University of Mindanao, Inc.

vs Bangko Sentral ng Pilipinas

G.R. No. 194964-65, January 11, 2016

Facts:
University of Mindanao is an educational institution. On May 25, 1982, University of
Mindanao’s Vice President for Finance, Saturnino Petalcorin, executed a deed of real estate
mortgage over University of Mindanao’s property in Cagayan de Oro City in favor of Bangko
Sentral ng Pilipinas. It was allegedly executed on University of Mindanao’s behalf. On June 18,
1999, Bangko Sentral ng Pilipinas sent a letter to University of Mindanao, informing it that the
bank would foreclose its properties if the total outstanding obligation of P12,534,907.73 remained
unpaid. In its reply to Bangko Sentral ng Pilipinas, University of Mindanao denied that its
properties were mortgaged. It also denied having received any loan proceeds from Bangko Sentral
ng Pilipinas.
A complaint filed before the Court, the Regional Trial Court found that there was no board
resolution giving Petalcorin authority to execute mortgage contracts on behalf of University of
Mindanao. Hence, the mortgage of University of Mindanao was unenforceable. Petalcorin’s
unauthorized acts should be annulled. Upon appeal, the Court of Appeals ruled that Bangko Sentral
ng Pilipinas merely relied in good faith on the Secretary’s Certificate. University of Mindanao is
estopped from denying Petalcorin’s authority. Moreover, the Secretary’s Certificate was notarized.
This meant that it enjoyed the presumption of regularity as to the truth of its statements and
authenticity of the signatures. Thus, BSP cannot be faulted for relying on the Secretary’s
Certificate. Hence, University of Mindanao filed this Petition for Review.

Issues:
a. Whether the execution of the mortgage contract was ultra vires.
b. Whether doctrine of “Piercing the corporate veil” applicable.
c. Whether the mortgages executed by Petalcorin were unenforceable because of lack of
authority for no Board Resolution to that effect.

Ruling:
a. Yes. The execution of the mortgage contract was ultra vires. Corporations are artificial
entities granted legal personalities upon their creation by their incorporators in accordance with
law. Unlike natural persons, they have no inherent powers. Third persons dealing with corporations
cannot assume that corporations have powers. It is up to those persons dealing with corporations
to determine their competence as expressly defined by the law and their articles of incorporation.
A corporation may exercise its powers only within those definitions. Corporate acts that
are outside those express definitions under the law or articles of incorporation or those "committed
outside the object for which a corporation is created" are ultra vires. The only exception to this
rule is when acts are necessary and incidental to carry out a corporation’s purposes, and to the
exercise of powers conferred by the Corporation Code and under a corporation’s articles of
incorporation. This exception is specifically included in the general powers of a corporation under
Section 36 of the Corporation Code.

b. No, there is no evidence pointing to the possibility that petitioner used its separate
personality to defraud third persons or commit illegal acts. What has been shown instead was that
petitioner, too, had been victimized by fraudulent and unauthorized acts of its own officers and
directors.
Corporate veil is pierced when the separate personality of the corporation is being used to
perpetrate fraud, illegalities, and injustices. In Lanuza, Jr. v. BF Corporation: Piercing the
corporate veil is warranted when “the separate personality of a corporation is used as a means to
perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, or to confuse legitimate issues." It is also warranted in alter ego cases
"where a corporation is merely a farce since it is a mere alter ego or business conduit of a person,
or where the corporation is so organized and controlled and its affairs are so conducted as to make
it merely an instrumentality, agency, conduit or adjunct of another corporation."

c. Yes. They cannot bind petitioner for not having the proper board resolution to authorize
Petalcorin to execute the mortgage contracts for petitioner, the contracts he executed are
unenforceable against petitioner.
SEC. 23. The board of directors or trustees.—Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for one (1) year and until their successors
are elected and qualified.
Being a juridical person, petitioner cannot conduct its business, make decisions, or act in
any manner without action from its Board of Trustees. The Board of Trustees must act as a body
in order to exercise corporate powers. Individual trustees are not clothed with corporate powers
just by being a trustee. Hence, the individual trustee cannot bind the corporation by himself or
herself. The corporation may, however, delegate through a board resolution its corporate powers
or functions to a representative, subject to limitations under the law and the corporation’s articles
of incorporation.
Also, since the notarized Secretary’s Certificate was found to have been issued without a
supporting board resolution, it produced no effect. It is not binding upon petitioner. It should not
have been relied on by respondent especially given its status as a bank. The banking institution is
"impressed with public interest" such that the public’s faith is "of paramount importance." Banks
are required to exercise the highest degree of diligence in their transactions.
 Air Canada vs Commisioner of Internal Revenue
G.R. No. 169507, January 11, 2016

Facts:
Air Canada is a "foreign corporation organized and existing under the laws of Canada.” On
April 24, 2000, it was granted an authority to operate as an offline carrier by the Civil Aeronautics
Board, subject to certain conditions. "As an off-line carrier, Air Canada does not have flights
originating from or coming to the Philippines and does not operate any airplane in the Philippines.
Air Canada engaged the services of Aerotel Ltd., Corp. (Aerotel) as its general sales agent in the
Philippines. Aerotel "sells Air Canada’s passage documents in the Philippines." On November 28,
2002, Air Canada filed a written claim for refund of alleged erroneously paid income taxes.
The En Banc ruled that Air Canada is subject to tax as a resident foreign corporation doing
business in the Philippines since it sold airline tickets in the Philippines. Hence, this Petition for
Review was filed.

Issue:
Whether petitioner Air Canada, as an offline international carrier selling passage
documents through a general sales agent in the Philippines, is a resident foreign corporation.

Ruling:
Yes. Under the Presidential Decree No. 1158-A took effect on June 3, 1977 amending
certain sections of the 1939 National Internal Revenue Code. Section 24(b)(2) on foreign resident
corporations was amended, but it still provides that "[a] corporation organized, authorized, or
existing under the laws of any foreign country, engaged in trade or business within the
Philippines, shall be taxable as provided in subsection (a) of this section upon the total net income
received in the preceding taxable year from all sources within the Philippines.
Republic Act No. 7042 or the Foreign Investments Act of 1991 provides guidance with its
definition of "doing business" with regard to foreign corporations. Section 3(d) of the law
enumerates the activities that constitute doing business: d. the phrase "doing business" shall
include soliciting orders, service contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or
more; participating in the management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the performance of acts or
works, or the exercise of some of the functions normally incident to, and in progressive prosecution
of, commercial gain or of the purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or officer to represent its interests
in such corporation; nor appointing a representative or distributor domiciled in the Philippines
which transacts business in its own name and for its own account
While Section 3(d) above states that "appointing a representative or distributor domiciled
in the Philippines which transacts business in its own name and for its own account" is not
considered as "doing business," the Implementing Rules and Regulations of Republic Act No.
7042 clarifies that "doing business" includes "appointing representatives or
distributors, operating under full control of the foreign corporation, domiciled in the Philippines
or who in any calendar year stay in the country for a period or periods totaling one hundred
eighty (180) days or more. Petitioner is, therefore, a resident foreign corporation that is taxable
on its income derived from sources within the Philippines. Petitioner’s income from sale of
airline tickets, through Aerotel, is income realized from the pursuit of its business activities in
the Philippines.
 Marcelino Florente, Jr., vs Rogelio C. Florente
GR. No. 174909, January 20, 2016

Facts:
People’s Broadcasting Service, Inc. is a private corporation authorized to operate, own,
maintain, install, and construct radio and television stations in the Philippines. The issuance of
1,250 shares to Consolidated Broadcasting System, Inc., the Marcelino, Jr. Group argues that
Board Resolution No. 4, the basis for the issuance of the 1,250 shares in favor of Consolidated
Broadcasting System, Inc., was a forgery: it was simulated, unauthorized, and issued without a
quorum as required under Section 25 of the Corporation Code. They add that Salome, who
allegedly transferred her 10 shares to complete the 1,250 share transfer, was already dead at the
time of the alleged transfer. The Marcelino, Jr. Group claims that no member of the Board attended
the meeting referred to in Board Resolution No. 4.
The Regional Trial Court issued a Decision (which it called a "Placitum") dismissing the
Marcelino, Jr. Group’s Complaint. It ruled that the Marcelino, Jr. Group did not have a cause of
action against the Rogelio, Sr. Group and that the former is estopped from questioning the assailed
movement of shares of People’s Broadcasting. It also ruled that indispensible parties were not
joined in their Complaint. The Court of Appeals further emphasized that the estates of Marcelino,
Sr. and Salome had long been settled, with those in the Marcelino, Jr. Group participating in their
capacity as heirs. In the interim, they even participated in the affairs of People’s Broadcasting,
voting their shares and electing members of the Board of Directors.

Issue:
Whether the action by Marcelino, Jr Group’s in their individual capacity is proper.

Ruling:
No. The specific provisions adverted to by the Marcelino, Jr. Group signify alleged
wrongdoing committed against the corporation itself and not uniquely to those stockholders who
now comprise the Marcelino, Jr. Group. A violation of Sections 23 and 25 of the Corporation
Code—on how decision-making is vested in the board of directors and on the board’s quorum
requirement—implies that a decision was wrongly made for the entire corporation, not just with
respect to a handful of stockholders. Section 65 specifically mentions that a director’s or officer’s
liability for the issuance of watered stocks in violation of Section 62 is solidary "to the
corporation and its creditors," not to any specific stockholder. Transfers of shares made in
violation of the registration requirement in Section 63 are invalid and, thus, enable the corporation
to impugn the transfer. Notably, those in the Marcelino, Jr. Group have not shown any specific
interest in, or unique entitlement or right to, the shares supposedly transferred in violation of
Section 63.
Also, the damage inflicted upon People’s Broadcasting’s individual stockholders, if any,
was indiscriminate. It was not unique to those in the Marcelino, Jr. Group. It pertained to "the
whole body of People’s Broadcasting’s stock." Accordingly, it was upon People’s Broadcasting
itself that the causes of action now claimed by the Marcelino Jr. Group accrued. While
stockholders in the Marcelino, Jr. Group were permitted to seek relief, they should have done so
not in their unique capacity as individuals or as a group of stockholders but in place of the
corporation itself through a derivative suit. As they, instead, sought relief in their individual
capacity, they did so bereft of a cause of action. Likewise, they did so without even the slightest
averment that the requisites for the filing of a derivative suit, as spelled out in Rule 8, Section 1 of
the Interim Rules of Procedure for Intra-Corporate Controversies, have been satisfied. Since the
Complaint lacked a cause of action and failed to comply with the requirements of the Marcelino,
Jr. Group’s vehicle for relief, it was only proper for the Complaint to have been dismissed.
 Guillermo vs Uson
G.R. No. 198967 March 07, 2016

Facts:
Respondent Uson was an accounting supervisor in Royal Class Venture Phils., Inc.
(RCVPI) until Dec. 20, 2000 when he was allegedly dismissed by petitioner Guillermo, the
company’s president/general manager, for having exposed the latter’s practice of dictating and
undervaluing the shares of stocks of the corporation. Thereafter he filed a complaint for illegal
dismissal against the corporation, RCVPI.
The Labor Arbiter rendered a decision in favor of Uson, ordering respondent to reinstate
him to his former position and pay his backwages, 13th month pay as well as moral damages,
exemplary damages and attorney’s fees. RCVPI did not file an appeal but repeated issuances of
Writs of Execution against the same remained unsatisfied.
Uson filed another Motion for Alias Writ of Execution and to Hold Directors and Officers
of Respondent Liable for the Decision and quoted from the sheriff’s return: a) that at RCVPI’s
address (to which the writs are being served) there is a new establishment named “ Joel and Sons
Corporation” which was a family corporation owned by the Guillermos, in which Jose Emmanuel
Guillermo, the President and General Manager of RCVPI, is one of the stockholders; b) that Jose
received the writ using the nickname “Joey” concealing his real identity and pretended to be the
brother of Jose; c) that RCVPI has already been dissolved.
Labor Arbiter granted the motion filed by respondent and held herein petitioner Jose
Emmanuel Guillermo, in his personal capacity jointly and severally liable with the corporation
stating that the officers of the corporation are jointly and severally liable for the obligations of the
corporation (“piercing the veil of corporate fiction”) to the employees even if the said officers were
not parties to the case.
Guillermo filed a Motion for Reconsideration/To Set Aside the Order of the labor arbiter.
His contentions were a) officers cannot be included as judgement obligor in a labor case for the
first time only after the decision of the Labor Arbiter had become final and executory b) in piercing
the veil of RCVPI, he was allegedly discriminated against when he alone was belatedly impleaded
despite the existence of other officers of RCVPI; c)that the labor arbiter has no jurisdiction because
the case is one of an intra-corporate controversy, with the complainant Uson also claiming to be a
stockholder and director of the corporation.

Issues:
a. Whether an officer of a corporation may be included as judgement obligor in a labor case for
the first time only after the decision of the Labor Arbiter had become final and executory.
b. Whether the twin doctrines of “piercing the veil of corporate fiction” and personal liability of
company officers in labor cases apply.
Ruling:
a.) Yes. In earlier labor cases, the Court held that persons who were not originally
impleaded in the case were, even during execution, held to be solidarity liable with the employer
corporation for the latter's unpaid obligations to complainant-employees. Personal liability
attaches only when, as enumerated by the said Section 31 of the Corporation Code, there is a
wilfull and knowing assent to patently unlawful acts of the corporation, there is gross negligence
or bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting in
damages to the corporation. The conferment of liability on officers for a corporation's obligations
to labor is held to be an exception to the general doctrine of separate personality of a corporation.
It also bears emphasis that in cases where personal liability attaches, not even all officers
are made accountable. Rather, only the "responsible officer," i.e., the person directly responsible
for and who "acted in bad faith" in committing the illegal dismissal or any act violative of the
Labor Code, is held solidarily liable, in cases where in the corporate veil is pierced

b.) Yes. The veil of corporate fiction can be pierced, and responsible corporate directors
and officers or even a separate but related corporation, may be impleaded and held answerable
solidarily in a labor case, even after final judgment and on execution, so long as it is established
that such persons have deliberately used the corporate vehicle to unjustly evade the judgment
obligation, or have resorted to fraud, bad faith or malice in doing so.
In the case at hand, respondent Uson’s sworn allegations stating that Guillermo was the
responsible officer in charge of running the company as well as the one who maliciously and
illegally dismissed Uson from employment was uncontroverted. Furthermore, it was Guillermo
himself, as President and General Manager of the company, who received the summons to the
case, and who also subsequently and without justifiable cause refused to receive all notices and
orders of the Labor Arbiter that followed. He, likewise, was shown to have a role in dissolving the
original obligor company in an obvious "scheme to avoid liability".
Essentially, then, the facts form part of the records and stand as further proof of Guillermo's
bad faith and malicious intent to evade the judgment obligation.It is settled in jurisprudence that
not all conflicts between a stockholder and the corporation are intra-corporate; an examination of
the complaint must be made on whether the complainant is involved in his capacity as a
stockholder or director, or as an employee.
In the case at bar, Uson's allegation was that he was maliciously and illegally dismissed as
an Accounting Supervisor by Guillermo, the Company President and General Manager. It raised
no intra-corporate relationship issues between him and the corporation or Guillermo; neither did
it raise any issue regarding the regulation of the corporation.
As correctly found by the appellate court, Uson's complaint and redress sought were
centered alone on his dismissal as an employee, and not upon any other relationship he had with
the company or with Guillermo. Thus, the matter is clearly a labor dispute cognizable by the labor
tribunals.
 UFC Philippines vs Fiesta Barrio Corp.
G.R. No. 198889, January 20, 2016

Facts:
On April 4, 2002, respondent filed Application for the mark "PAPA BOY & DEVICE" for
goods under Class 30, specifically for "lechon sauce." On December 11, 2006, petitioner filed with
the IPO-BLA a Verified Notice of Opposition to the application of respondent, alleging that the
mark "PAPA BOY & DEVICE" is identical to the mark "PAPA" owned by Opposer UFC and
duly registered in its favor (Certificate of Registration No. 32416) particularly the dominant feature
thereof, resulting to confusion and deception to the consuming public. Petitioner further contends
that the approval of the subject application will violate Opposer's right to the exclusive use of its
registered mark "PAPA" and the variations thereof per Section 138 of the Intellectual Property
Code.
Respondent argued that there are no confusing features between them. The dominant
features of Respondent-applicant's mark "PAPA BOY & DEVICE" are the words "PAPA BOY"
and the representation of a smiling hog-like character gesturing the thumbs-up sign and wearing a
traditional Filipino hat and scarf while the dominant feature of Opposer's mark "PAPA
KETSARAP" are the words "Papa" and "Ketsarap", not the word "Papa"; and the word "Ketsarap
" is more prominently printed and displayed in the foreground than the word "Papa" for which
reasons opposer's reference to the Dominancy Test fails.
The IPO-BLA rendered a Decision sustaining petitioner’s opposition on respondent’s
application using the Dominancy Test. The IPO Director General sustained the decision of IPO-
BLA. The Court of Appeals, however, reversed their decision by using the Holistic Test. The CA
reasoned that petitioner's trademark is "PAPA BOY" as a whole as opposed to respondent's
"PAPA". Although on its label the word "PAPA" is prominent, the trademark should be taken as
a whole and not piecemeal. The difference between the two marks are conspicuous and noticeable.
While respondent's products are both labeled as banana sauces, that of petitioner Barrio Fiesta is
labeled as lechon sauce.

Issue:
WON PAPA BOY is confusingly similar to Opposer’s PAPA mark.

Ruling:
Yes. There are two tests used in jurisprudence to determine likelihood of confusion, namely
the dominancy test used by the IPO, and the holistic test adopted by the Court of Appeals. 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 x x x or a
dominant feature thereof." The totality or holistic test only relies on visual comparison between
two trademarks whereas the dominancy test relies not only on the visual but also on the aural and
connotative comparisons and overall impressions between the two trademarks. The Supreme Court
agreed on the findings of IPO. Under the Dominancy Test, the dominant features of the competing
marks are considered in determining whether these competing marks are confusingly similar. If
the competing trademark contains the main or essential or dominant features of another, and
confusion and deception is likely to result, infringement takes place. Actual confusion is not
required: Only likelihood of confusion on the part of the buying public is necessary so as to render
two marks confusingly similar so as to deny the registration of the junior mark.
In the case, the word "PAPA" is also the dominant feature of respondent's "PAPA BOY &
DEVICE" mark subject of the application, such that "the word 'PAPA' is written on top of and
before the other words such that it is the first word/figure that catches the eyes; and contrary to
respondent's contention, "KETSARAP" cannot be the dominant feature of the mark as it is merely
descriptive of the product.
Verily, the protection of trademarks as intellectual property is intended not only to preserve
the goodwill and reputation of the business established on the goods bearing the mark through
actual use over a period of time, but also to safeguard the public as consumers against confusion
on these goods.
 NISSAN CAR LEASE PHILS., INC., Petitioner, vs. LICA MANAGEMENT, INC. AND
PROTON PILIPINAS, INC., Respondents.
G.R. No. 176986, January 13, 2016

FACTS:
Lica Management, Inc. (LMI) entered into a contract of lease with Nissan Car Lease Phils.,
Inc. (NCLPI), the former being the owner of the property. Later, however, NCLPI became
delinquent in paying the monthly rent. Thus, in a letter, LMI informed NCLPI that it was
terminating their Contract of Lease, and asked to vacate the premises.
Later, or on November 8, 1996, LMI entered into a Contract of Lease with Proton over the
subject premises. NCLPI demanded Proton to vacate the leased premises. However, Proton replied
that it was occupying the property based on a lease contract with LMI. In a letter of even date
addressed to LMI, NCLPI asserted that its failure to pay rent does not automatically result in the
termination of the Contract of Lease nor does it give LMI the right to terminate the same.
LMI contended that the NCLPI’s must be denied outright on the ground that Luis Manuel
T. Banson (Banson), the President of NCLPI, who caused the preparation of the petition and signed
the Verification and Certification against Forum Shopping, was not duly authorized to do so. His
apparent authority was based, not by virtue of any NCLPl Board Resolution, but on a Special
Power of Attorney (SPA) signed only by NCLPI's Corporate Secretary Robel C. Lomibao.

ISSUE:
WON Banson, as the President of NCLPI, has the authority to sign the verification and
certification, even without a Board Resolution to that effect.

HELD:
Yes. As a rule, a corporation has a separate and distinct personality from its directors and
officers and can only exercise its corporate powers through its board of directors. Following this
rule, a verification and certification signed by an individual corporate officer is defective if done
without authority from the corporation's board of directors. The requirement of verification being
a condition affecting only the form of the pleading, this Court has, in a number of cases, held that:
The following officials or employees of the company can sign the verification and certification
without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President
of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and
(5) an Employment Specialist in a labor case.
In this case, Banson was President of NCLPI at the time of the filing of the petition. Thus,
and applying the foregoing ruling, he can sign the verification and certification against forum
shopping in the petition without the need of a board resolution.
 PHILIPPINE OVERSEAS TELECOMMUNICATIONS CORPORATION (POTC),
PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION (PHILCOMSAT)
vs. SANDIGANBAYAN (3rd DIVISION), REPUBLIC OF THE PHILIPPINES
REPRESENTED BY PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT
(PCGG)
G.R. No. 174462, February 10, 2016

FACTS:
Pursuant to Executive Order Nos. 1 and 2, on 14 March 1986, then PCGG Commissioner
Ramon A. Diaz issued a letter directing Officer-In-Charge Carlos M. Ferrales to sequester and
immediately take over POTC and PHILCOMSAT among others, and to freeze all withdrawals,
transfers and/or remittances under any type of deposit accounts, trust accounts or placements.
On 22 July 1987, the Office of the Solicitor General (OSG), on behalf of the Republic of
the Philippines, filed a Complaint for Reconveyance, Reversion, Accounting and Restitution, and
Damages, docketed as Civil Case No. 0009, against Jose L. Africa, Manuel H. Nieto, Jr., Ferdinand
E. Marcos, Imelda R. Marcos, Ferdinand R. Marcos, Jr., Roberto S. Benedicto, Juan Ponce Enrile,
and Potenciano Ilusorio (collectively hereinafter referred to as "defendants"), the individual
shareholders of POTC and PHILCOMSAT. As alleged in the Complaint, the wealth that should
go to the coffers of the government, went to the defendants in their own individual accounts —
some, however, through conduits or corporations. The property supposedly acquired illegally was
specifically set out in a list appended to the Complaint as Annex A, where both POTC and
PHILCOMSAT are mentioned.
This case (Civil Case No. 0009) was long decided by the Supreme Court to be final and
executory. The Court upheld the Compromise Agreement between the government and Ilusorio.
As a consequence, the government is now the undisputed owner of 34.9% of the shares of stock
of the sequestered corporations. Later, however, the PCGG, through a memorandum, continued
sequestration of the shares, averring that the ultimate purpose of sequestration has not yet attained
finality.

ISSUE:
WON the failure to properly implead POTC and PHILCOMSAT as defendants in Civil
Case No. 0009 is a fatal jurisdictional error.

HELD:
Yes. Section 26, Article XVIII of the Constitution mandates that if no judicial action has
been filed within six (6) months after the ratification of the 1987 Constitution, the writ of
sequestration shall automatically be lifted. In the case at bar, there was no judicial action filed
against POTC and PHILCOMSAT. There has never been any appropriate judicial action for
reconveyance or recovery ever instituted by the Republic against POTC and PHILCOMSAT. The
Complaint was filed only against POTC and PHILCOMSAT's stockholders, who are private
individuals. Similarly, POTC and PHILCOMSAT were also merely annexed to the list of
corporations and were not properly impleaded in the case. The suit was against its individual
shareholders.
Thus, failure to implead POTC and PHILCOMSAT is a violation of the fundamental
principle that a corporation has a legal personality distinct and separate from its stockholders; that,
the filing of a complaint against a stockholder is not ipso facto a complaint against the corporation.
As already settled, a suit against individual stockholders is not a suit against the corporation.
 MERVIC REALTY, INC. AND VICCY REALTY, INC., Petitioner, v. CHINA
BANKING CORPORATION, Respondent
G.R. No. 193748, February 03, 2016

FACTS:
On October 16, 2006, Mervic Realty, Inc. and Viccy Realty, Inc. (the petitioners) jointly
filed a petition for the declaration of state of suspension of payments with a proposed rehabilitation
plan (rehabilitation petition) before the Regional Trial Court of Malabon City, Branch 74
(rehabilitation court) for approval. They disclosed that their common president is Mario Siochi
and that a majority of their stockholders and officers are members of the Siochi family. They
invoked A.M. No. 00-8-10-SC dated December 2, 2008, or the 2008 Rules of Procedure on
Corporate Rehabilitation (2008 Rules) which allow the joint filing of rehabilitation petition by a
group of companies.
The respondent China Banking Corporation (China Bank), a creditor of the petitioners,
opposed the rehabilitation petition. It argued that the petitioners are separate entities and should
have filed separate petitions even if the majority of their common stockholders and officers belong
to the Siochi family; that the assets of one corporation cannot be considered the assets of the other;
that their financial conditions are not the same; that they have different creditors; that their
obligations vary; and that the feasibility of rehabilitation for one corporation may not necessarily
be true for the other.

ISSUE:
WON the petitioners, which are close family corporations, can jointly file the petition for
rehabilitation under the Interim Rules.

HELD:
No. The rules in effect at the time the rehabilitation petition was filed were the Interim
Rules. The Interim Rules took effect on December 15, 2000, and did not allow the joint or
consolidated filing of rehabilitation petitions. On the other hand, the 2008 Rules took effect on
January 16, 2009. Rule 9, Section 2 of the 2008 Rules allows the retroactive application of the
2008 Rules to pending rehabilitation proceedings only when these have not yet undergone the
initial hearing stage at the time of the effectivity of the 2008 Rules.
In the present case, the rehabilitation court conducted the initial hearing on January 22,
2007, and approved the rehabilitation plan on April 15, 2008 - long before the effectivity of the
2008 Rules on January 16, 2009. Clearly, the 2008 Rules cannot be retroactively applied to the
rehabilitation petition filed by the petitioners.
 VIVA SHIPPING LINES, INC., Petitioner, v. KEPPEL PHILIPPINES MINING, INC.,
METROPOLITAN BANK & TRUST COMPANY, PILIPINAS SHELL PETROLEUM
CORPORATION, CITY OF BATANGAS, CITY OF LUCENA, PROVINCE OF
QUEZON, ALEJANDRO OLIT, NIDA MONTILLA, PIO HERNANDEZ, EUGENIO
BACULO, AND HARLAN BACALTOS, Respondents.
G.R. No. 177382, February 17, 2016

FACTS:
Viva Shipping Lines, Inc. (Viva Shipping Lines) filed a petition for corporate rehabilitation
before the Regional Trial Court of Lucena City. The Regional Trial Court initially denied the
petition for failure to comply with the requirements in Rule 4, Sections 2 and 3 of the Interim Rules
of Procedure on Corporate Rehabilitation. On October 17, 2005, Viva Shipping Lines filed an
amended petition. In the amended petition, Viva Shipping Lines claimed to own and operate 19
maritime vessels and Ocean Palace Mall, a shopping mall in downtown Lucena City. Viva
Shipping Lines also declared its total properties' assessed value at about P45,172,790.00. However,
these allegations were contrary to the attached documents in the amended petition.
According to Viva Shipping Lines, the devaluation of the Philippine peso, increased
competition, and mismanagement of its businesses made it difficult to pay its debts as they became
due. It also stated that "almost all its vessels were rendered unserviceable either because of age
and deterioration that it can no longer compete with modern made vessels owned by other
operators.
The Regional Trial Court found that Viva Shipping Lines' amended petition to be
"sufficient in form and substance," and issued a stay order. It stayed the enforcement of all
monetary and judicial claims against Viva Shipping Lines, and prohibited Viva Shipping Lines
from selling, encumbering, transferring, or disposing of any of its properties except in the ordinary
course of business. Before the initial hearing, the respondents filed their respective comments and
oppositions to Viva Shipping Lines' Amended Petition.
The Regional Trial Court lifted the stay order and dismissed Viva Shipping Lines amended
petition for failure to show the company's viability and the feasibility of rehabilitation. It found
that Viva Shipping Lines' assets all appeared to be non-performing. Further, it noted that Viva
Shipping Lines failed to show any evidence of consent to sell real properties belonging to its sister
company.

ISSUE:
Whether or not the Regional Trial Court correctly dismissed the amended petition for
Corporate Rehabilitation.

HELD:
YES. The dismissal of the amended petition did not emanate from petitioner's failure to
provide complete details on its assets and liabilities but on the trial court's finding that
rehabilitation is no longer viable for petitioner. Under the Interim Rules of Procedure on Corporate
Rehabilitation, a "petition shall be dismissed if no rehabilitation plan is approved by the court upon
the lapse of one hundred eighty (180) days from the date of the initial hearing." The proceedings
are also deemed terminated upon the trial court's disapproval of a rehabilitation plan, "or a
determination that the rehabilitation plan may no longer be implemented in accordance with its
terms, conditions, restrictions, or assumptions. It found that petitioner's assets are non-performing.
Petitioner admitted this in its Amended Petition when it stated that its vessels were no longer
serviceable.
Petitioner's rehabilitation plan should have shown that petitioner has enough serviceable
assets to be able to continue its business. Yet, the plan showed that the source of funding would
be to sell petitioner's old vessels. Disposing of the assets constituting petitioner's main business
cannot result in rehabilitation. A business primarily engaged as a shipping line cannot operate
without its ships. On the other hand, the plan to purchase new vessels sacrifices the corporation's
cash flow. This is contrary to the goal of corporate rehabilitation, which is to allow present value
recovery for creditors. The plan to buy new vessels after selling the two vessels it currently owns
is neither sound nor workable as a business plan.
The other part of the rehabilitation plan entails selling properties of petitioner's sister
company. As pointed out by the Regional Trial Court, this plan requires conformity from the sister
company. Even if the two companies have the same directorship and ownership, they are still two
separate juridical entities.
It is not solely the responsibility of the rehabilitation receiver to determine the validity of
the rehabilitation plan. The Interim Rules of Procedure on Corporate Rehabilitation allows the trial
court to disapprove a rehabilitation plan and terminate proceedings or, should the instances
warrant, to allow modifications to a rehabilitation plan.
 BANGKO SENTRAL NG PILIPINAS, Petitioner, v. VICENTE JOSE CAMPA, JR.,
MIRIAM M. CAMPA, MARIA ANTONIA C. ORTIGAS, MARIA TERESA C.
AREVALO, MARIA NIEVES C. ALVAREZ, MARIAN M. CAMPA AND BALBINO
JOSE CAMPA, Respondents
G.R. No. 185979, March 16, 2016

FACTS:
Bankwise applied for a Special Liquidity Facility (SLF) loan from BSP sometime in 2000.
BSP advised Bankwise to submit mortgages of properties owned by third parties to secure its
outstanding obligation to BSP. In compliance with the requirement, Bankwise mortgaged some
real properties belonging to third-party mortgagors. When Bankwise failed to pay its obligations
to BSP, the latter applied for extra-judicial foreclosure of the third-party mortgages. All mortgaged
properties were sold at public auction to BSP being the highest bidder and corresponding
certificates of sale were registered.
Eduardo Aliño (Aliño) filed a complaint for specific performance, novation of contracts
and damages with application for Temporary Restraining Order (TRO)/writ of preliminary
injunction against BSP and Bankwise. Aliño alleged that he is a stockholder of VR Holdings,
owning 10% of the outstanding shares of stock therein. Aliño averred that he allowed his properties
to be used by Bankwise as collateral for the SLF loan because Bankwise and VR Holdings assured
him that the properties will be returned to him and that he will not be exposed to the risk of
foreclosure.
Respondents filed a motion for leave to intervene and admit their Complaint-in-
Intervention. Respondents asserted that they have a legal interest in the matter of litigation being
the registered owners of certain real properties subject of the mortgage and in accommodation of
the request of Bankwise who assured them that there is no risk of foreclosure. They allowed their
properties to be used as security for Bankwise's SLF with BSP. Respondents repleaded the causes
of action submitted by Aliño in his complaint. The RTC through Judge Emma S. Young granted
the motion and admitted the Complaint-in-Intervention filed by respondents.
BSP appealed said order to the Court of Appeals via petition for certiorari alleging grave
abuse of discretion on the part of the trial court. The Court of Appeals ruled in favor of respondents
and found no grave abuse of discretion on the part of the trial court in allowing the motion for
leave to intervene and admission of a Complaint-in-Intervention. BSP moved for reconsideration
insisting that respondents, not being stockholders of VR Holdings, do not have any legal interest
in the subject matter of Commercial Case No. 06-114866 the same being a derivative suit initiated
by Aliño as a stockholder of VR Holdings. Said motion was denied.

ISSUE:
Whether or not Commercial Case No. 06-114866 is a derivative suit
HELD:
No. The rule on derivative suits presupposes that the corporation is the injured party and
the individual stockholder may file a derivative suit on behalf of the corporation to protect or
vindicate corporate rights whenever the officials of the corporation refuse to sue, or are the ones
to be sued, or hold control of the corporation. The damage in this case does not really devolve on
the corporation. The harm or injury that Aliño sought to be prevented pertains to properties
registered under Aliño and other third-party mortgagors.
Furthermore, the prayer in the complaint seeks for recovery of the properties, belonging to
Aliño and other third-party mortgagors, some of whom are not stockholders of VR Holdings, who
mortgaged their properties to BSP.
The suit clearly is not for the benefit of the corporation for a judgment in favor of the
complainant would mean recovery of his personal property. There is no actual or threatened injury
alleged to have been done to the corporation due to the foreclosure of the properties belonging to
third-party mortgagors.
A reading of the Interim Rules further demonstrates that the complaint could not be
considered a derivative suit: first, Aliño failed to exhaust all remedies available to him as a
stockholder of VR Holdings. The "supplications" referred to in the complaint are in the form of
one demand letter sent to each company, which does not suffice. Moreover, the letter was
addressed to the President of Bankwise and VR Holdings, and not to the Board of Directors;
second, the unavailability of appraisal right as a requirement for derivative suits does not apply in
this case. A stockholder who dissents from certain corporate actions has the right to demand
payment of the fair value,of his or her shares. This right, known as the right of appraisal, is
expressly recognized in Section 81 of the Corporation Code. The appraisal right does not obtain
in this case because the subject of the act complained of is the private properties of a stockholder
and not that of the corporation.appraisal right does not obtain in this case because the subject of
the act complained of is the private properties of a stockholder and not that of the corporation;
Third, the instant case is a harassment suit.
CONCORDE CONDOMINIUM, INC., BY ITSELF AND COMPRISING THE UNIT
OWNERS OF CONCORDE CONDOMINIUM BUILDING, Petitioner, v. AUGUSTO H.
BACULIO; NEW PPI CORPORATION; ASIAN SECURITY AND INVESTIGATION
AGENCY AND ITS SECURITY GUARDS; ENGR. NELSON B. MORALES, IN HIS
CAPACITY AS BUILDING OFFICIAL OF THE MAKATI CITY ENGINEERING
DEPARTMENT; SUPT. RICARDO C. PERDIGON, IN HIS CAPACITY AS CITY FIRE
MARSHAL OF THE MAKATI CITY FIRE STATION; F/C SUPT. SANTIAGO E.
LAGUNA, IN HIS CAPACITY AS REGIONAL DIRECTOR OF THE BUREAU OF FIRE
PROTECTION-NCR, AND ANY AND ALL PERSONS ACTING WITH OR UNDER
THEM, Respondents.
G.R. No. 203678, February 17, 2016

FACTS:
Petitioner filed with the Regional Trial Court of Makati City a Petition for Injunction with
Damages with prayer for the issuance of a Temporary Restraining Order (TRO), Writ of
Preliminary (Prohibitory) Injunction, and Writ of Preliminary Mandatory Injunction against
respondents. On April 24, 2012, the RTC called the case for hearing to determine the propriety of
issuing a TRO, during which one Mary Jane Prieto testified and identified some documents.
However, the trial court interrupted her testimony to find a better solution to the problem, and
issued an order Respondents Baculio and New PPI Corporation filed an urgent motion to re-raffle
claiming that it is a regular court, not a Special Commercial Court, which has jurisdiction over the
case, however, it was denied.
In their motion to vacate order and motion to dismiss, respondents Baculio and New PP1
Corporation assailed the RTC Order dated April 24, 2012, stating that the case is beyond its
jurisdiction as a Special Commercial Court. Respondents claimed that the petition seeks to restrain
or compel certain individuals and government officials to stop doing or performing particular acts,
and that there is no showing that the case involves a matter embraced in Section 5 of Presidential
Decree (P.D.) No. 902-A, which enumerates the cases over which the SEC [now the RTC acting
as Special Commercial Court pursuant to Republic Act (R.A.) No. 8799] exercises exclusive
jurisdiction. They added that petitioner failed to exhaust administrative remedies, which is a
condition precedent before filing the said petition. The trial court dismissed the case for lack of
jurisdiction. It noted that by petitioner's own allegations and admissions, respondents Baculio and
New PPI Corporation are not owners of the two subject lots and the building. Due to the absence
of intra-corporate relations between the parties, it ruled that the case does not involve an intra-
corporate controversy cognizable by it sitting as a Special Commercial Court. It also held that there
is no more necessity to discuss the other issues raised in the motion to dismiss, as well as the
motion to vacate order, for lack of jurisdiction over the case. Petitioner filed a motion for
reconsideration, which the RTC denied for lack of merit.
Petitioner contends that its petition for injunction with damages is an ordinary civil case
correctly filed with the RTC which has jurisdiction over actions where the subject matter is
incapable of pecuniary estimation. However, petitioner claims that through no fault on its part, the
petition was raffled to Branch 149 of the Makati RTC, a designated Special Commercial Court
tasked to hear intra-corporate disputes.

ISSUE:
Whether or not the subject matter of the petition is an ordinary civil case, and not an intra-
corporate controversy.

HELD:
Yes. There is no doubt that the petition filed before the RTC is an action for injunction, as
can be gleaned from the allegations made and reliefs sought by petitioner, namely: (1) to enjoin
respondents Baculio and New PPI Corporation from misrepresenting to the public, as well as to
private and government offices/agencies, that they are the owners of the disputed lots and
Concorde Condominium Building, and from pushing for the demolition of the building which they
do not even own; (2) to prevent respondent Asian Security and Investigation Agency from
deploying its security guards within the perimeter of the said building; and (3) to restrain
respondents Engr. Morales, Supt. Perdigon and F/C Supt. Laguna from responding to and acting
upon the letters being sent by Baculio, who is a mere impostor and has no legal personality with
regard to matters concerning the revocation of building and occupancy permits, and the fire safety
issues of the same building.
Applying the relationship test and the nature of the controversy test in determining whether
a dispute constitutes an intra-corporate controversy, as enunciated in Medical Plaza Makati
Condominium Corporation v. Cullen, the Court agrees with Branch 149 that Civil Case No. 12-
309 for injunction with damages is an ordinary civil case, and not an intra-corporate controversy.
A careful review of the allegations in the petition for injunction with damages indicates no
intra-corporate relations exists between the opposing parties, namely (1) petitioner condominium
corporation, by itself and comprising all its unit owners, on the one hand, and (2) respondent New
PP1 Corporation which Baculio claims to be the owner of the subject properties, together with the
respondents Building Official and City Fire Marshal of Makati City, the Regional Director of the
Bureau of Fire Protection, and the private security agency, on the other hand. Moreover, the
petition deals with the conflicting claims of ownership over the lots where Concorde
Condominium Building stands and the parking lot for unit owners, which were developed by Pulp
and Paper Distributors, Inc. (now claimed by respondent Baculio as the New PPI Corporation), as
well as the purported violations of the National Building Code which resulted in the revocation of
the building and occupancy permits by the Building Official of Makati City. Clearly, as the suit
between petitioner and respondents neither arises from an intra-corporate relationship nor does it
pertain to the enforcement of their correlative rights and obligations under the Corporation Code,
and the internal and intra-corporate regulatory rules of the corporation, Branch 149 correctly found
that the subject matter of the petition is in the nature of an ordinary civil action.
ANNA TENG, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION (SEC) AND
TING PING LAY, Respondents.
G.R. No. 184332, February 17, 2016

FACTS:
This case has its origin in G.R. No. 129777 entitled TCL Sales Corporation and Anna Teng
v. Hon. Court of Appeals and Ting Ping Lay. Herein respondent Ting Ping purchased 480 shares
of TCL Sales Corporation (TCL) from Peter Chiu on February 2, 1979; 1,400 shares on September
22, 1985 from his brother Teng Ching, who was also the president and operations manager of TCL;
and 1,440 shares from Ismaelita Maluto on September 2, 1989. Upon Teng Ching's death in 1989,
his son Henry Teng (Henry) took over the management of TCL. To protect his shareholdings with
TCL, Ting Ping on August 31, 1989 requested TCL's Corporate Secretary, herein petitioner Teng,
to enter the transfer in the Stock and Transfer Book of TCL for the proper recording of his
acquisition. Lie also demanded the issuance of new certificates of stock in his favor. TCL and
Teng, however, refused despite repeated demands. Because of their refusal, Ting Ping filed a
petition for mandamus with the SEC against TCL and Teng. The SEC granted Ting Ping's petition.
TCL and Teng appealed to the SEC en bane, which, in its order dated, affirmed the SEC
decision with modification, in that Teng was held solely liable for the payment of moral damages
and attorney's fees. Not contented, TCL and Teng filed a petition for review with the CA. the
Appellate Court, however, dismissed the petition for having been filed out of time and for finding
no cogent and justifiable grounds to disturb the findings of the SEC en banc.
Teng argues, among others, that the CA erred when it held that the surrender of Maluto's
stock certificates is not necessary before their registration in the corporate books and before the
issuance of new stock certificates. She contends that prior to registration of stocks in the corporate
books, it is mandatory that the stock certificates are first surrendered because a corporation will be
liable to a bona fide holder of the old certificate if, without demanding the said certificate, it issues
a new one. She also claims that the CA's reliance on Tan v. SEC is misplaced since therein subject
stock certificate was allegedly surrendered.
On the other hand, Ting Ping contends that Section 63 of the Corporation Code does not
require the surrender of the stock certificate to the corporation, nor make such surrender an
indispensable condition before any transfer of shares can be registered in the books of the
corporation. Ting Ping considers Section 63 as a permissive mode of transferring shares in the
corporation. Citing Rural Bank of Salinas, Inc. v. CA, he claims that the only limitation imposed
by Section 63 is when the corporation holds any unpaid claim against the shares intended to be
transferred. Thus, for as long as the shares of stock are validly transferred, the corporate secretary
has the ministerial duty to register the transfer of such shares in the books of the corporation,
especially in this case because no less than this Court has affirmed the validity of the transfer of
the shares in favor of Ting Ping.
ISSUE:
Whether or not the surrender of the certificates of stock is a requisite before registration of
the transfer may be made in the corporate books and for the issuance of new certificates in its
stead.

HELD:
NO. Under the Section 63 of the Corporation Code, certain minimum requisites must be
complied with for there to be a valid transfer of stocks, to wit: (a) there must be delivery of the
stock certificate; (b) the certificate must be endorsed by the owner or his attorney-in-fact or other
persons legally authorized to make the transfer; and (c) to be valid against third parties, the transfer
must be recorded in the books of the corporation.re
It is the delivery of the certificate, coupled with the endorsement by the owner or his duly
authorized representative that is the operative act of transfer of shares from the original owner to
the transferee. The Court even emphatically declared in Fil-Estate Golf and Development, Inc., et
al. v. Vertex Sales and Trading, Inc. that in "a sale of shares of stock, physical delivery of a stock
certificate is one of the essential requisites for the transfer of ownership of the stocks purchased."
The delivery contemplated in Section 63, however, pertains to the delivery of the certificate of
shares by the transferor to the transferee, that is, from the original stockholder named in the
certificate to the person or entity the stockholder was transferring the shares to, whether by sale or
some other valid form of absolute conveyance of ownership. Shares of stock may be transferred
by delivery to the transferee of the certificate properly indorsed. Title may be vested in the
transferee by the delivery of the duly indorsed certificate of stock.
It is thus clear that Teng's position - that Ting Ping must first surrender Chiu's and Maluto's
respective certificates of stock before the transfer to Ting Ping may be registered in the books of
the corporation -does not have legal basis. The delivery or surrender adverted to by Teng, i.e., from
Ting Ping to TCL, is not a requisite before the conveyance may be recorded in its books. To compel
Ting Ping to deliver to the corporation the certificates as a condition for the registration of the
transfer would amount to a restriction on the right of Ting Ping to have the stocks transferred to
his name, which is not sanctioned by law. The only limitation imposed by Section 63 is when the
corporation holds any unpaid claim against the shares intended to be transferred.
 Designer Baskets, Inc., Petitioner, vs. Air Sea Transport, Inc., Respondent
G.R. No. 184513, March 9, 2016

FACTS:
Ambiente, a foreign corporation, ordered from DBI, a domestic corporation, 223 cartoons
of its assorted wooden products worth US $ 12, 590.87 and payable through telegraphic transfer.
ACCLI, a domestic corporation and an acting agent of ASTI, a foreign corporation engaged in
carrier transport business, was Ambiente’s forwarding agent to ship out its order from the
Philippines to the US. DBI delivered the shipment to ACCLI and received triplicate copies of
ASTI bill of lading. DBI retained such bills of lading pending the payment of the goods by
Ambiente. However, Ambiente entered into an Indemnity Agreement with ASTI wherein ASTI
delivers the shipment even without the bill of lading and in return, Ambiente will hold ASTI and
its agent free from any liability as a result of the shipment. The shipment was then released without
DBI’s knowledge and without its receipt of payment for the cost of the goods shipped. DBI then
made several demands to Ambiente for it to pay, but to no avail. Thus, it filed a complaint against
ASTI, ACCLI, and ACCLI’s incorporators-stockholders for the payment of the value of the
shipment. It alleged that in the bill of lading, ASTI and/or ACCLI is to release the shipment to the
consignee only after the original copy of the bill of lading is surrendered to them, otherwise, they
are liable to the shipper for the value of the shipment.
The defendants filed a motion to dismiss arguing that: (a) they are not the real parties-in-
interest in the action because the cargo was delivered to Ambiente and that the case was a simple
case of non-payment of the buyer; (b) relative to the incorporators-stockholders of ACCLI,
piercing the corporate veil is misplaced; and (c) contrary to DBI’s allegation, the bill of lading
does not contain a proviso exposing ASTI to a liability in case the shipment is released without
the surrender of the bill of lading. DBI amended its complaint and impleaded Ambiente. The trial
court found ASTI, ACCLI, and Ambiente solidarily liable to DBI for the shipment’s value. It held
ASTI and ACCLI as its agent liable for their unwarranted release of the shipment to Ambiente
despite non-presentation of the bill of lading. It absolved ACCLI’s incorporators-stockholders.
Upon appeal to the CA, it found Ambiente as the only one liable to DBI. Hence, this appeal.

ISSUE:
Whether the ASTI/ACCLI may be held liable for releasing the shipment to the consignee
without first demanding the surrender of the bill of lading.

HELD:
No. The Court held that a common carrier may release the goods to the consignee even
without the surrender of the bill of lading.
Under Article 350 of the Code of Commerce, “the shipper as well as the carrier of the
merchandise or goods may mutually demand that a bill of lading be made.” A bill of lading,
when issued by the carrier to the shipper, is the legal evidence of the contract of carriage between
the former and the latter. It defines the rights and liabilities of the parties in reference to the
contract of carriage. The stipulations in the bill of lading are valid and binding unless they are
contrary to law, morals, customs, public order or public policy. Here, ACCLI, as agent of ASTI,
issued a bill of lading to DBI. This bill of lading governs the rights, obligations and liabilities of
DBI and ASTI. DBI claims that this bill of lading contains a provision stating that ASTI and
ACCLI are “to release and deliver the cargo/shipment to the consignee, x x x, only after the
original copy or copies of the said Bill of Lading is or are surrendered to them; otherwise they
become liable to [DBI] for the value of the shipment. Quite tellingly, however, DBI does not
point or refer to any specific clause or provision on the bill of lading supporting this claim. The
language of the bill of lading shows no such requirement. There is no obligation, therefore, on
the part of ASTI and ACCLI to release the goods only upon the surrender of the original bill of
lading.
Also, under Article 353 of the Code of Commerce, in case the consignee, upon receiving
the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or any
other cause, he must give the latter a receipt for the goods delivered this receipt producing the
same effects as the return of the bill of lading. Here, Ambiente could not produce the bill of
lading not because it was lost, but for another cause: the bill was retained by DBI pending
Ambiente’s full payment of the shipment. Ambiente and ASTI then entered into an Indemnity
agreement, wherein Ambiente asked ASTI to release even without the surrender of the bill. The
execution of this agreement and the fact that the shipment was released to Ambiente pursuant to
it, operates as a receipt in substantial compliance of the law.

RICAFORT, Petitioner, vs DICDICAN, Respondent

G.R. Nos. 202647-50, March 9, 2016

FACTS:
On August 15, 2011, NADECOR held its annual stockholders’ meeting (ASM) to elect its
board of directors for the year 2011-2012. Gatmaitan, its corporate secretary, attested to the
presence of a quorum of 94.1% of its outstanding shares of stock. New board of directors were
then elected. On October 20, 2011, the shareholders of record, Corazon Ricafort and some others
filed a complaint against NADECOR itself, the newly-elected directors, and Gatmaitan before the
RTC to declare null and void the ASM. They alleged that they had no knowledge or prior notice
of the ASM since they only received the notice of the ASM only on August 16, 2011 or one day
late, in violation of the 3-day notice provided in NADECOR’s By-Laws. The defendants seek the
dismissal of the case as because it is time-barred as it involved an election contest and as such, it
should have been filed within 15 days from the date of the election as provided for under Section
3, Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate Controversies, and
plaintiffs had no cause of action as they were duly served with notice of the meeting as shown in
the affidavit of the NADECOR messenger who mailed the notices on August 11, 2011.
 The RTC ruled in favor of plaintiff contending that they were not validly served with notice
and that their complaint did not involve an election contest and thus, was not subject to the 15-day
prescriptive period for filing an election protest. It declared null and void the ASM and ordered
within 30 days the holding of another ASM. Four separate petitions for certiorari were then filed
by the defendants to the CA against plaintiffs. Such was consolidated and the CA nullified and set
aside the RTC’s order. It declared the ASM to be valid and the board of directors and officers are
lawfully elected.

ISSUE:
Whether the case is time-barred because it involves an elections contest and therefore is
subject to the 15-day prescription period.

HELD:
Yes. The Court ruled that where one of the reliefs sought in the complaint is to nullify the
election of the Board of Directors at the annual stockholders’ meeting, the complaint involves an
election contest. Here the case put in issue the validity of the ASM and indirectly, the election of
the members of the Board of Directors. Here, by seeking nullify the August 15, 2011 ASM of
NADECOR, including all proceedings taken thereat, all the consequences thereof, and all acts
carried out pursuant thereto, the petitioners were clearly challenging the validity of the election of
the new board of directors. As such, it should have been filed within the 15-day prescriptive period
allowed for an election protest under Section 3 of Rule 6 of the Interim Rules.

OLANO, Petitioner, vs LIM ENG CO., Respondent

G.R. No. 195835, March 14, 2016

FACTS:
The petitioners are officers and/or directors of Metrotech Steel Industries, Inc. while
respondent Lim Eng Co is the chairman of LEC Steel Manufacturing Corporation which
specializes in architectural metal manufacturing. LEC was subcontracted by SKI-FB to
manufacture and install interior and exterior hatch doors for the 7th to 22nd floors of the
Project based on the final shop plans/drawings that LEC has submitted to them. Sometime
thereafter, LEC learned that Metrotech was also subcontracted to install interior and exterior hatch
doors forthe Project's 23rd to 41st floors. LEC demanded Metrotech to cease from infringing its
intellectual property rights but Metrotech insisted that no copyright infringement was committed
because the hatch doors it manufactured were patterned in accordance with the drawings provided
by SKI-FB. LEC sought the assistance of the National Bureau of Investigation (NBI) which in turn
applied for a search warrant before the Regional Trial Court (RTC) of Quezon City, Branch 24. It
resulted in the confiscation of finished and unfinished metal hatch doors as well as machines used
in fabricating and manufacturing hatch doors from the premises of Metrotech.
 On August 13, 2004, the respondent filed a Complaint-Affidavit before the DOJ against
the petitioners for copyright infringement. In the meantime or on September 8, 2004, the RTC
quashed the search warrant on the ground that copyright infringement was not established. The
investigating prosecutor dismissed the respondent's complaint based on inadequate evidence. The
respondent filed a petition for review before the DOJ but it was also denied. Upon the respondent's
motion for reconsideration, however, the DOJ reversed the investigating prosecutor’s decision and
directed the Chief State Prosecutor to file the appropriate information for copyright infringement
against the petitioners ruling that there was copyright infringement. The petitioners moved for
reconsideration which was granted declaring that the evidence on record did not establish probable
cause because the subject hatch doors were plainly metal doors with functional components devoid
of any aesthetic or artistic features. The respondent thereafter filed a motion for reconsideration
but it was denied. The respondent then sought recourse before the CA via a petition for
certiorari ascribing grave abuse of discretion on the part of the DOJ. CA granted the petition and
reiterated its ruling by denying the petitioner’s motion for reconsideration. Hence, this petition.

ISSUE:
Whether there is copyright infringement in this case.

HELD:
None. Copyright infringement is committed by any person who shall use original literary
or artistic works, or derivative works, without the copyright owner's consent in such a manner as
to violate the foregoing copy and economic rights. For a claim of copyright infringement to prevail,
the evidence on record must demonstrate: (1) ownership of a validly copyrighted material by the
complainant; and (2) infringement of the copyright by the respondent. While both elements subsist
in this case, they do not simultaneously concur so as to substantiate infringement. The respondent
failed to substantiate the alleged reproduction of the drawings/sketches of hatch doors copyrighted
under its Certificate of Registrations. There is no proof that the petitioners reprinted the
copyrighted sketches/drawings of LEC's hatch doors. The raid on Metrotech’s premises yielded
no copies or reproduction of LEC’s copyrighted sketches/drawings of hatch doors. What were
discovered were finished and unfinished hatch doors. As LEC’s Certificate of Registration only
covers sketches/drawings, LEC’s copyright protection covered only the hatch door
sketches/drawings and not the actual hatch door they depict. To constitute infringement, the
usurper must have copied or appropriated the original work of an author or copyright proprietor,
absent copying, there can be no infringement of copyright.
Hongkong and Shanghai Banking Corporation Limited v. National Steel Corporation and
Citytrust Banking Corporation
G.R. No. 183486, February 24, 2016

FACTS:
National Steel Corporation (NSC) entered into an Export Sales Contract with Klockner
East Asia Limited (Klockner) for the sale of 1,200 metric tons of prime cold rolled coils to
Klockner under FOB ST Iligan terms. In accordance with the requirements in the contract,
Klockner applied for an irrevocable letter of credit with HSBC in favor of NSC. HSBC then issued
an irrevocable and onsight letter of credit with NSC as the beneficiary. The bill stated that it is
governed by the International Chamber of Commerce Uniform Customs and Practice for
Documentary Credits (UCP 400). Under UCP 400, HSBC, the issuing bank, has the obligation to
immediately pay NSC upon presentment of the documents listed in the Letter of Credit. These
documents are: (1) one original commercial invoice; (2) one packing list; (3) one non-negotiable
copy of clean on board ocean bill of lading made out to order, blank endorsed marked 'freight
collect and notify applicant etc. NSC, through Emerald Forwarding Corporation, loaded and
shipped the cargo of prime cold rolled coils on board MV Sea Dragon under China Ocean Shipping
Company Bill of Lading. The cargo arrived in Hongkong and NSC coursed the collection of its
payment from Klockner through CityTrust Banking Corporation (CityTrust). NSC had earlier
obtained a loan from CityTrust secured by the proceeds of the Letter of Credit issued by HSBC.
CityTrust sent a collection order to HSBC respecting the collection of payment from Klockner.
HSBC sent a cablegram to CityTrust acknowledging receipt of the Collection Order. It also stated
that the documents will be presented to "the drawee against payment subject to UCP 322 [Uniform
Rules for Collection (URC) 322] as instructed. It also informed SCB-M that it has referred the
matter to Klockner for payment and that it will revert upon the receipt of the amount.
On December 8, 1993, the Letter of Credit expired. HSBC sent another cablegram to SCB-
M advising it that Klockner had refused payment. It then informed SCB-M that it intends to return
the documents to NSC with all the banking charges for its account. CityTrust insisted that a
demand for payment must be made from Klockner since the documents "were found in compliance
with LC terms and conditions." HSBC replied that in accordance with CityTrust's instruction in its
Collection Order, HSBC treated the transaction as a matter under URC 322. Thus, it demanded
payment from Klockner which unfortunately refused payment for unspecified reasons. It then
noted that under URC 322, Klockner has no duty to provide a reason for the refusal. Meanwhile,
NSC sent a letter to HSBC where it, for the first time, demanded payment under the Letter of
Credit. Unable to collect from HSBC, NSC filed a complaint against it for collection of sum of
money in the RTC Makati. NSC alleged that it coursed the collection of the Letter of Credit through
CityTrust. However, notwithstanding CityTrust's complete presentation of the documents in
accordance with the requirements in the Letter of Credit, HSBC unreasonably refused to pay its
obligation in the amount of US$485,767.93. HSBC denied that it has any liability under the Letter
of Credit. It argued that CityTrust modified the obligation when it stated in its Collection Order
that the transaction is subject to URC 322 and not under UCP 400.
The RTC Makati rendered a decision finding that HSBC is not liable to pay NSC the
amount stated in the Letter of Credit. It ruled that the applicable law is URC 322 as it was the law
which CityTrust intended to apply to the transaction. Under URC 322, HSBC has no liability to
pay when Klockner refused payment. The CA reversed the ruling of the RTC. The CA found that
it is UCP 400 and not URC 322 which governs the transaction as the terms of the Letter of Credit
clearly stated that UCP 400 shall apply. Further, the CA explained that even if the Letter of Credit
did not state that UCP 400 governs, it nevertheless finds application as this Court has consistently
recognized it under Philippine jurisdiction. Thus, applying UCP 400 and principles concerning
letters of credit, the CA explained that the obligation of the issuing bank is to pay the seller or
beneficiary of the credit once the draft and the required documents are properly presented.

ISSUE:
Who among the parties bears the liability to pay the amount stated in the Letter of Credit.

HELD:
HSCB is liable to pay NSC. In transactions where the letter of credit is payable on sight,
as in this case, the issuer must pay upon due presentment. This obligation is imbued with the
character of definiteness in that not even the defect or breach in the underlying transaction will
affect the issuing bank’s liability. This is the Independence Principle on the law on letters of credit.
Article 17 of UCP 400 explains that under this principle, an issuing bank assumes no liability or
responsibility for the form, sufficiency, accuracy, genuineness, falsification, or legal effect of any
documents, or for the general and/or particular conditions stipulated in the documents or
superimposed thereon. Thus, as long as the proper documents are presented, the issuing bank has
an obligation to pay even if the buyer should later on refuse payment. Hence, Klockner’s refusal
to pay carries no effect whatsoever on HSBC’s obligation to pay under the Letter of Credit.To
allow HSBC to refuse to honor the Letter of Credit simply because it could not collect first from
Klockner is to countenance a breach of the Independence Principle.