GAMBOA V. TEVES, G.R.

NO 176579, JUNE 28, 2011

▪ In (1928): The Philippine legislature enacted Legislative Act No. 3436 which granted PLDT franchise and the right to engage in
telecommunication business alright? (grabe buhay na pala PLDT noon? pano sila nagcocommunicate? dalawang lata na may tale? oh well I
guess it’s understandable, the brilliant dude Alex Graham Bell invented the telephone in around 1876? The invention must have probably
evolved when it reached Philippine soil, although I just wonder if our predecessors were able to utilize the earliest model, the one that you
stuck this thing in your ear and the other one in your mouth and say 'greetings!'
▪ Alright, in (1969): GTE (General Telephone Electronics), (the one that merged with Bell Atlantic. GTE is the parent company that spearheaded
subsidiaries like Verizon and the Canadian company Telus? Yeah like the BPO outsourcing company, you know that building you see across
the Araneta Coliseum?) GTE is an American firm and during that time was one of the major PLDT stockholders. So, what happened was it
sold the 26% of its Outstanding Common Shares to PTIC. Outstanding Common Shares, meaning were talking about the whole shares of
stocks of PLDT okay?. (Parang kase the whole PLDT shares wasn't owned individually but severally like most of the stocks, right? Like a
conglomerate.) And the 26% OComS which was owned by the Americans was sold to a Filipino company which is PTIC, (Philippine
Telecommunications Investment Corporation, which I think was majorly owned by the Cojuancos.)
▪ Now in (1977): PHI (Prime Holdings Inc. ) was incorporated which I think was surreptitiously created since it subsequently became
owner of 111 thousand shares of PTIC by virtue of a Deed of Assignment executed by PTIC then stockholder Ramon Cojuanco. (I think this
was during the time of Marcos when a lot of clandestine transfer of ownership were being affected, but of course the anti-Marcoses saw all
that).
▪ In (1986): after the EDSA Revolution. The PCGG was created and it sequestered these 111 thousand shares which was later declared by
court as government owned. The 111 thousand shares by the way comprises 46% of the Outstanding Capital Stock of PTIC. OCapS meaning
like were talking about Total Capital Shares of Stocks meaning may be owned within the individual shares of companies that comprised the
PLDT stockholder companies. Gets? Now here comes the foreign company that started the issue entering the picture.
▪ In (1999): First Pacific a Hong Kong based investment management and holding company acquired the remaining 54% Outstanding Capital
Stocks of PTIC... so were talking about OCapS here alright? as opposed to OComS. This acquisition simply means a foreign company had
just bought himself in and became a player as one of the stockholders of PLDT through PTIC stocks. Crystal?
▪ Now (2006): We now all know that 46% of OCapS of PTIC is now government owned right? PCGG sequestered the assets remember? Now,
the government wanted to dispose these shares in order to privatize it, so through the IPC (Inter-Agency Privatization Council) it announced a
public bidding where thereafter only 2 bidders submitted a bid. Parallax Ventures and PAN ASIA. Parallax won with a bid of P25 Billion.
▪ Now watch out here comes that foreign company First Pacific once again. As a PLDT stockholder and one of the stock players, it entered the
picture once again eyeing that remaining 46% PTIC shares... in other words foreign owned First Pacific wanted to own PTIC by 100% alright?
So, what it did was it announced that it will exercise its Right of First Refusal as a PTIC stockholder (it has a right because it owned the 54%
PTIC shares of stocks remember?) and it offered to buy the remaining 46% by matching the bid price of Parallax.
▪ But in (2007): First Pacific failed to do so and therefore not complying with the deadline. So it was opted out by the government seller. But
since the company was insistent First Pacific thru its subsidiary company MPAH entered into a conditional sale with the government and
purchased the 46% for P25 Billion which resulted to an increase of First Pacific's stock ownership, rendering PTIC as wholly foreign
owned. (Kaya pag magtatayo ka ng kompanya, magtayo ka ng subsidiary di ba? or affiliates through acquired assets. to do the dirty work
▪ Now this is primarily the reason for this petition. PLDT stock holder Wilson Gamboa saw all that and he now questions the sale between the
government and MPAH (First Pacific) alleging that the sale resulted to an Indirect Sale which violated the 40% foreign capital ownership
limitation of Sec. 11 of Art. 12 of the 1987 Constitutional provision.
▪ Finance Secretary Margarito Teves who was the prime respondent in this case together with the then PCGG Commissioner Abcede defended
the sale and alleged that First Pacific's intended acquisition of government's 111 thousand PTIC shares resulting in 100% ownership of PTIC
WILL NOT VIOLATE the 40% constitutional limit on foreign ownership of public utility since PTIC holds only 13% of the total OUTSTANDING
COMMON SHARES of PLDT. (OComS remember?)
ISSUE:
▪ Whether the term CAPITAL in Sec. 11 Art. 12 of Consti refer to the total common shares only, or to the total outstanding capital stocks of
PLDT.
RULING:
▪ The petition is PARTLY MERITORIOUS.
▪ The Court said that it is not a trier of facts. That factual questions raised by petitioner are generally beyond the court jurisdiction. So, adhering
this well settled principle. the court said it will confine its resolution solely on the threshold of purely legal matter on the interpretation of the
term 'CAPITAL'. So it was a question of law after all. (After all the hoopla and bombardization of facts Lol.)
▪ The Court partly granted the petition and held that the term “capital” in Sec. 11, Art. 12 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 Sec. 11, Art. 12 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 Sec. 11, Art. 12 of the Constitution refers only to shares of stock that can vote in the election of directors.

ROY III VS. HERBOSA

Facts
The Supreme Court issued the Gamboa Decision ruling that the term “capital” in Section 11, Article XII of the 1987 Constitution refers only
to shares of stock entitled to vote in the election of directors, and thus only to common shares, and not to the total outstanding capital stock
(common and nonvoting preferred shares). On October 18, 2012, the Gamboa decision attained finality. Pursuant to the Court’s directive in the
Gamboa Decision, the SEC issued SEC-MC No. entitled “Guidelines on Compliance with the Filipino-Foreign Ownership Requirements
Prescribed in the Constitution and/or Existing Laws by Corporations Engaged in Nationalized and Partly Nationalized Activities.”
Section 2 of SEC-MC No. 8 provides:
Section 2. All covered corporations shall, at all times, observe the constitutional or statutory ownership requirement. For purposes of
determining compliance therewith, the required percentage of Filipino ownership shall be applied to BOTH (a) the total number of outstanding
shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock, whether or not entitled to vote
in the election of directors.
Corporations covered by special laws which provide specific citizenship requirements shall comply with the provisions of said law.
Petitioner Roy, as a lawyer and taxpayer, filed the Petition, assailing the validity of SEC-MC No. 8. He seeks to apply the 60-40 Filipino ownership
requirement separately to each class of shares of a public utility corporation, whether common, preferred non-voting, preferred voting or any other
class of shares.
Issue:
Whether the term ‘capital’ in Section 11, Article XII of the Constitution refers to the total common shares only or to the total outstanding
capital stock (combined total of commonand nonvoting preferred shares).
Ruling:
The Court rules that SEC-MC No. 8 is not contrary to the Court’s definition and interpretation of the term “capital.”
(Pronouncement in Gamboa)
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 Section11, 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.
The evident purpose of the citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to
the national interest. The Court noted that the foregoing interpretation is consistent with the intent of the framers of the Constitution to place in the
hands of Filipino citizens the control and management of public utilities; and, as revealed in the deliberations of the Constitutional Commission,
“capital” refers to the voting stock or controlling interest of a corporation.
However, mere legal title is insufficient to meet the 60 percent Filipino -owned “capital” required in the Constitution. Full beneficial
ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial
ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the
constitutional mandate. Otherwise, the corporation is” considered as non-Philippine national.
Both the Voting Control Test and the Beneficial Ownership Test must be applied to determine whether a corporation is a “Philippine
national” and that a “Philippine national” is “a Filipino citizen, or a domestic corporation “at least sixty percent (60%) of the capital
stock outstanding and entitled to vote,” is owned by Filipino citizens. A domestic corporation is a “Philippine national” only if at least
60% of its voting stock is owned by Filipino citizens.” (Foreign Investments Act of 1991)
The right to vote in the election of directors, coupled with full beneficial ownership of stocks, translates to effective control of
a corporation. If the voting right of a share held in the name of a Filipino citizen or national is assigned or transferred to an alien, that
share is not to be counted in the determination of the required Filipino equity. In the same vein, if the dividends and other fruits and
accessions of the share do not accrue to a Filipino citizen or national, then that share is also to be excluded or not counted.
Notes:
The full beneficial ownership test – the full ownership up to 60% of a public utility encompasses both control and economic rights,
both of which must stay in Filipino hands. Filipinos, who own 60% of the controlling interest, must also own 60% of the economic
interest in a public utility.If the Filipino has the “specific stock’s” voting power (he can vote the stock or direct another to vote for him),
or the Filipino has the investment power over the “specific stock” (he can dispose of the stock or direct another to dispose it for him),
or he has both (he can vote and dispose of the “specific stock” or direct another to vote or dispose it for him), then such Filipino is the
“beneficial owner” of that “specific stock” — and that “specific stock” is considered (or counted) as part of the 60% Filipino ownership
of the corporation.

Ang sabi, dahil sa ginawang SEC-MC NO.8, the term capital has been stablished, so in-announce na ng SEC sa
website nila ‘yon, and ask to have public dialogue para mapag-usapan yung bagong memorandum. Ang sabi, si
Atty. Jose M. Roy III ay nagbigay ng comment about sa bagong memo, at sinasabing yung SEC ay inabuso yung
bagong batas, kasi sa napag-usapan based sa ruling doon sa case nila Gamboa, na yung capital ay common
shares lang at shares na pinagbobotohan, but doon sa sinabing batas, yung capital ay BOTH (a) the total number
of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of
outstanding shares of stock, whether or not entitled to vote in the election of directors. Yung ruling ay, hindi
inabuso ng SEC yung memorandum circular number 8, instead, ginamit nila yung case ni gamboa vs teves bilang
basis ng SEC memo no. 8, to prevent aliens to assume that they have the control over the public instrument

NARRA NICKEL MINING AND DEV. CORP. VS. REDMONT CONSOLIDATED MINES, G.R. NO. 195580, APR. 21, 2014
Si Redmont ay isang domestic mining corporation existing under PH laws, at gustong magmina sa Palawan, pero napagalaman niya na yung lugar
ay already covered by Mineral Production Sharing Agreement (MPSA) at need ng application and Exploration permit para makapag-mina, at yung
Narra Nickle mining and dev. Corp, Tesoro mining and dev corp. at McArthur Mining Inc. ay nagmimina na roon kasi meron na silang permit. Etong si
Redmont nag-filed ng petition para mawalan ng permit and application yung Narra, Tesoro, at McArthur, kasi sabi n’ya na yung mga mining corp na
‘yon ay 60% ng shares ay pagmamay-ari ng foreigners which is MBMI Resources Inc. (MBMI), a 100% Canadian corporation. Ang sabi naman nila
narra, na qualified sila sa pagmimina kasi yung nationality raw nila ay immaterial because they also applied for FTAA which granted to foreign
corporations. They also claimed that 60% daw ng capital nila ay pagmamay-ari ng Filipinos. Yung ruling, disqualified yung Narra, et. Al. from gaining
the Sharing agreement or yung permit and application to mine, kasi ang sabi ng Poa na foreign corp sila at effectively controlled by MBMI, a 100%
Canadian corporation, and declared their MPSAs null and void. Redmont also filed a complaint with the SEC, seeking the revocation of the
certificates for registration nila Narra et.al on the ground that they are foreign-owned or controlled corp engaged ni mining in violation of the PH laws.
Court of Appeals (CA)found that there was a doubt to the nationality of petitioners (Narra et.al) when it realized that the petitioners had common
major investor na si MBMI, pursuant to the laws peratining to the exploitation of natural resources, the CA used the grandfather rule to determine
the nationality of the petitioners.

Grandfather rule- traces the nationality of the stockholders of investor corporation so as to ascertain the nationality of the corporation where the
investment is made. Only applied when the corporation’s filipino equity falls below the constitutional threshold of 60% or when there is a doubt as
to the filipino to foreign equity.

SHRIMP SPECIALISTS, INC., VS. FUJI-TRIUMPH AGRI-IND CORP., G.R. NO. 168756, DEC. 7, 2009
Si Shrimp Specialist Inc. (SSI) tsaka si Fuji ay nag-entered into a distribution agreement na si Fuji magd-deliver ng prawn feeds kay Shrimp Specialist.
From June 3, 1989 to July, 1989 nagd-deliver ng feeds si Fuji at may postdated checks yung SSI sa Fuji, which means, yung Fuji may 9 pa na check
na hindi pa nai-in cash. Pero, yung SSI nag-order na itigil yung pagbabayad sa Fuji at i-hold daw muna yung mga cheke at bawal muna raw i-in cash
ni Fuji yung mga postdated checks kasi raw yung mga na-deliver na feeds ay naglalaman ng aflatoxin na nakaaapekto sa production ng prawns, so
in short parang defective yung na-deliver na feeds. Na-settled naman yung issue na iyon at nagkaroon ng agreement na yung SSI magbibigay ng
bagong checke pamalit doon sa dating cheke. Pero, si SSI nag-order ulit na itigil yung pagbabayad at i-hold ulit yung mga cheke , at yung mga
pambayad sana ng SSI sa Fuji ay dinishonored ng bangko, na naging dahilan kung bakit nag-file ng criminal complaint in anti-bouncing checks law
yung Fuji, pero na-dismissed kasi ang sabi dapat daw munang palitan ng Fuji yung contaminated feeds before silang magbayad, dahil doon sa
kasunduan na ginawa nila, sumang-ayon “daw” yung Fuji na contaminated nga yung feeds. On October 26, 1990, nag-filed ng civil complaint sa
RTC yung Fuji and RTC rendered solidary liable the SSI and Eugene Lim (Signatory and president of SSI) for the amount of 767,427 for payment and
30,000 atty., fee. Nag-filed naman ng apila yung SSI at yung Court of Appeals ruled that Eugene Lim absolved in the lawsuit and he is not solidary
liable with SSI.
Yung unang issue, kung si Eugene Lim ay solidary liable with SSI, the ruling was no, kasi walang sapat na ebidensya naipakita yung Fuji na nagp-
proved na si Eugene Lim ay may ginwang bad faith para ma-treat yung company tsaka siya as one entity.

Yung pangalawang issue naman, kung yung sa kasunduan na naglalaman ng statement na “to inform in advance in case the same checks cannot be
deposited for failure to replace the defective feeds.” Ay nag-a-agree yung Fuji na defective nga yung feeds na na-deliver nila. The ruling, no rin, kasi
yung statement na yun ay hindi nanganaghulungang inamin ng Fuji na defective yung feeds nila, at yung pag-amin dapat ay expressed in definite,
certain and unequivocal language.

ZAMBRANO V. PHILIPPINE CARPET MANUFACTURING CORP., G.R. NO. 224099, JUNE 21, 2017
FACTS:
The petitioners were notified of the termination of their employment effective February 3, 2011 on the ground of cessation of operation
due to serious business losses. They asserted that their dismissal constituted unfair labor practice as it involved the mass dismissal of all union
officers and members of the Philippine Carpet Manufacturing Employees Association. Phil Carpet countered that it permanently closed and totally
ceased its operations because there had been a steady decline in the demand for its products due to global recession, stiffer competition, and the
effects of a changing market. Thus, in order to stem the bleeding the company implemented several cost-cutting measures, including voluntary
redundancy and early retirement programs. The petitioners and the Department of Labor and Employment (DOLE) were served written notices one
(1) month before the intended closure of the company. The termination of the petitioners' employment was effective as of the close of office hours
on February 3, 2011.

The petitioners were also paid their separation pay and they voluntarily executed their respective Release and Quitclaim6 before the DOLE
officials. The Labor Arbiter (LA) dismissed the complaints for illegal dismissal and unfair labor practice which was affirmed by the NLRC through its
decision and denied the Motion for Reconsideration filed by the petitioners. Unsatisfied, petitioners elevated their petition to the Court of Appeals
which was dismissed the same. Hence, this petition.

ISSUES:
Whether pacific carpet may be held liable for Philippine carpet's obligations?
HELD:
NO. Pacific Carpet has a personality separate and distinct from Phil Carpet. A corporation is an artificial being created by operation of law.
It has a personality separate and distinct from the persons composing it, as well as from any other legal entity to which it may be related.

The principle that the corporate mask may be removed or the corporate veil pierced when the corporation is just an alter ego of a person
or of another corporation. For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it
becomes a shield for fraud, illegality or inequity committed against third persons. Hence, any application of the doctrine of piercing the corporate
veil should be done with caution. A court should be mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was
misused to such an extent that injustice, fraud, or crime was committed against another, in disregard of rights. The wrongdoing must be clearly and
convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may result from an erroneous application.

Piercing the corporate veil based on the alter ego theory requires the concurrence of three elements: control of the corporation by the
stockholder of parent corporation, fraud or fundamental unfairness imposed on the plaintiff, and harm or damage caused to the plaintiff by the
fraudulent or unfair act of the corporation. The absence of any of these elements prevents piercing the corporate veil.

The Court finds that none of the tests has been satisfactorily met in this case. Although ownership by one corporation of all or a great
majority of stocks of another corporation and their interlocking directorates may serve as indicia of control, by themselves and without more, these
circumstances are insufficient to establish an alter ego relationship or connection between Phil Carpet on the one hand and Pacific Carpet on the
other hand, that will justify the puncturing of the latter's corporate cover.

This Court has declared that "mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself sufficient ground for disregarding the separate corporate personality." It has likewise ruled that the "existence of
interlocking directors, corporate officers and shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud
or other public policy considerations."

As to the transfer of Phil Carpet's machines to Pacific Carpet, settled is the rule that "where one corporation sells or otherwise
transfers all its assets to another corporation for value, the latter is not, by that fact alone, liable for the debts and liabilities of the transferor”.
Moreover, the petitioners failed to present substantial evidence to prove their allegation that Pacific Carpet is a mere alter ego of Phil Carpet.
WHEREFORE, the petition is denied. The Supreme Court affirmed the decision of the Court of Appeals in toto