REGULATORY

FRAMEWORK AND
LEGAL ISSUES IN
BUSINESS
CASE DIGEST

FIONA P. MIRALPES
BSA 2B
ATTY. KHEERLEE JOHN A. ESTABILLO
RECTO
LAW
Equitable Savings Bank v. Palces, G.R. No. 214752

FACTS:
Respondent Palces purchased a Hyundai Starex through a loan granted by petitioner in the
amount of ₱1,196,100.00 payable for 36 monthly installments. To secure said loan, Palces
executed a Promissory Note with Chattel Mortgage in favor of the petitioner.

Stipulated, among others, in the promissory note are:

a. Monthly installments shall be paid on due date without prior notice or demand.
b. In case of default, the total unpaid principal sum plus the agreed charges shall become
immediately due and payable.
c. The mortgagor's default will allow the mortgagee to exercise the remedies available to it
under the law – foreclosure of the mortgage.

Respondent failed to pay such installments, hence the entire obligation became due and
demandable. As the demand went unheeded, petitioner bank filed a complaint for recovery of
possession with alternative prayer for sum of money and damages against Palces before the RTC.
The sheriff took possession of the Starex by virtue of the writ of replevin.

ISSUE:
1. WON respondent is entitled for reimbursement of the ₱103,000.00.
2. WON the attorney’s fees payable by respondent should be deleted.

RULINGS:

RTC: Ruled in favor of petitioner. Confirmed petitioner’s right of possession over the vehicle.

CA: AFFIRMED with modification. Ordered the bank to return the amount of ₱103,000.00 to
respondent representing her late partial payments. By choosing to recover the subject vehicle via
a writ of replevin, petitioner already waived its right to recover any unpaid installments, pursuant
to Art. 1484 of the Civil Code.

HELD:
1. NO.
Art. 1484 is misapplied. There was no vendor-vendee relationship between the Bank and
Places. Respondent never bought the subject vehicle from the petitioner but from a third
party. A loan contract with the accessory chattel mortgage contract and not a contract of
sale of personal property in installments was entered into by the parties with respondent
standing as the debtor-mortgagor and petitioner as the creditor-mortgagee.
 Since the bank had already gained possession of the vehicle, it is only appropriate that
foreclosure proceedings, if none yet has been conducted/concluded, be commenced in
accordance with the provisions of Act No. 1508 (The Chattel Mortgage Law).

Furthermore, there is nothing in the Promissory Note with Chattel Mortgage that bars
petitioner from receiving any late partial payments from respondent. Such partial
payment will be reduced to Palces’ outstanding obligation. Palces is only entitled for the
excess of the proceeds from the foreclosure should there be any.

2. YES.
Attorney’s fees cannot be recovered as part of damages because of the policy that no
premium should be placed on the right to litigate. They are not to be awarded every time
a party wins a suit. Art. 2208 of the NCC demands factual, legal and equitable
justification which in this case is lacking.

PARTLY GRANTED
PCI Leasing and Finance v. Giraffe-X Creative Imaging, G.R. No.
142618

Petitioner: PCI Leasing and Finance, Inc. (PCI)

Respondent: Giraffe-X Creative Imaging, Inc. (Giraffe)

FACTS:
● PCI leased out equipment to Giraffe under a Lease Agreement for a 36-month term.
● Giraffe defaulted on its monthly rental payments after a year.
● PCI sent a demand letter offering Giraffe two options: pay the remaining balance or
return the equipment.
● Giraffe did not respond to the demand letter.
● PCI filed a case for replevin (recovery of the leased property) and demanded payment of
the outstanding balance.
● Giraffe argued the agreement was actually a "lease with option to buy" and that PCI
couldn't seize the equipment because they hadn't exercised the purchase option.

ISSUE:
Whether or not the Lease Agreement between the PCI and Giraffe constituted a pure lease or a
lease with an option to buy, falling under the provisions of the Recto Law (Articles 1484 and
1485 of the New Civil Code.)

HELD: YES
The PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase
the equipment. This has been made manifest by the actions of the petitioner itself of which is the
declarations made in its demand letter to the respondent. There could be no other explanation
than that if the respondent paid the balance, then it could keep the equipment for its own; if not,
then it should return them. This is clearly an option to purchase given to the respondent. Being
so, Article 1485 of the Civil Code should apply.
Visayan Sawmill Co. v. CA, G.R. No. 83851

FACTS:
On May 1, 1983, herein RJH Trading and VSC entered into a sale involving scrap iron subject to
the condition that RJH Trading will open a letter of credit in the amount of P250,000.00 in favor
of VSC on or before May 15, 1983, evidenced by a contract duly signed by both parties.

On May 17, 1983, RJH Trading started to dig and gather and scrap iron at the VSC premises,
until May 30 when VSC allegedly directed RJH trading’s men to desist from pursuing the work
in view of an alleged case filed against RJH trading by a certain Alberto Pursuelo. This,
however, is denied by VSC who allege that on May 23, 1983, they sent a telegram to
plaintiff-appellee canceling the contract of sale because of failure of the latter to comply. RJH
Trading informed Visayan Windmills that the letter of credit was opened May 12, 1983 at BPI
main office, but then the transmittal was delayed.

RJH Trading sent a series of telegrams stating that the case filed against him by Pursuelo had
been dismissed and demanding that defendants-appellants comply with the deed of sale,
otherwise a case will be filed against them.

On July 29, 1983, RHJ Trading, filed the complaint. In his complaint, private respondent prayed
for judgment ordering the petitioner corporation to comply with the contract by delivering to him
the scrap iron subject thereof; he further sought an award of actual, moral and exemplary
damages, attorney's fees and the costs of the suit. In their Answer with Counterclaim, petitioners
insisted that the cancellation of the contract was justified because of private respondent's
non-compliance with essential pre-conditions, among which is the opening of an irrevocable and
unconditional letter of credit not later than 15 May 1983.

RTC ruled in RHJ’s favor, awarding the damages sought. Petitioners appealed from said decision
to the Court of Appeals alleged that the trial court erred in the decision

ISSUE:
1. Were the reasons or grounds for canceling valid and justified?
2. Are the parties entitled to damages they respectively claim under the pleadings?

RULING:

The court ruled in favor of the petitioner corporation, stating the transaction was a contract to
sell, not a sale, due to the trial court's mistaken assumption of an "implied delivery" of the
agreement's object. The petition was granted, and the case was dismissed
Northern Motors v. Sapinoso, G. R. No. L-28074

Petitioner: Northern Motors, Inc. (seller/mortgagee)

Respondent: Ralph R. Sapinoso (buyer/mortgagor)

FACTS
● Northern Motors sold a car to Sapinoso on an installment basis.
● As security for payment, Sapinoso executed a chattel mortgage in favor of Northern
Motors over the car.
● The chattel mortgage stipulated that upon default on any installment payment, the entire
balance would become due and the car could be repossessed by Northern Motors.
● Sapinoso defaulted on payments after the first two installments.
● Northern Motors filed a case for replevin (recovery of personal property) to repossess the
car.
● Sapinoso argued that Northern Motors could not repossess the car because they had not
yet filed a foreclosure action on the chattel mortgage.

ISSUE
Whether Visayan Sawmill Company (VSC) was justified in rescinding the contract due to
Ramon Hibionada's (RJH) failure to secure an irrevocable and unconditional Letter of Credit
(LOC).

HELD
The lower court erred in determining that the action's legal effect was to prevent Northern
Motors from accepting further payments on the promissory note, as the foreclosure and sale of
the mortgaged chattel prevented further recovery of any outstanding obligations not satisfied by
the sale.

The restrictive provision in Article 1484(3) is not applicable as there has been no foreclosure,
and the payment of P1,250.00 by Sapinoso was voluntary and not a result of further action by
Northern Motors.
● If a mortgage creditor can recover unpaid balances before a foreclosure sale, even if they
filed an action of replevin for extrajudicial foreclosure, or if they foreclose but refuse to
proceed with the auction sale without gaining any advantage or harming the
vendee-mortgagor, there's no reason to prevent them from accepting payments voluntarily
from a debtor mortgagor with a subsisting indebtedness.
Macondray & Co. v. Eustaquio, G.R. No. 43683

Petitioner: Macondray & Co. (seller)

Respondent: Urbano Eustaquio (buyer)

Facts:
The plaintiff sued the defendant to acquire an automobile mortgaged by him, recover the
outstanding balance, interest, attorney's fees, collection expenses, and costs.
The plaintiff sold a De Soto car to the defendant for P595, and he executed a note on May 22,
1934, committing to pay the car in twelve monthly installments with 12 percent interest per
annum. If the defendant fails to pay, the remaining installments will become due, and the
defendant will pay 20% of the principal.
The defendant mortgaged a car to the plaintiff to ensure payment of their obligations under a
note. The defendant failed to pay the first installment and failed to pay the remaining
installments. The plaintiff called the sheriff for possession, but the defendant refused. The car
was sold at public auction to the plaintiff.
Issues:
Could Macondray & Co. repossess an automobile and recover the remaining balance on a loan
due to the buyer's default, considering the enactment of Act No. 4122?
Ruling:
Yes. The Supreme Court ruled in favor of Macondray & Co.
● The case involved a chattel mortgage on an automobile purchased through an installment
plan.
● Act No. 4122, a recently enacted law, established new procedures for enforcing chattel
mortgages on installment sales.
● The buyer (Eustaquio) argued that Macondray & Co. could not repossess the car without
following the procedures mandated by the new law.
● The Supreme Court upheld the validity of Act No. 4122. They reasoned that:
○ The law aimed to address abuses in repossessing mortgaged properties under
installment sales.
○ The Legislature has the authority to enact laws regulating remedies for enforcing
contracts.
○ Act No. 4122 did not completely deprive sellers of a remedy, but rather offered
them alternative options for pursuing payment.
○ The new law did not violate vested rights as procedural laws are generally not
retroactive.
MACEDA
LAW
McLaughlin v. CA, G. R. No. L-57552

Petitioner: McLaughlin (seller)

Respondent: Flores (buyer)

Facts:
McLaughlin sold a property to Flores on an installment basis.
A compromise agreement was reached after Flores defaulted on payments. This agreement
stipulated a deadline for Flores to settle the remaining balance.
Despite the agreement, Flores failed to make the payment by the set date.
McLaughlin demanded rescission of the contract due to the non-payment.
Issues:
The issue here is whether the respondent court committed a grave abuse of discretion in issuing
the orders dated November 21, 1980 and November 27, 1980.
The general rule is that rescission will not be permitted for a slight or casual breach of the
contract, but only for such breaches as are substantial and fundamental as to defeat the object of
the parties in making the agreement.
Ruling:
The petitioner did not accept the amount owed, requiring the private respondent to deposit it with
the court. The respondent failed to do so, resulting in unpaid obligations and additional monthly
rental payments. Upon full payment of P76,059.71 and arrears rentals, the respondent will be
entitled to a deed of absolute sale for the real property.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the following
modifications:
(a) Petitioner is ordered to accept from the private respondent the Metrobank Cashier's Check
No. CC 004233 in her favor in the amount of P76,059.71 or another certified check of a
reputable bank drawn in her favor in the same amount;
(b) Private respondent is ordered to pay petitioner, within sixty (60) days from the finality of this
decision, the rentals in arrears of P1,000.00 a month from January 1, 1981 until full payment
thereof; and
(c) Petitioner is ordered to execute a deed of absolute sale in favor of the private respondent over
the real property in question upon full payment of the amounts as provided in paragraphs (a) and
(b) above. No costs.
Siska Dev. Corp. v. Office of the President, G.R. No. 93176
Petitioner: Siska Development Corporation (Siska Dev. Corp.)

Respondent: Office of the President of the Philippines (representing the Executive Secretary)

Private Respondents: Spouses Jose and Socorro Sering (buyers)

Facts:

● Siska Dev. Corp. (seller) entered into a Contract to Sell a lot in their subdivision with
Guadalupe Sering (later transferred to Socorro Sering, wife of Jose Sering) (buyers).
● The agreement stipulated installment payments for the lot.
● The buyers defaulted on some payments, but Siska Dev. Corp. initially accepted late
payments.
● Siska Dev. Corp. later sent a notice of rescission due to continued defaults.
● However, they subsequently cancelled the rescission notice after the buyers made some
additional payments.
● The dispute arose when the buyers still failed to pay the complete balance.

Issue:

Could Siska Dev. Corp. rescind the Contract to Sell and refuse to convey ownership of the lot
due to the buyers' failure to complete the payments?

Ruling:

Yes. The Supreme Court ruled in favor of Siska Dev. Corp.

● The court distinguished between a Sale and a Contract to Sell:

○ Sale: Ownership of the property transfers upon full payment of the purchase price.
○ Contract to Sell: Ownership transfers only upon full payment, not necessarily
upon delivery.
● The agreement between Siska Dev. Corp. and the buyers constituted a Contract to Sell.
● Since the buyers failed to meet their obligation of full payment, Siska Dev. Corp. had the
right to rescind the contract and retain ownership of the lot.
● The court acknowledged that Siska Dev. Corp. initially accepted late payments, but this
did not waive their right to rescind due to continued defaults.
DOUBLE
SALES
Spouses German v. Spouse Santuyo, G.R. No. 210845
Petitioners: Spouses Danilo and Clarita German (original owners)
Respondents: Spouses Benjamin and Editha Santuyo (buyers) and Heirs of Helen S. Mariano
(seller)

FACTS:
● The German spouses originally owned the land.
● They sold it to Spouses Mariano.
● Spouses Mariano then sold the same land to Spouses Santuyo.
● The German spouses claimed they never received full payment from Spouses Mariano
and therefore the sale to them was not completed.
● Spouses Santuyo argued they were purchasers in good faith and had a valid title from
Spouses Mariano.
ISSUE:
Who was the rightful owner of the land - the German spouses (original owners) or the Spouses
Santuyo (buyers from Spouses Mariano)?
HELD:
The Supreme Court ruled in favor of the Spouses German.
● The Court applied the principle of double sale. This principle states that when a property
is sold twice by the same seller, the first buyer with a perfected right prevails.
● While the German spouses hadn't received full payment from Spouses Mariano, they
argued the sale was not yet completed.
● The Court found that Spouses Santuyo did not exercise due diligence when purchasing
the land.
○ They were aware the land had a previous owner (German spouses) based on the
available documents.
○ They did not inquire about the status of the sale between the German spouses and
Spouses Mariano.
Amoguis v. Ballado, G.R. No. 189626
Petitioners: Gregorio Amoguis and Tito Amoguis (brothers)
Respondents: Concepcion Ballado, Mary Grace Ballado Ledesma, and St. Joseph Realty, Ltd
Facts:
● The Amoguis brothers claimed they were beneficiaries of a contract between St. Joseph
Realty and Francisco Pinili for the sale of two lots.
● They allegedly paid St. Joseph Realty for the lots but did not receive titles.
● The Ballado spouses later acquired titles to the same lots.
● The Amoguis brothers filed a case against St. Joseph Realty and the Ballado spouses to
nullify the titles and enforce the sale.
Issues:
1. Jurisdiction: Did the Court of First Instance have jurisdiction over the case against St.
Joseph Realty?
2. Estoppel by Laches: Were the Amoguis brothers barred from raising the issue of
jurisdiction due to delay in asserting their claim?
3. Validity of Judgment: Could the Ballado spouses rely on the titles they acquired if the
contract with St. Joseph Realty and the Amoguis brothers was valid?
Ruling:
● Jurisdiction: The Supreme Court ruled that the Court of First Instance did have
jurisdiction over the case against St. Joseph Realty. The issue of jurisdiction could be
raised at any time during the proceedings.
● Estoppel by Laches: The Court held that estoppel by laches did not apply to the
Amoguis brothers. While there was a delay, the specific circumstances (raising the issue
during the case) did not bar them from contesting jurisdiction.
● Validity of Judgment: Since the Court found the Court of First Instance had jurisdiction
over the case against St. Joseph Realty, the validity of the contract and the Amoguis
brothers' claim could be determined. The titles acquired by the Ballado spouses might be
nullified if the contract with the Amoguis brothers was valid.
Roman Catholic Church v. Pante, G.R. No. 174118
Petitioner: Roman Catholic Church (represented by the Archbishop of Caceres)
Respondent: Regino Pante

Facts:
● The Church sold a 32-square meter lot to Pante through a Contract to Sell.
● The Church believed Pante was an actual occupant of the land based on his statements.
● The contract outlined a purchase price with a down payment and installments.
● Later, the Church unknowingly sold a larger property, including the lot sold to Pante, to
the spouses Rubi.
● When construction by the Rubis blocked Pante's access to his lot, he filed a case to
invalidate the sale between the Church and the Rubis insofar as it affected his lot.
● The Church counterclaimed, seeking to void their contract with Pante due to alleged
misrepresentation. They claimed Pante wasn't living on the lot and only used it as a
passageway.
Issues:
For the Church, the presence of fraud and misrepresentation that would suffice to annul the sale
is the primary issue that the tribunals below should have resolved.
Could the Church void the sale of the lot to Pante due to his alleged misrepresentation about
occupancy?
Ruling:
The Supreme Court ruled in favor of Regino Pante. The Church failed to prove
misrepresentation.
● The Court established the agreement between the Church and Pante was a valid Contract
to Sell.
● The contract didn't require the buyer to be a permanent resident on the land.
● Even if Pante primarily used the lot for access, it didn't necessarily mean he didn't intend
to occupy it in some way.
● The Church couldn't demonstrate that Pante's statement about occupancy was made with
malicious intent to deceive them.
CONDOMINIUM
ACT
Leviste Management System, Inc v. Legaspi Towers 200, Inc. et. al.,
G.R. No. 199353

Petitioner: Leviste Management System, Inc. (LEMANS)

Respondents: Legaspi Towers 200, Inc. (Legaspi Towers) and others

Facts:
● Legaspi Towers is a 7-floor condominium building with a deck roof and 2 levels above
the deck roof, as stated in the Master Deed, at Paseo De Roxas, Makati City with a unit
on the roof deck and 2 levels above said unit called Concession 2 and Concession 3.
Concession 3 was bought by Leviste Management System (Petitioner).
● Petitioner sought to build another unit called Concession 4 on top of Concession 3 and
was able to secure a building permit for its construction. However, Legaspi Towers 200
Inc. (Respondent) sent a notice to Petitioner that its construction was illegal but the latter
did not heed such. Petitioner filed a writ of mandatory injunction against Respondent.
● The RTC affirmed Respondent wherein it found application of Art. 448 of the Civil Code
and Depra v. Dumlao1. The “airspace” above the unit actually belongs to the Respondent.
● Respondent sought to demolish Concession 4 at the expense of Petitioner. Respondent
argued that Petitioner should first get the consent of the registered owners of the
condominium project before amendment of the Master Deed under Sec. 4 of the
Condominium Act. Petitioner argued that there must be a determination of the required
values under Depra before Respondent can take action.
● RTC: Affirmed Respondent.
● CA: Affirmed RTC Decision
Issues:
Could Leviste Management System, Inc. (LEMANS) construct an additional unit (Concession 4)
on top of their existing unit (Concession 3) in a condominium building governed by a Master
Deed?
Ruling:
The Supreme Court ruled in favor of Legaspi Towers. LEMANS was not allowed to build
Concession 4.
● The case centered on the interpretation of the Master Deed, a document outlining the
rules and regulations for the condominium building.
● The Master Deed did not grant LEMANS ownership of the air space above their unit.
● The air space was considered a common area governed by Legaspi Towers.
● LEMANS argued that Articles 448 and 546 of the Civil Code on builders in good faith
applied, allowing them to build on their property.
● The Court disagreed. These articles are not applicable to condominiums with a governing
Master Deed.
● As a unit owner, LEMANS became part of a corporation (Legaspi Towers) and co-owner
of the common areas, including the air space.
 PHILIPPINE
DEPOSIT
INSURANCE
CORPORATION
Philippine Deposit Insurance Corporation v. Citibank, N.A., G.R.
No. 170290

Petitioner: Philippine Deposit Insurance Corporation (PDIC)

Respondents: Citibank, N.A. and Bank of America, S.T. & N.A. (foreign banks with branches in
the Philippines)

Facts:
● The Philippine Deposit Insurance Corporation (PDIC) examined the books of Citibank
and Bank of America in the Philippines.
● PDIC discovered significant deposits in US dollars received from their head offices and
foreign branches over several years.
● These funds were not reported to PDIC as deposit liabilities subject to assessment for
insurance coverage.
Issues:
● Did the placements from the head offices and foreign branches constitute deposits subject
to PDIC assessment and insurance?
● Should the Philippine branches be considered separate entities from the head
office/foreign branches for deposit insurance purposes?
Ruling:

The Supreme Court ruled in favor of Citibank and Bank of America (Respondents).

● The Court applied the concept of a principal-agent relationship between the head office
and foreign branches based on American jurisprudence.
● Since there wasn't a separate depositor and depositary (both were part of the same bank
entity), the transactions were considered internal movements of funds and not deposits
requiring PDIC insurance.
Rizal Commercial Banking Corp. v. Hi-Tri Development Corp.,
G.R. No. 192413
Petitioner: Rizal Commercial Banking Corporation (RCBC)
Respondents: Hi-Tri Development Corporation and Luz R. Bakunawa

FACTS:
● Spouses Bakunawa (respondents) sought to rescind a property sale and received a
manager's check from RCBC (petitioner) as a refund for their downpayment.
● The manager's check was issued in favor of Rosmil (presumably the payee for the
downpayment).
● The check was never negotiated or cashed by Rosmil (payee).
● The funds for the manager's check remained in RCBC's account for Hi-Tri (presumably
representing the respondents).
● Years later, RCBC initiated escheat proceedings to claim the unclaimed balance,
including the funds allocated for the manager's check.
● Hi-Tri contested the escheat proceedings, arguing the funds remained theirs.

ISSUE:
Could RCBC escheat (claim ownership of unclaimed bank deposits) funds allocated for a
manager's check that was never negotiated or presented for payment?

Rulling:
The Supreme Court ruled in favor of Hi-Tri Development Corp. and Luz R. Bakunawa
(respondents).
● The Court disagreed with RCBC's claim that the mere issuance of a manager's check
transferred the funds to the payee (Rosmil).
● Since the check was never delivered, presented, or negotiated, the transfer of funds was
not complete.
● The allocated funds remained part of Hi-Tri's account (representing the original
downpayment).
● The Court also found that RCBC failed to properly notify Hi-Tri about the escheat
proceedings, violating their right to due process.
 LAW ON
SECRECY OF
BANK DEPOSIT
Bangayan v. Rizal Commercial Banking Corporation, G.R. No.
149193, April 4, 2011
Petitioner: Ricardo B. Bangayan
Respondents: Rizal Commercial Banking Corporation (RCBC) and Philip Saria

Facts:

● Ricardo Bangayan maintained a savings and current account with a linked automatic
transfer service at a branch of RCBC.
● He claimed that RCBC dishonored seven of his checks.
● Bangayan further alleged that RCBC wrongfully disclosed confidential information
regarding his accounts, violating the Bank Secrecy Act.

Issue:

Did the dishonoring of checks and alleged disclosure of confidential bank information by RCBC
warrant awarding damages to Ricardo Bangayan (petitioner)?

Ruling:

The Supreme Court ruled in favor of Rizal Commercial Banking Corporation (RCBC) and
Philip Saria (respondents).

● The Court found that Bangayan failed to provide sufficient evidence to substantiate his
claim of wrongful disclosure of confidential information by RCBC.
● Regarding the dishonored checks, the Court determined that the dishonor resulted from
Bangayan's agreement to act as a surety for letters of credit for four corporations.
● Since he was a surety, the bank acted within its rights to dishonor the checks if there were
insufficient funds to cover them.
● The Court concluded that RCBC did not exhibit bad faith or malicious intent; they were
simply acting as a creditor under the Surety Agreement.
Joseph Victor G. Ejercito v. Sandiganbayan, G.R. No. 157294-95,
November 30, 2006
Petitioner: Joseph Victor G. Ejercito
Respondents: Sandiganbayan

Facts:

● Joseph Victor G. Ejercito, then Mayor of San Juan, was charged with violations of the
Anti-Graft and Corrupt Practices Act (RA 3019) related to the procurement process for
the construction of the San Juan Municipal Hall.
● Ejercito filed motions to dismiss the charges, claiming the information was defective, the
facts did not constitute an offense, and there was no probable cause.
● The Sandiganbayan denied the motions, prompting Ejercito to seek relief from the
Supreme Court.

Issues:

1. Whether the Sandiganbayan committed grave abuse of discretion in denying the motions
to dismiss.
2. Whether the information filed against Ejercito was valid.
3. Whether there was probable cause to charge Ejercito.

Ruling:

● The Supreme Court ruled in favor of Joseph Victor G. Ejercito.

➢ Grave Abuse of Discretion: The Court found that the Sandiganbayan acted with
grave abuse of discretion by not sufficiently addressing the defects raised by
Ejercito. It failed to properly consider the arguments concerning the validity of the
information and the lack of probable cause.
➢ Validity of Information: The information was deemed defective because it did not
specify the acts constituting the alleged offenses with the necessary particularity.
It was vague and lacked the details needed to inform Ejercito of the specific
accusations against him.
➢ Probable Cause: The Court determined that there was insufficient evidence to
establish probable cause against Ejercito. The evidence presented did not
adequately support the charges, making it unjust to proceed with the prosecution.
Karen E. Salvacion, et. al. v. Central Bank of the Philippines, et. al.
FACTS:
Greg Bartelli, an American tourist, lured Karen Salvacion, then 12 years old into his apartment
wherein he detained the girl and raped her several times. Karen was rescued after 4 days. Bartelli
was arrested and detained. Criminal cases for serious illegal detention and 4 counts of rape were
filed against him. Petitioners also filed a case for damages with preliminary attachment.
The application for a writ of preliminary attachment was granted. The Deputy Sheriff of Makati
served a Notice of Garnishment to China Banking Corporation. However, China Bank invoked
RA 1405 (Secrecy of Bank Deposits) as its answer to the notice of garnishment. The sheriff
claimed that the garnishment did not violate the secrecy of bank deposits since the disclosure is
merely incidental to a garnishment legally made by virtue of a court order. China Bank then
invoked Section 113 of Central Bank Circular No. 960.
The petitioners are seeking declaratory relief against Sec. 113 of Central Bank Circular No. 960,
which they argue contradicts the Constitution's provisions, as it exempts foreign currency
deposits from attachment, garnishment, or other court orders, which they believe has violated
their right to have defendant Greg Bartelli's bank deposit garnished.
ISSUE:
Whether or not Sec. 113 of Central Bank Circular No. 960 and Section 8 of the Foreign Currency
Deposit Act shall be made applicable to a foreign transient.
HELD:
NO. Foreign currency deposits made by transient or tourist individuals are not encouraged by PD
Nos. 1034 and 1035 due to their short stay in the country and short-term bank retention,
requiring additional incentives and protection.
Greg Bartelli, a tourist or transient, deposited his dollars with China Banking Corporation for
safekeeping during his temporary stay in the Philippines.
The application of law depends on its justice. If Section 113 of Central Bank Circular No. 960
applies to a foreign transient, injustice may occur, especially to citizens aggrieved by the foreign
guest. This would negate Article 10 of the New Civil Code, which presumes right and justice to
prevail in doubtful interpretations.
Section 113 of CB Circular No. 960 and PD No. 1246, which amends Section 8 of R.A. No.
6426, is deemed INAPPLICABLE due to its unique circumstances.
TRUTH IN
LENDING
ACT
New Sampaguita Builders Construction, Inc, et. al. v. Philippine
National Bank, G.R. No. 148753, July 30, 2004

Facts:

● NSBCI secured a loan from PNB.

● The loan agreement contained an escalation clause allowing PNB to increase interest
rates unilaterally, without informing NSBCI.
● PNB increased the interest rates on the loan without notifying NSBCI.

Issue:

Whether the escalation clause allowing unilateral interest rate increases by PNB is valid.

Ruling:

The Supreme Court ruled in favor of NSBCI. The Court held that escalation clauses granting
lenders unrestricted power to raise interest rates without notice to borrowers are invalid. These
clauses violate the principle of mutuality of contracts and enable lenders to take unfair advantage
of borrowers.

● Escalation clauses can be valid, but they cannot give lenders absolute discretion to
increase interest rates without notifying borrowers and obtaining their consent.
● Courts have the authority to strike down or modify such clauses.
● Even though the Usury Law (which limited interest rates) was no longer in effect, the
Court can still reduce excessively high or unfair interest rates.
● The Truth in Lending Act requires disclosure of all interest rates, fees, and other charges
associated with a loan. Charges not disclosed in the statement cannot be enforced, even if
stipulated in the loan agreement.
Consolidated Bank and Trust Company v. Court of Appeals, 316
Phil. 247, 258, July 14, 1995
Facts:

● George King Tim Pua secured three separate loans from Solidbank in his personal
capacity.
● The borrower defaulted on the loans.
● Solidbank sued Pua and his company to recover the loan amounts.
● The lower courts awarded attorney's fees to Solidbank on top of the loan amount.

Issues:

1. Whether the marginal deposit made by George and George Trade, Inc. should be
deducted from the amount of the loan.
2. Whether the interest rate stipulation in the loan agreements was valid.
3. Whether the award of attorney's fees to Solidbank was justified.

Rulings:

1. Marginal Deposit: The Court ruled that the marginal deposit made by George and
George Trade, Inc. should be deducted from the amount of the loan. This deduction
prevents Solidbank from unjust enrichment, as they should not benefit from holding onto
both the loan amount and the deposit.
2. Interest Rate: The Court declared the interest rate stipulation invalid. The agreement
allowed the interest rate to "float" without referencing a set rate for determining changes.
This lack of clarity creates ambiguity and potential unfairness toward the borrower.
3. Attorney's Fees: The Court emphasized that awarding attorney's fees is discretionary
and requires justification based on factual, legal, and equitable considerations. A mere
statement in the decision's dispositive portion is insufficient. The lower courts did not
provide proper justification for awarding attorney's fees, so the Court set aside that part of
the decision.
UCPB v. Sps. Beluso, Gxz. No. 159912, August 17, 2007
Facts:

● UCPB granted the spouses Beluso a credit line with a maximum amount under a Credit
Agreement.
● The spouses Beluso signed promissory notes to avail of the credit.
● The promissory notes contained a clause allowing UCPB to determine interest rates at its
discretion.

Issue:

Whether the clause in the promissory notes allowing UCPB to set interest rates unilaterally is
valid.

Ruling:

The Supreme Court ruled in favor of the spouses Beluso. The clause allowing UCPB to set
interest rates without any guidelines or limitations was declared void. The Court cited two main
reasons:

1. Mutuality of Contracts: The clause violated the principle of mutuality of contracts. A

contract requires both parties to have a clear understanding of their obligations and rights.
In this case, the spouses Beluso had no way of knowing what interest rates they would be
charged, giving UCPB unfair leverage.
2. Truth in Lending Act: The clause potentially violated the Truth in Lending Act, which
requires lenders to disclose all finance charges, including interest rates, to borrowers. The
ambiguous clause in the promissory notes did not provide proper disclosure.
 DATA
PRIVACY
ACT
Vivares vs STC, et al G.R. No. 202666
Facts:

● High school students at St. Theresa's College (STC), including Angela Tan (daughter of
petitioner Rhonda Vivares), posted revealing pictures of themselves on Facebook.
● A teacher, Mylene Escudero, discovered the pictures from her students and reported them
to the school administration.
● The school investigated and found the pictures to be a violation of the student handbook.
● As a consequence, the students were banned from participating in their graduation
ceremony.

Issue:

Whether the students' right to privacy was violated by the school's actions.

Ruling:

The Supreme Court ruled in favor of St. Theresa's College. The Court found that the students did
not have a reasonable expectation of privacy for the pictures posted on Facebook, especially
considering:

● The lack of evidence that the privacy settings were set to "Friends Only" or a similar
restrictive setting.
● The nature of the pictures being potentially damaging to the school's reputation.
ELECTRONIC
COMMERCE
ACT
Ellery March G. Torres vs. Philippine Amusement and Gaming
Corporation (G.R. No. 193531, December 14, 2011)
Facts:

● Ellery March G. Torres was a Slot Machine Operations Supervisor (SMOS) employed by
the Philippine Amusement and Gaming Corporation (PAGCOR).
● PAGCOR suspected Torres of involvement in a scheme to manipulate Credit Meter
Readings (CMR) of slot machines.
● Torres was investigated and subsequently dismissed from his job for dishonesty, serious
misconduct, fraud, and violation of office regulations.

Issue:

Whether Torres' motion for reconsideration of his dismissal was validly filed.

Ruling:

The Supreme Court ruled against Torres. The issue hinged on the proper method for filing a
motion for reconsideration:

● Applicable Rules: The Court applied the Revised Uniform Rules on Administrative Cases
in the Civil Service.
● Valid Filing Methods: These rules specify that motions for reconsideration can only be
filed through registered mail or personal delivery.
● Fax Not Sufficient: Torres' attempt to file via facsimile transmission (fax) was deemed
inadequate. Faxes were not recognized as a valid method for filing under the rules.