SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC. vs.

COURT OF
APPEALS

the agreement adverted to of the amended complaint; that Mrs. Gruenbergs

signature on the agreement is inadequate to bind Motorich.

G.R. No. 129459

RTC: rendered the judgment appealed from; dismissing plaintiff-appellants

complaint, ruling that:
'The issue to be resolved is: whether plaintiff had the right to compel
defendants to execute a deed of absolute sale in accordance with the
agreement and if so, whether plaintiff is entitled to damages. There is no
evidence to show that defendant Nenita Lee Gruenberg was indeed
authorized by defendant corporation, Motorich Sales, to dispose of that
property. Since the property is clearly owned by the corporation, Motorich
Sales, then its disposition should be governed by the requirement laid down
in Sec. 40, of the Corporation Code of the Philippines.

Facts:
Plaintiff-appellant San Juan Structural and Steel Fabricators, Inc. entered into
an agreement with defendant-appellee Motorich Sales Corporation for the
transfer to it of a parcel of land, paid the down payment in the sum of
P100,000.00 , the balance to be paid on or before March 2, 1989. Mr. Andres
T. Co, president of plaintiff-appellant corporation, was ready with the amount
corresponding to the balance, covered by Metrobank Cashiers Check No.
004223, payable to defendant-appellee Motorich Sales Corporation; that
plaintiff-appellant and defendant-appellee Motorich Sales Corporation were
supposed to meet in the office of plaintiff-appellant but defendant-appellees
treasurer, Nenita Lee Gruenberg, did not appear despite repeated demands
and in utter disregard of its commitments had refused to execute the
Transfer of Rights/Deed of Assignment which is necessary to transfer the
certificate of title.
As a result of defendants-appellees Nenita Lee Gruenberg and Motorich Sales
Corporations bad faith in refusing to execute a formal Transfer of
Rights/Deed of Assignment, plaintiff-appellant suffered moral and nominal
damages which may be assessed against defendants, that as a result of
defendants-appellees Nenita Lee Gruenberg and Motorich Sales Corporations
unjustified and unwarranted failure to execute the required Transfer of
Rights/Deed of Assignment or formal deed of sale in favor of plaintiffappellant, defendants-appellees should be assessed exemplary damages in
the sum of P100,000; that by reason of defendants-appellees bad faith in
refusing to execute a Transfer of Rights/Deed of Assignment in favor of
plaintiff-appellant, the latter lost the opportunity to construct a residential
building in the sum of P100,000; In its answer, defendants-appellees
Motorich Sales Corporation and Nenita Lee Gruenberg interposed as
affirmative defense that the President and Chairman of Motorich did not sign

Regarding the question of damages, the Court likewise, does not find
substantial evidence to hold defendant Nenita Lee Gruenberg liable
considering that she did not in anyway misrepresent herself to be authorized
by the corporation to sell the property to plaintiff.
CA: debunked petitioners arguments and affirmed the Decision of the RTC
with the modification that Respondent Nenita Lee Gruenberg was ordered to
refund P100,000 to petitioner, the amount remitted as downpayment or
earnest money.
Hence this petition.
Issues:
1. Whether or not there is a valid contract of sale between petitioner and
Motorich?
2. Whether or not the doctrine of piercing the veil of corporate fiction be
applied to Motorich?
3. Whether or ntot respondents liable for damages and attorneys fees?
Ruling:

1. Petitioner San Juan Structural and Steel Fabricators, Inc. alleges that it
entered through its president, Andres Co, into the disputed Agreement with
Respondent Motorich Sales Corporation, which was in turn allegedly
represented by its treasurer, Nenita Lee Gruenberg. Petitioner insists that
when Gruenberg and Co affixed their signatures on the contract they both
consented to be bound by the terms thereof. Ergo, petitioner contends that
the contract is binding on the two corporations. We do not agree.
True, Gruenberg and Co signed the Agreement according to which a lot
owned by Motorich Sales Corporation was purportedly sold. Such contract,
however, cannot bind Motorich, because it never authorized or ratified such
sale. A corporation is a juridical person separate and distinct from its
stockholders or members. Accordingly, the property of the corporation is not
the property of its stockholders or members and may not be sold by the
stockholders or members without express authorization from the
corporations board of directors.
Indubitably, a corporation may act only through its board of directors, or,
when authorized either by its bylaws or by its board resolution, through its
officers or agents in the normal course of business. The general principles of
agency govern the relation between the corporation and its officers or agents,
subject to the articles of incorporation, bylaws, or relevant provisions of law.
In the case at bar, Respondent Motorich categorically denies that it ever
authorized Nenita Gruenberg, its treasurer, to sell the subject parcel of land.
Consequently, petitioner had the burden of proving that Nenita Gruenberg
was in fact authorized to represent and bind Motorich in the transaction.
Petitioner failed to prove such authority. It has not shown any provision of
said respondents articles of incorporation, bylaws or board resolution to
prove that Nenita Gruenberg possessed such power.
That Nenita Gruenberg is the treasurer of Motorich does not free petitioner
from the responsibility of ascertaining the extent of her authority to
represent the corporation. Petitioner cannot assume that she, by virtue of
her position, was authorized to sell the property of the corporation. Selling is
obviously foreign to a corporate treasurers function, which generally has

been described as to receive and keep the funds of the corporation, and to
disburse them in accordance with the authority given him by the board or the
properly authorized officers
2. The Court has consistently ruled that [w]hen the fiction is used as a
means of perpetrating a fraud or an illegal act or as a vehicle for the evasion
of an existing obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of knavery or crime,
the veil with which the law covers and isolates the corporation from the
members or stockholders who compose it will be lifted to allow for its
consideration merely as an aggregation of individuals.
We stress that the corporate fiction should be set aside when it becomes a
shield against liability for fraud, illegality or inequity committed on third
persons. The question of piercing the veil of corporate fiction is essentially,
then, a matter of proof. In the present case, however, the Court finds no
reason to pierce the corporate veil of Respondent Motorich. Petitioner
utterly failed to establish that said corporation was formed, or that it is
operated, for the purpose of shielding any alleged fraudulent or illegal
activities of its officers or stockholders; or that the said veil was used to
conceal fraud, illegality or inequity at the expense of third persons, like
petitioner.
Petitioner claims that Motorich is a close corporation. We rule that it is not.
Section 96 of the Corporation Code. The articles of incorporation of Motorich
Sales Corporation does not contain any provision stating that (1) the number
of stockholders shall not exceed 20, or (2) a preemption of shares is
restricted in favor of any stockholder or of the corporation, or (3) listing its
stocks in any stock exchange or making a public offering of such stocks is
prohibited. From its articles, it is clear that Respondent Motorich is not a
close corporation. Motorich does not become one either, just because
Spouses Reynaldo and Nenita Gruenberg owned 99.866% of its subscribed
capital stock. The [m]ere 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 personalities.

3. Andres Co is not a neophyte in the world of corporate business. He has

been the president of Petitioner Corporation for more than ten years and has
also served as chief executive of two other corporate entities. Co cannot feign
ignorance of the scope of the authority of a corporate treasurer such as
Gruenberg. Neither can he be oblivious to his duty to ascertain the scope of
Gruenbergs authorization to enter into a contract to sell a parcel of land
belonging to Motorich.
Indeed, petitioners claim of fraud and bad faith is unsubstantiated and fails
to persuade the Court. Indubitably, petitioner appears to be the victim of its
own officers negligence in entering into a contract with and paying an
unauthorized officer of another corporation.
NARRA NICKEL MINING AND DEVELOPMENT CORP vs. REDMONT
CONSOLIDATED MINES CORP.
G.R. No. 195580
Facts:
Respondent Redmont Consolidated Mines Corp., a domestic corporation
organized and existing under Philippine laws, took interest in mining and
exploring certain areas of the province of Palawan. After inquiring with the
Department of Environment and Natural Resources, it learned that the areas
where it wanted to undertake exploration and mining activities where
already covered by Mineral Production Sharing Agreement (MPSA)
applications of petitioners Narra, Tesoro and McArthur. Through its
predecessor-in-interest Sara Marie Mining, Inc. (SMMI), filed an application
for an MPSA and Exploration Permit (EP) with the Mines and Geo-Sciences
Bureau (MGB).
Subsequently, SMMI was issued MPSA-AMA-IVB-153 covering an area of over
1,782 hectares in Province of Palawan. The MPSA and EP were then
transferred to Madridejos Mining Corporation (MMC) and assigned to
petitioner McArthur.

Petitioner Narra acquired its MPSA from Alpha Resources and Development
Corporation and Patricia Louise Mining & Development Corporation
(PLMDC) which previously filed an application for an MPSA with the MGB
Through the said application, the DENR issued MPSA-IV-1-12 covering an
area of 3.277 hectares in Municipality of Narra, Palawan. Subsequently,
PLMDC conveyed, transferred and/or assigned its rights and interests over
the MPSA application in favor of Narra.
Another MPSA application of SMMI was filed with the DENR Region IV-B,
labeled as MPSA-AMA-IVB-154 over 3,402 hectares in Barangays Malinao and
Princesa Urduja, Municipality of Narra, Province of Palawan. SMMI
subsequently conveyed, transferred and assigned its rights and interest over
the said MPSA application to Tesoro.
Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3)
separate petitions for the denial of petitioners applications for MPSA. In the
petitions, Redmont alleged that at least 60% of the capital stock of McArthur,
Tesoro and Narra are owned and controlled by MBMI Resources, Inc. (MBMI),
a 100% Canadian corporation. Redmont reasoned that since MBMI is a
considerable stockholder of petitioners, it was the driving force behind
petitioners filing of the MPSAs over the areas covered by applications since it
knows that it can only participate in mining activities through corporations
which are deemed Filipino citizens. Redmont argued that given that
petitioners capital stocks were mostly owned by MBMI, they were likewise
disqualified from engaging in mining activities through MPSAs, which are
reserved only for Filipino citizens.
In their Answers, petitioners averred that they were qualified persons under
Section 3(aq) of Republic Act No. (RA) 7942 or the Philippine Mining Act of
1995. Additionally, they stated that their nationality as applicants is
immaterial because they also applied for Financial or Technical Assistance
Agreements denominated as AFTA-IVB-09 for McArthur, AFTA-IVB-08 for
Tesoro and AFTA-IVB-07 for Narra, which are granted to foreign-owned
corporations. Nevertheless, they claimed that the issue on nationality should

not be raised since McArthur, Tesoro and Narra are in fact Philippine
Nationals as 60% of their capital is owned by citizens of the Philippines. They
asserted that though MBMI owns 40% of the shares of PLMC 40% of the
shares of MMC (which owns 5,997 shares of McArthur) and 40% of the shares
of SLMC (which, in turn, owns 5,997 shares of Tesoro), the shares of MBMI
will not make it the owner of at least 60% of the capital stock of each of
petitioners. They added that the best tool used in determining the nationality
of a corporation is the "control test," embodied in Sec. 3 of RA 7042 or the
Foreign Investments Act of 1991.
POA: issued a resolution disqualifying petitioners from gaining MPSAs; it is
clearly established that respondents are not qualified applicants to engage in
mining activities. Finds McArthur Mining Inc., Tesoro Mining and
Development, Inc., and Narra Nickel Mining and Development Corp. as,
DISQUALIFIED for being considered as Foreign Corporations. Their
Mineral Production Sharing Agreement (MPSA) are hereby DECLARED NULL
AND VOID.
McArthur and Tesoro filed a joint Notice of Appeal and Memorandum of
Appeal with the Mines Adjudication Board (MAB) while Narra separately
filed its Notice of Appeal and Memorandum of Appeal. Pending the resolution
of the appeal filed by petitioners with the MAB, Redmont filed a Complaint
with the Securities and Exchange Commission (SEC), seeking the revocation
of the certificates for registration of petitioners on the ground that they are
foreign-owned or controlled corporations engaged in mining in violation of
Philippine laws.
Subsequently, Redmont filed before the Regional Trial Court of Quezon City
(RTC) a Complaint for injunction with application for issuance of a temporary
restraining order and/or writ of preliminary injunction, Redmont prayed for
the deferral of the MAB proceedings pending the resolution of the Complaint
before the SEC. But before the RTC can resolve Redmonts Complaint and
applications for injunctive reliefs, the MAB issued an order finding the appeal
meritorious.

MAB: REVERSES and SETS ASIDE the Resolution dated of the Panel of
Arbitrators of Region IV-B.
Redmont filed a Motion for Reconsideration. of the order of the MAB.
Subsequently, it filed a Supplemental Motion for Reconsideration.
Before the MAB could resolve Redmonts Motion for Reconsideration and
Supplemental Motion for Reconsideration, Redmont filed before the RTC a
Supplemental Complaint.
RTC: issued an order granting Redmonts application for a TRO and setting
the case for hearing the prayer for the issuance of a writ of preliminary
injunction. It issued an Order granting the issuance of a writ of preliminary
injunction enjoining the MAB from finally disposing of the appeals of
petitioners and from resolving Redmonts Motion for Reconsideration and
Supplement Motion for Reconsideration of the MABs
However, the MAB issued a second Order denying Redmonts Motion for
Reconsideration and Supplemental Motion for Reconsideration and resolving
the appeals filed by petitioners. Hence, the petition for review filed by
Redmont before the CA, assailing the Orders issued by the MAB.
CA: PARTIALLY GRANTED petitions and assailed orders of the Mining
Adjudication Board are reversed and set aside. The findings of the Panel
of Arbitrators of the Department of Environment and Natural Resources that
respondents McArthur, Tesoro and Narra are foreign corporations is upheld
and, therefore, the rejection of their applications for Mineral Product Sharing
Agreement should be recommended to the Secretary of the DENR. With
respect to the applications of respondents McArthur, Tesoro and Narra for
Financial or Technical Assistance Agreement (FTAA) or conversion of their
MPSA applications to FTAA, the matter for its rejection or approval is left for
determination by the Secretary of the DENR and the President of the Republic
of the Philippines.
CA denied the Motion for Reconsideration filed by petitioners.

CA found that there was doubt as to the nationality of petitioners when it

realized that petitioners had a common major investor, MBMI, a corporation
composed of 100% Canadians. Pursuant to the first sentence of paragraph 7
of Department of Justice (DOJ) Opinion No. 020, Series of 2005, adopting the
1967 SEC Rules which implemented the requirement of the Constitution and
other laws pertaining to the exploitation of natural resources, the CA used the
"grandfather rule" to determine the nationality of petitioners.
In determining the nationality of petitioners, the CA looked into their
corporate structures and their corresponding common shareholders. Using
the grandfather rule, the CA discovered that MBMI in effect owned majority
of the common stocks of the petitioners as well as at least 60% equity
interest of other majority shareholders of petitioners through joint venture
agreements. The CA found that through a "web of corporate layering, it is
clear that one common controlling investor in all mining corporations
involved x x x is MBMI. Thus, it concluded that petitioners McArthur, Tesoro
and Narra are also in partnership with, or privies-in-interest of, MBMI. It
viewed the conversion of the MPSA applications of petitioners into FTAA
applications suspicious in nature and, as a consequence, it recommended the
rejection of petitioners MPSA applications by the Secretary of the DENR.
Finally, the CA upheld the findings of the POA in its Resolution which
considered petitioners McArthur, Tesoro and Narra as foreign corporations.
Nevertheless, the CA determined that the POAs declaration that the MPSAs of
McArthur, Tesoro and Narra are void is highly improper.
While petition is pending in CA, Redmont filed with the Office of the President
a petition to cancel petitioners FTAAs. The OP, affirmed the cancellation of
the issued FTAAs, agreed with Redmont stating that petitioners committed
violations against the Constitution. Motion for Reconsideration of the
Decision was further denied by the OP in a Resolution.
CA affirmed the Decision and Resolution of the OP.
Hence this petition.

Issues:
1. The Court of Appeals erred when it did not dismiss the case for lack of
jurisdiction considering that the Panel of Arbitrators has no jurisdiction to
determine the nationality of Narra, Tesoro and McArthur.
2. The Court of Appeals ruling that Narra, Tesoro and McArthur are foreign
corporations based on the "Grandfather Rule" is contrary to law, particularly
the express mandate of the Foreign Investments Act of 1991, as amended,
and the FIA Rules.
Ruling:
1. We affirm the ruling of the CA in declaring that the POA has jurisdiction
over the instant case. The POA has jurisdiction to settle disputes over rights
to mining areas which definitely involve the petitions filed by Redmont
against petitioners Narra, McArthur and Tesoro. Redmont, by filing its
petition against petitioners, is asserting the right of Filipinos over mining
areas in the Philippines against alleged foreign-owned mining corporations.
Such claim constitutes a "dispute" found in Sec. 77 of RA 7942:
Within thirty (30) days, after the submission of the case by the parties for the
decision, the panel shall have exclusive and original jurisdiction to hear and
decide the following:
(a) Disputes involving rights to mining areas
(b) Disputes involving mineral agreements or permits.
It is basic that the jurisdiction of the court is determined by the statute in
force at the time of the commencement of the action.
Sec. 19, Batas Pambansa Blg. 129 or "The Judiciary Reorganization
Act of 1980" reads:
Sec. 19. Jurisdiction in Civil Cases.Regional Trial Courts shall exercise
exclusive original jurisdiction:
1. In all civil actions in which the subject of the litigation is incapable of
pecuniary estimation.
Section 77. Panel of Arbitrators.

It is clear that POA has exclusive and original jurisdiction over any and all
disputes involving rights to mining areas. One such dispute is an MPSA
application to which an adverse claim, protest or opposition is filed by
another interested applicant. In the case at bar, the dispute arose or
originated from MPSA applications where petitioners are asserting their
rights to mining areas subject of their respective MPSA applications. Since
respondent filed 3 separate petitions for the denial of said applications, then
a controversy has developed between the parties and it is POAs jurisdiction
to resolve said disputes.
Moreover, the jurisdiction of the RTC involves civil actions while what
petitioners filed with the DENR Regional Office or any concerned DENRE or
CENRO are MPSA applications. Thus POA has jurisdiction.
2. In statutory construction is when there is conflict between the Constitution
and a statute, the Constitution will prevail. Specifically pertaining to the
provisions under Art. XII of the Constitution on National Economy and
Patrimony, Sec. 3 of the FIA will have no place of application. As decreed by
the honorable framers of our Constitution, the grandfather rule prevails and
must be applied.
Under the above-quoted SEC Rules, there are two cases in determining the
nationality of the Investee Corporation. The first case is the liberal rule, later
coined by the SEC as the Control Test and pertains to the portion in said
Paragraph 7 of the 1967 SEC Rules which states, (s)hares belonging to
corporations or partnerships at least 60% of the capital of which is owned by
Filipino citizens shall be considered as of Philippine nationality. Under the
liberal Control Test, there is no need to further trace the ownership of the
60% (or more) Filipino stockholdings of the Investing Corporation since a
corporation which is at least 60% Filipino-owned is considered as Filipino.
The second case is the Strict Rule or the Grandfather Rule Proper and
pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which
states, "but if the percentage of Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares corresponding to
such percentage shall be counted as of Philippine nationality." Under the

Strict Rule or Grandfather Rule Proper, the combined totals in the Investing
Corporation and the Investee Corporation must be to determine the total
percentage of Filipino ownership.
After a scrutiny of the evidence extant on record, the Court finds that this
case calls for the application of the grandfather rule since, as ruled by the
POA and affirmed by the OP, doubt prevails and persists in the corporate
ownership of petitioners. Also, as found by the CA, doubt is present in the 6040 Filipino equity ownership of petitioners Narra, McArthur and Tesoro,
since their common investor, the 100% Canadian corporationMBMI,
funded them. Obviously, the instant case presents a situation which exhibits
a scheme employed by stockholders to circumvent the law, creating a cloud
of doubt in the Courts mind. To determine, therefore, the actual
participation, direct or indirect, of MBMI, the grandfather rule must be used.
WILSON GAMBOA
vs.
FINANCE SECRETARY
Facts:
There are two sides claiming of their versions of the facts here is the facts,
according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long
Distance Telephone Company. which granted PLDT a franchise and the right
to engage in telecommunications business. In 1969, General Telephone and
Electronics Corporation (GTE), an American company and a major PLDT
stockholder, sold 26 % of the outstanding common shares of PLDT to PTIC.
Prime Holdings, Inc. subsequently became the owner of 111,415 shares of
stock of PTIC by virtue of three Deeds of Assignment executed by PTIC
stockholders Ramon Cojuangco and Luis Tirso Rivilla. The 111,415 shares of
stock of PTIC held by PHI were sequestered by the Presidential Commission
on Good Government. The 111,415 PTIC shares, which represent about
46.125 % of the outstanding capital stock of PTIC, were later declared by this
Court to be owned by the Republic of the Philippines.

First Pacific, a Bermuda-registered, Hong Kong-based investment firm,

acquired the remaining 54 percent of the outstanding capital stock of PTIC.
The Inter-Agency Privatization Council of the Philippine Government
announced that it would sell the 111,415 PTIC shares, or 46.125 % of the
outstanding capital stock of PTIC, through a public bidding, there are only
two bidders, Parallax Venture Fund XXVII and Pan-Asia Presidio Capital.
Parallax won with a bid of P25.6 billion or US$510 million.
On the other hand, public respondents Finance Secretary Margarito B. Teves,
version of facts; PTIC was incorporated and had since engaged in the
business of investment holdings. PTIC held 26,034,263 PLDT common shares,
or 13.847 percent of the total PLDT outstanding common shares. PHI became
the owner of 111,415 PTIC shares or 46.125 percent of the outstanding
capital stock of PTIC by virtue of three Deeds of Assignment executed by
Ramon Cojuangco and Luis Tirso Rivilla. The 111,415 PTIC shares held by
PHI were sequestered by the PCGG, and subsequently declared by this Court
as part of the ill-gotten wealth of former President Ferdinand Marcos. The
sequestered PTIC shares were reconveyed to the Republic of the Philippines
in accordance with this Courts decision .
The Philippine Government decided to sell the 111,415 PTIC shares, which
represent 6.4 % of the outstanding common shares of stock of PLDT, and
designated the Inter-Agency Privatization Council (IPC) An invitation to bid
was published in seven different newspapers, a pre-bid conference was held.
During the bidding, Parallax Capital Management LP emerged as the highest
bidder with a bid of P25,217,556,000. The government notified First Pacific
and gave First Pacific its right of first refusal in accordance with PTICs
Articles of Incorporation. First Pacific announced its intention to match
Parallaxs bid.
The House of Representatives (HR) Committee on Good Government
conducted a public hearing on the particulars of the then impending sale of
the 111,415 PTIC shares. The HR Committee Report No. 2270 concluded that:

(a) the auction of the governments 111,415 PTIC shares bore due diligence,
transparency and conformity with existing legal procedures; and (b) First
Pacifics intended acquisition of the governments 111,415 PTIC shares
resulting in First Pacifics 100% ownership of PTIC will not violate the
40 percent constitutional limit on foreign ownership of a public utility
since PTIC holds only 13.847 percent of the total outstanding common
shares of PLDT. First Pacific completed the acquisition of the 111,415 shares
of stock of PTIC.
Petitioner filed the instant petition for prohibition, injunction, declaratory
relief, and declaration of nullity of sale of the 111,415 PTIC shares claims,
among others, that the sale of the 111,415 PTIC shares would result in an
increase in First Pacifics common shareholdings in PLDT from 30.7 % to 37
%, and this, combined with Japanese NTT DoCoMos common shareholdings
in PLDT, would result to a total foreign common shareholdings in PLDT of
51.56 % which is over the 40 % constitutional limit.
Issue:
1. 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 common and non-voting preferred shares) of PLDT,
a public utility.
Ruling:
The 1987 Constitution provides for the Filipinization of public utilities by
requiring that any form of authorization for the operation of public utilities
should be granted only 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. The provision is [an
express] recognition of the sensitive and vital position of public utilities
both in the national economy and for national security. 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. This
specific provision explicitly reserves to Filipino citizens control of public
utilities, pursuant to an overriding economic goal of the 1987 Constitution: to

conserve and develop our patrimony and ensure a self-reliant and

independent national economy effectively controlled by Filipinos.
Any citizen or juridical entity desiring to operate a public utility must
therefore meet the minimum nationality requirement prescribed in Section
11, Article XII of the Constitution. Hence, for a corporation to be granted
authority to operate a public utility, at least 60 % of its capital must be
owned by Filipino citizens.
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, and thus in
the present case only to common shares, and not to the total outstanding
capital stock comprising both common and non-voting preferred shares.
The Corporation Code of the Philippines classifies shares as common or
preferred, thus:
Sec. 6. Classification of shares. - The shares of stock of stock corporations may
be divided into classes or series of shares, or both, any of which classes or
series of shares may have such rights, privileges or restrictions as may be
stated in the articles of incorporation: Provided, That no share may be
deprived of voting rights except those classified and issued as
preferred or redeemable shares, unless otherwise provided in this
Code: Provided, further, That there shall always be a class or series of shares
which have complete voting rights. Any or all of the shares or series of shares
may have a par value or have no par value as may be provided for in the
articles of incorporation: Provided, however, That banks, trust companies,
insurance companies, public utilities, and building and loan associations shall
not be permitted to issue no-par value shares of stock.
Indisputably, construing the term capital in Section 11, Article XII of the
Constitution to include both voting and non-voting shares will result in the
abject surrender of our telecommunications industry to foreigners,
amounting to a clear abdication of the States constitutional duty to limit
control of public utilities to Filipino citizens. Such an interpretation certainly

runs counter to the constitutional provision reserving certain areas of

investment to Filipino citizens, such as the exploitation of natural resources
as well as the ownership of land, educational institutions and advertising
businesses. The Court should never open to foreign control what the
Constitution has expressly reserved to Filipinos for that would be a betrayal
of the Constitution and of the national interest. The Court must perform its
solemn duty to defend and uphold the intent and letter of the Constitution to
ensure, in the words of the Constitution.
The petition is partly granted and rule 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 in the present case
only to common shares, and not to the total outstanding capital stock
(common and non-voting preferred shares).
HON. ALFREDO LIM
vs.
COURT OF APPEALS
G.R. No. 124715
Facts:
Petitioner Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose
estate is the subject of probate proceedings in Special Proceedings. Private
respondents Auto Truck Corporation, Alliance Marketing Corporation, Speed
Distributing, Inc., Active Distributing, Inc. and Action Company are
corporations formed, organized and existing under Philippine laws and
which owned real properties covered under the Torrens system.
Pastor Y. Lim died intestate. Private respondent corporations, whose
properties were included in the inventory of the estate of Pastor Y. Lim, then
filed a motion6 for the lifting of lis pendens and motion7 for exclusion of
certain properties from the estate of the decedent.

RTC: sitting as a probate court, granted the private respondents' twin

motions.
Subsequently, Rufina Luy Lim filed a verified amended petition which
contained the following averments:

The late Pastor Y. Lim personally owned during his lifetime

Although the above business entities dealt and engaged in business
with the public as corporations, all their capital, assets and equity
were however, personally owned by the late Pastor Y Lim. Hence the
alleged stockholders and officers appearing in the respective articles
of incorporation of the above business entities were mere dummies
of Pastor Y. Lim, and they were listed therein only for purposes of
registration with the Securities and Exchange Commission.
That the following real properties, although registered in the name of
the above entities, were actually acquired by Pastor Y. Lim during his
marriage with petitioner, The aforementioned properties and/or
real interests left by the late Pastor Y. Lim, are all conjugal in nature,
having been acquired by him during the existence of his marriage
with petitioner.

RTC: as probate court denied anew private respondents' motion for exclusion
Private respondent filed a special civil action for certiorari with an urgent
prayer for a restraining order or writ of preliminary injunction, before the
Court of Appeals questioning the orders of the Regional Trial Court, sitting as
a probate court.
CA: set aside and decide in favor of herein private respondents
Hence the instant petition for review.
Issue:

Whether or not Court of Appeals erred in reversing the orders of the lower
court, which merely allowed the preliminary or provisional inclusion of the
private respondents as part of the estate of the late deceased.
Ruling:
A perusal of the records would reveal that no strong compelling evidence was
ever presented by petitioner to bolster her bare assertions as to the title of
the deceased Pastor Y. Lim over the properties. Even so, P.D. 1529, otherwise
known as, "The Property Registration Decree", proscribes collateral attack on
Torrens Title.
Inasmuch as the real properties included in the inventory of the estate of the
Late Pastor Y. Lim are in the possession of and are registered in the name of
private respondent corporations, which under the law possess a personality
separate and distinct from their stockholders, and in the absence of any
cogency to shred the veil of corporate fiction, the presumption of
conclusiveness of said titles in favor of private respondents should stand
undisturbed.
The corporate mask may be lifted and the corporate veil may be pierced
when a corporation is just but the alter ego of a person or of another
corporation. Where badges of fraud exist, where public convenience is
defeated; where a wrong is sought to be justified thereby, the corporate
fiction or the notion of legal entity should come to naught. Further, 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 plaintiffs legal right; and

(3) The aforesaid control and breach of duty must proximately cause the
injury or unjust loss complained of. The absence of any of these elements
prevent "piercing the corporate veil"
The decision of the Court of Appeals which nullified and set aside the orders
issued by the Regional Trial Court, Branch 93, acting as a probate court, dated
04 July 1995 and 12 September 1995 is AFFIRMED.1wphi1.nt
RUBEN SAW
vs.
HON. COURT OF APPEALS
G.R. No. 90580
Facts:
A collection suit with preliminary attachment was filed by Equitable Banking
Corporation against Freeman, Inc. and Saw Chiao Lian, its President and
General Manager. The petitioners moved to intervene, alleging that (1) the
loan transactions between Saw Chiao Lian and Equitable Banking Corp. were
not approved by the stockholders representing at least 2/3 of corporate
capital; (2) Saw Chiao Lian had no authority to contract such loans; and (3)
there was collusion between the officials of Freeman, Inc. and Equitable
Banking Corp. in securing the loans.
RTC: Motion for intervention is denied
Meanwhile Equitable and Saw Chiao Lian entered into a compromise
agreement which they submitted to and was approved by the lower court.
But because it was not complied with, Equitable secured a writ of execution,
and two lots owned by Freeman, Inc. were levied upon and sold at public
auction to Freeman Management and Development Corp.
CA: sustained the denial of the petitioners' motion for intervention holding
that "the compromise agreement between Freeman, Inc., through its
President, and Equitable Banking Corp. will not necessarily prejudice

petitioners whose rights to corporate assets are at most inchoate, prior to the
dissolution of Freeman.
Issue:
Whether or not Court of Appeals erred in holding that the petitioners cannot
intervene in the case because their rights as stockholders of Freeman are
merely inchoate and not actual, material, direct and immediate prior to the
dissolution of the corporation.
Issue:
Petition is DENIED. The petitioners base their right to intervene for the
protection of their interests as stockholders on Everett v. Asia Banking Corp.
where it was held:
The well-known rule that shareholders cannot ordinarily sue in equity to
redress wrongs done to the corporation, but that the action must be brought
by the Board of Directors, . . . has its exceptions. (If the corporation [were]
under the complete control of the principal defendants, . . . it is obvious that a
demand upon the Board of Directors to institute action and prosecute the
same effectively would have been useless, and the law does not require
litigants to perform useless acts.
The Everett case is not applicable because it involved an action filed by the
minority stockholders where the board of directors refused to bring an action
in behalf of the corporation. In the case at bar, it was Freeman, Inc. that was
being sued by the creditor bank.