business torts

Business TortsBy:

Nature and Definition: a tort that impairs some aspect of an economic interest or business relationship and

causes economic loss rather than property damage or bodily harm. (Black’s Law Dictionary).

intentional torts not committed against persons or property. Instead, the harm done is to intangible assets, such as economic interests or business relationships.

civil wrongs that are committed by or against an organization. They frequently involve harm done to the organization’s intangible assets, such as its business relationships with clients or its intellectual property. Some common categories of business torts include fraud, breach of fiduciary duty, and unfair competition.

Business Torts in other Jurisdiction:

Breach of Fiduciary Duty Civil Conspiracy Civil Theft Constructive Trust Conversion Equitable Accounting Florida’s Deceptive & Unfair Trade Practices ActFraud Fraud in the Inducement Injurious Falsehood Theft and Loss of Business Opportunities Theft of Trade Secrets Tortious Interference Business Torts in the Philippines:Interference with contractInterference with prospective advantageUnfair CompetitionSecurities related torts

Relief:Typical legal remedies include economic losses if they can be proven with certainty and mental distress. Additionally, punitive damages may be awarded if malice on the part of the wrongdoer can be established.

Equitable remedies may include injunctive relief in the form of a negative injunction that would be used to prevent the wrongdoer from benefiting from any contractual relationship that may arise out of the interference, i.e., the performance of a singer who was originally contracted with the plaintiff to perform at the same time.

I. Interference with contract Occurs where the tortfeasor convinces a party to breach the contract against the

plaintiff, or where the tortfeasor disrupts the ability of one party to perform his obligations under the contract, thereby preventing the plaintiff from receiving the performance promised.

The classic example of this tort occurs when one party induces another party to breach a contract with a third party, in circumstances where the first party has no

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privilege to act as it does and acts with knowledge of the existence of the contract. Such conduct is termed tortious inducement of breach of contract.

Article 1314, Civil Code:Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.

Exemption to the relativity of contracts in Article 1311 of the Civil Code

Elements:1. Existence of a valid contract 2. Knowledge on the part of the third person of the existence of the contract 3. Interference of the third person without legal justification

Existence of a valid contract No tort is committed if the party has already broken the contract and offers to

contract with the defendant No action can be maintained if the contract is void

Knowledge on the part of the tort interfeasor Is the existence of malice necessary? It is enough if the wrongdoer, having knowledge of the existence of the contract

relation, in bad faith sets about to break it up. Whether the motive is to benefit himself or gratify his spite by working mischief to

the other is immaterial.

Interference without legal justification Is competition a legal justification? Yes if in the competition:

a.) defendant’s purpose is justifiable and b.) the defendant employs no means of fraud or deception which are regarded as unfair.

If it is an unfair competition or the dominant purpose is to inflict harm or injury: Not a legal justification.

Extent of Liability:Whatever may be the character of the liability which a stranger to a contract may incur by advising or assisting one of the parties to evade performance, such stranger cannot become more extensively liable in damages for the non-performance of the contract than the party in whose behalf he intermeddles. (Daywalt vs. La Corporacion)


When competition constitutes justifiable interference; when not. Competition in business, even though carried to the extent of ruining a rival, constitutes justifiable interference in another’s business relations, and is not actionable, so long as it is carried on in furtherance of one’s own interest, and by means that are lawful.

Interference with the business relations of another by means of competition is not justifiable where the methods of competition employed are unfair or not lawful, or where the dominant purpose of the competition is to inflict harm or injury and not to further one’s business.

G.R. No. 86683 January 21, 1993PHILIP S. YU, petitioner, vs.THE HONORABLE COURT OF APPEALS, THE HONORABLE PRESIDING JUDGE, RTC OF MANILA, BRANCH XXXIV (34) and UNISIA MERCHANDISING CO., INC., respondents.

Facts:Philip S. Yu, petitioner herein, has an exclusive sales agency agreement with the House of Mayfair since 1987. As such, petitioner is the exclusive distributor of House of Mayfair wall covering products in the Philippines.

Unisia Marketing, herein private respondent, imported the same goods (via the FNF Trading), who eventually sold the merchandise in the domestic market.

According to the petitioner, private respondent together with the FNF trading misled House of Mayfair to believe that the goods ordered by them were intended for shipment to Nigeria. However, the truth was such goods were delivered and sold in the Philippines.

Private respondent professed ignorance of the exclusive contract in favor of petitioner.

Petitioner filed a suit for injunction before the RTC which sought to enjoin the sale and distribution by private respondent of the same goods in the same market.

Petitioner anchors his plea for redress on his perception that private respondent has distributed and continues to sell Mayfair covering products in contravention of petitioner's exclusive right conferred by the covenant with the House of Mayfair.

RTC dismissed the suit. Petitioner filed a petition for review with the CA, but was also dismissed.

Issue: Whether or not Unisia Marketing was guilty of interference of contractual relations.

Held: Yes, Unisia Marketing was guilty of interference of contractual relations

Ratio: The liability of private respondent, if any, does not emanate from the four corners of the contract for undoubtedly, Unisia Merchandising Co., Inc. is not a party thereto but its accountability is "an independent act generative of civil liability".


Respondent court overlooked that the House of Mayfair was deceived that the goods ordered through FNF trading were to be shipped to Nigeria only, but the goods were actually sent to and sold in the Philippines.

“A ploy of this character is akin to the scenario of a third person who induces a party to renege on or violate his undertaking under a contract, thereby entitling the other contracting party to relief therefrom” (Article 1314, New Civil Code).

G.R. No. L-9356 February 18, 1915C. S. GILCHRIST, plaintiff-appellee, vs.E. A. CUDDY, ET AL., defendants. JOSE FERNANDEZ ESPEJO and MARIANO ZALDARRIAGA, appellants.

Facts:C. S. Gilchrist, the plaintiff, was the proprietor of Eagle theater located in Iloilo.

Defendant Cuddy was the owner of the film “Zigomar”. Cuddy rented the same to plaintiff Gilchrist for P 125.00. The film was to be exhibited in Gilchrist's theater during the week beginning May 26, 1913.

Later, defendants Espejo and Zaldarriaga, who were also operating a theater in Iloilo, also obtained from Cuddy a contract for the exhibition of the same film to be shown in their theater for the same week with a rental amount of P 350.00.

Gilchirst commenced an action seeking that the court issue a preliminary injunction against the defendants Espejo and Zaldarriaga prohibiting them from receiving, exhibiting or using said film in Iloilo during the last week of May 1913, or at any time prior to the delivery to the plaintiff.

Gilchrist was able to procure a preliminary injunction.

Espejo and Zaldarriaga moved for the dissolution of the preliminary injunction.

Issue: Whether or not Espejo and Zaldarriaga were guilty of interference in contractual relations.

Held: Yes, Espejo and Zaldarriaga were guilty of interference in contractual relations

Ratio:Cuddy willfully violated his contract in order that he might accept the appellant's offer of P350 for the film for the same period. The appellants must necessarily have known at the time they made their offer to Cuddy that the latter had booked or contracted the film for six weeks from April 26. Therefore, the inevitable conclusion is that the appellants knowingly induced Cuddy to violate his contract with another person.

In the case at bar the only motive for the interference with the Gilchrist — Cuddy contract on the part of the appellants was a desire to make a profit by exhibiting the film in their theater. There was no malice beyond this desire; but this fact does not relieve them of the legal liability for interfering with that contract and causing its breach.


Advising Third Person The right to give honest and friendly advice has been recognized where the interest of the person giving it are in some way involved. In our jurisdiction, interference by giving such advice is not actionable. The purpose is to protect the public and private interests and freedom of communication, decent conduct, and professional as well as lay counsel.

G.R. No. L-13505 February 4, 1919GEO. W. DAYWALT, plaintiff-appellant, vs.LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS, ET AL., defendants-appellees.

Facts:In 1902, Teodorica Endencia, executed a contract to convey a parcel of land to Geo W. Daywalt.

It was agreed that a deed should be executed as soon as the Torrens Certificate to the land is acquired by Teodorica.

The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the proceedings relative to the registration of the land, it was found by official survey that the area of the tract enclosed in the boundaries stated in the contract was about 1.248 hectares of 452 hectares as stated in the contract. In view of this development Teodorica Endencia became reluctant to transfer the whole tract to the purchaser, asserting that she never intended to sell so large an amount of land and that she had been misinformed as to its area.

This attitude of hers led to litigation in which Daywalt finally succeeded, upon appeal to the Supreme Court, in obtaining a decree for specific performance; and Teodorica Endencia was ordered to convey the entire tract of land to Daywalt pursuant to the contract of October 3, 1908, which contract was declared to be in full force and effect.

The defendant, La Corporacion de los Padres Recoletos, is a religious corporation which was tge owner of an estate on the immediately adjacent to the land which Teodorica had sold to Geo. W. Daywalt; and for many years the Recoletos Fathers had maintained large herds of cattle on the farms referred to. Their representative was father Isidoro Sanz. Father Sanz had long been well acquainted with Teodorica and exerted over her an influence and ascendency due to his religious character as well as to the personal friendship which existed between them.

Father Sanz was fully aware of the existence of the contract of 1902 by which Teodorica agreed to sell her land to the plaintiff.

In one of the causes of action stated in the complaint, the plaintiff seeks to recover from the defendant corporation the sum of P500,000, as damages, on the ground that said corporation, for its own selfish purposes, unlawfully induced Teodorica Endencia to refrain from the performance of her contract for the sale of the land in question and to withhold delivery to the plaintiff of the Torrens title. The cause of action here stated is based on liability derived from the wrongful interference of the defendant in the performance of the contract between the plaintiff and Teodorica.

Issue:


Whether or not the defendant was guilty of interference in contractual relations.

Held: No


Ratio: The court found that while it is true that the fact that the officials of the defendant corporation may have advised Teodorica not to carry the contract into effect would not constitute actionable interference with such contract.

“To our mind a fair conclusion on this feature of the case is that father Juan Labarga and his associates believed in good faith that the contract could not be enforced and that Teodorica would be wronged if it should be carried into effect. Any advice or assistance which they may have given was, therefore, prompted by no mean or improper motive. It is not, in our opinion, to be denied that Teodorica would have surrendered the documents of title and given possession of the land but for the influence and promptings of members of the defendant’s corporation. But we do not credit the idea that they were in any degree influenced to the giving of such advice by the desire to secure to themselves the paltry privilege of grazing their cattle upon the land in question to the prejudice of the just rights of the plaintiff.”

G.R. No. 120554 September 21, 1999So Ping Bun vs. Court of Appeals, Tek Hua Enterprises Corp. and Manuel C. Tiong

Facts:In 1963, Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease agreements with lessor Dee C. Chuan & Sons Inc. (DCCSI). Subjects of four (4) lease contracts were premises located at Nos. 930, 930-Int., 924-B and 924-C, Soler Street, Binondo, Manila. Tek Hua used the areas to store its textiles. The contracts each had a one-year term. They provided that should the lessee continue to occupy the premises after the term, the lease shall be on a month-to-month basis.

When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to occupy the premises. In 1976, Tek Hua Trading Co. was dissolved. Later, the original members of Tek Hua Trading Co. including Manuel C. Tiong, formed Tek Hua Enterprising Corp., herein respondent corporation.

So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Giok's grandson, petitioner So Ping Bun, occupied the warehouse for his own textile business, Trendsetter Marketing.

On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua Enterprises, informing the latter of the 25% increase in rent effective September 1, 1989. The rent increase was later on reduced to 20% effective January 1, 1990, upon other lessees' demand. Again on December 1, 1990, the lessor implemented a 30% rent increase. Enclosed in these letters were new lease contracts for signing. DCCSI warned that failure of the lessee to accomplish the contracts shall be deemed as lack of interest on the lessee's part, and agreement to the termination of the lease. Private respondents did not answer any of these letters. Still, the lease contracts were not rescinded.

On March 1, 1991, private respondent Tiong sent a letter to petitioner. However, petitioner refused to vacate. On March 4, 1992, petitioner requested formal contracts of lease with DCCSI in favor Trendsetter Marketing. So Ping Bun claimed that after the death of his grandfather, So Pek Giok, he had been occupying the premises for his textile business and religiously paid rent. DCCSI acceded to petitioner's request. The lease contracts in favor of Trendsetter were executed.


Issues:Whether or not the petitioner is guilty of tortuous inference of the contract.Whether or not damage is an essential element of tort interference.


Held:Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or compensation awarded for the damage suffered. One becomes liable in an action for damages for a nontrespassory invasion of another's interest in the private use and enjoyment of asset if (a) the other has property rights and privileges with respect to the use or enjoyment interfered with, (b) the invasion is substantial, (c) the defendant's conduct is a legal cause of the invasion, and (d) the invasion is either intentional and unreasonable or unintentional and actionable under general negligence rules.

The elements of tort interference are:1. Existence of a valid contract; 2. Knowledge on the part of the third person of the existence of contract; and 3. Interference of the third person is without legal justification or excuse.

A duty which the law of torts is concerned with is respect for the property of others, and a cause of action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the other of his private property. This may pertain to a situation where a third person induces a party to renege on or violate his undertaking under a contract. In the case before us, petitioner's Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latter's property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort interference above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for the sole purpose of furthering his own financial or economic interest. One view is that, as a general rule, justification for interfering with the business relations of another exists where the actor's motive is to benefit himself. Such justification does not exist where his sole motive is to cause harm to the other. Added to this, some authorities believe that it is not necessary that the interferer's interest outweigh that of the party whose rights are invaded, and that an individual acts under an economic interest that is substantial, not merely de minimis, such that wrongful and malicious motives are negative, for he acts in self-protection. Moreover justification for protecting one's financial position should not be made to depend on a comparison of his economic interest in the subject matter with that of others. It is sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives. In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at the expense of respondent corporation. Though petitioner took interest in the property of respondent’s corporation and benefited from it, nothing on record imputes deliberate wrongful motives or malice on him.

Sec. 1314 of the Civil Code categorically provides also that, "Any third person who induces another to violate his contract shall be liable for damages to the other contracting party." Petitioner argues that damage is an essential element of tort interference, and since the trial court and the appellate court ruled that private respondents were not entitled to actual, moral or exemplary damages, it follows that he ought to be absolved of any liability, including attorney's fees.

It is true that the lower courts did not award damages, but this was only because the extent of damages was not quantifiable. We had a similar situation in Gilchrist, where it was difficult or impossible to determine the extent of damage and there was nothing on record to serve as basis thereof. In that case we refrained from awarding damages. We believe the same conclusion applies in this case.


While we do not encourage tort interferers seeking their economic interest to intrude into existing contracts at the expense of others, however, we find that the conduct herein complained of did not transcend the limits forbidding an obligatory award for damages in the absence of any malice. The business desire is there to make some gain to the detriment of the contracting parties. Lack of malice, however, precludes damages. But it does not relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones. The respondent appellate court correctly confirmed the permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter Marketing, without awarding damages. The injunction saved the respondents from further damage or injury caused by petitioner's interference.

II. Interference with Prospective Advantage The tort of interference with contractual relations has its roots in the tort of inducing

breach of contract. It is also referred to as the tort of interference with economic relations. Both the tort of interference with contract relations and the tort of interference with prospective contract or business relations involve basically the same conduct - in one case the interference takes place when a contract is already in existence, in the other, when a contract would, with certainty, have been consummated but for the conduct of the wrongdoer.

The act of inducing the breach must be an intentional one. If the actor had no knowledge of the existence of the contract or his actions were not intended to induce a breach, he cannot be held liable though an actual breach results from his lawful and proper acts.

It is not enough that the actor intended to perform the acts which caused the result -- he or she must have intended to cause the result itself. The claim only be asserted against a stranger to the contractual relationship, if the person complained of was a party to the contract, the claim should be brought as a breach of contract claim.

Proof that it is reasonably probable that the lost economic advantage would have been realized but for the defendant's interference is required to prevail on the claim.

Ex. A, with ill will, induced an employer not to hire B.

III. UNFAIR COMPETITION The competitors compete on unequal terms, because favorable or disadvantageous

conditions are applied to some competitors but not to others; or that the actions of some competitors actively harm the position of others with respect to their ability to compete on equal and fair terms.

Signifies fraud in the conduct of business to the detriment of other businesses within the same industry. Unfair competition is the employment of deceit, means and methods to overpower and make ineffective ones the other business competitors. This offense gives rise to a criminal liability as well as to causes of action for civil liability.

Refers to deceitful practices in trade primarily intended to obtain an upper hand and an advantage for purposes of gain by resorting to fraudulent activities to the great prejudice of other competitors. Some of the forms of the business practices which would constitute the offense are the utilization of schemes to confuse the consumers or the product users as to the truthful source of the merchandise, making its product origin fictitious. These practices aim to degrade the competitiveness of the market at the expense of innocent purchasers or consumers.


Provisions regarding Unfair Competition: Section 19, Article 12, Constitution:

The State shall regulate or prohibit private monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.

Article 28, Civil Code:Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive highhanded method shall give rise to a right of action by the person who thereby suffers damage.

Article 186, RPC. Monopolies and combinations in restraint of trade. The penalty of prision correccional in its minimum period or a fine ranging from 200 to 6,000 pesos, or both, shall be imposed upon:

1. Any person who shall enter into any contract or agreement or shall take part in any conspiracy or combination in the form of a trust or otherwise, in restraint of trade or commerce to prevent by artificial means free competition in the market.

2. Any person who shall monopolize any merchandise or object of trade or commerce, or shall combine with any other person or persons to monopolize said merchandise or object in order to alter the price thereof by spreading false rumors or making use of any other article to restrain free competition in the market.

3. Any person who, being a manufacturer, producer, or processor of any merchandise or object of commerce or an importer of any merchandise or object of commerce from any foreign country, either as principal or agent, wholesaler or retailer, shall combine, conspire or agree in any manner with any person likewise engaged in the manufacture, production, processing, assembling or importation of such merchandise or object to commerce or with any other persons not so similarly engaged for the purpose of making transactions prejudicial to lawful commerce, or of increasing the market price in any part of the Philippines, or any such merchandise or object of commerce manufactured, produced, processed, assembled in or imported into the Philippines, or of any article in the manufacture of which such manufactured, produced, processed, or imported merchandise or object of commerce is used.

Passing Off and Disparagement of Products

As provided for in the Intellectual Property Code, Section 168.2 and 168.3 (a) (b) specifies the different situations constitutive of the unfair competition known as “passing off” of one’s product to another.

168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:


a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or

c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

Interference Tortious interference, also known as intentional interference with contractual relations, in the common law of tort, occurs when a person intentionally damages the plaintiff's contractual or other business relationships. This tort is broadly divided into two categories, one specific to contractual relationships (irrespective of whether they involve business), and the other specific to business relationships or activities (irrespective of whether they involve a contract).

Unfair competition includes cases involving the tort of interference with contractual relations and interference with prospective advantage.

Misappropriation In law, misappropriation is the intentional, illegal use of the property or funds of another person for one's own use or other unauthorized purpose, particularly by a public official, a trustee of a trust, an executor or administrator of a dead person's estate or by any person with a responsibility to care for and protect another's assets (a fiduciary duty).

Ex. INS vs AP – the defendant was held guilty of unfair competition when it appropriated news taken from bulletins issued by the complainant. Note that the parties were competitors in the gathering and distribution of news and its publication for profit in newspapers in the US.

Monopolies and Predatory Pricing Monopoly embraces any combination the tendency of which is to prevent competition

in the broad and general sense, or to control prices to the detriment of the public. It is the concentration of business in the hands of the few. Its dominant thought is the notion of exclusiveness or unity, or the suppression of competition by the unification of interest or management, or it may be thru agreement and concert of action.

Predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business.


GR L-19441 JUNE 30, 1964SHELL COMPANY OF THE PHILIPPINES LTD VS INSULAR PETROLEUM REFINING CO LTD

Facts:Insular Petroleum is a company whose principal business is to collect used lubricating oil which through scientific process will result to two types of oil. During the purchase of the used oil, different drums were used as its container, one of which is a drum with an un-erased name of SHELL. A single transaction was consummated when the dealer of petitioner sold an oil placed in a drum still stenciled with the name of the petitioner. Due to such incident SHELL filed a civil case with of unfair competition and criminal case under Art 189 against the respondents. However the criminal case was dismissed due to lack of deceit. On the civil case, the petioner alleged two causes of action. First is that the respondent intended to mislead the buying public due to its act of not erasing the name of the petitioner in the container. Second, the petioner tried to persuade shell dealers to purchase the low- quality oil and pass the same to the public as Shell Oil. The respondent averred that they never attempted to pass of its product as that of another nor persuade any one to do the same. With regard to the second averment of petioner claims that the second issue was already barred by res judicata based on the decision in the criminal case. The CFI rendered a decision in favor of Shell however, such decision was reversed by the CA. Issue:Whether or not the defendant was guilty of unfair competition in the conduct of its trade of low-grade oil, specifically in the single transaction of the defendant’s agent and plaintiff’s dealer. Held:No.

Ratio:The used of the container bearing the competitor’s marking in the sale of the product doesn’t show that the buying public has been misled or will be misled and therefore unfair competition was not present. The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of the customers by reason of defendant's practices must always appear. Moreover other transaction of low-grade oil show that all markings and brand used in the container were erased or obliterated except for the specific transaction. Finally, there were no showing that the petitioner’s dealer nor the defendant’s agent connived or conspired in the distribution of such product.


REPUBLIC ACT NO. 8752 – “Anti-Dumping Act of 1999”

What is dumping? Dumping occurs when foreign producers sell their products to an importer in the domestic market at prices lower than in their own national markets, or at prices below cost of production, the sale or importation of which injures or threatens to injure a domestic industry producing like or comparable products or retards the establishment of a potential industry. It is a form of price discrimination between two national markets.

What are the elements of dumping?

There are four (4) elements of dumping, namely:

1. Like Product - product produced by the domestic industry which is identical or alike in all respects to the article under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.

2. Price Difference - amount by which the normal value (the price prevailing in the exporting country) exceeds the export price (selling price to an importer in the Philippines).

3. Injury - means material injury to a domestic industry, threat of material injury or material retardation of the establishment of a domestic industry. Injury test must be based on positive evidence and shall involve an objective examination of both (a) the volume of the dumped imports and the effect of dumped imports on prices in the domestic market for like product, and (b) the consequent impact of these imports on the domestic producers of such products.

4. Causal Link - refers to a finding that the material injury suffered by the domestic industry is the direct result of the importation of the dumped product. It must be clear that the injury suffered is directly attributable to the alleged dumping.

IV. Securities Related Torts

RA 8799 – The Securities Regulations Code

Nature of Securities Regulations Code The SRC is termed as the “Blue Sky Law”, enacted to protect the public from

unscrupulous promoters, who stake business or venture claims which have really no basis, and sell shares or interests therein to investors, who are then left holding certificates representing nothing more than a claim to a square of the blue sky.

Securities are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character. It includes:

(a) Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-backed securities;


(b) Investment contracts, certificates of interest or participation in a profit sharing agreement, certifies of deposit for a future subscription;

(c) Fractional undivided interests in oil, gas or other mineral rights;

(d) Derivatives like option and warrants;

(e) Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments

(f) Proprietary or nonproprietary membership certificates in corporations; and

(g) Other instruments as may in the future be determined by the Commission.

FRAUD refers to deceit, trickery; specifically the intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. It is also an act of deceiving or misrepresenting.

SEC. 26 Fraudulent Transactions. - It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities to: 26.1. Employ any device, scheme, or artifice to defraud; 26.2. Obtain money or property by means of any untrue statement of a material fact of any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or 26.3. Engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person.

246 SCRA 738 (1995)SEC vs. CA, Cualoping Securities Corp., and Fidelity Stock

Facts: Cualoping Securities Corporation is a stockbroker, Fidelity Stock Transfer, Inc. on the other hand, is the stock transfer agent of Philex Mining Corporation.

On or about the first half of 1988, certificates of stock of PHILEX representing one million four hundred [thousand] (1,400,000) shares were stolen from the premises of FIDELITY. These stock certificates consisting of stock dividends of certain PHILEX shareholders had been returned to FIDELITY for lack of forwarding addresses of the shareholders concerned.

Later, the stolen stock certificates ended in the hands of a certain Agustin Lopez, a messenger of New World Security Inc., an entirely different stock brokerage firm. In the first half of 1989, Agustin Lopez brought the stolen stock certificates to CUALOPING for trading and sale with the stock exchange. When the said stocks were brought to CUALOPING, all of the said stock certificates bore the "apparent" indorsement in blank of the owners (the stockholders to whom the stocks were issued by PHILEX) thereof. At the side of these indorsements (signatures), the words "Signature Verified" apparently of FIDELITY were stamped on each and every certificate. Further, on the words "Signature Verified" showed the usual initials of the officers of FIDELITY.


After the stock exchange awarded and confirmed the sale of the stocks represented by said certificates to different buyers, the same were delivered to FIDELITY for the cancellation of the stocks certificates and for issuance of new certificates in the name of the new buyers. Agustin Lopez on the other hand was paid by CUALOPING with several checks for Four Hundred Thousand (P400,000.00) Pesos for the value of the stocks.

After acquiring knowledge of the pilferage, FIDELITY conducted an investigation with assistance of the National Bureau of Investigation (NBI) and found that two of its employees were involved and signed the certificates.

After two (2) months from receipt of said stock certificates, FIDELITY rejected the issuance of new certificates in favor of the buyers for reasons that the signatures of the owners of the certificates were allegedly forged and thus the cancellation and new issuance thereof cannot be effected.FIDELITY sought an opinion on the matter from SEC.

SEC decided that Cualoping was guilty of fraud under the Securities Act.

Issue: Whether or not fraud was committed under the Revised Securities Act (predecessor of SRA)

Ruling: There is no question that both FIDELITY and CUALOPING have been guilty of negligence in the conduct of their affairs involving the questioned certificates of stock. To constitute, however, a violation of the Revised Securities Act that can warrant an imposition of a fine under Section 29(3), in relation to Section 46 of the Act, fraud or deceit, not mere negligence, on the part of the offender must be established. Fraud here is akin to bad faith which implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is unlike that of the negative idea of negligence in that fraud or bad faith contemplates a state of mind affirmatively operating with furtive objectives. Given the factual circumstances found by the appellate court, neither FIDELITY nor CUALOPING, albeit indeed remiss in the observance of due diligence, can be held liable under the above provisions of the Revised Securities Act. We do not imply, however, that the negligence committed by private respondents would not at all be actionable; upon the other hand, as we have earlier intimated, such an action belongs not to the SEC but to those whose rights have been injured. --------------------------------For a fraud claim, a plaintiff must establish that the defendant intentionally misrepresented a material fact and the plaintiff relied on and was harmed by the misrepresentation.

For example, if a business submits materially misleading financial statements to a bank in an attempt to secure a loan and the bank, relying on such statements, lends money to the business, the bank will have a fraud claim against the business if the business later defaults on the loan. A fraud claim may also arise from the failure to disclose a material fact if a defendant owed a duty to speak on account of a special relationship. For example, a financial advisor representing both a buyer and seller of real property may be liable for fraud if he knows that the property contains toxic chemicals and fails to tell this to the buyer.

MISSTATEMENTSRegistration with Securities and Exchange Commission

False Registration Statement

Plaintiff


Section 56. Civil Liabilities on Account of False Registration Statement. 56.1. Any person acquiring a security, the registration statement of which or any part thereof contains on its effectivity an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make such statements not misleading, and who suffers damage, may sue and recover damages from the following enumerated persons, unless it is proved that at the time of such acquisition he knew of such untrue statement or omission:

Liability only arises if the false statement or material omission is contained in the registration statement “on its effectivity”

Materiality is reckoned as of that one date

56.2. If the person who acquired the security did so after the issuer has made generally available to its security holders an income statement covering a period of at least twelve months beginning from the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such income statement, but such reliance may be established without proof of the reading of the registration statement by such person.

Limitation with respect to matters stated in an income statement

Defendants (Section 56)

a) The issuer and every person who signed the registration statement; b) Every person who was a director of, or any other person performing similar functions,

or a partner in, the issuer at the time of the filing of the registration statement or any part, supplement or amendment thereof with respect to which his liability is asserted;

c) (Every person who is named in the registration statement as being or about to become a director of, or a person performing similar functions, or a partner in, the issuer and whose written consent thereto is filed with the registration statement;

d) Every auditor or auditing firm named as having certified any financial statements used in connection with the registration statement or prospectus.

e) Every person who, with his written consent, which shall be filed with the registration statement, has been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement, report, or valuation, which purports to have been prepared or certified by him.

f) Every selling shareholder who contributed to and certified as to the accuracy of a portion of the registration statement, with respect to that portion of the registration statement which purports to have been contributed by him.

g) Every underwriter with respect to such security.

Defenses

Free from liability if:a) Plaintiff knew of untrue statement or omission at the time of acquisitionb) Plaintiff cannot be said to have relied on the untrue statement if he was aware of

the falsity thereofc) A form of assumption of risk

Damages


Nature and Extent (56-61)SEC. 57. Civil Liabilities Arising in Connection With Prospectus, Communications and Reports. - 57.1. Any person who:

a) Offers to sell or sells a security in violation of Chapter III; or b) Offers to sell or sells a security, whether or not exempted by the provisions of

this Code, by the use of any means or instruments of transportation or communication, by means of a prospectus or other written or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall fail in the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.

c) Any person who shall make or cause to be made any statement in any report, or document filed pursuant to this Code or any rule or regulation thereunder, which statement was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, shall be liable to any person who, not knowing that such statement was false or misleading, and relying upon such statements shall have purchased or sold a security at a price which was affected by such statement, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading.

SEC. 58. Civil Liability For Fraud in Connection With Securities Transactions. - Any person who engages in any act or transaction in violation of Sections 19.2, 20 or 26, or any rule or regulation of the Commission thereunder, shall be liable to any other person who purchases or sells any security, grants or refuses to grant any proxy, consent or authorization, or accepts or declines an invitation for tender of a security, as the case may be, for the damages sustained by such other person as a result of such act or transaction.

SEC. 59. Civil Liability For Manipulation of Security Prices. - Any person who willfully participates in any act or transaction in violation of Section 24 shall be liable to any person who shall purchase or sell any security at a price which was affected by such act or transaction, and the person so injured may sue to recover the damages sustained as a result of such act or transaction. SEC. 60. Civil Liability With Respect to Commodity Futures Contracts and Pre-need Plans. - 60.1. Any person who engages in any act or transaction in willful violation of any rule or regulation promulgated by the Commission under Section 11 or 16, which the Commission denominates at the time of issuance as intended to prohibit fraud in the offer and sale of pre-need plans or to prohibit fraud, manipulation, fictitious transactions, undue speculation, or other unfair or abusive practices with respect to commodity future contracts, shall be liable to any other person sustaining damage as a result of such act or transaction. 60.2. As to each such rule or regulation so denominated, the Commission by rule shall prescribe the elements of proof required for recovery and any limitations on the amount of damages that may be imposed.


SEC. 61. Civil Liability on Account of Insider Trading. - 61.1. Any insider who violates Subsection 27.1 and any person in the case of a tender offer who violates Subsection 27.4 (a)(i), or any rule or regulation thereunder, by purchasing or selling a security while in possession of material information not generally available to the public, shall be liable in a suit brought by any investor who, contemporaneously with the purchase or sale of securities that is the subject of the violation, purchased or sold securities of the same class unless such insider, or such person in the case of a tender offer, proves that such investor knew the information or would have purchased or sold at the same price regardless of disclosure of the information to him. 61.2. An insider who violates Subsection 27.3 or any person in the case of a tender offer who violates Subsection 27.4 (a), or any rule or regulation thereunder, by communicating material non-public information, shall be jointly and severally liable under Subsection 61.1 with, and to the same extent as, the insider, or person in the case of a tender offer, to whom the communication was directed and who is liable under Subsection 61.1 by reason of his purchase or sale of a security.

Damages in the amount not exceeding triple the amount of the transactions plus actual damagesExemplary damages may also be awarded in cases of bad faith, fraud, malevolence and wantonness in the violation of the CodeAttorney’s fees not exceeding 30% of the award

Joint and Several Liability

If two or more persons are made liable as defendants, they shall be jointly and severally liable for the payment of damages.

With right of recovery from any other person, who if sued separately, would have been liable to make same payment, unless there was guilty of fraudulent representation on the part of the former and none on the latter.

All persons held liable shall contribute equally to the total liability adjudged

Prospectus and the like

SEC. 57. Civil Liabilities Arising in Connection With Prospectus, Communications and Reports. – 57.1. Any person who:

a) Offers to sell or sells a security in violation of Chapter III; or b) Offers to sell or sells a security, whether or not exempted by the provisions of

this Code, by the use of any means or instruments of transportation or communication, by means of a prospectus or other written or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall fail in the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.

c) Any person who shall make or cause to be made any statement in any report, or document filed pursuant to this Code or any rule or regulation thereunder, which statement was at the time and in the light of the circumstances under


which it was made false or misleading with respect to any material fact, shall be liable to any person who, not knowing that such statement was false or misleading, and relying upon such statements shall have purchased or sold a security at a price which was affected by such statement, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading.


Statute of Limitation

SEC. 62. Limitation of Actions. - 62.1. No action shall be maintained to enforce any liability created under Section 56 or 57 of this Code unless brought within two (2) years after the discovery of the untrue statement or the omission, or, if the action is to enforce a liability created under Subsection 57.1(a), unless brought within two (2) years after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under Section 56 or Subsection 57.1 (a) more than five (5) years after the security was bona fide offered to the public, or under Subsection 57.1 (b) more than five (5) years after the sale. 62.2. No action shall be maintained to enforce any liability created under any other provision of this Code unless brought within two (2) years after the discovery of the facts constituting the cause of action and within five (5) years after such cause of action accrued.


business torts

Documents

income received

tek hua trading

civil liabilities

document filed

revised securities

contractual

ping bun

father sanz