[A.C. No. 10580. July 12, 2017.

GERALDY AND LILIBETH VICTORY vs. ATTY. MARIAN JO S. MERCADO

Facts
Sometime in 2009, Spouses Geraldy and Lilibeth were enticed by Atty. Mercado to enter into
a financial transaction with her with a promise of good monetary returns. Spouses Victory entrusted
their money to respondent to invest, manage, and administer into some financial transactions that would
earn good profit for the parties.
Atty. Mercado called and asked Geraldy Victory whether he wanted to invest his money. The
respondent promised that for an investment of PhP400,000, she will give Geraldy PhP600,000 in 30
days; and for PhP500,000, she will give Geraldy PhP625,000.
The investment transactions went well for the first 10 months. Spouses Victory received the
agreed return of profit. Some of such financial transactions were covered by Memoranda of Agreement.
Later on, respondent became evasive in returning to Spouses Victory the money that the latter
were supposed to receive as part of the agreement. Respondent failed to settle and account the money
entrusted to her by Spouses Victory.
Spouses Victory alleged that the outstanding obligation of respondent is PhP5 Million plus
interest or a total of PhP8.3 Million.
Spouses Victory filed a criminal complaint for estafa and violation of Batas Pambansa Blg.
22 with the Office of the City Prosecutor of Sta. Rosa, Laguna.
After the filing of said criminal case, respondent met with Spouses Victory. Respondent
proposed to reduce her obligation from PhP8.3 Million to PhP7.5 Million in staggered payments, to
which Spouses Victory agreed. Respondent then issued three postdated checks in the amount of
PhP300,000 each. However, said checks bounced.

Issue
Should the respondent be held administratively liable based on the allegations in the pleadings
of all parties on record?
Decision
It is without dispute that respondent has an outstanding obligation with Spouses Victory, as the
latter's investments which they coursed through the respondent fell through. To make matters worse,
respondent issued several checks to settle her obligation; unfortunately, said checks bounced.

[G.R. No. 185024. April 24, 2017.]

JOSELITO HERNAND M. BUSTOS vs. MILLIANS SHOE, INC., SPOUSES

FERNANDO AND AMELIA CRUZ, and the REGISTER OF DEEDS OF MARIKINA
CITY

FACTS
Spouses Fernando and Amelia Cruz owned a 464-square-meter lot covered by Transfer
Certificate of Title (TCT) No. N-126668. On 6 January 2004, the City Government of Marikina levied
the property for nonpayment of real estate taxes. The Notice of Levy was annotated on the title on 8
January 2004. On 14 October 2004, the City Treasurer of Marikina auctioned off the property, with
petitioner Joselito Hernand M. Bustos emerging as the winning bidder.
Petitioner then applied for the cancellation of TCT No. N-126668. On 13 July 2006, the
Regional Trial Court, Marikina City, Branch 273, rendered a final and executory Decision ordering the
cancellation of the previous title and the issuance of a new one under the name of petitioner.
Meanwhile, notices of lis pendens were annotated on TCT No. N-126668 on 9 February
2005. These markings indicated that SEC Corp. Case No. 036-04, which was filed before the RTC and
involved the rehabilitation proceedings for MSI, covered the subject property and included it in the Stay
Order issued by the RTC dated 25 October 2004.
On 26 September 2006, petitioner moved for the exclusion of the subject property from the
Stay Order. He claimed that the lot belonged to Spouses Cruz who were mere stockholders and officers
of MSI. He further argued that since he had won the bidding of the property on 14 October 2004, or
before the annotation of the title on 9 February 2005, the auctioned property could no longer be part of
the Stay Order.
The RTC denied the entreaty of petitioner. It ruled that because the period of redemption up to
15 October 2005 had not yet lapsed at the time of the issuance of the Stay Order on 25 October 2004,
the ownership thereof had not yet been transferred to petitioner.
Petitioner moved for reconsideration, but to no avail. He then filed an action for certiorari before
the CA. He asserted that the Stay Order undermined the taxing powers of the local government unit.
He also reiterated his arguments that Spouses Cruz owned the property, and that the lot had already
been auctioned to him.
In the assailed Decision dated 12 June 2008, the CA brushed aside the claim that the
suspension orders undermined the power to tax. As regards petitioner's main contention, the CA ruled
as follows:
In the case at bar, the delinquent tax payers were the Cruz Spouses who were
the registered owners of the said parcel of land at the time of the delinquency sale.
The sale was held on October 14, 2004 and the Cruz Spouses had until October 15,
2005 within which to redeem the parcel of land. The stay order was issued on October
25, 2004 and inscribed at the back of the title on February 9, 2005, which is within the
redemption period. The Cruz Spouses were still the owners of the land at the time of
the issuance of the stay order. The said parcel of land which secured several mortgage
liens for the account of MSI remains to be an asset of the Cruz Spouses, who are the
stockholders and/or officers of MSI, a close corporation. Incidentally, as an exception
to the general rule, in a close corporation, the stockholders and/or officers usually
manage the business of the corporation and are subject to all liabilities of
directors, i.e. personally liable for corporate debts and obligations. Thus, the Cruz
Spouses being stockholders of MSI are personally liable for the latter's debt
and obligations.
Petitioner unsuccessfully moved for reconsideration. The CA maintained its ruling and even
held that his prayer to exclude the property was time-barred by the 10-day reglementary period to
oppose rehabilitation petitions under Rule 4, Section 6 of the Interim Rules of Procedure on Corporate
Rehabilitation.
Before this Court, petitioner maintains three points: (1) the Spouses Cruz are not liable for the
debts of MSI; (2) the Stay Order undermines the taxing power of Marikina City; and (3) the time bar
rule does not apply to him, because he is not a creditor of MSI.
In their Comment, respondents do not contest that Spouses Cruz own the subject property.
Rather, respondents assert that as stockholders and officers of a close corporation, they are personally
liable for its debts and obligations. Furthermore, they argue that since the Rehabilitation Plan of MSI
has been approved, petitioner can no longer assail the same.
 ISSUE OF THE CASE
Whether the CA correctly considered the properties of Spouses Cruz answerable for
the obligations of MSI.

DECISION
Petition for review on certiorari is GRANTED.

[G.R. No. 218071. September 6, 2017.]

HBD PARTNERS HOLDINGS, INC vs. MED CENTRAL, INC., DAVID M. SARMIENTO,
WARREN DAVID A. SARMIENTO, AISSA AMOR A. SARMIENTO, HENRY F. SIA,
JEROLD JOSEPHSON U. CAONES, ANTONIO S. CRUZ, JOHNNY PEREZ, and
ZENO ZUIGA

FACTS
In 2008, the owners and stockholders of MCI decided to sell their shares in the business along
with the medical clinic and its equipment. In connection with the sale, Aissa was appointed by MCI as
its attorney-in-fact to negotiate with potential buyers. One of those interested was Dr. Hernando Delizo
(Delizo) who claimed to represent Healthcare Business Development Partners Holdings, Inc., which is
a domestic corporation engaged in the business of "investing, purchase, or x x x acquisition of real and
personal properties, including the acquisition of corporations, partnerships or other kind of business
outfits, x x x, particularly in the field of health care and wellness, among others." During the course of
the negotiations, Aissa provided Healthcare with MCI's Statement of Revenues and Expenses for the
year 2008 through electronic mail.
On 12 February 2009, a Memorandum of Agreement (MOA) was entered into by and between
Healthcare and MCI wherein both parties confirmed the purchase price for the sale of MCI at P15 million
payable in four installments. Upon payment of the first installment on 13 February 2009, Delizo took
possession and control of MCI's medical clinic and operated it. All the equipment was turned over to
Delizo, who changed the name of the clinic to "Clinica Medcentral." Thereafter, Healthcare reneged on
its obligation to pay the agreed installment payments. Of the entire obligation, only P3 million was paid
to MCI. In 2010, Delizo requested for a renegotiation for the payment of the balance. The parties,
however, failed to reach an agreement.
Meanwhile, as the lease on the premises occupied by Clinica Medcentral was about to expire,
the stockholders of MCI pulled out all the equipment, vacated the premises, and returned the same to
its original condition pursuant to the lease agreement with Robinsons Land Corporation. An inventory
was conducted which revealed that some of the equipment turned over to Delizo were still in the latter's
possession. The stockholders of MCI requested for a meeting with Delizo for an accounting of their
mutual obligations, but the same did not materialize.
On 18 October 2010, HBD Partners Holdings, Inc. (HBD), through Delizo, filed a
Complaint 7 against respondents for the issuance of a writ of preliminary attachment, confirmation of
the alleged unilateral rescission of the MOA, and the return of the P3 million as partial payment for the
purchase of MCI's business and shares.
In its Order of 26 November 2010, the RTC granted the prayer for the issuance of a writ of
preliminary attachment upon the payment of a bond of P3 million.
Respondents filed Motions to Dismiss on the ground of failure to state a cause of action since
petitioner HBD is not a real party in interest. According to respondents, HBD is not a party to the MOA
and HBD came into existence only a month after the execution of the MOA. Aissa filed a separate
motion to dismiss alleging additionally that she is not a stockholder of MCI and does not have any
interest in the MOA. Aissa merely represented MCI and its stockholders when she executed the MOA
on their behalf. Johnny and Zeno jointly filed a separate motion to dismiss claiming additionally that
they were not stockholders of MCI in their own right but merely nominee stockholders of Warren. The
RTC denied the motions to dismiss. The motion for reconsideration was likewise denied.
On petition for certiorari, the Court of Appeals partially granted the petition for certiorari. The
Court of Appeals dismissed the complaint against Aissa for being merely a representative of MCI; and
against David, Warren, Henry, Jerold, Antonio, Johnny, and Zeno for being merely stockholders of MCI.
The Court of Appeals held that the MOA is a contract being the best evidence of the parties'
intention. Thus, when the terms of an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon. The MOA laid down the reciprocal obligations of each party.
The Court of Appeals rejected MCI's claim that HBD is not a real party in interest to the case
having no legal personality in the MOA due to the fact that it was only incorporated a month after the
MOA was entered into. The Court of Appeals cited Merrill Lynch Futures, Inc. v. CA, 9 where the Court
clarified that a party is estopped from challenging the personality of a corporation after having
acknowledged the same by entering into a contract with it. Thus, by contracting with HBD and
benefitting therefrom, MCI can no longer claim that HBD lacked the personality to enter into contracts.
The contracting parties to the MOA are clearly MCI and HBD.
The Court of Appeals held that MCI and HBD, being corporations, have their own legal
personality separate and distinct from those of their stockholders, directors, or officers. A stockholder
is not answerable for the acts or liabilities of the corporation and vice versa. The MOA was explicit in
stating that Aissa was merely representing MCI in the said agreement as an agent. No stockholder took
part in the said agreement in their personal capacity. Thus, the RTC erred in not dismissing the
complaint as against Aissa and the stockholders.

ISSUE
Whether the Court of Appeals committed reversible error in dismissing the complaint against
Aissa and the stockholders of MCI.

DECISION
The petition is DENIED. The assailed Decision and Resolution of the Court of Appeals
are AFFIRMED.

[G.R. No. 192602. January 18, 2017.]

SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR. vs. LAND BANK OF THE
PHILIPPINES and the REGISTER OF DEEDS FOR DAVAO CITY

FACTS
Sometime in 1996, Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May), requested
the latter to provide her with collateral for a loan. At the time, Agbisit was the chairperson of Milflores
Cooperative and she needed P600,000 to P650,000 for the expansion of her backyard cut flowers
business. May convinced her husband, Johnny Villaluz (collectively, the Spouses Villaluz), to allow
Agbisit to use their land, located in Calinan, Davao City and covered by Transfer Certificate of Title
(TCT) No. T-202276, as collateral. On March 25, 1996, the Spouses Villaluz executed a Special Power
of Attorney in favor of Agbisit authorizing her to, among others, "negotiate for the sale, mortgage, or
other forms of disposition a parcel of land covered by Transfer Certificate of Title No. T-202276" and
"sign in our behalf all documents relating to the sale, loan or mortgage, or other disposition of the
aforementioned property." The one-page power of attorney neither specified the conditions under which
the special powers may be exercised nor stated the amounts for which the subject land may be sold or
mortgaged.
On June 19, 1996, Agbisit executed her own Special Power of Attorney, appointing Milflores
Cooperative as attorney-in-fact in obtaining a loan from and executing a real mortgage in favor of Land
Bank of the Philippines (Land Bank). On June 21, 1996, Milflores Cooperative, in a representative
capacity, executed a Real Estate Mortgage in favor of Land Bank in consideration of the P3,000,000
loan to be extended by the latter. On June 24, 1996, Milflores Cooperative also executed a Deed of
Assignment of the Produce/Inventory as additional collateral for the loan. Land Bank partially released
one-third of the total loan amount, or P995,500, to Milflores Cooperative on June 25, 1996. On the
same day, Agbisit borrowed the amount of P604,750 from Milflores Cooperative. Land Bank released
the remaining loan amount of P2,000,500 to Milflores Cooperative on October 4, 1996.
Unfortunately, Milflores Cooperative was unable to pay its obligations to Land Bank. Thus,
Land Bank filed a petition for extra-judicial foreclosure sale with the Office of the Clerk of Court of Davao
City. Sometime in August, 2003, the Spouses Villaluz learned that an auction sale covering their land
had been set for October 2, 2003. Land Bank won the auction sale as the sole bidder.
The Spouses Villaluz filed a complaint with the Regional Trial Court (RTC) of Davao City
seeking the annulment of the foreclosure sale.

ISSUE
Whether Agbisit could have validly delegated her authority as attorney-in-fact to Milflores
Cooperative.

DECISION
Petition is DENIED.

[G.R. No. 212690. February 20, 2017.]

ROMEO PAJARES and IDA T. PAJARES vs. REMARKABLE LAUNDRY AND DRY
CLEANING

FACTS
On September 3, 2012, Remarkable Laundry and Dry Cleaning (respondent) filed a Complaint
denominated as "Breach of Contract and Damages" against spouses Romeo and Ida Pajares
(petitioners) before the RTC of Cebu City, which was docketed as Civil Case No. CEB-39025 and
assigned to Branch 17 of said court. Respondent alleged that it entered into a Remarkable Dealer
Outlet Contract with petitioners whereby the latter, acting as a dealer outlet, shall accept and receive
items or materials for laundry which are then picked up and processed by the former in its main plant
or laundry outlet; that petitioners violated Article IV (Standard Required Quota & Penalties) of said
contract, which required them to produce at least 200 kilos of laundry items each week, when, on April
30, 2012, they ceased dealer outlet operations on account of lack of personnel; that respondent made
written demands upon petitioners for the payment of penalties imposed and provided for in the contract,
but the latter failed to pay; and, that petitioners' violation constitutes breach of contract. Respondent
thus prayed, as follows:
WHEREFORE, premises considered, by reason of the above-mentioned
breach of the subject dealer contract agreement made by the defendant, it is most
 respectfully prayed of the Honorable Court to order the said defendant to pay the
following incidental and consequential damages to the plaintiff, to wit:
a) Two HUNDRED THOUSAND PESOS (PHP200,000.00) plus legal interest
as incidental and consequential [sic] for violating Articles IV and XVI of the Remarkable
Laundry Dealer Contract dated 08 September 2011.
b) Thirty Thousand Pesos (P30,000.00) as legal expenses.
c) Thirty Thousand Pesos (P30,000.00) as exemplary damages.
d) Twenty Thousand Pesos (P20,000.00) as cost of suit.
e) Such other reliefs that the Honorable Court deems as just and equitable.
Petitioners submitted their Answer, to which respondent filed its Reply.
During pre-trial, the issue of jurisdiction was raised, and the parties were required to submit
their respective position papers.

Issue
In a June 29, 2015 Resolution, this Court resolved to give due course to the Petition, which
claims that the CA erred in declaring that the RTC had jurisdiction over respondent's Complaint which,
although denominated as one for breach of contract, is essentially one for simple payment of damages.

DECISION
The Court grants the Petition.