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.

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November 2013 Philippine Supreme Court Decisions on Tax Law

Here are select rulings of the Supreme Court of the Philippines on tax laws:

Merger; concept.  The term “merger” or “consolidation”, when used shall be understood to mean: (i) the ordinary merger or consolidation, or (ii) the acquisition by one corporation of all or substantially all the properties of another corporation solely for stock: Provided, [t]hat for a transaction to be regarded as a merger or consolidation, it must be undertaken for a bona fide business purpose and not solely for the purpose of escaping the burden of taxation. In case of a merger, two previously separate entities are treated as one entity and the remaining entity may be held liable for both of their tax deficiencies. In the agreement between Traders Royal Bank and Bank of Commerce, it was explicitly provided that they shall continue to exist as separate entities. Since the purchase and sale of identified assets between the two companies does not constitute a merger under the foregoing definition, the Bank of Commerce is considered an entity separate from petitioner. Thus, it cannot be held liable for the payment of the deficiency documentary stamp tax assessed against petitioner. Commissioner of Internal Revenue v. Bank of Commerce, G.R. No. 180529. November 13, 2013.

Newly discovered evidence; concept; applicability. Ordinarily, the concept of newly discovered evidence is applicable to litigations in which a litigant seeks a new trial or the re-opening of the case in the trial court. Seldom is the concept appropriate when the litigation is already on appeal, because appellate courts, in general, are not triers of facts. Facts have to be proven while the case is still pending with the lower courts. The taxpayer has to convince the CTA that the quasi-judicial agency a quo should not have denied the claim, and to do so the taxpayer should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA, including whatever was required for the successful prosecution of the administrative claim as the means of demonstrating to the CTA that its administrative claim should have been granted in the first place. In order that newly discovered evidence may be a ground for allowing a new trial, it must be fairly shown that: (a) the evidence is discovered after the trial; (b) suchevidence could not have been discovered and produced at the trial even with the exercise of reasonable diligence; (c) such evidence is material, not merely cumulative, corroborative, or impeaching; and (d) such evidence is of such weight that it would probably change the judgment if admitted. The first two requisites are not present here. First, the proposed evidence was plainly not newly discovered considering the taxpayer’s submission that its former Finance and Accounting Manager had misplaced the VAT official receipts. Second, the receipts, had they truly existed, could have been sooner discovered and easily produced at the trial with the exercise of reasonable diligence. Luzon Hydro Corporation v. Commissioner of Internal Revenue, G.R. No. 188260. November 13, 2013.

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August 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are selected August 2010 rulings of the Supreme Court of the Philippines on labor law and procedure:

Labor Law

Dismissal; abandonment. Time and again, the Supreme Court has held that abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so if the same is accompanied by a prayer for reinstatement. In the present case, however, petitioner filed his complaint more than one year after his alleged termination from employment. Moreover, petitioner did not ask for reinstatement in the complaint form, which he personally filled up and filed with the NLRC. The prayer for reinstatement is made only in the Position Paper that was later prepared by his counsel. This is an indication that petitioner never had the intention or desire to return to his job. Elpidio Calipay vs. National Labor Relations Commission, et al., G.R. No. 166411, August 3, 2010.

Dismissal; burden of proof. In termination cases, the employer has the burden of proving, by substantial evidence that the dismissal is for just cause. If the employer fails to discharge the burden of proof, the dismissal is deemed illegal. In the present case, BCPI failed to discharge its burden when it failed to present any evidence of the alleged fistfight, aside from a single statement, which was refuted by statements made by other witnesses and was found to be incredible by both the Labor Arbiter and the NLRC. Alex Gurango vs. Best Chemicals and Plastic, Inc., et al., G.R. No. 174593, August 25, 2010.

Dismissal; burden of proof. The law mandates that the burden of proving the validity of the termination of employment rests with the employer. Failure to discharge this evidentiary burden would necessarily mean that the dismissal was not justified and, therefore, illegal. Unsubstantiated suspicions, accusations, and conclusions of employers do not provide for legal justification for dismissing employees. In case of doubt, such cases should be resolved in favor of labor, pursuant to the social justice policy of labor laws and the Constitution. Century Canning Corporation, Ricardo T. Po, Jr., et al. vs. Vicente Randy R. Ramil, G.R. No. 171630, August 8, 2010.

Dismissal; due process. In termination proceedings of employees, procedural due process consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employer’s decision to dismiss him. The requirement of a hearing is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. Pharmacia and Upjohn, Inc., et al. vs. Ricardo P. Albayda, Jr., G.R. No. 172724, August 23, 2010.

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Dissension in the Court: August 2010

The following are selected decisions promulgated by the High Court in August 2010 where at least one Justice felt compelled to express his or her dissent from the decision penned by the ponente.

1.         [Union] Shop Talk (Leonardo-De Castro vs. Brion and Carpio)

Apart from the wide-spread paranoia about a possible Y2K global computer cataclysm, one other significant development occurring around the start of the twenty-first century was the merger of two giant banking institutions—Far East Bank and Trust Company (FEBTC) and Bank of the Philippine Islands (BPI)—with BPI being the surviving entity.  One of several legal issues spawned by that merger was the subject matter of Republic of the Philippines vs. Bank of the Philippine Islands penned by Justice Teresita J. Leonardo-De Castro.

At the time of the merger, the BPI Employees Union-Davao Chapter (the “Union”) constituted the exclusive bargaining agent of BPI’s rank and file employees in Davao City.  Their existing collective bargaining agreement (CBA) with BPI included a “Union Shop” clause which read as follows:

Article II:

x     x     x

Section 2.  Union Shop – New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as a condition of their continued employment.  It is understood that membership in good standing in the Union is a condition of their continued employment with the Bank.

Once the FEBTC-BPI merger took effect, the Union required BPI to implement the Union Shop Clause and compel the former FEBTC employees to join the Union.  BPI took the position that the former FEBTC employees were not covered by the Union Security Clause on the ground that the former FEBTC employees were not new employees who were hired and subsequently regularized, but were absorbed employees “by operation of law” because the “former employees of FEBTC can be considered assets and liabilities of the absorbed corporation.”

While the Voluntary Arbitrator sided with BPI, the Court of Appeals reversed the Voluntary Arbitrator’s decision.  The Court of Appeals held that while there is indeed a distinction between “absorbed” employees and “new” employees, such distinction applied only with respect to recognition of the past service of the “absorbed” employees with their former employer, FEBTC.  However, for purposes of applying the Union Shop Clause, they should be deemed to be “new” employees as otherwise, inequities would arise.

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August 2010 Philippine Supreme Court Decisions on Commercial Law

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

Corporation; liability of directors and officers.  Elementary is the rule that a corporation is invested by law with a personality separate and distinct from those of the persons composing it and from that of any other legal entity to which it may be related. “Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.”

In labor cases, corporate directors and officers may be held solidarily liable with the corporation for the termination of employment only if done with malice or in bad faith. Bad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud.  Wensha Spa Center, inc. and/or Xu Zhi Jie vs. Loreta T. Yung, G.R. No. 185122, August 16, 2010.

Crossed check;  effect. A check is a bill of exchange drawn on a bank payable on demand. There are different kinds of checks. In this case, crossed checks are the subject of the controversy.  A crossed check is one where two parallel lines are drawn across its face or across the corner thereof. It may be crossed generally or specially.

A check is crossed specially when the name of a particular banker or a company is written between the parallel lines drawn. It is crossed generally when only the words “and company” are written or nothing is written at all between the parallel lines, as in this case. It may be issued so that presentment can be made only by a bank.

In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a check has the following effects: (a) the check may not be encashed but  only  deposited  in the bank; (b) the check may be negotiated only once — to one who has an account with a bank; and (c) the act of crossing the check serves as warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due  course.

The Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be  deposited and  not  converted  into cash.  The effect of crossing a check, thus, relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein. The crossing of a check  is a warning that the check should be deposited only in the account of the payee. Thus, it is the duty of the collecting bank to ascertain that the check be deposited to the payee’s account only.   Vicente Go vs. Metropolitan Bank and Trust Co., G.R. No. 168842, August 11, 2010.

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