December 2010 Philippine Supreme Court Decisions on Commercial Law

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

Board members; criminal liability for illegal trading of petroleum products.  Sec. 4 of BP 33, as amended, provides for the penalties and persons who are criminally liable, thus:

Sec. 4.    Penalties. — Any person who commits any act herein prohibited shall, upon conviction, be punished with a fine of not less than twenty thousand pesos (P20,000) but not more than fifty thousand pesos  (P50,000), or imprisonment of at least two (2) years but not more than five (5) years, or both, in the discretion of the court.  In cases of second and subsequent conviction under this Act, the penalty shall be both fine and imprisonment as provided herein.  Furthermore, the petroleum and/or petroleum products, subject matter of the illegal trading, adulteration, shortselling, hoarding, overpricing or misuse, shall be forfeited in favor of the Government: Provided, That if the petroleum and/or petroleum products have already been delivered and paid for, the offended party shall be indemnified twice the amount paid, and if the seller who has not yet delivered has been fully paid, the price received shall be returned to the buyer with an additional amount equivalent to such price; and in addition, if the offender is an oil company, marketer, distributor, refiller, dealer, sub-dealer and other retail outlets, or hauler, the cancellation of his license.

Trials of cases arising from this Act shall be terminated within thirty (30) days after arraignment.

When the offender is a corporation, partnership, or other juridical person, the president, the general manager, managing partner, or such other officer charged with the management of the business affairs thereof, or employee responsible for the violation shall be criminally liable; in case the offender is an alien, he shall be subject to deportation after serving the sentence.

If the offender is a government official or employee, he shall be perpetually disqualified from office.  (Emphasis supplied.)

Relying on the third paragraph of the above statutory proviso, petitioners argue that they cannot be held liable for any perceived violations of BP 33, as amended, since they are mere directors of Omni who are not in charge of the management of its business affairs.  Reasoning that criminal liability is personal, liability attaches to a person from his personal act or omission but not from the criminal act or negligence of another.  Since Sec. 4 of BP 33, as amended, clearly provides and enumerates who are criminally liable, which do not include members of the board of directors of a corporation, petitioners, as mere members of the board of directors who are not in charge of Omni’s business affairs, maintain that they cannot be held liable for any perceived violations of BP 33, as amended.  To bolster their position, they attest to being full-time employees of various firms as shown by the Certificates of Employment[71] they submitted tending to show that they are neither involved in the day-to-day business of Omni nor managing it.  Consequently, they posit that even if BP 33, as amended, had been violated by Omni they cannot be held criminally liable thereof not being in any way connected with the commission of the alleged violations, and, consequently, the criminal complaints filed against them based solely on their being members of the board of directors as per the GIS submitted by Omni to SEC are grossly discriminatory.

On this point, we agree with petitioners except as to petitioner Arnel U. Ty who is indisputably the President of Omni.

It may be noted that Sec. 4 above enumerates the persons who may be held liable for violations of the law, viz:  (1) the president, (2) general manager, (3) managing partner, (4) such other officer charged with the management of the business affairs of the corporation or juridical entity, or (5) the employee responsible for such violation.  A common thread of the first four enumerated officers is the fact that they manage the business affairs of the corporation or juridical entity.  In short, they are operating officers of a business concern, while the last in the list is self-explanatory.

It is undisputed that petitioners are members of the board of directors of Omni at the time pertinent.  There can be no quibble that the enumeration of persons who may be held liable for corporate violators of BP 33, as amended, excludes the members of the board of directors.  This stands to reason for the board of directors of a corporation is generally a policy making body.  Even if the corporate powers of a corporation are reposed in the board of directors under the first paragraph of Sec. 23 of the Corporation Code, it is of common knowledge and practice that the board of directors is not directly engaged or charged with the running of the recurring business affairs of the corporation.  Depending on the powers granted to them by the Articles of Incorporation, the members of the board generally do not concern themselves with the day-to-day affairs of the corporation, except those corporate officers who are charged with running the business of the corporation and are concomitantly members of the board, like the President.  Section 25 of the Corporation Code requires the president of a corporation to be also a member of the board of directors.

Thus, the application of the legal maxim expressio unius est exclusio alterius, which means the mention of one thing implies the exclusion of another thing not mentioned.  If a statute enumerates the thing upon which it is to operate, everything else must necessarily and by implication be excluded from its operation and effect. The fourth officer in the enumerated list is the catch-all “such other officer charged with the management of the business affairs” of the corporation or juridical entity which is a factual issue which must be alleged and supported by evidence.  Arnel U. Ty, et al. vs. National Bureau of Investigation Supervising Agent Marvin E. De Jemil,et al., G.R. No. 182147, December 15, 2010.

Financial leasing.  Republic Act No. 8556 (RA 8556), otherwise known as the Financing Company Act of 1998, Section 3(d) of RA 8556 defines financial leasing as:

a mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and office machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property with the right to expense the lease rentals paid to the lessor and bears the cost of repairs, maintenance, insurance and preservation thereof, but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract.

Thus, in a true financial leasing, whether under RA 5980 or RA 8556, a finance company purchases on behalf of a cash-strapped lessee the equipment the latter wants to buy but, due to financial limitations, is incapable of doing so. The finance company then leases the equipment to the lessee in exchange for the latter’s periodic payment of a fixed amount of rental.

In this case, however, TMI already owned the subject equipment before it transacted with PCILF. Therefore, the transaction between the parties in this case cannot be deemed to be in the nature of a financial leasing as defined by law.

In the present case, since the transaction between PCILF and TMI involved equipment already owned by TMI, it cannot be considered as one of financial leasing, as defined by law, but simply a loan secured by the various equipment owned by TMI.  PCI Leasing and Finance, inc. vs. Trojan Metal Industries Inc., et al., G.R. No. 176381, December 15, 2010.