Petition for review of the order of the Securities and Exchange Commission denying the opposition to, and instead, granting the registration, and licensing the sale in the Philippines, of shares of the capital stock of the respondent-appellee San Jose Petroleum, Inc., a corporation organized and existing in the Republic of Panama.
FACTS:
SAN JOSE PETROLEUM is a corporation organized and existing in the Republic of Panama. It filed with the SEC a sworn registration statement for the registration and licensing for sale in the Philippines Voting Trust Certificates representing 2 million shares of its capital stock of a par value of $0.35 a share, at P1 per share. It was alleged that the entire proceeds of the sale of said securities will be devoted or used exclusively to finance the operations of SAN JOSE OIL COMPANY, a domestic mining corporation, which has 14 petroleum exploration concessions.
Palting, among others, allegedly prospective investors in the shares of SAN JOSE PETROLEUM, filed with the SEC an opposition to registration and licensing on the ground that the tie-up between the issuer, SAN JOSE PETROLEUM, and SAN JOSE OIL, is violative of the Constitution, the Corporation Law, and the Petroleum Act of 1949. SAN JOSE
PETROLEUM claimed that it was a “business enterprise” enjoying parity rights under the Ordinance appended to the Constitution, which parity right, with respect to mineral resources in the Philippines, may be exercised, pursuant to the Laurel-Langley Agreement, only though the medium of a corporation organized under the laws of the Philippines (SAN JOSE OIL).
ISSUE:
Is San Jose Petroleum an American business enterprise entitled to parity rights in the Philippines?
HELD:NO.
Firstly — It is not owned or controlled directly by citizens of the United States, because it is owned and controlled by a corporation, the OIL INVESTMENTS, another foreign
(Panamanian) corporation.
Secondly — Neither can it be said that it is indirectly owned and controlled by American citizens through the OIL INVESTMENTS, for this latter corporation is in turn owned and controlled, not by citizens of the United States, but still by two foreign (Venezuelan) corporations, the PANTEPEC OIL COMPANY and PANCOASTAL PETROLEUM.
hirdly — Although it is claimed that these two last corporations are owned and controlled respectively by 12,373 and 9,979 stockholders residing in the different American states, there is no showing in the certification furnished by respondent that the stockholders of PANCOASTAL or those of them holding the controlling stock, are citizens of the United States.
Fourthly — Granting that these individual stockholders are American citizens, it is yet necessary to establish that the different states of which they are citizens, allow Filipino citizens or corporations or associations owned or controlled by Filipino citizens, to engage in the exploitation, etc. of the natural resources of these states (see paragraph 3, Article VI of the Laurel-Langley Agreement, supra). Respondent has presented no proof to this effect. Fifthly — But even if the requirements mentioned in the two immediately preceding paragraphs are satisfied, nevertheless to hold that the set-up disclosed in this case, with a long chain of intervening foreign corporations, comes within the purview of the Parity Amendment regarding business enterprises indirectly owned or controlled by citizens of the United States, is to unduly stretch and strain the language and intent of the law. For, to
what extent must the word "indirectly" be carried? Must we trace the ownership or control of these various corporations ad infinitum for the purpose of determining whether the American ownership-control-requirement is satisfied? Add to this the admitted fact that the shares of stock of the PANTEPEC and PANCOASTAL which are allegedly owned or controlled directly by citizens of the United States, are traded in the stock exchange in New York, and you have a situation where it becomes a practical impossibility to determine at any given time, the citizenship of the controlling stock required by the law. In the circumstances, we have to hold that the respondent SAN JOSE PETROLEUM, as presently constituted, is not a business enterprise that is authorized to exercise the parity privileges under the Parity Ordinance, the Laurel-Langley Agreement and the Petroleum Law. Its tie- up with SAN JOSE OIL is, consequently, illegal.
N.B.
Article XIII, Section 1 of the Philippine Constitution provides:
SEC. 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease or concession at the time of the inauguration of this Government established under this Constitution. . . . (Emphasis supplied)
In the 1946 Ordinance Appended to the Constitution, this right (to utilize and exploit our natural resources) was extended to citizens of the United States, thus:
Notwithstanding the provisions of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of
Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines, and the operation of public utilities shall, if open to any person, be open to citizens of the United States, and to all forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines (Emphasis supplied.)
In the 1954 Revised Trade Agreement concluded between the United States and the Philippines, also known as the Laurel-Langley Agreement, embodied in Republic Act 1355, the following provisions appear:
ARTICLE VI
1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and sources of potential energy, and other natural resources of either Party, and the operation of public utilities, shall, if open to any person, be open to citizens of the other Party and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of such other Party in the same manner as to and under the same conditions imposed upon citizens or corporations or associations owned or controlled by citizens of the Party granting the right.
2. The rights provided for in Paragraph 1 may be exercised, . . . in the case of citizens of the United States, with respect to natural resources in the public domain in the Philippines, only through the medium of a corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned or controlled by citizens of the United States. . . .
3. The United States of America reserves the rights of the several States of the United States to limit the extent to which citizens or corporations or associations owned or controlled by citizens of the Philippines may engage in the activities specified in this Article. The Republic of the Philippines reserves the power to deny any of the rights specified in this Article to citizens of the United States who are citizens of States, or to corporations or associations at least 60% of whose capital stock or capital is owned or controlled by citizens of States, which deny like rights to citizens of the Philippines, or to corporations or associations which are owned or controlled by citizens of the Philippines. . . . (Emphasis supplied.)
Tayag vs. Benguet
An appeal from an order of the Court of First Instance of Manila.
Facts: Idonah Slade Perkins died in New York City in 1960, her estate in the United States which is administered by County Trust Co. adamantly refuses to surrender to her ancillary administrator in the Philippines, wherein she also left properties specifically two stock certificates from Benguet Consolidated Inc. On motion of Tayag, the ancillary administrator, the lower court declared that it considered as lost for all purposes in connection with the administration and liqiudation of the Philippine estate of Perkins' said two stock certificates standing in the books of Benguet Consolidated, orderd said certificates cancelled; and directed the said corporation to issue new certificates in lieu thereof, the same to be delivered by Benguet to the ancillary administrator or probate court. Benguet appeals that the said order holding that the same are in existence and in the possession of County Trust Co., in New York, therefore not lost. It also invokes a provision of its by laws alleging that "an action regarding ownership of such certificates or
certificates of stock allgedly lost, stolen or destroyed, the issuance of certificates would await the final decisionby a court regarding the ownership."
Issue: Is Benguet Consolidated's claim correct?
Held: Benguet does not dispute the authority of authority of the ancillary administrator. It is the duty of the latter to settle the the deceased's estate and satisfy the claims of the creditors. From such premise it would follow that Probate Court could require that the ancillary's right to the two certificates of stocks be respected by Benguet, for the latter is a Philippine corporation owing full allegiance and subject to unrestricted jurisdiction pf local courts. Its share of stock could not be considered in any wise as immune from lawful court orders. A corporation is an artificial being created by la, it owes its life to the state, its birth being purely dependent on its will. It is inconceivable that it could have more rights and priveleges of a higher priority than that of its creator. It cannot legitimately refuse to yield obedience to act of its state organs, certainly not excluding the judiciary whenever called upon to do so.
CONCEPT BUILDERS, INC. vs. THE NATIONAL LABOR RELATIONS COMMISSION, (First Division); and Norberto Marabe; Rodolfo Raquel, Cristobal Riego, Manuel Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador, Rogelio Salut, Emilio Garcia, Jr., Mariano Rio, Paulina Basea, Alfredo Albera, Paquito Salut, Domingo Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe Basilan, and Ruben Robalos
G.R. No. 108734 May 29, 1996 HERMOSISIMA, JR., J. NATURE Special Civil Action
FACTSConcept Builders, Inc., a domestic corporation, with principal office at 355 Maysan Road, Valenzuela, Metro Manila, is engaged in the construction business. Private respondents were employed by said company as laborers, carpenters and riggers.On November, 1981, private respondents were served individual written notices of termination of employment by petitioner, effective on November 30, 1981, stating that their contracts of employment had expired and the project in which they were hired had been completed.However they found that at the time of the termination of their employment, the project in which they were hired had not yet been finished and
completed. Concept Builders had to engage the services of sub-contractors whose workers performed the functions of private respondents.Private respondents filed a complaint for illegal dismissal, unfair labor practice and non-payment of their legal holiday pay, overtime pay and thirteenth-month pay against petitioner. The Labor Arbiter rendered judgment ordering reinstatement and payment of back wages. The NLRC dismissed the motion for reconsideration filed by Concept Builders, on the ground that it had become final and
executory. A writ of execution was issued. It was partially satisfied through garnishment of sums from petitioner's debtor, the Metropolitan Waterworks and Sewerage Authority. An alias writ was issued to satisfy the balance and the reinstatement of private respondents. It could not be served, because the petitioner no longer occupied the premises. Another alias writ was issued, which again could not be served because the employees claimed they were employees of Hydro Pipes Philippines, Inc. and that the properties to be levied upon were owned by the said corporation. Private respondents filed a "Motion for Issuance of a Break-Open Order," alleging that HPPI and Concept Builders were owned by the same incorporator/stockholders. They also alleged that petitioner temporarily suspended its business operations in order to evade its legal obligations to them and that private respondents were willing to post an indemnity bond to answer for any damages which petitioner and HPPI may suffer because of the issuance of the break-open order. The Labor Arbiter issued an Order which denied private respondents' motion for break-open order. On appeal, the NLRC issued the break-open order. Concept Builder’s motion for reconsideration was denied.
ISSUE Did the NLRC commit grave abuse of discretion when it issued a "break-open order" to the sheriff to be enforced against personal property found in the premises of petitioner's sister company?
HELD No
It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders and from other corporations to which it may be connected. But, this separate and distinct personality of a corporation is merely a fiction created by law for convenience and to promote justice. So, when the notion of separate juridical personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation.
The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:
1.
Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own;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 and unjust act in contravention of plaintiff's legal rights; and3.
The aforesaid control and breach of duty must proximately cause the injury or
The absence of any one of these elements prevents "piercing the corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant's relationship to that operation.
In this case, the NLRC noted that, while petitioner claimed that it ceased its business operations on April 29, 1986, it filed an Information Sheet with the SEC on May 15, 1987, stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI, the third-party claimant, submitted on the same day, a similar
information sheet stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila.
Both information sheets were filed by the same Virgilio O. Casiño as the corporate secretary of both corporations. It would also not be amiss to note that both corporations had the same president, the same board of directors, the same corporate officers, and substantially the same subscribers.
Clearly, petitioner ceased its business operations in order to evade the payment to private respondents of back wages and to bar their reinstatement to their former positions. HPPI is obviously a business conduit of petitioner corporation and its emergence was skillfully orchestrated to avoid the financial liability that already attached to petitioner
corporation.
In view of the failure of the sheriff, in the case at bar, to effect a levy upon the property subject of the execution, private respondents had no other recourse but to apply for a break-open order after the third-party claim of HPPI was dismissed for lack of merit by the NLRC. This is in consonance with Section 3, Rule VII of the NLRC Manual of Execution of Judgment.
Hence, the NLRC did not commit any grave abuse of discretion when it affirmed the break-open order issued by the Labor Arbiter.
PHILIPPINE STOCK EXCHANGE, INC. vs. THE HONORABLE COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and PUERTO AZUL LAND, INC.
G.R. No. 125469 October 27, 1997 TORRES, JR., J.:
NATURE Petition for Review on Certiorari of the resolution of the CA affirming the decision of the Securities and Exchange Commission ordering the PSE to allow Puerto Azul
Land, Inc. to be listed in its stock market, thus paving the way for the public offering of PALI's shares
FACTS The Puerto Azul Land, Inc. (PALI) sought to offer its shares to the public in order to raise funds allegedly to develop its properties and pay its loans with several banking institutions. PALI was issued a Permit to Sell its shares to the public by the SEC. PALI filed with the PSE an application to list its shares, with supporting documents attached. The Listing Committee of the PSE, upon a perusal of PALI's application, recommended to the PSE's Board of Governors the approval of PALI's listing application.
Before it could act upon PALI's application, the Board of Governors of the PSE received a letter from the heirs of Ferdinand E. Marcos, claiming that the late President Marcos was the legal and beneficial owner of certain properties which PALI claims to be among its assets and that the Ternate Development Corporation, which is among the stockholders of PALI, likewise appears to have been held and continue to be held in trust by one Rebecco Panlilio for then President Marcos and now, effectively for his estate, and requested PALI's application to be deferred. The Board of Governors of the PSE reached its decision to reject PALI's application, citing the existence of serious claims, issues and circumstances
surrounding PALI's ownership over its assets that adversely affect the suitability of listing PALI's shares in the stock exchange.PALI wrote a letter to the SEC addressed to the then Acting Chairman, requesting that the SEC, in the exercise of its supervisory and regulatory powers over stock exchanges under Section 6(j) of P.D. No. 902-A, review the PSE's action on PALI's listing application and institute such measures as are just and proper under the