THIRD DIVISION Carlos L.

Puno, who died on June 25, 1963, was an incorporator

of respondent Puno Enterprises, Inc. On March 14, 2003, petitioner
JOSELITO MUSNI PUNO G.R. No. 177066 Joselito Musni Puno, claiming to be an heir of Carlos L. Puno, initiated
(as heir of the late Carlos Puno),
a complaint for specific performance against respondent. Petitioner
Petitioner, Present:
averred that he is the son of the deceased with the latters common-law
YNARES-SANTIAGO, J., wife, Amelia Puno. As surviving heir, he claimed entitlement to the
Chairperson, rights and privileges of his late father as stockholder of respondent. The
CHICO-NAZARIO,
- versus - VELASCO, JR., complaint thus prayed that respondent allow petitioner to inspect its
NACHURA, and corporate book, render an accounting of all the transactions it entered
PERALTA, JJ. into from 1962, and give petitioner all the profits, earnings, dividends,
or income pertaining to the shares of Carlos L. Puno.[2]
PUNO ENTERPRISES, INC., Promulgated:
represented by JESUSA PUNO, Respondent filed a motion to dismiss on the ground that
Respondent. September 11, 2009 petitioner did not have the legal personality to sue because his birth
x------------------------------------------------------------------------------------x certificate names him as Joselito Musni Muno. Apropos, there was yet
a need for a judicial declaration that Joselito Musni Puno and Joselito
Musni Muno were one and the same.
DECISION

NACHURA, J.:
Upon the death of a stockholder, the heirs do not automatically
become stockholders of the corporation; neither are they mandatorily
entitled to the rights and privileges of a stockholder. This, we declare
in this petition for review on certiorari of the Court of Appeals (CA)
Decision[1] dated October 11, 2006 and Resolution dated March 6, 2007
in CA-G.R. CV No. 86137.
The facts of the case follow:
The court ordered that the proceedings be held in abeyance,
ratiocinating that petitioners certificate of live birth was no proof of his
paternity and relation to Carlos L. Puno.
Petitioner submitted the corrected birth certificate with the name
Joselito M. Puno, certified by the Civil Registrar of the City of Manila,
and the Certificate of Finality thereof. To hasten the disposition of the
case, the court conditionally admitted the corrected birth certificate as
genuine and authentic and ordered respondent to file its answer within
fifteen days from the order and set the case for pretrial.[3]
 On October 11, 2005, the court rendered a Decision, the
dispositive portion of which reads: In this petition, petitioner raises the following issues:

WHEREFORE, judgment is hereby rendered I. THE HONORABLE COURT OF APPEALS

ordering Jesusa Puno and/or Felicidad Fermin to allow the ERRED IN NOT RULING THAT THE JOSELITO
plaintiff to inspect the corporate books and records of the PUNO IS ENTITLED TO THE RELIEFS DEMANDED
company from 1962 up to the present including the HE BEING THE HEIR OF THE LATE CARLOS PUNO,
financial statements of the corporation. ONE OF THE INCORPORATORS [OF] RESPONDENT
CORPORATION.
The costs of copying shall be shouldered by the
plaintiff. Any expenses to be incurred by the defendant to II. HONORABLE COURT OF APPEALS ERRED IN
be able to comply with this order shall be the subject of a RULING THAT FILIATION OF JOSELITO PUNO, THE
bill of costs. PETITIONER[,] IS NOT DULY PROVEN OR
ESTABLISHED.
SO ORDERED.[4]
III. THE HONORABLE COURT ERRED IN NOT
RULING THAT JOSELITO MUNO AND JOSELITO
On appeal, the CA ordered the dismissal of the complaint in its Decision PUNO REFERS TO THE ONE AND THE SAME
dated October 11, 2006. According to the CA, petitioner was not able PERSON.
to establish the paternity of and his filiation to Carlos L. Puno since his
IV. THE HONORABLE COURT OF APPEALS
birth certificate was prepared without the intervention of and the ERRED IN NOT RULING THAT WHAT RESPONDENT
participatory acknowledgment of paternity by Carlos L. MERELY DISPUTES IS THE SURNAME OF THE
Puno. Accordingly, the CA said that petitioner had no right to demand PETITIONER WHICH WAS MISSPELLED AND THE
FACTUAL ALLEGATION E.G. RIGHTS OF
that he be allowed to examine respondents books. Moreover, petitioner
PETITIONER AS HEIR OF CARLOS PUNO ARE
was not a stockholder of the corporation but was merely claiming rights DEEMED ADMITTED HYPOTHETICALLY IN THE
as an heir of Carlos L. Puno, an incorporator of the corporation. His RESPONDENT[S] MOTION TO DISMISS.
action for specific performance therefore appeared to be premature; the
V. THE HONORABLE COURT OF APPEALS
proper action to be taken was to prove the paternity of and his filiation THEREFORE ERRED I[N] DECREEING THAT
to Carlos L. Puno in a petition for the settlement of the estate of the PETITIONER IS NOT ENTITLED TO INSPECT THE
latter.[5] CORPORATE BOOKS OF DEFENDANT
CORPORATION. [7]

Petitioners motion for reconsideration was denied by the CA in its

Resolution[6] dated March 6, 2007.
 The petition is without merit. Petitioner failed to establish the In any case, Sections 74 and 75 of the Corporation Code
right to inspect respondent corporations books and receive dividends enumerate the persons who are entitled to the inspection of corporate
on the stocks owned by Carlos L. Puno. books, thus

Sec. 74. Books to be kept; stock transfer agent. x x x.

Petitioner anchors his claim on his being an heir of the deceased
stockholder. However, we agree with the appellate court that petitioner The records of all business transactions of the
was not able to prove satisfactorily his filiation to the deceased corporation and the minutes of any meeting shall be open
stockholder; thus, the former cannot claim to be an heir of the latter. to the inspection of any director, trustee, stockholder or
member of the corporation at reasonable hours on
business days and he may demand, in writing, for a copy
Incessantly, we have declared that factual findings of the CA of excerpts from said records or minutes, at his expense.
supported by substantial evidence, are conclusive and binding.[8] In an
xxxx
appeal via certiorari, the Court may not review the factual findings of
the CA. It is not the Courts function under Rule 45 of the Rules of Sec. 75. Right to financial statements. Within ten (10)
Court to review, examine, and evaluate or weigh the probative value of days from receipt of a written request of any stockholder or
the evidence presented.[9] member, the corporation shall furnish to him its most
recent financial statement, which shall include a balance
sheet as of the end of the last taxable year and a profit or
A certificate of live birth purportedly identifying the putative loss of statement for said taxable year, showing in
father is not competent evidence of paternity when there is no showing reasonable detail its assets and liabilities and the result of
its operations.[12]
that the putative father had a hand in the preparation of the certificate.
The local civil registrar has no authority to record the paternity of an
illegitimate child on the information of a third person.[10] As correctly
The stockholders right of inspection of the corporations books
observed by the CA, only petitioners mother supplied the data in the
and records is based upon his ownership of shares in the corporation
birth certificate and signed the same. There was no evidence that Carlos
and the necessity for self-protection. After all, a shareholder has the
L. Puno acknowledged petitioner as his son.
right to be intelligently informed about corporate affairs.[13] Such right
rests upon the stockholders underlying ownership of the corporations
As for the baptismal certificate, we have already decreed that it
assets and property.[14]
can only serve as evidence of the administration of the sacrament on
the date specified but not of the veracity of the entries with respect to
the childs paternity.[11]
 Similarly, only stockholders of record are entitled to receive
dividends declared by the corporation, a right inherent in the ownership
of the shares.[15]
Upon the death of a shareholder, the heirs do not automatically
become stockholders of the corporation and acquire the rights and
privileges of the deceased as shareholder of the corporation. The stocks
must be distributed first to the heirs in estate proceedings, and the
transfer of the stocks must be recorded in the books of the
corporation. Section 63 of the Corporation Code provides that no
transfer shall be valid, except as between the parties, until the transfer
is recorded in the books of the corporation.[16] During such interim
period, the heirs stand as the equitable owners of the stocks, the
executor or administrator duly appointed by the court being vested with
the legal title to the stock.[17]Until a settlement and division of the estate
is effected, the stocks of the decedent are held by the administrator or
executor.[18] Consequently, during such time, it is the administrator or
executor who is entitled to exercise the rights of the deceased as
stockholder.
Corollary to this is the doctrine that a determination of whether
a person, claiming proprietary rights over the estate of a deceased
person, is an heir of the deceased must be ventilated in a special
proceeding instituted precisely for the purpose of settling the estate of
the latter. The status of an illegitimate child who claims to be an heir
to a decedents estate cannot be adjudicated in an ordinary civil action,
as in a case for the recovery of property.[19] The doctrine applies to the
instant case, which is one for specific performance to direct respondent
corporation to allow petitioner to exercise rights that pertain only to the
deceased and his representatives.
WHEREFORE, premises considered, the petition is DENIED. The
Court of Appeals Decision dated October 11, 2006 and Resolution dated
March 6, 2007 are AFFIRMED.
SO ORDERED.

Thus, even if petitioner presents sufficient evidence in this case

to establish that he is the son of Carlos L. Puno, he would still not be
allowed to inspect respondents books and be entitled to receive
dividends from respondent, absent any showing in its transfer book
that some of the shares owned by Carlos L. Puno were transferred to
him. This would only be possible if petitioner has been recognized as
an heir and has participated in the settlement of the estate of the
deceased.

EN BANC
[G.R. No. 141735. June 8, 2005]
SAPPARI K. SAWADJAAN, petitioner, vs. THE HONORABLE COURT
OF APPEALS, THE CIVIL SERVICE COMMISSION and AL-
AMANAH INVESTMENT BANK OF THE
PHILIPPINES, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court
of the Decision[1] of the Court of Appeals of 30 March 1999 affirming
Resolutions No. 94-4483 and No. 95-2754 of the Civil Service
Commission (CSC) dated 11 August 1994 and 11 April 1995,
respectively, which in turn affirmed Resolution No. 2309 of the Board
of Directors of the Al-Amanah Islamic Investment Bank of the
Philippines (AIIBP) dated 13 December 1993, finding petitioner guilty
of Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and dismissing him from
the service, and its Resolution[2] of 15 December 1999 dismissing
petitioners Motion for Reconsideration.
The records show that petitioner Sappari K. Sawadjaan was among
the first employees of the Philippine Amanah Bank (PAB) when it was
created by virtue of Presidential Decree No. 264 on 02 August 1973. He
rose through the ranks, working his way up from his initial designation
as security guard, to settling clerk, bookkeeper, credit investigator,
project analyst, appraiser/ inspector, and eventually, loans analyst.[3]
In February 1988, while still designated as appraiser/investigator,
Sawadjaan was assigned to inspect the properties offered as collaterals
by Compressed Air Machineries and Equipment Corporation (CAMEC)
for a credit line of Five Million Pesos (P5,000,000.00). The properties
consisted of two parcels of land covered by Transfer Certificates of Title
(TCTs) No. N-130671 and No. C-52576. On the basis of his Inspection
and Appraisal Report,[4] the PAB granted the loan application. When the
loan matured on 17 May 1989, CAMEC requested an extension of 180
days, but was granted only 120 days to repay the loan.[5]
In the meantime, Sawadjaan was promoted to Loans Analyst I on
01 July 1989.[6]
In January 1990, Congress passed Republic Act 6848 creating the
AIIBP and repealing P.D. No. 264 (which created the PAB). All assets,
liabilities and capital accounts of the PAB were transferred to the
AIIBP,[7] and the existing personnel of the PAB were to continue to
discharge their functions unless discharged.[8] In the ensuing
reorganization, Sawadjaan was among the personnel retained by the
AIIBP.
When CAMEC failed to pay despite the given extension, the bank,
now referred to as the AIIBP, discovered that TCT No. N-130671 was
spurious, the property described therein non-existent, and that the
property covered by TCT No. C-52576 had a prior existing mortgage in
favor of one Divina Pablico.
On 08 June 1993, the Board of Directors of the AIIBP created an
Investigating Committee to look into the CAMEC transaction, which
had cost the bank Six Million Pesos (P6,000,000.00) in losses.[9] The
subsequent events, as found and decided upon by the Court of
Appeals,[10] are as follows:
On 18 June 1993, petitioner received a memorandum from Islamic
Bank [AIIBP] Chairman Roberto F. De Ocampo charging him with
Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and preventively
suspending him.
In his memorandum dated 8 September 1993, petitioner informed the
Investigating Committee that he could not submit himself to the
jurisdiction of the Committee because of its alleged partiality. For his
failure to appear before the hearing set on 17 September 1993, after
the hearing of 13 September 1993 was postponed due to the
Manifestation of even date filed by petitioner, the Investigating
Committee declared petitioner in default and the prosecution was
allowed to present its evidence ex parte.
On 08 December 1993, the Investigating Committee rendered a
decision, the pertinent portions of which reads as follows:
In view of respondent SAWADJAANS abject failure to perform his
duties and assigned tasks as appraiser/inspector, which resulted to
the prejudice and substantial damage to the Bank, respondent should
be held liable therefore. At this juncture, however, the Investigating
Committee is of the considered opinion that he could not be held
liable for the administrative offense of dishonesty considering the fact
that no evidence was adduced to show that he profited or benefited
from being remiss in the performance of his duties. The record is
bereft of any evidence which would show that he received any amount
in consideration for his non-performance of his official duties.
This notwithstanding, respondent cannot escape liability. As adverted
to earlier, his failure to perform his official duties resulted to the
prejudice and substantial damage to the Islamic Bank for which he
should be held liable for the administrative offense of CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.
Premises considered, the Investigating Committee recommends that
respondent SAPPARI SAWADJAAN be meted the penalty of SIX (6)
MONTHS and ONE (1) DAY SUSPENSION from office in accordance
with the Civil Service Commissions Memorandum Circular No. 30,
Series of 1989.
On 13 December 1993, the Board of Directors of the Islamic Bank
[AIIBP] adopted Resolution No. 2309 finding petitioner guilty of
Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and imposing the penalty
of Dismissal from the Service.
On reconsideration, the Board of Directors of the Islamic Bank [AIIBP]
adopted the Resolution No. 2332 on 20 February 1994 reducing the
penalty imposed on petitioner from dismissal to suspension for a
period of six (6) months and one (1) day.
On 29 March 1994, petitioner filed a notice of appeal to the Merit
System Protection Board (MSPB).
On 11 August 1994, the CSC adopted Resolution No. 94-4483
dismissing the appeal for lack of merit and affirming Resolution No.
2309 dated 13 December 1993 of the Board of Directors of Islamic
Bank.
On 11 April 1995, the CSC adopted Resolution No. 95-2574 denying
petitioners Motion for Reconsideration.
On 16 June 1995, the instant petition was filed with the Honorable
Supreme Court on the following assignment of errors:
I. Public respondent Al-Amanah Islamic Investment Bank of the
Philippines has committed a grave abuse of discretion amounting to
excess or lack of jurisdiction when it initiated and conducted
administrative investigation without a validly promulgated rules of
procedure in the adjudication of administrative cases at the Islamic
Bank.
II. Public respondent Civil Service Commission has committed a
grave abuse of discretion amounting to lack of jurisdiction when it
prematurely and falsely assumed jurisdiction of the case not appealed
to it, but to the Merit System Protection Board.
 III. Both the Islamic Bank and the Civil Service Commission
erred in finding petitioner Sawadjaan of having deliberately reporting
false information and therefore guilty of Dishonesty and Conduct
Prejudicial to the Best Interest of the Service and penalized with
dismissal from the service.
On 04 July 1995, the Honorable Supreme Court En Banc referred this
petition to this Honorable Court pursuant to Revised Administrative
Circular No. 1-95, which took effect on 01 June 1995.
We do not find merit [in] the petition.
Anent the first assignment of error, a reading of the records would
reveal that petitioner raises for the first time the alleged failure of the
Islamic Bank [AIIBP] to promulgate rules of procedure governing the
adjudication and disposition of administrative cases involving its
personnel. It is a rule that issues not properly brought and ventilated
below may not be raised for the first time on appeal, save in
exceptional circumstances (Casolita, Sr. v. Court of Appeals, 275 SCRA
257) none of which, however, obtain in this case.
Granting arguendo that the issue is of such exceptional character that
the Court may take cognizance of the same, still, it must fail. Section
26 of Republic Act No. 6848 (1990) provides:
Section 26. Powers of the Board. The Board of Directors shall have
the broadest powers to manage the Islamic Bank, x x x The Board
shall adopt policy guidelines necessary to carry out effectively the
provisions of this Charter as well as internal rules and
regulations necessary for the conduct of its Islamic banking business
and all matters related to personnel organization, office functions and
salary administration. (Italics ours)
On the other hand, Item No. 2 of Executive Order No. 26 (1992)
entitled Prescribing Procedure and Sanctions to Ensure Speedy
Disposition of Administrative Cases directs, all administrative
agencies to adopt and include in their respective Rules of Procedure
provisions designed to abbreviate administrative proceedings.
The above two (2) provisions relied upon by petitioner does not require
the Islamic Bank [AIIBP] to promulgate rules of procedure before
administrative discipline may be imposed upon its employees. The
internal rules of procedures ordained to be adopted by the Board
refers to that necessary for the conduct of its Islamic banking
business and all matters related to personnel organization, office
functions and salary administration. On the contrary, Section 26 of
RA 6848 gives the Board of Directors of the Islamic Bank the broadest
powers to manage the Islamic Bank. This grant of broad powers would
be an idle ceremony if it would be powerless to discipline its
employees.
The second assignment of error must likewise fail. The issue is raised
for the first time via this petition for certiorari. Petitioner submitted
himself to the jurisdiction of the CSC. Although he could have raised
the alleged lack of jurisdiction in his Motion for Reconsideration of
Resolution No. 94-4483 of the CSC, he did not do so. By filing the
Motion for Reconsideration, he is estopped from denying the CSCs
jurisdiction over him, as it is settled rule that a party who asks for an
affirmative relief cannot later on impugn the action of the tribunal as
without jurisdiction after an adverse result was meted to him.
Although jurisdiction over the subject matter of a case may be
objected to at any stage of the proceedings even on appeal, this
particular rule, however, means that jurisdictional issues in a case
can be raised only during the proceedings in said case and during the
appeal of said case (Aragon v. Court of Appeals, 270 SCRA 603). The
case at bar is a petition [for] certiorari and not an appeal.
But even on the merits the argument must falter. Item No. 1 of CSC
Resolution No. 93-2387 dated 29 June 1993, provides:
Decisions in administrative cases involving officials and employees of
the civil service appealable to the Commission pursuant to Section 47
of Book V of the Code (i.e., Administrative Code of 1987) including
personnel actions such as contested appointments shall now be
appealed directly to the Commission and not to the MSPB.
In Rubenecia v. Civil Service Commission, 244 SCRA 640, 651, it was
categorically held:
. . . The functions of the MSPB relating to the determination of
administrative disciplinary cases were, in other words, re-allocated to
the Commission itself.
Be that as it may, (i)t is hornbook doctrine that in order `(t)o ascertain
whether a court (in this case, administrative agency) has jurisdiction
or not, the provisions of the law should be inquired into. Furthermore,
`the jurisdiction of the court must appear clearly from the statute law
or it will not be held to exist.(Azarcon v. Sandiganbayan, 268 SCRA
747, 757) From the provision of law abovecited, the Civil Service
Commission clearly has jurisdiction over the Administrative Case
against petitioner.
Anent the third assignment of error, we likewise do not find merit in
petitioners proposition that he should not be liable, as in the first
place, he was not qualified to perform the functions of
appraiser/investigator because he lacked the necessary training and
expertise, and therefore, should not have been found dishonest by the
Board of Directors of Islamic Bank [AIIBP] and the CSC. Petitioner
himself admits that the position of appraiser/inspector is one of the
most serious [and] sensitive job in the banking operations. He should
have been aware that accepting such a designation, he is obliged to
perform the task at hand by the exercise of more than ordinary
prudence. As appraiser/investigator, he is expected, among others, to
check the authenticity of the documents presented by the borrower by
comparing them with the originals on file with the proper government
office. He should have made it sure that the technical descriptions in
the location plan on file with the Bureau of Lands of Marikina, jibe
with that indicated in the TCT of the collateral offered by CAMEC, and
that the mortgage in favor of the Islamic Bank was duly annotated at
the back of the copy of the TCT kept by the Register of Deeds of
Marikina. This, petitioner failed to do, for which he must be held
liable. That he did not profit from his false report is of no moment.
Neither the fact that it was not deliberate or willful, detracts from the
nature of the act as dishonest. What is apparent is he stated
something to be a fact, when he really was not sure that it was so.
WHEREFORE, above premises considered, the instant Petition is
DISMISSED, and the assailed Resolutions of the Civil Service
Commission are hereby AFFIRMED.
On 24 March 1999, Sawadjaans counsel notified the court a quo of
his change of address,[11] but apparently neglected to notify his client
of this fact. Thus, on 23 July 1999, Sawadjaan, by himself, filed a
Motion for New Trial[12] in the Court of Appeals based on the following
grounds: fraud, accident, mistake or excusable negligence and newly
discovered evidence. He claimed that he had recently discovered that
at the time his employment was terminated, the AIIBP had not yet
adopted its corporate by-laws. He attached a Certification[13] by the
Securities and Exchange Commission (SEC) that it was only on 27 May
1992 that the AIIBP submitted its draft by-laws to the SEC, and that
its registration was being held in abeyance pending certain corrections
being made thereon. Sawadjaan argued that since the AIIBP failed to
file its by-laws within 60 days from the passage of Rep. Act No. 6848,
as required by Sec. 51 of the said law, the bank and its stockholders
had already forfeited its franchise or charter, including its license to
exist and operate as a corporation,[14] and thus no longer have the legal
standing and personality to initiate an administrative case.
Sawadjaans counsel subsequently adopted his motion, but
requested that it be treated as a motion for reconsideration.[15] This
motion was denied by the court a quo in its Resolution of 15 December
1999.[16]
Still disheartened, Sawadjaan filed the present petition
for certiorari under Rule 65 of the Rules of Court challenging the above
Decision and Resolution of the Court of Appeals on the ground that the
court a quo erred: i) in ignoring the facts and evidences that the alleged
Islamic Bank has no valid by-laws; ii) in ignoring the facts and
evidences that the Islamic Bank lost its juridical personality as a
corporation on 16 April 1990; iii) in ignoring the facts and evidences
that the alleged Islamic Bank and its alleged Board of Directors have
no jurisdiction to act in the manner they did in the absence of a valid
by-laws; iv) in not correcting the acts of the Civil Service Commission
who erroneously rendered the assailed Resolutions No. 94-4483 and
No. 95-2754 as a result of fraud, falsification and/or
misrepresentations committed by Farouk A. Carpizo and his group,
including Roberto F. de Ocampo; v) in affirming an unconscionably
harsh and/or excessive penalty; and vi) in failing to consider newly
discovered evidence and reverse its decision accordingly.
Subsequently, petitioner Sawadjaan filed an Ex-parte Urgent
Motion for Additional Extension of Time to File a Reply (to the
Comments of Respondent Al-Amanah Investment Bank of the
Philippines),[17] Reply (to Respondents Consolidated Comment,)[18] and
Reply (to the Alleged Comments of Respondent Al-Amanah Islamic
Bank of the Philippines).[19] On 13 October 2000, he informed this
Court that he had terminated his lawyers services, and, by himself,
prepared and filed the following: 1) Motion for New Trial;[20] 2) Motion
to Declare Respondents in Default and/or Having Waived their Rights
to Interpose Objection to Petitioners Motion for New Trial;[21] 3) Ex-
Parte Urgent Motions to Punish Attorneys Amado D. Valdez, Elpidio J.
Vega, Alda G. Reyes, Dominador R. Isidoro, Jr., and Odilon A. Diaz for
Being in Contempt of Court & to Inhibit them from Appearing in this
Case Until they Can Present Valid Evidence of Legal Authority;[22] 4)
Opposition/Reply (to Respondent AIIBPs Alleged Comment);[23] 5) Ex-
Parte Urgent Motion to Punish Atty. Reynaldo A. Pineda for Contempt
of Court and the Issuance of a Commitment Order/Warrant for His
Arrest;[24] 6) Reply/Opposition (To the Formal Notice of Withdrawal of
Undersigned Counsel as Legal Counsel for the Respondent Islamic
Bank with Opposition to Petitioners Motion to Punish Undersigned
Counsel for Contempt of Court for the Issuance of a Warrant of
Arrest);[25] 7) Memorandum for Petitioner;[26] 8) Opposition to SolGens
Motion for Clarification with Motion for Default and/or Waiver of
Respondents to File their Memorandum;[27] 9) Motion for Contempt of
Court and Inhibition/Disqualification with Opposition to OGCCs
Motion for Extension of Time to File Memorandum;[28] 10) Motion for
Enforcement (In Defense of the Rule of Law);[29] 11) Motion and
Opposition (Motion to Punish OGCCs Attorneys Amado D. Valdez, Efren
B. Gonzales, Alda G. Reyes, Odilon A. Diaz and Dominador R. Isidoro,
Jr., for Contempt of Court and the Issuance of a Warrant for their
Arrest; and Opposition to their Alleged Manifestation and Motion Dated
February 5, 2002);[30] 12) Motion for Reconsideration of Item (a) of
Resolution dated 5 February 2002 with Supplemental Motion for
Contempt of Court;[31] 13) Motion for Reconsideration of Portion of
Resolution Dated 12 March 2002;[32] 14) Ex-Parte Urgent Motion for
Extension of Time to File Reply Memorandum (To: CSC and AIIBPs
Memorandum);[33] 15) Reply Memorandum (To: CSCs Memorandum)
With Ex-Parte Urgent Motion for Additional Extension of time to File
Reply Memorandum (To: AIIBPs Memorandum);[34] and 16) Reply
Memorandum (To: OGCCs Memorandum for Respondent AIIBP).[35]
Petitioners efforts are unavailing, and we deny his petition for its
procedural and substantive flaws.
The general rule is that the remedy to obtain reversal or
modification of the judgment on the merits is appeal. This is true even
if the error, or one of the errors, ascribed to the court rendering the
judgment is its lack of jurisdiction over the subject matter, or the
exercise of power in excess thereof, or grave abuse of discretion in the
findings of fact or of law set out in the decision.[36]
The records show that petitioners counsel received the Resolution
of the Court of Appeals denying his motion for reconsideration on 27
December 1999. The fifteen day reglamentary period to appeal under
Rule 45 of the Rules of Court therefore lapsed on 11 January 2000. On
23 February 2000, over a month after receipt of the resolution denying
his motion for reconsideration, the petitioner filed his petition
for certiorari under Rule 65.
It is settled that a special civil action for certiorari will not lie as a
substitute for the lost remedy of appeal,[37] and though there are
instances[38] where the extraordinary remedy of certiorari may be
resorted to despite the availability of an appeal,[39] we find no special
reasons for making out an exception in this case.
Even if we were to overlook this fact in the broader interests of
justice and treat this as a special civil action for certiorari under Rule
65,[40] the petition would nevertheless be dismissed for failure of the
petitioner to show grave abuse of discretion. Petitioners recurrent
argument, tenuous at its very best, is premised on the fact that since
respondent AIIBP failed to file its by-laws within the designated 60 days
from the effectivity of Rep. Act No. 6848, all proceedings initiated by
AIIBP and all actions resulting therefrom are a patent nullity. Or, in his
words, the AIIBP and its officers and Board of Directors,
. . . [H]ave no legal authority nor jurisdiction to manage much less
operate the Islamic Bank, file administrative charges and investigate
petitioner in the manner they did and allegedly passed Board
Resolution No. 2309 on December 13, 1993 which is null and
void for lack of an (sic) authorized and valid by-laws. The CIVIL
SERVICE COMMISSION was therefore affirming, erroneously, a null
and void Resolution No. 2309 dated December 13, 1993 of the Board
of Directors of Al-Amanah Islamic Investment Bank of the Philippines
in CSC Resolution No. 94-4483 dated August 11, 1994. A motion for
reconsideration thereof was denied by the CSC in its Resolution No.
95-2754 dated April 11, 1995. Both acts/resolutions of the CSC are
erroneous, resulting from fraud, falsifications and misrepresentations
of the alleged Chairman and CEO Roberto F. de Ocampo and the
alleged Director Farouk A. Carpizo and his group at the alleged
Islamic Bank.[41]
Nowhere in petitioners voluminous pleadings is there a showing
that the court a quo committed grave abuse of discretion amounting to
lack or excess of jurisdiction reversible by a petition for certiorari.
Petitioner already raised the question of AIIBPs corporate existence and
lack of jurisdiction in his Motion for New Trial/Motion for
Reconsideration of 27 May 1997 and was denied by the Court of
Appeals. Despite the volume of pleadings he has submitted thus far, he
has added nothing substantial to his arguments.
The AIIBP was created by Rep. Act No. 6848. It has a main office
where it conducts business, has shareholders, corporate officers, a
board of directors, assets, and personnel. It is, in fact, here represented
by the Office of the Government Corporate Counsel, the principal law
office of government-owned corporations, one of which is respondent
bank.[42] At the very least, by its failure to submit its by-laws on time,
the AIIBP may be considered a de facto corporation[43] whose right to
exercise corporate powers may not be inquired into collaterally in any
private suit to which such corporations may be a party.[44]
Moreover, a corporation which has failed to file its by-laws within
the prescribed period does not ipso facto lose its powers as such. The
SEC Rules on Suspension/Revocation of the Certificate of Registration
of Corporations,[45] details the procedures and remedies that may be
availed of before an order of revocation can be issued. There is no
showing that such a procedure has been initiated in this case.
In any case, petitioners argument is irrelevant because this case is
not a corporate controversy, but a labor dispute; and it is an employers
basic right to freely select or discharge its employees, if only as a
measure of self-protection against acts inimical to its
interest.[46] Regardless of whether AIIBP is a corporation, a partnership,
a sole proprietorship, or a sari-saristore, it is an undisputed fact that
AIIBP is the petitioners employer. AIIBP chose to retain his services
during its reorganization, controlled the means and methods by which
his work was to be performed, paid his wages, and, eventually,
terminated his services.[47]
And though he has had ample opportunity to do so, the petitioner
has not alleged that he is anything other than an employee of AIIBP. He
has neither claimed, nor shown, that he is a stockholder or an officer
of the corporation. Having accepted employment from AIIBP, and
rendered his services to the said bank, received his salary, and accepted
the promotion given him, it is now too late in the day for petitioner to
question its existence and its power to terminate his services. One who
assumes an obligation to an ostensible corporation as such, cannot
resist performance thereof on the ground that there was in fact no
corporation.[48]
Even if we were to consider the facts behind petitioner Sawadjaans
dismissal from service, we would be hard pressed to find error in the
decision of the AIIBP.
As appraiser/investigator, the petitioner was expected to conduct
an ocular inspection of the properties offered by CAMEC as collaterals
and check the copies of the certificates of title against those on file with
the Registry of Deeds. Not only did he fail to conduct these routine
checks, but he also deliberately misrepresented in his appraisal report
that after reviewing the documents and conducting a site inspection,
he found the CAMEC loan application to be in order. Despite the
number of pleadings he has filed, he has failed to offer an alternative
explanation for his actions.
When he was informed of the charges against him and directed to
appear and present his side on the matter, the petitioner sent instead
a memorandum questioning the fairness and impartiality of the
members of the investigating committee and refusing to recognize their
jurisdiction over him. Nevertheless, the investigating committee
rescheduled the hearing to give the petitioner another chance, but he
still refused to appear before it.
Thereafter, witnesses were presented, and a decision was rendered
finding him guilty of dishonesty and dismissing him from service. He
sought a reconsideration of this decision and the same committee
whose impartiality he questioned reduced their recommended penalty
to suspension for six months and one day. The board of directors,
however, opted to dismiss him from service.
On appeal to the CSC, the Commission found that Sawadjaans
failure to perform his official duties greatly prejudiced the AIIBP, for
which he should be held accountable. It held that:
. . . (I)t is crystal clear that respondent SAPPARI SAWADJAAN was
remiss in the performance of his duties as appraiser/inspector. Had
respondent performed his duties as appraiser/inspector, he could
have easily noticed that the property located at Balintawak, Caloocan
City covered by TCT No. C-52576 and which is one of the properties
offered as collateral by CAMEC is encumbered to Divina Pablico. Had
respondent reflected such fact in his appraisal/inspection report on
said property the ISLAMIC BANK would not have approved CAMECs
loan of P500,000.00 in 1987 and CAMECs P5 Million loan in 1988,
respondent knowing fully well the Banks policy of not accepting
encumbered properties as collateral.
Respondent SAWADJAANs reprehensible act is further aggravated
when he failed to check and verify from the Registry of Deeds of
Marikina the authenticity of the property located at Mayamot,
Antipolo, Rizal covered by TCT No. N-130671 and which is one of the
properties offered as collateral by CAMEC for its P5 Million loan in
1988. If he only visited and verified with the Register of Deeds of
Marikina the authenticity of TCT No. N-130671 he could have easily
discovered that TCT No. N-130671 is fake and the property described
therein non-existent.
...
This notwithstanding, respondent cannot escape liability. As adverted
to earlier, his failure to perform his official duties resulted to the
prejudice and substantial damage to the ISLAMIC BANK for which he
should be held liable for the administrative offense of CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.[49]
From the foregoing, we find that the CSC and the court a
quo committed no grave abuse of discretion when they sustained
Sawadjaans dismissal from service. Grave abuse of discretion implies
such capricious and whimsical exercise of judgment as equivalent to
lack of jurisdiction, or, in other words, where the power is exercised in
an arbitrary or despotic manner by reason of passion or personal
hostility, and it must be so patent and gross as to amount to an evasion
of positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law.[50] The records show that the
respondents did none of these; they acted in accordance with the law.
WHEREFORE, the petition is DISMISSED. The Decision of the
Court of Appeals of 30 March 1999 affirming Resolutions No. 94-4483
and No. 95-2754 of the Civil Service Commission, and its Resolution of
15 December 1999 are hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.
Davide, Jr., C.J., Panganiban, Quisumbing, Ynares-Santiago,
Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales,
Callejo, Sr., Azcuna, Tinga, and Garcia, JJ., concur.
Puno, J., on official leave.
 EN BANC

WILSON P. GAMBOA, G.R. No. 176579

Petitioner,
Present:
- versus -

CORONA, C.J.,

FINANCE SECRETARY CARPIO,

MARGARITO B. TEVES, FINANCE
UNDERSECRETARY JOHN P. VELASCO, JR.,
SEVILLA, AND COMMISSIONER
RICARDO ABCEDE OF THE LEONARDO-DE CASTRO,
PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT (PCGG) IN BRION,
THEIR CAPACITIES AS CHAIR
AND MEMBERS, RESPECTIVELY, PERALTA,
OF THE PRIVATIZATION
COUNCIL, BERSAMIN,

CHAIRMAN ANTHONI SALIM OF DEL CASTILLO,

FIRST PACIFIC CO., LTD. IN HIS
CAPACITY AS DIRECTOR OF ABAD,
METRO PACIFIC ASSET
HOLDINGS INC., CHAIRMAN
MANUEL V. PANGILINAN OF VILLARAMA, JR.,
PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY (PLDT) IN PEREZ,
HIS CAPACITY AS MANAGING PABLITO V. SANIDAD and Promulgated:
DIRECTOR OF FIRST PACIFIC MENDOZA, and
CO., LTD., PRESIDENT ARNO V. SANIDAD,
NAPOLEON L. NAZARENO OF SERENO, JJ.
PHILIPPINE LONG DISTANCE Petitioners-in-Intervention. June 28, 2011
TELEPHONE COMPANY, CHAIR
FE BARIN OF THE SECURITIES
EXCHANGE COMMISSION, and x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
PRESIDENT FRANCIS LIM OF
THE PHILIPPINE STOCK
EXCHANGE,

Respondents.
DECISION

CARPIO, J.:

The Case

This is an original petition for prohibition, injunction, declaratory

relief and declaration of nullity of the sale of shares of stock of
Philippine Telecommunications Investment Corporation (PTIC) by the
government of the Republic of the Philippines to Metro Pacific Assets
Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited
(First Pacific).

The Antecedents
The facts, according to petitioner Wilson P. Gamboa, a stockholder of
Philippine Long Distance Telephone Company (PLDT), are as follows:1
On 28 November 1928, the Philippine Legislature enacted Act No.
3436 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 percent of the outstanding common shares
of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated
by several persons, including Roland Gapud and Jose Campos, Jr.
Subsequently, PHI 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. In 1986, the
111,415 shares of stock of PTIC held by PHI were sequestered by the
Presidential Commission on Good Government (PCGG). The 111,415
PTIC shares, which represent about 46.125 percent of the
outstanding capital stock of PTIC, were later declared by this Court to
be owned by the Republic of the Philippines.2
In 1999, First Pacific, a Bermuda-registered, Hong Kong-based
investment firm, acquired the remaining 54 percent of the
outstanding capital stock of PTIC. On 20 November 2006, the Inter-
Agency Privatization Council (IPC) of the Philippine Government
announced that it would sell the 111,415 PTIC shares, or 46.125
percent of the outstanding capital stock of PTIC, through a public
bidding to be conducted on 4 December 2006. Subsequently, the
public bidding was reset to 8 December 2006, and only two bidders,
Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital,
submitted their bids. Parallax won with a bid of P25.6 billion or
US$510 million.
Thereafter, First Pacific announced that it would exercise its right of
first refusal as a PTIC stockholder and buy the 111,415 PTIC shares
by matching the bid price of Parallax. However, First Pacific failed to
do so by the 1 February 2007 deadline set by IPC and instead, yielded
its right to PTIC itself which was then given by IPC until 2 March
2007 to buy the PTIC shares. On 14 February 2007, First Pacific,
through its subsidiary, MPAH, entered into a Conditional Sale and
Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of
the outstanding capital stock of PTIC, with the Philippine Government
for the price of P25,217,556,000 or US$510,580,189. The sale was
completed on 28 February 2007.
Since PTIC is a stockholder of PLDT, the sale by the Philippine
Government of 46.125 percent of PTIC shares is actually an indirect
sale of 12 million shares or about 6.3 percent of the outstanding
common shares of PLDT. With the sale, First Pacifics common
shareholdings in PLDT increased from 30.7 percent to 37
percent, thereby increasing the common shareholdings of
foreigners in PLDT to about 81.47 percent. This 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
percent.3
On the other hand, public respondents Finance
Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and
PCGG Commissioner Ricardo Abcede allege the following relevant
facts:
On 9 November 1967, 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, on the other hand, was incorporated in 1977,
and 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. In
1986, 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 decision4 which became final
and executory on 8 August 2006.
The Philippine Government decided to sell the 111,415 PTIC shares,
which represent 6.4 percent of the outstanding common shares of
stock of PLDT, and designated the Inter-Agency Privatization Council
(IPC), composed of the Department of Finance and the PCGG, as the
disposing entity. An invitation to bid was published in seven different
newspapers from 13 to 24 November 2006. On 20 November 2006, a
pre-bid conference was held, and the original deadline for bidding
scheduled on 4 December 2006 was reset to 8 December 2006. The
extension was published in nine different newspapers.
During the 8 December 2006 bidding, Parallax Capital Management
LP emerged as the highest bidder with a bid of P25,217,556,000. The
government notified First Pacific, the majority owner of PTIC shares,
of the bidding results and gave First Pacific until 1 February 2007 to
exercise its right of first refusal in accordance with PTICs Articles of
Incorporation. First Pacific announced its intention to match
Parallaxs bid.
On 31 January 2007, 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.
Respondents Teves and Sevilla were among those who attended the
public hearing. 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.5 On 28
February 2007, First Pacific completed the acquisition of the 111,415
shares of stock of PTIC.
Respondent Manuel V. Pangilinan admits the following facts: (a) the
IPC conducted a public bidding for the sale of 111,415 PTIC shares or
46 percent of the outstanding capital stock of PTIC (the remaining 54
percent of PTIC shares was already owned by First Pacific and its
affiliates); (b) Parallax offered the highest bid amounting
to P25,217,556,000; (c) pursuant to the right of first refusal in favor of
PTIC and its shareholders granted in PTICs Articles of Incorporation,
MPAH, a First Pacific affiliate, exercised its right of first refusal by
matching the highest bid offered for PTIC shares on 13 February
2007; and (d) on 28 February 2007, the sale was consummated when
MPAH paid IPC P25,217,556,000 and the government delivered the
certificates for the 111,415 PTIC shares.
Respondent Pangilinan denies the other allegations of facts of
petitioner.
On 28 February 2007, petitioner filed the instant petition for
prohibition, injunction, declaratory relief, and declaration of nullity of
sale of the 111,415 PTIC shares. Petitioner 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 percent to 37
percent, and this, combined with Japanese NTT DoCoMos common
shareholdings in PLDT, would result to a total foreign common
shareholdings in PLDT of 51.56 percent which is over the 40 percent
constitutional limit.6 Petitioner asserts:
If and when the sale is completed, First Pacifics equity in PLDT
will go up from 30.7 percent to 37.0 percent of its common or
voting- stockholdings, x x x. Hence, the consummation of the
sale will put the two largest foreign investors in PLDT First
Pacific and Japans NTT DoCoMo, which is the worlds largest
wireless telecommunications firm, owning 51.56 percent of
PLDT common equity. x x x With the completion of the sale,
data culled from the official website of the New York Stock
Exchange (www.nyse.com) showed that those foreign entities,
which own at least five percent of common equity, will
collectively own 81.47 percent of PLDTs common equity. x x x
x x x as the annual disclosure reports, also referred
to as Form 20-K reports x x x which PLDT
submitted to the New York Stock Exchange for the
period 2003-2005, revealed that First Pacific and
several other foreign entities breached the
constitutional limit of 40 percent ownership as
early as 2003. x x x7
Petitioner raises the following issues: (1) whether the consummation
of the then impending sale of 111,415 PTIC shares to First Pacific
violates the constitutional limit on foreign ownership of a public
utility; (2) whether public respondents committed grave abuse of
discretion in allowing the sale of the 111,415 PTIC shares to First
Pacific; and (3) whether the sale of common shares to foreigners in
excess of 40 percent of the entire subscribed common capital stock
violates the constitutional limit on foreign ownership of a public
utility.8
On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a
Motion for Leave to Intervene and Admit Attached Petition-in-
Intervention. In the Resolution of 28 August 2007, the Court granted
the motion and noted the Petition-in-Intervention.
Petitioners-in-intervention join petitioner Wilson Gamboa x x x in
seeking, among others, to enjoin and/or nullify the sale by
respondents of the 111,415 PTIC shares to First Pacific or assignee.
Petitioners-in-intervention claim that, as PLDT subscribers, they have
a stake in the outcome of the controversy x x x where the Philippine
Government is completing the sale of government owned assets in
[PLDT], unquestionably a public utility, in violation of the nationality
restrictions of the Philippine Constitution.
The Issue
This Court is not a trier of facts. Factual questions such as those
raised by petitioner,9 which indisputably demand a thorough
examination of the evidence of the parties, are generally beyond this
Courts jurisdiction. Adhering to this well-settled principle, the Court
shall confine the resolution of the instant controversy solely on
the threshold and purely legal issue of 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.
 The Ruling of the Court
The petition is partly meritorious.
Petition for declaratory relief treated as petition for mandamus
At the outset, petitioner is faced with a procedural barrier. Among the
remedies petitioner seeks, only the petition for prohibition is within
the original jurisdiction of this court, which however is not exclusive
but is concurrent with the Regional Trial Court and the Court of
Appeals. The actions for declaratory relief,10 injunction, and
annulment of sale are not embraced within the original jurisdiction of
the Supreme Court. On this ground alone, the petition could have
been dismissed outright.
While direct resort to this Court may be justified in a petition for
prohibition,11 the Court shall nevertheless refrain from discussing the
grounds in support of the petition for prohibition since on 28
February 2007, the questioned sale was consummated when MPAH
paid IPC P25,217,556,000 and the government delivered the
certificates for the 111,415 PTIC shares.
However, since the threshold and purely legal issue on the definition
of the term capital in Section 11, Article XII of the Constitution has
far-reaching implications to the national economy, the Court treats
the petition for declaratory relief as one for mandamus.12
In Salvacion v. Central Bank of the Philippines,13 the Court treated the
petition for declaratory relief as one for mandamus considering the
grave injustice that would result in the interpretation of a banking
law. In that case, which involved the crime of rape committed by a
foreign tourist against a Filipino minor and the execution of the final
judgment in the civil case for damages on the tourists dollar deposit
with a local bank, the Court declared Section 113 of Central Bank
Circular No. 960, exempting foreign currency deposits from
attachment, garnishment or any other order or process of any court,
inapplicable due to the peculiar circumstances of the case. The Court
held that injustice would result especially to a citizen aggrieved by a
foreign guest like accused x x x that would negate Article 10 of the
Civil Code which provides that in case of doubt in the interpretation
or application of laws, it is presumed that the lawmaking body
intended right and justice to prevail. The Court therefore required
respondents Central Bank of the Philippines, the local bank, and the
accused to comply with the writ of execution issued in the civil case
for damages and to release the dollar deposit of the accused to satisfy
the judgment.
In Alliance of Government Workers v. Minister of Labor,14 the Court
similarly brushed aside the procedural infirmity of the petition for
declaratory relief and treated the same as one for mandamus.
In Alliance, the issue was whether the government unlawfully
excluded petitioners, who were government employees, from the
enjoyment of rights to which they were entitled under the law.
Specifically, the question was: Are the branches, agencies,
subdivisions, and instrumentalities of the Government, including
government owned or controlled corporations included among the four
employers under Presidential Decree No. 851 which are required to
pay their employees x x x a thirteenth (13th) month pay x x x ? The
Constitutional principle involved therein affected all government
employees, clearly justifying a relaxation of the technical rules of
procedure, and certainly requiring the interpretation of the assailed
presidential decree.
In short, it is well-settled that this Court may treat a petition for
declaratory relief as one for mandamus if the issue involved has far-
reaching implications. As this Court held in Salvacion:
The Court has no original and exclusive jurisdiction over a
petition for declaratory relief. However, exceptions to this rule
have been recognized. Thus, where the petition has far-
reaching implications and raises questions that should be
resolved, it may be treated as one for
mandamus.15 (Emphasis supplied)
In the present case, petitioner seeks primarily the interpretation of the
term capital in Section 11, Article XII of the Constitution. He prays
that this Court declare that the term capital refers to common shares
only, and that such shares constitute the sole basis in determining
foreign equity in a public utility. Petitioner further asks this Court to
declare any ruling inconsistent with such interpretation
unconstitutional.
The interpretation of the term capital in Section 11, Article XII of the
Constitution has far-reaching implications to the national economy.
In fact, a resolution of this issue will determine whether Filipinos are
masters, or second class citizens, in their own country. What is at
stake here is whether Filipinos or foreigners will have effective
control of the national economy. Indeed, if ever there is a legal issue
that has far-reaching implications to the entire nation, and to future
generations of Filipinos, it is the threshhold legal issue presented in
this case.
The Court first encountered the issue on the definition of the term
capital in Section 11, Article XII of the Constitution in the case
of Fernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case
involved the same public utility (PLDT) and substantially the same
private respondents. Despite the importance and novelty of the
constitutional issue raised therein and despite the fact that the
petition involved a purely legal question, the Court declined to resolve
the case on the merits, and instead denied the same for disregarding
the hierarchy of courts.17 There, petitioner Fernandez assailed on a
pure question of law the Regional Trial Courts Decision of 21
February 2003 via a petition for review under Rule 45. The Courts
Resolution, denying the petition, became final on 21 December 2004.
The instant petition therefore presents the Court with another
opportunity to finally settle this purely legal issue which is of
transcendental importance to the national economy and a
fundamental requirement to a faithful adherence to our Constitution.
The Court must forthwith seize such opportunity, not only for the
benefit of the litigants, but more significantly for the benefit of the
entire Filipino people, to ensure, in the words of the Constitution, a
self-reliant and independent national economy effectively
controlled by Filipinos.18 Besides, in the light of vague and confusing
positions taken by government agencies on this purely legal issue,
present and future foreign investors in this country deserve, as a
matter of basic fairness, a categorical ruling from this Court on the
extent of their participation in the capital of public utilities and other
nationalized businesses.
Despite its far-reaching implications to the national economy, this
purely legal issue has remained unresolved for over 75 years since the
1935 Constitution. There is no reason for this Court to evade this ever
recurring fundamental issue and delay again defining the term
capital, which appears not only in Section 11, Article XII of the
Constitution, but also in Section 2, Article XII on co-production and
joint venture agreements for the development of our natural
resources,19 in Section 7, Article XII on ownership of private
lands,20 in Section 10, Article XII on the reservation of certain
investments to Filipino citizens,21 in Section 4(2), Article XIV on the
ownership of educational institutions,22 and in Section 11(2), Article
XVI on the ownership of advertising companies.23
Petitioner has locus standi
There is no dispute that petitioner is a stockholder of PLDT. As such,
he has the right to question the subject sale, which he claims to
violate the nationality requirement prescribed in Section 11, Article
XII of the Constitution. If the sale indeed violates the Constitution,
then there is a possibility that PLDTs franchise could be revoked, a
dire consequence directly affecting petitioners interest as a
stockholder.
More importantly, there is no question that the instant petition raises
matters of transcendental importance to the public. The fundamental
and threshold legal issue in this case, involving the national economy
and the economic welfare of the Filipino people, far outweighs any
perceived impediment in the legal personality of the petitioner to bring
this action.
In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a
suit on matters of transcendental importance to the public, thus:
In Taada v. Tuvera, the Court asserted that when the issue concerns
a public right and the object of mandamus is to obtain the
enforcement of a public duty, the people are regarded as the real
parties in interest; and because it is sufficient that petitioner is a
citizen and as such is interested in the execution of the laws, he
need not show that he has any legal or special interest in the
result of the action. In the aforesaid case, the petitioners sought to
enforce their right to be informed on matters of public concern, a right
then recognized in Section 6, Article IV of the 1973 Constitution, in
connection with the rule that laws in order to be valid and enforceable
must be published in the Official Gazette or otherwise effectively
promulgated. In ruling for the petitioners legal standing, the Court
declared that the right they sought to be enforced is a public right
recognized by no less than the fundamental law of the land.
Legaspi v. Civil Service Commission, while reiterating Taada, further
declared that when a mandamus proceeding involves the assertion
of a public right, the requirement of personal interest is satisfied
by the mere fact that petitioner is a citizen and, therefore, part
of the general public which possesses the right.
Further, in Albano v. Reyes, we said that while expenditure of public
funds may not have been involved under the questioned contract for
the development, management and operation of the Manila
International Container Terminal, public interest [was] definitely
involved considering the important role [of the subject contract] .
. . in the economic development of the country and the
magnitude of the financial consideration involved. We concluded
that, as a consequence, the disclosure provision in the Constitution
would constitute sufficient authority for upholding the petitioners
standing. (Emphasis supplied)
Clearly, since the instant petition, brought by a citizen, involves
matters of transcendental public importance, the petitioner has the
requisite locus standi.
Definition of the Term Capital in
Section 11, Article XII of the 1987 Constitution
Section 11, Article XII (National Economy and Patrimony) of the 1987
Constitution mandates the Filipinization of public utilities, to wit:
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)
The above provision substantially reiterates Section 5, Article XIV of
the 1973 Constitution, thus:
Section 5. 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 the capital of
which 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 National
Assembly when the public interest 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 the capital thereof. (Emphasis supplied)
The foregoing provision in the 1973 Constitution reproduced Section
8, Article XIV of the 1935 Constitution, viz:
Section 8. 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 other entities organized under the laws of
 the Philippines sixty per centum of the capital of which is
owned by citizens of the Philippines, nor shall such
franchise, certificate, or authorization be exclusive in character
or for a longer period than fifty years. No franchise or right shall
be granted to any individual, firm, or corporation, except under
the condition that it shall be subject to amendment, alteration,
or repeal by the Congress when the public interest so requires.
(Emphasis supplied)
Father Joaquin G. Bernas, S.J., a leading member of the 1986
Constitutional Commission, reminds us that
the Filipinization provision in the 1987 Constitution is one of the
products of the spirit of nationalism which gripped the 1935
Constitutional Convention.25 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.26 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.27 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 patrimony28 and ensure a self-reliant and independent
national economy effectively controlled by Filipinos.29
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 percent of
its capital must be owned by Filipino citizens.
The crux of the controversy is the definition of the term capital. Does
the term capital in Section 11, Article XII of the Constitution refer to
common shares or to the total outstanding capital stock (combined
total of common and non-voting preferred shares)?
Petitioner submits that the 40 percent foreign equity limitation in
domestic public utilities refers only to common shares because such
shares are entitled to vote and it is through voting that control over a
corporation is exercised. Petitioner posits that the term capital in
Section 11, Article XII of the Constitution refers to the ownership of
common capital stock subscribed and outstanding, which class of
shares alone, under the corporate set-up of PLDT, can vote and elect
members of the board of directors. It is undisputed that PLDTs non-
voting preferred shares are held mostly by Filipino citizens.30 This
arose from Presidential Decree No. 217,31 issued on 16 June 1973 by
then President Ferdinand Marcos, requiring every applicant of a PLDT
telephone line to subscribe to non-voting preferred shares to pay for
the investment cost of installing the telephone line.32
Petitioners-in-intervention basically reiterate petitioners arguments
and adopt petitioners definition of the term capital.33 Petitioners-in-
intervention allege that the approximate foreign ownership of common
capital stock of PLDT x x x already amounts to at least 63.54% of the
total outstanding common stock, which means that foreigners
exercise significant control over PLDT, patently violating the 40
percent foreign equity limitation in public utilities prescribed by the
Constitution.
Respondents, on the other hand, do not offer any definition of the
term capital in Section 11, Article XII of the Constitution. More
importantly, private respondents Nazareno and Pangilinan of PLDT do
not dispute that more than 40 percent of the common shares of PLDT
are held by foreigners.
In particular, respondent Nazarenos Memorandum, consisting of 73
pages, harps mainly on the procedural infirmities of the petition and
the supposed violation of the due process rights of the affected foreign
common shareholders. Respondent Nazareno does not deny
petitioners allegation of foreigners dominating the common
shareholdings of PLDT. Nazarenostressed mainly that the
petition seeks to divest foreign common shareholders purportedly
exceeding 40% of the total common shareholdings in PLDT of
their ownership over their shares. Thus, the foreign natural and
juridical PLDT shareholders must be impleaded in this suit so that
they can be heard.34 Essentially, Nazareno invokes denial of due
process on behalf of the foreign common shareholders.
While Nazareno does not introduce any definition of the term capital,
he states that among the factual assertions that need to be
established to counter petitioners allegations is the uniform
interpretation by government agencies (such as the SEC),
institutions and corporations (such as the Philippine National Oil
Company-Energy Development Corporation or PNOC-EDC) of
including both preferred shares and common shares in
controlling interest in view of testing compliance with the 40%
constitutional limitation on foreign ownership in public
utilities.35
Similarly, respondent Manuel V. Pangilinan does not define the term
capital in Section 11, Article XII of the Constitution. Neither does he
refute petitioners claim of foreigners holding more than 40 percent of
PLDTs common shares. Instead, respondent Pangilinan focuses on
the procedural flaws of the petition and the alleged violation of the
due process rights of foreigners. Respondent Pangilinan emphasizes
in his Memorandum (1) the absence of this Courts jurisdiction over
the petition; (2) petitioners lack of standing; (3) mootness of the
petition; (4) non-availability of declaratory relief; and (5) the denial of
due process rights. Moreover, respondent Pangilinan alleges that the
issue should be whether owners of shares in PLDT as well as owners
of shares in companies holding shares in PLDT may be required to
relinquish their shares in PLDT and in those companies without any
law requiring them to surrender their shares and also without notice
and trial.
Respondent Pangilinan further asserts that Section 11, [Article XII
of the Constitution] imposes no nationality requirement on the
shareholders of the utility company as a condition for keeping
their shares in the utility company. According to him, Section 11
does not authorize taking one persons property (the shareholders
stock in the utility company) on the basis of another partys alleged
failure to satisfy a requirement that is a condition only for that other
partys retention of another piece of property (the utility company
being at least 60% Filipino-owned to keep its franchise).36
The OSG, representing public respondents Secretary Margarito Teves,
Undersecretary John P. Sevilla, Commissioner Ricardo Abcede, and
Chairman Fe Barin, is likewise silent on the definition of the term
capital. In its Memorandum37 dated 24 September 2007, the OSG also
limits its discussion on the supposed procedural defects of the
petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of
interested parties, and lack of basis for injunction. The OSG does not
present any definition or interpretation of the term capital in Section
11, Article XII of the Constitution. The OSG contends that the petition
actually partakes of a collateral attack on PLDTs franchise as a public
utility, which in effect requires a full-blown trial where all the parties
in interest are given their day in court.38
Respondent Francisco Ed Lim, impleaded as President and Chief
Executive Officer of the Philippine Stock Exchange (PSE), does not
also define the term capital and seeks the dismissal of the petition on
the following grounds: (1) failure to state a cause of action against
Lim; (2) the PSE allegedly implemented its rules and required all listed
companies, including PLDT, to make proper and timely disclosures;
and (3) the reliefs prayed for in the petition would adversely impact
the stock market.
In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez
who claimed to be a stockholder of record of PLDT, contended that the
term capital in the 1987 Constitution refers to shares entitled to vote
or the common shares. Fernandez explained thus:
The forty percent (40%) foreign equity limitation in public
utilities prescribed by the Constitution refers to ownership of
shares of stock entitled to vote, i.e., common shares,
considering that it is through voting that control is being
exercised. x x x
Obviously, the intent of the framers of the Constitution in
imposing limitations and restrictions on fully nationalized and
partially nationalized activities is for Filipino nationals to be
always in control of the corporation undertaking said activities.
Otherwise, if the Trial Courts ruling upholding respondents
arguments were to be given credence, it would be possible for
the ownership structure of a public utility corporation to be
divided into one percent (1%) common stocks and ninety-nine
percent (99%) preferred stocks. Following the Trial Courts
ruling adopting respondents arguments, the common shares
can be owned entirely by foreigners thus creating an absurd
situation wherein foreigners, who are supposed to be minority
shareholders, control the public utility corporation.
xxxx
Thus, the 40% foreign ownership limitation should be
interpreted to apply to both the beneficial ownership and the
controlling interest.
xxxx
Clearly, therefore, the forty percent (40%) foreign equity
limitation in public utilities prescribed by the Constitution
refers to ownership of shares of stock entitled to vote, i.e.,
common shares. Furthermore, ownership of record of shares
will not suffice but it must be shown that the legal and
beneficial ownership rests in the hands of Filipino citizens.
Consequently, in the case of petitioner PLDT, since it is already
admitted that the voting interests of foreigners which would
gain entry to petitioner PLDT by the acquisition of SMART
shares through the Questioned Transactions is equivalent to
82.99%, and the nominee arrangements between the foreign
principals and the Filipino owners is likewise admitted, there is,
therefore, a violation of Section 11, Article XII of the
Constitution.
 Parenthetically, the Opinions dated February 15, 1988 and
April 14, 1987 cited by the Trial Court to support the
proposition that the meaning of the word capital as used in
Section 11, Article XII of the Constitution allegedly refers to the
sum total of the shares subscribed and paid-in by the
shareholder and it allegedly is immaterial how the stock is
classified, whether as common or preferred, cannot stand in the
face of a clear legislative policy as stated in the FIA which took
effect in 1991 or way after said opinions were rendered, and as
clarified by the above-quoted Amendments. In this regard,
suffice it to state that as between the law and an opinion
rendered by an administrative agency, the law indubitably
prevails. Moreover, said Opinions are merely advisory and
cannot prevail over the clear intent of the framers of the
Constitution.
In the same vein, the SECs construction of Section 11, Article
XII of the Constitution is at best merely advisory for it is the
courts that finally determine what a law means.39
On the other hand, respondents therein, Antonio O. Cojuangco,
Manuel V. Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal B.
Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C.
Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando
B. Vea, argued that the term capital in Section 11, Article XII of the
Constitution includes preferred shares since the Constitution does not
distinguish among classes of stock, thus:
17. But even assuming that resort to the proceedings of the
16. The Constitution applies its foreign ownership limitation on
the corporations capital, without distinction as to classes of
shares. x x x
In this connection, the Corporation Code which was already in
force at the time the present (1987) Constitution was drafted
defined outstanding capital stock as follows:
Section 137. Outstanding capital stock defined. The term
outstanding capital stock, as used in this Code, means the total
shares of stock issued under binding subscription agreements
to subscribers or stockholders, whether or not fully or partially
paid, except treasury shares.
Section 137 of the Corporation Code also does not distinguish
between common and preferred shares, nor exclude either class
of shares, in determining the outstanding capital stock (the
capital) of a corporation. Consequently, petitioners suggestion
to reckon PLDTs foreign equity only on the basis of PLDTs
outstanding common shares is without legal basis. The
language of the Constitution should be understood in the sense
it has in common use.
xxxx
Constitutional Commission is necessary, there is nothing in the
Record of the Constitutional Commission (Vol. III) which
petitioner misleadingly cited in the Petition x x x which
 supports petitioners view that only common shares should form
the basis for computing a public utilitys foreign equity.
xxxx
18. In addition, the SEC the government agency primarily
responsible for implementing the Corporation Code, and which
also has the responsibility of ensuring compliance with the
Constitutions foreign equity restrictions as regards nationalized
activities x x x has categorically ruled that both common and
preferred shares are properly considered in determining
outstanding capital stock and the nationality composition
thereof.40
We agree with petitioner and petitioners-in-intervention. 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,41 and not to the total
outstanding capital stock comprising both common and non-voting
preferred shares.
The Corporation Code of the Philippines42 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.
Preferred shares of stock issued by any corporation may be
given preference in the distribution of the assets of the
corporation in case of liquidation and in the distribution of
dividends, or such other preferences as may be stated in the
articles of incorporation which are not violative of the provisions
of this Code: Provided, That preferred shares of stock may be
issued only with a stated par value. The Board of Directors,
where authorized in the articles of incorporation, may fix the
terms and conditions of preferred shares of stock or any series
thereof: Provided, That such terms and conditions shall be
effective upon the filing of a certificate thereof with the
Securities and Exchange Commission.
Shares of capital stock issued without par value shall be
deemed fully paid and non-assessable and the holder of such
shares shall not be liable to the corporation or to its creditors in
respect thereto: Provided; That shares without par value may
not be issued for a consideration less than the value of five
(P5.00) pesos per share: Provided, further, That the entire
consideration received by the corporation for its no-par value
shares shall be treated as capital and shall not be available for
distribution as dividends.
A corporation may, furthermore, classify its shares for the
purpose of insuring compliance with constitutional or legal
requirements.
Except as otherwise provided in the articles of incorporation
and stated in the certificate of stock, each share shall be equal
in all respects to every other share.
Where the articles of incorporation provide for non-voting
shares in the cases allowed by this Code, the holders of such
shares shall nevertheless be entitled to vote on the following
matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other
disposition of all or substantially all of the corporate
property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another
corporation or other corporations;
7. Investment of corporate funds in another corporation
or business in accordance with this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the
vote necessary to approve a particular corporate act as provided
in this Code shall be deemed to refer only to stocks with voting
rights.
Indisputably, one of the rights of a stockholder is the right to
participate in the control or management of the corporation.43 This is
exercised through his vote in the election of directors because it is the
board of directors that controls or manages the corporation.44 In the
absence of provisions in the articles of incorporation denying voting
rights to preferred shares, preferred shares have the same voting
rights as common shares. However, preferred shareholders are often
excluded from any control, that is, deprived of the right to vote in the
election of directors and on other matters, on the theory that the
preferred shareholders are merely investors in the corporation for
income in the same manner as bondholders.45 In fact, under the
Corporation Code only preferred or redeemable shares can be
deprived of the right to vote.46 Common shares cannot be deprived of
the right to vote in any corporate meeting, and any provision in the
articles of incorporation restricting the right of common shareholders
to vote is invalid.47
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.
This 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. As revealed in the deliberations of the
Constitutional Commission, capital refers to the voting stock
or controlling interest of a corporation, to wit:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated
local or Filipino equity and foreign equity; namely, 60-40 in
Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15.
With respect to an investment by one corporation in another
corporation, say, a corporation with 60-40 percent equity
invests in another corporation which is permitted by the
Corporation Code, does the Committee adopt the grandfather
rule?

MR. VILLEGAS. That is right.

MR. VILLEGAS. Yes, that is the understanding of the

Committee.
MR. NOLLEDO. In teaching law, we are always faced with this
question: Where do we base the equity requirement, is it on the
authorized capital stock, on the subscribed capital stock, or on
the paid-up capital stock of a corporation? Will the Committee MR. NOLLEDO. Therefore, we need additional Filipino capital?
please enlighten me on this?

MR. VILLEGAS. Yes.48

MR. VILLEGAS. We have just had a long discussion with the
members of the team from the UP Law Center who provided us
a draft. The phrase that is contained here which we adopted
from the UP draft is 60 percent of voting stock. xxxx

MR. AZCUNA. May I be clarified as to that portion that was

accepted by the Committee.
MR. NOLLEDO. That must be based on the subscribed capital
stock, because unless declared delinquent, unpaid capital stock
shall be entitled to vote.
MR. VILLEGAS. The portion accepted by the Committee is the
deletion of the phrase voting stock or controlling interest.

MR. VILLEGAS. That is right.

MR. AZCUNA. Hence, without the Davide amendment, the

committee report would read: corporations or associations at
MR. NOLLEDO. Thank you. least sixty percent of whose CAPITAL is owned by such citizens.

MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck
with 60 percent of the capital to be owned by citizens.
MR. VILLEGAS. That is right.
MR. AZCUNA. But the control can be with the foreigners
even if they are the minority. Let us say 40 percent of the
capital is owned by them, but it is the voting capital,
whereas, the Filipinos own the nonvoting shares. So we can
have a situation where the corporation is controlled by
foreigners despite being the minority because they have the
voting capital. That is the anomaly that would result here.
MR. BENGZON. No, the reason we eliminated the word stock
as stated in the 1973 and 1935 Constitutions is that
according to Commissioner Rodrigo, there are associations
that do not have stocks. That is why we say CAPITAL.
MR. AZCUNA. We should not eliminate the phrase
controlling interest.
MR. BENGZON. In the case of stock corporations, it is
assumed.49 (Emphasis supplied)
Thus, 60 percent of the capital assumes, or should result
in, controlling interest in the corporation. Reinforcing this
interpretation of the term capital, as referring to controlling interest or
shares entitled to vote, is the definition of a Philippine national in the
Foreign Investments Act of 1991,50 to wit:
SEC. 3. Definitions. - As used in this Act:
a. The term Philippine national shall mean a citizen of the
Philippines; or a domestic partnership or association wholly
owned by citizens of the Philippines; or a corporation
organized under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock
outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a corporation organized abroad
and registered as doing business in the Philippines under the
Corporation Code of which one hundred percent (100%) of the
capital stock outstanding and entitled to vote is wholly owned
by Filipinos or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent (60%) of the fund
will accrue to the benefit of Philippine nationals: Provided, That
where a corporation and its non-Filipino stockholders own
stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital
stock outstanding and entitled to vote of each of both
corporations must be owned and held by citizens of the
 Philippines and at least sixty percent (60%) of the members of
the Board of Directors of each of both corporations must be
citizens of the Philippines, in order that the corporation, shall
be considered a Philippine national. (Emphasis supplied)
In explaining the definition of a Philippine national, the Implementing
Rules and Regulations of the Foreign Investments Act of 1991 provide:
b. Philippine national shall mean a citizen of the Philippines or a
domestic partnership or association wholly owned by the
citizens of the Philippines; or a corporation organized under
the laws of the Philippines of which at least sixty percent
[60%] of the capital stock outstanding and entitled to vote
is owned and held by citizens of the Philippines; or a trustee
of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least
sixty percent [60%] of the fund will accrue to the benefit of the
Philippine nationals; Provided,that where a corporation its non-
Filipino stockholders own stocks in a Securities and Exchange
Commission [SEC] registered enterprise, at least sixty percent
[60%] of the capital stock outstanding and entitled to vote of
both corporations must be owned and held by citizens of the
Philippines and at least sixty percent [60%] of the members of
the Board of Directors of each of both corporation must be
citizens of the Philippines, in order that the corporation shall be
considered a Philippine national. The control test shall be
applied for this purpose.
Compliance with the required Filipino ownership of a
corporation shall be determined on the basis of outstanding
capital stock whether fully paid or not, but only such
stocks which are generally entitled to vote are considered.
For stocks to be deemed owned and held by Philippine
citizens or Philippine nationals, mere legal title is not
enough to meet the required Filipino equity. Full beneficial
ownership of the stocks, coupled with appropriate voting
rights is essential. Thus, stocks, the voting rights of which
have been assigned or transferred to aliens cannot be
considered held by Philippine citizens or Philippine
nationals.
Individuals or juridical entities not meeting the
aforementioned qualifications are considered as non-
Philippine nationals. (Emphasis supplied)
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[s].
Under Section 10, Article XII of the Constitution, Congress may
reserve to citizens of the Philippines or to corporations or associations
at least sixty per centum of whose capital is owned by such citizens, or
such higher percentage as Congress may prescribe, certain areas of
investments. Thus, in numerous laws Congress has reserved certain
areas of investments to Filipino citizens or to corporations at least
sixty percent of the capital of which is owned by Filipino citizens.
Some of these laws are: (1) Regulation of Award of Government
Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or
R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium
Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping
Development Act or R.A. No. 7471; (5) Domestic Shipping
Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology
Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage Decree
or P.D. No. 1521. Hence, the term capital in Section 11, Article XII of
the Constitution is also used in the same context in numerous
lawsreserving certain areas of investments to Filipino citizens.
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.
We shall illustrate the glaring anomaly in giving a broad definition to
the term capital. Let us assume that a corporation has 100 common
shares owned by foreigners and 1,000,000 non-voting preferred
shares owned by Filipinos, with both classes of share having a par
value of one peso (P1.00) per share. Under the broad definition of the
term capital, such corporation would be considered compliant with
the 40 percent constitutional limit on foreign equity of public utilities
since the overwhelming majority, or more than 99.999 percent, of the
total outstanding capital stock is Filipino owned. This is obviously
absurd.
In the example given, only the foreigners holding the common shares
have voting rights in the election of directors, even if they hold only
100 shares. The foreigners, with a minuscule equity of less than
0.001 percent, exercise control over the public utility. On the other
hand, the Filipinos, holding more than 99.999 percent of the equity,
cannot vote in the election of directors and hence, have no control
over the public utility. This starkly circumvents the intent of the
framers of the Constitution, as well as the clear language of the
Constitution, to place the control of public utilities in the hands of
Filipinos. It also renders illusory the State policy of an independent
national economy effectively controlled by Filipinos.
The example given is not theoretical but can be found in the real
world, and in fact exists in the present case.
Holders of PLDT preferred shares are explicitly denied of the right to
vote in the election of directors. PLDTs 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.51
On the other hand, holders of common shares are granted the
exclusive right to vote in the election of directors. PLDTs Articles of
Incorporation52 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.53
In short, only holders of common shares can vote in the election of
directors, meaning only common shareholders exercise control over
PLDT. Conversely, holders of preferred shares, who have no voting
rights in the election of directors, do not have any control over PLDT.
In fact, under PLDTs Articles of Incorporation, holders of common
shares have voting rights for all purposes, while holders of preferred
shares have no voting right for any purpose whatsoever.
It must be stressed, and respondents do not dispute, that foreigners
hold a majority of the common shares of PLDT. In fact, based on
PLDTs 2010 General Information Sheet (GIS),54which is a document
required to be submitted annually to the Securities and Exchange
Commission,55 foreigners hold 120,046,690 common shares of PLDT
whereas Filipinos hold only 66,750,622 common shares.56 In other
words, foreigners hold 64.27% of the total number of PLDTs 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.
Moreover, the Dividend Declarations of PLDT for 2009,57 as submitted
to the SEC, shows that per share the SIP58 preferred shares earn a
pittance in dividends compared to the common shares. PLDT declared
dividends for the common shares at P70.00 per share, while the
declared dividends for the preferred shares amounted to a
measly P1.00 per share.59 So the preferred shares not only cannot
vote in the election of directors, they also have very little and
obviously negligible dividend earning capacity compared to common
shares.
As shown in PLDTs 2010 GIS,60 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.61 Worse, preferred shares constitute 77.85% of the authorized
capital stock of PLDT while common shares constitute only
22.15%.62 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.
The legal and beneficial ownership of 60 percent of the outstanding
capital stock must rest in the hands of Filipinos in accordance with
the constitutional mandate. Full beneficial ownership of 60 percent of
the outstanding capital stock, coupled with 60 percent of the voting
rights, is constitutionally required for the States grant of authority to
operate a public utility. The undisputed fact that the PLDT preferred
shares, 99.44% owned by Filipinos, are non-voting and earn only
1/70 of the dividends that PLDT common shares earn, grossly violates
the constitutional requirement of 60 percent Filipino control and
Filipino beneficial ownership of 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 xcorporations 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 PLDTs 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;63 (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.
Incidentally, the fact that PLDT common shares with a par value
of P5.00 have a current stock market value of P2,328.00 per
share,64 while PLDT preferred shares with a par value of P10.00 per
share have a current stock market value ranging from only P10.92
to P11.06 per share,65 is a glaring confirmation by the market that
control and beneficial ownership of PLDT rest with the common
shares, not with the preferred shares.
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, a
self-reliant and independent national economy effectively controlled by
Filipinos.
Section 11, Article XII of the Constitution, like other provisions of the
Constitution expressly reserving to Filipinos specific areas of
investment, such as the development of natural resources and
ownership of land, educational institutions and advertising business,
is self-executing. There is no need for legislation to implement these
self-executing provisions of the Constitution. The rationale why these
constitutional provisions are self-executing was explained in Manila
Prince Hotel v. GSIS,66 thus:
x x x Hence, unless it is expressly provided that a legislative act
is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are
self-executing. If the constitutional provisions are treated as
requiring legislation instead of self-executing, the legislature
would have the power to ignore and practically nullify the
mandate of the fundamental law. This can be cataclysmic. That
is why the prevailing view is, as it has always been, that
. . . in case of doubt, the Constitution should be considered self-
executing rather than non-self-executing. . . . Unless the
contrary is clearly intended, the provisions of the
Constitution should be considered self-executing, as a
contrary rule would give the legislature discretion to
determine when, or whether, they shall be effective. These
provisions would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by simply
refusing to pass the needed implementing statute. (Emphasis
supplied)
In Manila Prince Hotel, even the Dissenting Opinion of then Associate
Justice Reynato S. Puno, later Chief Justice, agreed that
constitutional provisions are presumed to be self-executing. Justice
Puno stated:
Courts as a rule consider the provisions of the Constitution as
self-executing, rather than as requiring future legislation for
their enforcement. The reason is not difficult to discern. For if
they are not treated as self-executing, the mandate of the
fundamental law ratified by the sovereign people can be
easily ignored and nullified by Congress. Suffused with
wisdom of the ages is the unyielding rule that legislative
actions may give breath to constitutional rights but
congressional inaction should not suffocate them.
Thus, we have treated as self-executing the provisions in the
Bill of Rights on arrests, searches and seizures, the rights of a
person under custodial investigation, the rights of an accused,
and the privilege against self-incrimination. It is recognized that
legislation is unnecessary to enable courts to effectuate
constitutional provisions guaranteeing the fundamental rights
of life, liberty and the protection of property. The same
treatment is accorded to constitutional provisions forbidding the
taking or damaging of property for public use without just
compensation. (Emphasis supplied)
Thus, in numerous cases,67 this Court, even in the absence of
implementing legislation, applied directly the provisions of the 1935,
1973 and 1987 Constitutions limiting land ownership to Filipinos.
In Soriano v. Ong Hoo,68 this Court ruled:
x x x As the Constitution is silent as to the effects or
consequences of a sale by a citizen of his land to an alien, and
as both the citizen and the alien have violated the law, none of
them should have a recourse against the other, and it should
only be the State that should be allowed to intervene and
determine what is to be done with the property subject of the
violation. We have said that what the State should do or could
do in such matters is a matter of public policy, entirely beyond
the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun
Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the
legislature has not definitely decided what policy should be
followed in cases of violations against the constitutional
prohibition, courts of justice cannot go beyond by declaring
the disposition to be null and void as violative of the
Constitution. x x x (Emphasis supplied)
To treat Section 11, Article XII of the Constitution as not self-
executing would mean that since the 1935 Constitution, or over the
last 75 years, not one of the constitutional provisions expressly
reserving specific areas of investments to corporations, at least 60
percent of the capital of which is owned by Filipinos, was enforceable.
In short, the framers of the 1935, 1973 and 1987 Constitutions
miserably failed to effectively reserve to Filipinos specific areas of
investment, like the operation by corporations of public utilities, the
exploitation by corporations of mineral resources, the ownership by
corporations of real estate, and the ownership of educational
institutions. All the legislatures that convened since 1935 also
miserably failed to enact legislations to implement these vital
constitutional provisions that determine who will effectively control
the national economy, Filipinos or foreigners. This Court cannot allow
such an absurd interpretation of the Constitution.
This Court has held that the SEC has both regulatory and
adjudicative functions.69 Under its regulatory functions, the SEC can
be compelled by mandamus to perform its statutory duty when it
unlawfully neglects to perform the same. Under its adjudicative or
quasi-judicial functions, the SEC can be also be compelled by
mandamus to hear and decide a possible violation of any law it
administers or enforces when it is mandated by law to investigate
such violation.
Under Section 17(4)70 of the Corporation Code, the SEC has the
regulatory function to reject or disapprove the Articles of
Incorporation of any corporation where the required percentage of
ownership of the capital stock to be owned by citizens of the
Philippines has not been complied with as required by existing
laws or the Constitution. Thus, the SEC is the government agency
tasked with the statutory duty to enforce the nationality requirement
prescribed in Section 11, Article XII of the Constitution on the
ownership of public utilities. This Court, in a petition for declaratory
relief that is treated as a petition for mandamus as in the present
case, can direct the SEC to perform its statutory duty under the law,
a duty that the SEC has apparently unlawfully neglected to
do based on the 2010 GIS that respondent PLDT submitted to the
SEC.
compliance with the laws and regulations that SEC administers or
enforces. The GIS that all corporations are required to submit to SEC
annually should put the SEC on guard against violations of the
nationality requirement prescribed in the Constitution and existing
laws. This Court can compel the SEC, in a petition for declaratory
relief that is treated as a petition for mandamus as in the present
case, to hear and decide a possible violation of Section 11, Article XII
of the Constitution in view of the ownership structure of PLDTs voting
shares, as admitted by respondents and as stated in PLDTs 2010 GIS
that PLDT submitted to SEC.
WHEREFORE, we PARTLY GRANT the petition 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).
Respondent Chairperson of the Securities and Exchange Commission
is DIRECTED to apply this 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.
SO ORDERED.

Under Section 5(m) of the Securities Regulation Code,71 the SEC is

vested with the power and function to suspend or revoke, after
proper notice and hearing, the franchise or certificate of
registration of corporations, partnerships or associations, upon
any of the grounds provided by law. The SEC is mandated under
Section 5(d) of the same Code with the power and function
to investigate x x x the activities of persons to ensure
 Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION

VIVIAN T. RAMIREZ, ALBERTO B. G.R. No. 168208

DIGNO, DANILO M. CASQUITE,
JUMADIYA A. KADIL, FAUJIA SALIH, Present:
ANTONIO FABIAN, ROMEL DANAG, GINA
PANTASAN, ARTHUR MATUGAS,
VIRGILIA OSARIO, ORLANDO EBRADA, CARPIO, J., Chairperson,
ROSANA CABATO, WILFREDO LUNA, BRION,
LILIA BARREDO, ISABEL ALBERTO, PEREZ,
NORA BONIAO, PILAR OSARIO, LYDIA SERENO, and
ESLIT, AMMAN SALI, AKMAD AKIL, REYES, JJ.
ROGELIO LAZARO, ISABEL
CONCILLADO, MARLON ABIAL,
HERMOCILLO NAPALCRUZ, WALTER Promulgated:
BUHIAN, ELISEO AMATORIO, JOSE
CASTRO, JAMIL LAGBAY, MA. EVELYN June 13, 2012
SANTOS, LEDENIA T. BARON, ELSA
AMATORIO, SARAH F. BUCOY,
EXPEDITO L. RELUYA, ARNULFO
ALFARO, EDGARDO F. BORGONIA,
DANILO R. MANINGO, ABDUSAID H. MARILYN RUFINO, JOSE AGUSTIN,
DAMBONG, LORINDA M. MUTIA, EFREN RIVERA, CRISALDO VALERO,
DOMINADOR DEL ROSARIO, JOEL E. SAFIA HANDANG, LUCENA R. MEDINA,
TRONO, HUSSIN A. JAWAJI, JUL-ASNAM DANNY BOY B. PANGASIAN, ABDURASA
JAKARIA, LUZVIMINDA A. NOLASCO, HASIL, ROEL ALTA, JOBERT BELTRAN,
VILMA G. GASCO, MORITA S. MARMETO, EDNA FAUSTO, TAJMAHAR HADJULA,
PROCESA JUANICO, ANTONIO A. ELENA MAGHANOY, ERIC B. QUITIOL,
MONDRAGON, JR., JESSICA F. JESSE D. FLORES, GEMMA CANILLAS,
QUIACHON, PACITA G. MEDINA, ARNEL ERNITO CANILLAS, MARILOU JAVIER,
S. SANTOS, ANECITA T. TARAS, MARGANI MADDIN, RICHARD SENA, FE
TOMINDAO T. TARAS, NULCA C. D. CANOY, GEORGE SALUD, EDGARDO
SABDANI, AKMAD A. SABDANI, ROWENA BORGONIA, JR., ANTONIO ATILANO,
J. GARCIA, LINA P. CASAS, MARLYN G. JOSE CASTRO, and LIBERATO
FRANCISCO, MERCEDITA MAQUINANO, BAGALANON,
NICOLAS T. RIO, TERESITA A. CASINAS, Petitioners,
VIRGILIO F. IB-IB, PANTALEON S.
ROJAS, JR., EVELYN V. BEATINGO, - versus -
MATILDE G. HUSSIN, ESPERANZA I.
LLEDO, ADOLFINA DELA MERCED, MAR FISHING CO., INC., MIRAMAR
LAURA E. SANTOS, ROGACIANA FISHING CO., INC., ROBERT BUEHS AND
MAQUILING, ALELIE D. SAMSON, JEROME SPITZ.
SHIRLEY L. ALVAREZ, MAGDALENA A. Respondents.
MARCOS, VIRGINIA S. ESPINOSA, x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ANTONIO C. GUEVARA, AUGUSTA S. DE - - - -x
JESUS, SERVILLA A. BANCALE, DECISION
PROSERFINA GATINAO, RASMA A.
FABRIGA, ROLANDO D. GATINAO,
ANALISA G. MEA, SARAH A. SALCEDO, SERENO, J.:
ALICIA M. JAYAG, FERNANDO G.
CABEROY, ROMEO R. PONCE, EDNA S.
PONCE, TEODORA T. LUY, WALDERICO Before this Court is a Petition for Review on Certiorari under Rule
F. ARIO, MELCHOR S. BUCOY, EDITA H. 45 of the Revised Rules of Court, seeking a review of the Court of
CINCO, RUDY I. LIMBAROC, PETER Appeals (CA) 19 March 2004 and 12 May 2005 Resolutions in CA-G.R.
MONTOJO, MARLYN S. ATILANO, SP NO. 82651. The appellate court had dismissed the Petition for
REGIDOR MEDALLO, EDWIN O.
Review on the ground that it lacked a Verification and Certification
DEMASUAY, DENNIS M. SUICANO,
ROSALINA Q. ATILANO, ESTRELLA against forum shopping.
FELICIANO, IMELDA T. DAGALEA,
 The pertinent facts are as follows: addition, even if Mar Fishing reneged on notifying the DOLE within 30
days prior to its closure, that failure did not make the dismissals void.
On 28 June 2001, respondent Mar Fishing Co., Inc. (Mar Consequently, the LA ordered Mar Fishing to give separation pay to its
Fishing), engaged in the business of fishing and canning of tuna, sold workers.[10]
its principal assets to co-respondent Miramar Fishing Co., Inc.
(Miramar) through public bidding.[1] The proceeds of the sale were paid The LA held thus:[11]
to the Trade and Investment Corporation of the Philippines (TIDCORP)
to cover Mar Fishings outstanding obligation in the amount of WHEREFORE, in view of the foregoing
₱897,560,041.26.[2] In view of that transfer, Mar Fishing issued a considerations, judgment is hereby rendered in these
Memorandum dated 23 October 2001 informing all its workers that the cases:
company would cease to operate by the end of the month.[3] On 29
1. Ordering Mar Fishing Company, Inc.,
October 2001 or merely two days prior to the months end, it notified through its president, treasurer, manager or
the Department of Labor and Employment (DOLE) of the closure of its other proper officer or representative, to pay
business operations.[4] the complainants their respective separation
pay, as computed in page 12 to 33 hereof, all
totaling SIX MILLION THREE HUNDRED
Thereafter, Mar Fishings labor union, Mar Fishing Workers
THIRTY SIX THOUSAND FIVE HUNDRED
Union NFL and Miramar entered into a Memorandum of EIGHTY SEVEN & 77/100 PESOS
Agreement.[5] The Agreement provided that the acquiring company, (₱6,336,587.77);
Miramar, shall absorb Mar Fishings regular rank and file employees
whose performance was satisfactory, without loss of seniority rights 2. Dismissing these case [sic] as against
and privileges previously enjoyed.[6] Miramar Fishing Company, Inc., as well as
against Robert Buehs and Jerome Spitz, for
lack of cause of action;
Unfortunately, petitioners, who worked as rank and file
employees, were not hired or given separation pay by Miramar.[7] Thus, 3. Dismissing all other charges and
petitioners filed Complaints for illegal dismissal with money claims claims of the complainants, for lack of merit.
before the Arbitration Branch of the National Labor Relations
Commission (NLRC). SO ORDERED.

In its 30 July 2002 Decision, the Labor Arbiter (LA) found that
Mar Fishing had necessarily closed its operations, considering that Aggrieved, petitioners pursued the action before the NLRC, which
Miramar had already bought the tuna canning plant.[8] By reason of the modified the LAs Decision. Noting that Mar Fishing notified the DOLE
closure, petitioners were legally dismissed for authorized cause.[9] In only two days before the business closed, the labor court considered
petitioners dismissal as ineffectual.[12] Hence, it awarded, apart from
separation pay, full back wages to petitioners from the time they were
terminated on 31 October 2001 until the date when the LA upheld the
validity of their dismissal on 30 July 2002.[13]
Additionally, the NLRC pierced the veil of corporate fiction and
ruled that Mar Fishing and Miramar were one and the same entity,
since their officers were the same.[14]Hence, both companies were
ordered to solidarily pay the monetary claims.[15]
On reconsideration, the NLRC modified its ruling by imposing
liability only on Mar Fishing. The labor court held that petitioners had
no cause of action against Miramar, since labor contracts cannot be
enforced against the transferee of an enterprise in the absence of a
stipulation in the contract that the transferee assumes the obligation
of the transferor.[16] Hence, the dispositive portion reads:[17]
WHEREFORE, foregoing premises considered, the
assailed resolution is MODIFIED in that only Mar Fishing
Company, Inc. through its responsible officers, is ordered
to pay complainants their separation pay, and full
backwages from the date they were terminated from
employment until 30 July 2002, subject to computation
during execution stage of proceedings at the appropriate
Regional Arbitration Branch.
SO ORDERED.
Despite the award of separation pay and back wages, petitioners
filed a Rule 65 Petition before the CA. This time, they argued that both
Mar Fishing and Miramar should be made liable for their separation
pay, and that their back wages should be up to the time of their actual
reinstatement. However, finding that only 3 of the 228
petitioners[18]signed the Verification and Certification against forum
shopping, the CA instantly dismissed the action for certiorari against
the 225 other petitioners without ruling on the substantive aspects of
the case.[19]
By means of a Manifestation with Omnibus Motion,[20] petitioners
submitted a Verification and Certification against forum shopping
executed by 161 signatories. In the said pleading, petitioners asked the
CA to reconsider by invoking the rule that technical rules do not strictly
apply to labor cases.[21] Still, the CA denied petitioners contentions and
held thus:[22]
Anent the liberality in application of the rules, as
alleged by petitioners, the same deserves scant
consideration. x x x.
xxx. While litigation is not a game of technicalities,
and that the rules of procedure should not be enforced
strictly at the cost of substantial justice, still it does not
follow that the Rules of Court may be ignored at will and
at random to the prejudice of the orderly presentation,
assessment and just resolution of the issues. xxx.
Before this Court, 124 petitioners raise the issue of whether the
CA gravely erred in dismissing their Petition for Review on the ground
that their pleading lacked a Verification and Certification against forum
shopping.[23]
The Rules of Court provide that a petition for certiorari must be
verified and accompanied by a sworn certification of non-forum
shopping.[24] Failure to comply with these mandatory requirements
shall be sufficient ground for the dismissal of the
petition.[25] Considering that only 3 of the 228 named petitioners signed
the requirement, the CA dismissed the case against them, as they did
not execute a Verification and Certification against forum shopping.
Petitioners invoke substantial compliance with procedural rules
when their Manifestation already contains a Verification and
Certification against forum shopping executed by 161 signatories. They
heavily rely on Jaro v. Court of Appeals,[26] citing Piglas-Kamao v.
National Labor Relations Commission and Cusi-Hernandez v. Diaz, in
which we discussed that the subsequent submission of the missing
documentary attachments with the Motion for Reconsideration
amounted to substantial compliance.
However, this very case does not involve a failure to attach the
Annexes. Rather, the procedural infirmity consists of omission the
failure to sign a Verification and Certification against forum shopping.
Addressing this defect squarely, we have already resolved that because
of noncompliance with the requirements governing the certification of
non-forum shopping, no error could be validly attributed to the CA
when it ordered the dismissal of the special civil action for
certiorari.[27] The lack of certification against forum shopping is not
curable by mere amendment of a complaint, but shall be a cause for
the dismissal of the case without prejudice.[28] Indeed, the general rule
is that subsequent compliance with the requirements will not
excuse a party's failure to comply in the first instance.[29] Thus, on
procedural aspects, the appellate court correctly dismissed the case.
However, this Court has recognized that the merit of a case is a
special circumstance or compelling reason that justifies the relaxation
of the rule requiring verification and certification of non-forum
shopping.[30] In order to fully resolve the issue, it is thus necessary to
determine whether technical rules were brushed aside at the expense
of substantial justice.[31] This Court will then delve into the issue on (1)
the solidary liability of Mar Fishing and Miramar to pay petitioners
monetary claims and (2) the reckoning period for the award of back
wages.
For a dismissal based on the closure of business to be valid, three
(3) requirements must be established. Firstly, the cessation of or
withdrawal from business operations must be bona fide in character.
Secondly, there must be payment to the employees of termination pay
amounting to at least one-half (1/2) month pay for each year of service,
or one (1) month pay, whichever is higher. Thirdly, the company must
serve a written notice on the employees and on the DOLE at least one
(1) month before the intended termination.[32]
In their Petition for Review on Certiorari, petitioners did not
dispute the conclusion of the LA and the NLRC that Mar Fishing had
an authorized cause to dismiss its workers. Neither did petitioners
challenge the computation of their separation pay.
Rather, they questioned the holding that only Mar Fishing was
liable for their monetary claims.[33]
Basing their conclusion on the Memorandum of Agreement and
Supplemental Agreement between Miramar and Mar Fishings labor
union, as well as the General Information Sheets and Company Profiles
of the two companies, petitioners assert that Miramar simply took over
the operations of Mar Fishing. In addition, they assert that these
companies are one and the same entity, given the commonality of their
directors and the similarity of their business venture in tuna canning
plant operations.[34]
At the fore, the question of whether one corporation is merely an
alter ego of another is purely one of fact generally beyond the
jurisdiction of this Court.[35] In any case, given only these bare
reiterations, this Court sustains the ruling of the LA as affirmed by the
NLRC that Miramar and Mar Fishing are separate and distinct entities,
based on the marked differences in their stock ownership.[36] Also, the
fact that Mar Fishings officers remained as such in Miramar does not
by itself warrant a conclusion that the two companies are one and the
same. As this Court held in Sesbreo v. Court of Appeals, the mere
showing that the corporations had a common director sitting in all the
boards without more does not authorize disregarding their separate
juridical personalities.[37]
Neither can the veil of corporate fiction between the two
companies be pierced by the rest of petitioners submissions, namely,
the alleged take-over by Miramar of Mar Fishings operations and the
evident similarity of their businesses. At this point, it bears
emphasizing that since piercing the veil of corporate fiction is frowned
upon, those who seek to pierce the veil must clearly establish that the
separate and distinct personalities of the corporations are set up to
justify a wrong, protect a fraud, or perpetrate a deception.[38] This,
unfortunately, petitioners have failed to do. In Indophil Textile Mill
Workers Union vs. Calica, we ruled thus:[39]
In the case at bar, petitioner seeks to pierce the veil
of corporate entity of Acrylic, alleging that the creation of
the corporation is a devi[c]e to evade the application of the
CBA between petitioner Union and private respondent
company. While we do not discount the possibility of the
similarities of the businesses of private respondent and
Acrylic, neither are we inclined to apply the doctrine
invoked by petitioner in granting the relief sought. The
fact that the businesses of private respondent and
Acrylic are related, that some of the employees of the
private respondent are the same persons manning and
providing for auxiliary services to the units of Acrylic,
and that the physical plants, offices and facilities are
situated in the same compound, it is our considered
opinion that these facts are not sufficient to justify
the piercing of the corporate veil of Acrylic. (Emphasis
supplied.)
Having been found by the trial courts to be a separate entity, Mar
Fishing and not Miramar is required to compensate petitioners. Indeed,
the back wages and retirement pay earned from the former employer
cannot be filed against the new owners or operators of an enterprise.[40]
Evidently, the assertions of petitioners fail on both procedural
and substantive aspects. Therefore, no special reasons exist to reverse
the CAs dismissal of the case due to their failure to abide by the
mandatory procedure for filing a petition for review on certiorari. Given
the correctness of the appellate courts ruling and the lack of
appropriate remedies, this Court will no longer dwell on the exact
computation of petitioners claims for back wages, which have been
sufficiently threshed out by the LA and the NLRC. Judicial review of
labor cases does not go beyond an evaluation of the sufficiency of the
evidence upon which labor officials' findings rest.[41]
While we sympathize with the situation of the workers in this
case, we cannot disregard, absent compelling reasons, the factual
determinations and the legal doctrines that support the findings of the
courts a quo. Generally, the findings of fact and the conclusion of the
labor courts are not only accorded great weight and respect, but are
even clothed with finality and deemed binding on this Court, as long as
they are supported by substantial evidence.[42]
On a final note, this Court reminds the parties seeking the
ultimate relief of certiorari to observe the rules, since nonobservance
thereof cannot be brushed aside as a mere technicality.[43] Procedural ABAD, and
rules are not to be belittled or simply disregarded, for these prescribed _____________,** JJ.
procedures ensure an orderly and speedy administration of justice.[44]

IN VIEW THEREOF, the assailed 19 March 2004 and 12 May DIOSDADO GARCIA, LUISITO GARCIA,
2005 Resolutions of the Court of Appeals in CA-GR SP NO. 82651 RODANTE ROMERO, REX BARTOLOME,
Promulgated:
are AFFIRMED. Hence, the 04 July 2005 Petition for Review filed by FELICIANO GASCO, JR., DANILO ROJO,
EDGAR SANFUEGO, AMADO GALANTO,
petitioners is hereby DENIED for lack of merit. SO ORDERED.
EUTIQUIO LUGTU, JOEL GRAMATICA,
MIEL CERVANTES, TERESITA CABANES,
ROE DELA CRUZ, RICHELO BALIDOY,
VILMA PORRAS, MIGUELITO SALCEDO,
CRISTINA GARCIA, MARIO NAZARENO, January 12, 2011
Republic of the Philippines
DINDO TORRES, ESMAEL RAMBOYONG,
Supreme Court ROBETO*MANO, ROGELIO BAGAWISAN,
ARIEL SNACHEZ, ESTAQULO VILLAREAL,
Manila
NELSON MONTERO, GLORIA ORANTE,
HARRY TOCA, PABLITO MACASAET and
RONALD GARCITA
Respondents.
SECOND DIVISION
x-----------------------------------------------------------------------------------------x

PRINCE TRANSPORT, INC. and MR. G.R. No. 167291

RENATO CLAROS, DECISION

Petitioners,
Present:
PERALTA, J.:

CARPIO, J., Chairperson,

Before the Court is a petition for review on certiorari under Rule 45 of
NACHURA,
- versus - the Rules of Court praying for the annulment of the Decision[1] and
PERALTA, Resolution[2] of the Court of Appeals (CA) dated December 20,
2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953.
The assailed Decision reversed and set aside the Resolutions dated May
30, 2003[3] and September 26, 2003[4] of the National Labor Relations
Commission (NLRC) in CA No. 029059-01, while the disputed
Resolution denied petitioners' Motion for Reconsideration.
The present petition arose from various complaints filed by herein
respondents charging petitioners with illegal dismissal, unfair labor
practice and illegal deductions and praying for the award of premium
pay for holiday and rest day, holiday pay, service leave pay, 13th month
pay, moral and exemplary damages and attorney's fees.
Respondents alleged in their respective position papers and other
related pleadings that they were employees of Prince Transport, Inc.
(PTI), a company engaged in the business of transporting passengers
by land; respondents were hired either as drivers, conductors,
mechanics or inspectors, except for respondent Diosdado Garcia
(Garcia), who was assigned as Operations Manager; in addition to their
regular monthly income, respondents also received commissions
equivalent to 8 to 10% of their wages; sometime in October 1997, the
said commissions were reduced to 7 to 9%; this led respondents and
other employees of PTI to hold a series of meetings to discuss the
protection of their interests as employees; these meetings led petitioner
Renato Claros, who is the president of PTI, to suspect that respondents
are about to form a union; he made known to Garcia his objection to
the formation of a union; in December 1997, PTI employees requested
for a cash advance, but the same was denied by management which
resulted in demoralization on the employees' ranks; later, PTI acceded
to the request of some, but not all, of the employees; the foregoing
circumstances led respondents to form a union for their mutual aid and
protection; in order to block the continued formation of the union, PTI
caused the transfer of all union members and sympathizers to one of
its sub-companies, Lubas Transport (Lubas); despite such transfer, the
schedule of drivers and conductors, as well as their company
identification cards, were issued by PTI; the daily time records, tickets
and reports of the respondents were also filed at the PTI office; and, all
claims for salaries were transacted at the same office; later, the
business of Lubas deteriorated because of the refusal of PTI to maintain
and repair the units being used therein, which resulted in the virtual
stoppage of its operations and respondents' loss of employment.
Petitioners, on the other hand, denied the material allegations of the
complaints contending that herein respondents were no longer their
employees, since they all transferred to Lubas at their own
request; petitioners have nothing to do with the management and
operations of Lubas as well as the control and supervision of the latter's
employees;petitioners were not aware of the existence of any union in
their company and came to know of the same only in June 1998 when
they were served a copy of the summons in the petition for certification
election filed by the union; that before the union was registered on April
15, 1998, the complaint subject of the present petition was already
filed; that the real motive in the filing of the complaints was because
PTI asked respondents to vacate the bunkhouse where they
(respondents) and their respective families were staying because PTI
wanted to renovate the same.
Subsequently, the complaints filed by respondents were consolidated.
On October 25, 2000, the Labor Arbiter rendered a Decision,[5] the
dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the complaints for Unfair Labor
Practice, non-payment of holiday pay and holiday
premium, service incentive leave pay and 13th month pay;
Dismissing the complaint of Edgardo Belda for
refund of boundary-hulog;
2. Dismissing the complaint for illegal dismissal
against the respondents Prince Transport, Inc. and/or
Prince Transport Phils. Corporation, Roberto
Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy,
Mario Feranil and Peter Buentiempo;
3. Declaring that the complainants named below
are illegally dismissed by Lubas Transport; ordering said
Lubas Transport to pay backwages and separation pay in
lieu of reinstatement in the following amount:
Complainants Backwages Separation Pay
(1) Diosdado Garcia P222,348.70 P79,456.00
(2) Feliciano Gasco, Jr. 203,350.00 54,600.00
(3) Pablito Macasaet 145,250.00 13,000.00
(4) Esmael Ramboyong 221,500.00 30,000.00
(5) Joel Gramatica 221,500.00 60,000.00
(6) Amado Galanto 130,725.00 29,250.00
(7) Miel Cervantes 265,800.00 60,000.00
(8) Roberto Mano 221,500.00 50,000.00
(9) Roe dela Cruz 265,800.00 60,000.00
(10) Richelo Balidoy 130,725.00 29,250.00
(11) Vilma Porras 221,500.00 70,000.00
(12) Miguelito Salcedo 265,800.00 60,000.00
(13) Cristina Garcia 130,725.00 35,100.00
(14) Luisito Garcia 145,250.00 19,500.00
(15) Rogelio Bagawisan 265,800.00 60,000.00
(16) Rodante H. Romero 221,500.00 60,000.00
(17) Dindo Torres 265,800.00 50,000.00
(18) Edgar Sanfuego 221,500.00 40,000.00
(19) Ronald Gacita 221,500.00 40,000.00
(20) Harry Toca 174,300.00 23,400.00
(21) Amado Galanto 130,725.00 17,550.00
(22) Teresita Cabaes 130,725.00 17,550.00
(23) Rex Bartolome 301,500.00 30,000.00
(24) Mario Nazareno 221,500.00 30,000.00
(25) Eustaquio Villareal 145,250.00 19,500.00
(26) Ariel Sanchez 265,800.00 60,000.00
(27) Gloria Orante 263,100.00 60,000.00
(28) Nelson Montero 264,600.00 60,000.00
(29) Rizal Beato 295,000.00 40,000.00
(30) Eutiquio Lugtu 354,000.00 48,000.00
(31) Warlito Dickensomn 295,000.00 40,000.00
(32) Edgardo Belda 354,000.00 84,000.00
(33) Tita Go 295,000.00 70,000.00
(34) Alex Lodor 295,000.00 50,000.00
(35) Glenda Arguilles 295,000.00 40,000.00
(36) Erwin Luces 354,000.00 48,000.00
(37) Jesse Celle 354,000.00 48,000.00
(38) Roy Adorable 295,000.00 40,000.00
(39) Marlon Bangcoro 295,000.00 40,000.00
(40)Edgardo Bangcoro 354,000.00 36,000.00
4. Ordering Lubas Transport to pay attorney's
fees equivalent to ten (10%) of the total monetary award;
and
6. Ordering the dismissal of the claim for moral and
exemplary damages for lack merit.
SO ORDERED.[6]
The Labor Arbiter ruled that petitioners are not guilty of unfair labor
practice in the absence of evidence to show that they violated
respondents right to self-organization. The Labor Arbiter also held that
Lubas is the respondents employer and that it (Lubas) is an entity
which is separate, distinct and independent from PTI. Nonetheless, the
Labor Arbiter found that Lubas is guilty of illegally dismissing
respondents from their employment.
Respondents filed a Partial Appeal with the NLRC praying, among
others, that PTI should also be held equally liable as Lubas.
In a Resolution dated May 30, 2003, the NLRC modified the Decision of
the Labor Arbiter and disposed as follows:
WHEREFORE, premises considered, the appeal is
hereby PARTIALLY GRANTED. Accordingly, the Decision
appealed from is SUSTAINED subject to the modification
that Complainant-Appellant Edgardo Belda deserves
refund of his boundary-hulog in the amount
of P446,862.00; and that Complainants-Appellants Danilo
Rojo and Danilo Laurel should be included in the
computation of Complainants-Appellants claim as follows:
Complainants Backwages Separation Pay
41. Danilo Rojo P355,560.00 P48,000.00
42. Danilo Laurel P357,960.00 P72,000.00
As regards all other aspects, the Decision appealed from
is SUSTAINED.
SO ORDERED.[7]
Respondents filed a Motion for Reconsideration, but the NLRC denied
it in its Resolution[8] dated September 26, 2003.
Respondents then filed a special civil action for certiorari with the CA
assailing the Decision and Resolution of the NLRC.
On December 20, 2004, the CA rendered the herein assailed Decision
which granted respondents' petition. The CA ruled that petitioners are
guilty of unfair labor practice; that Lubas is a mere instrumentality,
agent conduit or adjunct of PTI; and that petitioners act of transferring
respondents employment to Lubas is indicative of their intent to
frustrate the efforts of respondents to organize themselves into a union.
Accordingly, the CA disposed of the case as follows:
WHEREFORE, the Petition for Certiorari is hereby
GRANTED. Accordingly, the subject decision is hereby
REVERSED and SET ASIDE and another one ENTERED
finding the respondents guilty of unfair labor practice and
ordering them to reinstate the petitioners to their former
positions without loss of seniority rights and with full
backwages.
With respect to the portion ordering the inclusion of Danilo
Rojo and Danilo Laurel in the computation of petitioner's
claim for backwages and with respect to the portion
ordering the refund of Edgardo Belda's boundary-hulog in
the amount of P446,862.00, the NLRC decision is affirmed
and maintained.
SO ORDERED.[9]
Petitioners filed a Motion for Reconsideration, but the CA denied
it via its Resolution[10] dated February 24, 2005.
Hence, the instant petition for review on certiorari based on the
following grounds:
A Petitioners assert that factual findings of agencies exercising quasi-
THE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION IN GIVING DUE COURSE TO THE
RESPONDENTS' PETITION FOR CERTIORARI
1. THE COURT OF APPEALS SHOULD HAVE
RESPECTED THE FINDINGS OF THE LABOR
ARBITER AND AFFIRMED BY THE NLRC
2. ONLY ONE PETITIONER EXECUTED AND
VERIFIED THE PETITION
3. THE COURT OF APPEALS SHOULD NOT HAVE
GIVEN DUE COURSE TO THE PETITION WITH
RESPECT TO RESPONDENTS REX BARTOLOME,
FELICIANO GASCO, DANILO ROJO, EUTIQUIO
LUGTU, AND NELSON MONTERO AS THEY FAILED
TO FILE AN APPEAL TO THE NLRC
B CA.
THE COURT OF APPEALS SERIOUSLY ERRED IN
DECLARING THAT PETITIONERS PRINCE TRANSPORT,
INC. AND MR. RENATO CLAROS AND LUBAS TRANSPORT
ARE ONE AND THE SAME CORPORATION AND THUS,
LIABLE IN SOLIDUM TO RESPONDENTS.
C
THE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION IN ORDERING THE REINSTATEMENT OF
RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT
IS NOT ONE OF THE ISSUES RAISED IN RESPONDENTS'
PETITION FOR CERTIORARI.[11]
judicial functions like the NLRC are accorded not only respect but even
finality; that the CA should have outrightly dismissed the petition filed
before it because in certiorari proceedings under Rule 65 of the Rules
of Court it is not within the province of the CA to evaluate the
sufficiency of evidence upon which the NLRC based its determination,
the inquiry being limited essentially to whether or not said tribunal has
acted without or in excess of its jurisdiction or with grave abuse of
discretion. Petitioners assert that the CA can only pass upon the factual
findings of the NLRC if they are not supported by evidence on record,
or if the impugned judgment is based on misapprehension of facts
which circumstances are not present in this case. Petitioners also
emphasize that the NLRC and the Labor Arbiter concurred in their
factual findings which were based on substantial evidence and,
therefore, should have been accorded great weight and respect by the
Respondents, on the other hand, aver that the CA neither exceeded its
jurisdiction nor committed error in re-evaluating the NLRCs factual
findings since such findings are not in accord with the evidence on
record and the applicable law or jurisprudence.
The Court agrees with respondents.
The power of the CA to review NLRC decisions via a petition
for certiorari under Rule 65 of the Rules of Court has been settled as
early as this Courts decision in St. Martin Funeral Homes v. NLRC.[12] In
said case, the Court held that the proper vehicle for such review is a
special civil action for certiorari under Rule 65 of the said Rules, and
that the case should be filed with the CA in strict observance of the
doctrine of hierarchy of courts. Moreover, it is already settled that
under Section 9 of Batas Pambansa Blg. 129, as amended by Republic
Act No. 7902, the CA pursuant to the exercise of its original jurisdiction
over petitions for certiorari is specifically given the power to pass upon
the evidence, if and when necessary, to resolve factual
issues.[13] Section 9 clearly states:
xxxx
The Court of Appeals shall have the power to try cases and
conduct hearings, receive evidence and perform any and all
acts necessary to resolve factual issues raised in cases
falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or
further proceedings. x x x
However, equally settled is the rule that factual findings of labor
officials, who are deemed to have acquired expertise in matters within
their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e.,
the amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion.[14] But these findings are not
infallible. When there is a showing that they were arrived at arbitrarily
or in disregard of the evidence on record, they may be examined by the
courts.[15] The CA can grant the petition for certiorari if it finds that the
NLRC, in its assailed decision or resolution, made a factual finding not
supported by substantial evidence.[16] It is within the jurisdiction of the
CA, whose jurisdiction over labor cases has been expanded to review
the findings of the NLRC.[17]
In this case, the NLRC sustained the factual findings of the Labor
Arbiter. Thus, these findings are generally binding on the appellate
court, unless there was a showing that they were arrived at arbitrarily
or in disregard of the evidence on record. In respondents' petition
for certiorari with the CA, these factual findings were reexamined and
reversed by the appellate court on the ground that they were not in
accord with credible evidence presented in this case. To determine if
the CA's reexamination of factual findings and reversal of the NLRC
decision are proper and with sufficient basis, it is incumbent upon this
Court to make its own evaluation of the evidence on record.[18]
After a thorough review of the records at hand, the Court finds that the
CA did not commit error in arriving at its own findings and conclusions
for reasons to be discussed hereunder.
Firstly, petitioners posit that the petition filed with the CA is fatally
defective, because the attached verification and certificate against
forum shopping was signed only by respondent Garcia.
The Court does not agree.
While the general rule is that the certificate of non-forum shopping
must be signed by all the plaintiffs in a case and the signature of only
one of them is insufficient, the Court has stressed that the rules on
forum shopping, which were designed to promote and facilitate the
orderly administration of justice, should not be interpreted with such
absolute literalness as to subvert its own ultimate and legitimate
objective.[19] Strict compliance with the provision regarding the
certificate of non-forum shopping underscores its mandatory nature in
that the certification cannot be altogether dispensed with or its
requirements completely disregarded.[20] It does not, however, prohibit
substantial compliance therewith under justifiable circumstances,
considering especially that although it is obligatory, it is not
jurisdictional.[21]
In a number of cases, the Court has consistently held that when all the
petitioners share a common interest and invoke a common cause of
action or defense, the signature of only one of them in the certification
against forum shopping substantially complies with the rules.[22] In the
present case, there is no question that respondents share a common
interest and invoke a common cause of action. Hence, the signature of
respondent Garcia is a sufficient compliance with the rule governing
certificates of non-forum shopping. In the first place, some of the
respondents actually executed a Special Power of Attorney authorizing
Garcia as their attorney-in-fact in filing a petition for certiorari with the
CA.[23]
The Court, likewise, does not agree with petitioners' argument that the
CA should not have given due course to the petition filed before it with
respect to some of the respondents, considering that these respondents
did not sign the verification attached to the Memorandum of Partial
Appeal earlier filed with the NLRC. Petitioners assert that the decision
of the Labor Arbiter has become final and executory with respect to
these respondents and, as a consequence, they are barred from filing a
petition for certiorari with the CA.
With respect to the absence of some of the workers signatures in the
verification, the verification requirement is deemed substantially
complied with when some of the parties who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations
in the petition had signed the same. Such verification is deemed a
sufficient assurance that the matters alleged in the petition have been
made in good faith or are true and correct, and not merely speculative.
Moreover, respondents' Partial Appeal shows that the appeal stipulated
as complainants-appellants Rizal Beato, et al., meaning that there were
more than one appellant who were all workers of petitioners.
In any case, the settled rule is that a pleading which is required by the
Rules of Court to be verified, may be given due course even without a
verification if the circumstances warrant the suspension of the rules in
the interest of justice.[24] Indeed, the absence of a verification is not
jurisdictional, but only a formal defect, which does not of itself justify
a court in refusing to allow and act on a case.[25] Hence, the failure of
some of the respondents to sign the verification attached to their
Memorandum of Appeal filed with the NLRC is not fatal to their cause
of action.
Petitioners also contend that the CA erred in applying the doctrine of
piercing the corporate veil with respect to Lubas, because the said
doctrine is applicable only to corporations and Lubas is not a
corporation but a single proprietorship; that Lubas had been found by
the Labor Arbiter and the NLRC to have a personality which is separate
and distinct from that of PTI; that PTI had no hand in the management
and operation as well as control and supervision of the employees of
Lubas.
The Court is not persuaded.
On the contrary, the Court agrees with the CA that Lubas is a mere
agent, conduit or adjunct of PTI. A settled formulation of the doctrine
of piercing the corporate veil is that when two business enterprises are
owned, conducted and controlled by the same parties, both law and
equity will, when necessary to protect the rights of third parties,
disregard the legal fiction that these two entities are distinct and treat
them as identical or as one and the same.[26] In the present case, it may
be true that Lubas is a single proprietorship and not a
corporation. However, petitioners attempt to isolate themselves from
and hide behind the supposed separate and distinct personality of
Lubas so as to evade their liabilities is precisely what the classical
doctrine of piercing the veil of corporate entity seeks to prevent and
remedy.
Thus, the Court agrees with the observations of the CA, to wit:
As correctly pointed out by petitioners, if Lubas were truly
a separate entity, how come that it was Prince Transport
who made the decision to transfer its employees to the
former? Besides, Prince Transport never regarded Lubas
Transport as a separate entity. In the aforesaid letter, it
referred to said entity as Lubas operations. Moreover, in
said letter, it did not transfer the employees; it assigned
them. Lastly, the existing funds and 201 file of the
employees were turned over not to a new company but a
new management.[27]
The Court also agrees with respondents that if Lubas is indeed an entity
separate and independent from PTI why is it that the latter decides
which employees shall work in the former?
What is telling is the fact that in a memorandum issued by PTI,
dated January 22, 1998, petitioner company admitted that Lubas is
one of its sub-companies.[28] In addition, PTI, in its letters to its
employees who were transferred to Lubas, referred to the latter as its
New City Operations Bus.[29]
Moreover, petitioners failed to refute the contention of respondents that
despite the latters transfer to Lubas of their daily time records, reports,
daily income remittances of conductors, schedule of drivers and
conductors were all made, performed, filed and kept at the office of PTI.
In fact, respondents identification cards bear the name of PTI.
It may not be amiss to point out at this juncture that in two separate
illegal dismissal cases involving different groups of employees
transferred by PTI to other companies, the Labor Arbiter handling the
cases found that these companies and PTI are one and the same entity;
thus, making them solidarily liable for the payment of backwages and
other money claims awarded to the complainants therein.[30]
Petitioners likewise aver that the CA erred and committed grave abuse
of discretion when it ordered petitioners to reinstate respondents to
their former positions, considering that the issue of reinstatement was
never brought up before it and respondents never questioned the award
of separation pay to them.
The Court is not persuaded.

It is clear from the complaints filed by respondents that they are
seeking reinstatement.[31]
In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a
pleading shall specify the relief sought, but may add a general prayer
for such further or other reliefs as may be deemed just and equitable.
Under this rule, a court can grant the relief warranted by the allegation
and the proof even if it is not specifically sought by the injured party;
the inclusion of a general prayer may justify the grant of a remedy
different from or together with the specific remedy sought, if the facts
alleged in the complaint and the evidence introduced so warrant.[32]
Moreover, in BPI Family Bank v. Buenaventura,[33] this Court ruled that
the general prayer is broad enough to justify extension of a remedy
different from or together with the specific remedy sought. Even
without the prayer for a specific remedy, proper relief may be granted
by the court if the facts alleged in the complaint and the evidence
introduced so warrant. The court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for. The prayer
in the complaint for other reliefs equitable and just in the premises
justifies the grant of a relief not otherwise specifically prayed for.[34] In
the instant case, aside from their specific prayer for reinstatement,
respondents, in their separate complaints, prayed for such reliefs which
are deemed just and equitable.
As to whether petitioners are guilty of unfair labor practice, the Court
finds no cogent reason to depart from the findings of the CA that
respondents transfer of work assignments to Lubas was designed by
petitioners as a subterfuge to foil the formers right to organize
themselves into a union. Under Article 248 (a) and (e) of the Labor Code,
an employer is guilty of unfair labor practice if it interferes with,
restrains or coerces its employees in the exercise of their right to self-
organization or if it discriminates in regard to wages, hours of work and
other terms and conditions of employment in order to encourage or
discourage membership in any labor organization.
Indeed, evidence of petitioners' unfair labor practice is shown by the
established fact that, after respondents' transfer to Lubas, petitioners
left them high and dry insofar as the operations of Lubas was
concerned. The Court finds no error in the findings and conclusion of
the CA that petitioners withheld the necessary financial and logistic
support such as spare parts, and repair and maintenance of the
transferred buses until only two units remained in running condition.
This left respondents virtually jobless.
WHEREFORE, the instant petition is DENIED. The assailed Decision
and Resolution of the Court of Appeals, dated December 20,
2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953,
are AFFIRMED.
SO ORDERED.