BPI FAMILY SAVINGS BANK v. ST. MICHAEL MEDICAL CENTER, GR No.

205469, 2015-03-25

Facts:

Virgilio = x

Yolanda = y

SMMCI = a

BPI = b

Dr. Halum = z

Alibangbanb = w

Spouses X and Y are the owners and sole proprietors of St. Michael Diagnostic and Skin Care
Laboratory Services and Hospital (St. Michael Hospital), With a vision to upgrade St. Michael
Hospital into a modern, well-equipped and full service tertiary 11-storey hospital. Sps. X and Y
incorporated A, 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

To finance the costs of construction, A applied for a loan with petitioner B secured by a Real Estate
Mortgage after suffering financial losses due to problems with the first building contractor, Sps. X
and Y temporarily deferred the original construction plans for the 11-storey hospital building and,
instead, engaged the services of another contractor for the completion of the remaining structural
works of the unfinished building

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 A. As of May 2006, A was still neither operational
nor earning revenues. Hence, it was only able to pay the interest on its loan from the income of St.
Michael Hospital

B 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

A filed a Petition for Corporate Rehabilitation before the RTC, with prayer for the issuance of a Stay
Order as it foresaw the impossibility of meeting its obligation to B.

A 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

While several persons approached Sps. X and Y signifying their interest to invest in the corporation,
they needed enough time to complete their audit and due diligence of the company
In its proposed Rehabilitation Plan, A merely sought for B (a) to defer foreclosing on the mortgage
and (b) to agree to a moratorium of at least two (2) years during which A either through St. Michael
Hospital or its successor will retire all other obligations. After which, A can then start servicing its
loan obligation to the bank under a mutually acceptable restructuring agreement

Finding the Rehabilitation Petition to be sufficient in form and substance, the RTC issued a Stay
Order, the same was referred to the court-appointed Rehabilitation Receiver, Z.

Z gave credence to the feasibility study conducted by W, who was commissioned in 2008 to do a
study on the viability of the project, finding that the same was feasible given that St. Michael
Hospital, whose operations A will eventually absorb, registered outstanding revenue performance
for the last seven years of its operation with an average growth rate of 42.21% annually.
Accordingly, Z found that A may be rehabilitated because it is a viable option but, nevertheless,
opined that it will take more than what it had proposed to successfully bring the company back to
good financial health considering the finding that its obligation actually extends beyond the bank,
and also includes accounts payable due to suppliers and informal lenders the

RTC approved the Rehabilitation Plan with the modifications recommended by the Rehabilitation
Receiver

CA affirmed the RTC's approval of the Rehabilitation Plan

Issues:

whether or not the CA correctly affirmed A’s Rehabilitation Plan as approved by the RTC.

Ruling:

The petition is meritorious.

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.[45] Thus, the basic issues in rehabilitation proceedings concern the viability
and desirability of continuing the business operations of the distressed corporation,[46] 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.

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.
the Court observes that SMMCI could not have even complied with the form and substance of a
proper rehabilitation petition, and submit its accompanying documents, among others, the
required financial statements of a going concern.

this defect is not negated by the submission of the financial documents pertaining to St. Michael
Hospital, which is a separate and distinct entity from SMMCI. While the CA gave considerable
weight to St. Michael Hospital's supposed "profitability," as explicated in... its own financial
statements, as well as the feasibility study conducted by Mrs. Alibangbang,[48] in affirming the
RTC, it has unwittingly lost sight of the essential fact that SMMCI stands as the sole petitioning
debtor in this case; as such, its... rehabilitation should have been primarily examined from the lens
of its own financial history. While SMMCI claims that it would absorb St. Michael Hospital's
operations, there was dearth of evidence to show that a merger was already agreed upon between
them. Accordingly, St.

Michael Hospital's financials cannot be utilized as basis to determine the feasibility of SMMCI's
rehabilitation.

Note further that while it appears that Sps. Rodil effectively owned and exercised control over the
two entities, such fact does not, by and of itself, warrant their singular treatment for to do so would
only confuse the objective of the proceedings which is to ascertain whether... the petitioning
corporation, and not any other entity related thereto (except if joining as a co-petitioning debtor),
may be rehabilitated.

the CA even disregarded the fact that SMMCI's Rehabilitation Plan... failed to comply with the
fundamental requisites outlined in Section 18, Rule 3 of the Rules, particularly, that of a... material
financial commitment to support the rehabilitation and an accompanying liquidation analysis

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.[59]

Unfortunately, these negative indicators have all surfaced to the fore, much to SMMCI's chagrin.

Principles:

Restoration is the central idea behind the remedy of corporate rehabilitation.

Case law explains that corporate rehabilitation contemplates a... continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former position of successful
operation and solvency, the purpose being to enable the company to gain a new lease on life and
allow its creditors to be paid their... claims out of its earnings.

Consistent therewith is the term's statutory definition under Republic Act No. 10142... which
provides:

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.
BIRKENSTOCK ORTHOPAEDIE GMBH v. PHILIPPINE SHOE EXPO MARKETING CORPORATION,
GR No. 194307, 2013-11-20

Facts:

Petitioner, a corporation duly organized and existing under the laws of Germany, applied for
various trademark registrations before the IPO. 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
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. 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. The aforesaid cancellation of Registration No. 56334 paved the way for
the publication of the subject applications.

In response, respondent filed three (3) separate verified notices of oppositions to the subject
applications docketed as Inter Partes Case claiming among others it, together with its predecessor-
in-interest, has been using Birkenstock marks in the Philippines for... more than 16 years through
the mark "BIRKENSTOCK AND DEVICE”. In its Decision dated the BLA of the IPO sustained
respondent's opposition, thus, ordering the rejection of the subject applications. Aggrieved
petitioner appealed to the IPO Director General whereby in its decision, the latter reversed and set
aside the ruling of the BLA thus allowing the registration of the subject applications.

Finding the IPO Director General’s reversal of the BLA unacceptable, respondent filed a petition for
review with the Court of Appeals. In its decisions dated June 25, 2010, the CA reversed and set
aside the ruling of the IPO Director General and reinstated that of the BLA. The petitioner filed a
Motion for Reconsideration but was denied by the CA. Hence, this petition to the Supreme Court.

Issues:

WON the subject marks should be allowed registration in the name of the petitioner?

Ruling:

The court ruled in favour of the petitioner. Under Section 12 of Republic Act No. 166, it provides
that, “ Each certificate of registration shall remain in force for twenty years; Provided, that the
registration under the provisions of this Act shall be cancelled by the Director, unless within one
year following the fifth, tenth, and fifteenth anniversaries of the date of issue of the certificate of
registration, the registrant shall file in the Patent Office an affidavit showing that the mark or
trade-name is still in use or showing that its non-use is due to special circumstance which excuse
such non-use and is not due to any intention to abandon the same, and pay the required fee.

In the case at bar, respondent admitted that it failed to the file the 10 (tenth) year DAU for
Registration No. 56334 within the requisite period, or on or before October 21, 2004. As a
consequence, it was deemed to have abandoned or withdrawn any right or interest over the mark
“BIRKENSTOCK”. It must be emphasized that registration of a trademark, by itself, is not a mode
of acquiring ownership. If the applicant is not the owner of the trademark, he has no right to apply
for its registration. Registration merely creates a prima facie presumption of the validity of the
registration. Such presumption, just like the presumptive regularity in the performance of official
functions, is rebuttable and must give way to evidence to the contrary. Besides, petitioner has duly
established its true and lawful ownership of the mark “BIRKENSTOCK”. It submitted evidence
relating to the origin and history of “BIRKENSTOCK” and it use in commerce long before
respondent was able to register the same here in the Philippines. 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.

RICHARD K. TOM v. SAMUEL N. RODRIGUEZ RESOLUTION

For the Court's resolution is the Motion for Reconsideration with Motion to
Dissolve the Injunctive Writ filed by respondent Samuel N. Rodriguez
(Rodriguez) seeking the reconsideration of the Court's Decision dated July
6, 2015 and the dissolution of the writ of preliminary injunction issued by
the Court against him, his agents, and all persons acting under his authority
to refrain and desist from further exercising any powers of management
and control over Golden Dragon International Terminals, Inc. (GDITI).

In the Court's July 6, 2015 Decision, the Court found that the issuance of a
temporary restraining order (TRO) and/or a writ of preliminary injunction
was warranted to enjoin the Regional Trial Court of Nabunturan,
Compostela Valley, Branch 3 (RTC-Nabunturan) from implementing its
November 13, 2013 and December 11, 2013 Orders in the specific
performance case docketed as Civil Case No. 1043, which, inter alia, placed
the management and control of GDITI to Rodriguez.

In granting the injunctive writ, the Court upheld the established 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. To be sure, Section 23 of Batas Pambansa Bilang 68, otherwise known
as "The Corporation Code of the Philippines," states:

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. (Emphasis and underscoring supplied)

In his Motion for Reconsideration with Motion to Dissolve the Injunctive

Writ, Rodriguez asserts that the Court's July 6, 2015 Decision has been
rendered moot and academic with the execution of the Memorandum of
Agreement (MOA) dated May 25, 2015 signed by himself, petitioner
Richard K. Tom (Tom), and Cezar O. Mancao (Mancao), apparently one of
the original plaintiffs in Civil Case No. 1043 from which the present
incident originated. Pursuant to the MOA, Rodriguez, Tom, and Mancao
have come to an agreement with respect to the operation, control, and
management of the ports operated by GDITI, in that: (a) the port of
General Santos City shall be managed by Rodriguez and/or his authorized
representative; (b) the ports of Davao City and Panabo City shall be
managed by Tom and/or his authorized representative; and (c) the ports of
Manila, Batangas, and Bataan shall be managed by Mancao and/or his
authorized representative.

Rodriguez asseverates that with the execution of the MOA, the elements
necessitating the issuance of an injunctive writ no longer exist. Moreover,
he discloses that GDITI had already filed a Motion for Intervention in Civil
Case No. 1043, as such, its interests are already protected.

The submissions have no merit.

To reiterate, the Court granted the writ of preliminary injunction on the

ground that a corporation can only exercise its powers and transact its
business through its board of directors and through its officers and agents
when authorized by a board resolution or its by-laws. As held in AF Realty
& Development, Inc. v. Dieselman Freight Services, Co.:

Section 23 of the Corporation Code expressly provides that the corporate

powers of all corporations shall be exercised by the board of directors. Just
as a natural person may authorize another to do certain acts in his behalf,
so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it. Thus, contracts or
acts of a corporation must be made either by the board of directors or by a
corporate agent duly authorized by the board. Absent such valid
delegation/authorization, the rule is that the declarations of an individual
director relating to the affairs of the corporation, but not in the course of, or
connected with, the performance of authorized duties of such director, are
held not binding on the corporation.

As the provisions of the MOA are in direct contravention of the foregoing

precepts, which the Court had earlier espoused in the July 6, 2015 Decision,
its execution cannot in any way affect, change, or render the Court's
previous disquisitions moot and academic. In fact, the MOA is, clearly and
in all respects, contrary to law. Therefore, the writ of preliminary injunction
must stand.

Parenthetically, on October 29, 2015, Tom filed a Manifestation informing

the Court that he is no longer the President of GDITI. Nonetheless, on
March 20, 2015, he was elected as Treasurer during the Annual/Regular
Stockholders Meeting conducted for the purpose of electing the members of
GDITI's Board of Directors. As Tom's position in GDITI's Board of
Directors neither affects nor alters the Court's stance in this pending
incident, the Court merely resolves to note the same.

WHEREFORE, the Court resolves to DENY WITH FINALITY the

Motion for Reconsideration with Motion to Dissolve the Injunctive Writ
filed by respondent Samuel N. Rodriguez.

No further pleadings or motions shall be entertained. Let entry of judgment

be made in due course.