CORPORATION LAW CASE DIGEST

(Supreme Court Decisions related to Corporation Law from JANUARY 2019 until JULY
2019)
March 2019

Gios-Samar, Inc. vs DOTC and Civil Aviation Authority of the Philippines

GR No. 217158, March 12, 2019

FACTS:
On December 15, 2014, the Department of Transportation and Communication (DOTC) and its
attached agency, the Civil Aviation Authority of the Philippines (CAAP), posted an Invitation to Pre-
qualify and Bid Invitation on the airport development, operations, and maintenance of the Bacolod-Silay,
Davao, Iloilo, Laguindingan, New Bohol (Panglao), and Puerto Princesa Airports (collectively, Projects)
with a total cost of P116.23 Billion, broken down as follows:
The Invitation stated that the Projects aim to improve services and enhance the airside and
landside facilities of the key regional airports through concession agreements with the private sector. The
Projects will be awarded through competitive bidding, following the procurement rules and procedure
prescribed under Republic Act (RA) No. 6957, as amended by RA No. 7718 (BOT Law), and its
Implementing Rules and Regulations. The concession period would be for 30 years.
On March 10, 2015, the DOTC and the CAAP issued the Instructions to Prospective Bidders
(ITPB), which provided that prospective bidders are to pre-qualify and bid for the development,
operations, and maintenance of the airports, which are now bundled into two groups (collectively, the
Bundled Projects), namely: Bundle 1: Bacolod-Silay and Iloilo & Bundle 2: Davao, Laguindingan, and
New Bohol (Panglao).
The general procedure for the bidding of the Bundled Projects stated that "prospective bidders
may bid for only Bundle 1 or Bundle 2, or bid for both Bundle 1 and Bundle 2. xxx The [Pre-
Qualification, Bids and Awards Committee (PBAC) shall announce in a Bid Bulletin prior to the
Qualifications Submission Date, its policy on whether a prospective bidder may be awarded both bundles
or whether a prospective bidder may only be awarded with one (1) bundle."
On March 27, 2015, petitioner GIOS-SAMAR, a non-governmental organization composed of
subsistence fisherfolks and farmers of Samar, Inc., filed the petition for prohibition assailing the
constitutionality of the bundling of the Projects. Further, petitioner argues that the bundling of the Projects
is unconstitutional because it will: (i) create a monopoly; (ii) allow the creation and operation of a
combination of restraint of trade; (iii) violate anti-dummy laws and statutes giving citizens the opportunity
to invest in public utilities; and (iv) enable companies with shaky financial backgrounds to participate in
the Projects.
ISSUE: Is “bundling” of the Projects constitutional?

RULING:
NO. Consequently, the Supreme Court DISMISSED the petition. The Court finds that the grant
of a concession agreement to an entity, as a winning bidder, for the exclusive development, operation, and
maintenance of any or all of the Projects, does not by itself create a monopoly violative of the provisions
of the Constitution.
In any event, the Constitution provides that the State may, by law, prohibit or regulate
monopolies when the public interest so requires. Moreover, R.A No. 10667 does not define what
constitutes a "monopoly." Instead, it prohibits one or more entities which has/have acquired or achieved a
"dominant position"1 in a "relevant market" from "abusing" its dominant position
Here, petitioner has not alleged ultimate facts to support its claim that bundling will create a
monopoly, in violation of the Constitution. By merely stating legal conclusions, petitioner did not present
any sufficient allegation upon which the Court could grant the relief petitioner prayed for.
The bundling of the Projects is an arrangement made by the DOTC and the CAAP in the conduct
of public bidding. The question that arises is whether the same constitutes an anti-competitive agreement
prohibited by RA No. 10667. However, to resolve this, we refer to the factors enumerated in Section 26
of RA No. 106672.
In addition, to support the legal conclusion that bundling is an anticompetitive agreement, there
must be evidence that: (1) the relevant market is that of airport development, maintenance, and operation
(under the facts-based criterion enumerated in Section 24 of RA No. 10667); (2) bundling causes, or will
cause, actual or potential adverse impact on the competition/ in that relevant market; (3) said impact is
substantial and outweighs the actual or potential et1iciency gains that results from bundling; and (4) the
totality of evidence shows that the winning bidder, more likely than not engaged, in anti-competitive
conduct which the petitioners failed to show and present in the proper forum.

1
Sec. 4. Definition of Terms. - As used in this Act:
xxxx
(g) Dominant position refers to a position of economic strength that an entity or entities hold which
makes it capable of controlling the relevant market independently from any or a combination of the
following: competitors, customers, suppliers, or consumers[.]

2
Sec. 26. Determination of Anti-Competitive Agreement or Conduct. - In determining whether anti-competitive
agreement or conduct has been committed, the Commission shall:
(a) Define the relevant market allegedly affected by the anti-competitive agreement or conduct, following the
principles laid out in Section 24 of this Chapter;
(b) Determine if there is actual or potential adverse impact on competition in the relevant market caused by the
alleged agreement or conduct, and if such impact is substantial and outweighs the actual or potential efficiency
gains that result from the agreement or conduct;
(c) Adopt a broad and forward-looking perspective, recognizing future developments, any overriding need to make
the goods or services available to consumers, the requirements of large investments in infrastructure, the
requirements of law, and the need of our economy to respond to international competition, but also taking
account of past behavior of the parties involved and prevailing market conditions… (Emphasis supplied)
 EMPIRE INSURANCE, INC. vs. ATTY. MARCIANO S. BACALLA, JR. et al
G.R. No. 195215, March 6, 2019

FACTS:
This case is an offshoot of the liquidation proceedings of the Tibayan Group of
Companies (Tibayan Group), involving the recovery of 650,225 Prudential Bank common shares
allegedly acquired in fraud of the Tibayan Group's investor-creditors, 230,225 shares of which
formed part of the assets of TMG Holdings and 420,000 shares formed part of the assets of Cielo
Azul Holdings Corporation. Both entities were allegedly dummy corporations used by the
Tibayan Group to dispose of assets in fraud of creditors by using illegally transferred assets to
buy and sell shares of stock, some of which were acquired by petitioner Empire Insurance, Inc.
(EII), Virginia Belinda S. Ocampo, Jose Augusto G. Santos, and Katrina G. Santos.
On September 24, 2004, the RTC of Las Pinas City, Branch 253 granted the petition in
Civil Case No. LP-04-0082 for involuntary dissolution of the Tibayan Group.
Receiver Atty. Marciano S. Bacalla, Jr. is ordered to immediately effect the liquidation
process pursuant to Section 122 of the Corporation Code and exercise any and all of the powers
enumerated under Section 5, Rule 9 of the Interim Rules Governing Intra-Corporate
Controversies under RA 8799, and such other powers as may be deemed necessary, just and
equitable under the premises and / or circumstances.
Bacalla, as the court-appointed receiver of the Tibayan Group, filed a "Very Urgent" application
for injunctive relief before the trial court, seeking to enjoin the holders of the Prudential Bank shares from
selling or otherwise disposing the same to other parties. The trial court granted the application and further
authorized Bacalla to prosecute an action to recover the shares. To support the prayer for a writ of
preliminary injunction, the complaint further alleged that the shares are in danger of being dissipated
because the Securities and Exchange Commission (SEC) has received a tender offer to purchase them
from the defendants, which would place them beyond the reach of the Bacalla group. Preliminary
injunction was granted by the trial court, and was affirmed on appeal by the CA.
ISSUE: Is the Tibayan Group entitled to preliminary injunction?

RULING:
YES. The Empire group, in assailing the grant of preliminary injunctive relief to the Bacalla group,
essentially assails the courts a quo's appreciation of the evidence presented in support of said relief. They
argue that the SEC findings and the PSE memorandum do not constitute sufficient basis for the grant of a
preliminary injunctive writ. Very well-settled is the rule that the factual findings of the CA are binding the
Court, especially when such findings concur with those of the trial court.
At any rate, the Empire group failed to offer cogent reasons to reverse the concurrent rulings of the
courts a quo.
The purpose of preliminary injunction is "to prevent threatened or continuous irremediable injury
to some of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim to
preserve the status quo until the merits of the case can be heard fully," "by restraining action or
interference or by furnishing preventive relief. The status quo is the last actual, peaceable,
uncontested status which precedes the pending controversy." 
Jurisprudence has laid down the following requisites for the valid grant of preliminary injunctive relief:
(a) that the right to be protected exists prima facie; (b) that the act sought to be enjoined is violative of
that right; and (c) that there is an urgent and paramount necessity for the writ to prevent serious damage. 
Elucidating on these requirements, the Court has held that the evidence required to justify the issuance of
the writ need not be conclusive or complete; and only a sampling of evidence intended merely to give the
court an idea of the justification for the preliminary injunction is required. There must be proof of an
ostensible right to the final relief prayed for in the complaint. Ultimately, the grant of preliminary
injunctive relief rests upon the sufficiency, of the allegations made in support thereof.
The Court has studied the record assiduously and is satisfied that the allegations and evidence set forth by
the Bacalla group constitute sufficient bases for the grant of preliminary injunctive relief.
Anent the first requisite, there has been a prima facie showing of the existence of a right in esse in favor
of the Bacalla group. As found by the CA, their right to the shares in dispute is based on the final and
executory decision of the trial court in the dissolution proceedings against Tibayan Group. The findings
of the SEC which led to the issuance of the Cease-and-Desist Order against the Tibayan Group, and the
PSE memorandum only serve as further proof of the existence of this clear and unmistakable right, by
illustrating the flow of the assets from the Tibayan Group to the dummy corporations to the defendants.
The entitlement of the Bacalla Group to the shares in dispute is clearly established by the decision in the
dissolution case and the resolution of the trial court authorizing Bacalla to sue for their recovery and
inclusion in the asset pool of the Tibayan Group.
Anent the second and third requisites, given that shares of stock are a readily tradable commodity, the
Court concurs with the CA that the right of the Bacalla group to the return of the shares to the Tibayan
Group's asset pool will be greatly prejudiced if the continued disposition thereof is not enjoined. The
Court quotes with approval the findings of the appellate court:
Private respondents (the Bacalla group) truly have a clear and present right to be protected insofar as the
subject shares are concerned. To allow their further disposition would result in the continued dissipation
and dispersal of the original assets of the [Tibayan Group]. It would be harder for private respondents to
trace and pool them back together again. They would suffer serious damage for the assets sought to be
protected may forever get lost if they continue to change hands. By then, any judgment in the case would
become ineffectual.
 CENTRAL VISAYAS FINANCE CORPORATION VS. SPOUSES ADLAWAN
G.R. No. 212674, March 25, 2019

FACTS:
In 1996, respondent-spouses Eliezer and Leila Adlawan obtained a Php3,669,685.00 loan
from petitioner Central Visayas Finance Corporation covered by a Promissory Note, Chattel
Mortgage over a Komatsu Highway Dump Truck, and a Continuing Guaranty executed by the
respondents.

The spouses failed to pay the loan, prompting petitioner to file an action against
respondents for replevin before the trial court. the trial court ruled in petitioner's favor, and
respondents were ordered to deliver possession of the dump truck to petitioner. Petitioner then
foreclosed on the chattel mortgage and caused the sale at public auction of the dump truck,
which was then sold to it as the highest bidder for Php500,000.00.

Petitioner commenced a second case before the RTC for collection of sum of money
and/or deficiency judgment relative to respondents' supposed unpaid balance on their loan, which
petitioner claimed to be at Php2,104,604.97 - less the value of dump truck - with damages. This
time, petitioner in its Amended Complaint sought to hold respondents liable on their continuing
guaranty. The court agrees with the defendants that the instant complaint is barred by res judicata
under Section 47(b), Rule 39 of the Rules of Court. The CA affirmed the decision of the trial
court.

ISSUE: Is res judicata properly applied?

RULING:
YES. For res judicata to apply, four requisites must be met: (1) the former judgment or
order must be final; (2) it must be a judgment or an order on the merits; (3) it must have been
rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must
be, between the first and second actions, identity of parties, of subject matter and cause of action.

Contrary to petitioner's stance, the pronouncements in Bachrach Motor Co., Inc. v.

Icarangal and PCI Leasing & Finance, Inc. v. Dai apply to the instant case. Particularly, the PCI
Leasing case is squarely applicable; the CA committed no error in invoking the ruling in said
case. By failing to seek a deficiency judgment, after its case for recovery of possession was
resolved, petitioner is barred from instituting another action for such deficiency. Pursuant to
Section 47, Rule 39 of the 1997 Rules of Civil Procedure, on the effect of judgments or final
orders cited in the PCI Leasing case, the judgment, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto, conclusive
between the petitioner and respondents.

Petitioner's final claim to reversal is that there could be no identity of causes of action between
the civil cases filed since the latter case was instituted for the specific purpose of recovering the
deficiency from respondents, who were supposedly liable as guarantors on the continuing
guaranty that accompanied the loan agreement. However, petitioner's cause of action against
respondents is likewise barred. The contract of guaranty is merely accessory to a principal
obligation; it cannot survive without the latter. Under Article 2076 of the Civil Code, "(t)he
obligation of the guarantor is extinguished at the same time as that of the debtor, and for the
same causes as all other obligations."
The consequent satisfaction of petitioner's claim bars further recovery via a deficiency judgment
as against respondents, who are deemed to have paid their loan obligation. For this reason, their
obligation has been extinguished which should, in turn, operate to the benefit of their co--
respondents whose liability is based on guaranty, a mere accessory contract to the loan obligation
that cannot survive after the extinguishment of the latter.
 DOMESTIC PETROLEUM RETAILER CORPORATION v. MANILA
INTERNATIONAL AIRPORT AUTHORITY
GR No. 210641
2019-03-27

Facts:

Petitioner (DPRC) leased from the respondent (MIAA) parcel of land and building, and
entered into a Contract of Lease. MIAA ,later on, passed a resolution increasing the rentals paid
by its concessionaires and lessees. DPRC initially refused to pay the increased rentals which was
decreed without prior notice and hearing. MIAA demanded its payment of rental in arrears which
was based on the increase prescribed in the resolution with 2% interest compounded monthly.
DPRC protested in writing to MIAA the increased rentals and the computation. However, it also
signified its intention to comply in good faith with the terms and conditions of the lease contract
by paying.

In the said case, the Court nullified Resolution Nos. 98-30 and 99-11 issued by
respondent MIAA for non-observance of the notice and hearing requirements for the fixing rates
required. DPRC advised MIAA of its intention to stop paying the increased rental rate, and on
January 1, 2006, it stopped paying the increased rental rate, but continued paying the original
rental rate prescribed in the lease contract
MIAA required the payment of P645,216.21 allegedly representing the balance of the rentals
from January up to June 2006.

DPRC sent its reply to MIAA denying the unpaid obligation, reiterating that the rental
could no longer be computed based on the nullified Resolution No. 98-30. MIAA ignored its
demand, prompting DPRC to send a final written demand.

RTC ruled in favor of DPRC. CA affirmed the RTC's Decision holding respondent
MIAA liable to petitioner DPR.
CA found that the liability of respondent MIAA to petitioner DPRC for overpaid monthly rentals
was in the nature of a quasi-contract of solutio indebiti. CA held that "the claim of refund must
be commenced within six (6) years from date of payment pursuant to Article 1145(2)... of the
Civil Code... he CA found that, despite the records showing that petitioner DPRC made
overpayment in monthly rentals from December 11, 1998 up to December 5, 2005, such claim
could not be fully awarded to petitioner DPRC due to prescription. The claim for refund must be
made within six (6) years from date of payment. Since [petitioner] DPRC demanded the refund
of the increase in monthly rentals mistakenly paid only on July 27, 2006 and filed this case
before the [RTC] only on December 23, 2008, it can recover only those paid during the period
from January 9,2003 to December 5, 2005

Hence, the instant Petition.

Issues:
Was the CA correct in amending the RTC's Decision, modifying the amount of respondent
MIAA's liability based on the application of the six-year prescriptive period governing the quasi-
contract of solutio indebiti?

Ruling:
 NO. In the instant case, the Supreme Court finds that the essential requisites of
solutio indebiti are not present.

It is undisputed by all parties that respondent MIAA and petitioner DPRC are mutually
bound to each other under a Contract of Lease. Hence, with respondent MIAA and petitioner
DPRC having the juridical relationship of a lessor-lessee, it cannot be said that in the instant
case, the overpayment of monthly rentals was made when there existed no binding juridical tie or
relation between the pay or, i.e., petitioner DPRC, and the person who received the payment, i.e.,
respondent MIAA.

The Court finds that the cause of action of petitioner DPRC is based on the violation of a
contractual stipulation in the parties' Contract of Lease, and not due to the existence of a quasi-
contract.
Hence, by filing its Complaint, petitioner DPRC invoked the Contract of Lease and alleged that
respondent MIAA violated the aforementioned contractual stipulation, considering that the latter
imposed a price escalation of monthly rentals despite reneging on its contractual obligation to
first issue a valid Administrative Order and give petitioner DPRC prior notice.

Just because the Contract of Lease in itself may be silent as to petitioner DPRC's
entitlement to a refund does not mean that such claim for refund is not provided for in the
contract and cannot be asserted by petitioner DPRC.

It must be stressed that applicable laws form part of, and are read into, contracts without need for
any express reference thereto.

Furthermore, it cannot be said that petitioner DPRC's payments in monthly rentals from
December 11, 1998 up to December 5, 2005 in observance with the subsequently nullified
Resolution No. 98-30 were made due to mistake on the part of petitioner DPRC. DPRC
deliberately made the payments in accordance with respondent MIAA's Resolution No. 98-30,
albeit under protest. DPRC also signified its intention to comply in good faith with the terms and
conditions of the lease contract by paying the amount charged in accordance with Resolution No.
98-30 despite registering its objection to its validity.
Solutio indebiti applies when payment was made on the erroneous belief of facts or law that
such payment is due. In the case at hand, petitioner DPRC's overpayment of rentals from 1998
to 2005 was not made by sheer inadvertence of the facts or the misconstruction and
misapplication of the law. Petitioner DPRC did not make payment because it mistakenly and
inadvertently believed that the increase in rentals instituted by the subsequently voided
Resolution No. 98-30 was indeed due and demandable. From the very beginning, petitioner
DPRC was consistent in its belief that the increased rentals were not due as Resolution No. 98-30
was, in its view, void.

Therefore, with the absence of the two essential requisites of solutio indebiti in the instant case,
petitioner DPRC's cause of action is not based on the quasi-contract of solutio indebiti.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED.

Principle:
In order to establish the application of solutio indebiti in a given situation, two conditions must
concur: (1) a payment is made when there exists no binding relation between the payor who has
no duty to pay; and the person who received the payment; and (2) the payment is made through
mistake, and not through liberality or some other cause.
 EMPIRE INSURANCE, INC. vs. ATTY. MARCIANO S. BACALLA, JR. et al
G.R. No. 195215
March 6, 2019

FACTS:
This case is an offshoot of the liquidation proceedings of the Tibayan Group of
Companies (Tibayan Group), involving the recovery of 650,225 Prudential Bank common shares
allegedly acquired in fraud of the Tibayan Group's investor-creditors, 230,225 shares of which
formed part of the assets of TMG Holdings and 420,000 shares formed part of the assets of Cielo
Azul Holdings Corporation. Both entities were allegedly dummy corporations used by the
Tibayan Group to dispose of assets in fraud of creditors by using illegally transferred assets to
buy and sell shares of stock, some of which were acquired by petitioner Empire Insurance, Inc.
(EII), Virginia Belinda S. Ocampo, Jose Augusto G. Santos, and Katrina G. Santos.
On September 24, 2004, the RTC of Las Pinas City, Branch 253 granted the petition in
Civil Case No. LP-04-0082 for involuntary dissolution of the Tibayan Group.
Receiver Atty. Marciano S. Bacalla, Jr. is ordered to immediately effect the liquidation
process pursuant to Section 122 of the Corporation Code and exercise any and all of the powers
enumerated under Section 5, Rule 9 of the Interim Rules Governing Intra-Corporate
Controversies under RA 8799, and such other powers as may be deemed necessary, just and
equitable under the premises and / or circumstances.
Bacalla, as the court-appointed receiver of the Tibayan Group, filed a "Very Urgent" application
for injunctive relief before the trial court, seeking to enjoin the holders of the Prudential Bank shares from
selling or otherwise disposing the same to other parties. The trial court granted the application and further
authorized Bacalla to prosecute an action to recover the shares. To support the prayer for a writ of
preliminary injunction, the complaint further alleged that the shares are in danger of being dissipated
because the Securities and Exchange Commission (SEC) has received a tender offer to purchase them
from the defendants, which would place them beyond the reach of the Bacalla group. Preliminary
injunction was granted by the trial court, and was affirmed on appeal by the CA.

ISSUE:
Is the Tibayan Group entitled to preliminary injunction?

RULING:
YES. The Empire group, in assailing the grant of preliminary injunctive relief to the Bacalla group,
essentially assails the courts a quo's appreciation of the evidence presented in support of said relief. They
argue that the SEC findings and the PSE memorandum do not constitute sufficient basis for the grant of a
preliminary injunctive writ. Very well-settled is the rule that the factual findings of the CA are binding the
Court, especially when such findings concur with those of the trial court.
At any rate, the Empire group failed to offer cogent reasons to reverse the concurrent rulings of the
courts a quo.
The purpose of preliminary injunction is "to prevent threatened or continuous irremediable injury
to some of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim to
preserve the status quo until the merits of the case can be heard fully," "by restraining action or
interference or by furnishing preventive relief. The status quo is the last actual, peaceable,
uncontested status which precedes the pending controversy." 
Jurisprudence has laid down the following requisites for the valid grant of preliminary injunctive relief:
(a) that the right to be protected exists prima facie; (b) that the act sought to be enjoined is violative of
that right; and (c) that there is an urgent and paramount necessity for the writ to prevent serious damage. 

Elucidating on these requirements, the Court has held that the evidence required to justify the issuance of
the writ need not be conclusive or complete; and only a sampling of evidence intended merely to give the
court an idea of the justification for the preliminary injunction is required. There must be proof of an
ostensible right to the final relief prayed for in the complaint. Ultimately, the grant of preliminary
injunctive relief rests upon the sufficiency, of the allegations made in support thereof.
The Court has studied the record assiduously and is satisfied that the allegations and evidence set forth by
the Bacalla group constitute sufficient bases for the grant of preliminary injunctive relief.
Anent the first requisite, there has been a prima facie showing of the existence of a right in esse in favor
of the Bacalla group. As found by the CA, their right to the shares in dispute is based on the final and
executory decision of the trial court in the dissolution proceedings against Tibayan Group. The findings
of the SEC which led to the issuance of the Cease-and-Desist Order against the Tibayan Group, and the
PSE memorandum only serve as further proof of the existence of this clear and unmistakable right, by
illustrating the flow of the assets from the Tibayan Group to the dummy corporations to the defendants.
The entitlement of the Bacalla Group to the shares in dispute is clearly established by the decision in the
dissolution case and the resolution of the trial court authorizing Bacalla to sue for their recovery and
inclusion in the asset pool of the Tibayan Group.
Anent the second and third requisites, given that shares of stock are a readily tradable commodity, the
Court concurs with the CA that the right of the Bacalla group to the return of the shares to the Tibayan
Group's asset pool will be greatly prejudiced if the continued disposition thereof is not enjoined. The
Court quotes with approval the findings of the appellate court:
Private respondents (the Bacalla group) truly have a clear and present right to be protected insofar as the
subject shares are concerned. To allow their further disposition would result in the continued dissipation
and dispersal of the original assets of the [Tibayan Group]. It would be harder for private respondents to
trace and pool them back together again. They would suffer serious damage for the assets sought to be
protected may forever get lost if they continue to change hands. By then, any judgment in the case would
become ineffectual.
April 2019

BNL MANAGEMENT CORPORATION AND ROMEO DAVID v. REYNALDO UY

G.R. No. 210297, April 03, 2019
THIRD DIVISION
LEONEN, J.:

DOCTRINE:

A corporation, not having a nervous system or a human body, does not experience
physical suffering, mental anguish, embarrassment, or wounded feelings. Thus, a corporation
cannot be awarded moral damages. Except if the good reputation of the corporation was
besmirched, there is an award of moral damages.

FACTS:

BNL Management owned six (6) condominium units at the Imperial Bayfront Tower
Condominium, A. Mabini Street, Malate, Manila (Imperial Bayfront). These units were leased to
its clients under separate contracts of lease. BNL Management also held exclusive rights to three
(3) parking spaces of Imperial Bayfront.

BNL Management, through David, wrote a letter to the building administrator of Imperial
Bayfront, acknowledging receipt of the November billing statement containing the following
demands: (1) the general cleanliness and maintenance of common areas; (2) security; (3)
building insurance; (4) encroachment on two (2) of the parking spaces; and (5) the annotation of
the parking spaces on the mother title. In a follow-up letter BNL Management, through counsel,
declared that it would withhold paying monthly dues and instead deposit them and its arrears in a
bank as escrow, which could be withdrawn by the Imperial Bayfront Tower Condominium
Association (the Association) only after it has complied with the demands in the letter. In a
response, Building Administrator Erma Abella explained that the failure to annotate ownership
of the parking spaces was due to BNL Management not submitting the necessary documents to
the Association. It added that the maintenance issues were due to lack of funds as a result of
BNL Management's nonpayment of association dues.

BNL Management requested that it be removed from the Association's list of delinquent
members. BNL Management received a letter from Sevilla containing a breakdown of its arrears
in the payment of association dues from November 1996 to June 1999. Still, BNL Management
did not pay the arrears. Thus, the Association's Board of Directors, resolved to disconnect the
lighting facilities in the six (6) units owned by BNL Management. Since the Association refused
to restore its electricity and water, BNL Management and David filed before the Regional Trial
Court a Complaint17 against Uy, et al. for damages. BNL Management and David argue that
respondents showed bad faith in deliberately cutting off the utility services from the units despite
knowing that they were not the validly-elected officers of the Association.

ISSUE/S:

Are petitioners BNL Management Corporation and its president, Romeo David, entitled to
damages for the disconnection of water and electricity utilities from the units they own at
Imperial Bayfront?
RULING:

No, the petitioners are not entitled to damages. Here, respondents were not found to have
committed any culpable act or omission that would warrant an award of moral damages for
petitioner David. Clearly, the injury he allegedly sustained was caused by his own failure, as
president of petitioner BNL Management, to resolve the corporation's nonpayment of dues.

For its part, petitioner BNL Management, being a corporation, is not entitled to moral
damages. In Noell Whessoe, Inc. v. Independent Testing Consultants, Inc.:

A corporation is not a natural person. It is a creation of legal fiction and "has no feelings, no
emotions, no senses." A corporation is incapable of fright, anxiety, shock, humiliation, and
physical or mental suffering. "Mental suffering can be experienced only by one having a nervous
system and it flows from real ills, sorrows, and griefs of life." A corporation, not having a
nervous system or a human body, does not experience physical suffering, mental anguish,
embarrassment, or wounded feelings. Thus, a corporation cannot be awarded moral damages.

In the 1968 case of Mambulao Lumber v. Philippine National Bank, this Court stated, in passing,
"[a] corporation may have a good reputation which, if besmirched, may also be a ground for the
award of moral damages."

There is no standing doctrine that corporations are, as a matter of right, entitled to moral
damages. The existing rule is that moral damages are not awarded to a corporation since it is
incapable of feelings or mental anguish. Exceptions, if any, only apply pro hac vice.

In the cae, there is no showing here that an exception should apply pro hac vice  in favor of
petitioner BNL Management.
June 2019

FAR EAST BANK AND TRUST COMPANY vs. UNION BANK OF THE PHILIPPINES
GR no. 196637
JUNE 3, 2019

FACTS:
On September 19, 1997, a consortium of EYCO's creditors composed of 22 domestic banks,
including Union Bank of the Philippines, convened for the purpose of deciding their options in the event
that EYCO and its co-petitioners in SEC Case No. 09-97-5764 would invoke the provisions of
Presidential Decree No. 902-A. Among the matters agreed upon during said meeting were the
engagement of a lawyer to represent the creditors and composition of the management committee from
seven banks with the highest exposures. However, Union Bank, without notifying the members of the
Consortium, decided to break away from the group by suing EYCO and the Yutingcos in the regular
courts.

Union Bank alleged that Spouses Eulogio and Bee Kuan Yutingco were its debtors by virtue of a
Continuing Surety Agreement dated September 12, 1996 to secure credit accommodations amounting to
P110,000,000.00 granted to Nikon Industrial Corporation, Nikolite Industrial Corporation and 2000
Industries Corporation, which they owned. Upon investigation, Union Bank confirmed that majority of
NIKON's assets were used to purchase real estate properties through EYCO, purposely to shield NIKON
from answering for its debts. EYCO owned condominium units and parking spaces in Tektite Tower and
the Strata 200 Building Condominium Project. On September 15, 1997, these properties were sold to
herein petitioner, Far East Bank and Trust Company (FEBTC). Union Bank claimed that the sale of the
properties was fraudulent and done in bad faith to prevent them from being levied upon; in fact, it was
made a day before the Spouses Yutingco and NIKON filed a petition for suspension of payments with the
SEC. In furtherance of its conspiracy with the Spouses Yutingco and NIKON, FEBTC supposedly
authorized the purchase of various golf club shares and two more units and parking spaces in the same
condominium buildings, assets of EYCO and NIKON registered in their respective names. It is clear that
EYCO, in collusion with the Spouses Yutingco and FEBTC, intended to transfer all or nearly all of its
properties because of its insolvency or great embarrassment financially. FEBTC, being a vendee in fraud
of creditors, was deemed an implied trustee of the properties and should hold them for the benefit of those
who are entitled thereto. Union Bank, as unpaid creditor of the true owner of the property, is entitled to
nullify the sale in favor of FEBTC.

On September 19, 1997, an Order was issued by the SEC enjoining the disposition of the debtor
corporations' properties in any manner except in the ordinary course of business and payment outside of
legitimate business expenses during the pendency of the proceedings and suspending all actions, claims
and proceedings against EYCO until further orders from the SEC. In an Omnibus Order dated October
27, 1997, the SEC Hearing Panel directed the creation of a Management Committee (MANCOM).

On May 19, 1998, this Court promulgated its Decision in Union Bank of the Philippines v. Court
of Appeals, et al. holding that the SEC's jurisdiction on matters of suspension of payments is confined
only to those initiated by corporations, partnerships or associations. Consequently, the SEC exceeded its
jurisdiction in declaring the Spouses Yutingco together with EYCO under suspension of payments.
Accordingly, this Court ordered the SEC "to drop from the petition for suspension of payments filed
before it the names of Eulogio O. Yutingco, Caroline Yutingco-Yao and Theresa T. Lao without
prejudice to their filing a separate petition in the Regional Trial Court."

On December 18, 1998, the SEC issued an Order adopting the Unsolicited Rehabilitation
Proposal submitted by Strategies and Alliances Corporation (SAC) which was granted a period of six
months within which to complete the groundwork for the effective implementation of the early "all-debt
payment plan." The SAC plan proposed to settle and extinguish all financial obligations of EYCO to its
creditors, secured and unsecured, amounting to P5.2 Billion - P4 Billion by banks and P1.2 Billion by
non-banks. The repayment of principal and interest thereon on stated due dates were guaranteed to be
paid in cash by the Republic of the Philippines through the Home Insurance Guaranty Corporation
(HIGC). The SEC Order further barred all creditors from pursuing their respective claims until further
orders.

The Spouses Yutingco filed a Motion to Dismiss on the ground of pendency of the proceedings
in the SEC which had acquired prior jurisdiction over the subject matter of the case. FEBTC also filed a
motion to dismiss on the ground of Union Bank's failure to implead NIKON, which are indispensable
parties. Accordingly, the court should suspend the trial until such parties are made either as plaintiffs or
defendants. Moreover, since the complaint was for rescission of a contract of sale, it should have
expressly alleged that Union Bank had no other legal means to collect its credits. Thus, the complaint
failed to state a cause of action. There was also no allegation whether the credit accommodations
extended by Union Bank were secured or unsecured. More important, Union Bank had no legal
personality to sue for the enforcement of the rights and interests of the creditors as this is vested in the
rehabilitation receiver. In view of the pending SEC proceedings, Union Bank had an available remedy by
participating therein.

Union Bank asserted that litis pendentia is not applicable in this case as it is not a party to the
SEC proceedings for suspension of payments. Also, there is no identity of causes of action since the
present case is founded on Union Bank's right to effect retention lien on the properties of EYCO pursuant
to the provisions of the continuing surety agreement executed by the Spouses Yutingco. On the matter of
jurisdiction, Union Bank contended that the court has the exclusive authority to hear Civil Case No.
66477.

EYCO and Spouses Yutingco reiterated that NIKON are indispensable parties considering that
Union Bank claimed that the assets of said corporations were allegedly diverted to purchase real
properties "under the name" of EYCO. Union Bank's theory is the true ownership of NIKON of the
properties, the same being merely registered under EYCO. NIKON, being the actual sellers, were
indispensable parties without whom no final determination of action can be had. Moreover, an action for
rescission being subsidiary, cannot be instituted except "when the party suffering damages has no other
legal means to obtain reparation of the same." No allegation of unavailability of other remedies was made
by Union Bank in its complaint. Lastly, it was reiterated that it was now the SEC appointed interim
receiver who was given specific authority to take custody of all assets of the distressed corporations.
Hence, Union Bank should bring its claims before the said receiver. On March 22, 2005, the RTC issued
an Order granting the motions to dismiss on the ground of litis pendentia. On appeal to the CA, the CA
granted Union Bank's appeal and reversed the assailed orders of the RTC.

ISSUES:

Whether Union Bank had the legal personality to file Civil Case No. 66477.
RULING:

We deny the petition. We find no reversible error in the CA's ruling that when Union Bank filed Civil
Case No. 66477 on September 26, 1997, it still possessed the legal capacity (not legal personality) to do
so. This is because it was only on October 27, 1997 that the MANCOM was created. Notwithstanding the
CA's proper denial of the motion to dismiss Civil Case No. 66477, the SC held that said case should have
been suspended upon the constitution of the MANCOM.

The applicable law on the suspension of actions for claims against corporations is P.D. No. 902-A, which
was in force at the time EYCO filed its petition for suspension of payments with the SEC.

The pertinent provisions of P.D. No. 902-A read:cralawred

Section 5. In addition to the regulatory adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:cralawred

xxxx

d) Petitions of corporations, partnerships or associations to be declared in the state of suspension

of payments in cases where the corporation, partnership or association possesses sufficient
property to cover all its debts but foresees the impossibility of meeting them when they
respectively fall due or in cases where the corporation, partnership or association has no sufficient
assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or
Management Committee created pursuant to this Decree.62

chanRoblesvirtualLaw1ibrary

Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following:cralawred

xxxx

c) To appoint one or more receivers of the property, real or personal, which is the subject of the
action pending before the Commission in accordance with the pertinent provisions of the Rules of
Court in such other cases whenever necessary in order to preserve the rights of the parties-
litigants and/or protect the interest of the investing public and creditors. x x x Provided, further,
that 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.63 (emphasis supplied)

At this juncture, it must be conceded that the date when the claim arose, or when the action was filed, has
no bearing at all in deciding whether the given action or claim is covered by the stay or suspension order.
What matters is that as long as the corporation is under a management committee or a rehabilitation
receiver, all actions for claims against it, whether for money or otherwise, must yield to the greater
imperative of corporate revival, excepting only, as already mentioned, claims for payment of obligations
incurred by the corporation in the ordinary course of business.
 Thus, while the motions to dismiss Civil Case No. 66477 should have been denied by the trial
court, said case should have also been suspended in view of the creation of the MANCOM on October
27, 1997. As borne by the records, the case did not go beyond pre-trial stage because of the long
exchange of pleadings between the parties upon the sole incident of the motions to dismiss filed by
EYCO and Yutingcos. It was only on March 22, 2005 that the trial court issued the order granting the
motions to dismiss. Union Bank appealed to the CA, which resulted in more delays until the CA rendered
the assailed decision reversing the trial court's dismissal of the case.

Expectedly, the present controversy was overtaken by succeeding developments in SEC Case
No. 09-97-5764. The rehabilitation plan of a group of creditors earlier adopted by the SEC Hearing Panel,
was disapproved on September 14, 1999 by the SEC En Banc which granted the appeal of the
Consortium. The suspension of payment proceedings were terminated, the committees created dissolved
and discharged, the dissolution and liquidation of the petitioning corporations were ordered, and a
Liquidator appointed. On appeal by EYCO (CA-G.R. SP No. 55208), the CA upheld the SEC ruling.
EYCO then filed a petition for certiorari before this Court, docketed as G.R. No. 145977, which case
was eventually dismissed under Resolution dated May 3, 2005 upon joint manifestation and motion to
dismiss filed by the parties. Said resolution became final and executory on June 16, 2005. By October 10,
2000, the SEC had directed all creditors/claimants of the companies belonging to EYCO to file their
formal claims with the Liquidator. Atty. Concepcion took over as Liquidator on May 31, 2001 and his
proposed Liquidation Plan was eventually approved by the SEC on April 11, 2002.

While these developments in SEC Case No. 09-97-5764 were taking place, R.A. No. 8799 was
passed by Congress, transferring all those cases enumerated in Sec. 5 of P.D. No. 902-A to the regional
trial courts. As to the implications of the transfer of jurisdiction to the appropriate regional trial courts of
cases formerly handled by the SEC, this Court has previously ruled that the proceedings in SEC Case No.
09-97-5764 was effectively terminated upon the disapproval of the SAC rehabilitation plan for the EYCO
Group of Companies, and the order of dissolution and liquidation issued by the SEC En Banc on
September 14, 1999.

Before this Court, BPI as secured creditor of EYCO who initiated foreclosure proceedings, raised
the sole issue of whether the RTC can take cognizance of the injunction suit despite the pendency of SEC
Case No. 09-97-5764. We denied BPI's petition. However, R.A. No. 8799, which took effect on August
8, 2000, transferred to the appropriate regional trial courts the SEC's jurisdiction over those cases
enumerated in Sec. 5 of P.D. No. 902-A. Section 5.2 of R.A. No. 8799 provides:cralawred

SEC. 5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its
authority may designate the Regional Trial Court branches that shall exercise jurisdiction over
these cases. The Commission shall retain jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution which should be resolved within one (1) year
from the enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payments/ rehabilitation cases filed as of 30 June 2000 until finally disposed. x x x

Upon the effectivity of R.A. No. 8799, SEC Case No. 09-97-5764 was no longer pending. The
SEC finally disposed of said case when it rendered on September 14, 1999 the decision disapproving the
petition for suspension of payments, terminating the proposed rehabilitation plan, and ordering the
dissolution and liquidation of the petitioning corporation. With the enactment of the new law, jurisdiction
over the liquidation proceedings ordered in SEC Case No. 09-97-5764 was transferred to the RTC branch
designated by the Supreme Court to exercise jurisdiction over cases formerly cognizable by the SEC. As
this Court held in Consuelo Metal Corporation v. Planters Development Bank:cralawred

The SEC assumed jurisdiction over CMC's petition for suspension of payment and issued a
suspension order on 2 April 1996 after it found CMC's petition to be sufficient in form and substance.
While CMC's petition was still pending with the SEC as of 30 June 2000, it was finally disposed of on 29
November 2000 when the SEC issued its Omnibus Order directing the dissolution of CMC and the
transfer of the liquidation proceedings before the appropriate trial court. The SEC finally disposed of
CMC's petition for suspension of payment when it determined that CMC could no longer be successfully
rehabilitated.

However, the SEC's jurisdiction does not extend to the liquidation of a corporation. While the
SEC has jurisdiction to order the dissolution of a corporation, jurisdiction over the liquidation of the
corporation now pertains to the appropriate regional trial courts. This is the reason why the SEC, in its 29
November 2000 Omnibus Order, directed that "the proceedings on and implementation of the order of
liquidation be commenced at the Regional Trial Court to which this case shall be transferred." This is the
correct procedure because the liquidation of a corporation requires the settlement of claims for and against
the corporation, which clearly falls under the jurisdiction of the regular courts. The trial court is in the best
position to convene all the creditors of the corporation, ascertain their claims, and determine their
preferences. xxx

There is no showing in the records that SEC Case No. 09-97-5764 had been transferred to the
appropriate RTC designated as Special Commercial Court at the time of the commencement of the
injunction suit on December 18, 2000. Given the urgency of the situation and the proximity of the
scheduled public auction of the mortgaged properties as per the Notice of Sheriffs Sale, respondent was
constrained to seek relief from the same court having jurisdiction over the foreclosure proceedings - RTC
of Valenzuela City. Respondent thus filed Civil Case No. 349-V-00 in the RTC of Valenzuela City on
December 18, 2000 questioning the validity of and enjoining the extrajudicial foreclosure initiated by
petitioner. Pursuant to its original jurisdiction over suits for injunction and damages, the RTC of
Valenzuela City, Branch 75 properly took cognizance of the injunction case filed by the respondent. No
reversible error was therefore committed by the CA when it ruled that the RTC of Valenzuela City,
Branch 75 had jurisdiction to hear and decide respondent's complaint for injunction and damages. Lastly,
it may be mentioned that while the Consortium of Creditor Banks had agreed to end their opposition to
the liquidation proceedings upon the execution of the Agreement dated February 10, 2003, on the basis of
which the parties moved for the dismissal of G.R. No. 145977, it is to be noted that petitioner is not a
party to the said agreement. Thus, even assuming that the SEC retained jurisdiction over SEC Case No.
09-97-5764, petitioner was not bound by the terms and conditions of the Agreement relative to the
foreclosure of those mortgaged properties belonging to EYCO and/or other accommodation mortgagors.

Without delving into matters concerning the liquidation proceedings in SEC Case No. 09-97-
5764, We hold that with the termination of suspension of payment proceedings in SEC Case No. 09-97-
5764 on September 14, 1999, there is no more legal hindrance to the continuation of Civil Case No.
66477. Records show that the Spouses Yutingco already filed their Answer but BPI had requested for
suspension of proceedings until the present petition is finally resolved.
BDO LEASING AND FINANCE INC. v. GREAT DOMESTIC INSURANCE COMPANY
GR 205286
June 19, 2019

FACTS:

On November 27, 1998, respondents spouses Kiddy Lim Chao and Emily Rose Go Ko obtained
from petitioner BDO loans evidenced by two promissory notes for the amounts of P5,900,000.00 and
P3,288,570.00. Both loans were payable starting in December 1998 in 60 equal monthly amortization
payments with an interest rate of 22.5% per annum. As security for the payment of these loans,
respondents Sps. Chao executed in favor of petitioner BDO a Chattel Mortgage covering 40 motor
vehicles and personal properties.
Starting August 1999 until December 1999, respondents Sps. Chao failed to fully pay their
monthly amortization payments. As shown in a Statement of Account as of January 2000, respondents
Sps. Chao's account amounted to P10,565,165.70. Despite demands made, respondents Sps. Chao failed
to settle their obligation. Hence, on January 18, 2000, a Complaint for Recovery of Possession of
Personal Property, with an application for the issuance of a writ of replevin was filed by petitioner BDO
against respondents Sps. Chao. The case was docketed as Civil Case No. CEB-24769.
On November 13, 2000, the RTC issued an Order allowing the issuance of a writ of replevin on
the properties of respondents Sps. Chao upon the posting of a bond by petitioner BDO in the amount of
P10,000,000.00. On November 27, 2000, petitioner BDO posted the said bond and the writ
of replevin was issued against respondents Sps. Chao. On November 29, 2000, respondents Sps. Chao
posted a counter-replevin bond also in the amount of P10,000,000.00 issued by respondent Great
Domestic Insurance Company of the Philippines, Inc.
On January 9, 2004, petitioner BDO filed a motion to declare respondents Sps. Chao in default
for failing to file an answer within the allowable period. The RTC granted this motion and declared
respondents Sps. Chao in default, allowing the ex parte presentation of petitioner BDO's evidence. On
October 18, 2004, the RTC rendered its Decision granting the Complaint, ordering the defendants to
deliver to plaintiff the properties subject of the Chattel Mortgage. On appeal before the CA Special
20th Division, the latter rendered its Decision denying respondents Sps. Chao's appeal for lack of merit.
The case was further appealed before the Court's First Division in G.R. No. 178005, which was denied.
Hence, on July 16, 2008, petitioner BDO filed a Motion for Writ of Execution before the RTC,
which was granted by the latter in its Order dated July 18, 2008. Pursuant to the said Order, the Clerk of
Court and Ex-Officio Sheriff of the RTC issued a writ of execution on August 5, 2008. The Sheriff's
Progress Report dated March 2, 2009 indicated that the writ of execution was not satisfied. On April 20,
2009, petitioner BDO filed a Motion to Order Sheriff to Serve Writ of Execution on the Counter Bond.
This Motion was opposed by respondent Great Domestic.
The RTC granted petitioner BDO's Motion and ordered the serving of the writ of execution.
Respondent Great Domestic filed a Motion for Reconsideration of the said Order, which was later on
denied by the RTC.
 Feeling aggrieved, on January 7, 2010, petitioner BDO, still as PCI Leasing & Finance, Inc., filed
a Petition for Certiorari under Rule 65 of the Rules of Court before the CA Special 18th Division, arguing
that the RTC committed grave abuse of discretion in finding that respondent Great Domestic's liability on
the counter-bond is only P5,000,000.00. The CA Special 18th Division dismissed the Certiorari Petition
one ground is that petitioner BDO had no legal capacity to file the Certiorari Petition, considering that
when PCI Leasing and Finance, Inc. changed its name to BDO Leasing and Finance, Inc. on June 13,
2008, petitioner BDO should have sued under its new name "in order to avoid confusion and open door
to frauds and evasions and difficulties of administration and supervision." The CA Special 18th Division
further held that:
the change of corporate name x x x renders ineffective the Board Resolution and Special Power
of Attorney it issued long before the change of name took place authorizing its First Vice-
President Mr. Vicente C. Rallos to initiate appropriate court action in its behalf, thus, the
verification and certification against forum shopping Mr. Rallos has signed in connection with the
instant case has no binding and legal effect. After June 13, 2008, the said documents can no
longer vest or confer any authority upon Mr. Rallos to verify and certify any pleading of PCI
[L]easing and [F]inance, Inc. After said date, the board of directors of [petitioner] BDO [L]easing
and Finance, Inc. should have issued a new resolution and the instant petition filed in the name of
[petitioner] BDO [L]easing and Finance, Incorporated.
Petitioner BDO filed its Motion for Reconsiderationvdated March 3, 2011, which was denied by the CA
Special 18th Division in the second assailed Resolution. Hence, the instant Petition.
ISSUE:
Whether the change of name of petitioner BDO from PCI Leasing and Finance, Inc. to BDO Leasing and
Finance, Inc. did not affect its capacity to sue and be sued, and the authority of its authorized signatory,
Vicente C. Rallos (Rallos), to file the Certiorari Petition
RULING:
No. The CA Special 18th Division's position is incorrect in dismissing outright
the Certiorari Petition was petitioner BDO's lack of any "legal capacity to initiate or file the instant
petition" on account of the change of name of petitioner BDO from "PCI Leasing and Finance, Inc." to
"BDO Leasing and Finance, Inc." The CA Special 18th Division opined that since the Board Resolution
and Special Power of Attorney issued by petitioner BDO authorizing Rallos to initiate the appropriate
court action on behalf of the company was still under the name of "PCI Leasing and Finance, Inc.," and
considering that petitioner BDO has already changed its name, the aforesaid Board Resolution and
Special Power of Attorney have no more binding effect.
The Supreme Court held that “the corporation, upon such change in its name, is in no sense a
new corporation, nor the successor of the original corporation. It is the same corporation with a different
name, and its character is in no respect changed. A change in the corporate name does not make a new
corporation, and whether effected by special act or under a general law, has no effect on the identity of
the corporation, or on its property, rights, or liabilities. The corporation continues, as before, responsible
in its new name for all debts or other liabilities which it had previously contracted or incurred.
Hence, with petitioner BDO's change of name from "PCI Leasing and Finance, Inc." to "BDO
Leasing and Finance, Inc." having no effect on the identity of the corporation, on its property, rights, or
liabilities, with its character remaining very much intact, the Board Resolution and Special Power of
Attorney authorizing Rallos to institute the Certiorari Petition did not lose any binding effect whatsoever.