COMMERCIAL LAW

Solidary liabilities may at times be incurred by the directors and officers of the corporation but only when exceptional circumstances warrant Posted on February 29, 2012 by Erineus

Lastly, we deem it imperative to resolve the question of whether Grandteqs officers, who are co-petitioners herein, are solidarily liable with the company. There is solidary liability when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires.[44] In MAM Realty Development Corporation v. NLRC,[45] the solidary liability of corporate officers in labor disputes was discussed in this wise: A corporation, being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally, in the following cases: 1. When directors and trustees or, in appropriate cases, the officers of a corporation (a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; xxxx In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with the corporation for the termination of employment of employees done with malice or in bad faith. From the decisions of the LA, the NLRC, and the CA, there is no indication that Estrellas dismissal was effected with malice or bad faith on the part of Grandteqs officers. Their liability for Estrellas illegal dismissal, the consequential monetary award arising from such dismissal and the other money claims awarded in the LAs decision, as correctly affirmed by the CA, could thus only be joint, not solidary. This pronouncement does not extend to Estrellas claims for commissions, allowances, and incentives, as the same are still subject to the LAs scrutiny.
http://sc.judiciary.gov.ph/jurisprudence/2011/march2011/192416.htm The law imposes on banks a high degree of obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of banking Posted on February 19, 2012 by Erineus

The foregoing testimonies of PCIB officers clearly show that not only did PCIB fail to give prior notice to Gonzales about the Offering Ticket for the process of termination, suspension, or revocation of the credit line under the COHLA, but PCIB likewise failed to inform Gonzales of the fact that his credit line has been terminated. Thus, we find PCIB grossly negligent in the termination, revocation, or suspension of the credit line under the COHLA. While PCIB invokes its right on the so-called cross default provisions, it may not with impunity ignore the rights of Gonzales under the COHLA. Indeed, the business of banking is impressed with public interest and great reliance is made on the banks sworn profession of diligence and meticulousness in giving irreproachable service. Like a common carrier whose business is imbued with public interest, a bank should exercise extraordinary diligence to negate its liability to the depositors.[35] In this instance, PCIB is sorely remiss in the diligence required in treating with its client, Gonzales. It may not wantonly exercise its rights without respecting and honoring the rights of its clients. Art. 19 of the New Civil Code clearly provides that [e]very person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. This is the basis of the principle of abuse of right which, in turn, is based upon the maxim suum jus summa injuria (the abuse of right is the greatest possible wrong).[36] In order for Art. 19 to be actionable, the following elements must be present: (1) the existence of a legal right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or injuring another.[37] We find that such elements are present in the instant case. The effectivity clause of the COHLA is crystal clear that termination of the COH should be done only upon prior notice served on the CLIENT. This is the legal duty of PCIBto inform Gonzales of the termination. However, as shown by the above testimonies, PCIB failed to give prior notice to Gonzales. Malice or bad faith is at the core of Art. 19. Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.[38] In the instant case, PCIB was able to send a letter advising Gonzales of the unpaid interest on the loans[39] but failed to mention anything about the termination of the COHLA. More significantly, no letter was ever sent to him about the termination of the COHLA. The failure to give prior notice on the part of PCIB is already prima facie evidence of bad faith.[40] Therefore, it is abundantly clear that this case falls squarely within the purview of the principle of abuse of rights as embodied in Art. 19. Third. There is no dispute on the right of PCIB to suspend, terminate, or revoke the COHLA under the cross default provisions of both the promissory notes and the COHLA. However, these cross default provisions do not confer absolute unilateral right to PCIB, as they are qualified by the other stipulations in the contracts or specific circumstances, like in the instant case of an accommodation party. The promissory notes uniformly provide: The lender is hereby authorized, at its option and without notice, to set off or apply to the payment of this Note any and all moneys which may be in its hands on deposit or otherwise belonging to the Borrower. The Borrower irrevocably appoint/s the Lender, effective upon the nonpayment of this Note on demand/at maturity or upon the happening of any of the events of default, but without any obligation on the Lenders part should it choose not to perform this mandate, as the attorney-infact of the Borrower, to sell and dispose of any property of the Borrower, which may be in the Lenders

possession by public or private sale, and to apply the proceeds thereof to the payment of this Note; the Borrower, however, shall remain liable for any deficiency.[41] (Emphasis ours.) The above provisos are indeed qualified with the specific circumstance of an accommodation party who, as such, has not been servicing the payment of the dues of the loans, and must first be properly apprised in writing of the outstanding dues in order to answer for his solidary obligation. The same is true for the COHLA, which in its default clause provides: 16. DEFAULT The CLIENT shall be considered in default under the COH if any of the following events shall occur: 1. xxx 2. Violation of the terms and conditions of this Agreement or any contract of the CLIENT with the BANK or any bank, persons, corporations or entities for the payment of borrowed money, or any other event of default in such contracts.[42] The above pertinent default clause must be read in conjunction with the effectivity clause (No. 4 of the COHLA, quoted above), which expressly provides for the right of client to prior notice. The rationale is simple: in cases where the bank has the right to terminate, revoke, or suspend the credit line, the client must be notified of such intent in order for the latter to act accordinglywhether to correct any ground giving rise to the right of the bank to terminate the credit line and to dishonor any check issued or to act in accord with such termination, i.e., not to issue any check drawn from the credit line or to replace any checks that had been issued. This, the bankwith gross negligencefailed to accord Gonzales, a valued client for more than 15 years. Fourth. We find the testimony[43] of Ocampo incredible on the point that the principal borrower of the PhP 1,800,000 loan covered by the three promissory notes is Gonzales for which the bank officers had special instructions to grant and that it was through the instructions of Gonzales that the payment of the periodic interest dues were debited from the account of the spouses Panlilio. For one, while the first promissory note dated October 30, 1995 indeed shows Gonzales as the principal borrower, the other promissory notes dated December 26, 1995 and January 3, 1996 evidently show that it was Jose Panlilio who was the principal borrower with Gonzales as co-borrower. For another, Ocampo cannot feign ignorance on the arrangement of the payments by the spouses Panlilio through the debiting of their bank account. It is incredulous that the payment arrangement is merely at the behest of Gonzales and at a mere verbal directive to do so. The fact that the spouses Panlilio not only received the proceeds of the loan but were servicing the periodic interest dues reinforces the fact that Gonzales was only an accommodation party. Thus, due to PCIBs negligence in not giving Gonzalesan accommodation partyproper notice relative to the delinquencies in the PhP 1,800,000 loan covered by the three promissory notes, the unjust termination, revocation, or suspension of the credit line under the COHLA from PCIBs gross negligence in not honoring its obligation to give prior notice to Gonzales about such termination and in not informing Gonzales of the fact of such termination, treating Gonzales account as closed and dishonoring his PhP 250,000 check, was certainly a reckless act by PCIB. This resulted in the actual injury of PhP 250,000 to Gonzales whose FCD account was frozen and had to look elsewhere for money to pay Unson. With banks, the degree of diligence required is more than that of a good father of the family considering that the business of banking is imbued with public interest due to the nature of their function. The law imposes on banks a high degree of obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of banking.[44] Had Gonzales been properly notified of the delinquencies of the PhP 1,800,000 loan and the process of terminating his credit line under the COHLA, he could have acted accordingly and the dishonor of the check would have been avoided. Third Issue: Award of Damages The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized societybanks have attained a ubiquitous presence among the people, who have come to regard them with respect and even gratitude and most of all, confidence, and it is for this reason, banks should guard against injury attributable to negligence or bad faith on its part. [45] In the instant case, Gonzales suffered from the negligence and bad faith of PCIB. From the testimonies of Gonzales witnesses, particularly those of Dominador Santos[46] and Freddy Gomez,[47] the embarrassment and humiliation Gonzales has to endure not only before his former close friend Unson but more from the members and families of his friends and associates in the PCA, which he continues to experience considering the confrontation he had with Unson and the consequent loss of standing and credibility among them from the fact of the apparent bouncing check he issued. Credit is very important to businessmen and its loss or impairment needs to be recognized and compensated.[48] The termination of the COHLA by PCIB without prior notice and the subsequent dishonor of the check issued by Gonzales constitute acts of contra bonus mores. Art. 21 of the Civil Code refers to such acts when it says, Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damage. Accordingly, this Court finds that such acts warrant the payment of indemnity in the form of nominal damages. Nominal damages are recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind x x x.[49] We further explained the nature of nominal damages in Almeda v. Cario: x x x Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal damages are damages in name only and not in fact. When granted by the courts, they are not treated as an equivalent of a wrong inflicted but simply a recognition of the existence of a technical injury. A violation of the plaintiffs right, even if only technical, is sufficient to support an award of nominal damages. Conversely, so long as there is a showing of a violation of the right of the plaintiff, an award of nominal damages is proper.[50] (Emphasis Ours.) In the present case, Gonzales had the right to be informed of the accrued interest and most especially, for the suspension of his COHLA. For failure to do so, the bank is liable to pay nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.[51] In this case, the Court finds that the grant of PhP 50,000 as nominal damages is proper.

Moreover, as We held in MERALCO v. CA,[52] failure to give prior notice when required, such as in the instant case, constitutes a breach of contract and is a clear violation of Art. 21 of the Code. In cases such as this, Art. 2219 of the Code provides that moral damages may be recovered in acts referred to in its Art. 21. Further, Art. 2220 of the Code provides that [w]illful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Similarly, every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.[53] Evidently, Gonzales is entitled to recover moral damages. Even in the absence of malice or bad faith, a depositor still has the right to recover reasonable moral damages, if the depositor suffered mental anguish, serious anxiety, embarrassment, and humiliation.[54] Although incapable of pecuniary estimation, moral damages are certainly recoverable if they are the proximate result of the defendants wrongful act or omission. The factual antecedents bolstered by undisputed testimonies likewise show the mental anguish and anxiety Gonzales had to endure with the threat of Unson to file a suit. Gonzales had to pay Unson PhP 250,000, while his FCD account in PCIB was frozen, prompting Gonzales to demand from PCIB and to file the instant suit. The award of moral damages is aimed at a restoration within the limits of the possible, of the spiritual status quo anteit must always reasonably approximate the extent of injury and be proportional to the wrong committed.[55] Thus, an award of PhP 50,000 is reasonable moral damages for the unjust dishonor of the PhP 250,000 which was the proximate cause of the consequent humiliation, embarrassment, anxiety, and mental anguish suffered by Gonzales from his loss of credibility among his friends, colleagues and peers. Furthermore, the initial carelessness of the banks omission in not properly informing Gonza les of the outstanding interest duesaggravated by its gross neglect in omitting to give prior notice as stipulated under the COHLA and in not giving actual notice of the termination of the credit linejustifies the grant of exemplary damages of PhP 10,000. Such an award is imposed by way of example or correction for the public good. Finally, an award for attorneys fees is likewise called for from PCIBs negligence which compelled Gonzales to litigate to protect his interest. In accordance with Art. 2208(1) of the Code, attorneys fees may be recovered when exemplary damages are awarded. We find that the amount of PhP 50,000 as attorneys fees is reasonable.
http://sc.judiciary.gov.ph/jurisprudence/2011/february2011/180257.htm PD 902-A vested the SEC with jurisdiction on petitions for suspension of payments only on corporations, partnerships and associations; not on individual persons Posted on February 10, 2012 by Erineus

PD 902-A vested the SEC with jurisdiction on petitions for suspension of payments only on corporations, partnerships and associations; not on individual persons The SECs jurisdiction is evident from the statutorily vested power of jurisdiction, supervision and control by the SEC over all corporations, partnerships or associations, which are grantees of primary franchise, license or permit issued by the government to operate in the Philippines, and its then original and exclusive jurisdiction over petitions for suspension of payments of said entities. Secs. 3 and 5 of PD 902-A pertinently provides, thus: Sec. 3. The Commission shall have absolute jurisdiction, supervision and control over all corporations, partnerships or associations, who are the grantees of primary franchise and/or a license or permit issued by the government to operate in the Philippines; and in the exercise of its authority, it shall have the power to enlist the aid and support of any and all enforcement agencies of the government, civil or military. Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: x x x x (d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree. (Emphasis Ours.) It can be clearly gleaned from the above provisions that in cases of petitions for the suspension of payments, the SEC has jurisdiction over corporations, partnerships and associations, which are grantees of primary franchise or license or permit issued by the government to operate in the Philippines, and their properties. And it is indubitably clear from the aforequoted Sec. 5(d) that only corporations, partnerships and associationsNOT private individualscan file with the SEC, petitions for declaration in a state of suspension of payments. Thus, it logically follows that the SEC does not have jurisdiction to entertain petitions for suspension of payments filed by parties other than corporations, partnerships or associations. Indeed, settled is the rule that it is axiomatic that jurisdiction is the authority to hear and determine a cause, which is conferred by law and not by the policy of any court or agency.[38] Private individuals and their privately owned properties cannot be placed under the jurisdiction of the SEC in a petition for suspension of payments In Chung Ka Bio v. Intermediate Appellate Court,[39] this Court resolved in the negative the issue of whether private individuals can file with the SEC petitions for declaration in a state of suspension of payments. We held that Sec. 5(d) of PD 902-A clearly does not allow a mere individual to file the petition, which is limited to corporations, partnerships or associations. Besides, We pointed out that the SEC, being a mere administrative agency, is a tribunal of limited jurisdiction and, as such, can only exercise those powers, which are specifically granted to them by their enabling statutes. We, thus, concluded that where no authority is granted to hear petitions of individuals for suspension of payments, such petitions are beyond the competence of the SEC. In short, the SEC has no jurisdiction over private individuals relative to any petition for suspension of payments, whether the private individual is a petitioner or a co-petitioner. We have said time and again that the SECs jurisdiction is limited only to corporations and corporate assets; it has no jurisdiction over the properties of private individuals or natural persons, even if they are the corporations officers or sureties.[40] We have, thus, consistently applied this ruling to the subsequent Ong v. Philippine Commercial International Bank,[41] Modern Paper Products, Inc. v. Court of Appeals,[42] and Union Bank of the Philippines v. Court of Appeals.[43] Here, it is undisputed that the petition for suspension of payments was collectively filed by the five corporations owned by the Lee family. It is likewise undisputed that together with the consolidated petition

is a list of properties, which included the subject Antipolo properties owned by Samuel and Pauline Lee. The fact, however, that the subject properties were included in the list submitted to the SEC does not confer jurisdiction on the SEC over such properties. It is apparent that even if the members of the Lee family are joined as co-petitioners with the five corporations, still, this could not confer jurisdiction on the SEC over the Lee family membersas private individualsnor could this affect their privately owned properties. Further, the fact that the debts of MDEC and MHI to Bangkok Bank are secured by the Lee family through the guarantees will not likewise put the Lee family and their privately owned properties under the jurisdiction of the SEC through the consolidated petition for suspension of payments. Therefore, the February 20, 1998 Suspension Order issued by the SEC did not and could not have included the subject properties. The RTC correctly grasped this point that the disposition of the subject properties did not violate the suspension order.
http://sc.judiciary.gov.ph/jurisprudence/2011/february2011/173349.htm Posted in SEC | Tagged PD 902-A vested the SEC with jurisdiction on petitions for suspension of payments only on corporations partnerships and associations; not on individual persons | Leave a comment Prevailing and applicable SEC laws Posted on February 10, 2012 by Erineus

At the outset, it must be noted that at the time the Consolidated Petition for the Declaration of a State of Suspension of Payments and for Appointment of a Management Committee/Rehabilitation Receiver was filed before the SEC on February 16, 1998 by MDEC, MHI, and three other corporations owned by the Lee family, Batas Pambansa Blg.(BP) 178 or the then Revised Securities Act was the primary governing law along with Presidential Decree No. (PD) 902-A, as amended, and the Corporation Code of the Philippines. Pertinently, among others, the SEC was also covered by the Investment House Law (PD 129), the Financing Company Act under Republic Act. No. (RA) 2626, the Foreign Investments Act (RA 7042), and the Liberalized Foreign Investments Act (RA 8179). And subsequent to the filing of the instant case, the Securitization Act of 2004 (RA 9267) and the Lending Company Regularization Act of 2007 (RA 9474) were also enacted. PD 902-A,[34] however, was further amended by RA 8799 or the Securities Regulation Code, approved on July 19, 2000 by President Joseph Estrada.[35] Under Sec. 5.2 of RA 8799,[36] the SECs original and exclusive jurisdiction over all cases enumerated under Sec. 5 of PD 902-A[37] was transferred to the appropriate RTC. RA 8799, Sec. 5.2, however, expressly stated as an exception, that the [t]he Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed. Accordingly, the Consolidated Petition for the Declaration of a State of Suspension of Payments and for Appointment of a Management Committee/Rehabilitation Receiver filed on February 16, 1998 by MDEC, MHI and three other corporations owned by the Lee family, remained under the jurisdiction of the SEC until finally disposed of pursuant to the last sentence of Sec. 5.2 of RA 8799.
http://sc.judiciary.gov.ph/jurisprudence/2005/oct2005/156081.htm

Does the suspension of all claims as an incident to a corporate rehabilitation also contemplate the suspension of criminal charges filed against the corporate officers of the distressed corporation? Posted on February 3, 2012 by Erineus

The issue to be resolved then is: does the suspension of all claims as an incident to a corporate rehabilitation also contemplate the suspension of criminal charges filed against the corporate officers of the distressed corporation? This Court rules in the negative. In Rosario v. Co[24] (Rosario), a case of recent vintage, the issue resolved by this Court was whether or not during the pendency of rehabilitation proceedings, criminal charges for violation of Batas Pambansa Bilang 22 should be suspended, was disposed of as follows: x x x the gravamen of the offense punished by B.P. Blg. 22 is the act of making and issuing a worthless check; that is, a check that is dishonored upon its presentation for payment. It is designed to prevent damage to trade, commerce, and banking caused by worthless checks. In Lozano v. Martinez,this Court declared that it is not the nonpayment of an obligation which the law punishes. The law is not intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the making and circulation of worthless checks. Because of its deleterious effects on the public interest, the practice is proscribed by the law. The law punishes the act not as an offense against property, but an offense against public order. The prime purpose of the criminal action is to punish the offender in order to deter him and others from committing the same or similar offense, to isolate him from society, to reform and rehabilitate him or, in general, to maintain social order. Hence, the criminal prosecution is designed to promote the public welfare by punishing offenders and deterring others. Consequently, the filing of the case for violation of B.P. Blg. 22 is not a claim that can be enjoined within the purview of P.D. No. 902-A. True, although conviction of the accused for the alleged crime could result in the restitution, reparation or indemnification of the private offended party for the damage or injury he sustained by reason of the felonious act of the accused, nevertheless, prosecution for violation of B.P. Blg. 22 is a criminal action. A criminal action has a dual purpose, namely, the punishment of the offender and indemnity to the offended party. The dominant and primordial objective of the criminal action is the punishment of the offender. The civil action is merely incidental to and consequent to the conviction of the accused. The reason for this is that criminal actions are primarily intended to vindicate an outrage against the sovereignty of the state and to impose the appropriate penalty for the vindication of the disturbance to the social order caused by the offender. On the other hand, the action between the private complainant and the accused is intended solely to indemnify the former.[25] Rosario is at fours with the case at bar. Petitioners are charged with violations of Section 28 (h) of the SSS law, in relation to Article 315 (1) (b) of the Revised Penal Code, or Estafa. The SSS law clearly criminalizes the non-remittance of SSS contributions by an employer to protect the employees from unscrupulous employers. Therefore, public interest requires that the said criminal acts be immediately investigated and prosecuted for the protection of society.

The rehabilitation of SIHI and the settlement of claims against the corporation is not a legal ground for the extinction of petitioners criminal liabilities. There is no reason why criminal proceedings should be suspended during corporate rehabilitation, more so, since the prime purpose of the criminal action is to punish the offender in order to deter him and others from committing the same or similar offense, to isolate him from society, reform and rehabilitate him or, in general, to maintain social order.[26] As correctly observed inRosario,[27] it would be absurd for one who has engaged in criminal conduct could escape punishment by the mere filing of a petition for rehabilitation by the corporation of which he is an officer. The prosecution of the officers of the corporation has no bearing on the pending rehabilitation of the corporation, especially since they are charged in their individual capacities. Such being the case, the purpose of the law for the issuance of the stay order is not compromised, since the appointed rehabilitation receiver can still fully discharge his functions as mandated by law. It bears to stress that the rehabilitation receiver is not charged to defend the officers of the corporation. If there is anything that the rehabilitation receiver might be remotely interested in is whether the court also rules that petitioners are civilly liable. Such a scenario, however, is not a reason to suspend the criminal proceedings, because as aptly discussed in Rosario, should the court prosecuting the officers of the corporation find that an award or indemnification is warranted, such award would fall under the category of claims, the execution of which would be subject to the stay order issued by the rehabilitation court.[28] The penal sanctions as a consequence of violation of the SSS law, in relation to the revised penal code can therefore be implemented if petitioners are found guilty after trial. However, any civil indemnity awarded as a result of their conviction would be subject to the stay order issued by the rehabilitation court. Only to this extent can the order of suspension be considered obligatory upon any court, tribunal, branch or body where there are pending actions for claims against the distressed corporation. [29] On a final note, this Court would like to point out that Congress has recently enacted Republic Act No. 10142, or the Financial Rehabilitation and Insolvency Act of 2010.[30] Section 18 thereof explicitly provides that criminal actions against the individual officer of a corporation are not subject to the Stay or Suspension Order in rehabilitation proceedings, to wit: The Stay or Suspension Order shall not apply: xxxx (g) any criminal action against individual debtor or owner, partner, director or officer of a debtor shall not be affected by any proceeding commenced under this Act. Withal, based on the foregoing discussion, this Court rules that there is no legal impediment for Branch 51 to proceed with the cases filed against petitioners.
http://sc.judiciary.gov.ph/jurisprudence/2011/february2011/173846.htm Two-tier test in determining the existence of intra-corporate controversy Posted on December 21, 2011 by Erineus

Two-tier test in determining the existence of intra-corporate controversy Respondents strongly rely on this Courts pronouncement in the 1997 case ofTabang v. National Labor Relations Commission, to wit: [A]n intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification nor any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations.[16] In view of this, respondents contend that even if petitioner challenges his being a corporate officer, the present case still constitutes an intra-corporate controversy as petitioner is undisputedly a stockholder and a director of respondent corporation. It is worthy to note, however, that before the promulgation of the Tabang case, the Court provided in Mainland Construction Co., Inc. v. Movilla[17] a better policy in determining which between the Securities and Exchange Commission (SEC) and the Labor Arbiter has jurisdiction over termination disputes,[18] or similarly, whether they are intra-corporate or not, viz: The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of the SEC (now the Regional Trial Court[19]). The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is subject of their controversy . In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only SEC (now the Regional Trial Court[20]) can resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours) And, while Tabang was promulgated later than Mainland Construction Co., Inc.,the better policy enunciated in the latter appears to have developed into a standard approach in classifying what constitutes an intra-corporate controversy. This is explained lengthily in Reyes v. Regional Trial Court of Makati, Br. 142,[21] to wit: Intra-Corporate Controversy A review of relevant jurisprudence shows a development in the Courts approach in classifying what constitutes an intra-corporate controversy. Initially, the main consideration in determining whether a dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among the parties. The types of relationships embraced under Section 5(b) x x x were as follows: a) between the corporation, partnership or association and the public; b) between the corporation, partnership or association and its stockholders, partners, members or officers; c) between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and d) among the stockholders, partners or associates themselves. The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC (now the RTC), regardless of the subject matter of the dispute. This came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc.,the Court introduced the nature of the controversy test. We declared in this case that it is not the mere existence of an intracorporate relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or stockholders. We saw that there is no legal sense in disregarding or minimizing the value of the nature of the transactions which gives rise to the dispute. Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative rights and obligations under the Corporation Code and the internal and intra -corporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists. The Court then combined the two tests and declared that jurisdiction should be determined by considering not only the status or relationship of the parties, but also the nature of the question under controversy. This twotier test was adopted in the recent case of Speed Distribution Inc. v. Court of Appeals: To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy. The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or associates, between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership, or association and the State insofar as it concerns the individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy. [Citations omitted.] Guided by this recent jurisprudence, we thus find no merit in respondents contention that the fact alone that petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as to consider them as intra-corporate controversies. What then is the nature of petitioners Complaint for Illegal Dismissal? Is it intra-corporate and thus beyond the jurisdiction of the Labor Arbiter? We shall answer this question by using the standards set forth in the Reyes case. No intra-corporate relationship between the parties As earlier stated, petitioners status as a stockholder and director of respondent corporation is not disputed. What the parties disagree on is the finding of the NLRC and the CA that petitioner is a corporate officer. An examination of the complaint for illegal dismissal, however, reveals that the root of the controversy is petitioners dismissal as Manager of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is involved in this case not in his capacity as a stockholder or director, but as an alleged corporate officer. In applying the relationship test, therefore, it is necessary to determine if petitioner is a corporate officer of respondent corporation so as to establish the intra-corporate relationship between the parties. And albeit respondents claim that the determination of whether petitioner is a corporate officer is a question of fact which this Court cannot pass upon in this petition for review on certiorari, we shall nonetheless proceed to consider the same because such question is not the main issue to be resolved in this case but is merely collateral to the core issue earlier mentioned. Petitioner negates his status as a corporate officer by pointing out that although he was removed as Manager through a board resolution, he was never elected to said position nor was he appointed thereto by the Board of Directors. While the By-Laws of respondent corporation provides that the Board may from time to time appoint such officers as it may deem necessary or proper, he avers that respondents failed to present any board resolution that he was appointed pursuant to said By-Laws. He instead alleges that he was hired as Manager of respondent corporation solely by respondent Abe. For these reasons, petitioner claims to be a mere employee of respondent corporation rather than as a corporate officer. We find merit in petitioners contention. Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the Corporation Code or by the corporations by-laws. There are three specific officers whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer. The number of officers is not limited to these three. A corporation may have such other officers as may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The number of corporate officers is thus limited by law and by the corporations bylaws.[22] Respondents claim that petitioner was appointed Manager by virtue of Section 1, Article IV of respondent corporations By-Laws which provides: ARTICLE IV OFFICER Section 1. Election/Appointment Immediately after their election, the Board of Directors shall formally organize by electing the President, Vice-President, the Secretary at said meeting. The Board, may from time to time, appoint such other officers as it may determine to be necessary or proper. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as President and Treasurer or Secretary at the same time. x x x x[23] (Emphasis ours)

We have however examined the records of this case and we find nothing to prove that petitioners appointment was made pursuant to the above-quoted provision of respondent corporations By-Laws. No copy of board resolution appointing petitioner as Manager or any other document showing that he was appointed to said position by action of the board was submitted by respondents. What we found instead were mere allegations of respondents in their various pleadings[24] that petitioner was appointed as Manager of respondent corporation and nothing more. The Court has stressed time and again that allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.[25] It also does not escape our attention that respondents made the following conflicting allegations in their Memorandum on Appeal[26] filed before the NLRC which cast doubt on petitioners status as a corporate officer, to wit: xxxx 24. Complainant-appellee Renato Real was appointed as the manager of respondent-appellant Sangu on November 6, 1998. Priorly [sic], he was working at Atlas Ltd. Co. at Mito-shi, Ibaraki-kenJapan. He was staying in Japanas an illegal alien for the past eleven (11) years. He had a problem with his family here in the Philippineswhich prompted him to surrender himself to Japans Bureau of Immigration and was deported back to the Philippines. His former employer, Mr. Tsutomo Nogami requested Mr. Masahiko Shibata, one of respondent-appellant Sangus Board of Directors, if complainant-appellee Renato Real could work as one of its employees here in the Philippines because he had been blacklisted at Japans Immigration Office and could no longer go back to Japan. And so it was arranged that he would serve as respondent-appellant Sangus manager, receiving a salary of P25,000.00. As such, he was tasked to oversee the operations of the company. x x x (Emphasis ours) xxxx As earlier stated, complainant-appellee Renato Real was hired as the manager of respondent-appellant Sangu. As such, his position was reposed with full trust and confidence. x x x While respondents repeatedly claim that petitioner was appointed as Manager pursuant to the corporations By-Laws, the above-quoted inconsistencies in their allegations as to how petitioner was placed in said position, coupled by the fact that they failed to produce any documentary evidence to prove that petitioner was appointed thereto by action or with approval of the board, only leads this Court to believe otherwise. It has been consistently held that [a]n office is created by the charter of the corporation and the officer is elected (or appointed) by the directors or stockholders.[27] Clearly here, respondents failed to prove that petitioner was appointed by the board of directors. Thus, we cannot subscribe to their claim that petitioner is a corporate officer. Having said this, we find that there is no intra-corporate relationship between the parties insofar as petitioners complaint for illegal dismissal is concerned and that same does not satisfy the relationship test.
http://sc.judiciary.gov.ph/jurisprudence/2011/january2011/168757.htm

Even if not all the details are identical, as long as the general appearance of the two products are such that any ordinary purchaser would be deceived, the imitator should be liable for trademark infringement
Posted on March 2, 2012 by Erineus

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the primary issue posed by them dwells on the issue of whether or not respondent is guilty of trademark infringement. After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision. The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293. Specifically, Section 155 of R.A. No. 8293 states: Remedies; Infringement. Any person who shall, without the consent of the owner of the registered mark: 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.[15] The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed tests the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments.[16] In contrast, the Holistic or Totality Test necessitates 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 labels so that the observer may draw conclusion on whether one is confusingly similar to the other.[17] Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent.[18] Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized S by respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the IPO. While it is undisputed that petitioners stylized S is within an oval design, to this Courts mind, the dominant feature of the trademark is the stylized S, as it is

precisely the stylized S which catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact that it used the same stylized S, the same being the dominant feature of petitioners trademark, already constitutes infringement under the Dominancy Test. This Court cannot agree with the observation of the CA that the use of the letter S could hardly be considered as highly identifiable to the products of petitioner alone. The CA even supported its conclusion by stating that the letter S has been used in so many existing trademarks, the most popular of which is the trademark S enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such reasoning, however, misses the entire point, which is that respondent had used a stylized S, which is the samestylized S which petitioner has a registered trademark for. The letter S used in the Superman logo, on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA of the letter S used in the Superman trademark with petitioners stylized S is not appropriate to the case at bar. Furthermore, respondent did not simply use the letter S, but it appears to this Court that b ased on the font and the size of the lettering, the stylized S utilized by respondent is the very same stylized S used by petitioner; a stylized S wh ich is unique and distinguishes petitioners trademark. Indubitably, the likelihood of confusion is p resent as purchasers will associate the respondents use of the stylized S as having been authorized by petitioner or that respondents product is connected with petitioners business. Both the RTC and the CA applied the Holistic Test in ruling that resp ondent had not infringed petitioners trademark. For its part, the RTC noted the following supposed dissimilarities between the shoes, to wit: The mark S found in Strong Shoes is not enclosed in an oval design. The word Strong is conspicuously placed at the backside and insoles. The hang tags and labels attached to the shoes bears the word Strong for respondent and SkechersU.S.A. for private complainant; Strong shoes are modestly priced compared to the costs of Skechers Shoes.[19] While there may be dissimilarities between the appearances of the shoes, to this Courts mind such dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be readily observed by simply comparing petitioners Energy[20] model and respondents Strong[21] rubber shoes, respondent also used the color scheme of blue, white and gray utilized by petitioner. Even the design and wavelike pattern of the midsole and outer sole of respondents shoes are very similar to petitioners shoes, if not exact patterns thereof. A t the side of the midsole near the heel of both shoes are two elongated designs in practically the same location. Even the outer soles of both shoes have the same number of ridges, five at the back and six in front. On the side of respondents shoes, near the upper part, appears the stylized S, placed in the exact location as that of the stylized S on petitioners shoes. On top of the tongue of both shoes appears the stylized S in practically the same location and size. Moreover, at the back of petitioners shoes, near the heel counter, appears Skechers Sport Trail written in white lettering. However, on respondents shoes appears Strong Sport Trail noticeably written in the same white lettering, font size, direction and orientation as that of p etitioners shoes. On top of the heel collar of petitioners shoes are two grayish-white semi-transparent circles. Not surprisingly, respondents shoes also have two grayish-white semi-transparent circles in the exact same location. Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and frivolous that it is indubitable that respondents products will cause confusion and mistake in the eyes of the public. Respondents shoes may not be an exact replica of petitioners shoes, but the features and overall design are so similar and alike that confusion is highly likely. In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc.,[22] this Court, in a case for unfair competition, had opined that even if not all the details are identical, as long as the general appearance of the two products are such that any ordinary purchaser would be deceived, the imitator should be liable, to wit: From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for their respective brands, of course. We fully agree with the trial court that the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch and the soles of the two products are exactly the same (such that) at a distance of a few meters, it is impossible to distinguish Custombuilt from Chuck Taylor. These elements are more than sufficient to serve as basis for a charge of unfair competition. Even if not all the details just mentioned were identical, with the general appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and discriminating customer could be deceived, and, therefore, Custombuilt could easily be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must be held liable. x x x[23] Neither can the difference in price be a complete defense in trademark infringement. In McDonalds Corporation v. L.C. Big Mak Burger. Inc.,[24] this Court held: Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). x x x[25] Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market.[26] The purchasing public might be mistaken in thinking that petitioner had ventured into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport Trail might be associated or connected with petitioners brand, which scenario is plausible especially since both petitioner and respondent manufacture rubber shoes. Withal, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods.[27] While respondents shoes contain some dissimilarities with petitioners shoes, this Court cannot close its eye to the fact that for all int ents and purpose, respondent had deliberately attempted to copy petitioners mark and overall design and features of the shoes. Let it be remembered, that defendants in cases of infringement do not normally copy but only make colorable changes.[28] The most successful form of copying is to employ enough points of similarity to confuse the public, with enough points of difference to confuse the courts.[29] http://sc.judiciary.gov.ph/jurisprudence/2011/march2011/164321.htm
Posted in Intellectual Property, IPO, Trademark | Tagged Even if not all the details are identical as long as the general appearance of the two products are such that any ordinary purchaser would be deceived the imitator should be liable for trademark infri | Leave a comment

Solidary liabilities may at times be incurred by the directors and officers of the corporation but only when exceptional circumstances warrant
Posted on February 29, 2012 by Erineus

Lastly, we deem it imperative to resolve the question of whether Grandteqs officers, who are co -petitioners herein, are solidarily liable with the company.

There is solidary liability when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires.[44] In MAM Realty Development Corporation v. NLRC,[45] the solidary liability of corporate officers in labor disputes was discussed in this wise: A corporation, being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally, in the following cases: 1. When directors and trustees or, in appropriate cases, the officers of a corporation (a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; xxxx In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with the corporation for the termination of employment of employees done with malice or in bad faith. From the decisions of the LA, the NLRC, and the CA, there is no indication that Estrellas dismissal was effected with malice or bad faith on the part of Grandteqs officers. Their liability for Estrellas illegal dismissal, the consequential monetary award arising from such dismissal and the other money claims awarded in the LAs decision, as correctly affirmed by the CA, could thus only be joint, not solidary. This pronouncement does not extend to Estrellas claims for commissions, allowances, and incentives, as the same are still subject to the LAs scrutiny.
http://sc.judiciary.gov.ph/jurisprudence/2011/march2011/192416.htm
Posted in Corporation Law, Labor Law, Obligations and Contracts | Tagged Solidary liabilities may at times be incurred by the directors and officers of the corporation but only when exceptional circumstances warrant | Leave a comment

PD 902-A vested the SEC with jurisdiction on petitions for suspension of payments only on corporations, partnerships and associations; not on individual persons Posted on February 10, 2012 by Erineus PD 902-A vested the SEC with jurisdiction on petitions for suspension of payments only on corporations, partnerships and associations; not on individual persons The SECs jurisdiction is evident from the statutorily vested power of jurisdiction, supervision and control by the SEC over all corporations, partnerships or associations, which are grantees of primary franchise, license or permit issued by the government to operate in the Philippines, and its then original and exclusive jurisdiction over petitions for suspension of payments of said entities. Secs. 3 and 5 of PD 902-A pertinently provides, thus: Sec. 3. The Commission shall have absolute jurisdiction, supervision and control over all corporations, partnerships or associations, who are the grantees of primary franchise and/or a license or permit issued by the government to operate in the Philippines; and in the exercise of its authority, it shall have the power to enlist the aid and support of any and all enforcement agencies of the government, civil or military. Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: x x x x (d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree. (Emphasis Ours.) It can be clearly gleaned from the above provisions that in cases of petitions for the suspension of payments, the SEC has jurisdiction over corporations, partnerships and associations, which are grantees of primary franchise or license or permit issued by the government to operate in the Philippines, and their properties. And it is indubitably clear from the aforequoted Sec. 5(d) that only corporations, partnerships and associationsNOT private individualscan file with the SEC, petitions for declaration in a state of suspension of payments. Thus, it logically follows that the SEC does not have jurisdiction to entertain petitions for suspension of payments filed by parties other than corporations, partnerships or associations. Indeed, settled is the rule that it is axiomatic that jurisdiction is the authority to hear and determine a cause, which is conferred by law and not by the policy of any court or agency.[38] Private individuals and their privately owned properties cannot be placed under the jurisdiction of the SEC in a petition for suspension of payments In Chung Ka Bio v. Intermediate Appellate Court,[39] this Court resolved in the negative the issue of whether private individuals can file with the SEC petitions for declaration in a state of suspension of payments. We held that Sec. 5(d) of PD 902-A clearly does not allow a mere individual to file the petition, which is lim ited to corporations, partnerships or associations. Besides, We pointed out that the SEC, being a mere administrative agency, is a tribunal of limited jurisdiction and, as such, can only exercise those powers, which are specifically granted to them by their enabling statutes. We, thus, concluded that where no authority is granted to hear petitions of individuals for suspension of payments, such petitions are beyond the competence of the SEC. In short, the SEC has no jurisdiction over private individuals relative to any petition for suspension of payments, whether the private individual is a petitioner or a co-petitioner. We have said time and again that the SECs jurisdiction is limited only to corporations and corporate assets; it has no jurisdiction ov er the properties of private individuals or natural persons, even if they are the corporations officers or sureties.[40] We have, thus, consistently applied this ruling to the subsequent Ong v. Philippine Commercial International Bank,[41] Modern Paper Products, Inc. v. Court of Appeals,[42] and Union Bank of the Philippines v. Court of Appeals.[43] Here, it is undisputed that the petition for suspension of payments was collectively filed by the five corporations owned by the Lee family. It is likewise undisputed that together with the consolidated petition is a list of properties, which included the subject Antipolo properties owned by Samuel and Pauline Lee. The fact, however, that the subject properties were included in the list submitted to the SEC does not confer jurisdiction on the SEC over such properties. It is apparent that even if the members of the Lee family are joined as co-petitioners with the five corporations, still, this could not confer jurisdiction on the SEC over the Lee family membersas private individualsnor could this affect their privately owned properties. Further, the fact that the debts of MDEC and MHI to Bangkok Bank are secured by the Lee family through the guarantees will not likewise put the Lee family and their privately owned properties under the jurisdiction of the SEC through the consolidated petition for suspension of payments. Therefore, the February 20, 1998 Suspension Order issued by the SEC did not and could not have included the subject properties. The RTC correctly grasped this point that the disposition of the subject properties did not violate the suspension order. http://sc.judiciary.gov.ph/jurisprudence/2011/february2011/173349.htm Posted in SEC | Tagged PD 902-A vested the SEC with jurisdiction on petitions for suspension of payments only on corporations partnerships and associations; not on individual persons | Leave a comment Prevailing and applicable SEC laws Posted on February 10, 2012 by Erineus

At the outset, it must be noted that at the time the Consolidated Petition for the Declaration of a State of Suspension of Payments and for Appointment of a Management Committee/Rehabilitation Receiver was filed before the SEC on February 16, 1998 by MDEC, MHI, and three other corporations owned by the Lee family, Batas Pambansa Blg.(BP) 178 or the then Revised Securities Act was the primary governing law along with Presidential Decree No. (PD) 902-A, as amended, and the Corporation Code of the Philippines. Pertinently, among others, the SEC was also covered by the Investment House Law (PD 129), the Financing Company Act under Republic Act. No. (RA) 2626, the Foreign Investments Act (RA 7042), and the Liberalized Foreign Investments Act (RA 8179). And subsequent to the filing of the instant case, the Securitization Act of 2004 (RA 9267) and the Lending Company Regularization Act of 2007 (RA 9474) were also enacted. PD 902-A,[34] however, was further amended by RA 8799 or the Securities Regulation Code, approved on July 19, 2000 by President Joseph Estrada.[35] Under Sec. 5.2 of RA 8799,[36] the SECs original and exclusive jurisdiction over all cases enumerated under Sec. 5 of PD 902-A[37] was transferred to the appropriate RTC. RA 8799, Sec. 5.2, however, expressly stated as an exception, that the [t]he Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed. Accordingly, the Consolidated Petition for the Declaration of a State of Suspension of Payments and for Appointment of a Management Committee/Rehabilitation Receiver filed on February 16, 1998 by MDEC, MHI and three other corporations owned by the Lee family, remained under the jurisdiction of the SEC until finally disposed of pursuant to the last sentence of Sec. 5.2 of RA 8799. http://sc.judiciary.gov.ph/jurisprudence/2005/oct2005/156081.htm Posted in SEC | Tagged Prevailing and applicable SEC laws | Leave a comment Being an accredited exporter recognized by the Bureau of Export Trade Promotion (BETP) of the DTI proves that it is a deviation from the connotation of small scale. Posted on March 6, 2012 by Erineus Further militating against petitioners claim is the RTCs astute observation that being an accredited exporter recognized by the Bureau of Export Trade Promotion (BETP) of the DTI seemed like a deviation from the connotation of small scale. [64] The Court notes that, to be accredited by the BETP as an exporter, there are strict standards that the enterprise must meet. Under R.A. No. 7844, the Export Development Act of 1994, an exporter is any person, natural or juridical, licensed to do business in the Philippines, engaged directly or indirectly in the production, manufacture or trade of products or services, which earns at least fifty percent (50%) of its normal operating revenues from the sale of its products or services abroad for foreign currency.[65] The same law provides for tax incentives to exporters, with the qualification that the incentives shall be granted only upon presentation of their BETP certification of the exporters eligibility. [66] Qualified exporters applying for BETP certification must present a report of their export revenue/sales for the immediately preceding year.[67] DTI Administrative Order No. 3, Series of 1995, provides for the mechanisms of accreditation for exporters vis--vis the tax The Court recognizes the right of petitioner to engage in business and to profit from its industry. However, the exercise of the right must conform to the laws and regulations laid down by the competent authorities. http://sc.judiciary.gov.ph/jurisprudence/2011/march2011/171427.htm Posted in Cottage Industry, DTI, Export Devt Act, Jewelry Industry | Tagged Being an accredited exporter recognized by the Bureau of Export Trade Promotion (BETP) of the DTI proves that it is a deviation from the connotation of small scale." | Leave a comment Capitalization or asset requirements is a defining element in determining if an enterprise is a cottage industry. Posted on March 6, 2012 by Erineus Next, the Court must determine if petitioner is in fact a cottage industryentitled to claim the exemption under LLDA Resolution No. 41, Series of 1997. That jewelry-making is one of the activities considered as a cottage industry is undeniable. The laws bear this out. However, based on these same laws, the nature of the activity isonly one of several factors to be considered in determining whether the same is acottage industry. In view of the emphasis in law after law on the capitalization or asset requirements, it is crystal clear that the same is a defining element in determining if an enterprise is a cottage industry. Petitioner argues that its assets amount to only P312,500.00, representing its paid-up capital at the time of its SEC registration. The law then in force was R.A. No. 6977, which, to recapitulate, states: SEC. 3. Small and Medium Enterprises as Beneficiaries. Small and medium enterprise shall be defined as any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporationwhose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entitys office, plant, and equipment are situated, must have value falling under the following categories: micro : less than P50,000 cottage: P50,001 P500,000 small : P500,001 P5,000,000 medium: P5,000,001 P20,000,000 In a generic sense, all enterprises with total assets of Five million pesos (P5,000,000) and below shall be called small enterprises. Accordingly, it should be considered as a cottage industry, petitioner insists. http://sc.judiciary.gov.ph/jurisprudence/2011/march2011/171427.htm