5 CC - CDigests - Mercantile Law

S
ANBEDAUNI
VERSI
TY
COLLEGEOFLAW
Cent
ral
izedBarOper
ati
ons
COVEREDCASESAND
J.
PERLAS-
BERNABE
CASEDOCTRI
NES
CASEDI
GESTS
Mer
cant
il
eLaw
EXECUTIVE COMMITTEE
Over-all Chairperson Mary Cyriell C. Sumanqui
Chairperson for Academics Erica Mae C. Vista
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Subject Chair for Political Law Cherish Kim B. Ferrer
Subject Chair for Labor Law Kristina D. Cabugao
Subject Chair for Civil Law Ma. Cristina D. Arroyo
Subject Chair for Taxation Law Maria Carissa C. Guinto
Subject Chair for Mercantile Law Dentzen S. Villegas
Subject Chair for Criminal Law Maria Regina C. Gameng
Subject Chair for Remedial Law Raymond F. Ramos
Subject Chair for Legal Ethics Rhev Xandra Acuña
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Gabrielle Anne S. Endona Paulo O. Hernandez
Joelle Mae J. Garcia Teresa Katherine R. Kua
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Zennia S. Turrecha
Nestor J. Porlucas, Jr.
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PREFACE
The COVERED CASES AND J. PERLAS-BERNABE CASE DOCTRINES was
crafted as an apt response for the need to provide a comprehensive compilation of
jurisprudence, promulgated by the Supreme Court, covered for this year’s Bar
Examinations. This complement significantly the other bar review materials in the
repository of the San Beda Centralized Bar Operations.
On this year’s edition, the COVERED CASES is in two forms: a printed copy of
the Covered Cases: Case Doctrines, and a digital copy of the Covered Cases: Case
Digests which include the Supreme Court decisions released from July 1, 2017 to June
30, 2018; while the J. PERLAS-BERNABE CASE DOCTRINES includes the
summary of the rulings pronounced by the 2019 Bar Examination Chairperson, the
Honorable Justice Estela M. Perlas-Bernabe, from September 16, 2011 to December
31, 2018.
In addition to that, the cases herein are categorized and arranged based on the
2019 Supreme Court Bar Exam Syllabus in order to guide its readers in their
appreciation and understanding of the court decisions.
With this material, the San Beda Centralized Bar Operations seeks to uphold
its legacy of service and excellence in helping the examinees achieve their goal of
becoming worthy members of the legal profession.
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THE UNAUTHORIZED COPYING, REPRODUCTION,

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OF ANY OF THE CONTENTS OF THIS BOOK IS
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TABLE OF CONTENTS
MERCANTILE LAW
Page
Number
Evangelista vs. Screenex, Inc. ………………………………………………………………. 1

G.R. No. 211564; November 20, 2017
Metropolitan Bank vs. Junnel’s Marketing Corporation ………………………………… 2
G.R. No. 235511 & 235565; June 20, 2018
Equitable Insurance Corp vs. Transmodal International, Inc. …………………………………3

G.R. No. 223592; August 7, 2018
Oriental Assurance Corporation vs. Manuel Ong ………………………………………… 4
G.R. No. 189524; October 11, 2017
Jose Sanico & Vicente Castro vs. Werherlina P. Colipano ………………………………… 5

G.R. No. 209969; September 27, 2017
Pioneer Insurance and Surety Corporation vs. APL Co. Pte. Ltd. ……………………… 6
G.R. No. 226345; August 2, 2017
Luis Juan Virata vs. Alejandro Ng Wee ……………………………………………………………7

G.R. Nos. 220926, 221058, 221109, 221135, & 221218; July 5, 2017
International Academy of Management and Economics vs. Litton and Co. Inc. ……. 8
G.R. No. 191525; December 13, 2017
De La Salle Montessori International of Malolos, Inc. vs. De La Salle Brothers, Inc. et al 9

G.R. No. 205548; February 7, 2018
Calubad vs. Ricarcen Development Corporation …………………………………………. 10
G.R. No. 202364; August 30, 2017
Multinational Village Homeowners' Association, Inc. vs. Gacutan ……………………… 11
G.R. No. 188307; August 02, 2017
Symex Security Services, Inc. vs. Rivera, Jr. ……………………………………………….. 12
G.R. No. 202613; November 8, 2017
Mactan Rock Industries, Inc. and Antonio Tompar vs. Benfrei Germo …………………. 13
G.R. No. 228799; January 10, 2018
Securities and Exchange Commission vs. College Assurance Plan ……………………… 14

Philippines, Inc.
G.R. No. 202052; March 7, 2018
Lydia Lao et al. vs. Yao Bio Lim and Philip King ……………….………………………… 15
G.R. No. 201306; August 9, 2017
Lydia Lao et al. vs. Yao Bio Lim and Philip King …………………………………………. 16
G.R. No. 201306; August 9, 2017
Carolina Que Villongco, et al. vs. Cecilia Que Yabut, et al. ………………………………… 17
G.R. Nos. 225022 & 225024; February 5, 2018
Rogelio M. Florete, Sr. vs. Marcelino M. Florete, Jr. et al. ………………………………… 18
G.R. No. 223321; April 02, 2018
Bank of Commerce vs. Heirs of Rodolfo Dela Cruz ………………………………………… 19

G.R. No. 211519; August 14, 2017
Roberto V. San Jose and Delfin P. Angcao vs. Jose Ma. Ozamiz ……………………………20
G.R. No. 190590; July 12, 2017
Belo Medical Group, Inc. vs. Jose L. Santos and Victoria G. Belo …………………….. 21
G.R. No. 185894; August 30, 2017
Norma D. Cacho and North Star International Travel, Inc., vs. ………………………………22
Virginia D. Balagtas
G.R. No. 202974; February 7, 2018
Dr. Gil J. Rich vs. Guillermo Paloma III, et al. ……………………………………………… 23

G.R. No. 210538; March 7, 2018
Apex Bancrights Holdings, Inc. vs. Bangko Sentral Ng Pilipinas Deposit Corp. …… 24
G.R. No. 214866; October 2, 2017
Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas ………. 25
G.R. No. 200678; June 04, 2018
Spouses Kishore Ladho Chugani And Prisha Kishore Chugani, et al. vs. ………….. 26
Philippine Deposit Insurance Corporation
G.R. No. 230037; March 19, 2018
Peter L. So vs. Philippine Deposit Insurance Corporation ………………………………… 27
G.R. No. 230020; March 19, 2018
Fernando U. Juan vs. Roberto U. Juan and Laundromatic Corporation ……………… 28

G.R. No. 221732; January 23, 2017
De La Salle Montessori International of Malolos, Inc. v. ………………………………… 29
De La Salle Brothers, Inc. et al
G.R. No. 205548; February 7, 2018
Société Des Produits, Nestlé, S.A. vs. Puregold Price Club, Inc. ………………………… 30
G.R. No. 217194; September 6, 2017
W Land Holdings vs. Starwood Hotels …………………………………………………….. 31
G.R. No. 222366; December 4, 2017
Kensonic, Inc. vs. Uni-Line Multi-Resources, Inc. (Phil.) ……………………………….. 32
G.R. Nos. 211834-35; June 6, 2018
Citigroup, Inc. vs. Citystate Savings Bank, Inc. …………………………………………………33
G.R. No. 205409; June 13, 2018
San Miguel Pure Foods Co., Inc. vs. Foodsphere, Inc. ………………………………………… 34
G.R. No. 217781; June 20, 2018
ABS-CBN Publishing, Inc. vs Director of the Bureau of Trademarks …………………. 35
G.R. No. 217916; June 20, 2018
Allied Banking Corporation vs. In the Matter of Petition to Have ………………………. 36

Steel Corporation of the Philippines Placed Under Corporate Rehabilitation
G.R. No. 191939; March 14, 2018
Patricia Dela Torre vs. Primetown Property Group, Inc. …………………………………. 37
G.R. No. 221932; February 14, 2018
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON MERCANTILE LAW
AN OBLIGATION EVIDENCED BY THE ISSUANCE OF A CHECK IS DISCHARGED BY

ANY ACT WHICH WILL DISCHARGE A SIMPLE CONTRACT SUCH AS PRESCRIPTION;
AN ACTION TO COLLECT ON A CHECK PRESCRIBES 10 YEARS FROM THE DATE
INDICATED ON THE CHECK OR FROM THE DATE OF ITS ISSUANCE, IF UNDATED
Benjamin Evangelista vs. Screenex, Inc., Represented by Alexander Yu

G.R. No. 211564; November 20, 2017
Sereno, C.J.
FACTS:
In this petition for review on Certiorari under Rule 45, petitioner Evangelista seeks the
reversal of the Decision of the CA which denied his plea to be released from an order to pay his
alleged civil obligation to private complainant.
In 1991, petitioner Evangelista obtained a loan from respondent Screenex, Inc. As security
for the payment of the loan, petitioner gave two open-dated checks, both payable to the order of
respondent. From the time the checks were issued, they were held in a safe, kept together with
other documents and papers of the company by Philip Gotuaco, Sr., father-in-law of respondent
Yu, until Gotuaco’s death on November 19, 2004. When the checks were discovered, demand was
made to the petitioner who refused to pay. Respondent thus dated, then deposited said checks on
December 22, 2004. Predictably, the checks were dishonored. The petitioner was charged with
the violation of BP Blg. 22 before the MeTC on August 25, 2005.
Among other defenses, petitioner contends that his obligation is deemed paid since the
check delivered to the respondent had been impaired.
ISSUE:
Has petitioner been discharged from liability on the check when it was dated and deposited
more than 10 years after it was issued undated?
RULING:
Yes, the petitioner is already discharged from liability.
Section 119 of the NIL states that a negotiable instrument is discharged by any act which
will discharge a simple contract for the payment of money. A check, therefore, is subject to
prescription of actions upon a written contract which must be brought within ten years from the
time the right of action accrues (Article 1144, Civil Code).
Barring any extrajudicial or judicial demand that may toll the 10-year prescription period
and any evidence which may indicate another time when the obligation to pay is due, the cause of
action based on a check is reckoned from the date indicated on the check. If the check is undated,
however, the cause of action is reckoned from the date of the issuance of the check. While the
space for the date of the check may be left blank by the issuer, it must, however, be filled up strictly
in accordance with the authority given to the payee and within a reasonable time.
In this case, the cause of action on the checks has prescribed and thus time-barred. No
written extrajudicial or judicial demand was shown to have been made within the 10 years following
their issuance in 1991. Prescription has indeed set in.
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ON MERCANTILE LAW
LIABILITY FOR UNAUTHORIZED PAYMENT OF CHECK IS STRICT AND DRAWEE MAY

BE HELD LIABLE BY DRAWER WITHOUT PREJUDICE TO RECOVERY FROM THE
COLLECTING BANK AND APPLICATION OF THE DOCTRINE OF COMPARATIVE
NEGLIGENCE
Metropolitan Bank vs. Junnel’s Marketing Corporation

G.R. No. 235511 & 235565; June 20, 2018
Velasco Jr., J.
FACTS:
These are two consolidated appeals filed by petitioners Metropolitan Bank and Trust
Company (Metrobank) and the Bank of Commerce (BOC), appealing the Decision and Resolution
of the CA, which affirmed with modification the Decision of the RTC finding them jointly liable to
respondent Junnel’s Marketing Corporation (JMC) for payment of a sum of money.
JMC discovered an anomaly involving 11 checks it had issued to the orders of Jardine
Wines and Spirits (Jardine) and Premiere Wines (Premiere) on various dates from October 1998
to May 1999. The subject checks, which were all crossed, amounted to P1,481,292.00, and were
charged against JMC’s current account with Metrobank. It was found that the checks were
deposited with BOC to an account which neither Jardine nor Premiere owned. JMC filed before
the RTC of Pasay City a complaint for sum of money against Metrobank and BOC.
Metrobank posits that it should be absolved because it exercised absolute diligence in

verifying the genuineness of the checks. It argues that it complied with Section 17 of the PCHC
Rules and Regulations and relied on BOC’s express guarantees. JMC alleges that the wrongful
conversion of the checks was caused by the negligent and unlawful acts of Metrobank and BOC.
As a counter-claim, BOC invokes the application of the Doctrine of Comparative Negligence to
reduce its liability.
ISSUE:
Is Metrobank liable to JMC for the payment of the value of the checks despite compliance
with the PCHC Rules on the collecting bank’s express guarantees?
RULING:
Yes, Metrobank is liable to pay JMC for the payment of the value of the checks, without
prejudice to full reimbursement by BOC.
The SC ruled in Bank of America vs. Associated Citizens Bank that the liability of the
drawee bank to the drawer in cases of unauthorized payment of checks is strict by nature. Once
an unauthorized payment on a check has been made, the resulting liability of the drawee bank to
the drawer for such payment attaches even if the former had acted merely upon the guarantees of
a collecting bank. However, the Metrobank can seek reimbursement from BOC, because of the
latter’s warranties.
The doctrine of comparative negligence, in which the drawee bank and the collecting bank
are held jointly liable for the wrongful encashment of checks on a 60% and 40% ratio, are
applicable only to cases where the drawee bank is found guilty of negligence.
In this case, the doctrine is not applicable because Metrobank only acted upon the
guarantees made by BOC under prevailing banking practices. There is no negligence on the part
of Metrobank which will preclude it from recovering fully from BOC as general indorser.
Ergo, Metrobank is liable to pay JMC, is account holder, the value of the checks wrongfully
paid, without prejudice to full reimbursement from BOC as the negligent collecting bank.
2|
ON MERCANTILE LAW
THE INSURANCE POLICY IS DISPENSABLE EVIDENCE IN REIMBURSEMENT CLAIMS

INSTITUTED BY THE INSURER FOR AMOUNTS PAID TO THE INSURED
Equitable Insurance Corp. vs. Transmodal International, Inc.

G.R. No. 223592; August 07, 2017
Peralta, J.
FACTS:
In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, petitioner
seeks to reverse and set aside the Decision of the CA which dismissed its action for actual
damages against respondent under the right of subrogation.
Sytengco Enterprises Corporation (Sytengco) hired respondent Transmodal International,

Inc. (Transmodal) to clear cargoes consisting of 200 cartons of Gum Arabic from the customs
authorities and withdraw, transport, and deliver them to its warehouse. In the delivery receipt
however, it was noted that all the containers were wet. Thus, Sytengco demanded from respondent
Transmodal the payment for total loss of shipment. On that same date, petitioner, as insurer of the
cargoes paid Sytengco's claim. Sytengco then signed a subrogation receipt and loss receipt in
favor of petitioner Equitable Insurance. Equitable Insurance thus filed a complaint for damages
invoking its right as subrogee and averred that the damages of the shipment were caused by
respondent Transmodal's fault and gross negligence as a common carrier.
Respondent Transmodal denied knowledge of an insurance policy and claimed that the
damages to the cargoes were not due to its fault or gross negligence. The RTC ruled that that
Transmodal failed to prove due diligence and thus was liable to pay. The RTC likewise recognized
petitioner’s right of subrogation on the basis of the signed marine risk note The CA reversed the
RTC's decision, stating that it found no proof of insurance of the cargoes at the time of their loss
and what was presented before the court was just the marine risk note which did not prove
payment. The CA ruled that the insurance contract or policy should have been presented in court.
Hence, the petition for review on certiorari.
ISSUE:
Is the non-presentation of the insurance contract or policy fatal to Equitable Insurance’s
claim?
RULING:
No. The non-presentation of the marine insurance policy is not fatal to the reimbursement
claim.
The records show that petitioner was able to accomplish its obligation under the insurance
policy as it has paid the assured of its insurance claim. The payment by the insurer to the insured
operates as an equitable assignment to the insurer of all the remedies which the insured may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation
is not dependent upon, nor does it grow out of any privity of contract or upon written assignment
of claim. It accrues simply upon payment by the insurance company of the insurance claim.
Therefore, it is not necessary to present the insurance policy in court.
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ON MERCANTILE LAW
AN INSURER-SUBROGEE IS BOUND BY THE PROVISIONS OF A CONTRACT WHICH

LIMITS THE RIGHT OF ACTION OF THE INSURED
Oriental Assurance Corporation vs. Manuel Ong

G.R. No. 189524; October 11, 2017
Leonen, J.
FACTS:
This Petition for Review on Certiorari seeks a review of the Resolution of the CA which
affirmed the RTC’s dismissal of the petitioner’s original complaint on the ground of prescription.
JEA Steel imported from South Korea 72 aluminum-zinc-alloy-coated steel sheets in coils.
These steel sheets were transported to Manila. Upon arrival, the 72 coils were discharged and
stored under the custody of the arrastre contractor, Asian Terminals. They were then delivered by
Respondent Ong to JEA Steel's plant where it was found that 11 of these coils “in damaged
condition, dented or their normal round shape deformed.
JEA Steel filed a claim with Oriental Assurance pursuant to their Marine Insurance policy.
Oriental paid JEA Steel. Oriental then sent a demand to Ong and Asian Terminals, but they refused
to pay. Ong countered that 11 coils were already damaged when they were loaded on board his
trucks and transported to the consignee. Asian Terminals on the other hand claimed that the
damages were sustained while the same was still in the custody of the vessel or the customs
broker. Asian Terminals further argued that Oriental's claim was barred for the latter's failure to file
a notice of claim within the 15-day period provided in the Gate Pass or Management Contract.
The RTC dismissed the complaint ruling that it was not established that respondents were
the ones responsible for the damage to the 11 coils. The CA modified the RTC holding that that as
an arrastre operator, Asian Terminals was also bound to observe the extraordinary diligence thus
had to rebut the presumption of negligence against it. Nevertheless, Asian Terminals was absolved
from liability because Oriental's claim was filed beyond the 15-day prescriptive period provided
under the Management Contract between JEA Steel and Asian Terminals.
ISSUE:
Are the provisions of a contract between a warehouseman and the insured binding on the
insurer as a subrogee and successor-in-interest of the insured?
RULING:
Yes, the insurer is bound by the provisions regarding the prescriptive period fixed in the
Management Contract between the warehouseman (Asian Terminals, in this case) and the insured
(JEA Steel).
In GSIS v. Manila Railroad Company, this Court held that the provisions of an arrastre
management contract are binding on an insurer-subrogee even if the latter is not a party to it.
Oriental is subrogated to the rights of the consignee simply upon its payment of the insurance
claim. And since the right of action of the consignee is subject to a precedent condition stipulated
in the Management Contract, necessarily a suit by the insurer is subject to the same precedent
condition.
Be that as it may, the petitioner's complaint is not time-barred. Under the Management
Contract, the consignee had 30 days from receipt of the cargo to request for a certificate of loss
from the arrastre operator which the arrastre must issue within 15 days thereafter. Then, it is only
from the date of issuance of the certificate of loss or from the lapse of the 15 days, when the
consignee has another 15 days to file a formal claim of damages. In this case, the claim letter was
received by Asian Terminals 17 days from the last delivery of the goods, which is still within the
first 30-day period. Prescription could not have set in yet as Asian Terminal did not issue any
certificate of loss.
4|
ON MERCANTILE LAW
ONLY THE OWNER AND THE OPERATOR OF A COMMON CARRIER ARE LIABLE TO
THE PASSENGER IN A BREACH OF CONTRACT OF CARRIAGE
Jose Sanico & Vicente Castro vs. Werherlina P. Colipano

G.R. No. 209969; September 27, 2017
Caguioa, J.
FACTS:
This is a Petition for Review on Certiorari under Rule 45 filed by petitioners, assailing the
Decision of the CA which found them liable for breach of contract of carriage.
Werherlina Colipano (Colipano) claimed that on Christmas Day, she and her daughter were
paying passengers in the jeepney operated by Jose Sanico (Sanico), which was driven by Vicente
Castro (Castro). Colipano was made to sit on an empty beer case at the edge of the rear
entrance/exit of the jeepney with her sleeping child on her lap. And at an uphill, the jeepney slid
backwards because it did not have the power to reach the top.
Colipano pushed both her feet against the step board so that they would not be thrown out
of the exit, but because the step board was wet, her left foot slipped and got crushed between the
step board and a coconut tree which the jeepney bumped, causing the jeepney to stop its backward
movement. Colipano's leg was badly injured and was eventually amputated. Colipano filed a
complaint for breach of contract of carriage.
Sanico and Castro admitted that Colipano's leg was crushed and amputated but claimed
that it was Colipano's fault that her leg was crushed. Although the conductor instructed everyone
not to panic, Colipano tried to disembark and so her foot got caught in between the step board and
the coconut tree. The RTC found that Sanico and Castro breached the contract of carriage. The
CA affirmed.
ISSUE:
Are the operator and driver jointly and severally liable in a breach of contract of carriage?
RULING:
No, only the operator of the common carrier is liable because he is the only party to the
contract of carriage.
In Soberano v. Manila Railroad Co., the Court ruled that a complaint for breach of a contract
of carriage is dismissible as against the employee who was driving the bus because the parties to
the contract of carriage are only the passenger, the bus owner, and the operator.
Since Castro, the driver, was not a party to the contract of carriage, Colipano had no cause
of action against him and the complaint against him should be dismissed. He was a mere employee
of Sanico, who was the operator and owner of the jeepney. The obligation to carry Colipano safely
to her destination was Sanico’s. Thus, when Colipano's leg was injured while she was a passenger
in Sanico's jeepney, the presumption of fault or negligence on Sanico's part arose and he had the
burden to prove that he exercised the extraordinary diligence required of him. He failed to do this
however. Moreover, the evidence indubitably established Sanico's negligence when Castro made
Colipano sit on an empty beer case at the edge of the rear entrance/exit of the jeepney with her
sleeping child on her lap, which put her and her child in greater peril than the other passengers.
Therefore, Sanico shall be the only one liable.
|5
ON MERCANTILE LAW
A SHORTER PRESCRIPTIVE PERIOD MAY BE STIPULATED SUBJECT TO THE

EXCEPTIONS PROVIDED BY LAW
Pioneer Insurance and Surety Corporation vs. APL Co. Pte. Ltd.
G.R. No. 226345; August 2, 2017
Mendoza, J.
FACTS:
This petition for review on certiorari seeks to reverse and set aside the Resolution of the
CA that ruled that a shorter prescriptive period to bring a suit may be stipulated upon, provided it
is reasonable.
The respondent carrier received 250 bags of chili pepper for transport from India to Manila.
The cargo was insured with petitioner Pioneer Insurance and Surety Corporation (Pioneer
Insurance). On February 2, 2012, the insured consignee received the peppers from respondent.
However, 76 bags were found to be wet and heavily infested with mold. Consequently, the entire
shipment of 250 bags was declared unfit for human consumption and thus a total loss.
Pioneer Insurance thus paid the insurance claim of the consignee. It then sought payment
from respondent carrier but the latter refused, which prompted the former to file a complaint for
sum of money on February 1, 2013.
Both the MTC and the RTC declared that as a common carrier, respondent was bound to
observe extraordinary diligence. It was proved that the shipment was wet because of water which
seeped inside the steel container that the respondent carrier provided. The respondent raised as
defense Clause 8 of the Bill of Lading which provided that the Carrier (respondent) shall be
absolved from any liability unless a case is filed within nine months from delivery of the goods. The
RTC ruled however that under the COGSA, a prescriptive period shorter that one year cannot be
stipulated in the Bill of Lading. The CA reversed the decision of the RTC and ruled that Clause 8
was binding and thus the present action was barred by prescription.
ISSUE:
Is the stipulation of a shorter prescriptive period valid?
RULING:
Yes, a stipulation of a shorter prescriptive period for actions is generally valid.
In Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., the Court
recognized that 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.
In this case however, the Bill of Lading categorically provided for an exception such that
although it stipulated a 9-month prescriptive period, it also provided that if a compulsory law
provided for a different period, the compulsory law shall apply. Thus, in construing the clear and
unequivocal terms of Clause 8 in the Bill of Lading, the exception was applicable and thus the
prescriptive period that applies in this case shall be the one-year prescription under the COGSA.
Hence, the action of the petitioner has not prescribed when it was filed on February 1,
2013, 358 days from the date the cargo was delivered.
6|
ON MERCANTILE LAW
OWNERSHIP OF ALMOST ALL OF A CORPORATION’S STOCK BY ONE DIRECTOR

COUPLED WITH EVIDENCE THAT THE CORPORATION NEVER WENT TO
OPERATION ARE INDICIA THAT THE CORPORATION IS A MERE ALTER-EGO OF
SUCH DIRECTOR
Luis Juan L. Virata vs. Alejandro Ng Wee

G.R. Nos. 220926, 221058, 221109, 221135 & 221218; July 5, 2017
Velasco Jr., J.
FACTS:
These are consolidated petitions appealing the Decision and the Resolution of the CA
which affirmed the trial court’s judgment declaring petitioners Luis Virata (Virata), the majority
stockholder and Director of Power Merge Corporation (Power Merge) among others, solidarily
liable to Alejandro Ng Wee (Ng Wee), plus interests and damages.
Ng Wee was a valued client of Westmont Bank. Sometime in 1998, he was enticed by the
bank manager to make money placements with Westmont Investment Corporation (Wincorp), a
domestic corporation organized and licensed to operate as an investment house, and one of the
bank's affiliates. Offered to him were "sans recourse" transactions which paired him up with Power
Merge Corporation (Power Merge) despite its glaring inability to pay back the loans as shown by
its measly subscribed capital. Notably, Wincorp also failed to disclose the existence of “side
agreements” to its investors. In his Complaint, Ng Wee thus claimed that he fell prey to the intricate
scheme of fraud and deceit that was hatched by Wincorp and Power Merge.
Sought to be held personally liable by Ng Wee, Virata invoked that he may not be held
liable for business judgments of Power Merge on the doctrine of separate juridical personality. The
RTC and the CA both ruled that since Power Merge was merely an alter-ego of Virata, he was
solidarily liable for Power Merge’s liabilities. Hence this appeal.
ISSUE:
May the veil of corporate fiction of Power Merge be pierced to hold Virata liable?
RULING:
Yes, the veil of corporate fiction of Power Merge may be pierced to hold Virata liable.
Concept Builders, Inc. v. NLRC instructs that the distinct personality of a corporation may
be disregarded when the corporation is merely an adjunct, a business conduit or an alter ego of
another corporation. The SC uses a three-pronged test to determine the application of the alter-
ego theory, namely: (1) Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction had at the time no separate mind, will or
existence of its own; (2) Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust
act in contravention of plaintiff’s legal right; and, (3) The aforesaid control and breach of duty must
have proximately caused the injury or unjust loss complained of.
In the present case, Virata not only owned majority of the Power Merge shares; he
exercised complete control thereof. He is the company president and owns 374,996 out of 375,000
of its subscribed capital stock. The clearest indication of all is that Power Merge never operated to
perform its business functions, but for the benefit of Virata. Therefore, the lower courts did not err
when they found that Power Merge was merely an alter-ego of Virata and correctly pierced the
veil.
|7
ON MERCANTILE LAW
THE CORPORATE VEIL MAY BE PIERCED WHEN FACTS SHOW THAT THE
JUDGEMENT DEBTOR USED A CORPORATION TO CONCEAL ASSETS WHICH WERE
SUPPOSED TO PAY FOR THE JUDGMENT AGAINST HIM
International Academy of Management and Economics vs. Litton and Co., Inc.
G.R. No. 191525; December 13, 2017
Sereno, C.J.
FACTS:
This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the CA’s
decision affirming the RTC’s decision to pierce the veil of petitioner corporation and execute upon
its properties a judgement debt of one of its corporate officers.
Litton had obtained a favorable judgement against Atty. Emmanuel Santos (Santos) for
unlawful detainer before the MeTC which included a judgement for unpaid rents and damages.
The MeTC sheriff, on execution, levied on a piece of real property and registered in the name of
petitioner International Academy of Management and Economics Incorporated (I/AME). I/AME
questioned the levy and claimed that it has a separate and distinct personality from Santos, and
hence, its properties should not be made to answer for the latter's liabilities.
The MeTC annulled the execution but the RTC reversed and ruled that the levy was valid
based on the existence of grounds to pierce the corporate veil. It found that I/AME was formed
shortly after Santos was adjudge to be liable in the unlawful detainer case and that almost all of
his properties subject to execution were assigned to I/AME. Thus, the RTC ruled that I/AME was
merely Santos’ alter-ego and that the corporation was created to defraud Santos’ creditors. The
CA affirmed the RTC, hence this appeal.
ISSUE:
Did the CA err in ruling that the RTC correctly pierced the corporate veil to make the
properties of I/AME answerable for Santos’ liabilities?
RULING:
No, the Supreme Court agrees with the CA that Santos used I/AME as means to overthrow
judicial process and escape his responsibilities to Litton.
Alter-ego piercing is based upon the misuse of the corporate vehicle by an individual for
wrongful or inequitable purposes, and in such case the court merely disregards the corporate entity
and holds the individual responsible for acts knowingly and intentionally done in the name of the
corporation.
I/AME is merely an alter ego of Santos. Santos falsely represented himself as President of
I/AME in the Deed of Absolute Sale when he bought the Makati real property at a time when I/AME
had not yet existed. Uncontroverted facts in this case also reveal the findings of lower court
showing Santos and I/AME as being one and the same person.
As in Arcilla vs. Court of Appeals, Santos

(1) was adjudged liable to pay on a judgment against him;
(2) became President of a corporation;
(3) formed a corporation to conceal assets which were supposed to pay for the
judgment against his favor.
The doctrine may be applied to execute upon corporate assets when it is shown by clear
and convincing evidence that the judgement debtor merely formed a corporation to conceal assets
which were supposed to pay for the judgment against him.
8|
ON MERCANTILE LAW
USE OF THE DOMINANT TERM “DE LA SALLE” AS A CORPORATE NAME FOR A

SCHOOL IS CONFUSINGLY SIMILAR AND NOT ALLOWED BY LAW
De La Salle Montessori International of Malolos, Inc. vs. De La Salle Brothers, Inc. et al.
G.R. No. 205548; February 7, 2018
Jardeleza, J.
FACTS:
Petitioner De La Salle Montessori International of Malolos, Inc. filed this petition for review
under Rule 45 to appeal the CA’s Decision affirming the respective decisions of the SEC En Banc
and the SEC Office of the General Counsel directing the petitioner to change its corporate name.
Petitioner reserved with the SEC its corporate name “De La Salle Montessori International
Malolos, Inc.” in 2007. On January 29, 2010, respondents De La Salle Brothers, Inc., and other
members of the “La Salle” group filed a petition before the SEC seeking to compel petitioner to
change its corporate name.
Respondents claim that petitioner's corporate name is misleading or confusingly similar to

the names over which they have acquired a prior right to use. According to respondents,
petitioner's use of the dominant phrases "La Salle" and "De La Salle" gives an erroneous
impression that petitioner is part of the "La Salle" group, and thus violates Section 18 of the
Corporation Code. Also, being the prior registrants, respondents have acquired exclusive rights to
the use of said phrases as part of their corporate names.
The SEC and CA agreed with the respondents and directed the petitioner to change its
corporate name. Hence this appeal.
ISSUE:
Did the CA and SEC err in finding that petitioner had no right to use the phrase “De La
Salle” in its corporate name?
RULING:
No, Sec. 18 of the Corporation Code prohibits the use corporate names which are (1)
identical or deceptively or confusingly similar to that of any existing corporation or to any other
name protected by law or is (2) patently deceptive, confusing or contrary to existing laws.
In Philips Export B.V. v. Court of Appeals, the Court held that to fall within the prohibition
of Section 18, two requisites must be proven, to wit: (1) that the complainant corporation acquired
a prior right over the use of such corporate name; and (2) the proposed name is either: (a) identical,
or deceptively or confusingly similar to that of any existing corporation or to any other name already
protected by law; or (b) patently deceptive, confusing, or contrary to existing law.
As to the first requisite, respondents’ corporate names were registered on 1960, 1961,
1975, 1976, and 1998 while petitioner’s corporate name was registered only on 2007. Hence, the
respondents clearly obtained the prior right. The second requisite is also satisfied since there is a
confusing similarity between petitioner's and respondents' corporate names. While these corporate
names are not entirely identical, it is evident that the phrase "De La Salle" is the dominant phrase
used in all of the names and thus produces a likelihood of confusion that petitioner is part of the
“La Salle” group of companies.
Ergo, it is not error to require petitioner to change its corporate name.
|9
ON MERCANTILE LAW
EVEN IF NO ACTUAL AUTHORITY HAS BEEN CONFERRED ON THE PRESIDENT OF

THE CORPORATION, HIS OR HER ACTS, AS LONG AS THEY ARE WITHIN HIS OR HER
APPARENT SCOPE OF AUTHORITY, BINDS THE CORPORATION AS PRINCIPAL
Calubad vs. Ricarcen Development Corporation

G.R. No. 202364; August 30, 2017
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari filed by petitioner Arturo C. Calubad (Calubad),
appealing the rulings of the CA and RTC which declared as null and void the real estate mortgages
executed in his favor by Marilyn Soliman (Soliman) on behalf of Ricarcen Development Corporation
(Ricarcen).
Respondent Ricarcen is a domestic corporation engaged in renting out real estate, and the
registered owner of a parcel of land subject of the dispute. Soliman, acting on Ricarcen's behalf as
its president, took out a loan from Calubad. This loan was secured by a real estate mortgage over
a real property owned by Ricarcen in Quezon City. To prove her authority to execute the mortgage
contracts in Ricarcen's behalf, Soliman presented Calubad with a Board Resolution empowering
her to borrow money and to use the Quezon City property as collateral for the loans.
Sometime in 2003, after Ricarcen failed to pay its loan, Calubad initiated extrajudicial
foreclosure proceedings on the real estate mortgage. To prevent the foreclosure, Ricarcen filed a
judicial complaint to annul the real estate mortgages. Both the RTC and CA found that Soliman did
not have sufficient proof of authority to bind the property of Ricarcen, hence this appeal.
Petitioner argues that Ricarcen is barred by estoppel from denying Soliman's authority to
enter into the contract of loan and mortgage between him and Ricarcen.
ISSUE:
Is Ricarcen estopped from denying the authority of Marilyn R. Soliman, its former
President, from entering into the contract of loan and mortgage with Calubad?
RULING:
Yes, the factual circumstances of the case show that Ricarcen is estopped for having
clothed Soliman with apparent authority which Calubad had relied upon in good faith.
Apparent authority is based on the principle of estoppel. The doctrine of apparent authority
provides that even if no actual authority has been conferred on an agent, his or her acts, as long
as they are within his or her apparent scope of authority, will bind the principal to a third party who
is reasonably led to believe in good faith that the agent was indeed authorized to act for the
principal due to the principal's conduct. Apparent authority is determined by the acts of the principal
and not by the acts of the agent.
As the president of Ricarcen at the time, it was within Soliman’s scope of authority to act
for, negotiate, and enter into contracts in Ricarcen's behalf. She also had possession of the owner's
duplicate of the certificate of title covering the Quezon City property which she presented to
Calubad to secure the mortgage. Calubad could not thus be faulted for continuing to transact with
Soliman because Ricarcen, a real estate company, clearly clothed her with apparent authority to
deal with one of its real properties. Moreover, Ricarcen's officers cannot deny the existence of the
loan and mortgage when it issued corporate checks in favor of Calubad to pay for the loan which
were cleared and honored.
10 |
ON MERCANTILE LAW
THE ELECTION OF A NEW BOARD OF DIRECTORS UNDER THE ORDER AND

SUPERVISION OF THE HLURB TO REPLACE 12-YEAR INCUMBENTS IS LAWFUL IN
ORDER TO PREVENT THE MISCHIEF OF DIRECTORS EXTENDING THEIR TERM BY
MERELY REFUSING TO RECOGNIZE THE VALIDITY OF AN ELECTION
Multinational Village Homeowners' Association, Inc. vs. Gacutan

G.R. No. 188307; August 02, 2017
Carpio, J.
FACTS:
In this Petition for Review on Certiorari under Rule 45, petitioner Multinational Village
Homeowners' Association, Inc. (MVHAI) challenges the decision of the CA, nullifying the
Clarificatory Resolution and Decision issued by the Office of the President (OP).
Respondents, officers and members of the Board of petitioner MVHAI in 2005 (2005
Board), approved a resolution setting the 2006 annual election of new Board members and the
guidelines on proxy voting, among others. Petitioner Jimmy del Mundo then sought injunctive relief
from the HLURB-NCRFO because of the alleged lack of transparency in the issuance of proxy
forms and the alleged burning of election records to supposedly prevent verification of the previous
elections. HLURB-NCRFO granted the application. Despite respondent’s appeal, petitioners
proceeded with the election without proxy forms with petitioners being elected as the new Board
(2006 Board). The 2005 Board refused to recognize the 2006 elections, refused to relinquish their
posts, and declared themselves as hold-over directors until valid elections were properly held.
Election protests commenced between the parties where the HLURB-NCRFO eventually
ruling in favor of the respondents. (2005 Decision) Although initially reversed by the HLURB Board
of Commissioners, the decision of the HLURB-NCRFO was finally affirmed and reinstated by the
Office of the President (OP) in 2006.
In 2007, the HLURB-NCRFO ordered a new election pursuant to the affirmed 2005
Decision, declared by the OP as final and executory in a subsequent resolution (2006 Resolution).
The petitioners however refused to participate in the 2007 elections claiming that they were still
waiting for a Clarificatory Resolution of the OP to clarify its 2006 Resolution. A new Board (2007
Board) was constituted. Both the 2005 and 2006 Board now question the validity of the election of
the 2007 Board.
ISSUE:
Can the 2005 Hold-over Board indefinitely hold their office without calling for an election to
replace them on the ground of pending election disputes?
RULING:
No, a Board cannot unjustifiably refuse to call and hold an election which is mandated by
the law and by the corporation’s by-laws.
Section 4 of HLURB Resolution No. R-771-04 expressly authorizes the HLURB-NCRFO

to call the election when the circumstances so warrant, as in this case. To sustain respondents'
hold-over positions since 2005 is to make them stay as the board members for approximately 12
years, notwithstanding the expiration of their one-year term.
Surely, the annual election of directors of petitioner MVHAI cannot be held hostage by the
whims of a group of homeowners who refuse to relinquish their seats in the Board. In situations
such as this, the issuances of the HLURB, which governed homeowners' associations at the time
this case was filed, are instructive. The HLURB validly called the elections to prevent the evil of a
permanent board membership.
| 11
ON MERCANTILE LAW
AN OFFICER MAY NOT BE HELD LIABLE FOR THE CORPORATION’S LABOR

OBLIGATIONS UNLESS HE ACTED WITH EVIDENT MALICE AND/OR BAD FAITH IN
DISMISSING AN EMPLOYEE
Symex Security Services, Inc. vs. Rivera, Jr.

G.R. No. 202613; November 8, 2017
Caguioa, J.
FACTS:
In this petition for review on certiorari, Petitioners Symex Security Services, Inc. (Symex)
and Rafael Arcega, president of Symex, appeal the decision of the CA which affirmed the decisions
of the NLRC finding Arcega solidarily liable with Symex for the backwages and monetary claims of
respondents.
Respondents, Magdalino Rivera, Jr. and Roberto Yago, were assigned as security guards
at Guevent Industrial Development Corporation (Guevent), a client of Symex. During the course of
their employment, they were required to work from 6:00AM to 6:00PM without overtime pay, and
to report for work during legal holidays without holiday pay. Respondents were also not given rest
days. Hence, respondents filed a complaint for nonpayment of holiday pay, premium for rest day,
13th month pay, as well as illegal deductions and damages. After filing their complaint,
respondents were relieved from their post because Guevent reduced the number of guards on
duty. Respondents then amended their complaint to include illegal dismissal.
The LA dismissed respondents’ complaint for illegal dismissal but ordered Symex to pay
respondents their 13th month pay. On appeal, the NLRC reversed the LA’s decision concluding
that respondents were also illegally dismissed and were therefore entitled to separation pay and
backwages, in addition to their initial monetary claims. Notably, Arcega was held solidarily liable
with Symex as its President. The CA affirmed the NLRC’s decision when Arcega appealed the
ruling that made him solidarily liable with Symex.
ISSUE:
Can Arcega, President of Symex, be held liable for the obligations of Symex to
respondents?
RULING:
No, Arcega cannot be held solidarily liable for the obligations of Symex because there was
no showing that Arcega, as President of Symex, willingly and knowingly voted or assented to the
unlawful acts of the company.
A corporation is a juridical entity with a legal personality separate and distinct from those
acting for and in its behalf, and, in general, from the people comprising it. Thus, as a general rule,
an officer may not be held liable for the corporation's labor obligations unless he acted with evident
malice and/or bad faith in dismissing an employee. Section 31 of the Corporation Code is the
governing law on personal liability of officers for the debts of the corporation. 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.
As there was no evidence at all to show Arcega's participation in the illegal dismissal of the
respondents, the twin requisites of allegation and proof of bad faith, necessary to hold Arcega
personally liable for the monetary awards to the respondents, are lacking.
Thus, Arcega cannot be held solidarily liable for Symex’s liability to respondents in this
case.
12 |
ON MERCANTILE LAW
DIRECTORS, OFFICERS, AND EMPLOYEES CANNOT BE HELD PERSONALLY LIABLE

FOR OBLIGATIONS OF THE CORPORATION WHERE THERE IS NO ALLEGATION OR
PROOF OF FRAUD, BAD FAITH, OR NEGLIGENCE IN THE MANAGEMENT OF
CORPORATE AFFAIRS
Mactan Rock Industries, Inc. and Antonio Tompar vs. Benfrei Germo
G.R. No. 228799; January 10, 2018.
Perlas-Bernabe, J.
FACTS:
For review in this appeal are the Decision and Resolution of the CA which affirmed the
RTC ruling finding petitioners Mactan Rock Industries, Inc. (MRII) and Antonio Tompar (Tompar)
solidarily liable for MRII’s debt to respondent Benfrei S. Germo (Germo).
MRII is a domestic corporation engaged in supplying water, selling industrial maintenance

chemicals, and water treatment and chemical cleaning services. Petitioner Tompar is the
corporation’s President and Chief Executive Officer (CEO). In 2004, MRII, through Tompar,
entered into a Technical Consultancy Agreement (TCA) with Germo whereby the parties agreed,
among others, that Germo shall stand as MRII's marketing consultant who shall take charge of
negotiating, perfecting sales, orders, contracts, or services of MRII, and be paid on a commission
basis, including a monthly allowance. Germo successfully negotiated and closed with International
Container Terminal Services, Inc. (ICTSI) a supply contract of 700 cubic meters of purified water
per day. Despite having successfully negotiated the ICTSI contract, Germo claims that he was not
paid the commissions due from the deal.
Respondent thereafter filed a case before the RTC to secure payment for unpaid
commissions. The RTC ruled in Respondent’s favor. In particular, the RTC ruled that Tompar is
solidarily pay Germo the amount of the unpaid commission. On appeal, Tompar questioned the
ruling that held him solidarily liable for corporate debts. The CA however affirmed the RTC, hence
this appeal.
ISSUE:
May Tompar be made solidarily liable for corporate debts by mere fact that it was Tompar
who negotiated with respondent Germo?
RULING:
No, the mere fact that Tompar was the one who negotiated the consultancy agreement
with Germo, in his capacity as then-President and CEO of MRII, does not make him solidarily liable
with MRII for breach of said agreement.
It is a basic rule that a corporation is a juridical entity which is vested with legal and
personality separate and distinct from those acting for and in behalf of, and from the people
comprising it.
Before a director or officer of a corporation can be held personally liable for corporate
obligations, the following requisites must concur: (1) the complainant must allege 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) the complainant must clearly and convincingly
prove such unlawful acts, negligence or bad faith.
In this case, Germo's complaint did not allege that Tompar assented to patently unlawful
acts of MRII or that his acts were tainted by gross negligence or bad faith. Nor where theses proven
in the course of trial. Therefore, the deletion of Tompar's solidary liability with MRII is in order.
| 13
ON MERCANTILE LAW
IN PRE-NEED COMPANIES, THE SO-CALLED “TRUST FUND” IS NOT PART OF THE

PAID-UP CAPITAL WHICH COULD BE USED TO SATISFY THE CLAIMS OF THE
CORPORATION’S CREDITORS
Securities and Exchange Commission vs. College Assurance Plan Philippines, Inc.
G.R. No. 202052; March 7, 2018
Bersamin, J.
FACTS:
In this petition for review on certiorari, petitioners are appealing the decision of the CA
which authorized payment by College Assurance Plan Phil. (CAP) out of its trust fund for
obligations due to its creditors, Smart Share Investment, Ltd., and Fil-Estate Management, Inc.
(SMART/FEMI)
Respondent CAP is engaged in the selling of pre-need educational plans. To guarantee

the payment of benefits under its educational plans, CAP is mandated by law to set up a Trust
Fund. Later on, it was found out that CAP incurred a trust fund deficiency of P3.179 billion as of
December 31, 2001. To correct said deficiency, CAP purchased MRT III Bonds from SMART/FEMI
and assigned the same to the Trust Fund.
After paying part of the purchase price of the MRT III Bonds, CAP was ordered by the SEC
Oversight Board to stop paying SMART/FEMI due the inadequacy of funds. To settle its obligation
with SMART/FEMI, respondent had its Rehabilitation Plan approved where it stated that CAP
would sell the MRT Bonds at 60% of their face value. While negotiations of the sale were ongoing,
Smart demanded CAP to immediately settle its outstanding debt arguing that the debt can be paid
from the Trust Fund. The receiver then moved for the payment of the respondent's obligations to
SMART/FEMI.
The RTC denied the motion of the receiver for CAP to settle its obligations to
SMART/FEMI. On appeal however, the CA reversed the RTC’s ruling and ruled that payment to
SMART/FEMI constituted "benefits" that could be validly withdrawn from the Trust Fund pursuant
to Rule 16.4 of the New Rules on the Registration and Sale of Pre-Need Plans under Section 16
of the Securities and Regulation Code. Thus, CAP’s obligations can be paid to SMART/FEMI.
Hence this appeal.
ISSUE:
May CAP’s obligation to SMART/FEMI be validly withdrawn from the Trust Fund?
RULING:
No, CAP cannot validly withdraw from the Trust Fund to pay its obligation to SMART/FEMI.
In pre-need companies, the Trust Fund set up from the planholders' payments is for the
payment of the cost of benefits and services, termination values payable to the planholders, and
other costs necessary to ensure the delivery of benefits or services to the planholders as provided
for in the pre-need contracts. The trust fund is separate and distinct from the capital stock of the
company, and is established under a trust agreement approved by the Securities and Exchange
Commission to pay the benefits as provided in the pre-need plans. The trust fund therefore is not
subject to the “Trust Fund Doctrine” which pertains to the capital stock of the corporation.
Section 30 of R.A. No. 9829 expressly stipulates that the trust fund is to be used at all times
for the sole benefit of the planholders, and cannot be applied to satisfy the claims of creditors.
Even assuming that the obligations were incurred by the respondent in order to infuse sufficient
money in the trust fund to correct its deficiencies, such obligations should be paid for by corporate
assets and not from the pre-need trust fund.
14 |
ON MERCANTILE LAW
ELECTIONS OF A NEW BOARD OF DIRECTORS AND THE RATIFICATION OF ACTS OF

THE INCUMBENT BOARD OF DIRECTORS ARE STANDARD ORDERS OF BUSINESS IN
A REGULAR ANNUAL STOCKHOLDERS MEETING AND NEED NOT BE INCLUDED IN
THE NOTICE OF MEETING
Lydia Lao et al. vs. Yao Bio Lim and Philip King
G.R. No. 201306; August 9, 2017
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari seeking to annul and set aside the CA decision
which affirmed the decision of the RTC of Quezon City to annul the 2002 elections of the board of
directors of Philadelphia School, Inc. (PSI).
This is actually a continuation of a protracted legal battle between two factions vying for
control of PSI led by King (King Faction) and Lao (Lao Faction), which began in 1998. While cases
were pending between the factions, a regular stockholder’s meeting was held in March 15, 2002
where members of the Lao Faction were elected to the Board. Respondents questioned the validity
of the meeting because although they received the notice of the meeting five days prior, they
alleged that the notice did not state the agenda or the purpose of the meeting and is therefore void.
On the other hand, petitioners claimed that the stockholders' meeting and the elections were
conducted in accordance with the PSI's by-laws and the Corporation Code.
Both the RTC and CA ruled in favor of the respondents nullifying the 2002 stockholders'
meeting agreeing that since the notice did not state that the meeting was for the election of a new
board and for the ratification of the acts of the board and officers in 2001, the meeting was void for
being invalidly called, hence this appeal.
ISSUE:
Does a notice of a general stockholder meeting need to state that its order of business
included the election of a new board and the ratification of corporate acts of the previous year?
RULING:
No, the notice of a general stockholder meeting need not state that its order of business
included the election of a new board and the ratification of corporate acts of the previous year.
The elections of a new board of directors and the ratification of acts of the incumbent board
of directors and management are standard orders of business in a regular annual meeting of
stockholders of a corporation. It is understood and well-known that these are the principal agenda
of any regular annual stockholder’s meeting.
Hence, the requirement that the Notice of Meeting must state the object and purpose of a
meeting as provided for in Article VIII (5) of the PSI's by-laws does not apply to the Notice for the
March 15, 2002 annual stockholders' meeting. The rule on specification of agenda in the notice of
meeting only applies to notice of special stockholder’s meetings.
| 15
ON MERCANTILE LAW
THE PERIOD WITHIN WHICH TO SEND NOTICE TO CALL A MEETING MAY BE

SHORTENED OR LENGTHENED IN THE BY-LAWS
Lydia Lao et al. vs. Yao Bio Lim and Philip King
G.R. No. 201306; August 9, 2017
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari seeking to annul and set aside the CA decision
which affirmed the decision of the RTC of Quezon City to annul the 2002 elections of the board of
directors of Philadelphia School, Inc. (PSI).
This is actually a continuation of a protracted legal battle between two factions vying for
control of PSI led by King (King Faction) and Lao (Lao Faction), which began in 1998. While cases
were pending between the factions, a regular stockholder’s meeting was held in March 15, 2002
where members of the Lao Faction were elected to the Board. Respondents questioned the validity
of the meeting because although they received the notice of the meeting five days prior, they
alleged that the notice did not state the agenda or the purpose of the meeting and is therefore void.
They also alleged that the notices were not sent two weeks prior to the meeting as required by law.
On the other hand, petitioners claimed that the stockholders' meeting and the elections were
conducted in accordance with the PSI's by-laws and the Corporation Code. The by-laws expressly
stated that notice of meetings shall be sent no less than 5 days prior to the date set for regular and
special meetings.
Both the RTC and CA ruled in favor of respondents nullifying the said stockholders'
meeting. In addition to the defect in the notice itself, the CA held that the notice was not sent to the
stockholders at least two (2) weeks prior to the meeting as required under Section 50 of the
Corporation Code. Hence this petition for review.
ISSUE:
May the by-laws validly prescribe a different period for the sending of the notice of meeting?
RULING:
Yes, the by-laws may validly prescribe a different period for the sending of the notice of
meeting.
Section 50 of the Corporation Code expressly prescribes an exception when it stated that
"written notice of regular meetings shall be sent to all stockholders or members of record at least
two (2) weeks prior to the meeting, unless a different period is required by the by-laws."
Under PSI's by-laws, notice of every regular or special meeting must be mailed or
personally delivered to each stockholder not less than five (5) days prior to the date set for the
meeting. PSI's by-laws providing only for a five (5)-day prior notice must prevail over the two (2)-
week notice under the Corporation Code.
Thus, the mailing of the Notice to respondents on March 5, 2002 calling for the annual
stockholders' meeting held in March 15, 2002 (10 days later) is not irregular, since it complies with
what was stated in PSI's by-laws.
16 |
ON MERCANTILE LAW
TOTAL OUTSTANDING CAPITAL STOCKS, WITHOUT DISTINCTION AS TO DISPUTED

OR UNDISPUTED SHARES OF STOCK, IS THE BASIS IN DETERMINING THE PRESENCE
OF QUORUM
Carolina Que Villongco, et al. vs. Cecilia Que Yabut, et al.

G.R. Nos. 225022 & 225024; February 5, 2018
Tijam, J.
FACTS:
These are two separate Petitions for Review on Certiorari appealing the decisions of the
CA annulling the annual stockholder's meeting held by the respondents for lack of proper quorum
and declaring the subsequent acts performed by respondents as ultra vires acts.
Carolina Que Villongco et al, comprising the majority of the Board of Directors of Phil-Ville
Development and Housing Corp. (Phil-Ville), held an emergency meeting in 2014 and passed a
resolution to postpone the 2014 annual stockholders' meeting until the a controversy regarding the
distribution of 3,140 shares of stocks in the name of certain stockholders is settled. The SEC and
all the stockholders were apprised of the resolution to postpone the meeting. Despite the
postponement, Yabut et al. proceeded with the scheduled annual stockholder's meeting which was
participated only by a few stockholders.
Villongco et al, thus filed the instant election case praying that the election of the Yabut et
al. as directors be declared void as the meeting had a lack of quorum. The lower courts found in
favor of Villongco et al, hence this appeal. Yabut et al. however assert that they were properly
elected as the basis for determining quorum is the total number of undisputed shares of stock.
ISSUE:
Are shares of stocks whose ownership is disputed excluded for purposes of determining
quorum?
RULING:
No, shares of stocks whose ownership is disputed are not excluded for purposes of
determining quorum.
It is settled that what may not be voted or considered in determining whether a quorum is
present in a stockholders' meeting are unissued stocks and treasury stocks. All voting stocks
actually issued and outstanding may be included in determining the quorum even if their ownership
is disputed. Thus, for stock corporations, the quorum is based on the number of outstanding voting
stocks.
It follows that the 200,000 outstanding capital stocks of Phil-Ville should be the basis for
determining the presence of a quorum, without any distinction. To constitute a quorum, the
presence of 100,001 shares of stocks in Phil-Ville was necessary. However, in the meeting that
elected Yabut et al., only 98,430 shares of stocks were present.
Therefore, no quorum was obtained, and Yabut et all were not validly elected.
| 17
ON MERCANTILE LAW
TRANSFER OF STOCK OF A CLOSE CORPORATION MADE IN BREACH OF

QUALIFYING CONDITIONS STILL VALID IF ALL STOCKHOLDERS ASSENTED
Rogelio M. Florete, Sr. vs. Marcelino M. Florete, Jr. et al.

G.R. No. 223321; April 02, 2018
Peralta, J.
FACTS:
This is a petition for review on certiorari seeking to reverse the CA decision that declared
void the conveyance of shares of respondents in favor of Rogelio M. Florete Sr. (Rogelio) for being
transferred violation of par. 7 of Marsal's Articles of Incorporation (AOI).
Marsal & Co., Inc. (Marsal) was organized as a close corporation by petitioners and
respondents. Among others, par. 7 of its AOI requires that in the sale of the shares of stock, any
stockholder who desires to sell his share of stock in the company must notify in writing the Board
of Directors (BOD) of his intention to sell.
Teresita Florete Menchavez (Teresita), one of the stockholders, died. Ephraim Menchavez
(Ephraim), Teresita's husband, was granted letters of administration. Ephraim then sold all the
shareholdings of Teresita in Marsal as well as her future inheritance from her parents to her
brother, petitioner Rogelio. Ephraim did not comply with the restrictions in Marsal’s AOI.
Seventeen years later, Marcelino Florete Sr. died and Rogelio was appointed as
administrator of the estate. Pursuant to Teresita’s sale to Rogelio of her shares in Marsal and her
interests in Marcelino’s Estate, Rogelio prepared a partition plan where he will receive ½ of
Marcelino’s estate, while the rest were adjudicated to respondents Ma. Elena and Marcelino Jr.
Among other oppositions, respondent sought to annul the sale of Teresita’s shares in Marsal in
favor of Rogelio on the ground that the same were in violation of par. 7 of Marsal's AOI, there being
no written notice to the BOD of the sale.
The RTC dismissed the complaint holding that since the transfer of shares was not to a
third person but to Rogelio who was also a shareholder of Marsal, the restriction on transfer in par.
7 of the AOI does not apply. Moreover, the respondents were bound by laches and estoppel as
they did not question the sale for almost 17 years. The CA however reversed the RTC hence this
appeal.
ISSUE:
Is the sale of Teresita’s shares valid despite having been sold without written notice to the
BOD of Marsal contrary to par. 7 of the AOI?
RULING:
Yes, the sale of Teresita’s shares was valid despite having been sold without the written
notice prescribed by the AOL of Marsal.
Under Section 99, even if a transfer of stocks in a close corporation is made in violation of
the restrictions enumerated in its AOI, by-laws, and stock certificates, such transfer will still be valid
if it has been consented to by all the stockholders of the close corporation, expressly or impliedly.
While it would appear that petitioner estate of Teresita, through its administrator Ephraim
and petitioner Rogelio, did not comply with the procedure on the sale of Teresita's Marsal shares
as stated under par. 7 of the AOI, it appears in the records however that the respondents had
nonetheless been informed of the sale and to which they are deemed to have already given their
consent by their silence of 17 years despite knowledge of such sale.
Therefore, the stocks may be registered in the name of petitioner Rogelio and the
corporation cannot refuse to register the transfer of stock in the name of the transferee.
18 |
ON MERCANTILE LAW
MERGER CANNOT BE PRESUMED; NOT ALL ACQUISITIONS OFA CORPORATION’S

ASSETS BY ANOTHER CORPORATION RESULTS IN MERGER
Bank of Commerce vs. Heirs of Rodolfo Dela Cruz

G.R. No. 211519; August 14, 2017
Bersamin, J.
FACTS:
This petition for review on certiorari originated from a complaint for collection of a sum of
money and damages filed by Rodolfo Dela Cruz against Pan Asia Banking, Inc. and Bank of
Commerce.
Rodolfo maintained a bank account with Pan Asia. He then discovered that Pan Asia
allowed his son, Allan Dela Cruz, to withdraw money from his account without his consent and/or
authority. Upon such discovery, Rodolfo sent a letter to Pan Asia stating that he did not authorize
Allan to make any withdrawals. Despite such instruction, Allan was still able to withdraw a total of
P56,223,066.07. Consequently, a suit for collection of a sum of money was instituted against Pan
Asia.
On July 2000, assets of Pan Asia were acquired by the Bank of Commerce pursuant to a
Purchase and Sale Agreement. Upon knowledge of this acquisition, Rodolfo impleaded the Bank
of Commerce as an additional defendant and sought to compel it to pay the liability of Pan Asia to
him. As a defense, Bank of Commerce claimed that it purchased from Pan Asia only selected
accounts and liabilities.
The RTC declared that Bank of Commerce and Pan Asia jointly and severally liable to the
late Rodolfo Dela Cruz. The trial court concluded that Pan Asia was negligent in its fiduciary
responsibility to Rodolfo by allowing Allan to withdraw from Rodolfo’s account despite lack of
authority. As BOC acquired Pan Asia’s assets, it also acquired its liabilities. The BOC appealed
the ruling on its liability but the CA affirmed the RTC’s decision.
ISSUE:
Is BOC not liable for Pan Asia liabilities despite purchasing the assets of Pan Asia?
RULING:
Yes, BOC cannot be held liable for Pan Asia’s liabilities despite purchasing its assets.
The RTC and CA unreasonably declared Bank of Commerce to be solidarily liable with
Pan Asia. The RTC should have required Dela Cruz to present evidence of the alleged merger,
including its terms, in view of Bank of Commerce’s specific denial of any merger between it and
Pan Asia. Merger is an act that cannot be assumed. Its details must be shown and its effects must
be based on the terms adopted by the parties concerned (through their respective boards of
directors) and approved by their respective stockholders and the SEC.
In this case, respondents did not present any evidence of merger, much less a certificate
of merger issued by the SEC. Thus, Bank of Commerce cannot be presumed to have undertaken
to acquire the liabilities of Pan Asia. Ergo, it cannot be held liable for Pan Asia’s liabilities.
Considering that the merger involves fundamental changes in the corporation, as well as
in the rights of the stockholders and the creditors, there must be an express provision of law
authorizing the merger. The merger does not become effective upon the mere agreement of the
constituent corporations, but upon the approval of the articles of merger by the Securities and
Exchange Commission issuing the certificate of merger as required by Section 79 of the
Corporation Code.
| 19
ON MERCANTILE LAW
CASES INVOLVING INTRA-CORPORATE DISPUTES ARE WITHIN THE ORIGINAL AND

EXCLUSIVE JURISDICTION OF THE REGIONAL TRIAL COURTS
Roberto V. San Jose and Delfin P. Angcao vs. Jose Ma. Ozamiz
G.R. No. 190590; July 12, 2017
Carpio, J.
FACTS:
In this petition for review on certiorari under Rule 45, petitioners Roberto San Jose and
Delfin Angcao appeal the decision of the CA which ruled that it is the RTC that has jurisdiction over
the present controversy.
Petitioner San Jose acted as both director and Corporate Secretary of Philcomsat Holdings
Corporation (PHC) while petitioner Angcao acted as Assistant Corporate Secretary. Sometime in
May 2007, a request for a copy of all the Minutes of the Meetings of the Board of Directors and
Executive Committee of PHC from 2000 to 2007 and certificate of completeness of said records
were requested by Ozamiz from petitioners. Despite the follow-ups done by Ozamiz’s secretary,
nothing happened.
On March 25, 2007, Ozamiz filed a complaint for inspection of books with the RTC, praying
that he be provided a copy of all the minutes of the meetings of directors, executive committee and
other committees of PHC from 2000 to 2007. Petitioners assert that PHC is 80.35% owned by
another corporation, Philippine Communications Satellite Corp., which is subject of a standing
sequestration order issued by the Presidential Commission on Good Government (PCGG). Thus,
the case should have been filed before the Sandiganbayan and not the RTC. They prayed that the
complaint be dismissed for lack of jurisdiction and for lack of merit.
The RTC ruled in favor of petitioners stating that Sandiganbayan has jurisdiction over all
incidents involving sequestered companies. On appeal, the CA reversed the order of the RTC on
the ground PHC is not the company under a writ of sequestration issued by the PCGG. As the
complaint was a simple intra-corporate dispute, the RTC had jurisdiction over it.
ISSUE:
Does the RTC have jurisdiction over a complaint against directors of a corporation which
is partly owned by another corporation that is under sequestration by the PCGG?
RULING:
Yes, the RTC has jurisdiction over the complaint.
The mere fact that a corporation's shares of stocks are owned by a sequestered
corporation does not, by itself, automatically categorize the matter as one involving sequestered
assets, or matters incidental to or related to transactions involving sequestered corporations and/or
their assets.
As the case merely involves a simple intra-corporate dispute, the case is within the
jurisdiction of the RTC. While PD No. 902-A conferred original and exclusive jurisdiction over intra-
corporate disputes to the Securities and Exchange Commission, this was transferred to the
appropriate RTC under Section 5.2 of RA No. 8799 (Securities Regulation Code) which provides
that all cases enumerated under Section 5 of Presidential Decree No. 902-A are transferred to the
Courts of general jurisdiction or the appropriate Regional Trial Court.
20 |
ON MERCANTILE LAW
A DISPUTE IS INTRACORPORATE WHEN AN INTRACORPORATE RELATION EXISTS

BETWEEN THE PARTIES AND THE NATURE OF THEIR DISPUTE INVOLVES RIGHTS
AND OBLIGATIONS UNDER THE CORPORATION CODE
Belo Medical Group, Inc. vs. Jose L. Santos and Victoria G. Belo
G.R. No. 185894; August 30, 2017
Leonen, J.
FACTS:
This is a Petition for Review under Rule 45 wherein Petitioner Belo Medical Group, Inc.
(Belo Medical Group) appeals the RTC’s Joint Resolution granting respondent Jose L. Santos'
(Santos) Motion to Dismiss and dismissed Belo Medical Group's Complaint for interpleader against
Santos and Victoria G. Belo (Belo).
On May 5, 2008, Belo Medical Group received a request from Santos for the inspection of
corporate records. Santos claimed that he was a registered shareholder and a co-owner of Belo's
shares, as these were acquired while they cohabited as husband and wife. Santos inquired on the
reason why he was not notified of corporate meetings in 2007 and 2008. Santos attempted to
inspect the corporate books and records of Belo Medical Group thrice for naught.
Belo contended that Santos had no right to inspect the books as he was not the owner of
the 25 shares of stock in his name and that he was acting in bad faith because he was a majority
owner of House of Obagi, a competitor. She further argued that the proceedings should not have
been classified as intra-corporate as the issue involves around the issue of co-ownership. On the
other hand, Santos asserted that based on the corporation's Articles of Incorporation and General
Information Sheet, he was reflected as a stockholder and the owner of the 25 shares of stock.
ISSUE:
Is there an intra-corporate dispute when the issue in the case is the right of inspection of a
shareholder whose shareholding is disputed by another shareholder?
RULING:
Yes, such a controversy is an intra-corporate dispute.
The SC uses the relationship test and the nature of the controversy test to determine if a
dispute is intra-corporate. Pursuant to the former test, if an intra-corporate relationship exists
between the parties, the issue is intra-corporate. The latter test states that it was not just the
relationship between the parties that mattered but also the conflict between them.
Applying the relationship test, Belo and Santos are both named shareholders in Belo
Medical Group’s AOI. This is not seriously disputed.
On the other hand, while it is true that the original complaint seeks a determination of the
true owner of the shares of stock registered in Santos' name, a study of the history of this case
shows that the ultimate goal of the respondents is to stop Santos from exercising his right to inspect
the corporate books of the Belo Medical Group. The ownership of the stocks registered in Santos’
name was merely disputed as a defense.
Therefore, for being a controversy between shareholders over the right of inspection, the
dispute is indubitably intra-corporate.
| 21
ON MERCANTILE LAW
INCIDENTS AND ISSUES THAT ARE ADJUNCTS OF A DISMISSED OFFICER’S

CORPORATE OFFICE MAKE A CONTROVERSY AN INTRACORPORATE
CONTROVERSY
Norma D. Cacho and North Star International Travel, Inc. vs. Virginia D. Balagtas
G.R. No. 202974; February 7, 2018
Leonardo-De Castro, J.
FACTS:
This a petition for review on certiorari under Rule 45 seeking to set aside the decision of
the CA which reversed the NLRC and affirmed the decision of the Labor Arbiter finding that
respondent Balagtas was illegally dismissed from North Star International Travel, Inc. and that the
case was not an intra-corporate controversy.
Respondent Balagtas was the General Manager of petitioner corporation and she was later
appointed as Executive Vice President/Chief Executive Officer. After 14 years of service, petitioner
was placed under 30 days preventive suspension due to some allegedly questionable transactions.
After being prevented from reassuming her position, respondent filed a complaint before the Labor
Arbiter contending that she was constructively and illegally dismissed from employment.
Petitioner asserts that since the respondent was a corporate officer, incorporator, and
member of the North Star's Board of Directors, the case is not a labor dispute but an intracorporate
controversy, and thus beyond the jurisdiction of the NLRC. Respondent, on the other hand, claims
that her position as EVP/CEO was a mere nomenclature as she was never empowered to exercise
the functions of a corporate officer. She claims that she was a mere employee of the corporation;
hence, jurisdiction of the case rests on the NLRC.
ISSUE:
Is the constructive dismissal of an Executive Vice President a labor dispute when it is based
on the alleged misappropriation of corporate funds handled by the officer under fiduciary duty?
RULING:
No, this is an intra-corporate case.
To determine whether a case is an intracorporate controversy, a two-tiered test must be

employed: (a) the relationship test, and (b) the nature of the controversy test. A dispute is
considered an intra-corporate controversy when, among others, it is one between the corporation
and its stockholders, partners, members, or officers. Then under the nature of the controversy test,
the disagreement must not only be rooted in the existence of an intra-corporate relationship, but
must as well pertain to the enforcement of the parties' correlative rights and obligations under the
Corporation Code and the internal and intra-corporate regulatory rules of the corporation.
Petitioner North Star’s by-laws clearly provide that there may be one or more vice president
positions all such positions shall be corporate offices. Thus, respondent Balagtas, as “Executive
Vice President” is a corporate officer. Then, it is also clear that the termination complained of is
intimately and inevitably linked to respondent Balagtas's role as petitioner North Star's corporate
officer: first, the alleged misappropriations were committed by respondent Balagtas in her capacity
as executive vice president; second, these alleged misappropriations were alleged to have
breached North Star's trust and confidence specifically reposed in respondent Balagtas as vice
president of the corporation.
That all these incidents are adjuncts of her corporate office leads the Court to conclude
that respondent Balagtas's dismissal is an intra-corporate controversy, not a mere labor dispute.
22 |
ON MERCANTILE LAW
A CORPORATION MAY REDEEM A MORTGAGE ESTABLISHED PRIOR TO ITS

DISSOLUTION; IF THE MORTGAGE WAS ESTABLISHED AFTER ITS DISSOLUTION,
BOTH THE MORTGAGE AND ANY REDEMPTION MADE ON THE BASIS OF SUCH
MORTGAGE ARE VOID
Dr. Gil J. Rich vs. Guillermo Paloma III, et al.

G.R. No. 210538; March 7, 2018
Reyes Jr., J.
FACTS:
Petitioner Dr. Gil Rich filed this Petition for Review under Rule 45 to challenge the
Decision and Resolution of the CA which reversed and set aside the decision of the RTC which
had ruled that the redemption made by respondents was invalid.
Petitioner had lent a sum of money to his brother, Estanislao Rich (Estanislao), secured
by a real estate mortgage over a parcel of land. Due to Estanislao’s failure to make good of his
obligations, petitioner foreclosed the mortgaged property, acquiring said property as the highest
bidder in the subsequent public auction sale and, was issued a Certificate of Sale as
Purchaser/Mortgagee. Apparently, Estanislao had established a second mortgage on the same
property in favor of Maasin Traders Lending Corporation (MTLC). Thus, respondent Servacio, on
behalf of MTLC, exercised equitable redemption over the same property and was issued a Deed
of Redemption. It seems however that at the time the second mortgage and equitable redemption
were made, MTLC was already a dissolved corporation.
Petitioner thus questioned the validity of the redemption, arguing that MTLC no longer has
juridical personality to enter into the mortgage or exercise any equitable right of redemption.
ISSUE:
Is a mortgage and exercise of redemption by a dissolved corporation void?
RULING:
Yes, a mortgage and exercise of redemption by a dissolved corporation is void.
Section 122 of the Corporation Code empowers every dissolved corporation to continue
as a body corporate for three years after the time when it would have been dissolved only for the
purposes of "prosecuting and defending suits by or against it and enabling it to settle and close its
affairs, to dispose of and convey its property and to distribute its assets."
If MTLC had agreed to the mortgage prior to the dissolution, then the second mortgage
would have been validly established. A redemption, even if effected after the dissolution, would be
valid. However, since MTLC entered into the mortgage with Estanislao on January 24, 2005, after
its dissolution in September 2003, the mortgage is invalid as MTLC did not have any juridical
capacity to accept the mortgage. Consequently, no right of redemption can be exercised based on
void mortgage.
Ergo, MTLC’s redemption of Estanislao’s property on the basis of a void mortgage is

likewise void and without effect.
| 23
ON MERCANTILE LAW
MONETARY BOARD IS NOT REQUIRED TO MAKE AN INDEPENDENT

DETERMINATION OF WHETHER A BANK MAY STILL BE REHABILITATED
Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas Deposit Corp.
G.R. No. 214866; October 2, 2017
Perlas-Bernabe, J.
FACTS:
In a petition for review on certiorari under Rule 45, petitioner Apex Bancrights Holdings,
Inc. (Apex) appeals the Decision of CA, which affirmed the Resolution of the Monetary Board of
respondent Bangko Sentral ng Pilipinas (BSP) ordering the liquidation of the Export and Industry
Bank (EIB).
EIB entered a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp Investments,
Inc. (UII). However, EIB encountered financial difficulties which prompted the BSP, through the
Monetary Board, to issue a Resolution prohibiting EIB from doing business and placing it under
the receivership of PDIC, in accordance with Sec. 30 of the New Central Bank Act.
Apex, who are stockholders representing the majority stock of EIB, insist that the Monetary
Board must first make its own independent finding that the bank could no longer be rehabilitated -
instead of merely relying on the findings of the PDIC - before ordering the liquidation of a bank.
The BSP however, maintained that it had ample factual and legal bases to order EIB's liquidation.
ISSUE:
Is the BSP, through the Monetary Board, required to make an independent determination
of whether a bank may still be rehabilitated or not?
RULING:
No, the Monetary Board is not required to make an independent determination of whether
a bank may still be rehabilitated.
Nothing in Section 30 of R.A. No. 7653 requires the BSP, through the Monetary Board, to
make an independent determination of whether a bank may still be rehabilitated or not. As
expressly stated in the said provision, once the receiver determines that rehabilitation is no longer
feasible, the Monetary Board is simply obligated to: (a) notify in writing the bank's board of directors
of the same; and (b) direct the PDIC to proceed with liquidation.
Here, the resolution ordering the liquidation of EIB cannot be said to be tainted with grave
abuse of discretion as it was amply supported by the factual circumstances at hand and made in
accordance with prevailing law and jurisprudence.
Hence, petitioner is mistaken to contend that the Monetary Board must make its own
independent determination to affirm the receiver’s findings.
24 |
ON MERCANTILE LAW
A CLOSED BANK MAY SUE AND BE SUED ONLY THROUGH ITS RECEIVER: THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION
Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas and the Monetary
Board
G.R. No. 200678; June 04, 2018
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari, appealing the CA’s decision and resolution ruling
that the trial court had no jurisdiction over petitions for certiorari under Rule 65 assailing the acts
of the Bangko Sentral (BSP), particularly of the Monetary Board (MB).
In a controversy involving the existence and legality of conditions imposed by the

respondents on Banco Filipino Savings and Mortgage Bank (Banco Filipino) for financial
assistance, Banco Filipino filed a Petition for Certiorari with prayer for issuance of TRO before the
RTC on October 20, 2010, assailing the acts of the BSP and MB. The RTC issued the TRO prayed
for so the respondents in turn filed its own petition for certiorari before the CA alleging that the
RTC’s TRO was issued without jurisdiction.
While the petition before the CA was pending, the CA promulgated a decision on a
separate case, dated January 27, 2012, (Separate Case) where it declared that Banco Filipino had
been illegally closed. Then on February 16, 2012, the CA affirmed that the RTC had no jurisdiction
over the original petition for certiorari. Thus, on April 10, 2012, the petitioner filed this appeal from
the CA’s February 16 decision.
However, while this appeal was pending, the CA reconsidered its own ruling on the
Separate Case, and ruled that Banco Filipino was a closed bank under receivership. Thus,
considering the turn of events, the respondents raised the question of whether this present appeal
is proper when it was filed without joining the Philippine Deposit Insurance Corporation (PDIC), as
an indispensable party.
ISSUE:
Can Banco Filipino, as a closed bank under receivership, file a Petition for Review without
joining its statutory receiver, the PDIC, as a party to the case?
RULING:
No, a closed bank under receivership can only sue or be sued through its receiver, the
PDIC.
Considering that the receiver has the power to take charge of all the assets of the closed
bank and to institute for or defend any action against it, only the receiver, in its fiduciary capacity,
may sue and be sued on behalf of the closed bank. 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
which is authorized to conserve the latter's property for the benefit of its creditors.
Banco Filipino cannot rely on the January 27, 2012 decision of the CA (on the Separate
Case) as the same had not become final and executory at the time this appeal was filed. Thus,
despite the pendency of such case, Banco Filipino was still deemed to be a closed bank under
receivership.
Moreover, it was speculative on petitioner's part to presume the PDIC might not allow the
suit. If the PDIC refused, the PDIC could have been joined as a respondent (unwilling co-petitioner)
Since petitioner’s case involved matters that could have affected the status of its insolvency, the
PDIC’s participation was necessary for the discharge of its duty as receiver.
Ergo, the PDIC should have been joined in Banco Filipino’s action as Banco Filipino
was still presumed to be a closed bank under receivership.
| 25
ON MERCANTILE LAW
THE PDIC IS EXERCISING QUASI-JUDICIAL FUNCTIONS WHEN IT DENIES DEPOSIT

INSURANCE CLAIMS
Spouses Kishore Ladho Chugani and Prisha Kishore Chugani, et al. vs. Philippine Deposit
Insurance Corporation
G.R. No. 230037; March 19, 2018
Tijam, J.
FACTS:
This is an petition for review on certiorari seeking to correct the CA’s ruling that the proper
forum for the petition for certiorari assailing the PDIC’s denial of a deposit insurance claim is the
CA and not the RTC.
Petitioners allege that they had Time Deposit Accounts with Rural Bank of Mawab (Davao)
Inc. (RBMI). Sometime in September 2011, petitioners came to know that the Monetary Board of
the Bangko Sentral ng Pilipinas placed RBMI under receivership and thereafter closed the bank.
Petitioners thus filed claims for deposit insurance on their time deposits.
Respondent Philippine Deposit Insurance Corporation (PDIC) denied the claims on the
following grounds: 1) based on bank records submitted by RBMI, petitioners' deposit accounts are
not part of RBMI's outstanding deposit liabilities; 2) the time deposits of petitioners are fraudulent
and the Certificates of Time Deposit (CTDs) were not duly issued by RBMI, but were mere replicas
of unissued CTD's in the inventory submitted by RBMI to PDIC; and 3) the amounts purportedly
deposited by the petitioners were credited to the personal account of as certain Garan, hence, they
could not be construed as valid liabilities of RBMI. Petitioners filed a request for reconsideration of
PDIC's denial of their claim. PDIC however rejected the same.
Petitioners thus filed a petition for certiorari before the RTC but it was dismissed for lack of
jurisdiction. The CA likewise denied the appeal of the petitioners holding that the RTC is correct
since the PDIC is a quasi-judicial agency, a petition for certiorari to assail the PDIC’s denial of a
deposit insurance claim is within the original and exclusive jurisdiction of the CA.
ISSUE:
Did the CA err in holding the the PDIC exercises quasi-judicial power when it denies
deposit insurance claims?
RULING:
No, the CA did not err because the PDIC is a quasi-judicial agency and therefore a Petition
for Certiori to assail its decisions is within the jurisdiction of the CA and not of the RTC.
The PDIC was created by Republic Act (R.A.) No. 3591 on June 22, 1963 as an insurer of
deposits in all banks entitled to the benefits of insurance under the PDIC Charter to promote and
safeguard the interests of the depositing public by way of providing permanent and continuing
insurance coverage of all insured deposits.
Based on its charter, the PDIC has the duty to grant or deny claims for deposit insurance.
The PDIC has the power to prepare and issue rules and regulations to effectively discharge its
responsibilities. The power of the PDIC as to whether it will deny or grant the claim for deposit
insurance based on its rules and regulations partakes of a quasi-judicial function.
Also, R.A. No. 3591, as amended, provides that decisions of the PDIC with respect to
deposit insurance shall be final and executory. Such decisions therefore can only be set aside by
a petition for certiorari.
26 |
ON MERCANTILE LAW
THE PDIC IS DEEMED A QUASI-JUDICIAL AGENCY FOR PURPOSES OF FILING A

PETITION FOR CERTIORARI ASSAILING ITS DENIAL TO PAY A CLAIM FOR DEPOSIT
INSURANCE SUCH THAT THE PETITION SHOULD BE FILED WITH THE COURT OF
APPEALS
Peter L. So vs. Philippine Deposit Insurance Corporation

G.R. No. 230020; March 19, 2018
Tijam, J.
FACTS:
This is a petition for review on certiorari under Rule 45, seeking to correct that RTC’s
perceived error on a pure question of law that the it does not have jurisdiction over petitions for
certiorari assailing the PDIC’s denial of a deposit insurance claim.
Peter L. So, petitioner, had opened a deposit account with the Cooperative Rural Bank
Bulacan (CRBB), with an initial deposit of P300,000, for which he was assigned a Special Incentive
Savings Account (SISA). On the same year, however, petitioner learned that CRBB closed its
operations and was placed under Philippine Deposit Insurance Corporation's (PDIC's)
receivership. This prompted petitioner, together with other depositors, to file deposit insurance
claims with the PDIC. Upon investigation, the PDIC found that petitioner's account was among
those subject to account splitting which is prohibited by law. Thus, the PDIC denied petitioner's
claim for payment of deposit insurance. Petitioner filed a Petition for certiorari under Rule 65 before
the RTC after its Request for Reconsideration was denied by the PDIC. The RTC however
dismissed the petition on the ground of lack of jurisdiction, hence this Rule 45 petition on a pure
question of law.
ISSUE:
Does the RTC have jurisdiction over a petition for certiorari assailing the PDIC's denial of
a deposit insurance claim?
RULING:
No, the RTC does not have jurisdiction over the petition filed against PDIC’s decision.
The rule on where the petition for certiorari should be filed is under Section 4, Rule 65 of
the Rules, “xxx if the petition involves an act or an omission of a quasi-judicial agency, unless
otherwise provided by law or these rules, the petition shall be filed with and be cognizable only by
the Court of Appeals.” Clearly, a petition for certiorari, questioning the PDIC's denial of a deposit
insurance claim should be filed before the CA, not the RTC.
The Court has laid down the test for determining whether an administrative body is
exercising judicial or merely investigatory functions: adjudication signifies the exercise of the power
and authority to adjudicate upon the rights and obligations of the parties. Hence, if the only purpose
of an investigation is to evaluate the evidence submitted to an agency based on the facts and
circumstances presented to it, and if the agency is not authorized to make a final pronouncement
affecting the parties, then there is an absence of judicial discretion and judgment.
The legislative intent in creating PDIC as a quasi-judicial agency is clearly manifest.

Indeed, PDIC exercises judicial discretion and judgment in determining whether a claimant is
entitled to a deposit insurance claim, which determination results from its investigation of facts and
weighing of evidence presented before it. Noteworthy also is the fact that the law considers PDIC's
action as final and executory and may be reviewed only on the ground of grave abuse of discretion.
Therefore, it is the CA which has jurisdiction over a petition for certiorari filed to question
the PDIC's action.
| 27
ON MERCANTILE LAW
BY THEIR VERY DEFINITIONS, COPYRIGHT AND TRADE NAME OR SERVICE NAME

ARE DIFFERENT
Fernando U. Juan vs. Roberto U. Juan and Laundromatic Corporation

G.R. No. 221732; January 23, 2017
Peralta, J.
FACTS:
In this petition for review under Rule 45, petitioner Fernando U. Juan (Fernando) seeks to
reverse and set aside the decision and resolution of the CA that dismissed his appeal from the
RTC.
Respondent Roberto U. Juan (Roberto) claimed that he began using the name and mark
“Lavandera Ko” in his laundry business on July 4, 1994. Thereafter, the National Library issued to
him a certificate of copyright over the said name and mark. He then formed a corporation
Laundromatic Corporation (Laundromatic) in 1997 to manage the business. Meanwhile
“Lavandera Ko” was registered as a business name in 1998 with the SEC. Thereafter, Roberto
discovered that his brother, petitioner Fernando was able to register the same name and mark with
the Intellectual Property Office (IPO) on October 18, 2001.
Thus, respondent Roberto filed a complaint before the RTC arguing that his copyright over
the mark gave him exclusive rights to its use. The RTC rendered a Resolution dismissing the
petition and ruling that neither of the parties had a right to the exclusive use or appropriation of the
mark "Lavandera Ko" because the same was the original work of a certain Santiago S. Suarez.
According to the RTC, the mark in question was created by Suarez in 1942 in his musical
composition called, "Lavandera Ko" and both parties of the present case failed to prove that they
were the originators of the same mark. Fernando thus elevated the case to the CA where he
contended that a trademark is different from a copyright and are not interchangeable. Ergo, his
use of the phrase as a trademark gave him priority and exclusive right to use. The CA however
found no merit in the argument and dismissed the appeal hence this petition for review.
ISSUE:
Is a trademark different from a copyright?
RULING:
Yes, copyrights are not the same as trademarks or service marks. The law on trademarks,
service marks and trade names are found under Part III of the Republic Act No. 8293, while Part
IV of the same law governs copyrights.
By their very definitions, copyright is the right of literary property while trade name is any
designation which (a) is adopted and used by person to denominate goods which he markets, or
services which he renders, or business which he conducts, or has come to be so used by other,
and (b) through its association with such goods, services, or business, has acquired a special
significance as the name thereof, and (c) the use of which for the purpose stated in (a) is prohibited
neither by legislative enactment nor by otherwise defined public policy.
Therefore, “Lavendera Ko”, when used as a service name, is not protected by a copyright
of either Suarez or Roberto since the business to which it pertains involves the rendering of laundry
services. The phrase protected under the copyright law is part of a musical composition. A
copyright protection cannot be extended to protect the same words or phrases as trademarks.
28 |
ON MERCANTILE LAW
GENERIC TERMS ARE NOT REGISTRABLE WHILE SUGGESTIVE TERMS ARE

REGISTRABLE; “DE LA SALLE” IS A SUGGESTIVE TERM
De La Salle Montessori International of Malolos, Inc. vs. De La Salle Brothers, Inc. et al.
G.R. No. 205548; February 7, 2018
Jardeleza, J.
FACTS:
Petitioner De La Salle Montessori International of Malolos, Inc. filed this petition for review
under Rule 45 to appeal the CA’s Decision affirming the respective decisions of the SEC En Banc
and the SEC Office of the General Counsel directing the petitioner to change its corporate name.
Petitioner reserved with the SEC its corporate name “De La Salle Montessori International
Malolos, Inc.” from June 4 to August 3, 2007. On January 29, 2010, respondents De La Salle
Brothers, Inc., and other members of the “La Salle” group filed a petition with the SEC seeking to
compel petitioner to change its corporate name.
Respondents claim that petitioner's corporate name is misleading or confusingly similar to

the names over which they have acquired a prior right to use. According to respondents,
petitioner's use of the dominant phrases "La Salle" and "De La Salle" gives an erroneous
impression that petitioner is part of the "La Salle" group. Also, being the prior registrants,
respondents have acquired exclusive rights to use of said phrases as part of their corporate names.
Petitioner, in response, invokes the case of Lyceum of the Philippines, Inc. v. Court of
Appeals for having similar facts, where the SC held that Lyceum of the Philippines, Inc. cannot
claim exclusive use of the name “lyceum.”
ISSUE:
Are the terms “La Salle” and “De La Salle” generic as to be incapable of appropriation?
RULING:
No, the terms “La Salle” and “De La Salle” are suggestive terms which indicate that the
user is part of the “La Salle” group of schools.
Generic terms are those which constitute "the common descriptive name of an article or
substance," or comprise the "genus of which the particular product is a species," or are "commonly
used as the name or description of a kind of goods," or "characters," or "refer to the basic nature
of the wares or services provided rather than to the more idiosyncratic characteristics of a particular
product," and are not legally protectable. A suggestive mark, however, is a word, picture, or other
symbol that suggests, but does not directly describe something about the goods or services in
connection with which it is used as a mark and gives a hint as to the quality or nature of the product.
Suggestive trademarks therefore can be distinctive and are registrable.
The phrase "De La Salle" is not merely a generic term. Respondents' use of the phrase is
entitled to legal protection. The Court notes that both parties are private educational institutions
offering pre-elementary, elementary, and secondary courses. Petitioner's name thus gives the
impression that it is a branch or affiliate of respondents. It is settled that proof of actual confusion
need not be shown. It suffices that confusion is probable or likely to occur.
Ergo, it is correct to require petitioner to change its corporate name.
| 29
ON MERCANTILE LAW
THERE IS NO LIKELIHOOD OF CONFUSION EVEN IF COMPETING MARKS DIFFER ON

JUST 2 LETTERS WHEN THE EYES AND EARS OF THE CONSUMER WOULD NOT
MISTAKE THE TWO MARKS DUE TO SIGNIFICANT VISUAL AND PHONETIC
DIFFERENCES
Société Des Produits, Nestlé, S.A. vs. Puregold Price Club, Inc.
G.R. No. 217194; September 6, 2017
Carpio, J.
FACTS:
This is a petition for review on certiorari appealing the May 15, 2014 Resolution and the
October 14, 2014 Resolution of the Court of Appeals (CA) dismissing the appeal of Société Des
Produits, Nestlé, S.A.’s (Nestle) on procedural grounds.
The case began when Nestle filed an opposition to Puregold Price Club’s (Puregold)
application for registration of the “COFFEE-MATCH” mark. Nestle alleged that it is the exclusive
owner of the “COFFEE-MATE” trademark and that there is confusing similarity between the
“COFFEE-MATE” and “COFFEE-MATCH”.
The Bureau of Legal Affair-Intellectual Property Office (BLA-IPO) dismissed Nestle’s

opposition. The BLA-IPO ruled that while both Nestle’s “-MATE” and Puregold’s “-MATCH” contain
the same first three letters, the last two in Puregold’s mark rendered a visual and aural character
that makes it easily distinguishable from Nestle’s mark. The Office of the Director General of the
Intellectual Property Office (ODG-IPO) and the Court of Appeals both dismissed Nestle’s appeal
on the same grounds hence this petition for review.
ISSUE:
Is Puregold’s “COFFEE-MATCH” mark identical with Nestle’s “COFFEE-MATE” mark as it
would indicate connection and confusing similarity between the two goods?
RULING:
No, Puregold’s “COFFEE-MATCH” mark is not identical with Nestle’s “COFFEE-MATE”
mark.
In determining similarity or likelihood of confusion, our jurisprudence has developed two

tests: the dominancy and the holistic test. The dominancy test focuses on the similarity of the
prevalent features of the competing trademarks that might cause confusion and deception. In
contrast, the holistic test entails a consideration of the entirety of the marks as applied to the
products, including the labels and packaging, in determining confusing similarity.
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 rendered a visual and
aural character that made it easily distinguishable from Nestle’s mark. Also, there is a phonetic
difference in pronunciation between Nestle’s “-MATE” and Puregold’s “-MATCH”.
Therefore, the eyes and ears of the consumer would not mistake Nestle’s product for
Puregold’s product. The IPO and the CA did not err and the petition is denied.
30 |
ON MERCANTILE LAW
MERE USE OF REGISTERED MARK ON WEBSITES IS NOT ACTUAL USE AS

CONTEMPLATED BY THE IPC UNLESS IT IS SHOWN THAT THE USE PRODUCES A
DISCERNABLE COMMERCIAL EFFECT OR ACTIVITY IN THE PHILIPPINES
W Land Holdings vs. Starwood Hotels

G.R. No. 222366; December 4, 2017
Perlas-Bernabe, J.
FACTS:
This is an appeal from the decision of the CA affirming the Director General of the IPO
finding that respondent’s use of the “W” mark on its websites constituted sufficient use as to
maintain its registration over the same.
On May 29, 2009, W Land Holdings (W Land) filed a Petition for Cancellation of Starwood
Hotel's (Starwood) “W” mark for non-use under Section 151.1 of the IP Code. It claimed that
Starwood has failed to use its mark in the Philippines because it has no hotel or establishment in
the Philippines rendering the services covered by its registration.
Starwood denied having abandoned the subject mark on the ground of non-use, asserting
that it filed with the Director of Trademarks a notarized Declaration of Actual Use (DAU) with
evidence of use on December 2, 2008. In addition, Starwood argued that it conducts hotel and
leisure business both directly and indirectly through subsidiaries and franchisees, and operates
interactive websites for its “W Hotels” in order to accommodate its potential clients worldwide.
According to Starwood, apart from viewing agents, discounts, promotions, and other marketing
fields being offered by it, these interactive websites allow Philippine residents to make reservations
and bookings.
The BLA ordered the cancellation of Starwood’s mark arguing that using said marks on
websites accessible from anywhere in the world does not constitute use within the Philippines. On
appeal, the Director General set aside the BLA order and dismissed Starwood’s petition. The
Director General held that use of the mark on the interactive website is sufficient to indicate actual
use in the Philippines citing Rule 205 Trademark Regulations. The CA affirmed him, hence, this
petition.
ISSUE:
Does use of a mark on an interactive website constitute actual use of a mark?
RULING:
Yes, the IP Code and the Trademark Regulations have not specifically defined "use."
However, it is understood that the "use" which the law requires to maintain the registration of a
mark must be genuine, and not merely token. Genuine use may be characterized as a bona fide
use which results or tends to result, in one way or another, into a commercial interaction or
transaction "in the ordinary course of trade." Moreover, the use of the mark must be "within the
Philippines."
Mere use of a mark on a website which can be accessed anywhere in the world will not
automatically mean that the mark has been used in the ordinary course of trade of a particular
country. However, the use of mark on the internet may considered as bona fide use in trade if it is
shown to result in a within-State sale, or at the very least, it discernibly intended to target customers
that reside in that country.
In this case, Starwood has proven that it owns Philippine registered domain names, i.e.,
www.whotels.ph, www.wreservations.ph, www.whotel.ph, www.wreservation.ph, for its website
that showcase its mark. These interactive websites are clearly intended to produce a discernable
commercial effect or activity within the Philippines, or at the very least, seeks to establish
commercial interaction with local consumers. Therefore, this is sufficient to constitute actual use.
| 31
ON MERCANTILE LAW
THE CLASSIFICATION OF GOODS UNDER SEPARATE CLASSES IN THE NICE

CLASSIFICATION IS A CONCLUSIVE INDICATOR THAT THEY ARE UNRELATED
GOODS AND REGISTRATION OF A MARK FOR USE IN ONE CLASS DOES NOT EXTEND
TO USE IN OTHER CLASSES NOT COVERED BY THE REGISTRATION
Kensonic, Inc. Vs. Uni-Line Multi-Resources, Inc. (Phil.)

G.R. Nos. 211834-35; June 6, 2018
Bersamin, J.
FACTS:
This is an appeal seeking to reverse the CA’s ruling which upheld the Director General of
the IPO who found that respondent Uni-Line can validly register the “SAKURA” Mark for products
under Classes 7 and 11 of the Nice Classification.
On June 6, 2002, Uni-Line filed an application for the registration of the trademark SAKURA
for use on several lines of home appliances under Classes 7, 9, and 11 of the Nice Classification.
Kensonic opposed Uni-Line's application on the ground that it had prior use and registration of the
SAKURA mark since October 1994.
The Bureau of Legal Affairs (BLA) Director thus cancelled Uni-Line's certificate of
registration. It observed that the marks were confusingly similar with each other. He also found
that the goods sought to be covered by Uni-Line’s registration of were related to the goods of
Kensonic under Class 9. On appeal, the Director General of the IPO (DG) reversed the BLA and
and reinstated Uni-Line's registration of the SAKURA mark but only as to goods classified under
Classes 7 and 11, limiting the cancellation to its registration under class 9. Hence, both parties
appealed to the CA.
The CA substantially upheld the ruling of the DG, holding that since Kensonic’s registration
only covers products under Class 9, Uni-line may register the same mark for products under Class
7 and 11. Hence, this appeal. Uni-line insists that products under Class 7 and 11 are related to
Class 9 products, or are at least within the natural zone of expansion of its business.
ISSUE:
Do Kensonic's goods falling under Class 9 be deemed related to UniLine's goods falling
under Classes 7 and 11 as they all constitute home appliances?
RULING:
No, Uni-Line’s goods classified under Classes 7 and 11 are not related to Kensonic’s goods
registered under Class 9.
The prohibition under Section 123 of the Intellectual Property Code extends to goods that
are related to the registered goods, not to goods that the registrant may produce in the future.
Among other factors, the fact that that the goods of Uni-Line are categorically classfied
under different classes from those of Kensonic under the Nice Classification already mean that
these products are not related. Moreover, a perusal of the products of the two parties show clear
differences in descriptive attribues as well as the purposes and the conditions of the goods.
As Kensonic’s registration of the mark only covers products under Class 9, it can only claim
a limited prior right. The fact that Kensonic may produce products under Classes 7 and 11 in the
future is immaterial if it failed to register the mark for those classes. Uni-line therefore now has the
prior right to use the mark for products under Classes 7 and 11.
32 |
ON MERCANTILE LAW
THE QUESTION IN INFRINGEMENT CASES IS WHETHER THE USE OF THE MARKS

INVOLVED IS LIKELY TO CAUSE CONFUSION OR MISTAKE IN THE MIND OF THE
PUBLIC OR TO DECEIVE CONSUMERS
Citigroup, Inc. vs. Citystate Savings Bank, Inc.

G.R. No. 205409; June 13, 2018
Leonen, J.
FACTS:
This is a petition for review on certiorari appealing the August 2012 Decision and the
January 2013 Resolution of the Court of Appeals (CA) finding no likelihood of confusion in the use
of the marks in controversy.
The ATM cards issued by Citibank N.A. (Citibank), Philippine Branch and Citibank Savings,
Inc. are labelled "CITICARD". The trademark CITICARD is owned by Citibank and is registered in
the Intellectual Property Office (IPO) of the Philippines.
On the other hand, a group of Filipinos and Singaporean companies formed a consortium
to establish respondent Citystate Savings Bank, Inc (Citystate). Respondent's registered mark has
in its name affixed a lion's head, which is likened to the national symbol of Singapore, the Merlion.
In line with this, respondent filed an application for registration with the IPO of the trademark "CITY
CASH WITH GOLDEN LION'S HEAD" for its ATM card service.
Citigroup, Inc. (Citigroup) filed an opposition to Citystate's application claiming that the
"CITY CASH WITH GOLDEN LION'S HEAD" mark is confusingly similar to its own "CITI" marks.
The Director of the Bureau of Legal Affairs of the IPO rendered a decision in favor of the petitioner,
but the Office of the Director General of the IPO reversed the decision. Citigroup’s appeal to the
CA was denied upon the finding that Citystate's mark was not confusingly similar to Citigroup's
marks. Hence, this petition for review on certiorari.
ISSUE:
Is Citystate’s "CITY CASH WITH GOLDEN LION'S HEAD" mark confusingly similar to
Citigroup’s “CITI” mark?
RULING:
No, the "CITY CASH WITH GOLDEN LION'S HEAD" mark will not result in the likelihood
of confusion in the minds of customers.
The dominancy test focuses on the similarity of the prevalent features of the competing
trademarks that might cause confusion and deception, thus constituting infringement. If the
competing trademark contains the main, essential, and dominant features of another, and
confusion or deception is likely to result, infringement occurs. Exact duplication or imitation is not
required. The question is whether the use of the marks involved is likely to cause confusion or
mistake in the mind of the public or to deceive consumers.
A visual comparison of the marks reveals no likelihood of confusion. The Court considered
"the main, essential, and dominant features" of the marks in this case, as well as the contexts in
which the marks are to be used. Applying the dominancy test, the Court sees that the prevalent
feature of respondent's mark, the golden lion's head device, is not present at all in any of
petitioner's marks. The only similar feature between respondent's mark and petitioner's collection
of marks is the word "CITY" in the former, and the "CITI" prefix found in the latter.
| 33
ON MERCANTILE LAW
SWITCHING FROM A BOX PACKAGING TO ONE THAT IS SIMILAR TO THAT OF THE

COMPETITOR’S PRODUCT, COUPLED WITH THE USE OF SIMILAR TRADEMARKS ON
SAID PACKAGING CONSTITUTES TRADEMARK INFRINGEMENT AND UNFAIR
COMPETITION
San Miguel Pure Foods Co., Inc. vs. Foodsphere, Inc.

G.R. No. 217781; June 20, 2018
Peralta, J.
FACTS:
These are consolidated cases for petition for review on certiorari under Rule 45 which
questions the Decision and Resolutions of the CA declaring Foodsphere, Inc. (Foodsphere) not
liable for unfair competition and trademark infringement.
Petitioner San Miguel Pure Foods Co. (San Miguel) filed a complaint for trademark
infringement and unfair competition against Foodsphere. San Miguel alleged that the mark and
products of Foodsphere, namely its "PISTA" ham, was strikingly similar with its trademark
"PUREFOODS FIESTA HAM".
Furthermore, San Miguel alleged that Foodsphere is likewise guilty of unfair competition
because Foodsphere switched from a box packaging to a paper ham bag packaging. Thus, there
is confusing similarity in the general appearance of the packaging of the goods of the parties and
a clear intent on the part of Foodsphere to deceive the public and defraud San Miguel.
The Bureau of Legal Affairs dismissed San Miguel’s Petition while Office of the Director
General only partially granted San Miguel’s appeal. Unsatisfied, San Miguel elevated the matter to
the CA which only affirmed the ruling of the Director General on the absence of trademark
infringement.
ISSUES:
Did respondents shift to a packaging similar to that of a competitor coupled with the use of
similar trademarks constitute infringement and unfair competition?
RULING:
Yes, Foodsphere is of guilty of trademark infringement and unfair competition.
The "true test" of unfair competition is "whether the acts of the defendant have the intent
of deceiving or are calculated to deceive the ordinary buyer making his purchases under the
ordinary conditions of the particular trade to which the controversy relates."
Foodsphere's intent is evidenced by the fact that not only did Foodsphere switch from its
old box packaging to the same paper ham bag packaging as that used by San Miguel, it also used
the same layout design printed on the ham bag. Records show that there exists a substantial and
confusing similarity in the packaging of Foodsphere's product with that of San Miguel.
Foodsphere's packaging in its entirety, and not merely its "PISTA" mark thereon, renders
the general appearance thereof confusingly similar with the packaging of San Miguel's ham, that
would likely influence purchasers to believe that these products are similar, if not the same, as
those of San Miguel.
Ergo, Foodsphere is guilty of infringing the “FIESTA HAM” mark and unfair competition
when it switch to using paper ham bags as its product packaging.
34 |
ON MERCANTILE LAW
DOMINANCY TEST HAS BEEN INCORPORATED IN SECTION 155. 1 OF THE

INTELLECTUAL PROPERTY CODE AND FOCUSES ON THE DOMINANT FEATURES OF
THE MARKS BEING COMPARED
ABS-CBN Publishing, Inc. vs Director of the Bureau of Trademarks

G.R. No. 217916; June 20, 2018
Reyes Jr., J.
FACTS:
This is an appeal from the decision of the CA upholding the findings of the IPO that the
“METRO” mark of petitioner was not registrable for being identical to marks already registered.
In 2004, petitioner ABS-CBN Publishing filed with the Intellectual Property Office of the
Philippines (IPOPHIL) its application for the registration of its trademark "METRO" (applicant mark)
under class 16 of the Nice Classification, with specific reference to "magazines." The case was
assigned to Examiner Arlene M. Icban (Examiner Icban), who, after a judicious examination of the
application, refused the applicant mark's registration because the applicant mark is identical with
three other registered marks, and is therefore unregistrable according to Section 123.1(d) of the
Intellectual Property Code of the Philippines (IPC).
Both the Director of the Bureau of Trademarks and the Director General, in successive
appeals, upheld the finding of Examiner Icban that the applicant mark and the registered marks
were indeed confusingly similar, so much so that there not only will there be a likelihood of
confusion as to the goods but also a confusion as to the source or origin of the goods.
ISSUE:
Was the Director General correct in uphold the findings of Examiner Icban and the Bureau
Director that the applicant mark is identical and confusingly similar with the marks already
registered with the IPO?
RULING:
Yes, the trend has been to veer away from the usage of the holistic test and to focus more
on the usage of the dominancy test as the primary test of infringment. As stated by the Court in
McDonald's Corporation vs. L.C. Big Mak Burger, Inc., the "test of dominancy is now explicitly
incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement
as the colorable imitation of a registered mark or a dominant feature thereof. In using this test,
focus is to be given to the dominant features of the marks in question.
To commit the infringing act, the infringer merely introduces negligible changes in an
already registered mark, and then banks on these slight differences to state that there was no
identity or confusing similarity, which would result in no infringement. This kind of act, which leads
to confusion in the eyes of the public, is exactly the evil that the dominancy test refuses to accept.
The small deviations from a registered mark are insufficient to remove the applicant mark from the
ambit of infringement.
In the present case, the dominant feature of the applicant mark is the word "METRO" which
is identical, both visually and aurally, to the cited marks already registered with the IPO. Greater
relevance is to be accorded to the finding of Examiner Icban on the confusing similarity between,
if not the total identity of, the applicant makrs and the cited marks. Examiner Icban said that the
applicant and cited marks are "the same in sound, spelling, meaning, overall commercial
impression, covers substantially the same goods and flows through the same channel of trade,"
which leads to no other conclusion than that "confusion as to the source of origin is likely to occur."
Ergo, the CA and the IPO did not err in finding that petitioner’s “METRO” mark cannot be
registered.
| 35
ON MERCANTILE LAW
EFFECT OF COMMENCEMENT ORDER SHALL RETROACT TO THE DATE THE

PETITION WAS FILED
Allied Banking Corporation vs. In the Matter of Petition to Have Steel Corporation of the
Philippines Placed Under Corporate Rehabilitation
G.R. No. 191939; March 14, 2018
Martires, J.
FACTS:
This is a petition for review on certiorari seeking the reversal of the CA’s affirmation of
RTC’s decision which ordered the creditors of Steel Corporation of the Philippines (SCP) who are
banks, one of which is petitioner Allied Banking Corporation (ABC), to unfreeze and restore the
bank accounts of SCP to its rehabilitation receiver.
On September 11, a petition was filed to place SCP under rehabilitation. At the time, ABC
had extended a revolving credit facility denominated as a “trust receipt line” to SCP, which
authorized ABC to debit SCP outstanding debts to ABC from SCP's account under certain
instances.
The RTC issued a Stay Order staying all claims against SCP on September 12. This order
however was not published until September 16. In the meantime, on September 15, ABC applied
the remaining balance on SCP's Current Account with ABC to its obligations under the TR Line.
SCP’s rehabilitation receiver thus complained that ABC had violated the rehabilitation court's stay
order. In response, ABC contended that it did not violate the Stay Order as it had no notice of its
issuance at the time it performed the legal compensation on September 15. ABC also alleged that
it was deprived of due process since the rehabilitation court did not acquire jurisdiction over it.
ISSUE:
Is ABC correct in contending that it had performed the setting off of SCP’s account against
its obligations to ABC prior to notice of the Stay Order?
RULING:
No, ABC should not have applied the money to SCP’s obligations.
The Rehabilitation Rules provide that the court shall issue a commencement order once it
finds the petition for rehabilitation sufficient in form and substance. The commencement includes
a Stay Order. Then under the same rules, the effects of commencement/stay order retroacts to the
date that the petition was filed, and thus renders void any attempt to collect on or enforce a claim
against the debtor or to set off any debt by the debtor's creditors, after the date the petition for
rehabilitation was filed.
When a petition for rehabilitation is given due course, its purpose will be defeated if the
debtors are still allowed to dispose their property and pay their liabilities after its rehabilitation had
already commenced. The petition, when granted, is a recognition of the debtor's distressed
financial status not only at the time the order is issued, but also at the time the petition is filed. It
is, therefore, more consistent with the objectives of rehabilitation that the order should retroact to
the date the petition is filed.
In this case, the commencement order was issued on September 12. Thus, even if the
Order was only published September 16, the order is deemed to be effective since September 11,
the day the petition was filed. Hence, the setting off made on September 15 is void.
36 |
ON MERCANTILE LAW
DURING CORPORATE REHABILITATION, EXECUTION OF A DEED OF SALE IS

SUBJECT TO STAY ORDER OF THE COURT; MOTION FOR INTERVENTION IS A
PROHIBITED MOTION IN REHABILITATION PROCEEDINGS
Patricia Dela Torre vs. Primetown Property Group, Inc.,

G.R. No. 221932; February 14, 2018
Peralta, J.
FACTS:
This is a petition for review on certiorari seeking to reinstate the RTC’s ruling which allowed
the Motion for Intervention of petitioner Patricia Dela Torre in corporate rehabilitation proceedings
involving respondent Primetown Property Group, Inc (Primetown).
Due to the Asian financial crisis, Primetown experienced financial difficulties which led to
its filing of a petition for corporate rehabilitation with a prayer for suspension of payments and
actions. The RTC, finding merit, issued a Stay Order in Primetown’s favor. Petitioner then filed a
Motion for Leave to Intervene in order to compel the execution in her favor of a deed of sale for a
property she allegedly bought from respondent.
Respondent resisted the claim, arguing among other defenses, that the Stay Order bars
any claim against its properties. Petitioner contended that her claim is not suspended as ‘claims’
refer to debts or demands of pecuniary nature. What she asks for however, is merely the execution
of a deed of absolute sale evidencing a sale that had been perfected prior to the Stay Order, which
is therefore not barred by the Stay Order. The RTC granted leave to intervene. The CA however
reversed the RTC holding that intervention was a prohibited pleading. Hence this appeal.
ISSUE:
Can a creditor “intervene” in rehabilitation proceedings in order to enforce a right of action
against a corporation under rehabilitation?
RULING:
No, the right to the execution of a deed of sale is subject to the application of the Stay
Order. Moreover, a motion to intervene is an expressly prohibited motion in rehabilitation
proceedings.
Rule 2, Section 1 of the Interim Rules defines a claim as referring to all claims or demands
of whatever nature or character against a debtor or its property, whether for money or otherwise.
The definition is all-encompassing as it refers to all actions whether for money or otherwise. There
are no distinctions or exemptions. A Stay Order therefore stays the enforcement of all claims,
whether for money or otherwise and whether such enforcement is by court action or otherwise,
against the debtor, its guarantors and sureties not solidarily liable with the debtor.
This is notwithstanding the fact that Intervention is expressly prohibited under Section 1,
Rule 3 of the Interim Rules. This is why under Rule 4, Sec. 6 of the Interim Rules, all creditors and
all interested parties are directed to file and serve on the debtor a verified comment or opposition
to the petition for rehabilitation not later than ten days before the date of the initial hearing. Failure
to do so will bar them from participating in the rehabilitation proceedings.
The RTC should not have entertained the motion for intervention at all.
| 37
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5 CC - CDigests - Mercantile Law

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S

LAYOUT AND CONTENT EDITORS

SAN BEDA COLLEGE OF LAW

CHARLOTTE VINA S. CASINILLO

UT IN OMNIBUS GLORIFICETUR DEUS!

THIS IS THE INTELLECTUAL PROPERTY OF THE

THE UNAUTHORIZED COPYING, REPRODUCTION,

Evangelista vs. Screenex, Inc. ………………………………………………………………. 1

Equitable Insurance Corp vs. Transmodal International, Inc. …………………………………3

Jose Sanico & Vicente Castro vs. Werherlina P. Colipano ………………………………… 5

Luis Juan Virata vs. Alejandro Ng Wee ……………………………………………………………7

De La Salle Montessori International of Malolos, Inc. vs. De La Salle Brothers, Inc. et al 9

Securities and Exchange Commission vs. College Assurance Plan ……………………… 14

Bank of Commerce vs. Heirs of Rodolfo Dela Cruz ………………………………………… 19

Dr. Gil J. Rich vs. Guillermo Paloma III, et al. ……………………………………………… 23

Fernando U. Juan vs. Roberto U. Juan and Laundromatic Corporation ……………… 28

Allied Banking Corporation vs. In the Matter of Petition to Have ………………………. 36

AN OBLIGATION EVIDENCED BY THE ISSUANCE OF A CHECK IS DISCHARGED BY

Benjamin Evangelista vs. Screenex, Inc., Represented by Alexander Yu

LIABILITY FOR UNAUTHORIZED PAYMENT OF CHECK IS STRICT AND DRAWEE MAY

Metropolitan Bank vs. Junnel’s Marketing Corporation

Metrobank posits that it should be absolved because it exercised absolute diligence in

THE INSURANCE POLICY IS DISPENSABLE EVIDENCE IN REIMBURSEMENT CLAIMS

Equitable Insurance Corp. vs. Transmodal International, Inc.

Sytengco Enterprises Corporation (Sytengco) hired respondent Transmodal International,

AN INSURER-SUBROGEE IS BOUND BY THE PROVISIONS OF A CONTRACT WHICH

Oriental Assurance Corporation vs. Manuel Ong

Jose Sanico & Vicente Castro vs. Werherlina P. Colipano

Therefore, Sanico shall be the only one liable.

A SHORTER PRESCRIPTIVE PERIOD MAY BE STIPULATED SUBJECT TO THE

OWNERSHIP OF ALMOST ALL OF A CORPORATION’S STOCK BY ONE DIRECTOR

Luis Juan L. Virata vs. Alejandro Ng Wee

As in Arcilla vs. Court of Appeals, Santos

USE OF THE DOMINANT TERM “DE LA SALLE” AS A CORPORATE NAME FOR A

Respondents claim that petitioner's corporate name is misleading or confusingly similar to

Ergo, it is not error to require petitioner to change its corporate name.

EVEN IF NO ACTUAL AUTHORITY HAS BEEN CONFERRED ON THE PRESIDENT OF

Calubad vs. Ricarcen Development Corporation

THE ELECTION OF A NEW BOARD OF DIRECTORS UNDER THE ORDER AND

Multinational Village Homeowners' Association, Inc. vs. Gacutan

Section 4 of HLURB Resolution No. R-771-04 expressly authorizes the HLURB-NCRFO

AN OFFICER MAY NOT BE HELD LIABLE FOR THE CORPORATION’S LABOR

Symex Security Services, Inc. vs. Rivera, Jr.

DIRECTORS, OFFICERS, AND EMPLOYEES CANNOT BE HELD PERSONALLY LIABLE

MRII is a domestic corporation engaged in supplying water, selling industrial maintenance

IN PRE-NEED COMPANIES, THE SO-CALLED “TRUST FUND” IS NOT PART OF THE

Respondent CAP is engaged in the selling of pre-need educational plans. To guarantee

ELECTIONS OF A NEW BOARD OF DIRECTORS AND THE RATIFICATION OF ACTS OF

THE PERIOD WITHIN WHICH TO SEND NOTICE TO CALL A MEETING MAY BE

TOTAL OUTSTANDING CAPITAL STOCKS, WITHOUT DISTINCTION AS TO DISPUTED

Carolina Que Villongco, et al. vs. Cecilia Que Yabut, et al.

TRANSFER OF STOCK OF A CLOSE CORPORATION MADE IN BREACH OF

Rogelio M. Florete, Sr. vs. Marcelino M. Florete, Jr. et al.

MERGER CANNOT BE PRESUMED; NOT ALL ACQUISITIONS OFA CORPORATION’S

Bank of Commerce vs. Heirs of Rodolfo Dela Cruz

CASES INVOLVING INTRA-CORPORATE DISPUTES ARE WITHIN THE ORIGINAL AND

A DISPUTE IS INTRACORPORATE WHEN AN INTRACORPORATE RELATION EXISTS

INCIDENTS AND ISSUES THAT ARE ADJUNCTS OF A DISMISSED OFFICER’S

To determine whether a case is an intracorporate controversy, a two-tiered test must be