Wilson P. Gamboa v. Finance Secretary Margarito Teves, et al., G.R.
stock (combined total of common and non-voting preferred shares) of PLDT,
No. 176579, June 28, 2011
DECISION
III.   THE RULING
CARPIO, J.:
I.      THE FACTS
This is a petition to nullify the sale of shares of stock of Philippine
Telecommunications Investment Corporation (PTIC) by the government of
the Republic of the Philippines, acting through the Inter-Agency Privatization
Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of
First Pacific Company Limited (First Pacific), a Hong Kong-based investment
management and holding company and a shareholder of the Philippine Long
Distance Telephone Company (PLDT).
The petitioner questioned the sale on the ground that it also
involved an indirect sale of 12 million shares (or about 6.3 percent of the
outstanding common shares) of PLDT owned by PTIC to First Pacific. With
the this sale, First Pacific’s common shareholdings in PLDT increased from
30.7 percent to 37 percent, thereby increasing the total common
shareholdings of foreigners in PLDT to about 81.47%. This, according to the
petitioner, violates Section 11, Article XII of the 1987 Philippine Constitution
which limits foreign ownership of the capital of a public utility to not more
than 40%, thus:
Section 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines, at least sixty per centum
of whose capital is owned by such citizens; nor shall such franchise,
certificate, or authorization be exclusive in character or for a longer period
than fifty years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration, or
repeal by the Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all
the executive and managing officers of such corporation or association must
be citizens of the Philippines. (Emphasis supplied)
II.    THE ISSUE
Does the term “capital” in Section 11, Article XII of the Constitution
refer to the total common shares only, or to the total outstanding capital
a public utility?
[The Court partly granted the petition and held that the term
“capital” in Section 11, Article XII of the Constitution refers only to shares of
stock entitled to vote in the election of directors of a public utility, i.e., to the
total common shares in PLDT.]
Considering that common shares have voting rights which translate
to control, as opposed to preferred shares which usually have no voting
rights, the term “capital” in Section 11, Article XII of the Constitution refers
only to common shares. However, if the preferred shares also have the right
to vote in the election of directors, then the term “capital” shall include such
preferred shares because the right to participate in the control or
management of the corporation is exercised through the right to vote in the
election of directors. In short, the term “capital” in Section 11, Article XII
of the Constitution refers only to shares of stock that can vote in the
election of directors.
   
To construe broadly the term “capital” as the total outstanding
capital stock, including both common and non-voting preferred shares,
grossly contravenes the intent and letter of the Constitution that the “State
shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.” A broad definition unjustifiably disregards who owns
the all-important voting stock, which necessarily equates to control of the
public utility.
   
Holders of PLDT preferred shares are explicitly denied of the right
to vote in the election of directors. PLDT’s Articles of Incorporation expressly
state that “the holders of Serial Preferred Stock shall not be entitled to
vote at any meeting of the stockholders for the election of directors or
for any other purpose or otherwise participate in any action taken by the
corporation or its stockholders, or to receive notice of any meeting of
stockholders.” On the other hand, holders of common shares are granted the
exclusive right to vote in the election of directors. PLDT’s Articles of
Incorporation state that “each holder of Common Capital Stock shall have
one vote in respect of each share of such stock held by him on all matters
voted upon by the stockholders, and the holders of Common Capital
Stock shall have the exclusive right to vote for the election of directors
and for all other purposes.”
It must be stressed, and respondents do not dispute, that foreigners
hold a majority of the common shares of PLDT. In fact, based on PLDT’s
2010 General Information Sheet (GIS), which is a document required to be
submitted annually to the Securities and Exchange Commission, foreigners
hold 120,046,690 common shares of PLDT whereas Filipinos hold only
66,750,622 common shares. In other words, foreigners hold 64.27% of the
total number of PLDT’s common shares, while Filipinos hold only 35.73%.
Since holding a majority of the common shares equates to control, it is clear
that foreigners exercise control over PLDT. Such amount of control
unmistakably exceeds the allowable 40 percent limit on foreign ownership of
public utilities expressly mandated in Section 11, Article XII of the
Constitution.
As shown in PLDT’s 2010 GIS, as submitted to the SEC, the par
value of PLDT common shares is P5.00 per share, whereas the par value of
preferred shares is P10.00 per share. In other words, preferred shares have
twice the par value of common shares but cannot elect directors and have
only 1/70 of the dividends of common shares. Moreover, 99.44% of the
preferred shares are owned by Filipinos while foreigners own only a
minuscule 0.56% of the preferred shares. Worse, preferred shares constitute
77.85% of the authorized capital stock of PLDT while common shares
constitute only 22.15%. This undeniably shows that beneficial interest in
PLDT is not with the non-voting preferred shares but with the common
shares, blatantly violating the constitutional requirement of 60 percent
Filipino control and Filipino beneficial ownership in a public utility.
  
In short, Filipinos hold less than 60 percent of the voting stock, and
earn less than 60 percent of the dividends, of PLDT. This directly
contravenes the express command in Section 11, Article XII of the
Constitution that “[n]o franchise, certificate, or any other form of authorization
for the operation of a public utility shall be granted except to x x x
corporations x x x organized under the laws of the Philippines, at least sixty
per centum of whose capital is owned by such citizens x x x.”
To repeat, (1) foreigners own 64.27% of the common shares of
PLDT, which class of shares exercises the sole right to vote in the election of
directors, and thus exercise control over PLDT; (2) Filipinos own only
35.73% of PLDT’s common shares, constituting a minority of the voting
stock, and thus do not exercise control over PLDT; (3) preferred shares,
99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn
only 1/70 of the dividends that common shares earn; (5) preferred shares
have twice the par value of common shares; and (6) preferred shares
constitute 77.85% of the authorized capital stock of PLDT and common
shares only 22.15%. This kind of ownership and control of a public utility is a
mockery of the Constitution.
[Thus, the Respondent Chairperson of the Securities and Exchange
Commission was DIRECTED by the Court to apply the foregoing definition of
the term “capital” in determining the extent of allowable foreign ownership in
respondent Philippine Long Distance Telephone Company, and if there is a
violation of Section 11, Article XII of the Constitution, to impose the
appropriate sanctions under the law.]
PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES (PICOP) v.
CA, CIR and CTA, G.R. Nos. 106949-50 (1995)
Facts:
Paper Industries Corporation of the Philippines (PICOP) is a Philippine
corporation registered with the Board of Investments (BOI) as a preferred
pioneer enterprise with respect to its integrated pulp and paper mill, and as a
preferred non-pioneer enterprise with respect to its integrated plywood and
veneer mills.  Petitioner received from the Commissioner of Internal
Revenue (CIR) two (2) letters of assessment and demand (a) one for
deficiency transaction tax and for documentary and science stamp tax; and
(b) the other for deficiency income tax for 1977, for an aggregate amount of
PhP88,763,255.00.
PICOP protested the assessment of deficiency transaction tax , the
documentary and science stamp taxes, and the deficiency income tax
assessment. CIR did not formally act upon these protests, but issued a
warrant of distraint on personal property and a warrant of levy on real
property against PICOP, to enforce collection of the contested assessments,
thereby denying PICOP's protests.  Thereupon, PICOP went before (CTA)
appealing the assessments.
On 15 August 1989, CTA rendered a decision, modifying the CIR’s findings
and holding PICOP liable for the reduced aggregate amount of
P20,133,762.33. Both parties went to the Supreme Court, which referred the
case to the Court of Appeals (CA).
CA denied the appeal of the CIR and modified the judgment against PICOP
holding it liable for transaction tax and absolved it from payment of
documentary and science stamp tax and compromise penalty.  It also held
PICOP liable for deficiency of income tax.
Issues:
1.     Whether PICOP is liable for transaction tax
Held:
1.     YES. PICOP reiterates that it is exempt from the payment of the transaction
tax by virtue of its tax exemption under R.A. No. 5186, as amended, known
as the Investment Incentives Act, which in the form it existed in 1977-1978,
read in relevant part as follows:  "SECTION 8. Incentives to a Pioneer
Enterprise. — In addition to the incentives provided in the preceding section,
pioneer enterprises shall be granted the following incentive benefits:  (a) Tax
Exemption. Exemption from all taxes under the National Internal Revenue
Code, except income tax, from the date of investment is included in the
Investment Priorities Plan x x x”. The Supreme Court holds that that PICOP's
tax exemption under R.A. No. 5186, as amended, does not include
exemption from the thirty-five percent (35%) transaction tax. In the first
place, the thirty-five percent (35%) transaction tax is an income tax, a tax on
the interest income of the lenders or creditors as held by the Supreme Court
in the case of Western Minolco Corporation v. Commissioner of Internal
Revenue. The 35% transaction tax is an income tax on interest earnings to
the lenders or placers. The latter are actually the taxpayers. Therefore, the
tax cannot be a tax imposed upon the petitioner. In other words, the
petitioner who borrowed funds from several financial institutions by issuing
commercial papers merely withheld the 35% transaction tax before paying to
the financial institutions the interest earned by them and later remitted the
same to the respondent CIR. The tax could have been collected by a
different procedure but the statute chose this method. Whatever collecting
procedure is adopted does not change the nature of the tax.  It is thus clear
that the transaction tax is an income tax and as such, in any event, falls
outside the scope of the tax exemption granted to registered pioneer
enterprises by Section 8 of R.A. No. 5186, as amended. PICOP was the
withholding agent, obliged to withhold thirty-five percent (35%) of the interest
payable to its lenders and to remit the amounts so withheld to the Bureau of
Internal Revenue ("BIR"). As a withholding, agent, PICOP is made
personally liable for the thirty-five percent (35%) transaction tax 10 and if it
did not actually withhold thirty-five percent (35%) of the interest monies it
had paid to its lenders, PICOP had only itself to blame.
First Lepanto Ceramics, Inc. v. CA
G.R. No. 117680 February 9, 1996
Vitug, J.
Facts:
                Petitioner First Lepanto Ceramics, Inc., was registered as a “non-
pioneer enterprise” with public respondent BOI having been so issued a
Certificate of Registration under Executive Order NO. 226, also known as
the Omnibus Investments Code of 1987, in the manufacture of glazed floor
tiles. Among the specific terms and conditions imposed on First Lepanto’s
registration were that: (1) The enterprise shall export at least 50% of its
production; and (2) The enterprise shall produce only glazed floor tile.
                In a letter addressed to the BOI, First Lepanto requested for an
amendment of its registered product to “ceramic tiles” in order to likewise
enable it to manufacture ceramic wall tiles; however, before the BOI could
act on First Lepanto’s request for amendment, Mariwasa and Fil-Hispano
Ceramics, Inc., already had on file their separate complaints with the BOI
against First Lepanto for violating the terms and conditions of its registration
by the use of its tax and duty-free equipment in the production of ceramic
wall tiles.
The BOI rendered a decision finding First Lepanto guilty and
imposing on the latter a fine of P797,950.40 without prejudice, however, 1) to
an imposition of additional penalty should First Lepanto continue to commit
the same violation; and 2) to the Board’s authority to consider/ evaluate First
Lepanto’s request for an amendment of its certificate of registration,
including, among other things, a change in its registered product from
“glazed floor tiles” to “ceramic tiles.”
After paying the imposed fine, First Lepanto formally filed its
application with the BOI to amend its registered product from “glazed floor
tiles” to “ceramic tiles.”
On 06 August 1992, another verified complaint was filed by
Mariwasa with the BOI which asseverated that, despite BOI’s finding that
First Lepanto had violated the terms and conditions of its registration, the
latter still continued with its unauthorized production and sale of ceramic wall
tiles. Respondent BOI dismissed the complaint for lack of merit. Its motion
for reconsideration having been denied, Mariwasa appealed the case to the
Office of the President.
In the meantime, First Lepanto caused the publicationin the Manila
Bulletin of a notice on the official filing with the BOI of the aforementioned
application for amendment of Certificate of Registration No. EP 89-452.
Mariwasa opposed the application. On 10 December 1992, respondent BOI
handed down its decision approving First Lepanto’s application.
Issue:
                whether or not the Court of Appeals erred in setting aside the
decision of the Board of Investments
Held:
                The BOI is the agency tasked with evaluating the feasibility of an
investment project and to decide which investment might be compatible with
its development plans. The exercise of administrative discretion is a policy
decision and a matter that can best be discharged by the government
agency concerned and not by the courts. BOI has allowed the amendment of
First Lepanto’s product line because that agency believes that allowing First
Lepanto to manufacture wall tiles as well will give it the needed technical and
market flexibility, a key factor, to enable the firm to eventually penetrate the
world market and meet its export requirements.
                It is basic rule that the courts will not interfere in matters which are
addressed to the sound discretion of government agencies entrusted with
the regulation of activities coming under the special technical knowledge and
training of such agencies.
Pilipinas Kao v. CA [GR 105014, 18 December 2001] First Division,
Kapunan (J) : 4 concur
Facts: Pilipinas Kao, Inc. is a corporation organized and existing under the
laws of the Philippines, engaged in multiple areas of registered activity, or
has a number of projects registered with the Board of Investments (BOI).
Batas Pambansa 391 (Investment Policy Act of 1983) was enacted in 1983,
providing, among others, for tax incentives for new and expanding export
producer. To avail itself of these tax incentives, the company applied with
BOI for registration of its expanded production capacity, which BOI approved
on 8 January 1987. Each project was entitled to a certain set of incentives
depending upon, among others, the law of registration and the status and
type of registration. These tax incentives apply only to the company’s
Certificate of Registration 87-1476 (Project 4) as new export producer, and
Certificate of Registration 87- 1247 (Project 3) as an expanding export
producer (an expansion of the company's existing projects registered under
RA +6135). The initial application by company for tax credit incentives for the
year 1987 was approved by BOI substantially as applied for. But those
applied for in 1988 and onwards were drastically reduced by BOI with the
adoption and application of a deductible "base figure" provided in its Tax
Credit on Net Local Content (NLC) and Net Value Earned (NVE) Manual of
Operations. On 31 March 1989, company filed applications for its 1988 tax
credits on the NVE for P8,583,328.00 and on the NLC for P25,928,673.00
for a grand total of P34,512,000.00. On 10 May 1990, the BOI Issued Board
Resolution 188, series of 1990, granting company's application for tax credit
but only in the reduced amounts of P1,512,758 for NVE and P2,631,018 for
NLC for a grand total of P4,223,776. Notified of the BOI s decision, company
requested for a reconsideration. But before the BOI could act thereon,
company again filed on 3 July 1990 its applications for 1989 tax credits on
the NVE in the amount of P9,649,459 and on the NLC, P25,648,401, for a
grand total of P35,297,860. On 27 July 1990, the BOI denied company's
request for reconsideration anent its 1988 tax credit, the denial being
communicated to company in a letter dated 1 August 1990 and received by
the latter on 15 August 1990.On 17 December 1990, company again moved
for reconsideration of the BOI s letter dated 1 August 1990, but the same
was denied by the BOI in a letter dated 11 March 1991. On 11 March 1991,
the BOI also advised company of the approval of its application for the year
1989 tax credit but only in the reduced amounts of P3,441,473 (NVE) and
P649,471 (NLC) for a grand total of P4,090,944. On 15 April 1991, and by
registered mail, company then filed with the Honorable Supreme Court a
motion for extension of time to file petition pursuant to Article 82 of the
Omnibus Investments Code; it likewise filed a second motion for extension of
time to file petition on 15 May 1991, both of which were not acted upon by
the Honorable Supreme Court. On 6 May 1991, however, the Supreme
Court issued a resolution referring the instant petition to the trial Court. The
trial court, however, dismissed the petition for review "on technical and
substantive grounds"; ruling that the petition for review was filed beyond the
30 period of appeal set in Article 78 of PD 1789, as amended by BP 391.
The Court of Appeals sustained the decision of the trial court and sustained
the reduction of credits on net value earned and net local content applied for
by the company in 1988 and 1989. Consequently, the company filed petition
to set aside decision of the Court of Appeals with the Supreme Court.
Issue: Whether the Board of Investment’s Manual of Operation, especially as
to the NLC and NVE, binds Pilipinas Kao, or the public as a whole.
Held: The Manual of Operations is not exempted from publication as it is not
merely internal in nature, regulating only the personnel of the administrative
agency and not the public, nor is it a letter of instruction issued by
administrative superiors concerning the rules and guidelines to be followed
by their subordinates in the performance of their duties. The Manual of
Operations affected the public in a substantial way. Administrative rules and
regulations must be published if their purpose is to enforce or implement
existing law pursuant to a valid delegation. The Manual of Operations was
meant to enforce or implement B.P. Blg. 391, a law of general application.
The absence of publication is a fatal omission that renders the Manual of
Operations void and of no effect (See Tanada v. Tuvera). Further, Section
17 of PD 1789, as amended by BP 391, explicitly provides that the rules and
regulations implementing the Investments Code take effect only after due
publication. Thus, the ''Tax Credit on NLC and NVE Manual of Operations"
(Manual of Operations) of BOI has no legal effect insofar as it adopts as a
"base figure" for net value earned (NVE) the "highest attained production
volume" in the period preceding the registration of petitioner's additional or
expanded capacity; and (2) only the expanded or additional capacity of
petitioner registered under BP 1789, as amended by BP 391, is entitled to
the tax credit provided therein, and not the pre-existing registered capacity.
Batangas Power v. Batangas City, GR No. 152675, April 28, 2004
Facts:
Enron Power Development Corporation and petitioner NPC
(National Power Corporation) entered into a Fast Track BOT Project. The
BOI issued a certificate of registration to BPC (Batangas Power Corporation)
as a pioneer enterprise entitled to a tax holiday for a period of 6 years.
Batangas City sent a letter to BPC demanding payment of business taxes
and penalties, commencing from the year 1994, BPC refused to pay, citing
its tax-exempt status as a pioneer enterprise for six (6) years under Section
133 (g) of the Local Government Code (LGC). The city’s tax claim was
modified and demanded payment of business taxes from BPC only for the
years 1998-1999. BPC still refused to pay the tax. It insisted that its 6-year
tax holiday commenced from the date of its commercial operation on July
1993, not from the date of its BOI registration in September 1992. In the
alternative, BPC asserted that the city should collect the tax from the NPC as
the latter assumed responsibility for its payment under their BOT Agreement.
While admitting assumption of BPCs tax obligations under their BOT
Agreement, NPC refused to pay BPCs business tax as it allegedly
constituted an indirect tax on NPC which is a tax-exempt corporation under
its Charter.
Issue:
WON BPC’s claim of tax-exemption on Section 133 (o) of the LGC
which exempts government instrumentalities from taxes imposed by local
government units (LGUs), citing in support thereof the case of Basco v.
PAGCOR valid.
Ruling:
Considered as the most revolutionary piece of legislation on local
autonomy, the Local Government Code effectively deals with the fiscal
constraints faced by LGUs. It widens the tax base of LGUs to include taxes
which were prohibited by previous laws. Batangas Power cannot rely for
exemption on the Basco case as this was decided prior to the effectivity of
the LGC (Local Government Code), when there was still no law empowering
local government units to tax instrumentalities of the national government.
Extra Info:
The effect of the LGC on the tax exemption privileges of the NPC
has already been extensively discussed and settled in the recent case of
National Power Corporation v. City of Cabanatuan. In said case, this Court
recognized the removal of the blanket exclusion of government
instrumentalities from local taxation as one of the most significant provisions
of the 1991 LGC. Specifically, we stressed that Section 193 of the LGC, an
express and general repeal of all statutes granting exemptions from local
taxes, withdrew the sweeping tax privileges previously enjoyed by the NPC
under its Charter.
G.R. No. 109272 August 10, 1994
GEORG GROTJAHN GMBH & CO., petitioner,
vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court,
Makati, Br. 59; ROMANA R. LANCHINEBRE; and TEOFILO A.
LANCHINEBRE, respondents.
A.M. Sison, Jr. & Associates for petitioner.
Pedro L. Laso for private respondents.
PUNO, J.:
Petitioner impugns the dismissal of its Complaint for a sum of money by the
respondent judge for lack of jurisdiction and lack of capacity to sue.
The records show that petitioner is a multinational company organized and
existing under the laws of the Federal Republic of Germany. On July 6,
1983, petitioner filed an application, dated July 2, 1983, 1 with the Securities
and Exchange Commission (SEC) for the establishment of a regional or area
headquarters in the Philippines, pursuant to Presidential Decree No. 218.
The application was approved by the Board of Investments (BOI) on
September 6, 1983. Consequently, on September 20, 1983, the SEC issued
a Certificate of Registration and License to petitioner. 2
Private respondent Romana R. Lanchinebre was a sales representative of
petitioner from 1983 to mid-1992. On March 12, 1992, she secured a loan of
twenty-five thousand pesos (P25,000.00) from petitioner. On March 26 and
June 10, 1992, she made additional cash advances in the sum of ten
thousand pesos (P10,000.00). Of the total amount, twelve thousand one
hundred seventy pesos and thirty-seven centavos (P12,170.37) remained
unpaid. Despite demand, private respondent Romana failed to settle her
obligation with petitioner.
On July 22, 1992, private respondent Romana Lanchinebre filed with the
Arbitration Branch of the National Labor Relations Commission (NLRC) in
Manila, a Complaint for illegal suspension, dismissal and non-payment of
commissions against petitioner. On August 18, 1992, petitioner in turn filed
against private respondent a Complaint for damages amounting to one
hundred twenty thousand pesos (P120,000.00) also with the NLRC
Arbitration Branch (Manila). 3 The two cases were consolidated.
On September 2, 1992, petitioner filed another Complaint for collection of
sum of money against private respondents spouses Romana and Teofilo
Lanchinebre which was docketed as Civil Case No. 92-2486 and raffled to
the sala of respondent judge. Instead of filing their Answer, private
respondents moved to dismiss the Complaint. This was opposed by
petitioner.
On December 21, 1992, respondent judge issued the first impugned Order,
granting the motion to dismiss. She held, viz:
Jurisdiction over the subject matter or nature of the action
is conferred by law and not subject to the whims and
caprices of the parties.
Under Article 217 of the Labor Code of the Philippines, the
Labor Arbiters shall have original and exclusive jurisdiction
 to hear and decide, within thirty (30) calendar days after
the submission of the case by the parties for decision, the
following cases involving all workers, whether agricultural
or non-agricultural:
(4) claims for actual, moral, exemplary and other forms of
damages arising from an employer-employee relations.
xxx xxx xxx
(6) Except claims for employees compensation, social
security, medicare and maternity benefits, all other claims
arising from employer-employee relations, including those
of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether or not accompanied with a claim for
reinstatement.
In its complaint, the plaintiff (petitioner herein) seeks to
recover alleged cash advances made by defendant
(private respondent herein) Romana Lanchinebre while
the latter was in the employ of the former. Obviously the
said cash advances were made pursuant to the employer-
employee relationship between the (petitioner) and the
said (private respondent) and as such, within the original
and exclusive jurisdiction of the National Labor Relations
Commission.
Again, it is not disputed that the Certificate of Registration
and License issued to the (petitioner) by the Securities and
Exchange Commission was merely "for the establishment
of a regional or area headquarters in the Philippines,
pursuant to Presidential Decree No. 218 and its
implementing rules and regulations." It does not include a
license to do business in the Philippines. There is no
allegation in the complaint moreover that (petitioner) is
suing under an isolated transaction. It must be considered
that under Section 4, Rule 8 of the Revised Rules of Court,
facts showing the capacity of a party to sue or be sued or
the authority of a party to sue or be sued in a
representative capacity or the legal existence of an
organized association of persons that is made a party
must be averred. There is no averment in the complaint
regarding (petitioner's) capacity to sue or be sued.
Finally, (petitioner's) claim being clearly incidental to the
occupation or exercise of (respondent) Romana
Lanchinebre's profession, (respondent) husband should
not be joined as party defendant. 4
On March 8, 1993, the respondent judge issued a minute Order denying
petitioner's Motion for Reconsideration.
Petitioner now raises the following assignments of errors:
I
THE TRIAL COURT GRAVELY ERRED IN HOLDING
THAT THE REGULAR COURTS HAVE NO
JURISDICTION OVER DISPUTES BETWEEN AN
EMPLOYER AND AN EMPLOYEE INVOLVING THE
APPLICATION PURELY OF THE GENERAL CIVIL LAW.
II
THE TRIAL COURT GRAVELY ERRED IN HOLDING
THAT PETITIONER HAS NO CAPACITY TO SUE AND
BE SUED IN THE PHILIPPINES DESPITE THE FACT
THAT PETITIONER IS DULY LICENSED BY THE
SECURITIES AND EXCHANGE COMMISSION TO SET
UP AND OPERATE A REGIONAL OR AREA
HEADQUARTERS IN THE COUNTRY AND THAT IT HAS
CONTINUOUSLY OPERATED AS SUCH FOR THE LAST
NINE (9) YEARS.
III
THE TRIAL COURT GRAVELY ERRED IN HOLDING
THAT THE ERRONEOUS INCLUSION OF THE
HUSBAND IN A COMPLAINT IS A FATAL DEFECT THAT
SHALL RESULT IN THE OUTRIGHT DISMISSAL OF THE
COMPLAINT.
IV
THE TRIAL COURT GRAVELY ERRED IN HOLDING
THAT THE HUSBAND IS NOT REQUIRED BY THE
RULES TO BE JOINED AS A DEFENDANT IN A
COMPLAINT AGAINST THE WIFE.
There is merit to the petition.
Firstly, the trial court should not have held itself without jurisdiction over Civil
Case No. 92-2486. It is true that the loan and cash advances sought to be
recovered by petitioner were contracted by private respondent Romana
Lanchinebre while she was still in the employ of petitioner. Nonetheless, it
does not follow that Article 217 of the Labor Code covers their relationship.
Not every dispute between an employer and employee involves matters that
only labor arbiters and the NLRC can resolve in the exercise of their
adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and
the NLRC under Article 217 of the Labor Code is limited to disputes arising
from an employer-employee relationship which can only be resolved by
reference to the Labor Code, other labor statutes, or their collective
bargaining agreement. In this regard, we held in the earlier case of Molave
Motor Sales, Inc. vs. Laron, 129 SCRA 485 (1984), viz:
Before the enactment of BP Blg. 227 on June 1, 1982,
Labor Arbiters, under paragraph 5 of Article 217 of the
Labor Code had jurisdiction over "all other cases arising
 from employer-employee relation, unless expressly
excluded by this Code." Even then, the principal followed
by this Court was that, although a controversy is between
an employer and an employee, the Labor Arbiters have no
jurisdiction if the Labor Code is not involved. In Medina vs.
Castro-Bartolome, 116 SCRA 597, 604 in negating
jurisdiction of the Labor Arbiter, although the parties were
an employer and two employees, Mr. Justice Abad Santos
stated:
The pivotal question to Our mind is
whether or not the Labor Code has any
relevance to the reliefs sought by
plaintiffs. For if the Labor Code has no
relevance, any discussion concerning
the statutes amending it and whether or
not they have retroactive effect is
unnecessary.
xxx xxx xxx
And in Singapore Airlines Limited vs. Paño, 122 SCRA
671, 677, the following was said:
Stated differently, petitioner seeks
protection under the civil laws and
claims no benefits under the Labor
Code. The primary relief sought is for
liquidated damages for breach of a
contractual obligation. The other items
demanded are not labor benefits
demanded by workers generally taken
cognizance of in labor disputes, such as
payment of wages, overtime
compensation or separation pay. The
items claimed are the natural
consequences flowing from breach of an
obligation, intrinsically a civil dispute.
x x x           x x x          x x x
In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized
the doctrines set forth in the Medina, Singapore Airlines, and Molave
Motors  cases, thus:
. . . The important principle that runs through these three
(3) cases is that where the claim to the principal relief
sought is to be resolved not by reference to the Labor
Code or other labor relations statute or a collective
bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts
of justice and not to the Labor Arbiter and the NLRC. In
such situations, resolutions of the dispute requires
expertise, not in labor management relations nor in wage
structures and other terms and conditions of employment,
but rather in the application of the general civil law.
Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to Labor Arbiters and the
NLRC and the rationale for granting jurisdiction over such
claims to these agencies disappears.
Civil Case No. 92-2486 is a simple collection of a sum of money brought by
petitioner, as creditor, against private respondent Romana Lanchinebre, as
debtor. The fact that they were employer and employee at the time of the
transaction does not negate the civil jurisdiction of the trial court. The case
does not involve adjudication of a labor dispute but recovery of a sum of
money based on our civil laws on obligation and contract.
Secondly, the trial court erred in holding that petitioner does not have
capacity to sue in the Philippines. It is clear that petitioner is a foreign
corporation doing business in the Philippines. Petitioner is covered by the
Omnibus Investment Code of 1987. Said law defines "doing business," as
follows:
. . . shall include soliciting orders, purchases, service
contracts, opening offices, whether called "liaison" offices
or branches; appointing representatives or distributors who
are domiciled in the Philippines or who in any calendar
year stay in the Philippines for a period or periods totalling
one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic
business firm, entity or corporation in the Philippines, and
any other act or acts that imply a continuity of commercial
dealings or arrangements and contemplate to that extent
the performance of acts or works, or the exercise of some
of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and
object of the business organization. 5
There is no general rule or governing principle as to what constitutes "doing"
or "engaging in" or "transacting" business in the Philippines. Each case must
be judged in the light of its peculiar circumstances. 6 In the case at bench,
petitioner does not engage in commercial dealings or activities in the country
because it is precluded from doing so by P.D. No. 218, under which it was
established. 7 Nonetheless, it has been continuously, since 1983, acting as a
supervision, communications and coordination center for its home office's
affiliates in Singapore, and in the process has named its local agent and has
employed Philippine nationals like private respondent Romana Lanchinebre.
From this uninterrupted performance by petitioner of acts pursuant to its
primary purposes and functions as a regional/area headquarters for its home
office, it is clear that petitioner is doing business in the country. Moreover,
private respondents are estopped from assailing the personality of petitioner. Whether or not Toshiba is entitled to refund for the input tax it paid on unutili
So we held in Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA zed capital goods purchased considering that it is registered with PEZA and l
824, 837 (1992): ocated within the ecozone.
The rule is that a party is estopped to challenge the  
personality of a corporation after having acknowledged the Ruling:
same by entering into a contract with it. And the "doctrine Yes. CIR failed to differentiate between VAT-exempt transactions from VAT-
of estoppel to deny corporate existence applies to foreign exempt entities. An exempt transactions are transactions specifically listed in 
as well as to domestic corporations;" "one who has dealth and expressly exempted from VAT under the Tax Code without regard to the 
with a corporation of foreign origin as a corporate entity is tax status, VAT-exempt or not, of the taxpayer. An exempt party, on the othe
estopped to deny its corporate existence and capacity." r hand, is a person or entity granted VAT-exemption under the Tax Code, sp
The principle "will be applied to prevent a person ecial law or an international agreement to which the Philippines is a signator
contracting with a foreign corporation from later taking y and by virtue of which its taxable transactions become exempt from VAT.
advantage of its noncompliance with the statutes chiefly in Toshiba, a PEZA-registered and located within a ecozone is a VAT-exempt 
cases where such person has received the benefits of the entity because of Sec 8 of Ta 7916 which establishes the fiction that ecozon
contract, . . . (Citations omitted.) es are foreign territory. Therefore, a supplier from the custom territory cannot 
Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on pass on output VAT to an ecozone enterprise, like Toshiba, since it is exemp
what it found to be the misjoinder of private respondent Teofilo Lanchinebre t.
as party defendant. It is a basic rule that "(m)isjoinder or parties is not
ground for dismissal of an action."8 Moreover, the Order of the trial court is
based on Section 4(h), Rule 3 of the Revised Rules of Court, which provides:
A married woman may not . . . be sued alone without
joining her husband, except . . . if the litigation is incidental
to the profession, occupation or business in which she is
engaged,
Whether or not the subject loan was incurred by private respondent as an
incident to her profession, occupation or business is a question of fact. In the
absence of relevant evidence, the issue cannot be resolved in a motion to
dismiss.
IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated
December 21, 1992 and March 8, 1993, in Civil Case No. 92-2486 are
REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby ordered
to hear the reinstated case on its merits. No costs.
SO ORDERED.
CIR vs Toshiba Information Equipment (Phil.) G.R. No. 150154, 9
August 2005
Facts:
Toshiba was claiming a refund for the input tax it paid on unutilized capital g
oods purchased. However, the CIR said that it cannot because the capital go
ods and services it purchased are considered not used in VAT taxable busin
ess and therefore, it is not entitled to refund of input taxes. Toshiba, on the o
ther hand, contended that it is PEZA-registered and located within the ecozo
ne and therefore for, VAT-exempt entity.
 
Issue: