ALFEO D.

VIVAS, ON HIS BEHALF AND ON BEHALF OF THE

SHAREHOLDERS OR EUROCREDIT COMMUNITY BANK v. THE MONETRAY
BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE PHILIPPINE
DEPOSIT INSURANCE CORPORATION
G.R. No. 191424, August 7, 2013, MENDOZA, J.
FACTS:
The Rural Bank of Faire, Incorporated (later changed to EuroCredit
Community Bank) was a duly registered rural banking institution with
principal office in Centro Sur, Sto. Nino, Cagayan. Sometime in 2006, petitioner
Alfeo D. Vivas (Vivas) and his principals acquired the controlling interest in
RBFI. At the initiative of Vivas and the new management team, an internal
audit was conducted on RBFI and results thereof highlighted the dismal
operation of the rural bank. In view of those findings, certain measures
calculated to revitalize the bank were allegedly introduced.
The Integrated Supervision Department II (ISD II) of the BSP conducted a
general examination on ECBI with the cut-off date of December 31, 2007
pursuant to The New Central Bank Act. Shortly after the completion of the
general examination, BSP apprised Vivas, the Chairman and President of ECBI,
as well as the other bank officers and members of its BOD that the bank is
under distress.
Series of examinations, resolutions and other transactions were
conducted between the bank and the Monetary Board. Until on June 4, 2009
the MB issued Resolution No. 823 approving the issuance of a cease and desist
order against ECBI, which enjoined it from pursuing certain acts and
transactions that were considered unsafe or unsound banking practices, and
from doing such other acts or transactions constituting fraud or might result in
the dissipation of its assets. In addition on March 4, 2010, the MB issued
Resolution No. 27623 placing ECBI under receivership in accordance with the
recommendation of the ISD II. PDIC was designated as the receiver of the bank.
Assailing MB Resolution No. 276, Vivas filed a petition for prohibition
ascribing grave abuse of discretion to the MB for prohibiting ECBI from
continuing its banking business and for placing it under receivership.
ISSUE:
Whether or not ECBI should be placed under receivership.

HELD:
At any rate, if circumstances warrant it, the Monetary Board may forbid
a bank from doing business and place it under receivership without prior
notice and hearing if the MB finds that a bank: (a) is unable to pay its liabilities
as they become due in the ordinary course of business; (b) has insufficient
realizable assets to meet liabilities; (c) cannot continue in business without
involving probable losses to its depositors and creditors; and (d) has willfully
violated a cease and desist order of the Monetary Board for acts or transactions
which are considered unsafe and unsound banking practices and other acts or
transactions constituting fraud or dissipation of the assets of the institution.
In the case at bench, the ISD II submitted its memorandum containing
the findings of the inability of ECBI to pay its liabilities as they would fall due
in the usual course of its business and that its liabilities being in excess of the
assets held. Also, it was noted that ECBIs continued banking operation would
most probably result in the incurrence of additional losses to the prejudice of
its depositors and creditors. On top of these, it was found that ECBI had
willfully violated the cease-and-desist order of the MB issued in its June 4,
2009 Resolution, and had disregarded the BSP rules and directives.

MALAYAN INSURANCE COMPANY, INC. v.

PAP CO., LTD. (PHILIPPINE BRANCH)
G.R. No. 200784. August 7, 2013, MENDOZA, J.
FACTS:
On May 13, 1996, Malayan Insurance Company (Malayan) issued a Fire
Insurance Policy to PAP Co., Ltd. (PAP Co.) for the latters machineries and
equipment located at Sanyo Precision Phils. Bldg., Phase III, Lot 4, Block 15,
PEZA, Rosario, Cavite (Sanyo Building). The insurance, which was for Fifteen
Million Pesos (15,000,000.00) and effective for a period of one (1) year, was
procured by PAP Co. for Rizal Commercial Banking Corporation (RCBC), the
mortgagee of the insured machineries and equipment.
After the passage of almost a year but prior to the expiration of the
insurance coverage, PAP Co. renewed the policy on an as is basis. Pursuant
thereto, a renewal policy was issued by Malayan to PAP Co. for the period May
13, 1997 to May 13, 1998.
On October 12, 1997 and during the subsistence of the renewal policy,
the insured machineries and equipment were totally lost by fire. Hence, PAP
Co. filed a fire insurance claim with Malayan in the amount insured.
In a letter, dated December 15, 1997, Malayan denied the claim upon the
ground that, at the time of the loss, the insured machineries and equipment

were transferred by PAP Co. to a location different from that indicated in the
policy. Specifically, that the insured machineries were transferred in September
1996 from the Sanyo Building to the Pace Pacific Bldg., Lot 14, Block 14, Phase
III, PEZA, Rosario, Cavite (Pace Pacific). Contesting the denial, PAP Co. argued
that Malayan cannot avoid liability as it was informed of the transfer by RCBC,
the party duty-bound to relay such information. However, Malayan reiterated
its denial of PAP Co.s claim. Distraught, PAP Co. filed the complaint below
against Malayan.
The RTC handed down its decision, ordering Malayan to pay PAP
Company Ltd (PAP) an indemnity for the loss under the fire insurance policy.
The CA affirmed the RTC decision.
ISSUE:
Whether or not Malayan should be held liable under the fire insurance
policy
HELD:
The Court agrees with the position of Malayan that it cannot be held
liable for the loss of the insured properties under the fire insurance policy.
The policy forbade the removal of the insured properties unless sanctioned by
Malayan
Condition No. 9(c) of the renewal policy provides:
9. Under any of the following circumstances the insurance ceases to
attach as regards the property affected unless the insured, before the
occurrence of any loss or damage, obtains the sanction of the company
signified by endorsement upon the policy, by or on behalf of the Company:
xxxxxxxxxxxx
(c) If property insured be removed to any building or place other than in
that which is herein stated to be insured.
Evidently, by the clear and express condition in the renewal policy, the
removal of the insured property to any building or place required the consent of
Malayan. Any transfer effected by the insured, without the insurers consent,
would free the latter from any liability. The transfer from the Sanyo Factory to
the PACE Factory increased the risk
The Court agrees with Malayan that the transfer to the Pace Factory
exposed the properties to a hazardous environment and negatively affected the

fire rating stated in the renewal policy. The increase in tariff rate from 0.449%
to 0.657% put the subject properties at a greater risk of loss. Such increase in
risk would necessarily entail an increase in the premium payment on the fire
policy.
Unfortunately, PAP chose to remain completely silent on this very crucial
point. Despite the importance of the issue, PAP failed to refute Malayans
argument on the increased risk.
Malayan is entitled to rescind the insurance contract. Considering that
the original policy was renewed on an as is basis, it follows that the renewal
policy carried with it the same stipulations and limitations. The terms and
conditions in the renewal policy provided, among others, that the location of
the risk insured against is at the Sanyo factory in PEZA. The subject insured
properties, however, were totally burned at the Pace Factory. Although it was
also located in PEZA, Pace Factory was not the location stipulated in the
renewal policy. There being an unconsented removal, the transfer was at PAPs
own risk. Consequently, it must suffer the consequences of the fire.
It can also be said that with the transfer of the location of the subject
properties, without notice and without Malayans consent, after the renewal of
the policy, PAP clearly committed concealment, misrepresentation and a breach
of a material warranty. Section 26 of the Insurance Code provides:
Section 26. A neglect to communicate that which a party knows and
ought to communicate, is called a concealment.
Under Section 27 of the Insurance Code, a concealment entitles the
injured party to rescind a contract of insurance.
Moreover, under Section 168 of the Insurance Code, the insurer is
entitled to rescind the insurance contract in case of an alteration in the use or
condition of the thing insured. Section 168 of the Insurance Code provides, as
follows:
Section 168. An alteration in the use or condition of a thing insured from
that to which it is limited by the policy made without the consent of the
insurer, by means within the control of the insured, and increasing the
risks, entitles an insurer to rescind a contract of fire insurance.
Accordingly, an insurer can exercise its right to rescind an insurance
contract when the following conditions are present, to wit:
1) the policy limits the use or condition of the thing insured;
2) there is an alteration in said use or condition;
3) the alteration is without the consent of the insurer;

4) the alteration is made by means within the insured's control; and

5) the alteration increases the risk of loss
In the case at bench, all these circumstances are present. It was clearly
established that the renewal policy stipulated that the insured properties were
located at the Sanyo factory; that PAP removed the properties without the
consent of Malayan; and that the alteration of the location increased the risk of
loss.

HUR TIN YANG v. PEOPLE OF THE PHILIPPINES

G.R. No. 195117, August 14, 2013, VELASCO, JR., J.

FACTS:
Supermax Philippines, Inc. (Supermax) is a domestic corporation
engaged in the construction business. On various occasions in the year 1998,
Metropolitan Bank and Trust Company (Metrobank), Magdalena Branch,
Manila, extended several commercial letters of credit (LCs) to Supermax. These
commercial LCs were used by Supermax to pay for the delivery of several
construction materials which will be used in their construction business.
Thereafter, Metrobank required petitioner, to sign twenty-four (24) trust receipts
as security for the construction materials and to hold those materials or the
proceeds of the sales in trust for Metrobank.
When the 24 trust receipts fell due and despite the receipt of a demand
letter, Supermax failed to pay or deliver the goods or proceeds to Metrobank.
Instead, Supermax, through petitioner, requested the restructuring of the loan.
When the intended restructuring of the loan did not materialize, Metrobank
sent another demand letter. As the demands fell on deaf ears, Metrobank,
through its representative, Winnie M. Villanueva, filed the instant criminal
complaints against petitioner.
The trial court charged and sentenced Hur Tin Yang of estafa under
Article 315 paragraph 1 (a). Petitioner appealed to the CA but to no avail. CA
affirmed the decision of the trial court and held that since the offense under
PD 15 is malum prohibitum, the mere failure to deliver the proceeds or the
return of goods is sufficient for conviction. Not satisfied, petitioner filed a
petition for review under Rule 45 of the Rules of Court. The SC dismissed the
Petition via a Minute Resolution on the ground that the CA committed no
reversible error in the assailed Decision. Hence, petitioner filed the present
Motion for Reconsideration contending that the transactions between the
parties do not constitute trust receipt agreements but rather of simple loans.
ISSUE:
Whether or not petitioner is liable for Estafa under Art. 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 entrustees construction business
HELD:

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.
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, therefore, two
obligations in a trust receipt transaction: the first refers to money received
under the obligation involving the duty to turn it over (entregarla) to the owner
of the merchandise sold, while the second refers to the merchandise received
under the obligation to return it (devolvera) to the owner. A violation of any of
these undertakings constitutes Estafa defined under Art. 315, par. 1(b) of the
RPC, as provided in Sec. 13 of PD 115. The purpose why Trust Receipts Law
was created is to aid in financing importers and retail dealers who do not have
sufficient funds or resources to finance the importation or purchase of
merchandise, and who may not be able to acquire credit except through
utilization, as collateral, of the merchandise imported or purchased.
Nonetheless, when both parties enter into an agreement knowing fully
well that the return of the goods subject of the trust receipt is not possible even
without any fault on the part of the trustee, it is not a trust receipt transaction
penalized under Sec. 13 of PD 115 in relation to Art. 315, par. 1(b) of the RPC,
as the only obligation actually agreed upon by the parties would be the return
of the proceeds of the sale transaction. This transaction becomes a mere loan,
where the borrower is obligated to pay the bank the amount spent for the
purchase of the goods.
In the instant case, the factual findings of the trial and appellate courts
reveal that the dealing between petitioner and Metrobank was not a trust
receipt transaction but one of simple loan. Petitioners admissionthat he
signed the trust receipts on behalf of Supermax, which failed to pay the loan or
turn over the proceeds of the sale or the goods to Metrobank upon demand
does not conclusively prove that the transaction was, indeed, a trust receipts
transaction. In contrast to the nomenclature of the transaction, the parties
really intended a contract of loan. This Courtin Ng v. People and Land Bank
of the Philippines v. Perez, cases which are in all four corners the same as the
instant caseruled 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.

ALPHA INSURANCE AND SURETY CO.v.

ARSENIA SONIA CASTOR
G.R. No. 198174, September 02, 2013, PERALTA, J.
FACTS:

Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota
Revo DLX DSL with Alpha Insurance and Surety Co (Alpha). The contract of
insurance obligates the petitioner to pay the respondent the amount of
P630,000 in case of loss or damage to said vehicle during the period covered.
On April 16, 2007, respondent instructed her driver, Jose Joel Salazar
Lanuza to bring the vehicle to nearby auto-shop for a tune up. However,
Lanuza no longer returned the motor vehicle and despite diligent efforts to
locate the same, said efforts proved futile. Resultantly, respondent promptly
reported the incident to the police and concomitantly notified petitioner of the
said loss and demanded payment of the insurance proceeds.
Alpha Insurance and Surety Co., however, denied the demand of Castor
claiming that they are not liable since the culprit who stole the vehicle is
employed with Castor. Under the Exceptions to Section III of the Policy, the
Company shall not be liable for (4) any malicious damage caused by the
insured, any member of his family or by A PERSON IN THE INSUREDS
SERVICE.

Castor filed a Complaint for Sum of Money with Damages against Alpha
before the Regional Trial Court of Quezon City. The trial court rendered its
decision in favor of Castor which decision is affirmed in toto by the Court of
Appeals. Hence, this petition.

ISSUE:

Whether or not the loss of respondents vehicle is excluded under the

insurance policy.

HELD:

NO. The words loss and damage mean different things in common
ordinary usage. The word loss refers to the act or fact of losing, or failure to
keep possession, while the word damage means deterioration or injury to
property. Therefore, petitioner cannot exclude the loss of Castors vehicle under
the insurance policy under paragraph 4 of Exceptions to Section III, since the
same refers only to malicious damage, or more specifically, injury to the
motor vehicle caused by a person under the insureds service. Paragraph 4
clearly does not contemplate loss of property.
When the terms of insurance contract contain limitations on liability,
courts should construe them in such a way as to preclude the insurer from
non-compliance with his obligation. Being a contract of adhesion, the terms of
an insurance contract are to be construed strictly against the party which
prepared the contract, the insurer. By reason of the exclusive control of the
insurance company over the terms and phraseology of the insurance contract,
ambiguity must be strictly interpreted against the insurer and liberally in favor
of the insured, especially to avoid forfeiture.

LIGAYA ESGUERRA, ET. AL. v. HOLCIM PHILIPPINES, INC.

G.R. No. 182571, September 2, 2013, REYES, J.
FACTS:
Respondent Esguerra filed on December 12, 1989 with the RTC, Malolos,
Bulacan, an action to annul the Free Patent in the name of de Guzman.
Esguerra claimed that he was the owner of the subject land with an
approximate area of 47,000 square meters. Esguerra learned that the said
parcel of land was being offered for sale by de Guzman to Hi-Cement
Corporation (now HOLCIM Philippines, Inc.). He later amended his complaint
to impleaded Hi-Cement as a co-defendant since the latter was hauling marble
from the subject land. The RTC dismissed Esguerras complaint but on appeal,
the CA reversed. The Supreme Court in its Decision dated December 27, 2002
affirmed the CAs decision. After attaining finality, the case was remanded to
the RTC for execution.
Now, herein petitioners (heirs of Esguerra), filed an Omnibus Motion with
the RTC, manifesting that the Courts December 27, 2002 decision has yet to
be executed. HOLCIM filed a motion for reconsideration alleging that it did not
owe any amount of royalty to the petitioners for the extracted limestone from
the subject land. It also filed a Manifestation and Motion for Ocular Inspection
to prove that it did not extract limestone from the subject land. Despite all of
this, an alias writ of execution and notices of garnishment on several banks
against HOLCIM have been issued by the RTC to cover the payment of royalties
to petitioner for the former's extraction of limestone, etc. HOLCIM filed a
Petition for Certiorari with Urgent Applications for Temporary Restraining Order
and/or Writ of Preliminary Injunction with the CA. The CA granted the motion.
ISSUE:
Whether or not the CA gravely erred in not dismissing HOLCIM's petition
for certiorari on the ground of lack of Board Resolution authorizing the filing of
petition.
HELD:
The general rule is that a corporation can only exercise its powers and
transact its business through its board of directors and through its officers and

agents when authorized by a board resolution or its bylaws. The power of a

corporation to sue and be sued is exercised by the board of directors. The
physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by
corporate bylaws or by a specific act of the board. Absent the said board
resolution, a petition may not be given due course.
In the case at bar, HOLCIM attached to its Petition for Certiorari before
the CA a Secretarys Certificate authorizing Mr. Paul M. OCallaghan
(OCallaghan), its Chief Operating Officer, to nominate, designate and appoint
the corporations authorized representative in court hearings and conferences
and the signing of court pleadings. It also attached the Special Power of
Attorney dated June 9, 2006, signed by OCallaghan, appointing Sycip Salazar
Hernandez & Gatmaitan and/or any of its lawyers to represent HOLCIM; and
consequently, the Verification and Certification of Non Forum Shopping signed
by the authorized representative. To be sure, HOLCIM, in its Reply filed in the
CA, attached another Secretarys Certificate, designating and confirming
OCallaghans power to authorize Sycip Salazar Hernandez & Gatmaitan
and/or any of its lawyers to file for and on behalf of HOLCIM, the pertinent civil
and/or criminal actions pending before the RTC.
The foregoing convinces the Court that the CA did not err in admitting
HOLCIMs petition before it. HOLCIM attached all the necessary documents for
the filing of a petition for certiorari before the CA. Indeed, there was no
complete failure to attach a Certificate of Non-Forum Shopping. In fact, there
was such a certificate.
While the board resolution may not have been
attached, HOLCIM complied just the same when it attached the Secretarys
Certificate dated July 17, 2006, thus proving that OCallaghan had the
authority from the board of directors to appoint the counsel to represent them.
The Court recognizes the compliance made by HOLCIM in good faith since after
the petitioners pointed out the said defect, HOLCIM submitted the Secretarys
Certificate dated July 17, 2006, confirming the earlier Secretarys Certificate
dated June 9, 2006.

CITIBANK, N.A. AND THE CITIGROUP PRIVATE BANK v.

ESTER H. TANCO- GABALDON, ET. AL./ CAROL LIM v. ESTER H. TANCOGABALDON, ET. AL.
G.R. No. 198444/G.R. No. 198469-70, September 4, 2013, REYES, J.
FACTS:
On September 21, 2007, Ester Gabaldon , Arsenio Tanco and the Heirs of
Ku Tiong Lam filed with the Securities and Exchange Commissions
Enforcement and Prosecution Department (SEC-EPD) a complaint for violation
of the Revised Securities Act and the Securities Regulation Code (SRC) against
petitioners Citibank, Citigroup and Carol Lim, who is Citigroups Vice-President
and Director. In their Complaint, the respondents alleged that they were joint
account holders of petitioner Citigroup and sometime in the year 2000, Lim
induced them into signing subscription agreements- one for the purchase of
USD 2,000,000.00 worth of Ceres II Finance Ltd. Income Notes and two for the
purchase of USD 500,000.00 worth of Aeries Finance II Ltd. Senior
Subordinated Income Notes. Afterwards, the respondents learned that their
investments declined, until their account was totally wiped out.
Upon
verification with the SEC, they learned that the purchased Notes were not duly
registered securities and that the petitioners are not duly-registered security
issuers, brokers, dealers or agents.
The respondents prayed that petitioners be held administratively liable
pursuant to Section 54(ii), SRC; that the petitioners existing registration/s or

secondary license/s to act as a broker/dealer in securities be revoked and a

criminal complaint be filed and endorsed to the Department of Justice (DOJ)
for investigation. The respondents disclaimed any participation by the Citibank
or its officers on the transactions and products complained of.
The SEC-EPD issued an order terminating the investigation on the
ground that respondents' action already prescribed. According to the SEC-EPD,
the aforesaid complaint was filed before the [SEC-EPD] on 21 September 2007
while a similar complaint was lodged before the [DOJ] on October 2005. Seven
(7) years had lapsed before the filing of the action before the SEC while the
complaint instituted before the DOJ was filed one month after the expiration of
the allowable period. The respondents filed a Notice and Memorandum of
Appeal to the SEC en banc and the latter reinstated the complaint and ordered
the investigation of the case. Thus, petitioners Citibank and Citigroup filed a
petition for review with the Court of Appeals. The CA affirmed the SEC en banc
decision.
ISSUES:
Whether or not the criminal action for offenses punished under the SRC
filed by the respondents against the petitioners has already prescribed
HELD:
The Resolution of the issue raised by the petitioners call for an
examination of the pertinent provisions of the SRC, particularly Section 62.
Section 62 provides for two different prescriptive periods: Section 62.1
specifically sets out the prescriptive period for the liabilities created under
Sections 56, 57, 57.1(a) and 57.1(b). Section 56 refers to Civil Liabilities on
Account of False Registration Statement while Section 57 pertains to Civil
Liabilities on Arising in Connection with Prospectus, Communications and
Reports. Under these provisions, enforcement of the civil liability must be
brought within two (2) years or five (5) years, as the case may be. On the other
hand, Section 62.2 provides for the prescriptive period to enforce any liability
created under the SRC. The phrase "any liability" refers only to civil liability
applying the rule on statutory construction that every part of the statute must
be interpreted with reference to the context, i.e., that every part of the statute
must be considered together with the other parts, and kept subservient to the
general intent of the whole enactment. Section 62.2 when read together with
Sections 56 57, 57.1 (a) and (b) indicates that the liability is limited only to civil
liability.

Given the absence of a prescriptive period for the enforcement of the

criminal liability in violations of the SRC, Act No. 3326 now comes into play.
Panaguiton, Jr. v. Department of Justice expressly ruled that Act No. 3326 is
the law applicable to offenses under special laws which do not provide their
own prescriptive periods. Under Section 73 of the SRC, violation of its
provisions or the rules and regulations is punishable with imprisonment of not
less than seven (7) years nor more than twenty-one (21) years. Applying Section
1 of Act No. 3326, a criminal prosecution for violations of the SRC shall,
therefore, prescribe in twelve (12) years. The prescription shall begin to run
from the day of the commission of the violation of the law and if the same be
not known at the time, from the discovery thereof and the institution of judicial
proceedings for its investigation and punishment.
In the given case, respondents alleged in their complaint that the
transactions occurred between September 2000, when they purchased the
Notes and July 31, 2003, when their account was totally wiped out.
Nevertheless, it was only sometime in November 2004 that the respondents
discovered that the securities they purchased were actually worthless.
Thereafter, the respondents filed on October 23, 2005 with the Mandaluyong
City Prosecutors Office a complaint for violation of the RSA and SRC. In
Resolution dated July 18, 2007, however, the prosecutors office referred the
complaint to the SEC. Finally, the respondents filed the complaint with the
SEC on September 21, 2007. Based on the foregoing antecedents, only seven
(7) years lapsed since the respondents invested their funds with the petitioners,
and three (3) years since the respondents discovery of the alleged offenses,
that the complaint was correctly filed with the SEC for investigation. Hence, the
respondents complaint was filed well within the twelve (12)-year prescriptive
period provided by Section 1 of Act No. 3326.