November 2011 Philippine Supreme Court

Decisions on Commercial Law

Posted on December 12, 2011 by Hector M. de Leon Jr Posted in Commercial Law
Here are selected November 2011 rulings of the Supreme Court of the Philippines on commercial law:
Corporations; piercing the corporate veil. Piercing the veil of corporate fiction is warranted only in cases when
the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime,
such that in the case of two corporations, the law will regard the corporations as merged into one. As
succinctly discussed by the Court in Velarde v. Lopez, Inc.:
Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by piercing the veil of corporate
fiction. Piercing the veil of corporate fiction is warranted, however, only in cases when the separate legal entity
is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two
corporations, the law will regard the corporations as merged into one. The rationale behind piercing a
corporations identity is to remove the barrier between the corporation from the persons comprising it to thwart
the fraudulent and illegal schemes of those who use the corporate personality as a shield for undertaking
certain proscribed activities.
In applying the doctrine of piercing the veil of corporate fiction, the following requisites must be established:
(1) control, not merely majority or complete stock control; (2) such control must have been used by the
defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonest acts in contravention of plaintiffs legal rights; and (3) the aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained of. (Citations omitted.)
Nowhere, however, in the pleadings and other records of the case can it be gathered that respondent has
complete control over Sky Vision, not only of finances but of policy and business practice in respect to
the transaction attacked, so that Sky Vision had at the time of the transaction no separate mind, will or
existence of its own. The existence of interlocking directors, corporate officers and shareholders is not enough
justification to pierce the veil of corporate fiction in the absence of fraud or other public policy considerations.
Hacienda Luisita Incorporated vs. Presidential Agrarian Reform Council, G.R. No. 171101, November 22,
2011.
Corporations; piercing the corporate veil. Absent any allegation or proof of fraud or other public policy
considerations, the existence of interlocking directors, officers and stockholders is not enough justification to
pierce the veil of corporate fiction as in the instant case. Hacienda Luisita Incorporated vs. Presidential
Agrarian Reform Council, G.R. No. 171101, November 22, 2011.
Mark; infringement. A mark is any visible sign capable of distinguishing the goods (trademark) or services
(service mark) of an enterprise and shall include a stamped or marked container of goods.
In McDonalds Corporation and McGeorge Food Industries, Inc. v. L.C. Big Mak Burger, Inc., this Court held:
To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiffs
mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable imitation by the
alleged infringer results in likelihood of confusion. Of these, it is the element of likelihood of confusion that
is the gravamen of trademark infringement.
A mark is valid if it is distinctive and not barred from registration. Once registered, not only the marks
validity, but also the registrants ownership of the mark is prima facie presumed. Gemma Ong a.k.a. Ma.
Theresa Gemma Catacutan vs. People of the Philippines, G.R. No. 169440,. November 23, 2011.