G.R. No. 193068, 1 February 2017


Sometime in 1977, National Galleon Shipping Corporation (Galleon), formerly known as Galleon Shipping Corporation, was organized to operate a liner service between the Philippines and it’s … trading partners. Galleon’s major stockholders were Sta. Ines Melale Forest Products Corporation (Sta. Ines), Cuenca Investment Corporation (Cuenca Investment), Universal Holdings Corporation (Universal Holdings), Galleon’s President Rodolfo M. Cuenca (Cuenca), Manuel I. Tinio (Tinio), and the Philippine National Construction Corporation (PNCC).

Galleon experienced financial difficulties and had to take out several loans from different sources such as foreign financial institutions, its shareholders (Sta. Ines, Cuenca Investment, Universal Holdings, Cuenca, and Tinio), and other entities “with whom it had ongoing commercial relationships.”

DBP guaranteed Galleon’s foreign loans. In return, Galleon and its stockholders Sta. Ines, Cuenca Investment, Universal Holdings, Cuenca, and Tinio, executed a Deed of Undertaking on October 10, 1979 and obligated themselves to guarantee DBP’s potential liabilities.

To secure DBP’s guarantee, Galleon undertook to secure a first mortgage on its five new vessels and two second-hand vessels. However, despite the loans extended to it, Galleon’s financial condition did not improve.”
Cuenca, as Galleon’s president, wrote to the members of the Cabinet Standing Committee “for the consideration of a policy decision to support a liner service.” Cuenca also wrote then President Ferdinand Marcos and asked for assistance.

On July 21, 1981, President Marcos issued Letter of Instructions No. 115518 addressed to the NDC, DBP, and the Maritime Industry Authority a Letter of Instructions directing a rehabilitation plan for Galleon Shipping Corporation.

On August 10, 1981,20 pursuant to that Letter of Instructions No. 1155, Galleon’s stockholders, represented by Cuenca, and NDC, through its then Chairman of the Board of Directors, Roberto V. Ongpin entered into a Memorandum of Agreement, where NDC and Galleon undertook to prepare and signed a share purchase agreement covering 100% of Galleon’s equity for ₱46,740,755.00.22 The purchase price was to be paid after five years from the execution of the share purchase agreement.23 The share purchase agreement also provided for the release of Sta. Ines, Cuenca, Tinio and Construction Development Corporation of the Philippines from the personal counter-guarantees they issued in DBP’s favor under the Deed of Undertaking.


1. Whether or not the Memorandum of Agreement obligates NDC to purchase Galleon’s shares of stocks and pay the advances made by respondents in Galleon’s favor;
2. Whether or not the Memorandum of Agreement novated the Deed of Undertaking executed between DBP and respondents; and
3. Whether or not the computation of legal interest should be at the rate of 6% per annum, instead of the 12% per annum pegged by the Court of Appeals.70


The court declared Sta. Ines Melale Forest Products Corporation, Rodolfo M. Cuenca, Manuel I. Tinio, Cuenca Investment Corporation, Universal Holdings Corporation, and the Philippine National Construction Corporation LIABLE to the National Development Corporation, the Development Bank of the Philippines, and the Asset Privatization Trust under the deed of undertaking, pledge, mortgages, and other accessory contracts among the parties.

The Court of Appeals found that the Memorandum of Agreement between NDC and Galleon was a perfected contract for NDC to purchase 100% of Galleon’s shareholdings. However, a careful reading of the Memorandum of Agreement shows that what the parties agreed to was the execution of a share purchase agreement to effect the transfer of 100% of Galleon’s shareholdings to NDC. DBP’s claims for damages are denied since it failed to support its claims of malicious prosecution and a deliberate act of Sta. Ines, Cuenca, Tinio, Cuenca Investment, and Universal Holdings to cause loss or injury to DBP.

The court held further that the award of the advances made by Sta. Ines Melale Forest Products Corporation, Rodolfo M. Cuenca, Manuel L. Tinio, Cuenca Investment Corporation, and Universal Holdings Corporation in Galleon’s favour, as well as the award of the payment for their shares of stocks in Galleon, shall earn an interest rate of 12% per annum from the date of the filing of this case on April 22, 1985 until June 30, 2013, after which, they shall earn interest at the rate of 6% per annum until the Decision becomes final and executor, These amounts shall earn interest at the rate of 6% per annum from the finality of this Decision until its satisfaction.

*Case Digest by Jelyn C. Ondong, Refresher, Andres Bonifacio College, SY: 2019-2020