March 2010 Philippine Supreme Court Decisions on Commercial Law

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

Bank; same day crediting. Based on the records, there is no sufficient evidence to show that BPI conclusively confirmed the same-day crediting of the RCBC check which Suarez’s client deposited late on 16 June 1997.

Clearly, Suarez failed to prove that BPI confirmed the same-day crediting of the RCBC check, or that BPI assured Suarez that he had sufficient available funds in his account. Accordingly, BPI was not estopped from dishonoring the checks for inadequacy of available funds in Suarez’s account since the RCBC check remained uncleared at that time.

While BPI had the discretion to undertake the same-day crediting of the RCBC check, and disregard the banking industry’s 3-day check clearing policy, Suarez failed to convincingly show his entitlement to such privilege. As BPI pointed out, Suarez had no credit or bill purchase line with BPI which would qualify him to the exceptions to the 3-day check clearing policy.

Considering that there was no binding representation on BPI’s part as regards the same-day crediting of the RCBC check, no negligence can be ascribed to BPI’s dishonor of the checks precisely because BPI was justified in dishonoring the checks for lack of available funds in Suarez’s account.  Bank of the Philippines Islands Vs. Reynald R. Suarez, G.R. No. 167750, March 15, 2010.

Corporation;  corporate veil. The doctrine of piercing the corporate veil applies only in three (3) basic instances, namely: a) when the separate and distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; b) in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or defend a crime; or c) is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

In the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities.

In the present case, we see no competent and convincing evidence of any wrongful, fraudulent or unlawful act on the part of PRISMA to justify piercing its corporate veil. While Pantaleon denied personal liability in his Answer, he made himself accountable in the promissory note “in his personal capacity and as authorized by the Board Resolution” of PRISMA. With this statement of personal liability and in the absence of any representation on the part of PRISMA that the obligation is all its own because of its separate corporate identity, we see no occasion to consider piercing the corporate veil as material to the case.  Prisma Construction and Development Corporation and Rogelio S. Pantaleon vs. Arthur F. Menchavez, G.R. No. 160545, March 9, 2010.

Corporation; doing business without a license. In this case, the contract between petitioner and NMC involved the purchase of molasses by petitioner from NMC. It was NMC, the domestic corporation, which derived income from the transaction and not petitioner. To constitute “doing business,” the activity undertaken in the Philippines should involve profit-making. Besides, under Section 3(d) of RA 7042, “soliciting purchases” has been deleted from the enumeration of acts or activities which constitute “doing business.”

Other factors which support the finding that petitioner is not doing business in the Philippines are: (1) petitioner does not have an office in the Philippines; (2) petitioner imports products from the Philippines through its non-exclusive local broker, whose authority to act on behalf of petitioner is limited to soliciting purchases of products from suppliers engaged in the sugar trade in the Philippines; and (3) the local broker is an independent contractor and not an agent of petitioner.

In the present case, petitioner is a foreign company merely importing molasses from a Philippine exporter. A foreign company that merely imports goods from a Philippine exporter, without opening an office or appointing an agent in the Philippines, is not doing business in the Philippines.  Cargill, Inc. Vs. Intra Strata Assurance Corporation, G.R. No. 168266, March 15, 2010.

Tradename; infringement. In Prosource International, Inc. v. Horphag Research Management SA, this Court laid down what constitutes infringement of an unregistered trade name, thus:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered;

(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer;

(3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services;

(4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and

(5) It is without the consent of the trademark or trade name owner or the assignee thereof.

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines.

Section 22 of Republic Act No. 166, as amended, required registration of a trade name as a condition for the institution of an infringement suit.

However, RA 8293, which took effect on 1 January 1998, has dispensed with the registration requirement.  Section 165.2 of RA 8293 categorically states that trade names shall be protected, even prior to or without registration with the IPO, against any unlawful act including any subsequent use of the trade name by a third party, whether as a trade name or a trademark likely to mislead the public. Thus:  “It is the likelihood of confusion that is the gravamen of infringement.  But there is no absolute standard for likelihood of confusion.  Only the particular, and sometimes peculiar, circumstances of each case can determine its existence.  Thus, in infringement cases, precedents must be evaluated in the light of each particular case. Coffee Partners, Inc. vs. San Francisco Coffee & Roastery, Inc., G.R. No. 169504, March 3, 2010.

Tradename; infringement; test. In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the dominancy test and the holistic test.  The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement.  If the competing trademark contains the main, essential, and dominant features of another, and confusion or deception is likely to result, infringement occurs.  Exact duplication or imitation is not required.  The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to deceive consumers.

In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.  The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both marks in order that the observer may draw his conclusion whether one is confusingly similar to the other.

Applying either the dominancy test or the holistic test, petitioner’s “San Francisco Coffee” trademark is a clear infringement of respondent’s “San Francisco Coffee & Roastery, Inc.” Trade name.  The descriptive words “San Francisco Coffee” are precisely the dominant features of respondent’s trade name.  Petitioner and respondent are engaged in the same business of selling coffee, whether wholesale or retail.  The likelihood of confusion is higher in cases where the business of one corporation is the same or substantially the same as that of another corporation.  In this case, the consuming public will likely be confused as to the source of the coffee being sold at petitioner’s coffee shops.  Petitioner’s argument that “San Francisco” is just a proper name referring to the famous city in California and that “coffee” is simply a generic term, is untenable.  Respondent has acquired an exclusive right to the use of the trade name “San Francisco Coffee & Roastery, Inc.” Since the registration of the business name with the DTI in 1995.  Thus, respondent’s use of its trade name from then on must be free from any infringement by similarity.  Of course, this does not mean that respondent has exclusive use of the geographic word “San Francisco” or the generic word “coffee.” Geographic or generic words are not, per se, subject to exclusive appropriation.  It is only the combination of the words “San Francisco Coffee,” which is respondent’s trade name in its coffee business, that is protected against infringement on matters related to the coffee business to avoid confusing or deceiving the public.

In Philips Export B.V. v. Court of Appeals, this court held that a corporation has an exclusive right to the use of its name. The right proceeds from the theory that it is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business thereunder, that another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name. Coffee Partners, Inc. vs. San Francisco Coffee & Roastery, Inc., G.R. No. 169504, March 3, 2010.