Sps. Vintola v. Insular Bank of Asia and America

Doctrine: A trust receipt is considered as a security transaction intended 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.

Facts: Spouses Tirso and Loreta Vintola, doing business under the name and style "Dax Kin International," engaged in the manufacture of raw sea shells into finished products, applied for and were granted a domestic letter of credit by the IBAA, Cebu City in the amount of P40,000.00. The Letter of Credit authorized the bank to negotiate for their account drafts drawn by their supplier, one Stalin Tan, on Dax Kin International for the purchase of puka and olive seashells. In consideration thereof, the VINTOLAS, jointly and severally, agreed to pay the bank "at maturity, in Philippine currency, the equivalent, of the aforementioned amount or such portion thereof as may be drawn or paid, upon the faith of the said credit together with the usual charges.”

On the same day, having received from Stalin Tan the puka and olive shells worth P40,000.00, the VINTOLAS executed a Trust Receipt agreement with IBAA, Cebu City. Under that Agreement, the VINTOLAS agreed to hold the goods in trust for IBAA as the "latter's property with liberty to sell the same for its account, " and "in case of sale" to turn over the proceeds as soon as received to IBAA the due date indicated in the document.

Having defaulted on their obligation, IBAA demanded payment from the VINTOLAS. The VINTOLAS, who were unable to dispose of the shells, responded by offering to return the goods. IBAA refused to accept the merchandise, and due to the continued refusal of the VINTOLAS to make good their undertaking, IBAA charged them with Estafa for having misappropriated, misapplied and converted for their own personal use and benefit the aforesaid goods. During the trial of the criminal case the VINTOLAS turned over the seashells to the custody of the Trial Court. CFI Cebu acquitted the VINTOLAS of the crime charged, after finding that the element of misappropriation or conversion was inexistent. 

IBAA commenced the present civil action to recover the value of the goods before RTC Cebu.

Holding that the complaint was barred by the judgment of acquittal in the criminal case, said Court dismissed the complaint. However, on IBAA's motion, the Court granted reconsideration.

Issue: Whether the Vintolas should be absolved from liabilities by settlement. No.

Held: A letter of credit-trust receipt arrangement is endowed with its own distinctive features and characteristics. Under that set-up, a bank extends a loan covered by the Letter of Credit, with the trust receipt as a security for the loan. In other words, the transaction involves a loan feature represented by the letter of credit, and a security feature which is in the covering trust receipt.

A trust receipt is a security agreement, pursuant to which a bank acquires a "security interest" in the goods. "It secures an indebtedness and there can be no such thing as security interest that secures no obligation.”

As elucidated in Samo vs. People "a trust receipt is considered as a security transaction intended 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.”

Contrary to the allegation of the VINTOLAS, IBAA did not become the real owner of the goods. It was merely the holder of a security title for the advances it had made to the VINTOLAS The goods the VINTOLAS had purchased through IBAA financing remain their own property and they hold it at their own risk. The trust receipt arrangement did not convert the IBAA into an investor; the latter remained a lender and creditor.

Since the IBAA is not the factual owner of the goods, the VINTOLAS cannot justifiably claim that because they have surrendered the goods to IBAA and subsequently deposited them in the custody of the court, they are absolutely relieved of their obligation to pay their loan because of their inability to dispose of the goods. The fact that they were unable to sell the seashells in question does not affect IBAA's right to recover the advances it had made under the Letter of Credit.

The acquittal of the VINTOLAS in the Estafa case is no bar to the institution of a civil action for collection. It is inaccurate for the VINTOLAS to claim that the judgment in the estafa case had declared that the facts from which the civil action might arise, did not exist, for, it will be recalled that the decision of acquittal expressly declared that "the remedy of the Bank is civil and not criminal in nature." This amounts to a reservation of the civil action in IBAA's favor, for the Court would not have dwelt on a civil liability that it had intended to extinguish by the same decision. The VINTOLAS are liable ex contractu for breach of the Letter of Credit — Trust Receipt, whether they did or they did not "misappropriate, misapply or convert" the merchandise as charged in the criminal case. Their civil liability does not arise ex delicto, the action for the recovery of which would have been deemed instituted with the criminal-action (unless waived or reserved) and where acquittal based on a judicial declaration that the criminal acts charged do not exist would have extinguished the civil action. Rather, the civil suit instituted by IBAA is based ex contractu and as such is distinct and independent from any criminal proceedings and may proceed regardless of the result of the latter. Under the situational circumstances of the parties, they are governed by Article 31 of the Civil Code, explicitly providing:

Art. 31. When the civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter.

Travel & Tours Advisers, Inc. v. Cruz

Doctrine: When the plaintiffs negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.

Facts: Respondent Edgar Hernandez was driving an Isuzu Passenger Jitney (jeepney) that he owns along Angeles-Magalang Road, Barangay San Francisco, Magalang, Pampanga, on January 9, 1998, around 7:50 p.m. Meanwhile,. a Daewoo passenger bus (RCJ Bus Lines) owned by petitioner Travel and Tours Advisers, Inc. and driven by Edgar Calaycay travelled in the same direction as that of respondent Edgar Hernandez vehicle. Thereafter, the bus bumped the rear portion of the jeepney causing it to ram into an acacia tree which resulted in the death of Alberto Cruz, Jr. and the serious physical injuries of Virginia Muñoz.

Thus, respondents Edgar Hernandez, Virginia Muñoz and Alberto Cruz, Sr., father of the deceased Alberto Cruz, Jr., filed a complaint for damages, before the RTC claiming that the collision was due to the reckless, negligent and imprudent manner by which Edgar Calaycay was driving the bus, in complete disregard to existing traffic laws, rules and regulations.

RTC rendered judgment in favor of the respondents.

Petitioner filed its appeal with the CA, which affirmed with modifications the decision of the RTC.

Issue: Whether Hernandez has contributory negligence

Held: Court finds no merit to grant the petition. The issues presented are all factual in nature and do not fall under any of the exceptions upon which this Court may review.

Nevertheless, a review of the issues presented in this petition would still lead to the finding that petitioner is still liable for the damages awarded to the respondents but with certain modifications.

The RTC and the CA are one in finding that both vehicles were not in their authorized routes at the time of the incident. The conductor of petitioner's bus admitted on cross-examination that the driver of the bus veered off from its usual route to avoid heavy traffic. The CA thus observed:

First. As pointed out in the assailed Decision, both vehicles were not in their authorized routes at the time of the mishap. FRANCISCO TEJADA, the conductor of defendant-appellant's bus, admitted on cross-examination that the driver of the bus passed through Magalang Road instead of Sta. Ines, which was the usual route. Regardless of the reason, however, the irrefutable fact remains that defendant-appellant's bus likewise veered from its usual route. It is indisputable that the jeepney was traversing a road out of its allowed route.

From the factual findings of both the RTC and the CA based on the evidence presented, the proximate cause of the collision is the negligence of the driver of petitioner's bus. The jeepney was bumped at the left rear portion. Thus, this Court's past ruling, that drivers of vehicles who bump the rear of another vehicle are presumed to be the cause of the accident, unless contradicted by other evidence, can be applied. The rationale behind the presumption is that the driver of the rear vehicle has full control of the situation as he is in a position to observe the vehicle in front of him. Thus, as found by the CA:

Second. The evidence on record preponderantly shows that it was the negligence of defendant-appellant's driver, EDGAR CALAYCAY, that was the proximate cause of the collision.

Even without considering the photographs showing the damage to the jeepney, it cannot be denied that the said vehicle was bumped in its left rear portion by defendant-appellant's bus. It has been held that drivers of vehicles "who bump the rear of another vehicle" are presumed to be "the cause of the accident, unless contradicted by other evidence." The rationale behind the presumption is that the driver of the rear vehicle has full control of the situation as he is in a position to observe the vehicle in front of him. x x x (F)rom the evidence presented, it was established that it was the driver of the RCJ Line Bus which was negligent and recklessly driving the bus of the defendant corporation.

The fact that at the time of the vehicular accident, the jeepney was in violation of its allowed route as found by the RTC and the CA, hence, the owner and driver of the jeepney likewise, are guilty of negligence as defined under Article 2179 of the Civil Code, which reads as follows:

When the plaintiffs negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. The petitioner and its driver, therefore, are not solely liable for the damages caused to the victims. The petitioner must thus be held liable only for the damages actually caused by his negligence. It is, therefore, proper to mitigate the liability of the petitioner and its driver. The determination of the mitigation of the defendant's liability varies depending on the circumstances of each case.

In the same manner, petitioner is also partly responsible for the injuries sustained by respondent Virginia Muñoz hence, of the P16,744.00 actual damages and P30,000.00 moral damages awarded by the CA, petitioner is liable for half of those amounts. Anent respondent Edgar Hernandez, due to his contributory negligence, he is only entitled to receive half the amount (P40,200.00) awarded by the CA as actual damages which is P20,100.00.

Taiwan Kolin Co., Ltd., v. Kolin Electronics Co., Inc. (2015)

Doctrines: 

• Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. The mere fact that one person has adopted and used a trademark on his goods would not, without more, prevent the adoption and use of the same trademark by others on unrelated articles of a different kind.
• In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no rigid set rules can plausible be formulated. Each case must be decided on its merits, with due regard to the goods or services involved, the usual purchaser’s character and attitude, among others. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of a particular case.

Facts: Taiwan Kolin filed with the IPO, then Bureau of Patents, Trademarks, and Technology Transfer, a trademark application for the use of "KOLIN" on a combination of goods, including colored televisions, refrigerators, window-type and split-type air conditioners, electric fans and water dispensers. Said goods allegedly fall under Classes 9, 11, and 21 of the Nice Classification (NCL). The would eventually be considered abandoned for Taiwan Kolin’s failure to respond to IPO’s Paper No. 5 requiring it to elect one class of good for its coverage. However, the same application was subsequently revived through another application, with petitioner electing Class 9. The application would in time be duly published.

Kolin Electronics opposed petitioner’s revived application. The mark Taiwan Kolin seeks to register is identical, if not confusingly similar, with its "KOLIN" mark, covering the following products under Class 9 of the NCL: automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated power supply, step-down transformer, and PA amplified AC-DC.

To digress a bit, Kolin Electronics’ "KOLIN" registration was, as it turns out, the subject of a prior legal dispute between the parties before the IPO. In the said case, Kolin Electronics’ own application was opposed by Taiwan Kolin, being, as Taiwan Kolin claimed, the prior registrant and user of the "KOLIN" trademark, having registered the same in Taipei, Taiwan on December 1, 1988. The Bureau of Legal Affairs of the IPO (BLA-IPO), however, did not accord priority right to Taiwan Kolin’s Taipei registration absent evidence to prove that it has already used the said mark in the Philippines as early as 1988. On appeal, the IPO Director General affirmed the BLA-IPO’s Decision. Taiwan Kolin elevated the case to the CA, but without injunctive relief, Kolin Electronics was able to register the "KOLIN" trademark for its products. CA affirmed the Decision.

In answer to respondent’s opposition, petitioner argued that it should be accorded the benefits of a foreign-registered mark under Secs. 3 and 131.1 of Republic Act No. 8293 (IP Code); that it has already registered the "KOLIN" mark in the People’s Republic of China, Malaysia and Vietnam, all of which are parties to the Paris Convention for the Protection of Industrial Property and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS); and that benefits accorded to a well-known mark should be accorded to petitioner.

BLA-IPO denied petitioner’s application. Citing Sec. 123(d) of the IP Code, the BLA-IPO held that a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor in respect of the same or closely-related goods. The BLA-IPO also noted that there was proof of actual confusion in the form of consumers writing numerous e-mails to respondent asking for information, service, and complaints about petitioner’s products.

Petitioner moved for reconsideration but the same was denied. Thus, petitioner appealed the above Decision to the Office of the Director General of the IPO.

IPO Director reversed the Decision of the BLA-IPO. In so ruling, the IPO Director General ratiocinated that product classification alone cannot serve as the decisive factor in the resolution of whether or not the goods are related and that emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics.

Aggrieved, respondent elevated the case to the CA. The appeal was granted. Petitioner moved for reconsideration but was denied.

Issue: Whether or not petitioner is entitled to its trademark registration of "KOLIN" over its specific goods of television sets and DVD players.

Held: Identical marks may be registered for products from the same classification.

Mere uniformity in categorization, by itself, does not automatically preclude the registration of what appears to be an identical mark, if that be the case. In fact, this Court, in a long line of cases, has held that such circumstance does not necessarily result in any trademark infringement.

Verily, whether or not the products covered by the trademark sought to be registered by Taiwan Kolin, on the one hand, and those covered by the prior issued certificate of registration in favor of Kolin Electronics, on the other, fall under the same categories in the NCL is not the sole and decisive factor in determining a possible violation of Kolin Electronics’ intellectual property right should petitioner’s application be granted. It is hornbook doctrine, as held in the above-cited cases, that emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. The mere fact that one person has adopted and used a trademark on his goods would not, without more, prevent the adoption and use of the same trademark by others on unrelated articles of a different kind. The CA erred in denying petitioner’s registration application.

The intertwined use, the same classification of the products as class 9 under the NICE Agreement, and the fact that they generally flow through the same channel of trade clearly establish that Taiwan Kolin’s television sets and DVD players are closely related to Kolin Electronics’ goods. As correctly pointed out by the BLA-IPO, allowing Taiwan Kolin’s registration would only confuse consumers as to the origin of the products they intend to purchase. Accordingly, protection should be afforded to Kolin Electronics, as the registered owner of the "KOLIN" trademark.

a. The products covered by petitioner’s application and respondent’s registration are unrelated

A certificate of trademark registration confers upon the trademark owner the exclusive right to sue those who have adopted a similar mark not only in connection with the goods or services specified in the certificate, but also with those that are related thereto.

It was erroneous for respondent to assume over the CA to conclude that all electronic products are related and that the coverage of one electronic product necessarily precludes the registration of a similar mark over another. In this digital age wherein electronic products have not only diversified by leaps and bounds, and are geared towards interoperability, it is difficult to assert readily, as respondent simplistically did, that all devices that require plugging into sockets are necessarily related goods.

b. The ordinarily intelligent buyer is not likely to be confused

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no rigid set rules can plausible be formulated. Each case must be decided on its merits, with due regard to the goods or services involved, the usual purchaser’s character and attitude, among others. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of a particular case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point. For a clearer perspective and as matter of record, the following image on the left is the trademark applied for by petitioner, while the image juxtaposed to its right is the trademark registered by respondent:

The differing features between the two, though they may appear minimal, are sufficient to distinguish one brand from the other.

It cannot be stressed enough that the products involved in the case at bar are, generally speaking, various kinds of electronic products. These are not ordinary consumable household items, like catsup, soy sauce or soap which are of minimal cost. The products of the contending parties are relatively luxury items not easily considered affordable. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely.

All told, We are convinced that petitioner's trademark registration not only covers unrelated good, but is also incapable of deceiving the ordinary intelligent buyer. The ordinary purchaser must be thought of as having, and credited with, at least a modicum of intelligence to be able to see the differences between the two trademarks in question.

Dispositive Portion: WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 122565, dated April 30, 2013 and November 6, 2013, respectively, are hereby REVERSED and SET ASIDE. Accordingly, the Decision of the Intellectual Property Office Director General in Inter Partes Case No. 14-2006-00096, dated November 23, 2011, is hereby REINSTATED.

Banco Filipino v. Monetary Board

Doctrine: The following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors; thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the statements of the department head to be true.

Fast Facts (tl;dr): This refers to 9 consolidated cases concerning the legality of the closure and receivership of petitioner Banco Filipino pursuant to the order of respondent Monetary Board. 

The Monetary Board ordered the closure of Banco Filipino and placed it under receivership. Then, it was placed under liquidation.

***

Facts: This refers to 9 consolidated cases concerning the legality of the closure and receivership of petitioner Banco Filipino pursuant to the order of respondent Monetary Board.

G.R No. 68878

This is a motion for reconsideration, filed by respondent Celestina Pahimuntung, of the decision promulgated by the SC granting the petition for review on certiorari and reversing the questioned decision of respondent appellate court, which annulled the writ of possession issued by the trial court in favor of petitioner.

The respondent-movant contends that the petitioner has no more personality to continue prosecuting the instant case considering that petitioner bank was placed under receivership by the Central Bank pursuant to the resolution of the Monetary Board.

G.R. Nos. 77255-58

Petitioners Top Management Programs Corporation and Pilar Development Corporation are corporations engaged in the business of developing residential subdivisions. Top Management and Pilar Development obtained loans from Banco Filipino. The loans were secured by mortgages in its respective various properties in Cavite.

The Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do business without loss to its creditors and depositors. It placed Banco Filipino under receivership of Carlota Valenzuela, Deputy Governor of the Central Bank.

The Monetary Board issued another resolution placing the bank under liquidation and designating Valenzuela as liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar, et al. to represent Banco Filipino in all litigations.

Banco Filipino filed the petition for certiorari questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino.

The SC resolved to issue a TRO enjoining the respondents from executing further acts of liquidation of the bank; that acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank are not enjoined. The Central Bank is ordered to designate a comptroller for Banco Filipino.

Subsequently, Top Management failed to pay its loan on the due date. Hence, the law firm of Sycip, Salazar, et al. acting as counsel for Banco Filipino under authority of Valenzuela as liquidator, applied for extra-judicial foreclosure of the mortgage over Top Management's properties. Top Management filed a petition for injunction and prohibition with the respondent appellate court seeking to enjoin RTC Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al. from proceeding with foreclosure sale.

Similarly, Pilar Development defaulted in the payment of its loans. The law firm of Sycip, Salazar, et al. filed separate applications with the ex-officio sheriff of RTC Cavite for the extra-judicial foreclosure of mortgage over its properties. Hence, Pilar Development filed with the respondent appellate court a petition for prohibition with prayer for the issuance of a writ of preliminary injunction seeking to enjoin the same respondents from enforcing the foreclosure sale of its properties.

Respondent appellate court rendered a decision dismissing the aforementioned petitions.

Hence, this petition was filed by the petitioners Top Management and Pilar Development alleging that Carlota Valenzuela, who was appointed by the Monetary Board as liquidator of Banco Filipino, has no authority to proceed with the foreclosure sale of petitioners' properties on the ground that the resolution of the issue on the validity of the closure and liquidation of Banco Filipino is still pending with the SC.

G.R. No. 78766

Petitioner El Grande Development Corporation is engaged in the business of developing residential subdivisions. It was extended by respondent Banco Filipino a credit accommodation to finance its housing program. Hence, petitioner was granted a loan secured by real estate mortgages on its various estates located in Cavite.

The Monetary Board forbade Banco Filipino to do business, placed it under receivership and designated Deputy Governor Carlota Valenzuela as receiver. The Monetary Board confirmed Banco Filipino's insolvency and designated the receiver Carlota Valenzuela as liquidator.

When petitioner El Grande failed to pay its indebtedness to Banco Filipino, the latter thru its liquidator, Carlota Valenzuela, initiated the foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite. Subsequently, the ex-officio sheriff issued the notice of extra-judicial sale of the mortgaged properties of El Grande.

In order to stop the public auction sale, petitioner El Grande filed a petition for prohibition with the CA alleging that respondent Carlota Valenzuela could not proceed with the foreclosure of its mortgaged properties on the ground that the SC in G.R. No. 70054 issued a resolution which restrained Carlota Valenzuela from acting as liquidator and allowed Banco Filipino to resume banking operations only under a Central Bank comptroller. CA dismissed the petition.

Hence this petition for review on certiorari was filed alleging that the respondent court erred when it held in its decision that although Carlota P. Valenzuela was restrained by this Honorable Court from exercising acts in liquidation of Banco Filipino Savings & Mortgage Bank, she was not legally precluded from foreclosing the mortgage over the properties of the petitioner through counsel retained by her for the purpose.

G.R. No. 81303

Pilar Development filed an action against Banco Filipino, the Central Bank and Carlota Valenzuela for specific performance. It appears that the former management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco Filipino. The said law firm filed an answer for Banco Filipino which confessed judgment against Banco Filipino.

Petitioner filed a second amended complaint. The Central Bank and Carlota Valenzuela, thru the law firm Sycip, Salazar, Hernandez and Gatmaitan filed an answer to the complaint. Sycip, et al., acting for all the defendants including Banco Filipino moved that the answer filed by Quisumbing & Associates for defendant Banco Filipino be expunged from the records. Despite opposition from Quisumbing & Associates, the trial court granted the motion to expunge. Petitioner Pilar Development moved to reconsider the order but the motion was denied.

Petitioner Pilar Development filed with the respondent appellate court a petition for certiorari and mandamus to annul the order of the trial court. CA dismissed the petition. A petition was filed with the SC but was denied. Hence, this instant motion for reconsideration.

G.R. No. 81304

On July 9, 1985, petitioner BF Homes Incorporated filed an action with the trial court to compel the Central Bank to restore petitioner's; financing facility with Banco Filipino.

The Central Bank filed a motion to dismiss the action. Petitioner BF Homes in a supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank.

Petitioner filed a second supplemental complaint to which respondents filed a motion to dismiss. The trial court granted the motion to dismiss the supplemental complaint on the grounds (1) that plaintiff has no contractual relation with the defendants, and (2) that the Intermediate Appellate Court in a previous decision in AC-G.R. SP. No. 04609 had stated that Banco Filipino has been ordered closed and placed under receivership pending liquidation, and thus, the continuation of the facility sued for by the plaintiff has become legally impossible and the suit has become moot.

The order of dismissal was appealed by the petitioner to the Court of Appeals. On November 4, 1987, the respondent appellate court dismissed the appeal and affirmed the order of the trial court.

Hence, this petition for review on certiorari was filed, alleging that the respondent court erred when it found that the private respondents should not be the ones to respond to the cause of action asserted by the petitioner and the petitioner did not have any cause of action against the respondents Central Bank and Carlota Valenzuela.

G.R. No. 90473

Petitioner El Grande Development Corporation obtained a loan from Banco Filipino, secured by a mortgage over its five parcels of land located in Cavite.

When Banco Filipino was ordered closed and placed under receivership in 1985, the appointed liquidator of BF, thru its counsel Sycip, Salazar, et al. applied with the ex-officio sheriff of RTC Cavite for the extrajudicial foreclosure of the mortgage constituted over petitioner's properties. 

Petitioner filed with the CA a petition for prohibition with prayer for writ of preliminary injunction to enjoin the respondents from foreclosing the mortgage and to nullify the notice of foreclosure. CA dismissed the petition.

Not satisfied with the decision, petitioner filed the instant petition for review on certiorari.

G.R. No. 70054

Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M.B. Resolution No. 223. It has 89 operating branches, 46 of which are in Manila, with more than 3 million depositors.

The list of stockholders showed the major stockholders to be: Metropolis Development Corporation, Apex Mortgage and Loans Corporation, Filipino Business Consultants, Tiu Family Group, LBH Inc. and Anthony Aguirre.

Petitioner Bank had an approved emergency advance of P119.7 million under M.B. Resolution No. 839. This was augmented with a P3 billion credit line under M.B. Resolution No. 934.

Respondent Board issued M.B. Resolution No. 955 placing petitioner bank under conservatorship of Basilio Estanislao. He was later replaced by Gilberto Teodoro as conservator. The latter submitted a report (Teodoro report) to respondent Board on the conservatorship of petitioner bank. Subsequently, another report (Tiaoqui Report) was submitted to the Monetary Board by Ramon Tiaoqui, Special Assistant to the Governor and Head, SES Department II of the Central Bank, regarding the major findings of examination on the financial condition of petitioner BF.

Petitioner filed a motion before the SC praying that a restraining order or a writ of preliminary injunction be issued to enjoin respondents from causing the dismantling of BF signs in its main office and 89 branches. The SC issued TRO.

The SC resolved to direct the respondents Monetary Board and Central Bank hold hearings at which the petitioner should be heard, and terminate such hearings and submit its resolution within 30 days. The Court further resolved to issue TRO enjoining the respondents from executing further acts of liquidation of a bank. Acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank were no enjoined. The Central Bank was also ordered to designate comptroller for the petitioner BF. The Court also ordered the consolidation of Civil Cases Nos. 8108, 9676 and 10183 in RTC Makati.

Justice Consuelo Santiago of the CA submitted her report (Santiago Report) and recommendation. Respondents filed their objections to the Santiago Report. Respondents submitted a motion for oral argument alleging that this Court is confronted with two conflicting reports on the same subject, one upholding on all points the Monetary Board's closure of petitioner, (Cosico Report) and the other (Santiago Report) holding that petitioner's closure was null and void because petitioner's insolvency was not clearly established before its closure; and that such a hearing on oral argrument will therefore allow the parties to directly confront the issues before the SC

The parties, having submitted their respective memoranda, the case is now submitted for decision.

G.R. No. 78767

Banco Filipino filed a complaint with the trial court to annul the resolution of the Monetary Board which ordered the closure of the bank and placed it under receivership.

The Central Bank and the receivers filed a motion to dismiss the complaint on the ground that the receivers had not authorized anyone to file the action. While the motion to dismiss was pending resolution, petitioner herein Metropolis Development Corporation filed a motion to intervene in the aforestated civil case on the ground that as a stockholder and creditor of Banco Filipino, it has an interest in the subject of the action.

The trial court denied the motion to dismiss and also denied the motion for reconsideration of the order later filed by Central Bank. The trial court allowed the motion for intervention.

Hence, the Central Bank and the receivers of Banco Filipino filed a petition for certiorari with the respondent appellate court alleging that the trial court committed grave abuse of discretion in not dismissing the Civil Case.

The respondent appellate court rendered a decision annulling and setting aside the questioned orders of the trial court, and ordering the dismissal of the complaint filed by Banco Filipino with the trial court as well as the complaint in intervention of petitioner Metropolis Development Corporation. Hence this petition.

G.R. No. 78894

A complaint was filed with the trial court in the name of Banco Filipino to annul the resolution o the Monetary Board which ordered the closure of Banco Filipino and placed it under receivership. The receivers appointed by the Monetary Board were Carlota Valenzuela, Arnulfo Aurellano and Ramon Tiaoqui.

Central Bank and the receiver filed a motion to dismiss the complaint on the ground that the receiver had not authorized anyone to file the action.

The Monetary Board placed the bank under liquidation and designated Valenzuela as liquidator and Aurellano and Tiaoqui as deputy liquidators.

The Central Bank filed a supplemental motion to dismiss which was denied. Hence, the latter filed a petition for certiorari with the respondent appellate court to set aside the order of the trial court denying the motion to dismiss. The respondent appellate court granted the petition and dismissed the complaint of Banco Filipino with the trial court.

Thus, this petition for certiorari was filed with the petitioner contending that a bank which has been closed and placed under receivership by the Central Bank under Section 29 of RA 265 could file suit in court in its name to contest such acts of the Central Bank, without the authorization of the CB-appointed receiver.

Issue: Whether or not the closure of BF Savings is proper.

Held: No. The law applicable in the determination of these issues is Section 29 of Republic Act No. 265, as amended, also known as the Central Bank Act. Based on the provision, the Monetary Board may order the cessation of operations of a bank in the Philippine and place it under receivership upon a finding of insolvency or when its continuance in business would involve probable loss its depositors or creditors. If the Monetary Board shall determine and confirm within 60 days that the bank is insolvent or can no longer resume business with safety to its depositors, creditors and the general public, it shall, if public interest will be served, order its liquidation.

There is no question that under Section 29 of the Central Bank Act, the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors; thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the statements of the department head to be true.

The actuation of the Monetary Board in closing petitioner bank barely four days after a conference with the latter on the examiners' partial findings on its financial position is also violative of what was provided in the CB Manual of Examination Procedures. It is hard to understand how a period of four days after the conference could be a reasonable opportunity for a bank to undertake a responsive and corrective action on the partial list of findings of the examiner-in-charge.

In the instant case, the basic standards of substantial due process were not observed. In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 Phil. 635, this Court laid down several cardinal primary rights which must be respected in a proceeding before an administrative body. However, as to the requirement of notice and hearing, Sec. 29 of RA 265 does not require a previous hearing before the Monetary Board implements the closure of a bank, since its action is subject to judicial scrutiny as provided for under the same law (Rural Bank of Bato v. IAC, G.R. No. 65642, October 15, 1984, Rural Bank v. Court of Appeals, G.R. 61689, June 20, 1988,162 SCRA 288).

The second requirement provided in Section 29, R.A. 265 before a bank may be closed is that the examination should disclose that the condition of the bank is one of insolvency.

As to the concept of whether the bank is solvent or not, the respondents contend that under the Central Bank Manual of Examination Procedures, Central Bank examiners must recommend valuation reserves, when warranted, to be set up or deducted against the corresponding asset account to determine the bank's true condition or net worth.

The test of insolvency laid down in Section 29 of the Central Bank Act is measured by determining whether the realizable assets of a bank are less than its liabilities. Hence, a bank is solvent if the fair cash value of all its assets, realizable within a reasonable time by a reasonable prudent person, would equal or exceed its total liabilities exclusive of stock liability; but if such fair cash value so realizable is not sufficient to pay such liabilities within a reasonable time, the bank is insolvent. (Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661). Stated in other words, the insolvency of a bank occurs when the actual cash market value of its assets is insufficient to pay its liabilities, not considering capital stock and surplus which are not liabilities for such purpose (Exley v. Harris, 267 p. 970, 973,126 Kan. 302; Alexander v. Llewellyn, Mo. App., 70 S.W. 2n 115,117).

The Insurance Assurance Co. v. Heirs of Jose Alvarez; Union Bank of the Philippines v. Heirs of Alvarez

Doctrine: The Insurance Code dispenses with proof of fraudulent intent in cases of rescission due to concealment, but not so in cases of rescission due to false representations. When an abundance of available documentary evidence can be referenced to demonstrate a design to defraud, presenting a singular document with an erroneous entry does not qualify as clear and convincing proof of fraudulent intent. Neither does belatedly invoking just one other document, which was not even authored by the alleged miscreant.

Facts: Alvarez and his wife, Adelina, owned a residential lot with improvements registered in the Caloocan City Registry of Deeds. Alvarez applied for and was granted a housing loan by UnionBank in the amount of P648,000.00. This loan was secured by a promissory note, a real estate mortgage over the lot, and a mortgage redemption insurance taken on the life of Alvarez with UnionBank as beneficiary. Alvarez was among the mortgagors included in the list of qualified debtors covered by the Group Mortgage Redemption Insurance that UnionBank had with Insular Life.

Alvarez passed away on April 17, 1998. In May 1998, UnionBank filed with Insular Life a death claim under Alvarez's name pursuant to the Group Mortgage Redemption Insurance. In line with Insular Life's standard procedures, UnionBank was required to submit documents to support the claim. These included: (1) Alvarez's birth, marriage, and death certificates; (2) the attending physician's statement; (3) the claimant's statement; and (4) Alvarez's statement of account.

Insular Life denied the claim after determining that Alvarez was not eligible for coverage as he was supposedly more than 60 years old at the time of his loan's approval.

With the claim's denial, the monthly amortizations of the loan stood unpaid. UnionBank sent the Heirs of Alvarez a demand letter, giving them 10 days to vacate the lot. Subsequently, on October 4, 1999, the lot was foreclosed and sold at a public auction with UnionBank as the highest bidder.

On February 14, 2001, the Heirs of Alvarez filed a Complaint for Declaration of Nullity of Contract and Damages against UnionBank, a certain Alfonso P. Miranda, who supposedly benefitted from the loan, and the insurer which was identified only as John Doe. The Heirs of Alvarez denied knowledge of any loan obtained by Alvarez.

The Heirs of Alvarez claimed that after Alvarez's death, they came upon a document captioned "Letter of Undertaking," which appeared to have been sent by UnionBank to Miranda. In this document, UnionBank bound itself to deliver to Miranda P466,000.00 of the approved P648,000.00 housing loan, provided that Miranda would deliver to it TCT No. C-315023, "free from any liens and/or encumbrances.” The Complaint was later amended and converted into one for specific performance to include a demand against Insular Life to fulfill its obligation as an insurer under the Group Mortgage Redemption Insurance.

In its defense, UnionBank asserted that the Heirs of Alvarez could not feign ignorance over the existence of the loan and mortgage considering the Special Power of Attorney executed by Adelina in favor of her late husband, which authorized him to apply for a housing loan with UnionBank.

For its part, Insular Life maintained that based on the documents submitted by UnionBank, Alvarez was no longer eligible under the Group Mortgage Redemption Insurance since he was more than 60 years old when his loan was approved.

The RTC ruled in favor of the Heirs of Alvarez. It found no indication that Alvarez had any fraudulent intent when he gave UnionBank information about his age and date of birth. It explained that UnionBank initiated and negotiated the Group Mortgage Redemption Insurance with Insular Life, and that "ordinary customers will not know about [insurance policies such as this] unless it is brought to their knowledge by the bank." It noted that if UnionBank's personnel were mindful of their duties and if Alvarez appeared to be disqualified for the insurance, they should have immediately informed him of his disqualification. It emphasized that in evaluating Alvarez's worthiness for the loan, UnionBank had been in possession of materials sufficient to inform itself of Alvarez's personal circumstances. It added that if Insular Life had any doubt on the information that UnionBank had provided, it should have inquired further instead of relying solely on the information readily available to it and immediately refusing to pay.

UnionBank and Insular Life filed separate appeals before the CA. CA affirmed RTC’s ruling. It noted that the errors assigned by Insular Life and UnionBank to the RTC boiled down to the issue of whether or not Alvarez was guilty of fraudulent misrepresentation as to warrant the rescission of the Group Mortgage Redemption Insurance obtained by UnionBank on Alvarez's life. It explained that fraud is never presumed and fraudulent misrepresentation as a defense of the insurer to avoid liability must be established by convincing evidence. Insular Life, in this case, failed to establish this defense.

Insular Life opted to directly appeal before the SC. UnionBank filed its Motion for Reconsideration before the CA which was denied. UnionBank then filed before the SC.

Issue: Whether or not petitioner The Insular Life Assurance Co., Ltd. is obliged to pay Union Bank of the Philippines the balance of Jose H. Alvarez's loan given the claim that he lied about his age at the time of the approval of his loan

Held: Fraud is not to be presumed, for "otherwise, courts would be indulging in speculations and surmises." Moreover, it is not to be established lightly. Rather, "[i]t must be established by clear and convincing evidence . . . [; a] mere preponderance of evidence is not even adequate to prove fraud." These precepts hold true when allegations of fraud are raised as grounds justifying the invalidation of contracts, as the fraud committed by a party tends to vitiate the other party's consent.

Citing Section 27 of the Insurance Code, however, Insular Life asserts that in cases of rescission due to concealment, i.e., when a party "neglect[s] to communicate that which [he or she] knows and ought to communicate," proof of fraudulent intent is not necessary.

Section 27 reads:

Section 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. (Emphasis supplied)

The statutory text is unequivocal. Insular Life correctly notes that proof of fraudulent intent is unnecessary for the rescission of an insurance contract on account of concealment.

This is neither because intent to defraud is intrinsically irrelevant in concealment, nor because concealment has nothing to do with fraud. To the contrary, it is because in insurance contracts, concealing material facts is inherently fraudulent: "if a material fact is actually known to the [insured], its concealment must of itself necessarily be a fraud." When one knows a material fact and conceals it, "it is difficult to see how the inference of a fraudulent intent or intentional concealment can be avoided." Thus, a concealment, regardless of actual intent to defraud, "is equivalent to a false representation.”

Another rule is that if the assured undertakes to state all the circumstances affecting the risk, a full and fair statement of all is required.

It is also held that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld; so it is held under English law that if no inquiries are made and no fraud or design to conceal enters into the concealment the contract is not avoided. And it is determined that even though silence may constitute misrepresentation or concealment it is not of itself necessarily so as it is a question of fact. Nor is there a concealment justifying a forfeiture where the fact of insanity is not disclosed no questions being asked concerning the same. . . .

Dispositive portion: WHEREFORE, the Petitions are DENIED. The assailed Court of Appeals May 21, 2013 Decision and November 6, 2013 Resolution in CA­ G.R. CV No. 91820 are AFFIRMED.

Petitioners Union Bank of the Philippines and The Insular Life Assurance Co., Ltd. are ordered to comply with the insurance undertaking under Mortgage Redemption Insurance Policy No. G-098496 by applying its proceeds as payment of the outstanding loan obligation of deceased Jose H. Alvarez with respondent Union Bank of the Philippines;

The extrajudicial foreclosure of the real estate mortgage over Jose H. Alvarez's TCT No. C-315023 is declared null and without legal force and effect;

Petitioner Union Bank of the Philippines is ordered to reconvey the title and ownership over the lot covered by TCT No. C-315023 to the Estate of the deceased Jose H. Alvarez for the benefit of his heirs and successors-in-interest; and

Petitioners Union Bank of the Philippines and The Insular Life Assurance Co., Ltd. are ordered to jointly and severally pay respondents the Heirs of Jose H. Alvarez attorney's fees and the costs of suit.