April 2014 Philippine Supreme Court Decisions on Commercial Law

Here are select April 2014 rulings of the Supreme Court of the Philippines on commercial law:

Corporate officers; liability. On  the  issue  of  the  solidary  obligation  of  the  corporate officers impleaded vis-à-vis the corporation for Mapua’s illegal dismissal, “[i]t is hornbook principle that personal liability of corporate directors, trustees or officers attaches only when: (a) they assent to a patently unlawful act of the corporation,  or  when  they  are  guilty  of  bad  faith  or  gross  negligence  in directing  its  affairs,  or  when  there  is  a  conflict  of  interest resulting  in damages  to  the  corporation,  its  stockholders  or  other  persons; (b)  they consent to the issuance of watered down stocks or when, having knowledge of  such  issuance,  do  not  forthwith  file  with  the  corporate  secretary  their written objection; (c) they agree to hold themselves personally and solidarily liable with the corporation; or (d) they are made by specific provision of law personally answerable fortheir corporate action.SPI Technologies, Inc., et al. v. Victoria K. Mapua,G.R. No. 199022, April 7, 2014.

Corporate officers; liability. A corporation has a personality separate and distinct from its officers and board of directors who may only be held personally liable for damages if it is proven that they acted with malice or bad faith in the dismissal of an employee. Absent any evidence on record that petitioner Bautista acted maliciously or in bad faith in effecting the termination of respondent, plus the apparent lack of allegation in the pleadings of respondent that petitioner Bautistaacted in such manner, the doctrine of corporate fiction dictates that only petitioner corporation should be held liable for the illegal dismissal of respondent. Mirant (Philippines) Corporation, et al. v. Joselito A. Caro,G.R. No. 181490, April 23, 2014.

Corporations; merger; concept. Merger is a re-organization of two or more corporations that results in their consolidating into a single corpor ation, which is one of the constituent corporations, one disappearing or dissolving and the other surviving.  To put it another way, merger is the absorption of one or more corporations by another existing corporation, which retains its identity and takes over the rights, privileges, franchises, properties, claims, liabilities and obligations of the absorbed corporation(s).  The absorbing corporation continues its existence while the life or lives of the other corporation(s) is or are terminated. Bank of Commerce v. Radio Philippines Network, Inc., et al.,G.R. No. 195615, April 21, 2014.

Corporations; merger; de facto merger. A de facto merger can be pursued by one corporation acquiring all or substantially all of the properties of another corporation in exchange of shares of stock of the acquiring corporation.  The acquiring corporation would end up with the business enterprise of the target corporation; whereas, the target corporation would end up with basically its only re maining assets being the shares of stock of the acquiring corporation. Bank of Commerce v. Radio Philippines Network, Inc., et al.,G.R. No. 195615, April 21, 2014.

Corporations; merger; effectivity. It is clear that no merger took place between Bancommerce and TRB as the requireme nts and procedures for a merger were absent.  A merger does not become effective upon the mere agreementof the constituent corporations.  All the requirements specified in the law must be complied with in order for merger to take effect.  Section 79 of the Corporation Code further provides that the merger shall be effective only upon the issuance by the Securities and Exchange Commission (SEC) of a certificate of merger. Bank of Commerce v. Radio Philippines Network, Inc., et al.,G.R. No. 195615, April 21, 2014.

Corporations; nationality. The “control test” is still the prevailing mode of determining whether or not a corporation is a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled to undertake the exploration, development and utilization of the natural resources of the Philippines. When in the mind of the Court there is doubt, based on the attendant facts and circumstances of the case, in the 60-40 Filipino-equity ownership in the corporation, then it may apply the “grandfather rule.” Narra Nickel Mining and Development Corp., et al. v. Redmont Consolidated Mines,G.R. No. 195580, April 21, 2014.

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