November 2011 Philippine Supreme Court Decisions on Commercial Law

Here are selected November 2011 rulings of the Supreme Court of the Philippines on commercial law:

Corporations; piercing the corporate veil.  Piercing the veil of corporate fiction is warranted only in cases when the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the law will regard the corporations as merged into one.  As succinctly discussed by the Court in Velarde v. Lopez, Inc.:

Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by piercing the veil of corporate fiction. Piercing the veil of corporate fiction is warranted, however, only in cases when the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the law will regard the corporations as merged into one. The rationale behind piercing a corporation’s identity is to remove the barrier between the corporation from the persons comprising it to thwart the fraudulent and illegal schemes of those who use the corporate personality as a shield for undertaking certain proscribed activities.

In applying the doctrine of piercing the veil of corporate fiction, the following requisites must be established: (1) control, not merely majority or complete stock control; (2) such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest acts in contravention of plaintiff’s legal rights; and (3) the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. (Citations omitted.)

Nowhere, however, in the pleadings and other records of the case can it be gathered that respondent has complete control over Sky Vision, not only of finances but of policy and business practice in respect to the  transaction attacked, so that Sky Vision had at the time of the transaction no separate mind, will or existence of its own. The existence of interlocking directors, corporate officers and shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud or other public policy considerations.

Hacienda Luisita Incorporated vs. Presidential Agrarian Reform Council, G.R. No. 171101, November 22, 2011.

Corporations; piercing the corporate veil.  Absent any allegation or proof of fraud or other public policy considerations, the existence of interlocking directors, officers and stockholders is not enough justification to pierce the veil of corporate fiction as in the instant case.  Hacienda Luisita Incorporated vs. Presidential Agrarian Reform Council, G.R. No. 171101, November 22, 2011.

Mark; infringement.  A “mark” is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods.

In McDonald’s Corporation and McGeorge Food Industries, Inc. v. L.C. Big Mak Burger, Inc., this Court held:

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff’s mark; (2) the plaintiff’s ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in “likelihood of confusion.”  Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement.

A mark is valid if it is distinctive and not barred from registration.  Once registered, not only the mark’s validity, but also the registrant’s ownership of the mark is prima facie presumed. Gemma Ong a.k.a. Ma. Theresa Gemma Catacutan vs. People of the Philippines, G.R. No. 169440,. November 23, 2011.

(Hector thanks Rachel T. Uy for her assistance to Lexoterica.)

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