November 2009 Philippine Supreme Court Decisions on Commercial Law

Here are selected November 2009 Philippine Supreme Court decisions on commercial law:

Corporate employees;  appointment. Ordinary company employees are generally employed not by action of the directors and stockholders but by that of the managing officer of the corporation who also determines the compensation to be paid such employees. Corporate officers, on the other hand, are elected or appointed by the directors or stockholders, and are those who are given that character either by the Corporation Code or by the corporation’s by-laws.

Here, it was the PDMC president who appointed petitioner Gomez administrator, not its board of directors or the stockholders. The president alone also determined her compensation package. Moreover, the administrator was not among the corporate officers mentioned in the PDMC by-laws. The corporate officers proper were the chairman, president, executive vice-president, vice-president, general manager, treasurer, and secretary.  Gloria V. Gomez vs. PNOC Development and Management Corporation (PDMC), G.R. No. 174044, November 27, 2009.

Rehabilitation; accommodation mortgagors. The rehabilitation court committed no reversible error when it removed TCT No. 133164 from the coverage of the stay order. The Interim Rules of Procedure on Corporate Rehabilitation is silent on the enforcement of claims specifically against the properties of accommodation mortgagors. It only covers the suspension, during the pendency of the rehabilitation, of the enforcement of all claims against the debtor, its guarantors and sureties not solidarily liable with the mortgagor.

Furthermore, the newly adopted Rules of Procedure on Corporate Rehabilitation has a specific provision for this special arrangement among a debtor, its creditor and its accommodation mortgagor. Section 7(b), Rule 3 of the said Rules explicitly allows the foreclosure by a creditor of a property not belonging to a debtor under corporate rehabilitation.  Pacific Wide Realty and Development Corporation vs. Puerto Azul Land, Inc./Pacific Wide Realty and Development Corporation Vs. Puerto Azul Land, Inc., G.R. No. 178768/G.R. No. 180893, November 25, 2009.

Rehabilitation;  opposition. Successful rehabilitation of a distressed corporation will benefit its debtors, creditors, employees, and the economy in general. The court may approve a rehabilitation plan even over the opposition of creditors holding a majority of the total liabilities of the debtor if, in its judgment, the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable. The rehabilitation plan, once approved, is binding upon the debtor and all persons who may be affected by it, including the creditors, whether or not such persons have participated in the proceedings or have opposed the plan or whether or not their claims have been scheduled.  Pacific Wide Realty and Development Corporation vs. Puerto Azul Land, Inc./Pacific Wide Realty and Development Corporation Vs. Puerto Azul Land, Inc., G.R. No. 178768/G.R. No. 180893, November 25, 2009.

Stockholders; liability. The “owners” of a corporate organization are its stockholders and they are to be distinguished from its directors and officers. The petitioners here, with the exception of Audie Llona, are being charged in their capacities as stockholders of Bicol Gas. But the Court of Appeals forgets that in a corporation, the management of its business is generally vested in its board of directors, not its stockholders. Stockholders are basically investors in a corporation. They do not have a hand in running the day-to-day business operations of the corporation unless they are at the same time directors or officers of the corporation. Before a stockholder may be held criminally liable for acts committed by the corporation, therefore, it must be shown that he had knowledge of the criminal act committed in the name of the corporation and that he took part in the same or gave his consent to its commission, whether by action or inaction. Manuel C. Espiritu, Jr., et al. vs. Petron Corporation, et al., G.R. No. 170891, November 24, 2009.


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