Latest Cases J. Del Castillo Ponencias Probable Questions On FRIA

BAR 2018
by: Judge Ella Dumlao-Escalante
►Latest cases
► J. Del Castillo ponencias
► Probable Questions on FRIA
NEGOTIABLE INSTRUMENTS LAW
RCBC SAVINGS BANK v ODRADA

G.R. No. 219037, October 19, 2016
Ponente: J. Carpio
May a manager's check which is considered good as cash be countermanded?
YES. While a manager's check is automatically accepted, a holder other than a holder in due
course is still subject to defenses.
In short, the purchaser of a manager's check may validly countermand payment to a holder
who is not a holder in due course. Accordingly, the drawee bank may refuse to pay the manager's
check by interposing a personal defense of the purchaser.
The mere issuance of a manager's check creates a privity of contract between the holder and
the drawee bank, the latter primarily binding itself to pay according to the tenor of its acceptance. The
drawee bank, as a result, has the unconditional obligation to pay a manager's check to a holder in due
course irrespective of any available personal defenses. However, while this Court has consistently
held that a manager's check is automatically accepted, a holder other than a holder in due course is
still subject to defenses.
METROBANK vs. WILFRED N. CHIOK

G.R. No. 172652 November 26, 2014
Ponente: J. Leonardo-De Castro
The legal effects of a manager’s check and a cashier’s check are the same. A manager’s check,
like a cashier’s check, is an order of the bank to pay, drawn upon itself, committing in effect its total
resources, integrity, and honor behind its issuance. By its peculiar character and general use in
commerce, a manager’s check or a cashier’s check is regarded substantially to be as good as the money
it represents.
They are PRE-ACCEPTED by the mere issuance thereof by the bank, which is both its drawer
and drawee. Thus, while manager’s and cashier’s checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against insufficient funds,
or for similar reasons such as a condition not appearing on the face of the check. BUT Manager’s and
cashier’s checks are still the subject of clearing to ensure that the same have not been materially
altered or otherwise completely counterfeited. They are NOT PRE-CLEARED.
BANK OF THE PHILIPPINE ISLANDS VS. FERNANDEZ

G.R. NO. 173134 September 2, 2015
Ponente: J. Brion
Is a certificate of deposit negotiable?
Yes. A certificate of deposit is defined as a written acknowledgment by a bank or banker of the

receipt of a sum of money on deposit which the bank or banker promises to pay to the depositor, to
1 - Escalante Notes
the order of the depositor, or to some other person or his order, whereby the relation of debtor and
creditor between the bank and the depositor is created. In particular, the certificates of deposit contain
provisions on the amount of interest, period of maturity, and manner of termination.
* Endorsement and presentation of the certificate of deposit are indispensable to their

termination. In other words, the accounts may only be terminated upon endorsement and
presentation of the certificates of deposit. Without the requisite presentation of the certificates of
deposit, the bank may not terminate them.
CORPORATION CODE
DUTCH MOVERS, INC., CESAR LEE and YOLANDA LEE v.

EDILBERTO LEQUIN, CHRISTOPHER R. SALVADOR, REYNALDO
L. SINGSING, and RAFFY B. MASCARDO
G.R. No. 210032, April 25, 2017
Ponente: J. Del Castillo
Owner/Officer of Corporation was impleaded; Judgment against corporation only
An illegal dismissal Complaint was filed by respondents against Dutch Movers, Inc. (DMI),
and/or Spouses Lee, its alleged President/Owner, and Manager respectively. NLRC ruled that there
was illegal dismissed.
Pending the resolution of the Writ of Execution, respondents filed a Manifestation and Motion
to Implead stating that upon investigation, they discovered that DMI no longer operates. They,
nonetheless, insisted that Spouses Lee — who managed and operated DMI, and consistently
represented to respondents that they were the owners of DMI — continue to work at Toyota Alabang,
which they also own and operate. They further averred that the Articles of Incorporation (AOI) of
DMI ironically did not include petitioners as its directors or officers; and those named directors and
officers were persons unknown to them. They likewise claimed that per inquiry with the SEC and the
DOLE, they learned that DMI did not file any notice of business closure; and the creation and
operation of DMI was attended with fraud making it convenient for petitioners to evade their legal
obligations to them.
Are spouses Lee liable in their personal capacity? Should veil of corporate fiction be
pierced?
Yes. The veil of corporate fiction must be pierced and accordingly, petitioners should be held
personally liable for judgment awards because the peculiarity of the situation shows that they
controlled DMI; they actively participated in its operation such that DMI existed not as a separate
entity but only as business conduit of petitioners. As will be shown below, petitioners controlled DMI
by making it appear to have no mind of its own, and used DMI as shield in evading legal liabilities,
including payment of the judgment awards in favor of respondents.
Piercing the veil of corporate fiction is allowed, and responsible persons may be impleaded,
and be held solidarily liable even after final judgment and on execution, provided that such persons
deliberately used the corporate vehicle to unjustly evade the judgment obligation, or resorted to fraud,
bad faith, or malice in evading their obligation.
In this case, petitioners were impleaded from the inception of this case. They had ample
opportunity to debunk the claim that they illegally dismissed respondents, and that they should be
held personally liable for having controlled DMI and actively participated in its management, and for
having used it to evade legal obligations to respondents.
While it is true that one's control does not by itself result in the disregard of corporate fiction;
however, considering the irregularity in the incorporation of DMI, then there is sufficient basis to hold
2 - Escalante Notes
that such corporation was used for an illegal purpose, including evasion of legal duties to its
employees, and as such, the piercing of the corporate veil is warranted. The act of hiding behind the
cloak of corporate fiction will not be allowed in such situation where it is used to evade one's
obligations, which "equitable piercing doctrine was formulated to address and prevent."
Clearly, petitioners should be held liable for the judgment awards as they resorted to such
scheme to countermand labor laws by causing the incorporation of DMI but without any indication
that they were part thereof. While such device to defeat labor laws may be deemed ingenious and
imaginative, the Court will not hesitate to draw the line, and protect the right of workers to security of
tenure, including ensuring that they will receive the benefits they deserve when they fall victims of
illegal dismissal.
EMMANUEL P. GUILLERMO v. CRISANTO P. USON

G.R. No. 198967, March 07, 2016
Ponente: J. Peralta
Officer not impleaded
The case originated from an ilegal dismissal case. Officer were not impleaded, only the
corporation. The employee won, and monetary judgment against corporation became final.
Unfortunately, the judgment remained unsatisfied. The employee filed a Motion to Hold
Directors and Officers liable.
Is this allowed even if the judgment is final and executory already?
YES. The veil of corporate fiction can be pierced, and responsible corporate directors and
officers or even a separate but related corporation, may be impleaded and held
answerable solidarily in a labor case, even after final judgment and on execution, so long
as it is established that such persons have deliberately used the corporate vehicle to
unjustly evade the judgment obligation, or have resorted to fraud, bad faith or malice.
The records showed that the officer acted in bad faith in dismissing the employee.
VICMAR DEVELOPMENT CORPORATION VS. ELARCOSA

G.R. No. 202215, December 9, 2015
Ponente: J. DEL CASTILLO
This case stemmed from a Complaint for illegal dismissal and money claims filed by
respondents against Vicmar Development Corporation (Vicmar). Respondents alleged that Vicmar, a
domestic corporation engaged in manufacturing of plywood for export and for local sale, has two
branches, Top Forest Developers, Incorporated (TFDI) and Greenwood International Industries,
Incorporated (GIII). These branches are located in the same compound where Vicmar operated. They
have the same owner; and they are all managed by the same group of persons. Vicmar contends that
some of the respondents were extra workers of TFDI, not Vicmar.
Should corporate veil be pierced?
YES. Vicmar and its branches have the same owner and management — which included one
resident manager, one administrative department, one and the same personnel and finance sections.
Notably, all respondents were employed by the same plant manager, who signed their identification
cards some of whom were under Vicmar, and the others under TFDI. Where it appears that business
enterprises are owned, conducted and controlled by the same parties, law and equity will disregard
3 - Escalante Notes
the legal fiction that these corporations are distinct entities and shall treat them as one. This is in order
to protect the rights of third persons, as in this case, to safeguard the rights of respondents.
HARPOON MARINE SERVICES, INC., et al. v.

FERNAN H. FRANCISCO
G.R. No. 167751, 02 March 2011
Harpoon Marine Service Inc. is a company engaged in ship building and ship repair with Rosit
as its President. The company hired Fernan Franciso in 1992 as Yard Supervisor to oversee and
supervise all the projects. Francisco left in 1998 but was later rehired and assumed his previous
position a year after.
According to Francisco, he was unceremoniously dismissed by the President, Rosit, because

the company could no longer afford his salary but promised that he would still be paid his separation
pay and accrued commissions. However, only his separation pay was given so he filed a complaint for
illegal dismissal.
Harpoon argued that Francisco incurred excessive absences and tardiness. He even sought
employment from another company engaged in the same line of business which resulted in serious
damage to Harpoon in the form of unfinished projects. Harpoon denied the termination and said that
Francisco abandoned his work.
Is Rosit liable for Francisco’s dismissal.
NO. Rosit could not be held solidarily liable with Harpoon for lack of substantial evidence of
bad faith and malice on his part. Rosit’s actuations only show the illegality of the manner of effecting
Francisco’s termination but do not point to any malice or bad faith on his part. Besides, good faith is
still presumed. In addition, liability only attaches if the officer has assented to patently unlawful acts
of the corporation.
Obligations incurred by corporate officers, acting as such corporate agents, are not theirs but
the direct accountabilities of the corporation they represent. As such, they should not be generally
held jointly and solidarily liable with the corporation. The general rule is grounded on the theory that
a corporation has a legal personality separate and distinct from the persons comprising it. To warrant
the piercing of the veil of corporate fiction, the officer’s bad faith or wrongdoing “must be established
clearly and convincingly” as “bad faith is never presumed.
GIRLY G. ICO vs.

SYSTEMS TECHNOLOGY INSTITUTE, INC., MONICO V.
JACOB and PETER K. FERNANDEZ
G.R. No. 185100, July 9, 2014
Systems Technology Institute, Inc. (STI) is an educational institution. Monico V. Jacob (Jacob)
and Peter K. Fernandez (Fernandez) are STI officers, the former being the President and Chief
Executive Officer (CEO) and the latter Senior Vice-President.
Girly G. Ico (Ico), a masteral degree holder with doctorate units earned, was hired as Faculty
Member by STI College Makati (Inc.), which operates STI College-Makati (STI-Makati). STI College
Makati (Inc.) is a wholly-owned subsidiary of STI. Ico was subsequent promoted as Dean of STI
College- Parañaque and, thereafter, as Chief Operating Officer (COO) of STI-Makati. However, after
the merger between STI and STI College Makati (Inc.), Ico received a memorandum cancelling her
COO assignment at STI-Makati, citing management’s decision to undertake an "organizational
4 - Escalante Notes
restructuring" in line with the merger of STI and STI-Makati. Further, Ico was ordered to report to
turn over her work to one Victoria Luz (Luz), who shall function as STI-Makati’s School
Administrator. According to STI, the "organizational re-structuring" was undertaken "in order to
streamline operations. In the process, the positions of Chief Executive Officer and Chief Operating
Officer of STI Makati were abolished."
The STI’s Corporate Auditor/Audit Advisory Group conducted an audit of STI-Makati

covering the whole period of Ico’s stint as COO/School Administrator therein. In a report (Audit
Report) later submitted to Fernandez, the auditors claim to have discovered several irregularities. In
another memorandum, it was recommended that an investigation committee be formed to investigate
Ico for grave abuse of authority, falsification, gross dishonesty, maligning and causing intrigues, and
other charges. Fernandez recommended that Ico be placed under preventive suspension pending
investigation. Hence, pursuant to said recommendation, Ico was placed under preventive suspension
and banning her entry to any of STI’s premises.
Labor Arbiter (LA) found Ico to have been illegally constructively and in bad faith dismissed
by respondents in her legally acquired status as regular employee thus, ordering respondents
SYSTEMS TECHNOLOGY INSTITUTE, INC. and/or MONICO V. JACOB, PETER K. FERNANDEZ
to reinstate her to her former position and pay Ico’s full back wages plus damages. On appeal, NLRC
reversed the ruling of the LA. On petition for certiorari by Ico before the CA, CA affirmed the ruling
of the NLRC, hence, this petition.
May Jacob, as officer of STI, be held solidarily liable with STI.
There is no showing of bad faith on the part of Jacob.
A corporation, as a juridical entity, may act only through its directors, officers and employees.
Obligations incurred as a result of the directors’ and officers’ acts as corporate agents, are not their
personal liability but the direct responsibility of the corporation they represent. As a rule, they are
only solidarily liable with the corporation for the illegal termination of services of employees if they
acted with malice or bad faith.
To hold a director or officer personally liable for corporate obligations, two requisites must
concur: (1) it must be alleged in the complaint that the director or officer assented to patently unlawful
acts of the corporation or that the officer was guilty of gross negligence or bad faith; and (2) there
must be proof that the officer acted in bad faith.
Forest Hills Golf and Country Club, Inc. vs. Fil-Estate Properties, Inc.
G.R. No. 206649 July 20, 2016
Upon the enactment of RA No. 8799, jurisdiction over intra-corporate disputes, including
derivatives suits, is now vested in the RTCs designated as special commercial courts by this Court
pursuant to A.M. No. 00-11-03-SC promulgated on November 21, 2000.
In Gonzales v. GJH Land, Inc., 774 SCRA 242 (2015), we laid down the guidelines to be
observed if a commercial case filed before the proper RTC is wrongly raffled to its regular branch. In
that case, we said that if the RTC has no internal branch designated as a Special Commercial Court,
the proper recourse is to refer the case to the nearest RTC with a designated Special Commercial Court
branch within the judicial region. Upon referral, the RTC to which the case was referred to should re-
docket the case as a commercial case. And if the said RTC has only one branch designated as a Special
Commercial Court, it should assign the case to the sole special branch.
5 - Escalante Notes
The Complaint filed by petitioner FHGCCI failed to comply with the requisites for a valid
derivative suit. Corollarily, "[f]or a derivative suit to prosper, it is required that the minority
stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on
a derivative cause of action on behalf of the corporation and all other stockholders similarly situated
who may wish to join him in the suit." It is also required that the stockholder "should have exerted all
reasonable efforts to exhaust all remedies available under the articles of incorporation, by-laws, laws
or rules governing the corporation or partnership to obtain the relief he desires [and that such fact is
alleged] with particularity in the complaint." The purpose for this rule is "to make the derivative suit
the final recourse of the stockholder, after all other remedies to obtain the relief sought had failed."
Finally, the stockholder is also required "to allege, explicitly or otherwise, the fact that there were no
appraisal rights available for the acts complained of, as well as a categorical statement that the suit is
not a nuisance or a harassment suit."
SUMIFRU (PHILIPPINES) CORPORATION (SURVIVING ENTITY IN A MERGER WITH

DAVAO FRUITS CORPORATION AND OTHER COMPANIES) v. BERNABE BAYA
G.R. No. 188269, April 17, 2017
Ponente: J. Perlas-Bernabe
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;
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.
An illegal dismissal was filed by Bernado Baya against DFC Corp. While the case was pending,
SUMIFRU Corp. merged with DFC in 2009. Sumifru argued that should DFC lose in the case, it should
not be held liable. In the alternative, its liability should only be counted beginning 2009.
Is DFC correct?
NO. Sec. 80 Corp. Code provides for the effects of merger. 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.
6 - Escalante Notes
ANNA TENG v. SEC
G.R. No. 184332, February 17, 2016
Ponente: J. Reyes
A certificate of stock is a written instrument signed by the proper officer of a corporation

stating or acknowledging that the person named in the document is the owner of a designated
number of shares of its stock. It is prima facie evidence that the holder is a shareholder of a corporation.
A certificate, however, is merely a tangible evidence of ownership of shares of stock. It is not a stock in
the corporation and merely expresses the contract between the corporation and the stockholder. The
shares of stock evidenced by said certificates, meanwhile, are regarded as property and the owner of
such shares may, as a general rule, dispose of them as he sees fit, unless the corporation has been
dissolved, or unless the right to do so is properly restricted, or the owner's privilege of disposing of
his shares has been hampered by his own action.
Certain minimum requisites must be complied with for there to be a valid transfer of stocks, to
wit: (a) there must be delivery of the stock certificate; (b) the certificate must be endorsed by the owner
or his attorney-in-fact or other persons legally authorized to make the transfer; and (c) to be valid
against third parties, the transfer must be recorded in the books of the corporation.
It is the delivery of the certificate, coupled with the endorsement by the owner or his duly
authorized representative that is the operative act of transfer of shares from the original owner to the
transferee.
Aguirre II v. FQB+7, Inc.

G.R. No. 170770, January 9, 2013
FQB+7, Inc. (FQB+7) was dissolved. During liquidation, Vitaliano filed a Complaint for intra-
corporate dispute, injunction, inspection of corporate books and records, and damages, against several
directors of the corporation. The complaint alleged that the officers were not 'real board of directors.'
Vitaliano discovered that no election occurred at the time they were supposedly elected. Vitaliano
prayed for the nullification of all the previous actions of the purported directors.
It was contended that the complaint seeks to continue the life of the corporation. It involved a
determination of the real Board that can take over the management of the corporation, not to sit as a
liquidation Board.
Issues:
1. Whether the Complaint seeks to continue the dissolved corporation's business.
2. Whether the RTC has jurisdiction over an intra-corporate dispute involving a dissolved corporation.
Ruling:
1. No, the complaint does not seek to continue the dissolved corporation.
Section 122 of the Corporation Code prohibits a dissolved corporation from continuing its
business, but allows it to continue with a limited personality in order to settle and close its affairs,
including its complete liquidation.
A corporation's board of directors is not rendered functus officio by its dissolution. Since Section
122 allows a corporation to continue its existence for a limited purpose, necessarily there must be a
board that will continue acting for and on behalf of the dissolved corporation for that purpose. In fact,
Section 122 authorizes the dissolved corporation's board of directors to conduct its liquidation within
three years from its dissolution. Jurisprudence has even recognized the board's authority to act as
7 - Escalante Notes
trustee for persons in interest beyond the said three-year period. Thus, the determination of which
group is the bona fide or rightful board of the dissolved corporation will still provide practical relief to
the parties involved.
The same is true with regard to Vitaliano's shareholdings in the dissolved corporation. A
party's stockholdings in a corporation, whether existing or dissolved, is a property right which he may
vindicate against another party who has deprived him thereof. The corporation's dissolution does not
extinguish such property right. Section 145 of the Corporation Code ensures the protection of this
right.
2. Yes, RTC maintains jurisdiction over intra-corporate disputes of dissolved corporations.
The nature of the case as an intra-corporate dispute is not affected by the subsequent
dissolution of the corporation.
The dissolution of the corporation simply prohibits it from continuing its business. However,
despite such dissolution, the parties involved in the litigation are still corporate actors. The dissolution
does not automatically convert the parties into total strangers or change their intra-corporate
relationships. Neither does it change or terminate existing causes of action, which arose because of the
corporate ties between the parties. Thus, a cause of action involving an intra-corporate controversy
remains and must be filed as an intra-corporate dispute despite the subsequent dissolution of the
corporation.
Section 145 of the Corporation Code protects, among others, the rights and remedies of
corporate actors against other corporate actors. The statutory provision assures an aggrieved party
that the corporation's dissolution will not impair, much less remove, his/her rights or remedies
against the corporation, its stockholders, directors or officers. It also states that corporate dissolution
will not extinguish any liability already incurred by the corporation, its stockholders, directors, or
officers. In short, Section 145 preserves a corporate actor's cause of action and remedy against another
corporate actor. In so doing, Section 145 also preserves the nature of the controversy between the
parties as an intra-corporate dispute.
ROBERTO L. ABAD et al v. PHILIPPINE COMMUNICATIONS SATELLITE

CORPORATION, REPRESENTED BY VICTOR AFRICA
G.R. No. 200620, March 18, 2015
Ponente: J. Villarama
After the People Power in 1986, several corporations known to be dummies of the Marcoses
were sequestered, including PHILCOMSAT which owns 81% of the outstanding capital stock of
Philcomsat Holdings Corporation (PHC). Power struggle and factions arose in PHC and Philcomsat.
Philcomsat filed a complaint for inspection of books of PHC. Is it Sandiganbayan or RTC who has
jurisdiction?
It is the RTC and not the Sandiganbayan which has jurisdiction over cases which do not
involve a sequestration-related incident but an intra-corporate controversy.
The original and exclusive jurisdiction given to the Sandiganbayan over PCGG cases pertains
to (a) cases filed by the PCGG, pursuant to the exercise of its powers under Executive Order Nos. 1, 2
and 14, as amended by the Office of the President, and Article XVIII, Section 26 of the Constitution,
i.e., where the principal cause of action is the recovery of ill-gotten wealth, as well as all incidents
arising from, incidental to, or related to such cases and (b) cases filed by those who wish to question or
challenge the commission’s acts or orders in such cases.
8 - Escalante Notes
The dispute is about inspection of corporate books. This is not about recovery of ill-gotten
wealth.
INSURANCE LAW
JAIME T. GAISANO v. DEVELOPMENT INSURANCE

AND SURETY CORPORATION
G.R. No. 190702, February 27, 2017
Ponente: J. Jardeleza
Gaisano was the registered owner of a 1992 Mitsubishi Montero which he insured under a
comprehensive commercial vehicle policy with insurer, with a face value of 1.5M. Check for payment
was prepared by Gaisano on September 27, 1996. But the check was not picked up. Insurer told
Gaisano that it was the bday of their manager, and that the check would be picked up the following
day, sept. 28. Unfortunately, the vehicle was stolen on the eve of sept. 27.
Is the policy binding?
NO. Insurance is a contract whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event. Just like any other
contract, it requires a cause or consideration. The consideration is the premium, which must be paid
at the time and in the way and manner specified in the policy. If not so paid, the policy will lapse and
be forfeited by its own terms. The law, however, limits the parties’ autonomy as to when payment of
premium may be made for the contract to take effect. The general rule in insurance laws is that unless
the premium is paid, the insurance policy is not valid and binding.
Here, there is no dispute that the check was delivered to and was accepted by respondent’s
agent, Trans-Pacific, only on September 28, 1996. No payment of premium had thus been made at the
time of the loss of the vehicle on September 27, 1996. While petitioner claims that Trans-Pacific was
informed that the check was ready for pickup on September 27, 1996, the notice of the availability of
the check, by itself, does not produce the effect of payment of the premium. Trans Pacific could not
be considered in delay in accepting the check because when it informed petitioner that it will only be
able to pick up the check the next day, petitioner did not protest to this, but instead allowed Trans-
Pacific to do so. Thus, at the time of loss, there was no payment of premium yet to make the
insurance policy effective. There are, of course, exceptions to the rule that no insurance contract takes
effect unless premium is paid.
STRONGHOLD INSURANCE CO., INC. v. PAMANA ISLAND RESORT HOTEL

G.R. No. 174838, June 01, 2016
Ponente: J. Reyes
Sec. 243 The amount of any loss or damage for which an insurer may be
liable, under any policy other than life insurance policy, shall be paid within thirty
days after proof of loss is received by the insurer and ascertainment of the loss or
damage is made either by agreement between the insured and the insurer or by
arbitration; but if such ascertainment is not had or made within sixty days after such
receipt by the insurer of the proof of loss, then the loss or damage shall be paid
within ninety days after such receipt.
Refusal or failure to pay the loss or damage within the time prescribed
herein will entitle the assured to collect interest on the proceeds of the policy for the
duration of the delay at the rate of twice the ceiling prescribed by the Monetary
Board, unless such failure or refusal to pay is based on the ground that the claim is
9 - Escalante Notes
fraudulent.
The applicable rate of interest shall be that imposed in a loan or forbearance of money. In the
past years, this rate was at 12% per annum.
However, in light of Circular No. 799, this must be reduced to 6% per annum from the time of
the circular's effectivity on July 1, 2013.
MANULIFE PHILIPPINES, INC. v. HERMENEGILDA YBANEZ

G.R. No. 204736, November 28, 2016
Ponente: DEL CASTILLO
The fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the
insurer. For failure of Manulife to prove intent to defraud on the part of the insured, it cannot validly
sue for rescission of insurance contracts.
On November 17, 2003, insured died. The policy had been in force for only one year and three
months, while the other for only four months. His widow, Hermenegilda, filed insurance claim and
submitted the Death Certificate of the insured which listed the cause of his death as: "Hepatocellular
CA., Crd Stage 4, secondary to Uric Acid Nephropathy; SAM Nephropathy recurrent malignant pleural
effusion; NASCVC."
Manulife conducted an investigation into the circumstances leading to the said insured's death,
in view of the aforementioned entries in the said insured's Death Certificate. Manulife thereafter
concluded that the insured misrepresented or concealed material facts at the time the subject
insurance policies were applied for; and that for this reason Manulife accordingly denied
Hermenegilda's death claims and refunded the premiums that the insured paid on the subject
insurance policies.
The RTC found no merit at all in Manulife's Complaint for rescission of the subject insurance
policies because it utterly failed to prove that the insured had committed the alleged
misrepresentation/s or concealment/s. The RTC stressed that the medical records that might or could
have established the insured's misrepresentation/s or concealment/s were inadmissible for being
hearsay, because Manulife did not present the physician or doctor, or any responsible official of the
CDH, who could confirm the due execution and authenticity of its medical records. CA affirmed the
decision of RTC.
RULING:
The Court must defer to the findings of fact of the RTC - as affirmed or confirmed by the CA -
that Manulife' s Complaint for rescission of the insurance policies in question was totally bereft of
factual and legal bases because it had utterly failed to prove that the insured had committed the
alleged misrepresentation/s or concealment/s of material facts imputed against him. The RTC
correctly held that the medical records that might have established the insured's purported
misrepresentation/s or concealment/s was inadmissible for being hearsay, given the fact that
Manulife failed to present the physician or any responsible official of the CDH who could confirm or
attest to the due execution and authenticity of the alleged medical records.
Manulife's sole witness gave no evidence at all relative to the particulars of the purported
concealment or misrepresentation allegedly perpetrated by the insured. In fact, Victoriano, theSenior
Manager of Manulife's Claims and Settlements Department, merely perfunctorily identified the
10 - Escalante Notes
documentary exhibits adduced by Manulife; she never testified in regard to the circumstances
attending the execution of these documentary exhibits much less in regard to its contents. Of
course, the mere mechanical act of identifying these documentary exhibits, without the testimonies of
the actual participating parties thereto, adds up to nothing. These documentary exhibits did not
automatically validate or explain themselves. The fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer
to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and
convincing evidence rests upon the insurer. For failure of Manulife to prove intent to defraud on the
part of the insured, it cannot validly sue for rescission of insurance contracts.
THE INSULAR LIFE ASSURANCE COMPANY, LTD. v. PAZ Y.

KHU, FELIPE Y. KHU, JR., AND FREDERICK Y. KHU
G.R. No. 195176, April 18, 2016, -
Ponente: J. DEL CASTILLO
Incontestability Clause
The date of last reinstatement mentioned in Section 48 of the Insurance Code pertains to the
date that the insurer approved' the application for reinstatement. However, in light of the ambiguity
in the insurance documents to this case, this Court adopts the interpretation favorable to the insured
in determining the date when the reinstatement was approved.
The insurance policy was reinstated effective June 22, 1999 whereas Felipe died on September
22, 2001 and therefore, the two year contestability period had already lapsed. Sec. 48 of the Insurance
Code states:
After a policy of life insurance made payable on the death of the insured shall
have been in force during the lifetime of the insured for a period of two years
from the date of its issue or of its last reinstatement, the insurer cannot prove that
the policy is void ab initio or is rescindible by reason of the fraudulent
concealment or misrepresentation of the insured or his agent.
Thus, it is settled that the reinstatement of an insurance policy should be reckoned from the
date when the same was approved by the insurer.
In this case, the parties differ as to when the reinstatement was actually approved. Insular Life
claims that it approved the reinstatement only on December 27, 1999. On the other hand, heirs of
Felipe Khu contend that it was on June 22, 1999 that the reinstatement took effect. The resolution of
this issue hinges on the following documents: 1) Letter of Acceptance; and 2) the Endorsement.
The Letter of Acceptance wherein Felipe affixed his signature was actually drafted and
prepared by Insular Life. This pro-forma document reads as follows:
LETTER OF ACCEPTANCE
Place: Cag. De [O]ro City
The Insular Life Assurance Co., Ltd.
P.O. Box 128, MANILA
Policy No. A000015683
Gentlemen:
Thru your Reinstatement Section, I/WE learned that this policy may be reinstated
provided I/we agree to the following condition/s indicated with a check mark:
[xx] Accept the imposition of an extra/additional extra premium of [P]5.00 a year per thousand of
insurance; effective June 22, 1999
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
After Felipe accomplished this form, Insular Life, through its Regional Administrative Manager issued
an Endorsement dated January 7, 2000. For emphasis, the Endorsement is again quoted as follows:
ENDORSEMENT
PN-A000015683
This certifies that as agreed to by the Insured, the reinstatement of this policy has been
approved by the Company on the understanding that the following changes are made
on the policy effective June 22, 1999:
Indeed, the insurance policy must be considered as reinstated on June 22, 1999. This finding
must be upheld not only because it accords with the evidence, but also because this is favorable to the
insured who was not responsible for causing the ambiguity or obscurity in the insurance contract. A
contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be
resolved against the insurer.
MANILA BANKERS LIFE INSURANCE CORPORATION vs.

CRESENCIA P. ABAN
G.R. No. 175666. July 29, 2013
The "Incontestability Clause" under Section 48 of the Insurance Code provides that an insurer
is given two years – from the effectivity of a life insurance contract and while the insured is alive – to
discover or prove that the police is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured
dies within the period, the insurer must make good on the policy, even though the policy was
obtained by fraud, concealment, or misrepresentation.
Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind
the contract. In the absence of proof of such fraudulent intent, no right to rescind arises.
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the
insured. Under the provision, an insurer is given two years – from the effectivity of a life insurance
contract and while the insured is alive – to discover or prove that the policy is void ab initio or is
rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent.
After the two-year period lapses, or when the insured dies within the period, the insurer must make
good on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation.
This is not to say that insurance fraud must be rewarded, but that insurers who recklessly and
indiscriminately solicit and obtain business must be penalized, for such recklessness and lack of
discrimination ultimately work to the detriment of bona fide takers of insurance and the public in
general.
Further, Section 48 prevents a situation where the insurer knowingly continues to accept
annual premium payments on life insurance, only to later on deny a claim on the policy on specious
claims of fraudulent concealment and misrepresentation, such as what obtains in the instant case.
Thus, instead of conducting at the first instance an investigation into the circumstances surrounding
the issuance of the policy which would have timely exposed the supposed flaws and irregularities
attending it as it now professes, petitioner appears to have turned a blind eye and opted instead to
continue collecting the premiums on the policy. For nearly three years, petitioner collected the
premiums and devoted the same to its own profit. It cannot now deny the claim when it is called to
account. Section 48 must be applied to it with full force and effect.
The insurer investigated the Sotero account only after a claim was filed thereon more than two
years later, naturally it was unable to detect the scheme. For its negligence and inaction, the Court
cannot sympathize with its plight.
Finally, insurers may not be allowed to delay the payment of claims by filing frivolous cases in
court, hoping that the inevitable may be put off for years – or even decades – by the pendency of these
unnecessary court cases. In the meantime, they benefit from collecting the interest and/or returns on
both the premiums previously paid by the insured and the insurance proceeds which should
otherwise go to their beneficiaries. The business of insurance is a highly regulated commercial activity
in the country, and is imbued with public interest. An insurance contract is a contract of adhesion
which must be construed liberally in favor of the insured and strictly against the insurer in order to
safeguard the former’s interest.
ASIAN TERMINALS, INC. v. MALAYAN INSURANCE, CO., INC

G.R. No. 171406, 4 April 2011
Non-presentation of the insurance contract or policy is not fatal in the instant case. The
subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private
respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also
the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment
by the insurance company of the insurance claim.
Once the insurer pays the insured, equity demands reimbursement, as no one should benefit at
the expense of the other.
TRANSPORTATION LAWS
PIONEER INSURANCE AND SURETY CORPORATION v. APL CO. PTE. LTD.

G.R. No. 226345, August 02, 2017
Ponente: J. Mendoza
50 bags of chili pepper were transported from India, to Manila. It was received by the
consignee on February 6, 2012. But it was discovered that 76 bags were wet and heavily infested with
molds. The shipment was declared unfit for human consumption and was eventually declared as a
total loss. The consignee made a formal claim against the carrier and the insurance company. After
investigation, the insurance company paid the consignee. Having been subrogated to all the rights
and cause of action of the consignee, Pioneer Insurance sought payment from APL, but the latter
refused. This prompted Pioneer Insurance to file a complaint for sum of money against APL.The suit
was filed on February 1, 2013. The bill of lading provides that complaints must be filed 9 months after
delivery. Pioneer insists that the shorter prescriptive period set out in the bill of lading is invalid since
it is contrary to the provisions of COGSA which provides for 1 year prescriptive period.
May the parties agree on a shorter period contrary to the prescriptive period provided for
under COGSA.
YES. Stipulated prescriptive periods shorter than their statutory counterparts are generally valid
because they do not affect the liability of the carrier but merely affects the shipper's remedy. But
contrary to the ruling of the CA, the Bill of Lading shows that the claim has not yet prescribed.
Has the action prescribed?
NO. The bill of lading itself provides:
“The carrier shall in any event be discharged from all liability whatsoever
in respect of the goods, unless suit is brought in the proper forum within
nine (9) months after delivery of the goods or the date when they should
have been delivered. Should the said nine-month period be contrary to any
law compulsory applicable, the period prescribed by the said law shall
apply.”
In short, the bill provides that the COGSA will govern. Thus, the action has not prescribed.
MARINA PORT SERVICES, INC. v. AMERICAN HOME

ASSURANCE CORPORATION
G.R. No. 201822, 12 August 2015
MPSI, the arrastre operator, cannot be held liable for the missing bags of flour since the
consigned goods were shipped under "Shipper's Load and Count" arrangement. "This means that the
shipper was solely responsible for the loading of the container, while the carrier was oblivious to the
contents of the shipment. Protection against pilferage of the shipment was the consignee's lookout.
The arrastre operator was, like any ordinary depositary, duty-bound to take good care of the goods
received from the vessel and to turn the same over to the party entitled to their possession, subject to
such qualifications as may have validly been imposed in the contract between the parties. The arrastre
operator was not required to verify the contents of the container received and to compare them with
those declared by the shipper because, as earlier stated, the cargo was at the shipper's load and count.
The arrastre operator was expected to deliver to the consignee only the container received from the
carrier.
Countercorp Trading PTE., Ltd. shipped to the Philippines 10 container vans of soft wheat
flour with seals intact on board the vessel M/V Uni Fortune. The shipment was insured against all
risks by American Home Assurance Corporation (AHAC) and consigned to MSC Distributor (MSC).
Upon arrival at the Manila South Harbor, the shipment was discharged in good condition and with
safety seals in place to the custody of the arrastre operator, Manila Port Services, Inc. (MPSI). After
unloading and prior to hauling, agents of the Bureau of Customs officially broke the seals and
examined the shipment for tax evaluation in the presence of MSC's broker and checker. Thereafter, the
customs inspector closed the container vans and refastened them with safety wire seals while MSC's
broker padlocked the same. MPSI then placed the said container vans in a back-to-back arrangement
at the delivery area of the harbor's container yard where they were watched over by the security
guards of MPSI and of the Philippine Ports Authority.
Subsequently, MSC's representative, AD's Customs Services (ACS), took out five container
vans for delivery to MSC. MPSI issued to ACS the corresponding gate passes for the vans indicating
its turnover of the subject shipment to MSC. However, upon receipt of the container vans at its
warehouse, MSC discovered substantial shortages in the number of bags of flour delivered. Hence, it
filed a formal claim for loss with MPSI. Pursuant to the gate passes issued by MPSI, ACS took out the
remaining five container vans from the container yard and delivered them to MSC. Upon receipt,
MSC once more discovered substantial shortages. Thus, MSC filed another claim with MPSI.
MPSI denied both claims of MSC. As a result, MSC sought insurance indemnity for the lost
cargoes from AHAC. Upon payment of the claim, MSC issued a subrogation receipt in favor of
AHAC. Thereafter, AHAC filed a Complaint for damages against MPSI before the Regional Trial
Court (RTC), which was dismissed. Aggrieved, AHAC appealed to the Court of Appeals (CA), which
granted the same and held MPSI liable to AHAC for the value of the missing bags of flour. MPSI
moved for reconsideration but the CA denied the same.
Is MPSI, the arrastre operator, liable for the loss of the bags of flour?
RULING:
No.
The relationship between an arrastre operator and a consignee is similar to that between a
warehouseman and a depositor, or to that between a common carrier and the consignee and/or the
owner of the shipped goods. Thus, an arrastre operator should adhere to the same degree of diligence
as that legally expected of a warehouseman or a common carrier as set forth in Section 3[b] of the
Warehouse Receipts [Act] and Article 1733 of the Civil Code. As custodian of the shipment discharged
from the vessel, the arrastre operator must take good care of the same and turn it over to the party
entitled to its possession.
In case of claim for loss filed by a consignee or the insurer as subrogee, it is the arrastre
operator that carries the burden of proving compliance with the obligation to deliver the goods to the
appropriate party. It must show that the losses were not due to its negligence or that of its employees.
It must establish that it observed the required diligence in handling the shipment. Otherwise, it shall
be presumed that the loss was due to its fault. In the same manner, an arrastre operator shall be liable
for damages if the seal and lock of the goods deposited and delivered to it as closed and sealed, be
broken through its fault. Such fault on the part of the arrastre operator is likewise presumed unless
there is proof to the contrary.
MPSI was able to prove delivery of the shipment to MSC in good and complete condition and
with locks and seals intact.
As held in International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co.,
Inc., the signature of the consignee's representative on the gate pass is evidence of receipt of the
shipment in good order and condition.
AHAC justifies the failure of ACS to immediately protest the alleged loss or pilferage upon
initial pick-up of the first batch of container vans. The Court cannot, however, accept such excuse.
Even assuming that stripping of the container vans is indeed not allowed at the pier area, it is hard to
believe that MSC or its representative ACS has no precautionary measures to protect itself from any
eventuality of loss or pilferage. To recall, ACS's representative signed the gate passes without any
qualifications. This is despite the fact that such signature serves as an acknowledgment of ACS's
receipt of the goods in good order and condition. If MSC was keen enough in protecting its interest, it
(through ACS) should have at least qualified the receipt of the goods as subject to inspection, and
thereafter arrange for such an inspection in an area where the same is allowed to be done. However,
no such action or other similar measure was shown to have been undertaken by MSC. What is clear is
that ACS accepted the container vans on its behalf without any qualification.
At any rate, the goods were shipped under "Shipper's Load and Count" arrangement. Thus,
protection against pilferage of the subject shipment was the consignees lookout.
At any rate, MPSI cannot just the same be held liable for the missing bags of flour since the
consigned goods were shipped under "Shipper's Load and Count" arrangement. "This means that the
shipper was solely responsible for the loading of the container, while the carrier was oblivious to the
contents of the shipment. Protection against pilferage of the shipment was the consignee's lookout.
The arrastre operator was, like any ordinary depositary, duty-bound to take good care of the goods
received from the vessel and to turn the same over to the party entitled to their possession, subject to
such qualifications as may have validly been imposed in the contract between the parties. The arrastre
operator was not required to verify the contents of the container received and to compare them with
those declared by the shipper because, as earlier stated, the cargo was at the shipper's load and count.
The arrastre operator was expected to deliver to the consignee only the container received from the
carrier."
MOF Company, Inc. vs. Shin Yang Brokerage Corporation

G.R. No. 172822, December 18, 2009
PONENTE: J. Del Castillo
Is the consignee bound by the terms of the bill of lading?
As a rule, the consignee is not bound by the stipulations in the bill of lading as it is oftentimes
drawn up by the shipper/consignor and the carrier without the intervention of the consignee.
However, the latter can be bound by the stipulations of the bill of lading when a) there is a
relation of agency between the shipper or consignor and the consignee or b) when the consignee
demands fulfillment of the stipulation of the bill of lading which was drawn up in its favor. In Keng
Hua Paper Products Co., Inc. v. Court of Appeals, 90 Phil. 836 (1952) we held that once the bill of
lading is received by the consignee who does not object to any terms or stipulations contained therein,
it constitutes as an acceptance of the contract and of all of its terms and conditions, of which the
acceptor has actual or constructive notice. x x x In sum, a consignee, although not a signatory to the
contract of carriage between the shipper and the carrier, becomes a party to the contract by reason of
either a) the relationship of agency between the consignee and the shipper/ consignor; b) the
unequivocal acceptance of the bill of lading delivered to the consignee, with full knowledge of its
contents or c) availment of the stipulation pour autrui, i.e., when the consignee, a third person,
demands before the carrier the fulfillment of the stipulation made by the consignor/shipper in the
consignee’s favor, specifically the delivery of the goods/cargoes shipped.
BANKING LAWS
Philippine National Bank vs. Vila

G.R. No. 213241 August 1, 2016
Ponente: J. Perez
Sometime in 1986, Spouses Cornista obtained a loan from Traders Royal Bank (Traders Bank).
To secure the said obligation, the Spouses Cornista mortgaged to the bank a parcel of land. For failure
of the Spouses Cornista to make good of their loan obligation after it has become due, Traders Bank
foreclosed the mortgage. The subject property was sold at the public auction on 23 December 1987
whereby Juan F. Vila (Vila) was declared as the highest bidder. The Certificate of Sale dated 13
January 1988 was duly recorded in the TCT.
To exercise his right of ownership, Vila immediately took possession of the subject property
and paid the real estate taxes corresponding thereon.
On 11 February 1989, a Certificate of Final Sale was issued to Vila after the one-year
redemption period had passed without the Spouses Cornista exercising their right to redeem. He was,
however, prevented from consolidating the ownership of the property under his name because the
owner's copy of the certificate of title was not turned over to him by the Sheriff. Despite the lapse of
the redemption period and the fact of issuance of a Certificate of Final Sale to Vila, the Spouses
Cormsta were nonetheless allowed to buy back the subject property. A Certificate of Redemption was
issued and was duly annotated in the title.
Claiming that the Spouses Cornista already lost their right to redeem the subject property, Vila
filed an action for nullification of redemption which was granted by the RTC. In order to enforce the
favorable decision, Vila filed before the RTC a Motion for Execution which was granted by the court.
Accordingly, a Writ of Execution was issued but the Sheriff could not successfully enforce the decision
because the certificate of title covering the subject property was no longer registered under the names
of the Spouses Cornista. Hence, the judgment was returned unsatisfied as shown in Sheriffs Return
dated 13 July 1999.
.
Upon investigation it was found out that during the interregnum the Spouses Cornista were
able to secure another loan, this time from PNB using the same property security. The Real Estate
Mortgage (REM) was recorded on 28 September 1992 or a month before the Notice of Lis Pendens was
annotated. Eventually, the Spouses Cornista defaulted in the payment of the loan. Mortgage was
foreclosed and at public auction, PNB was the highest bidder. Spouses Cornista once again failed to
redeem allowing PNB to consolidate its ownership over the subject property. Accordingly, the TCT in
the name of the Spouses Cornista was cancelled and a new TCT under the name of the PNB was
issued.
Vila commenced another round of litigation against the Spouses Cornista and PNB. For its
defense, PNB reasoned that it was a mortgagee in good faith pointing the fact that at the time the
subject property was mortgaged to it, the same was still free from any liens and encumbrances and the
Notice of Lis Pendens was registered only a month after the REM was annotated on the title. PNB
argued that at the time of the transaction, the Spouses Cornista were still the absolute owners of the
property possessing all the rights to mortgage the same to third persons. PNB also harped on the fact
that a close examination of title was conducted and nowhere was it shown that there was any cloud in
the title of the Spouses Cornista, the latter having redeemed the property after they have lost it in a
foreclosure sale.
Is PNB correct?
NO. Before approving a loan application, it is standard operating procedure for banks and
financial institutions to conduct an ocular inspection of the property offered for mortgage and to
determine the real owner(s) thereof. The apparent purpose of an ocular inspection is to protect the
"true owner" of the property as well as innocent third parties with a right, interest or claim thereon
from a usurper who may have acquired a fraudulent certificate of title thereto. Banks must exercise
the highest degree of diligence in its dealing with properties offered as securities for the loan
obligation. When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or
mortgagees for value is applied more strictly.
Land Bank of the Philippines vs. West Bay Colleges, Inc.

G.R. No. 211287 April 17, 2017
Ponente: J. Reyes
Westbay Inc. applied for a loan with Landbank for the construction of a school building. The loan was
secured by a mortgage over a vessel which Westbay insured with Lepanto Insurance. Unfortunately,
the vessel sank. By agreement of the parties, the proceeds were released to Landbank on account of its
insurable interest as mortgagee.
Later, Westbay filed for rehabilitation.The RTC approved the rehabilitation plan which
provided, inter alia, that the P21,980,000.00 insurance proceeds received by Land Bank shall instead be
applied to the loan of West Bay. The SC ruled that the payment of insurance proceeds shall earn
interest. How much is the rate of interest that must be imposed?
ANSWER: Since the obligation of Land Bank to reimburse the amount of insurance proceeds
does not constitute a forbearance of money, the interest rate of six percent (6%) is applicable. The
pronouncement of the Court in Sunga-Chan, et aL. v. CA, et al., on this matter is enlightening: For
transactions involving payment of indemnities in the concept of damages arising from default in
the performance of obligations in general and/or for money judgment not involving a loan or
forbearance of money, goods, or credit, the governing provision is Article. 2209 of the Civil Code
prescribing a yearly six percent (6%) interest.
Article 2209 of the Civil Code provides that if the obligation consists in the payment of a sum
of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal
interest, which is six percent (6%) per annum.
* In the case of loans or forbearances of money, the rate of legal interest used to be twelve
percent (12%) per annum pursuant to Central Bank Circular No. 905-82, which took effect on January 1,
1983.37 "The term 'forbearance', within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable."
* But effective on July 1, 2013, under Bangko Sentral ng Pilipinas Monetary Board Circular No.
799, the rate of interest is now back at six percent (6%) per annum for the loan or forbearance of any
money, goods or credits and in judgments, in the absence of an express contract as to such rate of
interest.
GENERAL BANKING LAW OF 2000
Balayan Bay Rural Bank, Inc. vs. National Livelihood

Development Corporation,
G.R. No. 194589 September 21, 2015
Ponente: J. Perez
National Livelihood Devt. Corp (NLDC) sued Balabayan Bay Rural Bank for sum of money.
During the pendency of the case, the bank was placed under receivership and PDIC was appointed as
receiver. NLDC moved that PDIC be substituted or joined as co-defendant. NDLC objected arguing
that PDIC is not the real party in interest but was merely tasked to conserve the assets of the bank for
the benefit of its creditors .
Is NDLC correct?
NO. The instant case involves a disputed claim of sum of money against a closed financial
institution. After the Monetary Board has declared that a bank is insolvent and has ordered it to cease
operations, the Board becomes the trustee of its assets for the equal benefit of all the creditors,
including depositors.The assets of the insolvent banking institution are held in trust for the equal
benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over
another by an attachment, execution or otherwise.Towards this end, the PDIC, as the statutory
receiver/liquidator of the bank, is mandated to immediately gather and take charge of all the assets
and liabilities of the institution and administer the same for the benefit of its creditors.
As the fiduciary of the properties of a closed bank, the PDIC may prosecute or defend the case
by or against the said bank as a representative party while the bank will remain as the real party in
interest. The inclusion of the PDIC as a representative party in the case is therefore grounded on its
statutory role as the fiduciary of the closed bank.
*The insolvent bank's legal personality is not dissolved by virtue of being placed under
receivership by the Monetary Board. It must be stressed here that a bank retains its juridical
personality even if placed under conservatorship; it is neither replaced nor substituted by the
conservator who shall only take charge of the assets, liabilities and the management of the institution.
It being the fact that the PDIC should not be considered as a substitute or as a co-defendant of
the petitioner bank but rather as a representative party or someone acting in fiduciary capacity, the
insolvent institution shall remain in the case and shall be deemed as the real party in interest.
** A bank which had been ordered closed by the monetary board retains its juridical
personality which can sue and be sued through its liquidator. The only limitation being that the
prosecution or defense of the action must be done through the liquidator. Otherwise, no suit for or
against an insolvent entity would prosper. In such situation, banks in liquidation would lose what
justly belongs to them through a mere technicality
In short, the legal personality of the petitioner bank is not ipso facto dissolved by insolvency; it
is not divested of its capacity to sue and be sued after it was ordered by the Monetary Board to cease
operation. The law mandated, however, that the action should be brought through its statutory
liquidator/receiver which in this case is the PDIC. The authority of the PDIC to represent the
insolvent bank in legal actions emanates from the fiduciary relation created by statute which reposed
upon the receiver the task of preserving and conserving the properties of the insolvent for the benefit
of its creditors.
Philippine National Bank v. Sps. Chea Chee Chong

G.R. No. 170865, April 25, 2012
Filipina Tuazon (Filipina) approached Ofelia Cheah to ask if she could have her (Filipina’s)
check cleared and encashed using Ofelia's account. Ofelia has a joint dollar savings account with her
Malaysian husband Cheah Chee Chong (Chee Chong) with PNB. The check is Bank of America Check
No. 190 under the account of Alejandria Pineda and Eduardo Rosales and drawn by Atty. Eduardo
Rosales against Bank of America Alhambra Branch in California, USA, with a face amount of
$300,000.00, payable to cash.
Assured that the deposit and subsequent clearance of the check is a normal transaction, Ofelia
deposited Filipina’s check. PNB then sent it for clearing through its correspondent bank, Philadelphia
National Bank. Five days later, PNB received a credit advice from Philadelphia National Bank that the
proceeds of the subject check had been temporarily credited to PNB’s account. Thereafter, PNB called
up Ofelia to inform her that the check had already been cleared. The following day, PNB Buendia
Branch, after deducting the bank charges, credited $299,248.37 to the account of the spouses Cheah.
Acting on Adelina’s instruction to withdraw the credited amount, Ofelia that day personally
withdrew $180,000.00. Adelina was able to withdraw the remaining amount the next day after having
been authorized by Ofelia. Filipina received all the proceeds.
Thereafter, Philadelphia National Bank contacted PNB and informed the latter that the check
was returned due to insufficiency of funds. PNB sent a demand letter to spouses Cheah for the return
of the amount of the check, froze their peso and dollar deposits and filed a complaint against them for
Sum of Money.
Is PNB held liable for the loss.
Yes. PNB’s act of releasing the proceeds of the check prior to the lapse of the 15-day clearing
period (construed as 15 banking days) was the proximate cause of the loss. The Court held that the
payment of the amounts of checks without previously clearing them with the drawee bank especially
so where the drawee bank is a foreign bank and the amounts involved were large is contrary to
normal or ordinary banking practice.
The Court further reiterated that before the check shall have been cleared for deposit, the
collecting bank can only ‘assume’ at its own risk that the check would be cleared and paid out. The
delay in the receipt by PNB Buendia Branch of the November 13, 1992 SWIFT message notifying it of
the dishonor of the subject check is of no moment, because had PNB Buendia Branch waited for the
expiration of the clearing period and had never released during that time the proceeds of the check, it
would have already been duly notified of its dishonor. Clearly, PNB’s disregard of its preventive and
protective measure against the possibility of being victimized by bad checks had brought upon itself
the injury of losing a significant amount of money.
It bears stressing that “the diligence required of banks is more than that of a Roman pater
familias or a good father of a family. The highest degree of diligence is expected.” PNB miserably
failed to do its duty of exercising extraordinary diligence and reasonable business prudence. The
disregard of its own banking policy amounts to gross negligence, which the law defines as
“negligence characterized by the want of even slight care, acting or omitting to act in a situation where
there is duty to act, not inadvertently but wilfully and intentionally with a conscious indifference to
consequences in so far as other persons may be affected.” With regard to collection or encashment of
checks, suffice it to say that the law imposes on the collecting bank the duty to scrutinize diligently the
checks deposited with it for the purpose of determining their genuineness and regularity. “The
collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this
field, and the law thus holds it to a high standard of conduct.” A bank is expected to be an expert in
banking procedures and it has the necessary means to ascertain whether a check, local or foreign, is
sufficiently funded.
Land Bank of the Philippines vs. Emmanuel Oñate

G.R. No. 192371; January, 15, 2014
Oñate opened and maintained seven trust accounts with Land Bank. Each trust account was
covered by an Investment Management Account (IMA) with Full Discretion and has a corresponding
passbook where deposits and withdrawals were recorded.
In a letter dated October 1981, Land Bank demanded from Oñate the return of P4 million it
claimed to have been inadvertently deposited to Trust Account No. 01-125 as additional funds. Oñate
refused. To settle the matter, a meeting was held, but the parties failed to reach an agreement. Since
then, the issue of “miscrediting” remained unsettled. Subsequently, Land Bank unilaterally applied
the outstanding balance in all of Oñate’s trust accounts against his resulting indebtedness reason of
the miscrediting of funds. Although it exhausted the funds in all of Oñate’s trust accounts, Land Bank
was able to debit the amount of P1,528,583.48 only. To recover the remaining balance of Oñate’s
indebtedness, Land Bank filed a Complaint for Sum of Money.
In his Answer, Oñate asserted that the set-off was without legal and factual bases. He
maintained that all the funds in his accounts came from legitimate sources and that he was totally
unaware of and had nothing to do with the alleged miscrediting.
RTC issued an Order creating a Board of Commissioners for the purpose of examining the
records of Oñate’s seven trust accounts, as well as to determine the total amount of deposits,
withdrawals, funds invested, earnings, and expenses incurred. Subsequently, the Board submitted a
consolidated report which revealed that there were undocumented and over withdrawals and
drawings from Oñate’s trust accounts.
The Board also submitted a Manifestation informing the RTC that its findings as to the
outstanding balance of each trust account may not be accurate considering that it was not given ample
opportunity to collate and sort out the documents related to each trust account and that there may
have been double take up of accounts since the documents previously reviewed may have been
considered again in subsequent reports.
May the bank be held liable for the inaccuracies of the report?
Bank is liable. The depositor expects the bank to treat his account with the utmost fidelity,
whether such account consists only of a few hundred pesos or of millions. The bank must record
every single transaction accurately, down to the last centavo and as promptly as possible. This has to
be done if the account is to reflect at any given time the amount of money the depositor can dispose of
as he sees fit, confident that the bank will deliver it as and to whomever he directs.
As to the conceded inaccuracies in the reports, we cannot allow Land Bank to benefit
therefrom. Time and again, we have cautioned banks to spare no effort in ensuring the integrity of the
records of its clients. And in Philippine National Bank v. Court of Appeals, we held that "as between
parties where negligence is imputable to one and not to the other, the former must perforce bear the
consequences of its neglect." In this case, the Board could have submitted a more accurate report had
Land Bank faithfully complied with its duty of maintaining a complete and accurate record of Oñate’s
accounts. But the Board could not find and present the corresponding slips for the withdrawals
reflected in the passbooks. In addition, Land Bank was less than cooperative when the Board was
examining the records of Oñate’s accounts. It did not give the Board enough leeway to go over the
records systematically or in orderly fashion. Hence, we cannot allow Land Bank to benefit from
possible inaccuracies in the report.
PHILIPPINE NATIONAL BANK v. F.F. CRUZ AND CO., INC.

G.R. No. 173259, 25 July 2011
F.F. Cruz and Co., Inc. (FFCCI) had a combo account with Philippine National Bank (PNB)
with President Felipe Cruz and Secretary-Treasurer Angelita Cruz as signatories. Both went to the
United States of America and while they were out of the country, two checks were presented to PNB
which were approved and debited from the account of FFCCI. When Angelita returned she
discovered the amounts debited from their account and requested PNB to credit back the amount lost.
PNB refused.
In its defense, PNB alleged that it exercised due diligence because it followed the standard
banking procedure. PNB concedes the absence of the signature of the bank verifier but argued that the
same was the result of inadvertence. PNB states that the testimonies of its branch manager and branch
cashier are sufficient to establish that the signature verification process was duly followed. In
addition, it was FFCCI which was negligent because of its delay in reporting to PNB the anomalous
transaction.
Is PNB guilty of negligence?
YES. The banking business is impressed with public trust and consequently, a higher degree of
diligence is expected of banks. PNB failed to meet the high standard of diligence required by the
circumstances to prevent the fraud.
PNB was negligent with respect to its failure to detect the forgeries which could have
prevented the loss. It was admitted that PNB’s employees received training on detecting forgeries
from the NBI. However, Emmanuel Guzman, then NBI senior document examiner, testified, as an
expert witness, that the forged signatures in the subject applications for managers check contained
noticeable and significant differences from the genuine signatures, and that the forgeries should have
been detected by a trained signature verifier of any bank.
PNB also failed to make the proper verification because the applications for the manager’s
check do not bear the signature of the bank verifier.
Corollarily, in a related case, the Supreme Court already resolved with finality that FFCCI is
also guilty of negligence ( G.R. No. 173278). Here, the proximate cause of the loss is the negligence of
the bank. As between a bank and its depositor, where the banks negligence is the proximate cause of
the loss and the depositor is guilty of contributory negligence, the greater proportion of the loss shall
be borne by the bank. Where the bank’s negligence is the proximate cause of the loss and the depositor
is guilty of contributory negligence, the Court allocated the damages between the bank and the
depositor on a 60-40 ratio.
FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010
Probable Bar Question: Elucidate on the concept of rehabilitation. What is its two-fold purpose?
Answer: Corporate rehabilitation is defined as the restoration of the debtor to a position 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 corporation continues as a going concern than if it is immediately liquidated. (Umale v.
ASB Realty Corporation, 652 SCRA 215, 15 June 2011)
Corporate rehabilitation has a two-fold purpose: equitable and rehabilitative. On one hand,
rehabilitation attempts to provide for the efficient and equitable distribution of an insolvent debtor's
remaining assets to its creditors; and on the other, it provides debtors with a "fresh start" by relieving
them of the weight of their outstanding debts and permitting them to reorganize their affairs. The
rationale of Presidential Decree No. 902-A, as amended, is to "effect a feasible and viable
rehabilitation," by preserving a floundering business as going concern, because the assets of a business
are often more valuable when so maintained than they would be when liquidated. (Wonder Book
Corporation v. Philippine Bank of Communications, 676 SCRA 489, 16 July 2012)
Probable Bar Question: What must considered in determining whether a rehabilitation plan may be
appoved? When may it be denied?
Answer: Under Section 23, Rule 4 of the Interim Rules, a rehabilitation plan may be approved
if there is a showing that rehabilitation is feasible and the opposition entered by the creditors holding
a majority of the total liabilities is unreasonable. In determining whether the objections to the approval
of a rehabilitation plan are reasonable or otherwise, the court has the following to consider: (a) that the
opposing creditors would receive greater compensation under the plan than if the corporate assets
would be sold; (b) that the shareholders would lose their controlling interest as a result of the plan;
and (c) that the receiver has recommended approval.
Rehabilitation is therefore available to a corporation who, while illiquid, has assets that can
generate more cash if used in its daily operations than sold. Its liquidity issues can be addressed by a
practicable business plan that will generate enough cash to sustain daily operations, has a definite
source of financing for its proper and full implementation, and anchored on realistic assumptions and
goals.
This remedy should be denied to corporations whose insolvency appears to be irreversible and
whose sole purpose is to delay the enforcement of any of the rights of the creditors, which is rendered
obvious by the following: (a) the absence of a sound and workable business plan; (b) baseless and
unexplained assumptions, targets and goals; (c) speculative capital infusion or complete lack thereof
for the execution of the business plan; (d) cash flow cannot sustain daily operations; and (e) negative
net worth and the assets are near full depreciation or fully depreciated. (Wonder Book Corporation v.
Philippine Bank of Communications, 676 SCRA 489, 16 July 2012)
Probable Bar Question: ASB Realty Corp. was placed under receivership by SEC. Later, it filed a suit
for unlawful detainer against Umale who failed to pay the rentals over a corporate property which he
leased from ASB Realty. Umale insisted that ASB Realty has no personality to sue and that it is the
duly appointed receiver who should sue to recover possession of the property. May a corporation file
a suit to recover corporate property despite the fact that it had been placed under rehabilation?
Answer: YES. There is nothing in the concept of corporate rehabilitation that would ipso facto
deprive the Board of Directors and corporate officers of a debtor corporation, such as ASB Realty, of
control such that it can no longer enforce its right to recover its property from an errant lessee.
To be sure, corporate rehabilitation imposes several restrictions on the debtor corporation. The
rules enumerate the prohibited corporate actions and transactions (most of which involve some kind
of disposition or encumbrance of the corporations assets) during the pendency of the rehabilitation
proceedings but none of which touch on the debtor corporation's right to sue. The implication
therefore is that rehabilitation does not restrict this particular power, save for the caveat that all its
actions are monitored closely by the receiver, who can seek an annulment of any prohibited or
anomalous transaction or agreement entered into by the officers of the debtor corporation. (Umale v.
ASB Realty Corporation, 652 SCRA 215, 15 June 2011; ponente: J. Del Castillo)
Probable Bar Question: Discuss the concept of “debtor-in-possession” or “debtor-in-place” in

corporate rehabilitation.
Answer: Corporate rehabilitation aims to restore the corporate-debtor to a position of

successful operation and solvency by preserving a floundering business as a going concern, because the
assets of a business are often more valuable when so maintained than they would be when liquidated.
This concept of preserving the corporation's business as a going concern while it is undergoing
rehabilitation is called debtor-in-possession or debtor-in-place. This means that the debtor corporation
(the corporation undergoing rehabilitation), through its Board of Directors and corporate officers,
remains in control of its business and properties, subject only to the monitoring of the appointed
rehabilitation receiver who is tasked only to ensure the successful implementation of the rehabilitation
plan. (Umale v. ASB Realty Corporation, 652 SCRA 215, 15 June 2011)
Probable Bar Question: Discuss the basis and purpose behind the issuance of a Stay Order during
corporate rehabilitation.
Answer: Section 6 (c) of Presidential Decree No. 902-A, as amended, provides for suspension of
claims against corporations undergoing rehabilitation, to wit: “upon appointment of a management
committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims
against corporations, partnerships or associations under management or receivership pending before
any court, tribunal, board or body, shall be suspended accordingly.”
The purpose for suspending actions for claims against the corporation in a rehabilitation
proceeding is to enable the management committee or rehabilitation receiver to effectively exercise
its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent
the rescue of the debtor company. (Panlilio v. RTC, Br. 51, City of Manila, 641 SCRA 439, 2 February
2011)
Probable Bar Question: What does the term “all claims” in a Stay Order contemplate?
Answer: The term "claim" has been construed to refer to debts or demands of a pecuniary
nature, or the assertion to have money paid. (Panlilio v. RTC, Br. 51, City of Manila, 641 SCRA 439, 2
February 2011)
Probable Bar Question: Does the Stay Order include the suspension of criminal charges against
corporate officers who may be held civilly liable should they be convicted?
Answer: NO. A criminal action against the director or officer of a distressed corporation shall
not be affected or stayed during corporate rehabilitation. (Sec. 18, par. [g] of FRIA 2010) The
prosecution of the officers of the corporation has no bearing on the pending rehabilitation, especially
since the officers are charged in their individual capacities. It would be absurd if one who has engaged
in criminal conduct could escape punishment by the mere filing of a petition for rehabilation by the
corporation of which he is an officer.
Probable Bar Question: The RTC of Manila issued an Order staying all claims against Silahis Hotel,
Inc. until after the petition for rehabilitation of said corporation was resolved. As it turned out,
criminal charges were initiated against several officers of Silahis Hotel for alleged violation of the
Social Security Act (SSS law), in relation to Art. 315 of the RPC (Estafa). The officers contended that
the criminal case should also be suspended in view of the Stay Order issued by the RTC. Are the
officers correct?
Answer: NO. The rehabilitation and the settlement of claims against the corporation is not a
legal ground for the extinction of criminal liabilities. There is no reason why criminal proceedings
should be suspended during corporate rehabilitation, more so, since the prime purpose of the criminal
action is to punish the offender in order to deter him and others from committing the same or similar
offense, to isolate him from society, reform and rehabilitate him or, in general, to maintain social
order. It would be absurd if one who has engaged in criminal conduct could escape punishment by
the mere filing of a petition for rehabilation by the corporation of which he is an officer.
Therefore, the penal sanctions as a consequence of violation of the SSS law can be implemented
if the officers are found guilty after trial. However, any civil indemnity awarded as a result of their
conviction would be subject to the stay order issued by the rehabilitation court. Only to this extent can the
order of suspension be considered obligatory upon any court, tribunal, branch or body where there
are pending actions for claims against the distressed corporation. (Panlilio v. RTC, Br. 51, City of
Manila, 641 SCRA 439, 2 February 2011)
Probable Bar Question: May the mortgagor-bank, a secured creditor, foreclose the mortgaged
properties of a corporation under liquidation?
Answer: YES. A secured creditor has the right to enforce his lien even during liquidation
proceedings. (Sec. 114 of Financial Rehabilitation and Insolvency Act (FRIA) of 2010; Yngson, Jr. PNB,
678 SCRA 447, 15 August 2012)
Probable Bar Question: ARCAM, Inc. secured a loan from PNB and executed a real estate mortgage
over its property. ARCAM, Inc. defaulted in its obligations impelling PNB to commence extrajudicial
foreclosure proceedings before the Office of the Sheriff. The public auction was scheduled on 16
December 2017. In the meantime, on 8 December 2017, ARCAM, Inc. filed before the SEC a Petition for
Suspension of Payment and Approval of Rehabilitation Plan which was later denied by the SEC on the
ground that ARCAM, Inc. could no longer be rehabilitated. SEC then appointed a liquidator for
ARCAM, Inc. For its part, PNB asked the sheriff to schedule the public auction of the mortgaged
properties. May PNB foreclose the mortgaged properties of a corporation under liquidation, without
the knowledge and approval of the liquidator or the SEC?
Answer:
YES. The right of PNB as a secured creditor to enforce his lien even during liquidation
proceedings is anchored on Section 114 of the FRIA, which provides:
SEC. 114. Rights of Secured Creditors. – The Liquidation Order shall not
affect the right of a secured creditor to enforce his lien in accordance with the
applicable contract or law. A secured creditor may:
(a) waive his rights under the security or lien, prove his claim in the
liquidation proceedings and share in the distribution of the assets of the debtor;
or
(b) maintain his rights under his security or lien;
If the secured creditor maintains his rights under the security or lien:
(1) the value of the property may be fixed in a manner agreed upon by
the creditor and the liquidator. When the value of the property is less than the
claim it secures, the liquidator may convey the property to the secured creditor
and the latter will be admitted in the liquidation proceedings as a creditor for the
balane; if its value exceeds the claim secured, the liquidator may convey the
property to the creditor and waive the debtor’s right of redemption upon
receiving the excess from the creditor;
(2) the liquidator may sell the property and satisfy the secured creditor’s
entire claim from the proceeds of the sale; or
(3) the secured creditor may enforce the lien or foreclose on the property
pursuant to applicable laws.
PNB elected to maintain its rights under the security or lien; hence, its right to foreclose the
mortgaged properties should be respected. Creditors of secured obligations may pursue their security
interest or lien, or they may choose to abandon the preference and prove their credits as ordinary
claims. The creditor-mortgagee has the right to foreclose the mortgage over a specific real property
whether or not the debtor-mortgagor is under insolvency or liquidation proceedings. The right to
foreclose such mortgage is merely suspended upon the appointment of a management committee or
rehabilitation receiver or upon the issuance of a stay order by the trial court. However, the creditor-
mortgagee may exercise his right to foreclose the mortgage upon the termination of the rehabilitation
proceedings or upon the lifting of the stay order. (Yngson, Jr. PNB, 678 SCRA 447, 15 August 2012)
Probable Bar Question: Advent Corp. was placed under receivership. After auditing the books of
Advent Corp., the court-appointed receiver found that Nicasio owed the corporation a sum of money
representing trust fees that it earned for managing the accounts of Nicasio. In due time, the receiver
requested Belson Securities to deliver to him more than P7 Million in cash dividends held by Belson
Securities in trust for Nicasio. Upon the refusal of Belson Securites, the receiver filed a motion before
the rehabilitation court to compel Belson Securities to deliver the dividends. Does the rehabilitation
court have the jurisdiction to adjudicate on whether the receiver may recover funds allegedly owing
to a distressed corporation but held in trust by a third person?
Answer: NO. Advent Corp. must file a separate action for collection to recover the trust fees it
allegedly earned. It cannot enforce its money claim by simply filing a motion in the rehabilitation case
for delivery of money beloning to Nicasio but in the possession of a third party.
Rehabilitation proceedings are summary and non-adversarial in nature, and do not

contemplate adjudication of claims that must be threshed out in ordinary court proceedings.
Adversarial proceedings similar to that in ordinary courts are inconsistent with the commercial nature
of a rehabilitation case. The latter must be resolved quickly and expeditiously for the sake of the
corporate debtor, its creditors and other interested parties. Advent Corp.'s claim is disputed and
requires a full trial on the merits. (Advent Capital and Finance Corporation v. Alcantara, 664 SCRA
224, 25 January 2012)
INTELLECTUAL PROPERTY CODE
SOCIETE DES PRODUITS, NESTLE, S.A. vs. PUREGOLD PRICE

CLUB, INC.G.R. No. 217194 September 6, 2017
Ponente: J. Carpio
Puregold filed an application for the registration of the trademark "COFFEE MATCH" for its
products consisting of coffee, tea, cocoa, sugar, artificial coffee, flour and preparations made from
cereals, bread, pastry and confectionery, and honey. Nestle opposed the application for registration on
the ground that it is the exclusive owner of the "COFFEE-MATE" trademark and that there is
confusing similarity between the "COFFEE-MATE" and "COFFEE MATCH". Nestle alleged that
"COFFEE-MATE" has been declared an internationally well-known mark and Puregold's use of
"COFFEE MATCH" would indicate a connection with the goods covered in Nestle's "COFFEE-MATE"
mark because of its distinct similarity. Nestle claimed that it would suffer damages if the application
were granted since Puregold's "COFFEE MATCH" would likely mislead the public that the mark
originated from Nestle.
May the application of COFFEE MATCH be approved?
YES. A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and
distinguish them from those manufactured, sold, or dealt by others. The gravamen of trademark
infringement is the likelihood of confusion.
Here, the likelihood of confusion does not exist.
The word "COFFEE" is the common dominant feature between Nestle's mark "COFFEE-MATE"
and Puregold's mark "COFFEE MATCH." However, following Section 123, paragraph (h) of RA 8293
which prohibits exclusive registration of generic marks, the word "COFFEE" cannot be exclusively
appropriated by either Nestle or Puregold since it is generic or descriptive of the goods they seek to
identify. Generic or descriptive words are not subject to registration and belong to the public domain.
Consequently, we must look at the word or words paired with the generic or descriptive word, in this
particular case "-MATE" for Nestle's mark and "MATCH" for Puregold's mark, to determine the
distinctiveness and registrability of Puregold's mark "COFFEE MATCH."
The distinctive features of both marks are sufficient to warn the purchasing public which are
Nestle's products and which are Puregold's products. While both "-MATE" and "MATCH" contain the
same first three letters, the last two letters in Puregold's mark, "C" and "H," rendered a visual and
aural character that made it easily distinguishable from Nestle's mark. Also, the distinctiveness of
Puregold's mark with two separate words with capital letters "C" and "M" made it distinguishable
from Nestle's mark which is one word with a hyphenated small letter "-m" in its mark. In addition,
there is a phonetic difference in pronunciation between Nestle's "-MATE" and Puregold's "MATCH."
As a result, the eyes and ears of the consumer would not mistake Nestle's product for Puregold's
product.
Mang Inasal Phils., Inc. vs. IFP Manufacturing Corporation

G.R. No. 221717, June 19, 2017
Ponente: J. Velasco
Mang Inasal is a domestic fast food company and the owner of the mark "Mang Inasal, Home
of Real Pinoy Style Barbeque and Device" (Mang Inasal mark), which was registered with the IPO in
2006 and had been used for Mang Inasal's chain of restaurants since 2003, consisting of the following
Insignia:
Respondent IFP applied for the registration of the mark "OK Hotdog Inasal Cheese Hotdog
Flavor Mark" (OK Hotdog Inasal mark), to be used in one of its curl snack products. The mark appears
as follows:
Mang Inasal opposed the registration arguing that the OK Hotdog Inasal mark and the Mang
Inasal mark share similarities- both as to their appearance and as to the goods or services that they
represent which tend to suggest a false connection or association between the said marks and, in that
regard, would likely cause confusion on the part of the public. Both marks feature the same dominant
element -i.e., the word "INASAL"-printed and stylized in the exact same manner, viz:
• In both marks, the word "INASAL" is spelled using the same font style and red color;
the word "INASAL" is placed inside the same black outline and yellow background;
and the word "INASAL" is arranged in the same staggered format.
Mang Inasal claimed that the goods that the OK Hotdog Inasal mark is intended to identify (i.e., curl
snack products) are also closely related to the services represented by the Mang Inasal mark (i.e., fast
food restaurants). Both marks cover inasal or inasal-flavored food products.
Is the mark of OK Hotdog Inasal likely to cause confusion when juxtaposed with the mark of
Mang Inasal?
YES. Confusion may either be confusion of goods or confusion of business.
Confusion of goods (product confusion), where the ordinarily prudent purchaser would be
induced to purchase one product in the belief that he was purchasing the other.
Confusion of business (source or origin confusion), where, although the goods of the parties
are different, the product, the mark of which registration is applied for by one party, is such as
might reasonably be assumed to originate with the registrant of an earlier product, and the
public would then be deceived either into that belief or into the belief that there is some
connection between the two parties, though inexistent.
Confusion, in either of its forms, is only possible when the goods or services covered by
allegedly similar marks are identical, similar or related in some manner. For the goods to be
considered as likely to deceive or cause confusion upon the purchasing public, a prospective
mark must be shown to meet two (2) minimum conditions:
1. The prospective mark must nearly resemble or be similar to an earlier mark; and
2. The prospective mark must pertain to goods or services that are either identical, similar or
related to the goods or services represented by the earlier mark.
Here, the mark of OK Hotdog Inasal bears similarities with the mark of Mang Inasal.
CONFUSION OF GOODS
The dominant element "INASAL" in the OK Hotdog Inasal mark is exactly the same as the
dominant element "INASAL" in the Mang Inasal mark. Both elements in both marks are printed using
the exact same red colored font, against the exact same black outline and yellow background and is
arranged in the exact same staggered format.
The mere fact that there are other elements in the OK Hotdog Inasal mark that are not present
in the Mang Inasal mark actually does little to change the probable public perception that both marks
are linked or associated. It is worth reiterating that the OK Hotdog Inasal mark actually brandishes a
literal copy of the most recognizable feature of the Mang Inasal mark. An average buyer catching a
casual glimpse of the OK Hotdog Inasal mark would pay more attention to the peripheral details of
the said mark than it would to the mark's more prominent feature, especially when the same invokes
the distinctive feature of another more popular brand. The use of Mang Inasal in OK Hotdog Inasal
has the potential to project the deceptive and false impression that the latter mark is somehow linked
or associated with the former mark.
CONFUSION OF BUSINESS
The curl snack product for which the registration of the OK Hotdog Inasal mark is sought is
related to the restaurant services represented by the Mang !nasal mark, in such a way that may lead to
a confusion of business. First. OK Hotdog Inasal uses the Mang Inasal mark in connection with its
restaurant services that is particularly known for its chicken inasal,i.e., grilled chicken doused in a
special inasal marinade. The inasal marinade is different from the typical barbeque marinade and it is
what gives the chicken inasal its unique taste and distinct orange color. Inasal refers to the manner of
grilling meat products using an inasal marinade.
Second. The Mang Inasal mark has been used for Mang Inasal's restaurant business since 2003. The
restaurant started in Iloilo but has since expanded its business throughout the country. Currently, the
Mang Inasal chain of restaurants has a total of 464 branches scattered throughout the nation's three
major islands. It is, thus, fair to say that a sizeable portion of the population is knowledgeable of the
Mang Inasal mark.
Third. OK Hotdog Inasal, on the other hand, seeks to market under the OK Hotdog Inasal mark curl
snack products which it publicizes as having a cheese hotdog inasal flavor.
Accordingly, it is the fact that the underlying goods and services of both marks deal with inasal and
inasal-flavored products which ultimately fixes the relations between such goods and services. Given
the foregoing circumstances and the aforesaid similarity between the marks in controversy, we are
convinced that an average buyer who comes across the curls marketed under the OK Hotdog Inasal
mark is likely to be confused as to the true source of such curls.
UFC v. Barrio Fiesta

GR 198889 January 20, 2016
Ponente: J. Leonardo-De Castro
Barrio Fiesta sought the registration of the mark “PAPA BOY” for its lechon sauce. UFC
opposed on the ground of likelihood of confusion as it has a product known as “PAPA BANANA
KETCHUP.”
May the mark be registered? NO.
Actual confusion is not required. Only likelihood of confusion on the part of the buying
public is necessary so as to render two marks confusingly similar so as to deny the registration of the
junior mark. Barrio Fiesta had an infinite field of words and combinations of words to choose from to
coin a mark for its lechon sauce. Why choose the word papa?
ABS CBN v. GOZON

G.R. No. 195956, March 11, 2015
Overseas Filipino worker Angelo dela Cruz was kidnapped by Iraqi militants and as a condition
for his release, a demand was made for the withdrawal of Filipino troops in Iraq. After negotiations, he
was released by his captors and was scheduled to return to the country in the afternoon of 22 July 2004.
Occasioned by said homecoming and the public interest it generated, both GMA Network, Inc. and
ABS CBN made their respective broadcasts and coverage of the live event.
ABS CBN allowed Reuters Television Service to air the footages it had taken under a special
agreement which provides that the footages shall be for the use of Reuter's international subscribers
only, and no Philippine subscriber would be allowed to use ABS CBN's footage without its consent.
GMA 7 received a live video feed of the coverage of Angelo dela Cruz's arrival from Reuters.
GMA-7 immediately carried the live newsfeed in its program "Flash Report," together with its live
broadcast. The footage was shown only for five seconds.
ABS CBN saw it, and sued GMA-7. The latter raised the defense that news is not
copyrightable.
Is GMA correct?
News or the event itself is not copyrightable. However, an event can be captured and presented in
a specific medium. News as expressed in a video footage is entitled to protection. News coverage in
television involves framing shots, using images, graphics, and sound effects. It involves creative
process and originality. Television news footage is an expression of the news.
- end -
-----------------------------------------------------------------------------------------------------------------------
Good luck and God bless you!

Latest Cases J. Del Castillo Ponencias Probable Questions On FRIA

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Latest Cases J. Del Castillo Ponencias Probable Questions On FRIA

Hochgeladen von

Copyright:

Verfügbare Formate

BAR 2018

by: Judge Ella Dumlao-Escalante

RCBC SAVINGS BANK v ODRADA

May a manager's check which is considered good as cash be countermanded?

METROBANK vs. WILFRED N. CHIOK

BANK OF THE PHILIPPINE ISLANDS VS. FERNANDEZ

Is a certificate of deposit negotiable?

Yes. A certificate of deposit is defined as a written acknowledgment by a bank or banker of the

* Endorsement and presentation of the certificate of deposit are indispensable to their

DUTCH MOVERS, INC., CESAR LEE and YOLANDA LEE v.

Owner/Officer of Corporation was impleaded; Judgment against corporation only

EMMANUEL P. GUILLERMO v. CRISANTO P. USON

Officer not impleaded

Is this allowed even if the judgment is final and executory already?

VICMAR DEVELOPMENT CORPORATION VS. ELARCOSA

Should corporate veil be pierced?

HARPOON MARINE SERVICES, INC., et al. v.

According to Francisco, he was unceremoniously dismissed by the President, Rosit, because

Is Rosit liable for Francisco’s dismissal.

GIRLY G. ICO vs.

The STI’s Corporate Auditor/Audit Advisory Group conducted an audit of STI-Makati

May Jacob, as officer of STI, be held solidarily liable with STI.

There is no showing of bad faith on the part of Jacob.

SUMIFRU (PHILIPPINES) CORPORATION (SURVIVING ENTITY IN A MERGER WITH

A certificate of stock is a written instrument signed by the proper officer of a corporation

Aguirre II v. FQB+7, Inc.

2. Yes, RTC maintains jurisdiction over intra-corporate disputes of dissolved corporations.

ROBERTO L. ABAD et al v. PHILIPPINE COMMUNICATIONS SATELLITE

JAIME T. GAISANO v. DEVELOPMENT INSURANCE

Is the policy binding?

STRONGHOLD INSURANCE CO., INC. v. PAMANA ISLAND RESORT HOTEL

MANULIFE PHILIPPINES, INC. v. HERMENEGILDA YBANEZ

THE INSULAR LIFE ASSURANCE COMPANY, LTD. v. PAZ Y.

MANILA BANKERS LIFE INSURANCE CORPORATION vs.

ASIAN TERMINALS, INC. v. MALAYAN INSURANCE, CO., INC

PIONEER INSURANCE AND SURETY CORPORATION v. APL CO. PTE. LTD.

Has the action prescribed?

NO. The bill of lading itself provides:

MARINA PORT SERVICES, INC. v. AMERICAN HOME

MOF Company, Inc. vs. Shin Yang Brokerage Corporation

Is the consignee bound by the terms of the bill of lading?

Philippine National Bank vs. Vila

Land Bank of the Philippines vs. West Bay Colleges, Inc.

GENERAL BANKING LAW OF 2000

Balayan Bay Rural Bank, Inc. vs. National Livelihood

Philippine National Bank v. Sps. Chea Chee Chong

Is PNB held liable for the loss.

Land Bank of the Philippines vs. Emmanuel Oñate

PHILIPPINE NATIONAL BANK v. F.F. CRUZ AND CO., INC.

Is PNB guilty of negligence?

FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010

Answer: Corporate rehabilitation is defined as the restoration of the debtor to a position of

Probable Bar Question: Discuss the concept of “debtor-in-possession” or “debtor-in-place” in

Answer: Corporate rehabilitation aims to restore the corporate-debtor to a position of

Rehabilitation proceedings are summary and non-adversarial in nature, and do not

SOCIETE DES PRODUITS, NESTLE, S.A. vs. PUREGOLD PRICE

May the application of COFFEE MATCH be approved?

Here, the likelihood of confusion does not exist.

Mang Inasal Phils., Inc. vs. IFP Manufacturing Corporation

YES. Confusion may either be confusion of goods or confusion of business.

UFC v. Barrio Fiesta

May the mark be registered? NO.

ABS CBN v. GOZON