Get Back Up
Thursday, January 29, 2009
Monday, January 26, 2009
Share Wars: Stockholders and their Rights
By Obiter07
Proxy fights and voting disputes can be part and parcel of share ownership in certain companies, particularly those that are publicly listed. What exactly are shareholders fighting about? It can be all about controlling the company, appointing the management or just getting the right to own more shares which can translate to a bigger share in the dividends.
Proxy fights and voting disputes can be part and parcel of share ownership in certain companies, particularly those that are publicly listed. What exactly are shareholders fighting about? It can be all about controlling the company, appointing the management or just getting the right to own more shares which can translate to a bigger share in the dividends.
Stockholder Voting Rights
In the absence of any agreement, there are certain corporation actions matters that require a stockholder’s approval which the company must secure through a required vote. Depending on which item is brought for approval, a higher or lower threshold of voting may be required. With enough shares of your own or together with those of stockholders that think the same way as you do, you can veto certain actions that the company may wish to undertake.
Veto right –
Requirement for 2/3 Vote
If a stockholder is able to maintain over 1/3 of the outstanding capital stock (or has allies that result in him having over 1/3 of the vote), then he effectively has a veto right over the following corporate actions which require the affirmative vote at least a 2/3 vote of the outstanding capital stock:
§ Amendment of the Articles;[1]
§ Removal of directors;[2]
§ Ratifying a director’s contract with the corporation or a director’s acquisition of a corporate business opportunity;[3]
§ Extending or shortening corporate term;[4]
§ Increase or decrease of capital stock or incurring bonded indebtedness;[5]
§ Denial of pre-emptive right;[6]
§ Sale, lease, mortgage or disposing of all or substantially all of the assets;[7]
§ Investment of corporate funds in another corporation or business or for any purpose other than the primary purpose;[8]
§ Issuance of stock dividends;[9]
§ Entry into management contracts where the managing and the managed corporation own or control more than 1/3 of the outstanding capital stock of the managed corporation or where a majority of the board of the managing also constitute a majority of the managed corporation;[10]
§ Delegation to the board of the power to amend, repeal or adopt new –bylaws;[11]
§ Corporation dissolution;[12] and
§ Merger or consolidation.[13]
The foregoing items can be crucial to the future of the company. For example, if the corporation wishes to get fresh capital by increasing the capital stock, then this may be blocked by some stockholders.
Majority vote
If a stockholder is able to maintain at least a “50% plus 1” ownership of the outstanding capital stock or partners with another stockholder to control 50% plus 1, then such a stockholder would have control and/or a veto right over the following corporate actions which require at least a majority vote of the stockholders:
§ Entry into a management contract where there are no interlocking interests of the managed and the managing corporation;[14]
§ To call a meeting to remove directors;[15]
§ To elect of directors;[16]
§ To adopt by-laws;[17]
§ To adopt, amend, repeal, adopt new by-laws;[18]
§ To revoke the delegation of the power to amend by-laws;[19] and
§ To fix the issued price of no par value shares.[20]
Other rights
And apart from voting, the following are some other rights of a stockholder:
§ To attend meetings and vote by proxy;
§ To compel the holding of a stockholders meeting;
§ To be issued stock certificates and to be registered as stockholder;
§ To receive dividends when declared;
§ To participate in the distribution of corporate assets upon dissolution;
§ Right to a transfer of stock to be recorded in the books;
§ Pre-emptive right to issuance of shares;
§ To inspect corporate books and records;
§ Right to financial reports;
§ To bring individual and derivative suits;
§ To recover stock unlawfully sold for delinquency;
§ To enter into voting trust agreements and
§ To demand payment of value of shares and to withdraw from the corporation in certain cases. [21]
Proxy Fights
What happens during a proxy solicitation fight? As mentioned earlier, one of the rights of a stockholder is to vote by proxy. In a proxy fight, 2 or more shareholders try to get votes from othershareholders in order to secure approval or denial of certain measures that are close to their hearts.
For example, a stockholder who wishes to control the board will try to get enough votes to have his slate of directors elected. If he elects enough directors, he could gain a board majority and thus control the company. This usually happens in listed companies and the SEC has strict rules on proxy solicitation.[22]
A company is almost akin to a country. Shareholders, just like citizens and their representatives, can vote into office their directors. Just like constitutional amendments, certain measures have to be approved by the stockholders and the number of votes required depends on their importance. And just like elections, share wars are won by those who get the most number of votes from the shareholders. And just like elections, they can be as dirty as can be.
[1] SECTION 16., Corporation Code.
[2] SECTION 28.
[3] SECTION 32
SECTION 34.
[4] SECTION 37.
[5] SECTION 38.
[6] SECTION 39.
[7] SECTION 40.
[8] SECTION 42.
[9] SECTION 43.
[10] SECTION 44.
[11] SECTION 48.
[12] SECTION 118.
[13] SECTION 119.
[14] Section 44,
[15] SECTION 28.)
[16] SECTION 24.
[17] SECTION 46.
[18] SECTION 48.
[19] Section 48.
[20] SECTION 62.
[21] De
[22] SRC Rule 20.
Monday, January 19, 2009
Making government work for your money (Differentiating between ministerial and discretionary duties)
By Siesta-friendly
A recent (December 18, 2008 to be exact) Supreme Court decision to compel government authorities to clean up
They can only be compelled if the act to be done is ministerial (i.e., not requiring discretion or judgment). This principle is the basis for Rule 65 Sec. 3 of the Revised Rules of Court, to wit:
“When any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station … and there is no other plain, speedy and adequate remedy … the person aggrieved thereby may file a verified petition … praying that judgment be rendered commanding the respondent … to do the act required to be done to protect the rights of the petitioner …”
It’s not that easy to compel authorities to do anything, especially if they’re not inclined to do so. And their usual defense naturally is that the act they’re being compelled to do requires judgment.
The Concerned Residents of
Fortunately, the Concerned Residents of Manila Bay knew better when it came to the implementation of Presidential Decree No. (PD) 1152 (“The Philippine Environment Code”) and filed an action to compel, take this, the MWSS, LWUA (Local Water Utilities Administration), DENR, PPA (Philippine Port Authority), MMDA, DA, DBM, DPWH, DOH, DECS, PCG (Philippine Coast Guard), and the PNP Maritime Group to clean up Manila Bay. Whew.
The Concerned Residents alleged that “the water quality of the
“x x x [The] reckless, wholesale, accumulated and ongoing acts of omission or commission [of the defendants] resulting in the clear and present danger to public health and in the depletion and contamination of the marine life of Manila Bay, [for which reason] ALL defendants must be held jointly and/or solidarily liable and be collectively ordered to clean up Manila Bay and to restore its water quality to class B waters fit for swimming, skin-diving, and other forms of contact recreation.”
Nice.
However, the facts disclosed at trial are far from it, if not unnerving.
“Water samples collected from different beaches around the Manila Bay showed that the amount of fecal coliform content ranged from 50,000 to 80,000 most probable number (MPN)/ml when what DENR Administrative Order No. 34-90 prescribed as a safe level for bathing and other forms of contact recreational activities, or the “SB” level, is one not exceeding 200 MPN/100 ml.”
The RTC was convinced and ordered the alphabets, okay, agencies, jointly and solidarily, to clean up and rehabilitate Manila Bay and restore its waters to SB classification to make it fit for swimming, skin-diving and other forms of contact recreation. The agencies, with DENR as the lead agency, were directed, within 6 months, to act and perform their respective duties by devising a consolidated, coordinated and concerted scheme of action for the rehabilitation and restoration of the bay.
Sweet.
Sweeter still, the CA agreed.
Of course, the alphabets claimed they couldn’t be compelled to clear the murky soup that is the
By the way, the complaint was filed in 1999. The RTC judgment was rendered and in 2002 and the CA’s in 2005. Just so you get a timeline.
Anyway, the agencies alleged that 1) PD 1152 only requires the cleaning of specified pollutants and not general cleaning; and in any case, 2) the cleaning of
Ministerial vs. Discretionary
Despite the agencies’ claims that their duties require policy evaluations and, of course, judgment and discretion, the Supreme Court held that under PD 1152, R.A. 9003 (Ecological Solid Waste Management Act), other laws and even their respective enabling statutes, the agencies are required “to perform certain functions relating directly or indirectly to the cleanup, rehabilitation, protection, and preservation of the Manila Bay.” This the SC noted from –
- DENR’s obligations under EO 192 and RA9275 (Philippine Clean Water Act of 2004),
- MWSS’s under its charter RA 6234,
- LWUA’s under PD 198 (Provincial Water Utilities Act of 1973) and RA 9275,
- DA’s under EO 292 (the Administrative Code of 1987), and also RA 9275,
- DPWH’s also under EO 292 while MMDA’s under its charter RA 7924, and the MOA between the 2 delineating their responsibilities within Metro Manila and nationwide,
- PCG’s under PD 601 (Revised Coast Guard Law of 1974) and of PD 979 (Marine Pollution Decree of 1976), RA 8550 (Philippine Fisheries Code of 1998),
- PNP’s under RA 6975 (Department of the Interior and Local Government (DILG) Act of 1990),
- PPA’s under EO 513 and the International Convention for the Prevention of Pollution from Ships,
- MMDA’s under RA 9003, RA 7279 (Urban Development and Housing Act of 1992),
- DOH’s under PD 1067 (Water Code), RA 9275 and PD 856 (Code of Sanitation of the
- DBM’s under EO 292 and RA 9275.
Under the respective laws, the agencies are given responsibilities and cannot decide whether or not to perform them. Thus, the SC held that the Concerned Residents were right to ask that the agencies be compelled to accomplish their duties as they were obviously ministerial despite any judgment that may be exercised in the manner in which they are performed.
General Cleaning
The other issue is whether the agencies are obligated to do general cleaning (said the Concerned Residents) or just limited cleaning (said the agencies) of Manila Bay, i.e, whether or not PD 1152 or the Philippine Environment Code envisions the occurrence of specific incidents causing pollution before the government agencies are obligated to clean up.
The short answer is given by the CA, as quoted by the SC: “PD 1152 aims to introduce a comprehensive program of environmental protection and management. This is better served by making [the relevant provisions] of general application rather than limiting them to specific pollution incidents.”
And so, we have the landmark decision ordering -
1. the DENR act as the primary agency responsible for the conservation, management, development, and proper use of the country’s environment and natural resources, and directing it to fully implement its Operational Plan for the Manila Bay Coastal Strategy for the rehabilitation, restoration, and conservation of the Manila Bay at the earliest possible time.
2. the DILG to direct all concerned LGUs to inspect all factories, commercial establishments, and private homes along the banks of the major river systems in their respective areas of jurisdiction, such as but not limited to rivers and lakes and other minor rivers and waterways that eventually discharge water into the Manila Bay; and the lands abutting the bay, to determine whether they have wastewater treatment facilities or hygienic septic tanks as prescribed. If none be found, these LGUs shall be ordered to require non-complying establishments and homes to set up said facilities or septic tanks within a reasonable time to prevent industrial wastes, sewage water, and human wastes from flowing into these rivers, waterways, esteros, and the
3. the MWSS to provide, install, operate, and maintain the necessary adequate waste water treatment facilities in Metro Manila, Rizal, and
4. the LWUA to provide, install, operate, and maintain sewerage and sanitation facilities and the efficient and safe collection, treatment, and disposal of sewage in the provinces of Laguna, Cavite, Bulacan, Pampanga, and Bataan where needed at the earliest possible time.
5. the DA to improve and restore the marine life of the
6. the PCG and the PNP Maritime Group to apprehend violators of existing laws and regulations designed to prevent marine pollution in the
7. the PPA to immediately adopt such measures to prevent the discharge and dumping of solid and liquid wastes and other ship-generated wastes into the
8. the MMDA to dismantle and remove all structures, constructions, and other encroachments established or built in violation of applicable laws along the Pasig-Marikina-San Juan Rivers, the NCR (Parañaque-Zapote, Las Piñas) Rivers, the Navotas-Malabon-Tullahan-Tenejeros Rivers, and connecting waterways and esteros in Metro Manila.
9. the DPWH to remove and demolish all structures, constructions, and other encroachments built in breach of applicable laws along the Meycauayan-Marilao-Obando (Bulacan) Rivers, the Talisay (Bataan) River, the Imus (Cavite) River, the Laguna De Bay, and other rivers, connecting waterways, and esteros that discharge wastewater into the Manila Bay.
10. the MMDA to establish, operate, and maintain a sanitary landfill, as prescribed by RA 9003, within 1 year from finality of this Decision. It is also ordered to cause the apprehension and filing of the appropriate criminal cases against violators of existing laws on pollution.
11. the DOH to, within 1 year from finality of this Decision, determine if all licensed septic and sludge companies have the proper facilities for the treatment and disposal of fecal sludge and sewage coming from septic tanks. The DOH shall give the companies, if found to be non-complying, a reasonable time within which to set up the necessary facilities under pain of cancellation of its environmental sanitation clearance.
12. the DepEd to integrate lessons on pollution prevention, waste management, environmental protection, and like subjects in the school curricula of all levels to inculcate in the minds and hearts of students and, through them, their parents and friends, the importance of their duty toward achieving and maintaining a balanced and healthful ecosystem in the entire Philippine archipelago.
13. the DBM to consider incorporating an adequate budget in the General Appropriations Act of 2010 and succeeding years to cover the expenses relating to the cleanup, restoration, and preservation of the water quality of the Manila Bay, in line with the country’s development objective to attain economic growth in a manner consistent with the protection, preservation, and revival of our marine waters.
14. the heads of petitioners-agencies MMDA, DENR, DepEd, DOH, DA, DPWH, DBM, PCG, PNP Maritime Group, DILG, and also of MWSS, LWUA, and PPA, in line with the principle of “continuing mandamus,” to, from finality of this Decision, each submit to the Court a quarterly progressive report of the activities undertaken in accordance with this Decision.
Gives you mixed feelings doesn’t it? Happy to have a very aggressive Supreme Court (or maybe Chief Justice) yet, sad and angry that government needs to be told their duties under the law.
Oh well, let’s just be grateful for the decision, and the vigilance of the Concerned Residents of Manila Bay.
Tuesday, January 13, 2009
The Debtstar: Defenses Against Creditors
By Obiter07
For a new year where recession and gloom seems to be in the cards, it should be appropriate to discuss how you can protect yourself against creditors once they come knocking on your door and you have no money with which to pay them.
First off, there are certain assets which are immune from the hands of your creditors. So even if you have lost everything, there are things that you can keep. Under the Family Code, the family home is exempt from execution, forced sale or attachment.[1] How do you constitute a family home? It is done from the time you occupy a house and lot as a family residence. It continues to be a family home from its constitution and for as long as any of its beneficiaries reside there.[2] Living in at your parent’s house can be a plus here.
The family home subsists for a period of 10 years from the time 1 or both spouses or the unmarried head of the family passes away or for as long as there is a minor beneficiary.[3]
However, not just any home is exempt from the creditor’s claws. The home’s actual value should not exceed P300,000 in urban areas and P200,000 for rural areas.[4] One wonders what kind of home one can buy at those prices and these amounts need to be revised to reflect current realities.
So mansions are not really exempt. Where the actual value exceeds the aforementioned amounts, the debtor can proceed to court for an order for the home to be sold. The debtor can then get the excess but at least, you can get reimbursement to the extent of P300,000 or P200,000.[5]
Also note that the family home is not exempt from all claims. It can be the subject of execution, sale or attachment for taxes, debts incurred prior to the constitution of the family home, debts secured by mortgages on the home, and debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building.[6]
You can only have one family home, not as many as the number of families you may have in case you have more than one.[7]
Assuming that you are able to keep your home, what happens to the rest of your assets? Under the Rule 39[8] of the Rules of Court, there are certain things that you can keep.
Apart from being able to keep your home, you will not be prevented from earning a living as “Ordinary tools and implements personally used by” you in your “trade, employment, or livelihood” are exempt from execution. You can also keep “Three horses, or three cows, or three carabaos, or other beasts of burden such as the judgment obligor may select necessarily used by him in his ordinary occupation.” One wonders why the number of livestock was pegged at three.
You can keep your “necessary clothing and articles for ordinary personal use” but “excluding jewelry”, even if you feel you can’t live without them. “Household furniture and utensils necessary for housekeeping, and used for that purpose by the judgment obligor and his family, such as the judgment obligor may select, of a value not exceeding one hundred thousand pesos” can be kept as well.
“Provisions for individual or family use sufficient for four months” are allowed. “Professional libraries and equipment of judges, lawyers, physicians, pharmacists, dentists, engineers, surveyors, clergymen, teachers, and other professionals, not exceeding three hundred thousand pesos in value” are not to be claimed by the creditors but kiss that cd collection good-bye.
If you are a fisherman, you can keep “One fishing boat and accessories not exceeding the total value of one hundred thousand pesos xxx.” Whatever salaries, wages, or earnings you have within the four months preceding the levy as are necessary for the support of your family are yours to use. “Lettered gravestones” can be kept which only a heartless creditor would go against. “[M]onies benefits, privileges, or annuities accruing or in any manner growing out of any life insurance” are exempt. Pensions are safe too as the “right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the Government” is expressly carved out in the rules. Last are “properties specially exempt by law.” And no article or species of property as above-mentioned are exempt from execution “issued upon a judgment recovered for its price or upon a judgment of foreclosure of a mortgage thereon.”
You do get to keep the clothes on your back and some other items. But the best weapon is prudence by not borrowing more than what you can pay otherwise it will be the debt of you and most of everything that you own.
Wednesday, January 7, 2009
Prescription for Trouble: Liability of Pharmacies
By Obiter07
Pharmacies and pharmacists better watch out and clearly read the handwriting of doctors who are not known for legibility. Giving out the wrong medicine may give rise to liability for damages.
In the case of MERCURY DRUG CORPORATION, et al. vs. DE LEON, G.R. No. 165622 October 17, 2008, a judge noticed that his left eye was reddish. A doctor friend prescribed to him the drugs “Cortisporin Opthalmic” and “Ceftin.” The good judge went to a branch of Mercury Drug Store Corporation to buy the prescribed medicines. He showed his prescription to a pharmacist assistant. He subsequently got the medicine handed over by the assistant.
When he applied the drop on his left eye, he felt “searing pain.” He rinsed it with water but the pain did not subside. He then discovered that he was given the wrong medicine or “Cortisporin Otic Solution.”
The judge returned to the same Mercury Drug branch. The assistant did not apologize and instead replied that she was unable to fully read the prescription. Her supervisor was the one who apologized and merely informed the judge that they did not have on stock the medicine that he needed.
The judge wrote Mercury Drug, through its president about the incident but did not get a response. Two sales persons went to his office and informed him that their supervisor was busy with other matters. With no apology or explanation forthcoming, he filed a complaint for damages against Mercury Drug. Hell hath no fury like a judge wronged.
Mercury Drug argued that the proximate cause was the judge’s own negligence. And that he should have first read and checked to see if he had the right eye solution. Also, Mercury Drug explained that there is no available medicine known as “Cortisporin Opthalmic” in the Philippine market. What was written on the piece of paper De Leon presented was “Cortisporin Solution” and the pharmacist assistant gave him the only available “Cortisporin Solution” in the market. Which leads one to ask, since his eye was troubling him, how could you expect him to read the label?
Moreover, Mercury argued that the judge failed to present a proper prescription as it lacked the required information concerning the attending doctor’s name and license number. He was entertained only because he was a regular customer of their branch.
The judge won damages in the lower court consisting of Php 153.25, the value of the medicine, Php 100,000.00 as moral damages, Php 300,000.00 as exemplary damages and attorney’s fees of P50,000.00. Mercury Drug appealed. The Court of Appeals dismissed the case on procedural grounds. Upon elevation to the Supreme Court, it upheld the decision of the lower court with modification.
The High Court found that the petitioners “failed to exercise the highest degree of diligence expected of them.” It held that petitioners can not exculpate themselves from any liability by alleging that judge should have checked the medicine that he got. It held that as “active players in the field of dispensing medicines to the public, the highest degree of care and diligence is expected of them.”
The court cited U.S. jurisprudence where it was ruled that “the profession of pharmacy demands care and skill, and druggists must exercise care of a specially high degree, the highest degree of care known to practical men. In other words, druggists must exercise the highest practicable degree of prudence and vigilance, and the most exact and reliable safeguards consistent with the reasonable conduct of the business, so that human life may not constantly be exposed to the danger flowing from the substitution of deadly poisons for harmless medicines.” The US Supreme Court has likewise “ruled that a druggist that sells to a purchaser or sends to a patient one drug for another or even one innocent drug, calculated to produce a certain effect, in place of another sent for and designed to produce a different effect, cannot escape responsibility, upon the alleged pretext that it was an accidental or innocent mistake. His mistake, under the most favorable aspect for himself, is negligence. And such mistake cannot be countenanced or tolerated, as it is a mistake of the gravest kind and of the most disastrous effect.”
In “holding himself out as competent to handle drugs, having rightful access to them, and relied upon by those dealing with him to exercise that high degree of caution and care called for by the peculiarly dangerous nature of the business, cannot be heard to say that his mistake by which he furnishes a customer the most deadly of drugs for those comparatively harmless, is not in itself gross negligence.”
In fact, two local decided cases support this position. In United States v. Pineda, complainant mixed with water what he thought and believed was potassium chlorate for his race horses. The substance turned out to be barium chlorate and the race horses died of poisoning only a few hours after. In Mercury Drug Corporation v. Baking, Sebastian Baking presented his prescription for Diamicron, which the pharmacist misread as Dormicum. Baking was given a potent sleeping tablet, instead of medicines for his blood sugar. On the third day of taking the wrong medicine, Baking figured in a vehicular accident when he fell asleep while driving. This Court held that the proximate cause of the accident was the gross negligence of the pharmacist who gave the wrong medicine to Baking. The Court said there:
The Court stated that the petitioners failed to live up to high standard of diligence expected of them as pharmacy professionals and they were grossly negligent in dispensing ear drops instead of the prescribed eye drops. Worse, they have once again attempted to shift the blame to their victim. As a buyer, the judge relied on the expertise and experience of Mercury Drug and its employees in dispensing to him the right medicine. The buyer and seller do not stand at arms length. There exists an imperative duty on the seller or the druggist to take precaution to prevent death or injury to any person who relies on one’s absolute honesty and peculiar learning. As the Court has emphasized:
The award of damages was proper but the Court reduced the moral and exemplary damages to P50,000.00 and P25,000.00 respectively.
In closing, the Court opined that the drugstore business is imbued with public interest. And that there can be no form of negligence which can jeopardize the health and safety of its loyal patrons. Moreover, a pharmacy owes a customer not only the “duty of reasonable care, but it is also duty-bound to accord one with respect.”
The foregoing is not an uncommon occurrence. A colleague once got medicine for arthritis by mistake instead for her thyroid problem. But in her case, she got to wonder how come her joints were getting to feel better.
The Court in this case recognized how the outcome of such an error could be much much worse. And the drug company has no one to blame but itself. That is one prescription it should not forget.
Pharmacies and pharmacists better watch out and clearly read the handwriting of doctors who are not known for legibility. Giving out the wrong medicine may give rise to liability for damages.
In the case of MERCURY DRUG CORPORATION, et al. vs. DE LEON, G.R. No. 165622 October 17, 2008, a judge noticed that his left eye was reddish. A doctor friend prescribed to him the drugs “Cortisporin Opthalmic” and “Ceftin.” The good judge went to a branch of Mercury Drug Store Corporation to buy the prescribed medicines. He showed his prescription to a pharmacist assistant. He subsequently got the medicine handed over by the assistant.
When he applied the drop on his left eye, he felt “searing pain.” He rinsed it with water but the pain did not subside. He then discovered that he was given the wrong medicine or “Cortisporin Otic Solution.”
The judge returned to the same Mercury Drug branch. The assistant did not apologize and instead replied that she was unable to fully read the prescription. Her supervisor was the one who apologized and merely informed the judge that they did not have on stock the medicine that he needed.
The judge wrote Mercury Drug, through its president about the incident but did not get a response. Two sales persons went to his office and informed him that their supervisor was busy with other matters. With no apology or explanation forthcoming, he filed a complaint for damages against Mercury Drug. Hell hath no fury like a judge wronged.
Mercury Drug argued that the proximate cause was the judge’s own negligence. And that he should have first read and checked to see if he had the right eye solution. Also, Mercury Drug explained that there is no available medicine known as “Cortisporin Opthalmic” in the Philippine market. What was written on the piece of paper De Leon presented was “Cortisporin Solution” and the pharmacist assistant gave him the only available “Cortisporin Solution” in the market. Which leads one to ask, since his eye was troubling him, how could you expect him to read the label?
Moreover, Mercury argued that the judge failed to present a proper prescription as it lacked the required information concerning the attending doctor’s name and license number. He was entertained only because he was a regular customer of their branch.
The judge won damages in the lower court consisting of Php 153.25, the value of the medicine, Php 100,000.00 as moral damages, Php 300,000.00 as exemplary damages and attorney’s fees of P50,000.00. Mercury Drug appealed. The Court of Appeals dismissed the case on procedural grounds. Upon elevation to the Supreme Court, it upheld the decision of the lower court with modification.
The High Court found that the petitioners “failed to exercise the highest degree of diligence expected of them.” It held that petitioners can not exculpate themselves from any liability by alleging that judge should have checked the medicine that he got. It held that as “active players in the field of dispensing medicines to the public, the highest degree of care and diligence is expected of them.”
The court cited U.S. jurisprudence where it was ruled that “the profession of pharmacy demands care and skill, and druggists must exercise care of a specially high degree, the highest degree of care known to practical men. In other words, druggists must exercise the highest practicable degree of prudence and vigilance, and the most exact and reliable safeguards consistent with the reasonable conduct of the business, so that human life may not constantly be exposed to the danger flowing from the substitution of deadly poisons for harmless medicines.” The US Supreme Court has likewise “ruled that a druggist that sells to a purchaser or sends to a patient one drug for another or even one innocent drug, calculated to produce a certain effect, in place of another sent for and designed to produce a different effect, cannot escape responsibility, upon the alleged pretext that it was an accidental or innocent mistake. His mistake, under the most favorable aspect for himself, is negligence. And such mistake cannot be countenanced or tolerated, as it is a mistake of the gravest kind and of the most disastrous effect.”
In “holding himself out as competent to handle drugs, having rightful access to them, and relied upon by those dealing with him to exercise that high degree of caution and care called for by the peculiarly dangerous nature of the business, cannot be heard to say that his mistake by which he furnishes a customer the most deadly of drugs for those comparatively harmless, is not in itself gross negligence.”
In fact, two local decided cases support this position. In United States v. Pineda, complainant mixed with water what he thought and believed was potassium chlorate for his race horses. The substance turned out to be barium chlorate and the race horses died of poisoning only a few hours after. In Mercury Drug Corporation v. Baking, Sebastian Baking presented his prescription for Diamicron, which the pharmacist misread as Dormicum. Baking was given a potent sleeping tablet, instead of medicines for his blood sugar. On the third day of taking the wrong medicine, Baking figured in a vehicular accident when he fell asleep while driving. This Court held that the proximate cause of the accident was the gross negligence of the pharmacist who gave the wrong medicine to Baking. The Court said there:
“x x x Considering that a fatal mistake could be a matter of life and death for a buying patient, the said employee should have been very cautious in dispensing medicines. She should have verified whether the medicine she gave respondent was indeed the one prescribed by his physician. The care required must be commensurate with the danger involved, and the skill employed must correspond with the superior knowledge of the business which the law demands.”The Court stated that “In cases where an injury is caused by the negligence of an employee, there instantly arises a presumption of law that there has been negligence on the part of the employer, either in the selection or supervision of one’s employees. This presumption may be rebutted by a clear showing that the employer has exercised the care and diligence of a good father of the family. Mercury Drug failed to overcome such presumption.” Note that this is at least the second case involving the same corporation.
The Court stated that the petitioners failed to live up to high standard of diligence expected of them as pharmacy professionals and they were grossly negligent in dispensing ear drops instead of the prescribed eye drops. Worse, they have once again attempted to shift the blame to their victim. As a buyer, the judge relied on the expertise and experience of Mercury Drug and its employees in dispensing to him the right medicine. The buyer and seller do not stand at arms length. There exists an imperative duty on the seller or the druggist to take precaution to prevent death or injury to any person who relies on one’s absolute honesty and peculiar learning. As the Court has emphasized:
“ x x x The nature of drugs is such that examination would not avail the purchaser anything. It would be idle mockery for the customer to make an examination of a compound of which he can know nothing. Consequently, it must be that the druggist warrants that he will deliver the drug called for.”The defense that the only available Cortisporin solution in the market was given does not deserve consideration. The assistant could have easily verified whether the medicine she gave was the prescribed one or consulted her supervisor. Absent the required certainty, she could have refused the purchase.
The award of damages was proper but the Court reduced the moral and exemplary damages to P50,000.00 and P25,000.00 respectively.
In closing, the Court opined that the drugstore business is imbued with public interest. And that there can be no form of negligence which can jeopardize the health and safety of its loyal patrons. Moreover, a pharmacy owes a customer not only the “duty of reasonable care, but it is also duty-bound to accord one with respect.”
The foregoing is not an uncommon occurrence. A colleague once got medicine for arthritis by mistake instead for her thyroid problem. But in her case, she got to wonder how come her joints were getting to feel better.
The Court in this case recognized how the outcome of such an error could be much much worse. And the drug company has no one to blame but itself. That is one prescription it should not forget.
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