MERCANTILE LAW

CASE DIGESTS

Adviser: Atty. Carlo D. Busmente

Subject Head: Krystle Angeline Rosales
Assistant Subject Head: Maria Patrese Gutierrez Claveria
Members:
De Ello, Philip Edwin
De Guzman, Gillian
Domingo, Rozette
Fullante, John Elan
Malabanan, Ma. Veronica
Martinez, Maria Regina
Masculino, Jenine Anne
Nadal, Leandro
Padua, Ailene Courtney

MERCANTILE LAW
(SBCA Centralized Bar Operations)
- Banking Laws
- Corporation Laws
- Insurance Laws
- Laws on Intellectual Property
- Negotiable Instruments Law
- Transportation Laws
- Special Commercial Laws

DOCTRINES

CORPORATION LAWS

1.

When the offender is a corporation, partnership, or other juridical person, the president, the general
manager, managing partner, or such other officer charged with the management of the business
affairs thereof, or employee responsible for the violation shall be criminally liable; in case the offender
is an alien, he shall be subject to deportation after serving the sentence. If the offender is a
government official or employee, he shall be perpetually disqualified from office. (Ty v. De Jemil, G.R.
No. 182147, December 15, 2010)

2.

Piercing the veil of corporate fiction is frowned upon. To justify the piercing of the veil of corporate
fiction, it must be shown by clear and convincing proof that the separate and distinct personality of
the corporation was purposefully employed to evade a legitimate and binding commitment and
perpetuate a fraud or like wrongdoings. (Kukan International Corporation v. Reyes, G.R. No. 182729,
September 29, 2010)

3.

The purpose of rehabilitation proceedings is to enable the company to gain new lease on life and
thereby allows creditors to be paid their claims from its earnings. Rehabilitation contemplates a
continuance of corporate life and activities in an effort to restore and reinstate the financially
distressed corporation to its former position of successful operation and solvency. (Philippine National
Bank v. Court of Appeals, G.R. No. 165571, January 20, 2009)

4.

In controversies arising out of intra-corporate relations, between and among stockholders, members
or associates, and between, any or all of them and the corporation, it is the RTC, not SEC, which has
jurisdiction over the case. (Orendain vs. BF Homes, Inc., 506 SCRA 348, October 31, 2006)

NEGOTIABLE INSTRUMENTS LAW

5.

A collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee
bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately
should be held liable therefor. However, this general rule is subject to exceptions, when the issuance
of the check itself was attended with negligence. (Allied Banking Corporation vs. Lim Sio Wan, 5 G.R. No.
133179, March 27, 2008)

6.

An accommodation party is solidarily liable with the one who received the proceeds of the loan they
both contracted. (Gonzales vs. Philippine Commercial and International Bank, G.R. No. 180257, February
23, 2011)

7.

In determining the nature of a contract, courts are not bound by the title or name given by the parties.
The decisive factor in evaluating such agreement is the intention of the parties, as shown not
necessarily by the terminology used in the contract but by their conduct, words, actions and deeds
prior to, during and immediately after executing the agreement. As such, therefore, documentary and
parol evidence may be submitted and admitted to prove such intention. (Hur Tin Yang vs. People, G.R.
No. 195117, August 14, 2013)

8.

A check "constitutes an evidence of indebtedness" and is a veritable "proof of an obligation." Hence, it

can be used "in lieu of and for the same purpose as a promissory note. (Pua vs. Lo Bun Tiong, 708
SCRA 571, October 23, 2013).

9.

By its peculiar character and general use in commerce, a managers check is regarded substantially to
be as good as the money it represents. (Philippine National Bank vs Tria, 671 scra 440, April 25, 2012)

INSURANCE LAW

10. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract. It
accrues simply upon payment by the insurance company of the insurance claim. (Malaya Insurance
Co., vs. Alberto, 664 SCRA 791, February 01, 2012)

CASE DIGESTS
TY VS. DE JEMIL
GR NO. 182147,
SEPTEMBER 15, 2010
DOCTRINE: When the offender is a corporation, partnership, or other juridical person, the president, the
general manager, managing partner, or such other officer charged with the management of the business
affairs thereof, or employee responsible for the violation shall be criminally liable; in case the offender is
an alien, he shall be subject to deportation after serving the sentence. If the offender is a government
official or employee, he shall be perpetually disqualified from office.
FACTS: Petitioners Arnel Ty, et al. are stockholders of Omni Gas Corp. (Omni), engaged in the business
of trading and refilling of Liquefied Petroleum Gas (LPG) cylinders. Petron, Shellane & Totalgaz Gasul
Dealers Assn., thru their lawyer, requested the NBI for the surveillance, investigation, and apprehension
of person or establishments in Pasig City that are engaged in the illegal trading of petroleum products
and underfilling of branded LPG cylinders in violation of BP 33, as amended. NBI Agents De Jemil and
Kawada conducted surveillance -- thru a test-buy, and found LPG cylinders without valve seals were
refilled and one of the cylinders was actually underfilled. Search warrants were applied for, issued and
served resulting to seizure of several items from Omni's premises. De Jamil filed with the DOJ a
complaint-affidavit for violation of BP 33. The Chief State Prosecutor (CSP) found probable cause. DOJ
reversed the CSP. CA reversed the DOJ/ reinstated the joint resolution of the CSP.
ISSUES:
1) Whether or not there exists probable cause against petitioners for violations of Sec. 2 (a) and (c) of BP
33, as amended.
2) Whether or not petitioners can be held liable therefor.
HELD:
1) Yes. Seized by the NBI are 16 LPG cylinders bearing the embossed brand names
of Shellane, Gasul and Totalgaz but were marked as Omnigas which violates the brand owners
property rights as infringement under Sec. 155.1 of RA 8293. Moreover, the quantum of evidences such
as the existence of facts and circumstances as to tampering of the LPG cylinders required to support a
finding of probable cause for violation of Sec. 2 (a) in relation to (c) of BP 33 exists. Probable cause
need not be based on clear and convincing evidence of guilt, as the investigating officer acts upon
reasonable belief. It implies probability of guilt and requires more than bare suspicion but less than
evidence which would justify a conviction.
2) Yes, except for Arnel Ty. Sec. 4 of BP 33, as amended, clearly provides and enumerates who are
criminally liable for a violation which excludes the other petitioners who are mere members of the
board of directors and not in charge of Omnis business affairs. Petitioner Arnel Ty can be held liable
for probable violations by Omni of BP 33, as president and operations manager of Multi-Gas Corp., a
family-owned business which manages the business affairs of Omni.

KUKAN INTERNATIONAL CORPORATION VS. HON. AMOR REYES

G.R. NO. 182729,
SEPTEMBER 29, 2010
DOCTRINE: Piercing the veil of corporate fiction is frowned upon. To justify the piercing of the veil of
corporate fiction, it must be shown by clear and convincing proof that the separate and distinct
personality of the corporation was purposefully employed to evade a legitimate and binding
commitment and perpetuate a fraud or like wrongdoings.
FACTS: Private respondent Romeo Morales doing business under the name RM Morales Trophies and
Plaques won the bid conducted by Petitioner Kukan, Inc. for the supply and installation of signages in a
building in Makati. The contract price was later reduced from P5Million to P3,388,502. After complying
with his contractual obligations, Morales was paid only P1,976,371.07. He filed a case against Kukan, Inc.,
for sum of money with the RTC of Manila. After Kukan, Inc., stopped participating in the proceedings, it
was declared in default and the RTC rendered a decision in favor of Morales ordering Kukan, Inc. to pay
the sum of P1,201,724.00 with legal interest of 12% per annum until fully paid plus damages, attorneys
fees, and litigation expenses. During the execution, the sheriff levied the personal properties found at the
office of Kukan, Inc. however, Kukan International Corporation (KIC) filed an Affidavit of Third Party
Claim claiming ownership of the properties levied. Morales filed an Omnibus Motion praying to apply
the principle of piercing the veil of corporate entity alleging that Kukan, Inc. and KIC are one and the
same corporation. Respondent Judge granted the Motion filed by Morales and decreed that Kukan, Inc.
and Kukan International Inc., as one and the same corporation; that the levy made on the properties of
KIC is valid; and ordering Kunkan International Corp. and Michael Chan as jointly and severally liable to
pay the award pursuant to the Decision of November 28, 2002. KICs Motion for Reconsideration was
denied. The CA denied KICs petition and subsequent Motion for reconsideration.
ISSUE: Whether or not the trial and appellate courts correctly applied the principle of piercing the veil of
corporate entity to support a conclusion that Kukan, Inc. and KIC are but one and the same corporation
with respect to the contract award to private petitioner.
HELD: No. To justify the piercing of the veil of corporate fiction, it must be shown by clear and
convincing proof that the separate and distinct personality of the corporation was purposefully employed
to evade a legitimate and binding commitment and perpetuate a fraud or like wrongdoings. In those
instances when the Court pierced the veil of corporate fiction of two corporations, there was a confluence
of the following factors: 1) A first corporation is dissolved; 2) The assets of the first corporation is
transferred to a second corporation to avoid a financial liability of the first corporation; and 3) Both
corporations are owned and controlled by the same persons such that the second corporation should be
considered as a continuation and successor of the first corporation. The second and third factors are
conspicuously absent in this case. In applying the principle, both the RTC and the CA miserably failed to
identify the presence of the abovementioned factors. KIC was not made a party defendant in this case
but entered a special but not a voluntary appearance in the trial court to assert that it was a separate
entity and has a separate legal personality from Kunkan, Inc. The fact that Michael Chan, a.k.a. Chan Kai
Kit, owns 40% of the outstanding capital stock of both corporations standing alone is insufficient to
establish identity. There must be at least a substantial identity of stockholders for both corporations in
order to consider this factor to be constitutive of corporate identity. The petition was granted.

PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS

G.R. NO. 165571,
JANUARY 20, 2009
Doctrine: The purpose of rehabilitation proceedings is to enable the company to gain new lease on life
and thereby allows creditors to be paid their claims from its earnings. Rehabilitation contemplates a
continuance of corporate life and activities in an effort to restore and reinstate the financially distressed
corporation to its former position of successful operation and solvency.
FACTS: Petitioners (PNB and Equitable PCI Bank) granted a loan of PHP 1.081M to ASBDC secured by a
mortgage of five parcels of land with improvements. The ASB Group filed with the SEC a verified
petition for rehabilitation with prayer for suspension of actions and proceedings pending rehabilitation
pursuant to Presidential Decree No. 902-A. SEC Hearing Panel issued an order suspending for 60 days all
actions for claims against the ASB Group, enjoining the latter from disposing its properties in any
manner. The consortium of creditor banks, which included petitioners, opposed praying for the dismissal
of the petition but was denied and allowed the filing of the petition for rehabilitation. Since the ASB
Group foresees its inability to meet its obligations within one year, it was considered technically insolvent
and, thus, qualified for rehabilitation under Sec. 4-1 of the Rules of Procedure on Corporate Recovery.
The panel also held that suspension of payment is necessarily an effect of the filing of the petition. Upon
motion by the ASB Group, the suspension period was extended through an order. The creditor banks
appealed before the SEC En Banc. Subsequently, the Hearing Panel approved the Rehabilitation Plan. The
SEC En Banc dismissed the petition and its supplement, thus affirming the orders of the Hearing Panel.
Petitioners filed a petition for review before the CA. The CA upheld the ruling of the SEC En Banc
explaining that the Rules does not preclude a solvent corporation, like the ASB Group, to file a petition
for rehabilitation instead of just a petition for suspension of payments because such temporary inability
to pay obligations may extend beyond one year or the corporation may become insolvent in the interim.
It stated that the determination of the sufficiency of the petition and the question of propriety of the
petition filed by the ASB Group are matters within the technical competence and administrative
discretion of the SEC.
ISSUE: Whether or not the filing of a petition for suspension of payments is necessary before a
corporation which is technically insolvent may file a petition for rehabilitation?
HELD: No. The Court affirms the ruling of the appellate court. Since petitioners raise issues which
mainly relate to technical insolvency, the Court limited its interpretation based on the Rules. There are
two kinds of insolvency contemplated in Rule IV, Sec. 4-1: (1) actual insolvency, i.e., the corporations
assets are not enough to cover its liabilities; and (2) technical insolvency defined under Sec. 3-12, i.e., the
corporation has enough assets but it foresees its inability to pay its obligations for more than one year. In
the case at bar, the ASB Group averred that it has sufficient assets to cover its obligations but it does not
make it solvent enough to prevent it from filing a petition for rehabilitation. A corporation may have
considerable assets but if it foresees the impossibility of meeting its obligations for more than one year, it
is considered as technically insolvent. Thus, it may file a petition for rehabilitationa remedy provided
under Sec. 4-1. When Sec. 4-1 mentioned technical insolvency under Sec. 3-12, it was referring to the
definition of technical insolvency in the said section; it was not requiring a previous filing of a petition for
suspension of payments.

ALLIED BANKING CIRPORATION VS. LIM SIO WAN

G.R. NO. 133179,
MARCH 27, 2008
DOCTRINE: A collecting bank which indorses a check bearing a forged indorsement and presents it to
the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and
ultimately should be held liable therefor. However, this general rule is subject to exceptions, when the
issuance of the check itself was attended with negligence.
FACTS: Respondent Lim Sio Wan deposited with petitioner a money market placement of 1,152,597.35
for a term of 31 days. Thereafter, a person claiming to be Lim Sio Wan called up Cristina So, an officer of
Allied, and instructed the latter to pre-terminate her money market placement, to issue a managers check
(MC) representing the proceeds of the placement, and to give the check to one Deborah Santos who
would pick up the check. The bank did as instructed and a check of P1,158,648.49 was given to Santos.
Thereafter, the MC was deposited for the account of Filipinas Cement Corporation (FCC) at respondent
Metrobank, with the forged signature of Lim Sio Wan as indorser. To clear the check and in compliance
with the requirements of the Philippine Clearing House Corporation (PCHC) Rules and Regulations,
Metrobank stamped a guaranty on the check, which reads: All prior endorsements and/or lack of
endorsement guaranteed. Allied funded the check without checking the authenticity of Lim Sio Wans
purported indorsement. Thus, the amount on the face of the check was credited to the account of FCC.
On maturity date, Lim Sio Wan went to Allied to withdraw her placement but was informed that it had
been pre-terminated upon her instructions. Thus she filed with the RTC a Complaint against Allied to
recover the proceeds of her money market placement. Allied filed a third party complaint against
Metrobank and Santos. The trial and appellate court ordered Allied to pay sixty (60%) percent,
Metrobank forty (40%) of the amount of P1,158,648.49 plus 12% interest per annum.
ISSUE: Is petitioners liability to the extent of 60% and Metrobank to the extent of 40% as guarantor of all
endorsement on the check proper and binding?
HELD: Yes. As provided in Section 66 in relation to Sec. 65 of the Negotiable Instruments Law, the
warranty that the instrument is genuine and in all respects what it purports to be covers all the defects
in the instrument affecting the validity thereof, including a forged indorsement. Thus, the last indorser
will be liable for the amount indicated in the negotiable instrument even if a previous indorsement was
forged. The SC held a collecting bank which indorses a check bearing a forged indorsement and
presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement itself,
and ultimately should be held liable therefor. However, this general rule is subject to exceptions. One
such exception is when the issuance of the check itself was attended with negligence. In the instant case,
Allied was negligent in issuing the managers check and in transmitting it to Santos without even a
written authorization. The liability of Allied, however, is concurrent with that of Metrobank as the last
indorser of the check. Given the relative participation of Allied and Metrobank to the instant case, both
banks cannot be adjudged as equally liable. Hence, the 60:40 ratio of the liabilities of Allied and
Metrobank must be upheld.

FLORENCIO ORENDAIN VS. BF HOMES, INC..

G.R. NO. 146313,
OCTOBER 31, 2006
DOCTRINE: In controversies arising out of intra-corporate relations, between and among stockholders,
members or associates, and between, any or all of them and the corporation, it is the RTC, not SEC, which
has jurisdiction over the case.
FACTS: BF Homes, Inc., a domestic corporation organized to develop and sell residential lots and houses,
availed itself of financial assistance from various sources to buy properties and convert them into
residential subdivisions. During its business operations, it was able to acquire properties and assets
which, if liquidated, were more than enough to pay all its creditors. Despite its solvent status, respondent
filed a Petition for Rehabilitation before the Securities and Exchange Commission (SEC). The SEC thereby
issued an Order, creating a Management Committee with petitioner Orendain as Chairman, and
appointing FBO Management Networks, Inc. as rehabilitation receiver. Thereafter, a Deed of Absolute
Sale was executed between BF Homes, represented by Orendain as absolute and registered owner, and
the Local Superior of the Franciscan Sisters of the Immaculate Phils., Inc. (LSFSIPI) over a parcel of land
situated in Metro Manila. BF Homes filed a Complaint before the RTC against LSFSIPI and Orendain for
reconveyance of the property. Orendain, filed a Motion to Dismiss for lack of merit. RTC issued Orders
denying the Motion to Dismiss and the subsequent Motion for Reconsideration. Orendain filed before the
CA a Petition seeking to annul the RTCs Orders alleging that the orders were issued without jurisdiction
or with grave abuse of discretion amounting to lack or in excess of jurisdiction. CA dismissed the
petition.
ISSUE: Whether or not the RTC had jurisdiction over the action for reconveyance.
HELD: Yes. The controversy involves matters purely civil in character and is beyond the ambit of the
limited jurisdiction of the SEC. As held in Viray v. Court of Appeals, "[t]he better policy in determining
which body has jurisdiction over a case would be to consider not only [1] the status or relationship of the
parties but also [2] the nature of the question that is the subject of their controversy." The LSFSIPI is
neither an officer nor a stockholder of BF Homes, and this case does not involve intra-corporate
proceedings. In addition, the seller, petitioner Orendain, is being sued in his individual capacity for the
unauthorized sale of the property in controversy. Hence, there is no reason to sustain petitioner's
manifestation that the resolution of the controversy depends on the ratification by the SEC of the acts of
its agent or the receiver because the act of Orendain was allegedly not within the scope of his authority as
receiver. Furthermore, the determination of the validity of the sale to LSFSIPI will necessitate the
application of the provisions of the Civil Code on obligations and contracts, agency, and other pertinent
provisions.

HUR TIN YANG VS. PEOPLE OF THE PHILIPPINES

G.R. No. 195117,
AUGUST 14, 2013.
DOCTRINE: In determining the nature of a contract, courts are not bound by the title or name given by
the parties. The decisive factor in evaluating such agreement is the intention of the parties, as shown not
necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior
to, during and immediately after executing the agreement. As such, therefore, documentary and parol
evidence may be submitted and admitted to prove such intention.
FACTS: Hur Tin Yang, is the then Vice President for Internal Affairs of Supermax Philippines, Inc. He
signed twenty-four trust receipts in favor of Metrobank to secure the payment of Supermax for the
delivery of the construction materials that are used for their construction business. When the 24 trust
receipts became due, Supermax failed to pay or deliver the goods or proceeds to Metrobank. Supermax,
through Hur Tin Yang, requested isntead for the restructuring of the loan but did not materialize.
Metrobank sent demand letters. As the demands fell on deaf ears, Metrobank filed the criminal
complaints of Estafa (under Article 315 of the Revised Penal Code) against petitioner. Petitioner contends
that the said trust receipts were demanded by Metrobank as additional security for the loans extended to
Supermax and that Metrobank knew all along that the construction materials subject of the trust receipts
were not intended for resale but for personal use of Supermax relating to its construction business. The
trial court convicted
petitioner for the crime of estafa CA affirmed, ruling that that since the offense is punished under PD 115
in the nature of malum prohibitum, a mere failure to deliver the proceeds of the sale or goods, if not sold,
is sufficient to justify a conviction.
ISSUE: Whether or not petitioner is liable for Estafa under Article 315, par. 1 (b) of the RPC in relation to
PD 115, even if it was sufficiently proved that the entruster (Metrobank) knew beforehand that the goods
(construction materials) subject of the trust receipts were never intended to be sold but only for use in the
entrustee's construction business.
HELD: No. Petitioner cannot be held liable for the crime of estafa due to the fact that the entruster bank
(Metrobank) knew even before the execution of the alleged trust receipt agreements that the covered
construction materials were never intended by the entrustee (petitioner) for resale or for the manufacture
of items to be sold and thus, would take the transaction to be outside the ambit of the Trust Receipts Law.
A trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the
price of the sale, or if the merchandise is not sold, to return the merchandise to the entruster. There are,
two obligations in a trust receipt transaction: (1) the first refers to money received under the obligation
involving the duty to turn it over (entregarla) to the owner of the merchandise sold, (2) while the second
refers to the merchandise received under the obligation to "return" it (devolvera) to the owner. While
petitioner admitted that he signed the trust receipts on behalf of Supermax, to pay the loan or turn over
the proceeds of the sale or the goods to Metrobank upon demand, in contrast to the nomenclature of the
transaction, the parties really intended a contract of loan. In Ng vs. People and Land Bank of the Philippines
vs. Perez, the Court said that the fact that the entruster bank knew even before the execution of the trust
receipt agreements that the construction materials covered were never intended by the entrustee for
resale or for the manufacture of items to be sold is sufficient to prove that the transaction was a simple
loan and not a trust receipts transaction.

PUA VS LO BUN TIONG

G.R. NO. 198660, OCTOBER 23, 2013
DOCTRINE: A check "constitutes an evidence of indebtedness" and is a veritable "proof of an
obligation." Hence, it can be used "in lieu of and for the same purpose as a promissory note.
FACTS: Petitioner Pua filed a Complaint for a Sum of Money against Respondent-Spouses Lo Bun Tiong
amounting to P8,500,000.00. Petitioner maintained that the said amount, which was covered by a check,
was given in consideration for the loans the latter obtained from Petitioner under a compound interest
agreement and after a re-computation of the loan from P13.2M to a decreased amount of P8.5M.
Respondents using an Asiatrust Check No. BND057750 dated March 30, 1997 was subsequently
dishonored for insufficiency of funds. Prior to the dishonored Asiatrust Check, 17 other checks were
given by Respondents to Petitioner but were all dishonored. In their defense, Respondents denied ever
obtaining a loan from the Petitioner and that Petitioner and her sister, the former business partner of
Ching Teng, conspired with one another to obtain a check under the Respondents name and completed
the check after delivery. The RTC then issued its Decision in favor of the Petitioner but on appeal, the CA
reversed the ruling of the RTC, instead holding that the Asiatrust Bank Check No. BND057550 was an
incomplete delivered instrument and that Petitioner failed to prove the existence of Respondents
indebtedness to her.
ISSUE: Whether or not Petitioner failed to prove the existence of Respondents debt.
HELD: No. The Court ruled that Petitioner need not prove the existence of the credit. While the creditor
has the burden of proof to show that the debtor had not yet satisfied the loan, there arises a presumption
in favor of the creditor that the credit has not been satisfied when he/she possesses and submits in
evidence an instrument showing the indebtedness. Thus, when the CA reversed the Decision of the RTC,
it had discounted the value of the checks presented by Petitioner. Further, the Court ruled that a check
constitutes an evidence of indebtedness and is a proof of obligation, and when in writing, could prove a
loan transaction. The Court held that the same principle is enshrined in Section 24 of the Negotiable
Instruments Law, which states, Every negotiable instrument is deemed prima facie to have been issued
for a valuable consideration; and every person whose signature appears thereon to have become a party
for value.

MALAYAN INSURANCE CO. VS. ALBERTO

G.R. No. 194320,
FEBRUARY 1, 2012
DOCTRINE: The right of subrogation is not dependent upon, nor does it grow out of, any privity of
contract. It accrues simply upon payment by the insurance company of the insurance claim.
FACTS: An accident involving four vehicles happened at 5am at the corner of EDSA and Ayala Avenue:
(1) a Nissan Bus operated by Aladdin Transit; (2) an Isuzu Tanker; (3) a Fuzo Cargo Truck; and (4) a
Mitsubishi Galant. The on-the-spot investigator issued a police report stating that the Isuzu Tanker was
in front of the Mitsubishi Galant with the Nissan Bus on their right side shortly before the incident. All 3
vehicles were at a halt along EDSA facing the south direction when the Fuzo Cargo Truck simultaneously
bumped the rear portion of the Mitsubishi Galant and the rear left portion of the Nissan Bus. Due to the
strong impact, these 2 vehicles were shoved forward and the front left portion of the Mitsubishi Galant
rammed into the rear right portion of the Isuzu Tanker. Malayan Insurance, being the insurer of First
Malayan Leasing and Finance Corporation paid the damages sustained by the assured Mitsubishi Galant
amounting to Php 700,000.00. It maintained that it has been subrogated to the rights and interests of the
assured by operation of law upon its payment to the latter. It sent several demand letters to respondents
Alberto and Reyes, the registered owner and driver, respectively, of the Fuzo Cargo Truck, to no avail.
Malayan then filed a complaint for damages for gross negligence against respondents. The RTC ruled in
favor of Malayan, the CA reverse.
ISSUE: Whether or not the subrogation of Malayan Insurance is impaired and/or deficient
HELD: No. There is proper subrogation. Malayan Insurance presented pieces of evidence such as the
claim check voucher and the Release of Claim and Subrogation Receipt to the trial court. It is not disputed
that the insurance company, indeed, paid Php 700,000.00 to the assured. Subrogation is the substitution of
one person by another with reference to a lawful claim or right, so that he who is substituted succeeds to
the rights of the other in relation to a debt or claim, including its remedies or securities. The principle
covers a situation wherein an insurer has paid a loss under an insurance policy is entitled to all the rights
and remedies belonging to the insured against a third party with respect to any loss covered by the
policy. It contemplates full substitution such that it places the party subrogated in the shoes of the
creditor, and he may use all means that the creditor could employ to enforce payment. Payment by the
insurer to the insured operates as an equitable assignment to the insurer of all the remedies that the
insured may have against the 3rd party whose negligence or wrongful act caused the loss.

10

GONZALES VS. PHILIPPINE COMMERCIAL and INTERNATIONAL BANK

GR No. 180257,
FEBRUARY 23, 2011
DOCTRINE: An accommodation party is solidarily liable with the one who received the proceeds of the
loan they both contracted.
FACTS: Petitioner Eusebio Gonzales was a client of Respondent Phil. Commercial and International Bank
(PCIB) for a good fifteen (15) years before he filed the case. His account was handled by Edna Ocampo of
PCIB, until she was replaced by Roberta Noceda. PCIB granted him a credit line, in which the aggregate
amount of accounts of Gonzales served as collateral. Petitioner drew from said credit line thru issuance of
check. He had a US Foreign Currency Deposit with PCIB. He obtained loans with PCIB with his wife; and
then two additional loans with Spouses Panlilio. These three (3) loans were covered under three (3)
promissory notes (PN). To secure the loans, a Real Estate Mortgage (REM) over a parcel of land was
executed by Petitioners and the Panlilios. Notably, the PNs specified, among others, the solidary liability
of Gonzales and the Panlilios for the payment of the loans. However, it was the Panlilios who received
the loan proceeds. The monthly interests were paid by the Panlilios thru automatic debiting. Eventually,
they defaulted. PCIB allegedly called the attention of Petitioner and closed the credit line of Gonzales for
failure to pay his loan with the Panlilios. This resulted to the dishonor of the check he issued to pay his
obligation with others. He was forced to source out and pay his other obligations in cash. This prompted
Gonzales to sue PCIB for damages. RTC - found Gonzales solidarily liable with the Panlilios. CA affirmed the RTC Decision.
ISSUE: Whether Gonzales was an accommodation party.
HELD: Yes. An accommodation party is one who meets all the three requisites, viz: 1) he must be a party
to the instrument, signing as maker, drawer, acceptor, or indorser; 2) he must not receive value therefor;
and 3) he must sign for the purpose of lending his name or credit to some other person. In his testimony,
Gonzales admitted that he merely accommodated the spouses at the suggestion of Ocampo, who was
handling his accounts, in order to facilitate the fast release of the loan. As an accommodation party,
Gonzales is solidarily liable with the Panlilios for the loan.

11

PHILIPPINE NATIONAL BANK VS. TRIA

G.R. No. 193250,
APRIL 25, 2012
DOCTRINE: By its peculiar character and general use in commerce, a managers check is regarded
substantially to be as good as the money it represents.
FACTS: MWSS opened Current Account (C/A) No. 244-850099-6 with Philippine National Bank MWSS
branch (PNB-MWSS) with an initial deposit of PhP 6,714,621.13 intended as a depository for a loan with
the Asian Development Bank. The account became dormant with a balance of PhP 5,397,154.07. In the
meantime, respondent Tria, then PNBs Branch Manager requested a listing of the dormant accounts of
PNB-MWSS and borrowed the folders of MWSS and C/A 244-850099-6. PNB-MWSS then received a
letter-request from MWSS instructing the withdrawal of PhP 5,200,000 (plus charges) from C/A 244850099-6 and the issuance of the corresponding managers check payable to a certain "Atty. Rodrigo A.
Reyes." Managers Check No. 1165848 was issued in the name of Atty. Reyes for the amount of PhP
5,200,000. Together with Tria, Atty. Reyes presented the Managers Check No. 1165848 to PNBs Quezon
City Circle Branch (PNB-Circle) for encashment. To confirm the issuance of Managers Check No.
1165848, PNB-Circle called PNB-MWSS. Sales and Service Head Veniegas confirmed that PNB-MWSS
issued a managers check in favor of Atty. Reyes. On November 1, 2004, Tria retired as PNB-MWSS
Manager under PNBs regular retirement plan. Later, it was found that MWSS did not apply for the
issuance of the managers check payable to Atty. Reyes. PNB conducted its own investigation and
sought to hold Tria liable for qualified theft. Tria denied the allegations. After preliminary investigation,
it was resolved that Trias identification of the payee did not consummate the payment of the Managers
Check but rather, the consummation of the payment occurred during Flandez approval of the
encashment. PNB moved for reconsideration but was denied. PNB filed a petition for review. CA decided
in favor of Tria. The CA ruled that probable cause against Tria and Atty. Reyes was not established since
the employees of PNB made the encashment after their own independent verification of C/A No. 244850099-6.
ISSUES: Whether or not the approval by PNB employees of the request for the issuance and for the
encashment of the managers check resulted in the withdrawal of the amount by Atty. Reyes/John Doe.
HELD: No. The acts of Tria and the relevant circumstances that led to the encashment of the check
provided more than sufficient basis for the finding of probable cause to file an information against him
and John Doe/Atty. Reyes for qualified theft. The money involved is the personal property of Trias
employer, PNB. Trias argument that the amount does not belong to PNB even if it is the depositary bank
is erroneous since it is well established that a bank acquires ownership of the money deposited by its
clients. It was through Trias misrepresentation that the person he called Atty. Reyes was able to encash
the managers check. Tria likewise made representations to the PNB-Circle that the Managers check is
legal and valid as evidenced by the annotation at the dorsal portion of the check "ok for payment per
confirmation and approval of PNB MWSS."
The petition was GRANTED. The Decision of the Court of Appeals was REVERSED and SET
ASIDE. The Office of the City Prosecutor of Quezon City was ORDERED to file an Information charging
Amelio C. Tria and Atty. Reyes/John Doe for Qualified Theft.

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