CASE DIGEST IN COMMERCIAL LAW

REVIEW

CASES:

1. BDO Unibank Inc. v. Lao (827 SCRA 481)

2. Virata v. Ng Wee (830 SCRA 371)

3. RCBC Saving Bank v. Odrada (806 SCRA 646)

4. Dy Teban Trading Inc. v. Dy (832 SCRA 533)

5. Indian Chaber of Commerce Philippines. Inc. v. Filipino Chamber of

Commerce in the Philippines. Inc. (799 SCRA 278)

6. University of Mindanao, Inc. v. Banko Sentral ng Pilipinas (778 SCRA

458)

7. Gaisano v. Development Insurance and Surety Inc. (818 SCRA 603)

8. Sun Life of Canada (Philippines) v. Sibya (793 SCRA 45)

SUBMITTED BY: JOHN REIÑER G. MANADAO

SUBMITTED TO: JUDGE EDMAR CASTILLO
 1. G.R. No. 227005 June 19, 2017

BDO UNIBANK, INC., Petitioner

vs.
ENGR. SELWYN LAO, doing business under the name and style "SELWYN F. LAO
CONSTRUCTION" AND "WING AN CONSTRUCTION AND DEVELOPMENT CORPORATION" and
INTERNATIONAL EXCHANGE BANK (now UNION BANK OF THE PHILIPPINES), Respondents

FACTS: Respondent Lao entered into a transaction with Ever link, under which, Everlink would
supply him with "HCG sanitary wares"; and that for the down payment, he issued two (2)
Equitable crossed checks payable to Everlink: Check No. 0127-242249 and Check No. 0127-
242250, in the amounts of ₱273,300.00 and ₱336,500.00, respectively. Upin encashment of the
chevhs, however, Everlink failed to perform its obligation. Lao learned that the checks were
deposited in two different bank accounts at respondent International Exchange Bank, now
respondent Union Bank of the Philippines (Union Bank).Lao filed a complaint against Everlink
and Wu for their failure to comply with their obligation and against BDO for allowing the
encashment of the two (2) checks. He later withdrew his complaint against Everlink as the
corporation had ceased existing. Lao filed an Amended Complaint, wherein he impleaded Union
Bank as additional defendant for allowing the deposit of the crossed checks in two bank
accounts other than the payee's, in violation of its obligation to deposit the same only to the
payee's account.

ISSUE: Whether or not the Union Bank, as a collecting bank, assume responsibility for a crossed
check as a general endorser in accordance with section 66 of the Negotiable Instruments Law?

RULING: Yes, Union Bank is liable for the crossed checks as the general endorser. The liability of
the collecting bank is anchored on its guarantees as the last endorser of the check. Under
Section 66 of the Negotiable Instruments Law, an endorser warrants "that the instrument is
genuine and in all respects what it purports to be; that he has good title to it; that all prior
parties had capacity to contract; and that the instrument is at the time of his endorsement valid
and subsisting." It has been repeatedly held that in check transactions, the collecting bank
generally suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements considering that the act of presenting the check for payment to the drawee is an
assertion that the party making the presentment has done its duty to ascertain the genuineness
of the endorsements. If any of the warranties made by the collecting bank turns out to be false,
then the drawee bank may recover from it up to the amount of the check.

In the case at bar, BDO as the drawee bank when it paid to Union Bank the value of the check
other than the payee named in the check which, in turn, credited the amount to New Wave's
account, it did not comply with the terms of the check and violates its duty to charge the
drawer's account only for properly payable items because as a drawee bank it is under strict
liability to pay the check only to the payee or to the payee's order and in this case the payee
named in the check was in favor of Everlink and that said check was not even endorsed by
Everlink to New Wave.

Nevertheless, even if BDO violated its duty, the loss still pertained to Union Bank being the
collecting bank. Union Bank was clearly negligent when it allowed the check to be presented by,
and deposited in the account of New Wave, despite knowledge that it was not the payee
named therein.

Further, it could not have escaped its attention that the subject checks were crossed checks. A
crossed check is one where two parallel lines are drawn across its face or across the comer
thereof. A check may be crossed generally or specially. A check is crossed especially when the
name of a particular banker or company is written between the parallel lines drawn. It is
crossed generally when only the words "and company" are written at all between the parallel
lines.

Jurisprudence dictates that the effects of crossing a check are:

(1) that the check may not be encashed but only deposited in the bank;
(2) that the check may be negotiated only once - to one who has an account with a bank; and
(3) that the act of crossing the check serves as a warning to the holder that the check has been
issued for a definite purpose so that he must inquire if he has received the check pursuant to
that purpose.

The effects of crossing a check, thus, relate to the mode of payment, meaning that the drawer
had intended the check for deposit only by the rightful person, i.e., the payee named therein. It
is undisputed that Check No. 0127-242250 had been crossed generally as nothing was written
between the parallel lines appearing on the face of the instrument. This indicated that Lao, the
drawer, had intended the same for deposit only to the account of Everlink, the payee named
therein. Despite this clear intention, however, Union Bank negligently allowed the deposit of
the proceeds of the said check in the account of New Wave.

2. G.R. No. 220926

LUIS JUAN L. VIRATA and UEMMARA PHILIPPINES CORPORATION (now known as

CAVITEXINFRASTRUCTURE CORPORATION), Petitioners
vs.
ALEJANDRO NG WEE, WESTMONT INVESTMENT CORP., ANTHONY T. REYES, SIMEON CUA,
VICENTE CUALOPING, HENRY CUALOPING, MARIZA SANTOSTAN, and MANUEL ESTRELLA,
Respondents
FACTS: Ng Wee was a valued client of Westmont Bank. He was enticed by the bank manager to
make money placements with Westmont Investment Corporation (Wincorp). Lured by
representations that the "sans recourse" transactions are safe, stable, high-yielding, and involve
little to no risk, Ng Wee, placed investments thereon under accounts in his own name, or in
those of his trustees. Ng Wee's initial investments were matched with Hottick Holdings
Corporation (Hottick), one of Wincorp's accredited borrowers, the majority shares of which was
owned by a Malaysian national by the name of Tan Sri Halim Saad (Halim Saad). Halim Saad was
then the controlling shareowner of UEM-MARA, which has substantial interests in the Manila
Cavite Express Tollway Project (Cavitex).

Hottick was extended a credit facility with a maximum drawdown of ₱l,500,908,026.87 in

consideration of the following securities it issued in favor of Wincorp: (1) a Suretyship
Agreement executed by herein petitioner Luis Juan Virata (Virata);
(2) a Suretyship Agreement executed by YBHG Tan Sri Halim Saad; and
(3) a Third Party Real Estate Mortgage executed by National Steel Corporation (NSC). Hottick
fully availed of the loan facility extended by Wincorp, but it defaulted in paying its outstanding
obligations when the Asian financial crisis struck. As a result, Wincorp filed a collection suit
against Hottick, Halim Saad, and NSC for the repayment of the loan and related costs.

A Writ of Preliminary Attachment was then issued against Halim Saad's properties, which
included the assets of UEM-MARA Philippines Corporation (UEM-MARA). Virata was not
impleaded as a party defendant in the case. To induce the parties to settle, petitioner Virata
offered to guarantee the full payment of the loan. The guarantee was embodied in the
Memorandum of Agreement between him and Wincorp. Virata was then able to broker a
compromise between Wincorp and Halim Saad that paved the way for the execution of a
Settlement Agreement. In the Settlement Agreement, Halim Saad agreed to pay USD l,
000,000.00 to Wincorp in satisfaction of any and all claims the latter may have against the
former under the Surety Agreement that secured Hottick's loan. As a result, Wincorp dropped
Halim Saad from the case and the Writ of Preliminary Attachment over the assets of UEM-
MARA was dissolved.

Thereafter, Wincorp executed a Waiver and Quitclaim in favor of Virata, releasing the latter
from any obligation arising from the Memorandum of Agreement, except for his obligation to
transfer forty percent (40%) equity of UEM Development Philippines, Inc. (UPDI) and forty
percent (40%) of UPDI's interest in the tollway project to Wincorp. Apparently, the
Memorandum of Agreement is a mere accommodation that is not meant to give rise to any
legal obligation in Wincorp's favor as against Virata, other than the stipulated equity transfer.

Alarmed by the news of Hottick's default and financial distress, Ng Wee confronted Wincorp
and inquired about the status of his investments. Wincorp assured him that the losses from the
Hottick account will be absorbed by the company and that his investments would be
transferred instead to a new borrower account. In view of these representations, Ng Wee
continued making money placements, rolling over his previous investments in Hottick and even
increased his stakes in the new borrower account - Power Merge Corporation (Power Merge).
Petitioner Virata is the majority stockholder of Power Merge.

In a special meeting of Wincorp's board of directors, the investment house resolved to file the
collection case against Halim Saad and Hottick and approved Power Merge' s application for a
credit line, extending a credit facility to the latter in the maximum amount of ₱l,
300,000,000.00. Barely a month later, Wincorp, through another board meeting allegedly
attended by the same personalities, increased Power Merge's maximum credit limit to
₱2,500,000,000.00.29 Accordingly, an Amendment to the Credit Line Agreement (Amendment)
was executed by the same representatives of the two parties.

Power Merge made a total of six (6) drawdowns from the amended Credit Line Agreement in
the aggregate amount of P2,183,755,253.11.31 Following protocol, Power Merge issued
Promissory Notes in favor of Wincorp, either for itself or as agent for or on behalf of certain
investors, for each drawdown. After receiving the promissory notes from Power Merge,
Wincorp, in turn, issued Confirmation Advices to Ng Wee and his trustees, as well as to the
other investors who were matched with Power Merge. A summary of the said Confirmation
Advices reveals that out of the ₱2,183,755,253.11 drawn by Power Merge, the aggregate
amount of ₱213,290,410.36 was sourced from Ng Wee's money placements under the names
of his trustees.

Unknown to Ng Wee, however, was that on the very same dates the Credit Line Agreement and
its subsequent Amendment were entered into by Wincorp and Power Merge, additional
contracts (Side Agreements) were likewise executed by the two corporations absolving Power
Merge of liability as regards the Promissory Notes it issued.
Save for the amount, identical provisions were included in the March 15, 1999 Side Agreement.
By virtue of these contracts, Wincorp was able to assign its rights to the uncollected Hottick
obligations and hold Power Merge papers instead. However, this also meant that if Power
Merge subsequently defaults in the payment of its obligations, it would refuse, as it did in fact
refuse, payment to its investors.

Despite repeated demands, Ng Wee was not able to collect Power Merge's outstanding
obligation under the Confirmation Advices in the amount of ₱213,290,410.36. Ng Wee institute
a Complaint for Sum of Money with Damages with prayer for the issuance of a Writ of
Preliminary Attachment (Complaint). Of the seventeen (17) named defendants therein, only
Virata, Power Merge, UPDI, UEM-MARA, Wincorp, Ong, Reyes, Cua, Tankiansee, Santos-Tan,
Vicente and Henry Cualoping, and Estrella were duly served with summons.

ISSUE: Whether or not Virata and UEM-MARA can be held liable under the doctrine of piercing
the corporate veil?
RULING:
a. Virata is liable for the obligations of Power Merge.

The circumstances of Power Merge clearly present an alter ego case that warrants the
piercing of the corporate veil. To elucidate, case law lays down 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 plaintiffs 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 not only the company president, he also owns 374,996 out of
375,000 of its subscribed capital stock. Meanwhile, the remainder was left for the nominal
incorporators of the business. The reported address of petitioner Virata and the principal office
of Power Merge are even one and the same. The clearest indication of all: Power Merge never
operated to perform its business functions, but for the benefit of Virata. Specifically, it was
merely created to fulfill his obligations under the Waiver and Quitclaim, the same obligations
for his release from liability arising from Hottick's default and non-payment.

Impelled by the desire to settle the outstanding obligations of Hottick under the terms of the
settlement agreement, Virata effectively allowed Power Merge to be used as Wincorp's pawn in
avoiding its legal duty to pay the investors under the failed investment scheme. Pursuant to the
alter ego doctrine, petitioner Virata should then be made liable for his and Power Merge's
obligations.

b. UEM-MARA cannot be held liable

UEM-MARA is an entity distinct and separate from Power Merge, and it was not established
that it was guilty in perpetrating fraud against the investors. It was a non-party to the "sans
recourse" transactions, the Credit Line Agreement, the Side Agreements, the Promissory Notes,
the Confirmation Advices, and to the other transactions that involved Wincorp, Power Merge,
and Ng Wee. There is then no reason to involve UEM-MARA in the fray. Otherwise stated,
respondent Ng Wee has no cause of action against UEM-MARA. UEM-MARA should not have
been impleaded in this case.

A cause of action is the act or omission by which a party violates a right of another.140 The
essential elements of a cause of action are (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on the part of such
defendant in violation of the right of the plaintiff or constituting a breach of the obligation of
the defendant to the plaintiff for which the latter may maintain an action for recovery of
damages or other appropriate relief.141

The third requisite is severely lacking in this case. Respondent Ng Wee cannot point to a specific
wrong committed by UEM-MARA against him in relation to his investments in Wincorp, other
than being the object of Wincorp's desires. He merely alleged that the proceeds of the Power
Merge loan was used by Virata in order to acquire interests in DEM-MARA, but this does not,
however, constitute a valid cause of action against the company even if we were to assume the
allegation to be true. It would indeed be a giant leap in logic to say that being Wincorp' s
objective automatically makes UEM-MARA a party to the fraud. DEM-Mara's involvement in
this case is merely incidental, not direct.

3. G.R. No. 219037 October 19, 2016

RCBC SAVINGS BANK, Petitioner, v. NOEL M. ODRADA, Respondent.

FACTS: Odrada filed a collection suit against Lim and RCBC after the checks were dishonored by
RCBC upon Lim’s instruction. Respondent Noel M. Odrada sold a secondhand Mitsubishi
Montero to Teodoro L. Lim for One Million Five Hundred Ten Thousand Pesos (P1,510,000). Of
the total consideration, Six Hundred Ten Thousand Pesos (P610,000) was initially paid by Lim
and the balance of Nine Hundred Thousand Pesos (P900,000) was financed by petitioner RCBC
Savings Bank through a car loan obtained by Lim.

After the issuance of the manager's checks and their turnover to Odrada but prior to the
checks' presentation, Lim notified Odrada in a letter dated 15 April 2002 that there was an issue
regarding the roadworthiness of the Montero. Among the issues with the Montero are hidden
defects such as misalignment of engine and signs of head on collision despite Odrada’s claim
that the car never had any collision. A meeting was requested with regard to the matter.
However, Odrada did not go to the slated meeting and instead deposited the manager's checks
with International Exchange Bank (Ibank) on 16 April 2002 and redeposited them on 19 April
2002 but the checks were dishonored both times apparently upon Lim's instruction to RCBC.
Consequently, Odrada filed a collection suit against Lim and RCBC.
In his Answer, Lim alleged that the cancellation of the loan was at his instance, upon discovery
of the misrepresentations by Odrada about the Montero's roadworthiness. On the other hand,
RCBC contended that the manager's checks were dishonored because Lim had cancelled the
loan. Moreover, RCBC alleged that despite notice of the defective condition of the Montero,
which constituted a failure of consideration, Odrada still proceeded with presenting the
manager's checks.

RTC ruled in favor of Odrada which was subsequently affirmed by CA. RCBC and Lim filed a
motion for reconsideration but the Court of Appeals denied the same. RCBC alone filed this
petition before the Court. Thus, the decision of the Court of Appeals became final and
executory as to Lim.

ISSUE: Whether or not can the RCBC, the drawee bank of a manager’s check, has the option of
refusing payment by interposing a personal defense of the purchaser of the manager’s check
who delivered the check to a third party?

RULING: Yes, RCBC may refuse to pay manager’s check.

As a general rule, the drawee bank is not liable until it accepts. Prior to a bill's acceptance, no
contractual relation exists between the holder and the drawee. Acceptance, therefore, creates
a privity of contract between the holder and the drawee so much so that the latter, once it
accepts, becomes the party primarily liable on the instrument.

The drawee bank, as a result, has the unconditional obligation to pay a manager's check to a
holder in due course irrespective of any available personal defenses. However, while this Court
has consistently held that a manager's check is automatically accepted, a holder other than a
holder in due course is still subject to defenses. Based on the rulings of the cases cited by the
Supreme Court in this case, it clearly establish that the drawee bank of a manager's check may
interpose personal defenses of the purchaser of the manager's check if the holder is not a
holder in due course. In short, the purchaser of a manager's check may validly countermand
payment to a holder who is not a holder in due course.

Accordingly, the drawee bank may refuse to pay the manager's check by interposing a personal
defense of the purchaser. Hence, the resolution of the present case requires a determination of
the status of Odrada as holder of the manager's checks.

Section 52 of the Negotiable Instruments Law defines a holder in due course as one who has
taken the instrument under the following conditions:
(a) That it is complete and regular upon its face;
 (b) That he became the holder of it before it was overdue, and without notice that it has
been previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it. (Emphasis supplied)

To be a holder in due course, the law requires that a party must have acquired the
instrument in good faith and for value.

In the present case, Odrada attempted to deposit the manager's checks on 16 April 2002, a day
after Lim had informed him that there was a serious problem with the Montero. Instead of
addressing the issue, Odrada decided to deposit the manager's checks. Odrada's actions do not
amount to good faith. Clearly, Odrada failed to make an inquiry even when the circumstances
strongly indicated that there arose, at the very least, a partial failure of consideration due to
the hidden defects of the Montero. Odrada's action in depositing the manager's checks despite
knowledge of the Montero's defects amounted to bad faith. Moreover, when Odrada
redeposited the manager's checks on 19 April 2002, he was already formally notified by RCBC
the previous day of the cancellation of Lim's auto loan transaction. Following UCPB, RCBC may
refuse payment by interposing a personal defense of Lim - that the title of Odrada had become
defective when there arose a partial failure or lack of consideration.

4. G.R. No. 185647

DY TEBAN TRADING, INC., Petitioner

vs.
PETER C. DY, JOHNNY C. DY and RAMON C. DY, Respondents

FACTS: DTTI is a domestic closed corporation owned by the Dy siblings. It has its principal office
at Concepcion St., Butuan City and a branch in Montilla Boulevard. 5 Due to certain
disagreements relating to its management, DTTI instituted an action for injunction against Peter
C. Dy, Johnny C. Dy and Ramon C. Dy (respondents) before the RTC on September 7, 2004 for
alleged squandering cash sales from the branch.

This was docketed as an intra-corporate case. Respondents, on the other hand, filed an action
for dissolution of the corporation. Both actions were raffled to Branch 33 of the RTC which,
incidentally, was also the designated commercial court. The RTC heard the cases jointly.  The
action for the dissolution of the corporation was, however, eventually dismissed due to the
respondents' failure to pay the proper docket fees.
On June 18, 2007, however, neither Atty. Go nor Atty. Rabor attended the hearing for
respondents. No motion for postponement was also filed. Atty. Asis thus moved that
respondents be declared to have waived their right to cross-examine Lorencio, who was DTTI' s
last witness. He also asked for 15 days within which to file his written formal offer of evidence.
The RTC granted this motion and issued an Order. RTC ruled in favor of DTTI relying solely on
documents presented by the petitioner and ordered injunction against the corporation. CA
remanded the case back to the RTC. The respondents challenge the jurisdiction of the RTC in
taking cognizance of the action for injunction as an intra-corporate case.

ISSUE: Whether or not the action filed before the RTC was an intra-corporate case properly
heard by the RTC acting as a special commercial court?

RULING: NO, Section 5 of the Securities Regulation Code  transferred the jurisdiction of the
Securities and Exchange Commission (SEC) over intra-corporate disputes to RTCs designated by
the Supreme Court as commercial courts.

The existence of an intra-corporate dispute must be properly alleged in a complaint filed before
a commercial court because the allegations in the complaint determine a tribunal's jurisdiction
over the subject matter. This means that the complaint must make out a case that meets both
the relationship and the nature of the controversy tests. Under the relationship test, a dispute
is intra-corporate if it is:
(1) between the corporation, partnership or association and the public;
(2) between the corporation, partnership or association and the state insofar as its franchise,
permit or license to operate is concerned;
(3) between the corporation, partnership or association and its stockholders, partners,
members or officers; and
(4) among the stockholders, partners or associates themselves.

The nature of the controversy test, on the other hand, requires that the dispute itself must be
intrinsically connected with the regulation of the corporation, partnership or
association. In Strategic Alliance Development Corporation v. Star Infrastructure Development
Corporation, we explained that the controversy "must not only be rooted in the existence of an
intra-corporate relationship, but must also refer to the enforcement of the parties' correlative
rights and obligations under the Corporation Code as well as the internal and intra-corporate
regulatory rules of the corporation.

Applying the foregoing tests, we agree with the CA that the complaint filed by DTTI before the
RTC was a civil action for injunction and not an intra-corporate dispute.
 5. GR No. 184008 August 03, 2016

INDIAN CHAMBER OF COMMERCE PHILS.

vs. FILIPINO INDIAN CHAMBER OF COMMERCE IN THE PHILIPPINES

FACTS: Filipino-Indian Chamber of Commerce of the Philippines, Inc. (defunct FICCPI) was
originally registered with the Securities and Exchange Commission (SEC) as Indian Chamber of
Commerce of Manila, Inc. On November 24, 2001, FICCPI’s corporate existence expired for it
didn’t apply for the extension of its term.

On January 20, 2005, Mr. Naresh Mansukhani (Mansukhani) reserved the corporate name
"Filipino Indian Chamber of Commerce in the Philippines, Inc" (FICCPI) for the period from
January 20, 2005 to April 20, 2005, with the Company Registration and Monitoring Department
(CRMD) of the SEC. Ram Sitaldas (Sitaldas), who claimed to be the representative of the defunct
FICCPI, opposed to this and argued that such unauthorized reservation was illegal.

According to the CRMD, the expiration of the defunct FICCPI’s corporate existence signified the
end of its right over the said name and thus, the same may be appropriated by another. Both
the SEC and CA ruled in favor of Mansukhani.

A year after the reservation of the name, FICCPI was issued a Certificate of Incorporation. In
2005, Mr. Pracash Dayacanl, who represented the defunct FICCPI, applied for the reservation of
the corporate name "Indian Chamber of Commerce Phils., Inc." (ICCPI) with the CRMD.
Mansukhani filed an opposition to this, which the CRMD denied. It stated that the name "Indian
Chamber of Commerce Phils., Inc." was not deceptively or confusingly similar to "Filipino Indian
Chamber of Commerce in the Philippines, Inc." On the same date, the CRMD approved and
issued a Certificate of Incorporation to ICCPI.

Upon appeal, the SEC En Banc ruled otherwise. The committee found the existence of a
similarity between the names that could lead to confusion. It also ruled that FICCPI enjoys prior
right to use its corporate name to the exclusion of the others. The CA affirmed such ruling,
stating that by simply looking at the corporate names of ICCPI and FICCPI, one may readily
notice the striking similarity between the two. An ordinary person using ordinary care and
discrimination may be led to believe that the corporate names of ICCPI and FICCPI refer to one
and the same corporation

ISSUE: Whether there is similarity between the petitioner’s and the respondent’s corporate
names that would inevitably lead to confusion?
RULING: YES. Section 18 of the Corporation Code expressly prohibits the use of a corporate
name which is identical or deceptively or confusingly similar to that of any existing corporation.
In Philips Export B. V. v. Court of Appeals, this Court ruled that to fall within the prohibition, two
requisites must be proven, namely: a) that the complainant corporation acquired a prior right
over the use of such corporate name, and b) that the proposed name is either identical,
deceptively or confusingly similar to that of any existing corporation or to any other name
already protected by law, or patently deceptive, confusing or contrary to existing law.

In the case at bar, both requisites were proven. ICCPI was incorporated a month after FICCPI
registered its corporate name. Thus, applying the Priority of Adoption Rule, FICCPI, which was
incorporated earlier, acquired a prior right over the use of the corporate name. ICCPI cannot
argue that it first incorporated and held the "Filipino Indian Chamber of Commerce," until it
failed to renew its name due to oversight. A corporation is deemed dissolved when its term
expires.

According to SEC Memorandum Circular No. 14-2000, the name of a dissolved firm shall not be
allowed to be used by other firms within three years after the approval of the dissolution of the
corporation by the Commission, unless allowed by the last stockholders representing at least
majority of the outstanding capital stock of the dissolved firm. Following this rule, FICCPI was
able to reserve the name "Filipino Indian Chamber of Commerce in the Philippines, Inc." after
the three-year prohibition.

Petitioner cannot argue that the combination of words in respondent's corporate name is
merely descriptive and generic, and consequently cannot be appropriated as a corporate name
to the exclusion of the others. Save for the words "Filipino," "in the," and "Inc.," the corporate
names of petitioner and respondent are identical in all other respects. This issue was also
discussed in the Iglesia case where this Court held. Furthermore, the wholesale appropriation
by petitioner of respondent's corporate name cannot find justification under the generic word
rule. We agree with the Court of Appeals' conclusion that a contrary ruling would encourage
other corporations to adopt verbatim and register an existing and protected corporate name, to
the detriment of the public.

On the second point, ICCPI's corporate name is deceptively or confusingly similar to that of
FICCPI. It is settled that to determine the existence of confusing similarity in corporate names,
the test is whether the similarity is such as to mislead a person, using ordinary care and
discrimination. In so doing, the court must examine the record as well as the names
themselves. Proof of actual confusion need not be shown. It suffices that confusion is probably
or likely to occur. In this case, the overriding consideration in determining whether a person,
using ordinary care and discrimination, might be misled is the circumstance that both ICCPI and
FICCPI have a common primary purpose, that is, the promotion of Filipino-Indian business in the
Philippines.
 6. G.R. No. 194964-65 January 11, 2016

UNIVERSITY OF MINDANAO, INC., Petitioner,

vs.
BANGKO SENTRAL NG PILIPINAS, ET AL., Respondents.

FACTS: University of Mindanao is an educational institution. For the year 1982, its Board of
Trustees was chaired by Guillermo B. Torres. His wife, Dolores P. Torres, sat as University of
Mindanao's Assistant Treasurer.

Before 1982, Guillermo B. Torres and Dolores P. Torres incorporated and operated two (2) thrift
banks: (1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2) Davao Savings and Loan
Association, Inc. (DSLAI). Guillermo B. Torres chaired both thrift banks. He... acted as FISLAI's
President, while his wife, Dolores P. Torres, acted as DSLAI's President and FISLAI's Treasurer.

Bangko Sentral ng Pilipinas issued a P1.9 million standby emergency credit to FISLAI. The
release of standby emergency credit was evidenced by three (3) promissory notes. 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. "The mortgage served as security for FISLAI's PI.9 Million loan. It was
allegedly executed on University of Mindanao's behalf. As proof of his authority to execute a
real estate mortgage for University of Mindanao, Saturnino Petalcorin showed a Secretary's
Certificate MSLAI failed to recover from its losses and was liquidated on May 24, 1991.

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 MSLAI's total outstanding obligation of
P12,534,907.73 remained unpaid. Gloria E. Detoya, denied that University of Mindanao's
properties were mortgaged. It also denied having received any loan proceeds from Bangko
Sentral ng Pilipinas.

Petitioner argues that the execution of the mortgage contract was ultra vires. As an educational
institution, it may not secure the loans of third persons. Securing loans of third persons is not
among the purposes for which petitioner was established.

Respondent argues that petitioner's act of mortgaging its properties to guarantee FISLAI's loans
was consistent with petitioner's business interests, since petitioner was presumably a FISLAI
shareholder whose officers and shareholders interlock with FISLAI. Respondent points out...
that petitioner and its key officers held substantial shares in MSLAI when DSLAI and FISLAI
merged. Therefore, it was safe to assume that when the mortgages were executed in 1982,
petitioner held substantial shares in FISLAI. Petitioner argues that it did not authorize Saturnino
Petalcorin to mortgage its properties on its behalf. There was no board resolution to that effect.
Thus, the mortgages executed by Saturnino Petalcorin were unenforceable.

ISSUES: Whether petitioner University of Mindanao is bound by the real estate mortgage
contracts executed by Saturnino Petalcorin?

RULING: Petitioner, is correct. 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

In this case, the presumption that the execution of mortgage contracts was within petitioner's
corporate powers does not apply. Securing third-party loans is not connected to petitioner's
purposes as an educational institution.

Thus, regardless of the number of shares that petitioner had with FISLAI, DSLAI, or MSLAI,
securing loans of third persons is still beyond petitioner's power to do. It is still inconsistent
with its purposes under the law[104] and its articles of... incorporation.

Petitioner's key officers, as shareholders of FISLAI, may have an interest in ensuring the viability
of FISLAI by obtaining a loan from respondent and securing it by whatever means. However,
having interlocking officers and stockholders with FISLAI does not mean that petitioner, as an
educational institution, is or must necessarily be interested in the affairs of FISLAI. Since
petitioner is an entity distinct and separate not only from its own officers and shareholders but
also from FISLAI, its interests as an educational institution may not be consistent with FISLAI's.
The mortgage contracts executed in favor of respondent do not bind petitioner. They were
executed without authority from petitioner.
Hence, without delegation by the board of directors or trustees, acts of a person including
those of the corporation's directors, trustees, shareholders, or officers executed on behalf of
the corporation are generally not binding on the corporation. Unauthorized acts that are
merely beyond the powers of the corporation under its articles of incorporation are not void ab
initio.

Saturnino Petalcorin's authority to transact on behalf of petitioner cannot be presumed based

on a Secretary's Certificate and excerpt from the minutes of the alleged board meeting that
were found to have been simulated. These documents cannot be considered as the corporate
acts... that held out Saturnino Petalcorin as petitioner's authorized representative for mortgage
transactions. They were not supported by an actual board meeting.

Principle:
Acts of an officer that arc not authorized by the board of directors/trustees do not bind the
corporation unless the corporation ratifies the acts or holds the officer out as a person with
authority to transact on its behalf.

7. G.R. No. 190702 February 27, 2017

JAIME T. GAISANO, Petitioner

vs.
DEVELOPMENT INSURANCE AND SURETY CORPORATION, Respondent

FACTS: On September 27, 1996, respondent issued a comprehensive commercial vehicle policy
to petitioner over the 1992 Mitsubishi Montero for a period of one year. Petitioner's company,
Noah's Ark immediately processed the payments and issued a check dated September 27, 1996
payable to TransPacific on the same day. The check represents payment for the policy, with
₱55,620.60 for the premium and other charges over the vehicle. However, nobody from Trans-
Pacific picked up the check that day (September 27) because its president and general manager,
Herradura, was celebrating his birthday. Trans-Pacific informed Noah's Ark that its messenger
would get the check the next day, September 28.

In the evening of September 27, 1996, while under the official custody of Noah's Ark marketing
manager Pacquing as a service company vehicle, the vehicle was stolen in the vicinity of SM
Megamall. Oblivious of the incident, Trans-Pacific picked up the check the next day, September
28. It issued an official receipt dated September 28, 1996, acknowledging the receipt of
₱55,620.60 for the premium and other charges over the vehicle.

On October 1, 1996, Pacquing informed petitioner of the vehicle's loss. In its Answer,
respondent asserted that the non-payment of the premium rendered the policy ineffective. The
premium was received by the respondent only on October 2, 1996, and there was no known
loss covered by the policy to which the payment could be applied.
ISSUE: Whether or not there is a binding insurance contract between petitioner and
respondent?

RULING: NO. Insurance is a contract whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or contingent event. Just like
any other contract, it requires a cause or consideration. The consideration is the premium,
which must be paid at the time and in the way and manner specified in the policy. If not so
paid, the policy will lapse and be forfeited by its own terms.

The law, however, limits the parties' autonomy as to when payment of premium may be made
for the contract to take effect. The general rule in insurance laws is that unless the premium is
paid, the insurance policy is not valid and binding. Section 77 of the Insurance Code, applicable
at the time of the issuance of the policy, provides:

Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy
or contract of insurance issued by an insurance company is valid and binding unless and until
the premium thereof has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies.

There is no dispute that the check was delivered to and was accepted by respondent's agent,
TransPacific, only on September 28, 1996. No payment of premium had thus been made at the
time of the loss of the vehicle on September 27, 1996. While petitioner claims that Trans-Pacific
was informed that the check was ready for pick-up on September 27, 1996, the notice of the
availability of the check, by itself, does not produce the effect of payment of the premium.
Trans-Pacific could not be considered in delay in accepting the check because when it informed
petitioner that it will only be able to pick-up the check the next day, petitioner did not protest
to this, but instead allowed TransPacific to do so. Thus, at the time of loss, there was no
payment of premium yet to make the insurance policy effective.

Petitioner also failed to establish the fact of a grant by respondent of a credit term in his favor,
or that the grant has been consistent. While there was mention of a credit agreement between
Trans-Pacific and respondent, such arrangement was not proven and was internal between
agent and principal. Under the principle of relativity of contracts, contracts bind the parties
who entered into it. It cannot favor or prejudice a third person, even if he is aware of the
contract and has acted with knowledge.

We cannot sustain petitioner's claim that the parties agreed that the insurance contract is
immediately effective upon issuance despite non-payment of the premiums. Even if there is
a waiver of pre-payment of premiums, that in itself does not become an exception to Section
77, unless the insured clearly gave a credit term or extension. This is the clear import of the
fourth exception in the UCPB General Insurance Co., Inc. To rule otherwise would render
nugatory the requirement in Section 77 that "notwithstanding any agreement to the contrary,
no policy or contract of insurance issued by an insurance company is valid and binding unless
and until the premium thereof has been paid.

Moreover, the policy states that the insured's application for the insurance is subject to the
payment of the premium. There is no waiver of pre-payment, in full or in installment, of the
premiums under the policy. Consequently, respondent cannot be placed in estoppel.

Thus, we find that petitioner is not entitled to the insurance proceeds because no insurance
policy became effective for lack of premium payment. The consequence of this declaration is
that petitioner is entitled to a return of the premium paid for the vehicle in the amount of
₱55,620.60 under the principle of unjust enrichment.

8. G.R. No. 211212, June 08, 2016

SUN LIFE OF CANADA (PHILIPPINES), INC., Petitioner, v. MA. DAISY'S. SIBYA, JESUS MANUEL S.
SIBYA III, JAIME LUIS S. SIBYA, AND THE ESTATE OF THE DECEASED ATTY. JESUS SIBYA, JR.,
Respondents.

FACTS: On January 10, 2001, Atty. Jesus Sibya, Jr. applied for life insurance with Sun Life. In his
Application for Insurance, he indicated that he had sought advice for kidney problems. Sun Life
approved the application and issued Insurance Policy No. 031097335. The policy indicated the
respondents as beneficiaries and entitles them to a death benefit of P1,000,000.00 should Atty.
Jesus Jr. dies on or before February 5, 2021, or a sum of money if Atty. Jesus Jr. is still living on
the endowment date.

On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound. As such, Ma. Daisy filed a
Claimant’s Statement with Sun Life to seek the death benefits indicated in his insurance policy.
However, Sun Life denied the claim on the ground that the details on Atty. Jesus Jr.’s medical
history were not disclosed in his application. Simultaneously, Sun Life tendered a check
representing the refund of the premiums paid by Atty. Jesus.

The respondents claimed that Atty. Jesus Jr. did not commit misrepresentation in his
application for insurance. The RTC held that Atty. Jesus Jr. did not commit material concealment
and misrepresentation when he applied for life insurance with Sun Life. It observed that given
the disclosures and the waiver and authorization to investigate executed by Atty. Jesus Jr. to
Sun Life, the latter had all the means of ascertaining the facts allegedly concealed by the
applicant.
 
ISSUE: Whether or not there was concealment or misrepresentation when Atty. Jesus Jr.
submitted his insurance application with Sun Life?

RULING: None. In the present case, Sun Life failed to clearly and satisfactorily establish its
allegations, and is therefore liable to pay the proceeds of the insurance.

In the present case, Sun Life issued Atty. Jesus Jr.’s policy on February 5, 2001. Thus, it has two
years from its issuance, to investigate and verify whether the policy was obtained by fraud,
concealment, or misrepresentation. Upon the death of Atty. Jesus Jr., however, on May 11,
2001, or a mere three months from the issuance of the policy, Sun Life loses its right to rescind
the policy.

As correctly observed by the CA, Atty. Jesus Jr. admitted in his application his medical treatment
for kidney ailment. Moreover, he executed an authorization in favor of Sun Life to conduct
investigation in reference with his medical history.

Indeed, the intent to defraud on the part of the insured must be ascertained to merit rescission
of the insurance contract. Concealment as a defense for the insurer to avoid liability is an
affirmative defense and the duty to establish such defense by satisfactory and convincing
evidence rests upon the provider or insurer. In the present case, Sun Life failed to clearly and
satisfactorily establish its allegations, and is therefore liable to pay the proceeds of the
insurance.