the
Corporation Code. In so doing, the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction, which is correctible by certiorari.

W Land Holdings, Inc. vs. Starwood Hotels and Resorts Worldwide, Inc., 847
SCRA 403, December 04, 2017
FACTS:
Starwood was granted before the IPO an application for registration of the trademark "W" for Classes 43 and
44 of the Nice Classification and thus, the "W" mark was registered in its name. W Land applied for the
registration of its own "W" mark for Class 36, which thereby prompted Starwood to oppose the same.
 31

The BLA found merit in Starwood's opposition, and ruled that W Land's "W" mark is confusingly similar with
Starwood's mark, which had an earlier filing date. W Land filed a Petition for Cancellation of Starwood's mark
for non-use under Section 151.1 of the IP Code claiming that Starwood has failed to use its mark in the
Philippines because it has no hotel or establishment in the Philippines rendering the services covered by its
registration; and that Starwood's "W" mark application and registration barred its own "'W" mark application
and registration for use on real estate.
In its defense, Starwood denied having abandoned the subject mark on the ground of non-use, asserting that it
filed with the Director of Trademarks a notarized Declaration of Actual Use, which was not rejected. In this
relation, Starwood argued that it conducts hotel and leisure business both directly and indirectly through
subsidiaries and franchisees, and operates interactive websites for its W Hotels in order to accommodate its
potential clients worldwide. According to Starwood, apart from viewing agents, discounts, promotions, and
other marketing fields being offered by it, these interactive websites allow Philippine residents to make
reservations and bookings, which presuppose clear and convincing use of the "W'' mark in the Philippines.
The BLA ruled in W Land's favor, and accordingly ordered the cancellation of Starwood's registration for the
"W" mark. The IPO DG granted Starwood's appeal and the CA affirmed the IPO DG ruling.
ISSUE:
Whether or not the CA correctly affirmed the IPO DG's dismissal of W Land's Petition for Cancellation of
Starwood's "W'' mark.
HELD
Yes.
The IP Code defines a "mark" as "any visible sign capable of distinguishing the goods (trademark) or services
(service mark) of an enterprise." The protection of trademarks as intellectual property is intended not only to
preserve the goodwill and reputation of the business established on the goods or services bearing the mark
through actual use over a period of time, but also to safeguard the public as consumers against confusion on
these goods or services.
The actual use of the mark representing the goods or services introduced and transacted in commerce over a
period of time creates that goodwill which the law seeks to protect. For this reason, the IP Code, under Section
124.2, requires the registrant or owner of a registered mark to declare "actual use of the mark" (DAU) and
present evidence of such use within the prescribed period. Failing in which, the IPO DG may cause the motu
propio removal from the register of the mark's registration. Also, any person, believing that "he or she will be
damaged by the registration of a mark," which has not been used within the Philippines, may file a petition for
cancellation. Following the basic rule that he who alleges must prove his case, the burden lies on the petitioner
to show damage and non-use.
Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the
marked article has been fixed in the public mind through advertising. Whether in the print, broadcast or
electronic communications medium, particularly on the Internet, advertising has paved the way for growth and
expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the
whole world into one vast marketplace. Therefore, the use of a registered mark representing the owner's goods
or services by means of an interactive website may constitute proof of actual use that is sufficient to maintain
the registration of the same. The "use" contemplated by law is genuine use - that is, a bona fide kind of use
tending towards a commercial transaction in the ordinary course of trade. Since the internet creates a borderless
marketplace, it must be shown that the owner has actually transacted, or at the very least, intentionally targeted
customers of a particular jurisdiction in order to be considered as having used the trade mark in the ordinary
course of his trade in that country. A showing of an actual commercial link to the country is therefore
imperative.
As the IP Code expressly requires, the use of the mark must be "within the Philippines."
A hotel's website has now become an integral element of a hotel business. In effect, the hotel's website acts as
a bridge or portal through which the hotel reaches out and provides its services to the client/customer anywhere
in the world, with the booking transaction completed at the client/customer's own convenience.
The use of the mark on an interactive website, for instance, may be said to target local customers when they
contain specific details regarding or pertaining to the target State, sufficiently showing an intent towards
realizing a within-State commercial activity or interaction.
 32

In this case, Starwood has proven that it owns Philippine registered domain names i.e., www.whotels.ph,
www.wreservations.ph, www.whotel.ph, www.wreservation.ph, for its website that showcase its mark. The
website is readily accessible to Philippine citizens and residents, where they can avail and book amenities and
other services in any of Starwood's W Hotels worldwide. Its website also readily provides a phone number for
Philippine consumers to call for information or other concerns. The website further uses the English language-
considered as an official language in this country- which the relevant market in the Philippines understands and
often uses in the daily conduct of affairs. In addition, the prices for its hotel accommodations and/or services
can be converted into the local currency or the Philippine Peso.
Amidst all of these features, Starwood's "W" mark is prominently displayed in the website through which
consumers in the Philippines can instantaneously book and pay for their accommodations, with immediate
confirmation, in any of its W Hotels. Furthermore, it has presented data showing a considerably growing
number of internet users in the Philippines visiting its website since 2003, which is enough to conclude that
Starwood has established commercially-motivated relationships with Philippine consumers.
Taken together, these facts and circumstances show that Starwood's use of its "W" mark through its interactive
website is intended to produce a discernable commercial effect or activity within the Philippines, or at the very
least, seeks to establish commercial interaction with local consumers. Accordingly, Starwood's use of the "W"
mark in its reservation services through its website constitutes use of the mark sufficient to keep its registration
in force.
Starwood's "W" mark is registered for Classes 43 which includes hotel reservation services.
Under Section 152.3 of the IP Code, "[t]he use of a mark in connection with one or more of the goods or
services belonging to the class in respect of which the mark is registered shall prevent its cancellation or removal
in respect of all other goods or services of the same class." Thus, Starwood's use of the "W" mark for reservation
services through its website constitutes use of the mark which is already sufficient to protect its registration
under the entire subject classification from non-use cancellation. This, notwithstanding the absence of a
Starwood hotel or establishment in the Philippines.

Roman, Jr. vs. Securities and Exchange Commission, 791 SCRA 638, June 01,
2016
Facts:
On June 6, 2007, private respondents Atty. Narciso T. Atienza, Eusebio A. Abaquin, Atty. Clodualdo C. De
Jesus, Sr., Atty. Clodualdo Antonio R. De Jesus, Jr., Atty. Ireneo T. Aguirre, Jr., Sunday O. Pineda, Porfirio M.
Florez, and Atty. Zosimo Padro, Jr. filed a verified letter-complaint against the petitioners before the SEC.
In their letter-complaint, private respondents alleged that on April 23, 1996, a Special Board of Directors
Meeting was held and, thereafter, a resolution was passed by the Board of Directors of Capitol. It was further
alleged that Roman also asked the Board to pass a resolution authorizing a third-party, Pacific Asia Capital
Corporation (Pacific Asia), to receive from Ayala Land, Inc. (ALI) the proceeds of the loan, or any portion
thereof.
To private respondents, all these were irregularities and anomalies amounting to fraud and misrepresentation
that prompted them to ask the SEC to investigate the Board and to order the constitution of the MANCOM
to temporarily oversee the affairs of Capitol. The said complaint was then docketed as SEC Case No. 169, series
of 2007
In its letter to Roman, dated July 3, 2007, the SEC informed him of the verified complaint and gave him 15
days upon receipt to file his answer to the said complaint.
In their Answer, the petitioners invoked the SEC's lack of jurisdiction claiming that the complaint of private
respondents involved an intra-corporate controversy. Accordingly, they argued that under the Securities
Regulation Code (SRC), jurisdiction over such intra-corporate controversies should be with the Regional Trial
Court (RTC) acting as special commercial court.
In its December 5, 2007 Order, the SEC, after finding merit in the arguments presented in the complaint,
composed the membership of the MANCOM pursuant to its authority under Section 5 of the SRC and
Presidential Decree (P.D.) No. 902-A. Thus, pursuant to Section 5 of the Securities Regulation Code and
Presidential Decree No. 902-A, as amended, and finding merit in the arguments presented for the creation of
 33

a Management Committee (Mancom) for Capitol Hills Golf and country Club, as prayed for by the Petitioners
in their letter dated May 08, 2007, the following are hereby designated to compose the Mancom of the
aforenamed corporation: Atty. Franklin I. Cueto – Chairman;
Atty. Noel Y. Artiza - Member; Mr. Manuel Baldeo, Jr. – Member.
Subsequently, the petitioners questioned the December 5, 2007 SEC order before the CA via a petition for
prohibition under Rule 65 of the Rules of Court. It asked the CA to enjoin the SEC from conducting further
proceedings and to dismiss the case and, in addition, prayed for the issuance of a temporary restraining order
and/or writ of preliminary injunction.
Issues:
(1) WAS TAKING COGNIZANCE OF THE LETTER- COMPLAINT FILED BY THE PRIVATE
RESPONDENTS BEYOND THE JURISDICTION OF THE SEC?
(2) WAS THE SEC ORDER CREATING THE MANCOM ISSUED IN EXCESS OF ITS
JURISDICTION?
Held:
The CA ruled in the negative on both scores and this Court agrees for the reasons discussed hereinafter.
1. On SEC's authority to take cognizance of the letter-complaint
Under the SRC, jurisdiction on matters stated under Section 5 of P.D. No. 902-A, which was originally vested
in the SEC, has already been transferred to the RTC acting as a special commercial court. Despite the said
transfer, however, the SEC still retains sufficient powers to justify its assumption of jurisdiction over matters
concerning its supervisory, administrative and regulatory functions. In SEC v. Subic Bay Golf and Country
Club, Inc. (SBGCCI) and Universal International Group Development Corporation (UIGDC), for instance,
the Court affirmed the SEC's assumption of jurisdiction over a complaint, which alleged that SBGCCI and
UIGDC committed misrepresentations in the sale of their shares. The Court held in the said case that nothing
prevented the SEC from assuming jurisdiction to determine if SBGCCI and UIGDC committed administrative
violations and were liable under the SRC despite the complaint having raised intra-corporate issues. It also ruled
that the SEC may investigate activities of corporations to ensure compliance with the law.
Beyond doubt, therefore, is the authority of the SEC to hear cases regardless of whether an action involves
issues cognizable by the RTC, provided that the SEC could only act upon those which are merely administrative
and regulatory in character. In other words, the SEC was never dispossessed of the power to assume jurisdiction
over complaints, even if these are riddled with intra-corporate allegations, if their invocation of authority is
confined only to the extent of ensuring compliance with the law and the rules, as well as to impose fines and
penalties for violation thereof; and to investigate even motu proprio whether corporations comply with the
Corporation Code, the SRC and the implementing rules and regulations.
As the SEC is not ousted of its regulatory and administrative jurisdiction to determine and act if administrative
violations were committed, no grave abuse of discretion can be attributed to it when it assumed jurisdiction
over the letter-complaint. Accordingly, the Court finds no error with what was held by the CA.
2.On the Constitution of the MANCOM
The SEC submits that the power to constitute a management committee is based on its supervisory and
regulatory functions. In effect, the authority of the SEC is viewed as one that is intimately related to its functions
as a regulator.
It must be stressed that under Section 5.1 (n) of the SRC, the SEC is permitted to exercise such other powers
as may be provided for by law as well as those which may be implied from, or which are necessary or incidental
to the carrying out, of the express powers granted the SEC to achieve the objectives and purposes of these
laws.
With such broad authority, it is beyond question that the SEC, as a regulator, has broad discretion to act on
matters that relate to its express power of supervision over all corporations, partnerships or associations who
are the grantees of primary franchises and/or a license or permit issued by the Government. Such grant of
express power of supervision, necessarily includes the power to create a management committee following the
doctrine of necessary implication.
 34

The reason is simple. The creation of a management committee is one that is premised on the immediate and
speedy protection of the interest not only of minority stockholders, but also of the general public from
immediate danger of loss, wastage or destruction of assets or the paralyzation of business of a concerned
corporation or entity. Nobody is more competent to provide such a temporary relief other than the regulatory
body of these companies - the SEC.
Thus, such authority is expressly sanctioned under SEC-MC No. 11, Series of 2003. Suffice it to state that such
circular enjoys the presumption of validity unless this Court declares otherwise.

Roy III vs. Herbosa, 823 SCRA 133, April 18, 2017FACTS:
Facts
On January 19, 2017, a Motion for Reconsideration was filed by petitioner Jose M. Roy III seeking the reversal
and setting aside of the Decision dated November 22, 2016 which denied the movant's petition, and declared
that the Securities and Exchange Commission did not commit grave abuse of discretion in issuing
Memorandum Circular No. 8, Series of 2013 (SEC-MC No. 8) as the same was in compliance with, and in fealty
to, the decision of the Court in Gamboa v. Finance Secretary Teves and the resolution denying the Motion for
Reconsideration therein.
In the Gamboa Decision, the court ruled that the term "capital" in Section 11, Article XII of the 1987
Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present
case only to common shares, and not to the total outstanding capital stock.
The Motion presents no compelling and new arguments to justify the reconsideration of the Decision. The
Decision has already exhaustively discussed and directly passed upon these grounds. Movant's petition was
dismissed based on both procedural and substantive grounds.
ISSUE:
Whether or not SEC committed grave abuse of discretion amounting to lack or excess of jurisdiction when it
issued SEC-MC No. 8.
HELD:
SEC did not commit grave abuse of discretion amounting to lack or excess of jurisdiction when it issued SEC¬-
MC No. 8. To the contrary, the Court finds SEC-MC No. 8 to have been issued in fealty to the Gamboa
Decision and 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.

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.
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not
enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate
voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens
cannot be considered held by Philippine citizens or Philippine nationals.

Dy Teban Trading, Inc. vs. Dy, 832 SCRA 533, July 26, 2017
Facts:
 35

DTTI is a domestic closed corporation owned by the Dy siblings. It has its principal office at Concepcion St.,
Butuan City and a branch in Montilla Boulevard. Due to certain disagreements relating to its management,
DTTI instituted an action for injunction against Peter C. Dy, Johnny C. Dy and Ramon C. Dy before the RTC.
This was docketed as an intra-corporate case.
DTTI alleged that Johnny, an employee in its Montilla branch, had "squandered cash sales and stocks" from
the branch either for his personal benefit or that of Peter and Ramon. To prevent further losses, DTTI decided
to close its Montilla branch and had the doors of the branch store welded shut. This notwithstanding, DTTI
claimed that respondents forcibly opened the branch store and have continuously deprived it of the use of the
same.
Issues:
Whether the action filed before the RTC was an intra-corporate case properly heard by the RTC acting as a
special commercial court.
Ruling:
No. Section 5 of the Securities Regulation Code transferred the jurisdiction of the Securities and Exchange
Commission (SEC) over intra-corporate disputes to RTCs designated by the Supreme Court as commercial
courts.
The existence of an intra-corporate dispute must be properly alleged in a complaint filed before a commercial
court because the allegations in the complaint determine a tribunal's jurisdiction over the subject matter. This
means that the complaint must make out a case that meets both the relationship and the nature of the
controversy tests.
Under the relationship test, a dispute is intra-corporate if it is: (1) between the corporation, partnership or
association and the public; (2) between the corporation, partnership or association and the state insofar as its
franchise, permit or license to operate is concerned; (3) between the corporation, partnership or association
and its stockholders, partners, members or officers; and (4) among the stockholders, partners or associates
themselves.
The nature of the controversy test, on the other hand, requires that the dispute itself must be intrinsically
connected with the regulation of the corporation, partnership or association. The controversy "must not only
be rooted in the existence of an intra-corporate relationship, but must also refer to the enforcement of the
parties' correlative rights and obligations under the Corporation Code as well as the internal and intra-corporate
regulatory rules of the corporation.
Applying the foregoing tests, the complaint filed by DTTI before the RTC was a civil action for injunction and
not an intra-corporate dispute.
First, a reading of the complaint will reveal that it contains no allegation respondents are stockholders of the
corporation. Notably, the complaint even identified Johnny as a DTTI employee. The complaint also does not
allege that the other defendants therein have acted in their capacity as stockholders in depriving DTTI of access
to its Montilla branch. Second, the nature of the controversy does not involve an intra-corporate dispute. The
complaint for injunction asks the RTC to order respondents to cease from controlling DTTI's Montilla branch
and allow DTTI to use the same. The complaint states that Johnny, DTTI's employee, colluded with co-
respondents Peter and Ramon in forcibly opening the Montilla branch store and preventing DTTI from using
the property. Third, DTTI, in its complaint, asked the RTC to: (1) prevent respondents from physically
possessing its branch store; and (2) allow DTTI to have access and control of the building. Nowhere in its
complaint did DTTI ask for a determination of the parties' rights under the Corporation Code, its articles of
incorporation or its by-laws.

Securities and Exchange Commission vs. Price Richardson Corporation, 832

SCRA 560, July 26, 2017
Facts:
Respondent Price Richardson Corporation (Price Richardson) is a Philippine corporation duly incorporated
under Philippine laws.
 36

On October 17, 2001, its former employee, Michelle S. Avelino, (Avelino) executed a sworn affidavit at the
National Bureau of Investigation's Interpol Division, alleging that Price Richardson was "engaged in boiler
room operations, wherein the company sells non-existent stocks to investors using high pressure sales tactics."
Whenever this activity was discovered, the company would close and emerge under a new company name.
Janet C. Rillo corroborated Avelino's claims. She was a former employee of Capital International Consultants,
Inc. (Capital International), a corporation that allegedly merged with Price Richardson. She claimed that their
calls to prospective investors should be in Price Richardson's name.
Upon application of the National Bureau of Investigation Interpol Division and the Securities and Exchange
Commission (SEC) issued three (3) search warrants against Capital International and Price Richardson for
violation of Section 28 of the Securities Regulation Code. The Regional Trial Court ordered the seizure of Price
Richardson's and Capital International's office equipment, documents, and other items that were connected
with the alleged violation.
The Securities and Exchange Commission alleged that Price Richardson was neither licensed nor registered "to
engage in the business of buying and selling securities within the Philippines or act as salesman, or an associated
person of any broker or dealer."
Price Richardson, Velarde-Albert, Resnick, and the incorporators and directors were also charged with Estafa
under Article 315(1)(b) of the Revised Penal Code.
In defense, the incorporators and directors denied knowing or agreeing to the offenses charged. They countered
that they already transferred their respective shares to various individuals in December 2000, as shown by their
registered Deeds of Absolute Sale of Shares of Stock.
State Prosecutor Reyes absolved the incorporators and directors from any liability considering that they already
relinquished their positions as directors of Price Richardson when they transferred their shares to third parties.
He also found Velarde-Albert and Resnick not liable for lack of sufficient proof that they engaged in the trading
of securities.
The Securities and Exchange Commission moved for reconsideration.
The Securities and Exchange Commission filed before the Department of Justice a Petition for Review but was
denied.
The Securities and Exchange Commission filed a Petition for Certiorari before the Court of Appeals.
On December 2, 2013, this Court issued a Resolution, giving due course to the Petition and required the parties
to file their respective memoranda.
Petitioner filed its Memorandum on March 21, 2014. Respondents Velarde-Albert, Resnick, and Price
Richardson submitted their Memoranda on February 24, 2014, April 3, 2014, and May 8, 2014, respectively.
Issue:
Whether there is probable cause to indict respondents for violation of Sections 26.3 and 28 of the Securities
Regulation Code.
Held:
An examination of the records reveals that probable cause exists to file an information against respondent Price
Richardson for violating the laws.
Based on the Certification dated October 11, 2001 issued by the Market Regulation Department of the
Securities and Exchange Commission, respondent Price Richardson "has never been issued any secondary
license to act as broker/dealer in securities, investment house and dealer in government securities." Petitioner
also certified that respondent Price Richardson "is not, under any circumstances, authorized or licensed to
engage and/or solicit investments from clients."
However, respondents Velarde-Albert and Resnick cannot be indicted for violations of the Securities
Regulation Code and the Revised Penal Code.
Petitioner failed to allege the specific acts of respondents Velarde-Albert and Resnick that could be interpreted
as participation in the alleged violations. There was also no showing, based on the complaints, that they were
deemed responsible for Price Richardson's violations.
 37

The evidence gathered by petitioner and the statement of respondent Price Richardson are facts sufficient
enough to support a reasonable belief that respondent is probably guilty of the offense charged.
A corporation's personality is separate and distinct from its officers, directors, and shareholders. To be held
criminally liable for the acts of a corporation, there must be a showing that its officers, directors, and
shareholders actively participated in or had the power to prevent the wrongful act.

G.R. No. 180064 September 16, 2013 JOSE U. PUA and BENJAMIN
HANBEN U. PUA, Petitioners, vs. CITIBANK, N. A., Respondent.
FACTS:
petitioners allege that they had been depositors of Citibank since 1996. That sometime in 1999 Guada Ang,
Citibank Binondo Manager invited Jose to a dinner party in Manila Hotel where he was introduced to several
officers and employees of Citibank HongKong branch.
A few months later, Yau, VP of Citibank Hongkong came to sell securities to Jose and required Jose to open
an account with Citibank Hongkong as one of the conditions for the sale of the securities. All the sale of
securities were perfected and signed in Citibank Binondo.
Petitioner discovered that the securities sold to them were not registered with the SEC and was not approved
by the SEC. Petitioner assailed the validity of the agreements and terms of condition of the securities as contrary
to law and/or public policy
Issue:
Whether SEC has jurisdiction over the case
HELD:
Yes, A criminal charge for violation of the Securities Regulation Code is a specialized dispute. Hence, it must
first be referred to an administrative agency of special competence.
Hence, all complaints for any violation of the Code and its implementing rules and regulations should be filed
with the SEC. Where the complaint is criminal in nature, the SEC shall indorse the complaint to the DOJ for
preliminary investigation and prosecution as provided in Section 53.1 earlier quoted.
It is apparent that the SRC provisions governing criminal suits are separate and distinct from those which
pertain to civil suits. Sections 56, 57, 58, 59, 60, 61, 62, and 63 of the SRC pertain to civil suits involving
violations of the same law. Among these, the applicable provisions to this case are Sections 57.1 and 63.1 of
the SRC which provide:
SEC. 57. Civil Liabilities Arising in Connection With Prospectus, Communications and Reports.
– 57.1. Any person who:
(a) Offers to sell or sells a security in violation of Chapter III;
or
(b) Offers to sell or sells a security, whether or not exempted by the provisions of this Code, by the use of any
means or instruments of transportation or communication, by means of a prospectus or other written or oral
communication, which includes an untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements, in the light of the circumstances under which they were made, not misleading
(the purchaser not knowing of such untruth or omission), and who shall fail in the burden of proof that he did
not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be
liable to the person purchasing such security from him, who may sue to recover the consideration paid for such
security with interest thereon, less the amount of any income received thereon, upon the tender of such security,
or for damages if he no longer owns the security.
Based on the foregoing, it is clear that cases falling under Section 57of the SRC, which pertain to civil liabilities
arising from violations of the requirements for offers to sell or the sale of securities, as well as other civil suits
under Sections 56, 58, 59, 60, and 61 of the SRC shall be exclusively brought before the regional trial courts. It
 38

is a well-settled rule in statutory construction that the term "shall" is a word of command, and one which has
always or which must be given a compulsory meaning, and it is generally imperative or mandatory

G.R. No. 198444 September 4, 2013 CITIBANK N.A. AND THE CITIGROUP
PRIVATE BANK, Petitioners, vs. ESTER H. TANCO-GABALDON,
ARSENIO TANCO & THE HEIRS OF KU TIONG LAM, Respondents.
G.R. No, 198469-70 CAROL LIM, Petitioner, vs. ESTER H. TANCO-
GABALDON, ARSENIO TANCO & THE HEIRS OF KU TIONG LAM,
Respondents.
REYES, J.:
FACTS:
Respondents filed with the SEC a complaint of the Revised Securities Act and the SRC against petitioner
alleging that the petitioner in the year 2000 induced them into signing a subscription agreement for the purchase
of $2000000 worth of Ceres II Finance Ltd. Income notes and in that same year, $500000 of Aeries Finance
Ltd. Income notes and in 2003 they learned that their investments declined and eventually wiped out.
Respondents learned that notes were not duly registered securities and the petitioners were not duly registered
security issuers, brokers, dealers, or agents.
Respondents prayed in their complaint that: (1) the petitioners be held administratively liable;5 (2) the
petitioners be liable to pay an administrative fine pursuant to Section 54(ii), SRC; (3) the petitioners’ existing
registration/s or secondary license/s to act as a broker/dealer in securities, government securities eligible dealer,
investment adviser of an investment house/underwriter of securities and transfer agent be revoked; and (4)
criminal complaints against the petitioners be filed and endorsed to the Department of Justice (DOJ) for
investigation.
Petitioners Citibank and Citigroup claimed that they did not receive a copy of the complaint and it was only
after the Bangko Sentral ng Pilipinas (BSP) wrote them on October 26, 2007 that they were furnished a copy.
SEC in its investigation ruled that the actions of the respondents were filed out of time. The CA reversed the
ruling and ordered SEC to proceed with the investigation
ISSUE:
Whether the complaint filed was filed out of time
HELD:
No, Section 62 provides for two different prescriptive periods.
Section 62.1 specifically sets out the prescriptive period for the liabilities created under Sections 56, 57, 57.1(a)
and 57.1(b). Section 56refers to Civil Liabilities on Account of False Registration Statement while Section 57
pertains to Civil Liabilities on Arising in Connection with Prospectus, Communications and Reports. Under
these provisions, enforcement of the civil liability must be brought within two (2) years or five (5) years, as the
case may be.
On the other hand, Section 62.2 provides for the prescriptive period to enforce any liability created under the
SRC. It is the interpretation of the phrase "any liability" that creates the uncertainty.
Section 62.1 merely addressed the prescriptive period for the civil liability provided in Sections 56, 57, 57.1(a)
and 57.1(b), then it reasonably follows that the other sub-provision, Section 62.2, deals with the other civil
liabilities that were not covered by Section 62.1, namely Sections59, 60 and 61. This conclusion is further
supported by the fact that the subsequent provision, Section 63, explicitly pertains to the amount of damages
recoverable under Sections 56, 57, 58, 59, 60 and 61, the trial court having jurisdiction over such actions, the
persons liable24 and the extent of their liability.
Section 1, Section 2 of Act No. 3326 states 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.
 39

In Republic v. Cojuangco, Jr.the Court ruled that Section 2 provides two rules for determining when the
prescriptive period shall begin to run: first, from the day of the commission of the violation of the law, if such
commission is known; and second, from its discovery, if not then known, and the institution of judicial
proceedings for its investigation and punishment.
Based on the foregoing antecedents, only seven (7) years lapsed since the respondents invested their funds with
the petitioners, and three (3) years since the respondents’ discovery of the alleged offenses, that the complaint
was correctly filed with the SEC for investigation. Hence, the respondents’ complaint was filed well within the
twelve (12)-year prescriptive period provided by Section 1 of Act No. 3326.

G.R. No. 195542 SECURITIES AND EXCHANGE COMMISSION,

Petitioner, vs. OUDINE SANTOS, Respondent.
PEREZ, J.:
FACTS:
Sometime in 2007, yet another investment scam was exposed with the disappearance of its primary perpetrator,
Michael H.K. Liew (Liew), a self- styled financial guru and Chairman of the Board of Directors of Performance
Investment Products Corporation (PIPC-BVI), a foreign corporation registered in the British Virgin Islands.
Soon thereafter, the SEC, through its Compliance and Endorsement Division, filed a complaint-affidavit for
violation of Sections 8, 26 and 28 of the Securities Regulation Code before the Department of Justice.
Lorenzo and Sy charge Santos in her capacity as investment consultant of PIPC Corporation who actively
engaged in the solicitation and recruitment of investors. Private complainants maintain that Santos, apart from
being PIPC Corporation’s employee, acted as PIPC Corporation’s agent and made representations regarding
its investment products and that of the supposed global corporation PIPC-BVI. Facilitating Lorenzo’s and Sy’s
investment with PIPC Corporation, Santos represented to the two that investing with PIPC Corporation, an
affiliate of PIPC-BVI, would be safe and full-proof.
ISSUE:
Whether Santos acted as agent of PIPC Corp.
HELD:
No, documents categorically show that the parties therein, i.e., Luisa Mercedes P. Lorenzo or Ricky Albino P.
Sy and PIPC-BVI, transacted with each other directly without any participation from respondent Santos.
Section 28 of the Securities Regulation Code (SRC) reads:
SEC. [28]. Registration of Brokers, Dealers, Salesmen and Associated Persons. – 28.1. No person shall engage
in the business of buying or selling securities in the Philippines as a broker or dealer unless registered as such
with the Commission.
28.2. No registered broker or dealer shall employ any salesman or any associated person, and no issuer shall
employ any salesman, who is not registered as such with the Commission.
Jurisprudence defines an "agent" as a "business representative, whose function is to bring about, modify, affect,
accept performance of, or terminate contractual obligations between principal and third persons."
A judicious examination of the records indicates the lack of evidence that respondent Santos violated Section
28 of the SRC, or that she had acted as an agent for PIPC Corp. or enticed Luisa Mercedes P. Lorenzo or Ricky
Albino P. Sy to buy PIPC Corp. or PIPC-BVI’s investment products.

G.R. No. 187702 October 22, 2014 SECURITIES AND EXCHANGE

COMMISSION, Petitioner, vs. THE HONORABLE COURT OF APPEALS,
OMICO CORPORATION, EMILIO S. TENG AND TOMMY KIN HING
TIA, Respondents. G.R. No. 189014 ASTRA SECURITIES CORPORATION,
 40

Petitioner, vs. OMICO CORPORATION, EMILIO S. TENG AND TOMMY

KIN HING TIA, Respondents.

SERENO, CJ:
FACTS:
Omico scheduled its annual stockholders’ meeting on 3 November 2008. It set the deadline for submission of
proxies on 23 October 2008 and the validation of proxies on 25 October 2008. Astra objected to the validation
of the proxies issued in favor of Tommy Kin Hing Tia (Tia), representing about 38% of the outstanding capital
stock of Omico.
Astra maintained that the proxy issuers, who were brokers, did not obtain the required express written
authorization of their clients in violation of SRC Rule 20(11)(b)(xviii). Furthermore, the proxies issued in favor
of Tia exceeded 19, thereby giving rise to the presumption of solicitation thereof under SRC Rule 20(2)(B)(ii)(b)
of the Amended SRC Rules. Tia did not comply with the rules on proxy solicitation, in violation of Section 20.1
of the SRC.
SEC issued the CDO enjoining Omico from accepting and including the questioned proxies in determining a
quorum and in electing the members of the board of directors during the annual stockholders’ meeting.
stockholders’ meeting proceeded as scheduled with 52.3% of the outstanding capital stock of Omico present
in person or by proxy.
ISSUE:
Whether the SEC has jurisdiction over controversies arising from the validation of proxies for the election of
the directors of a corporation.
HELD:
No, The Court pointed out therein that the power to pass upon the validity of proxies was merely incidental or
ancillary to the powers conferred on the SEC under Section 5 of the same decree. With the passage of the SRC,
the powers granted to SEC under Section 5 were withdrawn, together withthe incidental and ancillary powers
enumerated in Section 6.
the jurisdiction of the regular courts over so-called election contests or controversies under Section 5 (c) does
not extend toevery potential subject that may be voted on by shareholders, but only to the election of directors
or trustees, in which stockholders are authorized to participate under Section 24 of the Corporation Code.
The test is whether the controversy relates to such election. All matters affecting the manner and conduct of
the election of directors are properly cognizable by the regular courts. Otherwise, these matters may be brought
before the SEC for resolution based on the regulatory powers it exercises over corporations, partnerships and
associations.
The Court ruled that quasi-judicial agencies do not have the right to seek the review of an appellate court
decision reversing any of their rulings. This is because they are not real parties-in-interest. Thus, the Court
expunged the petition filed by the SEC for the latter's lack of capacity to file the suit. So, it must be in the
instant cases.

G.R. No. 193791 August 6, 2014 PRIMANILA PLANS, INC., herein

REPRESENTED by EDUARDO S. MADRID, Petitioner, vs. SECURITIES
AND EXCHANGE COMMISSION, Respondent.
REYES, J.:
FACTS:
The SEC declared that Primanila committed a flagrant violation of Republic Act No. 8799. It also breached the
New Rules on the Registration and Sale of Pre-Need Plans, specifically Rule Nos. 3 and 15 thereof.
 41

The SEC then issued the subject cease and desist order "in order to prevent further violations and in order to
protect the interest of its plan holders and the public.
Primanila filed a Motion for Reconsideration/Lift Cease and Desist Order, arguing that it was denied due
process as the order was released without any prior issuance by the SEC of a notice or formal charge that could
have allowed the company to defend itself.
ISSUE:
Whether SEC failed to afford due process to petitioners
HELD:
No, Contrary to its stance, Primanila was accorded due process notwithstanding the SEC’s immediate issuance
of the cease and desist order on April 9, 2008. The authority of the SEC and the manner by which it can issue
cease and desist orders are providedin Section 64 of the SRC, and we quote:
Section 64. Cease and Desist Order. –
64.1. The Commission, after proper investigation or verification, motu proprio,or upon verified complaint by
any aggrieved party, may issue a cease and desist order without the necessity of a prior hearingif in its judgment
the act orpractice, unless restrained, will operate as a fraud on investors or isotherwise likely to cause grave or
irreparable injury or prejudice to the investing public.
64.2. Until the Commission issues a cease and desist order, the fact that an investigation has been initiated or
that a complaint has been filed, including the contents of the complaint, shall be confidential. Upon issuance
of a cease and desist order,the Commission shall make public such order and a copy thereof shall be immediately
furnished to each person subject to the order. 64.3. Any person against whom a cease and desist order was
issued may, within five (5) days from receipt of the order, file a formal request for lifting thereof. Said request
shall be set for hearing by the Commission not later than fifteen (15) days from its filing and the resolution
thereof shall be made not later than ten (10) days from the termination of the hearing. If the Commission fails
to resolve the request within the time herein prescribed, the cease and desist order shall automatically be lifted.
The law is clear on the point that a cease and desist order may be issued by the SEC motu proprio, it being
unnecessary thatit results from a verified complaint from an aggrieved party. A prior hearing is also not required
whenever the Commission finds it appropriate to issue a cease and desist order that aims to curtail fraudor
grave or irreparable injury to investors. There is good reason for this provision, as any delay in the restraint of
acts that yield such resultscan only generate further injury to the public that the SEC is obliged to protect.
Due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding.
Due process is satisfied when a person is notified of the charge against him and given an opportunity to explain
or defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for
the person so charged to answer the accusations against him constitute the minimum requirements of due
process. The essence of due process is simply to be heard, or as applied to administrative proceedings, an
opportunity to explain one’s side, or an opportunity to seek a reconsideration of the action or ruling complained
of.

G.R. No. 181381 July 20, 2015 SECURITIES and EXCHANGE

COMMISSION, Petitioner, vs. UNIVERSAL RIGHTFIELD PROPERTY
HOLDINGS, INC., Respondent.
PERALTA, J.:
FACTS:
Petitioner Securities and Exchange Commission (SEC), through its Corporate Finance Department, issued an
Order revoking URPHI's Registration of Securities and Permit to Sell Securities to the Public for its failure to
timely file its Year 2001 Annual Report and Year 2002 1st, 2nd and 3rd Quarterly Reports pursuant to Section
17 of the Securities Regulation Code (SRC), Republic Act No. 8799.
URPHI filed with the SEC a Manifestation/Urgent Motion to Set Aside Revocation Order and Reinstate
Registration after complying with its reportorial requirements.
 42

SEC granted URPHI's motion to lift the revocation order, considering the current economic situation, URPHI's
belated filing of the required annual and quarterly reports.
URPHI failed again to comply with the same reportorial requirements.
Through its Chief Accountant, Rhodora Lahaylahay, informed the SEC why it failed to submit the reportorial
requirements, viz.: (1) it was constrained to reduce its accounting staff due to cost-cutting measures; thus, some
of the audit requirements were not completed within the original timetable; and (2) its audited financial
statements for the period ending December 31, 2003 could not be finalized by reason of the delay in the
completion of some of its audit requirements.
The Corporation foresees the impossibility of complying with its submission until the end of the month, as the
partners of SGV are still reviewing the final draft of the financial statements. The Corporation intends to
comply with its reportorial requirements. However, due to the foregoing circumstances, the finalization of our
financial statement has again been delayed. In this regard, may we request for the last time until November 15,
2004 within which to submit said reportorial requirements.
On December 1, 2004, URPHI filed with the SEC its 2003 Annual Report.
SEC revoked URPHI's Registration of Securities and Permit to Sell Securities to the Public for its failure to
submit its reportorial requirements within the final extension period.
Claiming that it exerted best effort and exercised good faith in complying with the reportorial requirements,
URPHI avers that the interest of the investing public will be better served if, instead of revoking its registration
of securities, the SEC will merely impose penalties and allow it to continue as a going concern in the hope that
it may later return to profitability.
ISSUE:
Whether the revocation of the Permit to Sell Securities to the Public given lawfully
HELD:
Yes, Sections 13 .1 and 54.1 of the SRC expressly provide that the SEC may suspend or revoke such registration
only after due notice and hearing, to wit:
13.1. The Commission may reject a registration statement and refuse registration of the security thereunder, or
revoke the effectivity of a registration statement and the registration of the security thereunder after due notice
and hearing by issuing an order to such effect, setting forth its findings in respect thereto, if it finds that:
a) The issuer:
xxxx
(ii) Has violated any of the provisions of this Code, the rules promulgated pursuant thereto, or any order of the
Commission of which the issuer has notice in connection with the offering for which a registration statement
has been filed;21
xxxx
The Court has consistently held that the essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a
reconsideration of the action or ruling complained of.23 Any seeming defect in its observance is cured by the
filing of a motion for reconsideration, and denial of due process cannot be successfully invoked by a party who
has had the opportunity to be heard on such motion.24 What the law prohibits is not the absence of previous
notice, but the absolute absence thereof and the lack of opportunity to be heard.
Granted that no formal hearing was held before the issuance of the Order of Revocation, the Court finds that
there was substantial compliance with the requirements of due process when URPHI was given opportunity to
be heard. Upon receipt of the SEC Order dated July 27, 2004, URPHI filed the letters dated September 13 and
28, 2004, seeking a final extension to submit the reportorial requirements, and admitting that its failure to
submit its 2nd Quarterly Report for 2004 was due to the same reasons that it was unable to submit its 2003
Annual Report and 1st Quarterly Report for 2004. Notably, in its Order of Revocation, the SEC considered
URPHI's letters and stated that it still failed to submit the required reports, despite the lapse of the final
extension requested.
 43

Therefore, notwithstanding the belated filing of the said reports, as well as the claim that public interest would
be better served if the SEC will merely impose penalties and allow it to continue in order to become profitable
again, the SEC cannot be faulted for revoking once again URPHI's registration of securities and permit to sell
them to the public due to its repeated failure to timely submit such reports. Needless to state, such continuing
reportorial requirements are pursuant to the state policies declared in Section 238 of the SRC of protecting
investors and ensuring full and fair disclosure of information about securities and their issuer.

G.R. No. 191995 August 3, 2011 PHILIPPINE VETERANS BANK, Petitioner,

vs. JUSTINA CALLANGAN, in her capacity as Director of the Corporation
Finance Department of the Securities and Exchange Commission and/or the
SECURITIES AND EXCHANGE COMMISSION, Respondent.
FACTS:
Respondent Justina F. Callangan, the Director of the Corporation Finance Department of the Securities and
Exchange Commission (SEC), sent the Bank a letter, informing it that it qualifies as a "public company" under
Section 17.2 of the Securities Regulation Code (SRC) in relation with Rule 3(1)(m) of the Amended
Implementing Rules and Regulations of the SRC. The Bank is thus required to comply with the reportorial
requirements set forth in Section 17.1 of the SRC.
The Bank responded by explaining that it should not be considered a "public company" because it is a private
company whose shares of stock are available only to a limited class or sector, i.e., to World War II veterans,
and not to the general public.
Director Callangan rejected the Bank’s explanation and assessed it a total penalty of One Million Nine Hundred
Thirty-Seven Thousand Two Hundred Sixty-Two and 80/100 Pesos (₱1,937,262.80) for failing to comply with
the SRC reportorial requirements from 2001 to 2003. The Bank moved for the reconsideration of the
assessment, but Director Callangan denied the motion.
ISSUE:
Whether the bank is a public company or not
HELD:
YES, from the provisions of the SRC Section 17, it is clear that a "public company," is not limited to a company
whose shares of stock are publicly listed; even companies like the Bank, whose shares are offered only to a
specific group of people, are considered a public company, provided they meet the requirements enumerated.

The records establish, and the Bank does not dispute, that the Bank has assets exceeding ₱50,000,000.00 and
has 395,998 shareholders. It is thus considered a public company that must comply with the reportorial
requirements set forth in Section 17.1 of the SRC.
17.2. The reportorial requirements of Subsection 17.1 shall apply to the following:
xxxx

c) An issuer with assets of at least Fifty million pesos (₱50,000,000.00) or such other amount as the Commission
shall prescribe, and having two hundred (200) or more holders each holding at least one hundred (100) shares
of a class of its equity securities: Provided, however, That the obligation of such issuer to file reports shall be
terminated ninety (90) days after notification to the Commission by the issuer that the number of its holders
holding at least one hundred (100) shares is reduced to less than one hundred (100). (emphases supplied)
We also cite Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the SRC, which defines a
"public company" as "any corporation with a class of equity securities listed on an Exchange or with assets in
excess of Fifty Million Pesos (₱50,000,000.00) and having two hundred (200) or more holders, at least two
hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities."

G.R. No. 199028 November 12, 2014 COSMOS BOTTLING

CORPORATION, Petitioner, vs. COMMISSION EN BANC of the
 44

SECURITIES AND EXCHANGE COMMISSION (SEC) and JUSTINA F.

CALLANGAN, in her capacity as Director of the Corporation Finance
Department of the SEC, Respondents.
FACTS:
Cosmos’s failed to submit its 2005 Annual Report to the SEC within the prescribed period. In connection
therewith, it requested an extension of time within which to file the same.
the SEC-CFD, through respondent Director Justina F. Callangan (Director Callangan), sent Cosmos a letter
dated May 18, 2006 denying the latter’s request and directing it to submit its 2005 Annual Report. The same
letter also ordered Cosmos toshow cause why the Subject Registration/Permit should not be revoked for
violating Section 17.1 (a) of Republic Act No. 8799, otherwise known as "The Securities Regulation Code"
(SRC)
Cosmos sent a reply-letter to the SEC-CFD, explaining that its failure to file its Annual Report was due to the
noncompletion by its external auditors of their audit procedures.
The SEC-CFD also stated that Cosmos’s failure to submit its 2005 Annual Report within the 60-day period
shall constrain the SEC to initiate proceedings for revocation of the Subject Registration/Permit.
After the lapse of the aforesaid period, Cosmos still failed to comply with the SEC’s directives. Thus, the
revocation proceedings commenced.
Cosmos finally submitted its 2005 and 2006 Annual Reports to the SEC.19 In connection therewith, Cosmos
sent a letter dated January 24, 2008 to the SEC-CFD, requesting that the latter lift the suspension order and
abandon the revocation proceedings against the former.
SEC en Banc denied the request.
CA ruled that the revocation was a motion for reconsideration dismissed by SEC en banc
ISSUE
Whether revocation was valid
HELD:
No, in this case, the Court disagrees with the findings of both the SEC En Bancand the CA that the Revocation
Order emanated from the SEC En Banc. Rather, such Order was merely issued by the SEC-CFD as one of the
SEC’s operating departments, as evidenced by the following: (a) it was printed and issued on the letterheadof
the SEC-CFD, and not the SEC En Banc; (b) it was docketed as a case under the SEC-CFD as an operating
department of the SEC, since it bore the serial number "SEC-CFD Order No. 027, [s.] 2008;" and (c) it was
signed solely by Director Callangan as director of the SEC-CFD, and notby the commissioners of the SEC En
Banc.
In sum, the Revocation Order is properly deemed as a decision issued by the SEC-CFD as one of the Operating
Departments of the SEC, and accordingly, may be appealed to the SEC En Banc, as what Cosmos properly did
in this case. Perforce, the SEC En Banc and the CA erred in deeming Cosmos’s appeal as a motion for
reconsideration and ordering its dismissal on such ground. In view thereof, the Court deems it prudent to
reinstate and remand the case to the SEC En Banc for its resolution on the merits.

G.R. No. 188639 SECURITIES AND EXCHANGE COMMISSION,

Petitioner, vs. HON. REYNALDO M. LAIGO, in his capacity as Presiding
Judge of the Regional Trial Court, National Capital Judicial Region, Makati
City, Branch 56, GLICERIA AYAD, SAHLEE DELOS REYES and
ANTONIO P. HUETE, JR., Respondents.
MENDOZA, J.:
FACTS:
 45

Legacy, being a pre-need provider, complied with the trust fund requirement and entered into a trust agreement
with the Land Bank of the Philippines (LBP).
In mid-2000, the industry collapsed for a range of reasons. Legacy, like the others, was unable to pay its
obligations to the plan holders.
This resulted in Legacy being the subject of a petition for involuntary insolvency filed on February 18, 2009 by
private respondents in their capacity as plan holders.
SEC opposed the inclusion of the trust fund in the inventory of corporate assets on the ground that to do so
would contravene the New Rules which treated trust funds as principally established for the exclusive purpose
of guaranteeing the delivery of benefits due to the planholders.
ISSUE:
Whether the Trust Funds of Legacy form part of its corporate assets
HELD:
Yes, the provisions of the SRC, the New Rules and the law on trusts warrants the exclusion of the trust fund
from the insolvency estate of Legacy.
The overarching consideration in the legislative mandate to establish trust funds is the protection of the interest
of the planholders in the investment plans. The SRC provides in no uncertain terms the intent to make such
interests paramount above all else. Thus, it directed the SEC to come up with rules and regulations to govern
not only trust funds but the industry as a whole. Pursuant to its mandate and delegated authority, the SEC came
out with the New Rules, which the Congress later on toughened through the enactment of the Pre-Need Code,
carrying similar protection but far more detailed in scope.
Section 30 of the Pre-Need Code clearly provides that the proceeds of trust funds shall redound solely to the
planholders. Section 30 reads:
SECTION 30. Trust Fund. — To ensure the delivery of the guaranteed benefits and services provided under
a pre-need plan contract, a trust fund per pre-need plan category shall be established. A portion of the
installment payment collected shall be deposited by the pre-need company in the trust fund, the amount of
which will be as determined by the actuary based on the viability study of the pre-need plan approved by the
Commission. Assets in the trust fund shall at all times remain for the sole benefit of the plan holders. At no
time shall any part of the trust fund be used for or diverted to any purpose other than for the exclusive benefit
of the plan holders. In no case shall the trust fund assets be used to satisfy claims of other creditors of the pre-
need company. The provision of any law to the contrary notwithstanding, in case of insolvency of the pre-need
company, the general creditors shall not be entitled to the trust fund.
It must be stressed that a person is considered as a beneficiary of a trust if there is a manifest intention to give
such a person the beneficial interest over the trust properties.
This categorical declaration doubtless indicates that the intention of the trustor is to make the planholders the
beneficiaries of the trust properties, and not Legacy. It is clear that because the beneficial ownership is vested
in the planholders and the legal ownership in the trustee, LBP, Legacy, as trustor, is left without any iota of
interest in the trust fund. This is consistent with the nature of a trust arrangement, whereby there is a separation
of interests in the subject matter of the trust, the beneficiary having an equitable interest, and the trustee having
an interest which is normally legal interest
nder the New Rules, it is unmistakable that the beneficial interest over the trust properties is with the
planholders. Rule 16.3 of the New Rules provides that : [n]o withdrawal shall be made from the trust fund
except for paying the benefits such as monetary consideration, the cost of services rendered or property
delivered, trust fees, bank charges and investment expenses in the operation of the trust fund, termination
values payable to the plan holders, annuities, contributions of cancelled plans to the fund and taxes on trust
funds.
It is clear from Section 16 that the underlying congressional intent is to make the plan holders the exclusive
beneficiaries. It has been said that what is within the spirit is within the law even if it is not within the letter of
the law because the spirit prevails over the letter.
This will by the legislature was fortified with the enactment of R.A. No. 9829 or the Pre-Need Code in 2009.
 46

In effect, Legacy merely agreed to facilitate the payment of the benefits from the trust fund to the intended
beneficiaries, acting as a conduit or an agent of the trustee in the enforcement of the trust agreement. Under
the general principles of trust, a trustee, by the terms of the agreement may be permitted to delegate to agents
or to co-trustees or to other persons the administration of the trust or the performance of act which could not
otherwise be properly delegated.