January 2010 Philippine Supreme Court Decisions on Commercial Law

Here are selected January 2010 rulings of the Supreme Court of the Philippines on commercial law:

SEC;  power to fix compensation of liquidators. To countenance petitioner’s posturing would be to unduly delimit the broad powers granted to the SEC under Presidential Decree No. 902-A, specifically the all-encompassing provision in Section 3 that the SEC has “absolute jurisdiction, supervision and control” over all corporations who are the grantees of primary franchises and/or license or permit issued by the government to operate in the Philippines. There is no gainsaying, therefore, that the SEC is authorized to determine the fees of receivers and liquidators not only when there is “failure of agreement” between the parties but also in the absence thereof. A contrary ruling would give license to corporations under liquidation or receivership to refuse to participate in negotiations for the fixing of the compensation of their liquidators or receivers so as to evade their obligation to pay the same.

Petitioner may not have been given the chance to meet face to face with respondent for the purpose of determining the latter’s fee. But this fact alone should not invalidate the amount fixed by the SEC. What matters is the reasonableness of the fee in light of the services rendered by the liquidator. It is the policy of the SEC to provide uniform/fair and reasonable compensation or fees for the comparable services rendered by the duly designated members of the Management Committee (MANCOM), rehabilitation receivers and liquidators in corporations or partnerships placed under MANCOM/receivership or liquidation, pursuant to Section 6(d) of Presidential Decree No. 902-A, the SEC Rules on Corporate Recovery, the Corporation Code of the Philippines, the Securities Regulation Code, and other related laws enforced by the SEC.  Catmon Sales International Corporation vs. Atty. Manuel D. Yngson, Jr. as Liquidator of Catmon Sales International Corporation, G.R. No. 179761, January 15, 2010.

Truth in Lending Act;  disclosure of financial charges in the promissory note.  Both the RTC and CA decisions cited BPI’s alleged violation of the Truth in Lending Act and the ruling of the Court in New Sampaguita Builders Construction, Inc. v. Philippine National Bank to justify their deletion of the penalty charges.

In this case, although BPI failed to state the penalty charges in the disclosure statement, the promissory note that the Yus signed, on the same date as the disclosure statement, contained a penalty clause that said: “I/We jointly and severally, promise to further pay a late payment charge on any overdue amount herein at the rate of 3% per month.” The promissory note is an acknowledgment of a debt and commitment to repay it on the date and under the conditions that the parties agreed on. It is a valid contract absent proof of acts which might have vitiated consent.

The question is whether or not the reference to the penalty charges in the promissory note constitutes substantial compliance with the disclosure requirement of the Truth in Lending Act.

The Court has affirmed that financial charges are amply disclosed if stated in the promissory note in the case of Development Bank of the Philippines v. Arcilla, Jr. The Court there said, “Under Circular 158 of the Central Bank, the lender is required to include the information required by R.A. 3765 in the contract covering the credit transaction or any other document to be acknowledged and signed by the borrower. In addition, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor.” In this case, the promissory notes signed by the Yus contained data, including penalty charges, required by the Truth in Lending Act. They cannot avoid liability based on a rigid interpretation of the Truth in Lending Act that contravenes its goal.  Bank of the Philippines Islands, Inc. vs. Sps. Norman and Angelina Yu, et al., G.R. No. 184122, January 20, 2010.