March 2014 Philippine Supreme Court Decisions on Commercial Law

Here are select March 2104 rulings of the Supreme Court of the Philippines on commercial law:

Corporations; piercing the corporate veil. It has  long  been  settled  that  the  law  vests  a  corporation  with a personality distinct and separate from its stockholders or members.  In the same vein, a corporation, by legal fiction and convenience, is an entity shielded by a protective mantle and imbued by law with a character alien to the  persons  comprising  it.  Nonetheless,  the  shield  is  not  at  all  times impenetrable and cannot be extended to a point beyond its reason and policy.  Circumstances  might  deny  a  claim  for  corporate  personality,  under  the “doctrine of piercing the veil of corporate fiction.”

Piercing the  veil  of  corporate  fiction  is  an  equitable  doctrine developed to address situations where the separate corporate personality of a corporation is abused or used for wrongful purposes. Under the doctrine, the corporate existence may be disregarded where the entity is formed or used for non-legitimate purposes, such as to evade a just and due obligation, or to justify a wrong, to shield or perpetrate fraud or to carry out similar or inequitable considerations, other unjustifiable aims or intentions, in which case, the fiction will be disregarded and the individuals composing it and the two corporations will be treated as identical.

In the present case, we see an indubitable link between CBB’s closure and Binswanger’s incorporation. CBB ceased to exist only in name; it re-emerged in the person of Binswanger for an urgent purpose — to avoid payment by CBB of the last two installments of its monetary obligation to Livesey, as well as its other financial liabilities.  Freed of CBB’s  liabilities,  especially  that  owing  to  Livesey,  Binswanger can continue, as it did continue, CBB’s real estate brokerage business. Eric Godfrey Stanley Livesey v. Binswanger Philippines, Inc. and Keith Elliot, G.R. No. 177493, March 19, 2014.

Insurance contracts; health care agreement. For  purposes  of  determining  the  liability  of a health care provider to its members, jurisprudence holds that a health care agreement  is  in  the  nature  of  non-life  insurance,  which  is  primarily  a contract of indemnity.  Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.  Fortune Medicare, Inc. v. David Robert U. Amorin, G.R. No. 195872, March 12, 2014.

Insurance contracts; interpretation. In Philamcare Health Systems, Inc. v. CA, we ruled that a health care agreement is in the nature of a non-life insurance.  It is an established rule in insurance contracts that when their terms contain limitations on liability, they should be construed strictly against the insurer.  These are contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract.  This doctrine is equally applicable to health care agreements. Fortune Medicare, Inc. v. David Robert U. Amorin, G.R. No. 195872, March 12, 2014.

(Hector thanks Marie Nickie  H. Bolos for her assistance to Lexoterica.)