"I chose to go to law school because I thought that someday, somehow I'd make a difference." -A.

December 20, 2016

South China Sea Dispute by Justice Carpio

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This is the brochure prepared by Justice Antonio T. Carpio (Senior Associate Justice, Supreme Court) during his talk at Ateneo de Davao University.

Title: "A Presentation on the Arbitration and Its Challenges"
Forum date: September 2, 2016
Organizer: AdDU College of Law Supreme Student Council

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October 8, 2016

Soriano vs. Sternberg

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  • Oscar Sternberg owns a parcel of land with a two storey-house which was built in 1905.
  • The said house has windows overlooking the adjacent lot belonging to Soriano.
  • The windows were built on the wall of the house which   has a 1.36 m. distance from the dividing line between the two lots.
  • Thereafter, Soriano filed an action to compel Sternberg to close the windows because it is less than 2 meters from the division line between the two lots and hence, a violation of Article 582 (now Article 670) of the Civil Code.
  • The law provides that "No windows or balconies or other similar projections which directly overlook the adjoining property may be opened or built without leaving a distance of not less than 2 meters between the wall in which they are built and such adjoining property.
  • Stenberg argues that the action of Soriano has already prescribed.
  • It must be noted that there is no annotation in the Torrens title of the parties involved. (No easement of view in the title of Soriano and no right to easement on the title of Sternberg.)
  • Here, there is no question of easement. 

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October 6, 2016

Zulueta vs. Pan American

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  • Zulueta and his family were passengers of Pan American World Airways travelling from Honolulu to Manila.
  • In one stopover, they were advised that they could disembark for about 30 minutes. 
  • However, Zulueta almost missed the flight because he came late (due to the defective announcing system).
  • He was asked to open his bags but the employees of the airlines found nothing. Later on, he was asked to go out of the plane.
  • He was left at Wake Island and was able to return to the Philippines 2 days after.
  • He filed an action for damages. 

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October 4, 2016

Santos vs. Rigos

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  • In 1961, Rigos and Sanchez executed a document titled ‘Option to Purchase’ whereby Rigos bound herself to sell a parcel of land to Sanchez for 1.5k pesos within two years from the execution of the contract. This option contract had no distinct consideration.
  • Sanchez made several tenders of the purchase price to Rigos, but Rigos ignored them. Sanchez consigned the payment in court  less than 2 months before the expiration of the period to exercise his right.
  • In other words, Sanchez accepted the optino before Rigos could withdraw the offer.
    • The RTC ruled in favor of Sanchez, ordering Rigos to accept the payment of the price. 
    • On appeal, Rigos claims that she could validly withdraw the option given to Sanchez, even if Sanchez has opted to exercise his right,  since the contract was not supported by a separate and distinct consideration (ruling in Southwestern Sugar v Altantic Gulf).

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October 2, 2016

Anti-Discrimination Ordinance of Davao City

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SECTION I. TITLE. This ordinance shall be known as "Anti-Discrimination Ordinance of Davao City;"


x x x

For the complete text of this ordinance, click here.

ENACTED, December 12, 2012, by a unanimous vote of all the Members of the Sanggunian present. 


  • Signed by: City Mayor Sara Z. Duterte
  • 16th City Council, 48th Regular Session

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October 1, 2016

Villamor vs. CA

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  • In 1971, the Reyeses sold a portion of their lot in Caloocan City to the sps Villamor. 
  • Later that year, they executed a Deed of Option wherein they stated that they have offered the remaining portion of the lot for sale, and that the Villamor spouses agreed to buy the same. 
  • The option to buy and sell was to be exercised ‘whenever the need of such sale arises, either on our part or on the part of the spouses (Julio) Villamor and Marina V. Villamor, at the same price of P70.00 per square meter.’
  • The Deed also mentioned that the cause or the impelling reason on the part of Reyes executing the deed of option as appearing in the deed itself is the Villamor's having agreed to buy the 300 square meter portion of private respondents' land at P70.00 per square meter "which was greatly higher than the actual reasonable prevailing price." 
  • In 1984, the Villamors offered to repurchase the portion of the lot they sold to the Villamor spouses in 1971. 
  • However, the Vilamor spouses decided they would rather buy the remaining portion and wanted to exercise their option as provided for in the Deed of Option. In 1984, they filed a case for specific performance against the Reyeses.
  • The RTC ruled in favor of the Villamors and ordered the Reyeses to sell the remaining portion.
  • The CA reversed, declaring the option contract to be void as it lacked a valid and distinct consideration.

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September 29, 2016

Tayag vs. Lacson

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  • In March 1996 a group of farmer-tenants on three parcels of land owned by the Lacsons assigned to petitioner Tayag their rights as tenants/tillers for p50/sqm. 
  • The said amount would be payable “when the legal impediments to the sale of the property to the petitioner no longer existed.” Tayag would have exclusive rights to purchase the property if and when the Lacsons agreed to sell the property. 
  • Tayag gave varied sums of money to the farmers as partial payments, and the farmers issued receipts. 
  • Sometime later Tayag discovered that the farmers changed their minds and would be selling their rights to the Lacsons instead, prompting Tayag to pray for Injunction against the farmers and Lacson.
  • In their defense, the Lacsons claimed that they did not induce the farmers to violate their contracts with Tayag, and that since the farmers were merely tenants, they had no right to enter into any transactions involving Lacson properties without the owners’ consent. 
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RP vs. Heirs of Felipe Alejaga Sr.

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  • December 28, 1978: Respondent Felibe Alejaga Sr. filed with the District Land Office of Roxas City a Free Patent Application of a parcel of land. (.3899 hectares, Roxas City)
  • Efren Recio,  Land Inspector, submitted the necessary report regarding the application. (Investigation & Verification Report)
  • March 14, 1979: The District Land Officer (DLO) approved the application and the issuance of a Free Patent to the applicant. It was then forwarded to Register of Deeds for the registration and issuance of a OCT. 
  • Thereafter, Original Certificate of Title and a Free Patent No. (VI-2) 3358 was issued to Alejaga.
  • April 4, 1979: The heirs of Ignacio Arrobang requested the Director of Lands of Manial for the investigation of DLO (conducted by Isagani Cartagena) in Roxas for the irregularities in the issuance of a title of a foreshore land in favor of Alejaga. 
  • After investigation, the Land Management Bureau of Manila requested the Director of Lands to cancel the Free Patent and the corresponding OCT.
  • In the meantime, Alejaga obtained a NACIDA loan. The loan was secured by a real estate mortgage to PNB.
  • April 18, 1990: The government through the Solicitor General instituted an action for Annulment/Cancellation of Patent and Title and Reversion against respondent Alejaga, the PNB of Roxas City and defendant Register of Deeds of Roxas City covering Free Patent Application of the land. While the case was pending, Alejaga was substituted by his heirs.
  • RTC ruled against responding saying that the OCT and Patent were obtained through fraud and misrepresentation. Hence, null and void. CA reversed RTC’s ruling.
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September 27, 2016

Reyes vs. Sisters of Mercy

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  • Jorge Reyes has been suffering from recurring fever with chills for around days.
  • Home medication afforded him no relief so he went to Mercy Community Clinic. He was then attended by Dr. Marlyn Rico.
  • Since typhoid fever was common at that time, the Widal test was performed and he was found positive for typhoid.
  • Thereafter, Dr. Marlyn Rico indorse Jorge Reyes to Dr. Marvie Blanes. 
  • Suspecting that that Jorge had typhoid fever, Dr. Marvie Blanes ordered that Jorge be tested for compatibility with chloromycetin, an antibiotic. Such test was conducted by Nurse Pagente.
  • As there was no adverse reaction, Dr. Blanes administered 500 mg of the antibiotic. Another dose was given 3 hours later.
  • Subsequently, Jorge Reyes developed high fever and experienced vomiting and convulsions. He then turned blue due to deficiency in oxygen – cyanosis – and died. The cause of death was stated to be “ventricular arrhythmia secondary to hyperpyrexia and typhoid fever.”
  • The heirs of Reyes filed with the RTC a complaint for damages against Sisters of Mercy, Sister Rose Palacio, Dr. Blanes, Dr. Rico and Mercy Community Clinic contending that the death of Jorge was due to the wrongful administration of chloromycetin. (NOTE: Petitioner’s action is for medical malpractice.)
  • RTC ruled in favor of the respondents. The CA affirmed in toto the RTC decision. Hence, this appeal.
  • Petitioners contend that:
    • Dr. Marlyn Rico hastily and erroneously relied upon the Widal test, diagnosed Jorge’s illness as typhoid fever, and immediately prescribed the administration of the antibiotic chloromycetin
    • Dr. Marvie Blanes erred in ordering the administration of the second dose of 500 milligrams of chloromycetin barely 3 hours after the first was given.
  • Testimony presented: That of Dr. Apolinar Vacalares, (Chief Pathologist of the Northern Mindanao Training Hospital) who performed an autopsy on the body – Dr. Vacalares testified that Reyes did not die of typhoid fever but of shock undetermined, which could be due to allergic reaction or chloromycetin overdose. 

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September 26, 2016

Nordic Asia vs. CA

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  • This case involves two cases.
  • The first case was an extrajudicial foreclosure of property instituted by Nordic Asia against Sextant Maritime for the latter’s failure in paying a loan.
  • The second case was a collection case filed by Nam Ung Maritime and 27 crew members against Sextant Maritime for recovery of unpaid wages, overtime pay and other benefits. The crew members here were able to cause the attachment of the vessel.
  • Upon learning of the collection case, Nordic Asia thereafter filed a motion for leave to intervene in the said case. 
  • It alleged that they hold a mortgage over the vessel and that their intervention is only for the purpose of opposing the crew members' unfounded and grossly exaggerated claim. 
  • RTC granted the said motion. (NOTE: the attachment of the vessel was discharged after Nordic put up a counterbound)
  • The lower court ruled Nordic Asia has no right to intervene because its complaint-in-intervention failed to state a cause of action and that the requisites for intervention are not present.

Issue: WON the complaint-in-intervention filed by Nordic Asia was proper. NO


The Supreme Court ruled in the negative. It enumerated the two requirements for intervention; namely:
[a] legal interest in the matter in litigation; and 
[b]consideration must be given as to whether the adjudication of the rights of the original parties may be delayed or prejudiced, or whether the intervenor's rights may be protected in a separate proceeding or not.

In this case, Nordic Asia failed to meet the requirements.

As to the first requirement, the SC said that: Legal interest, which entitles a person to intervene, must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal operation and effect of the judgment.

Nordic Asia, being co-creditors, are not the parties liable for the claims of Nam Ung and the crew members. Also, their remedies as unpaid mortgagees remain preserved as the collection case will not preclude the foreclosure of the vessel. Therefore, the collection case has no “direct” effect on the petitioners.

As to the second requisite, Nordic Asis’a rights were already protected through the extrajudicial foreclosure proceeding while on the other hand, the rights of Nam Ung and crew members have been unduly delayed or prejudiced. It was noted by the SC that the decision of the RTC in favor of Nam Ung and crew members never attained finality even if the actual judgment obligors (Sextant) neverf filed an appeal. Clearly, the only parties prolonging the collection case are the intervenors or Nordic Asia.

Re: intervention pro interesse suo *citing Int’l. Banking Corp vs. Corrales case (a lien or statutory right of preference clothed the intervenor with an interest in the subject-matter in litigation) and Joaquin Herrera (intervention pro interesse suo is a mode of intervention wherein a stranger desires to intervene for the purpose of asserting a property right which is the subject matter of litigation without becoming a formal plaintiff or defendant)

As to the argument of Nordic Asia that its intervention was in the nature of an intervention pro interesse suo, the SC said that:
In the International Banking Corp. case, intervention was allowed because the intervenor had a superior right of preference over the subject property and he had sought to enforce his own claims against the defendant and to foreclose on the said subject property. 
o Nordic prayed in this casethat they be allowed to intervene, on the basis of their secondary right as unpaid mortgagees, merely to oppose the claims of respondents and not for the purpose of enforcing their own claims.
In the Joaquin case, the plaintiff sought to compel the local officials of Caloocan to issue a cockpit license to him. A third party intervened to oppose the plaintiff's application and to assert his own right by asking that the cockpit license be issued to him instead. 
o In this case, Nordic wanted only to oppose the claims of respondents without asserting their unpaid mortgage.

o Legal interest, which entitles a person to intervene, must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal operation and effect of the judgment.
o Mortgagee – Nordic Asia
o Mortagagor – Sextant Maritime

  • G.R. No. 111159             
  • July 13, 2004
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Q & A: Certification Election

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The BUREAU OF LABOR RELATIONS covers the important aspects of labor relations. This department sets the environment for a healthy relationship by making both the employer and the employee aware of their rights and obligations. The BLR fosters an environment where employers and employees can reach a compromise regarding their issues and contribute in policy-making.

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September 25, 2016

Quileste vs. People

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  • Virgilio Quileste is a public officer found liable by the RTC for malversation.
  • He appealed with the CA.
  • The CA dismissed outright the appeal because Quileste. (Reason: Failure to furnish the Office of the Solicitor General a copy of his Motion for Extension to File Appellant’s Brief and his Appellant’s Brief in violation of Rule 124, Section 3.)
  • He moved to reconsider the said CA resolution.
  • The motion was denied by the CA on the finding that despite allegation that a copy of the motion was served upon the OSG via a registered mail, the registry receipt was not attached to the motion in violation of Sections 5 and 13 of Rule 13.
  • Furthermore, the affidavit of service attached to the motion to rectify the defect in appellant’s brief showed that it was filed via a registry mail and the registry receipt was not attached to the said affidavit. 
  • There was no explanation why the registered mail was resorted to in the service of appellant’s brief upon the OSG in violation of Section 11 and 13 of Rule 13.

Issue: WON the act of the CA in dismissing the appeal is proper based on mere technicality despite showing of substantial compliance with the requirements. 


The Court did not really discuss whether or not there was a violation of Section 11 of Rule 13 of the Rules.

It only ruled that Quileste should have appealed the RTC Decision of conviction to the Sandiganbayan within 15 days from the promulgation of the judgment or from the notice of the final order appealed from.

By lodging his appeal with the CA, which in turn erred in taking cognizance of the same, although it dismissed the appeal on technical grounds, the period within which to appeal with the proper court, the Sandiganbayan, lapsed.

Thus, Quileste lost his right to appeal. 

The RTC decision became final and executory upon the expiration of the period to appeal.


Rule 124, Section 3: When brief for the appellant to be filed – Within 30 days from receipt by the appellant or his counsel of the notice from the clerk of court of the Court of Appeals that the evidence, oral and documentary, is already attached to the record, the appellant shall file seven copies of his brief with the clerk of court which shall be accompanied by proof of service of two copies thereof upon the appellee.

Thus, Quileste lost his right to appeal.  Consequently, he cannot come before this Court to question the dismissal of his appeal, the RTC Decision having become final and executory upon the expiration of the period to appeal.

Rule 13 Section 11. Priorities in modes of service and filing. — Whenever practicable, the service and filing of pleadings and other papers shall be done personally. Except with respect to papers emanating from the court, a resort to other modes must be accompanied by a written explanation why the service or filing was not done personally. A violation of this Rule may be cause to consider the paper as not filed. (n)

  • G.R. No. 180334
  • February 18, 2009
  • VIRGILIO V. QUILESTE, Petitioner, - versus - PEOPLE OF THE PHILIPPINES, Respondent.
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September 23, 2016

Spouses Paragas vs. Heirs of Balacano

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  • Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and Lot 1175-F of the Subd. Plan Psd-38042 [located at Baluarte, Santiago City, Isabela].
  • Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed Balacano. 
  • Lorenza died on December 11, 1991. Gregorio, on the other hand, died on July 28, 1996. Petitioners were the grandchildren of Gregorio. 
  • Prior to his death, Gregorio was admitted at the Veterans General Hospital in Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until July 19, 1996. He was transferred in the afternoon of July 19, 1996 to the Veterans Memorial Hospital in Quezon City where he was confined until his death. 
  • Respondents essentially alleged – in asking for the nullification of the deed of sale – that: (1) their grandfather Gregorio could not have appeared before the notary public on July 22, 1996 at Santiago City because he was then confined at the Veterans Memorial Hospital in Quezon City; (2) at the time of the alleged execution of the deed of sale, Gregorio was seriously ill, in fact dying at that time, which vitiated his consent to the disposal of the property; and (3) Catalino (uncle) manipulated the execution of the deed and prevailed upon the dying Gregorio to sign his name on a paper the contents of which he never understood because of his serious condition. 
  • Alternatively, they alleged that assuming Gregorio was of sound and disposing mind, he could only transfer a half portion of Lots 1175-E and 1175-F as the other half belongs to their grandmother Lorenza who predeceased Gregorio – they claimed that Lots 1175-E and 1175-F form part of the conjugal partnership properties of Gregorio and Lorenza. 
  • Finally, they alleged that the sale to the Spouses Paragas covers only a 5-hectare portion of Lots 1175-E and 1175-F leaving a portion of 6,416 square meters that Catalino is threatening to dispose. They asked for the nullification of the deed of sale executed by Gregorio and the partition of Lots 1175-E and 1175-F. 
  • The defendants-appellees denied the material allegations of the complaint. Additionally, they claimed that: (1) the deed of sale was actually executed by Gregorio on July 19 (or 18), 1996 and not July 22, 1996; (2) the Notary Public personally went to the Hospital in Bayombong, Nueva Vizcaya on July 18, 1996 to notarize the deed of sale already subject of a previously concluded covenant between Gregorio and the Spouses Paragas; (3) at the time Gregorio signed the deed, he was strong and of sound and disposing mind; (4) Lots 1175-E and 1175-F were Gregorio’s separate capital and the inscription of Lorenza’s name in the titles was just a description of Gregorio’s marital status; (5) the entire area of Lots 1175-E and 1175-F were sold to the Spouses Paragas. 

Issues:Whether or not Gregorio has executed a perfected Deed of Sale. NO

Ruling: Gregorio’s consent was absent in the execution of the Deed of Sale. 

It is not disputed that when Gregorio signed the deed of sale, Gregorio was seriously ill, as he in fact died a week after the deed’s signing. Gregorio died of complications caused by cirrhosis of the liver. Gregorio’s death was neither sudden nor immediate; he fought at least a month-long battle against the disease until he succumbed to death on July 22, 1996. Given that Gregorio purportedly executed a deed during the last stages of his battle against his disease, we seriously doubt whether Gregorio could have read, or fully understood, the contents of the documents he signed or of the consequences of his act. We note in this regard that Gregorio was brought to the Veteran’s Hospital at Quezon City because his condition had worsened on or about the time the deed was allegedly signed. This transfer and fact of death not long after speak volumes about Gregorio’s condition at that time. We likewise see no conclusive evidence that the contents of the deed were sufficiently explained to Gregorio before he affixed his signature. 

Article 24 of the Civil Code tells us that in all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. 

In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the hospital. Gregorio was an octogenarian at the time of the alleged execution of the contract and suffering from liver cirrhosis at that – circumstances which raise grave doubts on his physical and mental capacity to freely consent to the contract.

  • G.R. No. 168220
  • August 31, 2005
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Associated vs. CA

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  • The Province of Tarlac maintains a current account with the Philippine National Bank (PNB) Tarlac Branch where the provincial funds are deposited.
  • Checks issued by the Province are signed by the Provincial Treasurer and countersigned by the Provincial Auditor or the Secretary of the Sangguniang Bayan.
  • A portion of the funds of the province is allocated to the Concepcion Emergency Hospital. The allotment checks for said government hospital are drawn to the order of "Concepcion Emergency Hospital, Concepcion, Tarlac" or "The Chief, Concepcion Emergency Hospital, Concepcion, Tarlac." 
  • The checks are released by the Office of the Provincial Treasurer and received for the hospital by its administrative officer and cashier.
  • It was then discovered that the hospital did not receive several allotment checks drawn by the Province.
  • The Provincial Treasurer requested the manager of the PNB to return all of its cleared checks which were issued from 1977 to 1980 in order to verify the regularity of their encashment. 
  • After the checks were examined, the Provincial Treasurer learned that 30 checks amounting to P203,300.00 were encashed by one Fausto Pangilinan, with the Associated Bank acting as collecting bank.
  • It turned out that Fausto Pangilinan, who was the administrative officer and cashier of Concepcion hospital until his retirement, collected the questioned checks from the office of the Provincial Treasurer. He claimed to be assisting or helping the hospital follow up the release of the checks and had official receipts.
  • Pangilinan sought to encash the first check with Associated Bank. However, the manager of Associated Bank refused and suggested that Pangilinan deposit the check in his personal savings account with the same bank. Pangilinan was able to withdraw the money when the check was cleared and paid by the drawee bank, PNB.
  • After forging the signature of Dr. Adena Canlas who was chief of the payee hospital, Pangilinan followed the same procedure for the other checks.
  • All the checks bore the stamp of Associated Bank which reads "All prior endorsements guaranteed ASSOCIATED BANK."
  • Jesus David, the manager of Associated Bank testified that Pangilinan made it appear that the checks were paid to him for certain projects with the hospital. He did not find as irregular the fact that the checks were not payable to Pangilinan but to the Concepcion Emergency Hospital. While he admitted that his wife and Pangilinan's wife are first cousins, the manager denied having given Pangilinan preferential treatment on this account.
  • The Provincial Treasurer wrote the manager of the PNB seeking the restoration of the various amounts debited from the current account of the Province.
  • In turn, the PNB manager demanded reimbursement from the Associated Bank on May 15, 1981. 
  • As both banks resisted payment, the Province of Tarlac brought suit against PNB which, in turn, impleaded Associated Bank as third-party defendant. The latter then filed a fourth-party complaint against Adena Canlas and Fausto Pangilinan.
  • RTC ordered: PNB to pay the Province of Tarlac P203,000 with interest, ordered Associated Bank to reimburse PNB for P203,000, Canlas and Pangilinan were not held liable.
  • CA affirmed in toto RTC’s ruling.
  • Arguments of the parties:
    • PNB: Province of Tarlac was negligent since it delivered and released the checks to Pangilinan who was already retired from the hospital and that the CA should have directed Associated Bank to pay the liability to the Province of Tarlac to avoid circuity.
    • Associated Bank: PNB as drawee bank is estopped from asserting the defense of guarantee of prior indorsements against Associated Bank (collecting bank). 
    • Associated Bank claims that PNB was at fault and should solely bear the loss because it cleared and paid the forged checks.xxx

Issue: Where thirty checks bearing forged endorsements are paid, who bears the loss, the drawer, the drawee bank or the collecting bank?

Held: Shared liability (50%-50%) [depending on the contributory negligence of the party]

Discussion re: Section 23 of the NIL on forged signature
The case at bench concerns checks payable to the order of Concepcion Emergency Hospital or its Chief. They were properly issued and bear the genuine signatures of the drawer, the Province of Tarlac. The infirmity in the questioned checks lies in the payee's (Concepcion Emergency Hospital) indorsements which are forgeries. At the time of their indorsement, the checks were order instruments. Checks having forged indorsements should be differentiated from forged checks or checks bearing the forged signature of the drawer.

Where the instrument is payable to order at the time of the forgery, such as the checks in this case, the signature of its rightful holder (here, the payee hospital) is essential to transfer title to the same instrument. When the holder's indorsement is forged, all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto.

An indorser of an order instrument warrants "that the instrument is genuine and in all respects what it purports to be; that he has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement valid and subsisting." He cannot interpose the defense that signatures prior to him are forged.

The drawee bank has the liability to pay the check to the order of the payee; the risk of loss falls on the drawee bank
The bank on which a check is drawn, known as the drawee bank, is under strict liability to pay the check to the order of the payee. The drawer's instructions are reflected on the face and by the terms of the check. Payment under a forged indorsement is not to the drawer's order. 

When the drawee bank pays a person other than the payee, it does not comply with the terms of the check and violates its duty to charge its customer's (the drawer) account only for properly payable items. Since the drawee bank did not pay a holder or other person entitled to receive payment, it has no right to reimbursement from the drawer. The general rule then is that the drawee bank may not debit the drawer's account and is not entitled to indemnification from the drawer. The risk of loss must perforce fall on the drawee bank.

Associated Bank will necessarily be liable to PNB for the checks bearing forged indorsements
In cases involving a forged check, where the drawer's signature is forged, the drawer can recover from the drawee bank. No drawee bank has a right to pay a forged check. If it does, it shall have to recredit the amount of the check to the account of the drawer. The liability chain ends with the drawee bank whose responsibility it is to know the drawer's signature since the latter is its customer.

In this case, the checks were indorsed by the collecting bank (Associated Bank) to the drawee bank (PNB). The former will necessarily be liable to the latter for the checks bearing forged indorsements. If the forgery is that of the payee's or holder's indorsement, the collecting bank is held liable, without prejudice to the latter proceeding against the forger.Since a forged indorsement is inoperative, the collecting bank had no right to be paid by the drawee bank. The former must necessarily return the money paid by the latter because it was paid wrongfully.

Discussion on Section 66 of the NIL and liability of the collecting bank or last indorser
More importantly, by reason of the statutory warranty of a general indorser in section 66 of the Negotiable Instruments Law, 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. It warrants that the instrument is genuine, and that it is valid and subsisting at the time of his indorsement. Because the indorsement is a forgery, the collecting bank commits a breach of this warranty and will be accountable to the drawee bank. This liability scheme operates without regard to fault on the part of the collecting/presenting bank. Even if the latter bank was not negligent, it would still be liable to the drawee bank because of its indorsement.

The Court has consistently ruled that "the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements."

The drawee bank is not similarly situated as the collecting bank 
The drawee makes no warranty as to the genuineness. of any indorsement. The drawee bank's duty is but to verify the genuineness of the drawer's signature and not of the indorsement because the drawer is its client.

Moreover, the collecting bank is made liable because it is privy to the depositor who negotiated the check. The bank knows him, his address and history because he is a client. It has taken a risk on his deposit. The bank is also in a better position to detect forgery, fraud or irregularity in the indorsement.

The province of Tarlac was equally negligent and should therefore share the burden of loss from the checks bearing the forged instruments
The Province of Tarlac permitted Fausto Pangilinan to collect the checks when the latter, having already retired from government service, was no longer connected with the hospital. With the exception of the first check (dated January 17, 1978), all the checks were issued and released after Pangilinan's retirement on February 28, 1978. After nearly three years, the Treasurer's office was still releasing the checks to the retired cashier. In addition, some of the aid allotment checks were released to Pangilinan and the others to Elizabeth Juco, the new cashier. The fact that there were now two persons collecting the checks for the hospital is an unmistakable sign of an irregularity which should have alerted employees in the Treasurer's office of the fraud being committed. There is also evidence indicating that the provincial employees were aware of Pangilinan's retirement and consequent dissociation from the hospital.

The failure of the Province of Tarlac to exercise due care contributed to a significant degree to the loss tantamount to negligence. Hence, the Province of Tarlac should be liable for part of the total amount paid on the questioned checks.

PNB is liable for its failure to pay only according to the terms of the check
The drawee bank PNB also breached its duty to pay only according to the terms of the check. Hence, it cannot escape liability and should also bear part of the loss.

PNB can recover from the Associated Bank
The situation in the case at bench is analogous to the case of Associated Bank vs. CA, for it was not the payee who deposited the checks with the collecting bank. Here, the checks were all payable to Concepcion Emergency Hospital but it was Fausto Pangilinan who deposited the checks in his personal savings account.

Although Associated Bank claims that the guarantee stamped on the checks (All prior and/or lack of endorsements guaranteed) is merely a requirement forced upon it by clearing house rules, it cannot but remain liable. The stamp guaranteeing prior indorsements is not an empty rubric which a bank must fulfill for the sake of convenience. 

A bank is not required to accept all the checks negotiated to it
It is within the bank's discretion to receive a check for no banking institution would consciously or deliberately accept a check bearing a forged indorsement. When a check is deposited with the collecting bank, it takes a risk on its depositor. It is only logical that this bank be held accountable for checks deposited by its customers.A delay in informing the collecting bank (Associated Bank) of the forgery, which deprives it of the opportunity to go after the forger, signifies negligence on the part of the drawee bank (PNB) and will preclude it from claiming reimbursement.

Even if the rule mandates that the checks be returned within 24 hours, PNB did not commit negligent delay
The rule mandates that the checks be returned within twenty-four hours after discovery of the forgery but in no event beyond the period fixed by law for filing a legal action. The rationale of the rule is to give the collecting bank (which indorsed the check) adequate opportunity to proceed against the forger. If prompt notice is not given, the collecting bank maybe prejudiced and lose the opportunity to go after its depositor.

PNB gave prompt notice to Associated Bank and the latter bank was not prejudiced in going after Fausto Pangilinan. After the Province of Tarlac informed PNB of the forgeries, PNB necessarily had to inspect the checks and conduct its own investigation. Thereafter, it requested the Provincial Treasurer's office on March 31, 1981 to return the checks for verification. The Province of Tarlac returned the checks only on April 22, 1981. Two days later, Associated Bank received the checks from PNB.

PNB is not estopped from recovering even if it paid and cleared the checks
Even if PNB cleared and paid the checks, it can still recover from Associated Bank. This is true even if the payee's Chief Officer who was supposed to have indorsed the checks is also a customer of the drawee bank. 

PNB's duty was to verify the genuineness of the drawer's signature and not the genuineness of payee's indorsement. Associated Bank, as the collecting bank, is the entity with the duty to verify the genuineness of the payee's indorsement.

Ruling of the court:
The Court finds as reasonable, the proportionate sharing of fifty percent - fifty percent (50%-50%). Due to the negligence of the Province of Tarlac in releasing the checks to an unauthorized person (Fausto Pangilinan), in allowing the retired hospital cashier to receive the checks for the payee hospital for a period close to three years and in not properly ascertaining why the retired hospital cashier was collecting checks for the payee hospital in addition to the hospital's real cashier, respondent Province contributed to the loss amounting to P203,300.00 and shall be liable to the PNB for fifty (50%) percent thereof. In effect, the Province of Tarlac can only recover fifty percent (50%) of P203,300.00 from PNB.

The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liable on its warranties as indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed the genuineness of all prior indorsements, including that of the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to ascertain the genuineness of the payee's indorsement.

  • G.R. No. 107382/G.R. No. 107612            
  •  January 31, 1996
  • x x x x x x x x x x x x x x x x x x x x x
  • G.R. No. 107612             
  • January 31, 1996
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September 21, 2016

Gonzalez vs. RCBC

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  • Gonzales was an employee of Rizal Commercial Banking Corporation (or RCBC) as New Accounts Clerk in the Retail Banking Department at its Head Office.
  • A foreign check of $7,500 was drawn by Dr. Don Zapanta of Ade Medical Group (Western Avenue, Los Angeles, California) against the drawee bank Wilshire Center Bank, N.A., (Los Angeles, California, U.S.A.) and payable to Gonzales’ mother, defendant Eva Alviar.
  • Alviar then endorsed this check.  
  • Since RCBC gives special accommodations to its employees to receive the check’s value without awaiting the clearing period, Gonzales presented the foreign check to Olivia Gomez, the RCBC’s Head of Retail Banking.  
  • After examining this, Gomez requested Gonzales to endorse it which she did.  
  • Gomez then acquiesced to the early encashment of the check and signed the check but indicated thereon her authority of “up to P17,500.00 only.
  • Afterwards, Olivia Gomez directed Gonzales to present the check to RCBC employee Carlos Ramos and procure his signature.  
  • After inspecting the check, Carlos Ramos also signed it with an “ok” annotation.  
  • After getting the said signatures Gonzales presented the check to Rolando Zornosa, Supervisor of the Remittance section of the Foreign Department of the RCBC Head Office, who after scrutinizing the entries and signatures therein authorized its encashment.  
  • Gonzales then received its peso equivalent of P155,270.85.
  • RCBC then tried to collect the amount of the check with the drawee bank by the latter through its correspondent bank, the First Interstate Bank of California, on two occasions dishonored the check because of “END. IRREG” or irregular indorsement.  
  • Insisting, RCBC again sent the check to the drawee bank, but this time the check was returned due to “account closed”.  
  • Unable to collect, RCBC demanded from Gonzales the payment of the peso equivalent of the check that she received.  
  • Gonzales settled the matter by agreeing that payment be made thru salary deduction.  This temporary arrangement for salary deductions was communicated by Gonzales to RCBC through a letter.
  • Alviar did not pay the obligation. Thereafter, Gonzales resigned from RCBC. What had been deducted from her salary was only P12,822.20 covering ten months.
  • A complaint for sum of money was filed by RCBC against Alviar and spouses Gonzales.
  • The RTC held Alviar (as principal debtor) and Theresa Gonzales (as guarantor) liable.
  • CA affirmed RTC ruling.

Issue: WON the prior indorsers Alviar and Gonzales is liable. NO


A subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith.  Eva Alviar’s and the petitioner’s  liability to subsequent holders of the foreign check is governed by Section 66 of NIL
Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor of subsequent endorsers extend only to the state of the instrument at the time of their endorsements, specifically, that the instrument is genuine and in all respects what it purports to be; that they have good title thereto; that all prior parties had capacity to contract; and that the instrument, at the time of their endorsements, is valid and subsisting.  

This provision, however, cannot be used by the party which introduced a defect on the instrument, such as respondent RCBC in this case, which qualifiedly endorsed the same, to hold prior endorsers liable on the instrument because it results in the absurd situation whereby a subsequent party may render an instrument useless and inutile and let innocent parties bear the loss while he himself gets away scot-free.  It cannot be over-stressed that had it not been for the qualified endorsement (“up to P17,500.00 only”) of Olivia Gomez, who is the employee of RCBC, there would have been no reason for the dishonor of the check, and full payment by drawee bank therefor would have taken place as a matter of course.

One who invokes Section 66 must come to court with clean hands
Section 66 of the Negotiable Instruments Law which further states that the general endorser additionally engages that, on due presentment, the instrument shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent endorser who may be compelled to pay it, must be read in the light of the rule in equity requiring that those who come to court should come with clean hands.  The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for “irregular endorsement” must not be the irregular endorser himself who gave cause for the dishonor. Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the instrument defective and later claim from prior endorsers who have no knowledge or participation in causing or introducing said defect to the instrument, which thereby caused its dishonor.

RCBC should bear the loss
RCBC, which caused the dishonor of the check upon presentment to the drawee bank, through the qualified endorsement of its employee, Olivia Gomez, cannot hold prior endorsers, Alviar and Gonzales in this case, liable on the instrument.

The Court must order the return of the salary deductions to Gonzalez, with legal interest of 12% per annum, notwithstanding the her apparent acquiescence to such an arrangement
It must be noted that Gonzales is not any ordinary client or depositor with whom RCBC had this isolated transaction.  She was a rank-and-file employee of RCBC, being a new accounts clerk thereat.  It is easy to understand how a vulnerable Gonzales, who is financially dependent upon RCBC, would rather bite the bullet, so to speak, and expectedly opt for salary deduction rather than lose her job and her entire salary altogether.  In this sense, we cannot take petitioner’s apparent acquiescence to the salary deduction as being an entirely free and voluntary act on her part.  

Additionally, under the obtaining facts and circumstances surrounding the present complaint for collection of sum of money by RCBC against its employee, which may be deemed tantamount to harassment, and the fact that RCBC itself was the one, acting through its employee, Olivia Gomez, which gave reason for the dishonor of the dollar-check in question, RCBC may likewise be held liable for moral and exemplary damages and attorney’s fees by way of damages, in the amount of P20,000.00 for each.

  • G.R. No. 156294 
  • November 29, 2006
  • MELVA THERESA ALVIAR GONZALES,   Petitioner,                          - versus -  RIZAL COMMERCIAL BANKING CORPORATION,                                           Respondent.
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September 19, 2016

Bank of America vs. Associated

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  • October 6, 1978: BA-Finance Corporation entered into a transaction with Miller Offset Press through Miller’s authorized representatives (Uy Kiat Chung, Ching Uy Seng and Uy Chung Guan Seng).
  • BA-Finance granted Miller a credit line facility through which Miller could assign or discount its trade receivables with the BA Finance. 
  • October 20, 1978: The representatives of Miller executed a Continuing Suretyship Agreement with BA-Finance whereby they jointly and severally guaranteed the full and prompt payment of any and all indebtedness which Miller may incur with BA-Finance.
  • Miller discounted and assigned several trade receivables to BA-Finance by executing Deeds of Assignment in favor of the BA-Finance.
  • BA-Finance issued four checks payable to the “Order of Miller Offset Press, Inc.” with the notation “For Payee’s Account Only.”  
  • These checks were drawn against Bank of America and had the following details:

Check No.    Date      Amount
128274 13 February 1981     P222,363.33
129067  26 February 1981      252,551.16
132133  20 April 1981            206,450.57
133057  7 May 1981                      59,862. 
 Total    P741,227.78

  • The four checks were deposited by Ching Uy Seng (a.k.a. Robert Ching), then the corporate secretary of Miller, in Account No. 989 in Associated Citizens Bank. (Note: Said account is a joint account under the names of representatives Ching Uy Seng and Uy Chung Guan Seng.)
  • Associated Bank stamped the checks with the notation “all prior endorsements and/or lack of endorsements guaranteed,” and sent them through clearing. 
  • Later, the drawee bank, Bank of America, honored the checks and paid the proceeds to Associated Bank as the collecting bank.
  • Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables.
  • BA-Finance filed a Complaint against Miller for collection of the amount of P731,329.63 which BA-Finance allegedly paid in consideration of the assignment, plus interest at the rate of 16% per annum and penalty charges. (note: representatives were impleaded in the case)
  • BA-Finance filed an Amended Complaint impleading Bank of America as additional defendant for allegedly allowing encashment and collection of the checks by person or persons other than the payee named thereon.  
  • Bank of America filed a Third Party Complaint against Associated Bank.   
  • In its Answer to the Third Party Complaint, Associated Bank admitted having received the four checks for deposit in the joint account of Ching Uy Seng (a.k.a. Robert Ching) and Uy Chung Guan Seng, but alleged that Robert Ching, being one of the corporate officers of Miller, was duly authorized to act for and on behalf of Miller.
  • RTC ruled in favor of BA Finance Corporation. Bank of America was ordered to pay.
  • CA modified the RTC decision: Bank of America was ordered to pay BA Finance, Associated Bank was ordered to reimburse Bank of America, representatives were ordered to pay Associated Bank.

Issue:  WON the CA erred in rendering judgment finding:
(1) Bank of America liable to pay BA-Finance the amount of the four checks; 
(2)  Associated Bank liable to reimburse Bank of America the amount of the four checks; and 
(3) Ching Uy Seng and/or Uy Chung Guan Seng liable to pay Associated Bank the amount of the four checks.  

Held: NO.

The Court of Appeals did not err in finding Bank of America liable to pay BA-Finance the amount of the four checks
The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract between the bank and its customer (drawer), to pay the check only to the payee or the payee’s order. The drawer’s instructions are reflected on the face and by the terms of the check. When the drawee bank pays a person other than the payee named on the check, it does not comply with the terms of the check and violates its duty to charge the drawer’s account only for properly payable items. 

Thus, we ruled in  Philippine National Bank v. Rodriguez that a drawee should charge to the drawer’s accounts only the payables authorized by the latter; otherwise, the drawee will be violating the instructions of the drawer and shall be liable for the amount charged to the drawer’s account.  

Bank of America violated the instructions of the drawer and therefore, it is liable for the amount charged to the drawer’s account
In this case, the four checks were drawn by BA-Finance and made payable to the “Order of Miller Offset Press, Inc.”  The checks were also crossed and issued “For Payee’s Account Only.” Clearly, the drawer intended the check for deposit only by Miller Offset Press, Inc. in the latter’s bank account.  Thus, when a person other than Miller, i.e., Ching Uy Seng, a.k.a. Robert Ching, presented and deposited the checks in his own personal account (Ching Uy Seng’s joint account with Uy Chung Guan Seng), and the drawee bank, Bank of America, paid the value of the checks and charged BA-Finance’s account therefor, the drawee Bank of America is deemed to have violated the instructions of the drawer, and therefore, is liable for the amount charged to the drawer’s account.

The Court of Appeals did not err in finding Associated Bank liable to reimburse Bank of America the amount of the four checks
Under Section 66 of the Negotiable Instruments Law, an endorser warrants “that the instrument is genuine and in all respects what it purports to be; that he has good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his endorsement valid and subsisting.” This Court has repeatedly held that in check transactions, the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements.

Associated Bank cannot deny liability since it assumed the warranty of an indorser
When Associated Bank stamped the back of the four checks with the phrase “all prior endorsements and/or lack of endorsement guaranteed,” that bank had for all intents and purposes treated the checks as negotiable instruments and, accordingly, assumed the warranty of an endorser.  Being so, Associated Bank cannot deny liability on the checks.

Associated Bank was negligent in depositing the checks to the account other than Miller’s
Associated Bank was also clearly negligent in disregarding established banking rules and regulations by allowing the four checks to be presented by, and deposited in the personal bank account of, a person who was not the payee named in the checks.  The checks were issued to the “Order of Miller Offset Press, Inc.,” but were deposited, and paid by Associated Bank, to the personal joint account of Ching Uy Seng (a.k.a. Robert Ching) and Uy Chung Guan Seng.  It could not have escaped Associated Bank’s attention that the payee of the checks is a corporation while the person who deposited the checks in his own account is an individual.  Verily, when the bank allowed its client to collect on crossed checks issued in the name of another, the bank is guilty of negligence.

  • G.R. No. 141001
  • May 21, 2009
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When does the duty to bargain collectively begin?

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The mechanics of collective bargaining is set in motion only when the following jurisdictional preconditions are present, namely:
  1. possession of the status of majority representation of the employees' representative in accordance with any of the means of selection or designation provided for by the Labor Code;
  2. proof of majority representation; and
  3.  a demand to bargain under Article 251, par. (a) of the New Labor Code x x x.

As ruled by the Supreme Court in the case of Kiok Luy vs. NLRC.

Case title: KIOK LOY, doing business under the name and style SWEDEN ICE CREAM PLANT, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION (NLRC) and PAMBANSANG KILUSAN NG PAGGAWA (KILUSAN), respondents.
Citation: G.R. No. L-54334
Date of promulgation: January 22, 1986
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September 15, 2016

Case Digests by Justice Velasco for Bar 2016

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Below is a list of the Case Digests Penned by Justice Velasco.

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September 14, 2016

Lyceum vs. CA

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  • Lyceum of the Philippines, Inc. is an educational institution duly registered with Securities and Exchange Commission since 1950. (Sept)
  • In 1984, it instituted proceedings before SEC to compel several education institutions to delete the word “Lyceum” from their corporate names and to permanently enjoin them from using the said word.
  • Their action is based on a SEC Resolution wherein SEC ordered the Lyceum of Baguio to change its corporate name as it is identical to the Lyceum of the Philippines which was able to register first.
  • SEC En Banc ruled that the attaching of the geographical names after the word “Lyceum” sufficiently distinguishes one from the other.
  • However, the CA ruled otherwise.

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September 13, 2016

Main Advantages Of Hiring A Car Accident Attorney To Represent You

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When you suffered an injury as you were involved in a car accident and the car needs repairs, many problems can appear. You may have to deal with a loss of stability and wages. The good news is that you do not really have to deal with all the expenses alone. You can be compensated for everything through a personal injury claim. 

Seeking compensation normally involves going after an injury settlement. The process is normally long and can be quite tiring. You have to do a lot of running around and it is possible that you will only be offered a small amount of money out of what you should be given. Experts always recommend working with car accident attorneys like at http://www.tariolaw.com/practice-areas/car-accidents/ if you want to get the money you should.
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September 11, 2016

Concerned Lawyers vs. Judge Pornillos

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  • This is an administrative case filed by the concerned lawyers of Bulacan against Judge Pornillos.
  • According to the lawyers, Judge Pornillos committed several violations among which is non-compliance with Section 9 of Rule 30 of the Rules of Court.
  • An audit of the acts of the Judge was made and in the audit report, Judge Pornillos was asked to comment on why she designated Ms. Venus M. Awin, Officer-in-Charge/Branch Clerk of Court to receive evidence ex-parte despite the clear mandate of Sec. 9, Rule 30 of the Rules of Court, requiring that only Clerk[s] of Court who are members of the bar can be delegated to receive evidence ex-parte.

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Castaneda vs. Alemany

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Note: The names of the parties were not really mentioned in the full text. This is an appeal case where the lower court ruled that the will of Moreno was valid. Appellants claimed that the will was invalid for non-compliance of the formalities required by law.

  • This case involves the will of testatrix Doña Juana Moreno.
  • The validity of the will was contested on the ground that the legal formalities required under Section 618 of the Code of Civil Procedure was not complied with.
  • It was argued that the will was not written in the presence of and under the express direction of the testatrix Moreno.

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Doctrine: The act that breaks the contract may also be a tort.

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TORTS: The act that breaks the contract may also be a tort.

Singson issued a check that was dishonored by BPI. By reason of such dishonor, his account with the bank was closed. After Singson claimed that his BPI account was not included in the writ of garnishment issued to BPI, the bank President Santiago Friexas rectified the mistake. Thereafter, Singson filed an action for damages. The lower court ruled that the damages for quasi-delict cannot be sustained because the relationship of Singson and BPI is contractual.

The Supreme Court said that the existence of a contract between the parties does not bar the commission of a tort by the one against the order and the consequent recovery of damages therefor. The act that breaks the contract may also be a tort. BPI was made liable to Singson. 

(Awarded: nominal damages and attorney’s fees apart from cost)

  • Singson vs. BPI
  • G.R. No. L-24837           
  • June 27, 1968

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September 10, 2016

Law Exam Success Tips

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Every law student's goal is to pass all his or her exams. Here is an infographic from "Studying Law" which contains a list of the different foods that can help us increase our concentration and memory or retention.

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Uy vs. Puzon

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  • Bartolome Puzon had two contracts with the government for the construction of roads and bridges. (Bureau of Public Highways)
  • He sought the financial assistance of William Uy, so he proposed that they create a partnership which would be the sub-contractor of the projects.
  • They also agreed that the profits will be divided among themselves.
  • William Uy agreed to the formation of the partnership "U.P. Construction Company". They agreed to contribute P50,000 each.  (Note: P40,000 was advanced by William Uy while Puzon was waiting for the approval of his P150,000 PNB Loan. Upon release of the loan, he promised to reimburse William Uy of the P40,000; pay his share of P50,000 and loan P60,000 to the partnership).
  • Loan was approved by November 1956. Note: At the end of 1957, Uy contributed a total of P115,
  • The partnership agreement was signed in 1957 (January 18) although the work for the projects began as early as 1956 (October 1).
  • Since Puzon was busy with other projects, Uy was the one who managed the partnership.
  • In order to guarantee the PNB Loan, Puzon, without the knowledge of Uy, assigned the payments to the payments to be received from the projects to PNB.
  • Due to the financial demands of the projects, Uy demanded that Puzon comply with his obligation to place his capital contribution in the company.
  • However, Puzon failed to comply even after formal demand letters were sent to him.
  • Thereafter, Puzon (as the primary contractor of the projects) wrote terminated the subcontract agreement with the partnership to which he is also a partner. (November 27, 1957)
  • Thereafter, Uy was not allowed to hold office in the UP Construction Company and his authority to negotiate with the Bureau was revoked by Puzon.
  • Uy clamied that Puzon had violated the terms of their partnership agreement. He sought for the dissolution of the partnership with damages.
  • The lower court ruled in favor of Uy.

Issue: WON Puzon failed to comply with his obligation of paying the capital contribution to the company. YES

Ruling: YES

According to the court, there was failure on the part of Puzon to contribute capital to the partnership. When his load with PNB was approved, he only gave P60,000 to Uy; P40,000 was for reimbursement to the payments made by Uy and the other P20,000 was for the capital contribution. Thereafter, Puzon never made additional contribution.

Also, it was found by the SC that Puzon misapplied partnership funds by assigning all payments for the projects to PNB. 

Such assignment was prejudicial to the partnership since the partnership only received a small share from the total payments made by the Bureau of Public Highways. As a result, the partnership was unable to discharge its obligations.

Here, the Court ordered Puzon to reimburse whatever amount Uy had invested in or spent for the partnership on account of construction projects. The amount P200,000 as compensatory damages was also awarded in favor of Uy.


Had the appellant not been remiss in his obligations as partner and as prime contractor of the construction projects in question as he was bound to perform pursuant to the partnership and subcontract agreements, and considering the fact that the total contract amount of these two projects is P2,327,335.76, it is reasonable to expect that the partnership would have earned much more than the P334,255.61 We have hereinabove indicated. The award, therefore, made by the trial court of the amount of P200,000.00, as compensatory damages, is not speculative, but based on reasonable estimate. 

WHEREFORE, finding no error in the decision appealed from, the said decision is hereby affirmed with costs against the appellant, it being understood that the liability mentioned herein shall be home by the estate of the deceased Bartolome Puzon, represented in this instance by the administrator thereof, Franco Puzon.

  • G.R. No. L-19819 
  • October 26, 1977
  • WILLIAM UY, plaintiff-appellee, vs.BARTOLOME PUZON, substituted by FRANCO PUZON, defendant-appellant.
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September 7, 2016

PALS Materials for Bar 2016 (FREE Download)

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Click the link/s below to download the materials.



  • Bar Review Notes on TAXATION prepared by Dean Manny Quibod and the students of the Ateneo de Davao Law School. 
  • Notes: http://bit.ly/PALS_TaxLaw2016


  • Bar Review Notes on CRIMINAL LAW prepared by Dean Gemy Lito L. Festin and the students of Polytechnic University of the Philippines. 
  • Notes: http://bit.ly/PALS_CrimLaw2016

  • Bar Review Notes on CIVIL LAW prepared by Dean Sol Deriquito-Mawis and the students of Lyceum of the Philippines University. 
  • Notes: http://bit.ly/PALS_CivilLaw2016


  • Bar Review Notes on LABOR LAW prepared by Ada D. Abad, Dean, Adamson University College of Law, with doctrinal digests by Dean Antonio H. Abad, Jr., Far Eastern University Institute of Law and Adamson University College of Law. 
  • Notes: http://bit.ly/PALS_LaborLaw2016

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