1.

Definitions and Classifications

a. Corporation defined

b. Classes of Corporations

c. Nationality of Corporations

d. Corporators and Incorporators, Stockholders & Members

e. Classification of Shares

Cases:

1. Zambrano vs. Pclil Carpet Manufacturing Corp (G.R. No. 224099, June 21, 2017)

FACTS: On January 3, 2011,petitioners, who were employees of private respondent Philippine Carpet Manufacturing Corporation, were notified of the termination of
their employment effective February 3, 2011 on the ground of cessation of operation due to serious business losses. They were of the belief that their dismissal was
without just cause and in violation of due process because the closure of Phil Carpet was a mere pretense to transfer its operations to its wholly owned and controlled
corporation, Pacific Carpet Manufacturing Corporation (PacificCarpet). They asserted that their dismissal constituted unfair labor practice as it involved the mass
dismissal of all union officers and members of the Philippine Carpet Manufacturing Employees Association (PHILCEA).

In its defense, Phil Carpet countered that it permanently closed and totally ceased its operations because there had been a steady decline in the demand for its products
due to global recession, stiffer competition, and the effects of a changing market. Thus, in order to stem the bleeding, the company implemented several cost-cutting
measures, including voluntary redundancy and early retirement programs. Phil Carpet likewise faithfully complied with the requisites for closure or cessation of business
under the Labor Code. The petitioners and the Department of Labor and Employment were served written notices one (1) month before the intended closure of the
company. The petitioners’ were also paid their separation pay and they voluntarily executed their respective Release and Quitclaim before the DOLE officials.

In the September 29, 2014 Decision, the Labor Arbiter dismissed the complaints for illegal dismissal and unfair labor practice. The NLRC affirmed the findings of the LA,
which was subsequently affirmed by the CA.

ISSUES:

1. Whether or not the petitioners were dismissed from employment for a lawful cause.

2. Whether or not the petitioners’ termination from employment constitutes unfair labor practice.

3. Whether or not the quitclaims signed by petitioners are valid and binding.

HELD: 1. Yes. The petitioners were terminated from employment for an authorized cause. In this case, the LA's findings that Phil Carpet suffered from serious business
losses which resulted in its closure were affirmed in toto by the NLRC, and subsequently by the CA. It is a rule that absent any showing that the findings of fact of the
labor tribunals and the appellate court are not supported by evidence on record or the judgment is based on a misapprehension of facts, the Court shall not examine
anew the evidence submitted by the parties.

Further, even if the petitioners refuse to consider these losses as serious enough to warrant Phil Carpet's total and permanent closure, it was a business judgment on
the part of the company's owners and stockholders to cease operations, a judgment which the Court has no business interfering with. The only limitation provided by
law is that the closure must be "bonafide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees. Thus, when an employer
complies with the foregoing conditions, the Court cannot prohibit closure "just because the business is not suffering from any loss or because of the desire to provide
the workers continued employment."

2. No. The dismissal of the petitioners did not amount to unfair labor practice. Unfair labor practice refers to acts that violate the workers' right to organize. There
should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers' right to self-organization. Thus, an employer may
only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of his employees to self-organize.

The general principle is that one who makes an allegation has the burden of proving it. The petitioners miserably failed to discharge the duty imposed upon them. They
did not identify the acts of Phil Carpet, which, they claimed, constituted unfair labor practice. They did not even point out the specific provisions, which Phil Carpet
violated.

3. Yes. The quitclaims were valid and binding upon the petitioners. Where the person making the waiver has done so voluntarily, with a full understanding thereof, and
the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid and binding undertaking.

In this case, the petitioners question the validity of the quitclaims they signed on the ground that Phil Carpet's closure was a mere pretense. As the closure of Phil
Carpet, however, was supported by substantial evidence, the petitioners' reason for seeking the invalidation of the quitclaims must necessarily fail. Further, as aptly
observed by the CA, the contents of the quitclaims, which were in Filipino, were clear and simple, such that it was unlikely that the petitioners did not understand what
they were signing. Finally, the amount they received was reasonable as the same complied with the requirements of the Labor Code.

Wherefore, the SC affirmed the decision of the CA in toto.

2.) Heirs of Fe Tan Uy vs. International Exchange Bank (G.R. No. 166282, February 13, 2013)

FACTS: Respondent International Exchange Bank (iBank), granted loans to Hammer Garments Corporation (Hammer), covered by promissory notes and deeds of
assignment. The loans were likewise secured by a P 9 Million-Peso Real Estate Mortgage executed by Goldkey Development Corporation (Goldkey) over several of its
properties and a P 25 Million-Peso Surety Agreement signed by Chua and his wife, Fe Tan Uy (Uy).

However, Hammer defaulted in the payment of its loans, prompting iBank to foreclose on Goldkey’s third-party Real Estate Mortgage. The mortgaged properties were
sold for P 12 million during the foreclosure sale, leaving an unpaid balance of P 13,420,177.62.9. For failure of Hammer to pay the deficiency, iBank filed a Complaint
for sum of money on December 16, 1997 against Hammer, Chua, Uy, and Goldkey before the Regional Trial Court, Makati City (RTC).

Hammer did not file any Answer, thus it was held in default. On the other hand, Uy claimed that she was not liable to iBank because she never executed a surety
agreement in favor of iBank. Goldkey also denies liability, averring that it acted only as a third-party mortgagor and that it was a corporation separate and distinct from
Hammer.

RTC decision: ruled in favor of iBank. The lower court said that while it made the pronouncement that the signature of Uy on the Surety Agreement was a forgery, it
nevertheless held her liable for the outstanding obligation of Hammer because she was an officer and stockholder of the said corporation. The RTC agreed with Goldkey
that as a third-party mortgagor, its liability was limited to the properties mortgaged. It came to the conclusion, however, that Goldkey and Hammer were one and the
same entity.

Aggrieved, the heirs of Uy and Goldkey (petitioners) elevated the case to the CA.

CA decision: affirming the findings of the RTC. The CA found that iBank was not negligent in evaluating the financial stability of Hammer. According to the appellate
court, iBank was induced to grant the loan because petitioners, with intent to defraud the bank, submitted a falsified Financial Report for 1996 which incorrectly
declared the assets and cashflow of Hammer. Because petitioners acted maliciously and in bad faith and used the corporate fiction to defraud iBank, they should be
treated as one and the same as Hammer.

Hence, the present petitions filed separately by the heirs of Uy and Goldkey which later on consolidated by this Court.

ISSUE: Whether or not the doctrine of piercing the corporate veil should apply in this case?

RULING: NO. RATIO:Basic is the rule in corporation law that a corporation is a juridical entity which is vested with a legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it. Following this principle, obligations incurred by the corporation, acting through its directors,
officers and employees, are its sole liabilities. A director, officer or employee of a corporation is generally not held personally liable for obligations incurred by the
corporation.

Nevertheless, this legal fiction may be disregarded if it is used as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes, or to confuse legitimate issues.

In this case, petitioners are correct to argue that it was not alleged, much less proven, that Uy committed an act as an officer of Hammer that would permit the piercing
of the corporate veil. A reading of the complaint reveals that with regard to Uy, iBank did not demand that she be held liable for the obligations of Hammer because
she was a corporate officer who committed bad faith or gross negligence in the performance of her duties such that the lifting of the corporate mask would be merited.
What the complaint simply stated is that she, together with her errant husband Chua, acted as surety of Hammer, as evidenced by her signature on the Surety
Agreement which was later found by the RTC to have been forged.

The Court emphasized that the application of the doctrine of piercing the corporate veil should be done with caution. A court should be mindful of the milieu where it
is to be applied. It must be certain that the corporate fiction was misused to such an extent that injustice, fraud, or crime was committed against another, in disregard
of its rights. The wrongdoing must be clearly and convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may result from
an erroneous application.

However, the Court finds Goldkey liable for it is a mere alter ego of Hammer.

Goldkey contends, among others, that iBank is estopped from expanding Goldkey’s liability beyond the real estate mortgage. It adds that it did not authorize the
execution of the said mortgage. Finally, it passes the blame on to iBank for failing to exercise the requisite due diligence in properly evaluating Hammer’s
creditworthiness before it was extended an omnibus line.

The Court disagrees.

Goldkey’s argument, that iBank is barred from pursuing Goldkey for the satisfaction of the unpaid obligation of Hammer because it had already limited its liability to
the real estate mortgage, is completely absurd. Goldkey needs to be reminded that it is being sued not as a consequence of the real estate mortgage, but rather,
because it acted as an alter ego of Hammer. Accordingly, they must be treated as one and the same entity, making Goldkey accountable for the debts of Hammer.

Similarly, Goldkey is undoubtedly mistaken in claiming that iBank is seeking to enforce an obligation of Chua. The records clearly show that it was Hammer, of which
Chua was the president and a stockholder, which contracted a loan from iBank. What iBank sought was redress from Goldkey by demanding that the veil of corporate
fiction be lifted so that it could not raise the defense of having a separate juridical personality to evade liability for the obligations of Hammer.

Under a variation of the doctrine of piercing the veil of corporate fiction, 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 two corporations are distinct entities and treat them as
identical or one and the same.

3.) Solidbank Corporation vs. Mindanao FerroAlloy Corporation (G.R. No. 153535, July 28, 2005).

Doctrine: It is axiomatic that solidary liability cannot be lightly inferred. Under Article 1207 of the Civil Code, "there is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity.

Facts: Private respondents herein secured a loan to the petitioner bank under the name of the respondent corporation. In the course of the corporations operation, it
was not able to pay its obligation to the petitioner and has to stop its operation. Petitioner bank filed an action against the corporation together with its principal
officers for the collection of the loan they acquired. The RTC ruled in favor of the bank petitioner and ordering the respondent corporation to pay the amount of loan
plus interest. On appeal, the CA held the decision of the RTC and ruled also that the private respondents were not solidary liable to the petitioner.

Issue: Whether or not principal officers can be held personally liable upon signing the contract of loan under the name of the corporation?

Ruling: Basic is the principle that a corporation is vested by law with a personality separate and distinct from that of each person composing or representing it. Equally
fundamental is the general rule that corporate officers cannot be held personally liable for the consequences of their acts, for as long as these are for and on behalf of
the corporation, within the scope of their authority and in good faith. The separate corporate personality is a shield against the personal liability of corporate officers,
whose acts are properly attributed to the corporation. Moreover, it is axiomatic that solidary liability cannot be lightly inferred. Since solidary liability is not clearly
expressed in the Promissory Note and is not required by law or the nature of the obligation in this case, no conclusion of solidary liability can be made. Furthermore,
nothing supports the alleged joint liability of the individual petitioners because, as correctly pointed out by the two lower courts, the evidence shows that there is only
one debtor: the corporation.

4.) CIR vs. Norton and Harrison Company (G.R. No. L-17618, August 31, 1964)

FACTS: Norton and Harrison is a corporation organized to buy and sell at wholesale and retail all kinds of goods and merchandise. Jackbilt is also a corporation organized
on for producing concrete blocks. On 1948, the corporations entered into an agreement whereby Norton was made the sole and exclusive distributor of concrete blocks
manufactured by Jackbilt.

On 1949, Norton purchased all the outstanding shares of stock of Jackbilt. This prompted the CIR to investigate and eventually asses Norton and Harrison for deficiency
sales tax and surcharges.

ISSUE: Whether Norton and Harrison is liable for the deficiency sales tax and surcharges.

RULING: YES. The Court ruled that Norton and Jackbilt should be considered as one. Jackbilt's outstanding stocks, board of directors, finance of operations, employees,
and compensation are all controlled by Norton and Harrison. Jackbilt is merely an adjunct, business conduit or alter ego, of Norton and Harrison and that the fiction of
corporate entities, separate and distinct from each, should be disregarded. This is a case where the doctrine of piercing the veil of corporate fiction, should be made to
apply. By being separate entities, the corporations would have to pay lesser income tax. The combined taxable Norton-Jackbilt income would subject Norton to a higher
tax.

5.) Martinez vs. CA (G.R. No. 131673, September 10, 2004)

Facts PERSONALITIES

BPI International Finance (respondent) - a foreign deposit-taking company organized under the laws of Hong Kong.

CCL (Cintas Largas, Ltd)- also a foreign corporation with a paid-up capital of HK$10,000.Its shareholders were mainly nominee shareholdersi n HK but it was also equally
owned by Wilfredo Martinez and Miguel Lacson, Ramon Siy, and Ricardo Lopa. Its business was mainly the importation of molasses from the Philippines and selling it
in the international market. It imported the molasses from Mar Tierra Corporation.

Mar Tierra Corporation- Its President was Wilfredo Martinez and Executive VP was Blamar Gonzales

RJL Fishing Corp- owned 42% of the stocks of Mar Tierra. One of its majority stockholders is Ruben Martinez, father of Wilfredo Martinez
The business operations of CLL and Mar Tierra were run by Wilfredo Martinez and Gonzales.

68% of Ruben Martinez’s assets were in RJL.BPI International Finance (respondent) granted CLL a letter of credit for US$3,000,000. In January1979 and March 1980,
CLL opened a money market placement with the respondent bearing MMP No.063 with an initial placement of US$390,000, and MMP No. 084 with an initial placement
of US$68,768, transferred from MMP No. 063. Wilfredo Martinez was the authorized signatory in both accounts but the two signature cards also bore Ruben Martinez,
and Miguel Lacson’s signatures. The three of them became the joint account holders of the said money market placements. At times, the funds in these MMPs were
transferred to CLL’s deposit account and vice versa. To resolve this, Wilfredo Matrinez and the respondent executed a back-to-back credit facility. Wilfredo Martinez,
and the other owners of CLL executed a suretyship agreement where they obliged themselves solidarily with CLL in order to pay for CLL’s credit facility. The CLL deposit
account, MMP063, and MMP 084 had subsisting balances. Blamar Gonzales requested the respondent to transferUS$340,000 to an account registered to Mar Tierra
as payee. The respondent confirmed thatUS$340,000 was the account available considering the CLL deposit account and money market placements. Months later
Wilfredo Martinez also made the same request for the transfer. The respondent complied but instead of deducting the funds from either of the three accounts
mentioned, it posted the US$340,000 as account receivable of CLL since the money market placements hadn’t matured yet. When these have matured, they just
allowed Wilfredo to make withdrawals and did not collect the US$340,000 so it failed to secure its reimbursement. Later problems came up regarding these three
accounts and the respondent pressured Wilfredo and Blamar Gonzales to pay the US$340,000. Wilfredo and Martinez had CLL’s account audited and it was confirmed
that the corporation owed the respondent this amount. Despite the respondent’s demands, Wilfredo, Gonzales, Lacson and ruben Martinez did not make any
remittance. Ruben Martinez even denied having knowledge of such liability. The respondent then filed a suit to recover the sum stating that the CLL was merely a paper
company or an alter ego of Wilfredo and Ruben. The RTC and CA ruled in its favor.

Issue: WON the liability incurred by CLL can be attributed to Ruben Martinez because CLL is merely their alter ego

Held: NO.Rationale: The general rule is that a corporation is clothed with a personality separate and distinct from the persons composing it—this separate and distinct
personality of a corporation is a fiction created by law for convenience and to prevent injustice. Such corporation cannot be liable for the obligations of the persons
composing it and vice versa. There are valid grounds though to pierce this veil of corporate entity. The test to determine whether this can be done is as follows:

1. Control, and not mere majority stock control, of policy and business practice in respect to the transaction attacked.

2. Such control must have been used by the defendant to commit fraud or wrong.

3. The said control and breach of duty must proximately cause injury or unjust loss complained of. The absence of any one of these three elements prevents the “piercing
of the corporate veil”.

In this case, the respondent failed to prove complete control by the petitioners. Mere ownership by a single stockholder or by another corporation of all or nearly all of
the capital stocks of a corporation is not by itself a sufficient ground separate corporate personality. The mere fact that the majority stock-holder of Mar Tierra is RJL
and that Ruben Martinez owned about 42% of the capital stocks of RJL do not constitute sufficient evidence that the latter corporation, had complete control of Mar
Tierra. They also failed to prove that Mar Tierra and RJL were organized as an instrument of Wilfredo Martinez andBlamar Gonzales.mthere is also no evidence that the
petitioner had any involvement in the transaction between Wilfredo and the respondent

6.) Francisco Motors Corporation vs. CA (G.R. No. 100812, June 25, 1999)

Facts: Petitioner Francisco Motors Corp filed a complaint to recover from respondent spouses Manuel the unpaid balance of the jeepney bought by the latter from
them. As their answer, respondent spouses interposed a counterclaim for unpaid legal services by Gregorio Manuel which was not paid by petitioner corporation’s
directors and officers. Respondent Manuel alleges that he represented members of the Francisco family who were directors and officers of herein petitioner corporation
in an intestate estate proceeding but even after its termination, his services were not paid. The trial court ruled in favor of petitioner but also allowed respondent
spouses’ counterclaim. CA affirmed.

Issue: Whether or not petitioner corporation may be held liable for the liability incurred by its directors and officers in their personal capacity.

Ruling: NO. In our view, however, given the facts and circumstances of this case, the doctrine of piercing the corporate veil has no relevant application here. Respondent
court erred in permitting the trial court’s resort to this doctrine.

In the case at bar, instead of holding certain individuals or persons responsible for an alleged corporate act, the situation has been reversed. It is the petitioner as a
corporation which is being ordered to answer for the personal liability of certain individual directors, officers and incorporators concerned. Hence, it appears to us that
the doctrine has been turned upside down because of its erroneous invocation. Note that according to private respondent Gregorio Manuel his services were solicited
as counsel for members of the Francisco family to represent them in the intestate proceedings over Benita Trinidad’s estate. These estate proceedings did not involve
any business of petitioner.

Furthermore, considering the nature of the legal services involved, whatever obligation said incorporators, directors and officers of the corporation had incurred, it was
incurred in their personal capacity. When directors and officers of a corporation are unable to compensate a party for a personal obligation, it is far-fetched to allege
that the corporation is perpetuating fraud or promoting injustice, and be thereby held liable therefore by piercing its corporate veil.

7.) Kukan International Corporation vs. Hon. Amor Reyes (G.R. No. 182729, September 29, 2010)
FACTS: Sometime in March 1998, Kukan, Inc. conducted bidding for the supply and installation of signages in a building being constructed in Makati City. Romeo Morales
tendered the winning bid and was awarded the PhP 5 million contract. Short changed, Morales filed a Complaint with the RTC against Kukan, Inc. for a sum of money.
The RTC rendered a Decision in favor of Morales and against Kukan, Inc. After the decision became final and executory, Morales moved for and secured a writ of
execution against Kukan, Inc. The sheriff then levied upon various personal properties of Kukan International Corporation (KIC). KIC then filed an Affidavit of Third-Party
Claim. Notably, KIC was incorporated in August 2000, or shortly after Kukan, Inc. had stopped participating in Civil Case. In reaction to the third party claim, Morales
interposed an Omnibus Motion dated April 30, 2003. In it, Morales prayed, applying the principle of piercing the veil of corporate fiction, that an order be issued for
the satisfaction of the judgment debt of Kukan, Inc. with the properties under the name or in the possession of KIC, it being alleged that both corporations are but one
and the same entity. By Order of May 29, 2003 as reiterated in a subsequent order, the court denied the omnibus motion. In a bid to establish the link between KIC and
Kukan, Inc., and thus determine the true relationship between the two, Morales filed a Motion for Examination of Judgment Debtors dated May 4, 2005. In this motion
Morales sought that subpoena be issued against the primary stockholders of Kukan, Inc., among them Michael Chan, a.k.a. Chan Kai Kit. This too was denied by the trial
court in an Order dated May 24,2005. Morales then sought the inhibition of the presiding judge, Eduardo B. Peralta, Jr., who eventually granted the motion. The
case was re-raffled to Branch 21, presided by public respondent Judge Amor Reyes. Before the Manila RTC, Branch 21, Morales filed a Motion to Pierce the
Veil of Corporate Fiction to declare KIC as having no existence separate from Kukan,Inc. This time around, the RTC, by Order dated March 12, 2007, granted the motion.
KIC moved but was denied reconsideration in another Order dated June 7, 2007. On petition for certiorari before CA, the same was denied. The CA later denied KIC’s
motion for reconsideration in the assailed resolution. Hence, the instant petition for review.

ISSUE: Whether the trial and appellate courts correctly applied, under the premises, the principle of piercing the veil of corporate fiction.

RULING: Piercing the veil of corporate entity applies only: (1) the court must first acquire jurisdiction over the corporation or corporations involved
before its or their separate personalities are disregarded; and (2) the doctrine of piercing the veil of corporate entity can only be raised during a full-blown trial
over a cause of action duly commenced involving parties duly brought under the authority of the court by way of service of summons or what passes as such service.
Mere ownership by a single stockholder or by another corporation of a substantial block of shares of a corporation does not, standing alone, provide sufficient
justification for disregarding the separate corporate personality. For this ground to hold sway in this case, there must be proof that Chan had control or complete
dominion of Kukan and KIC’s finances, policies, and business practices; he used such control to commit fraud; and the control was the proximate cause of the financial
loss complained of by Morales.

The absence of any of the elements prevents the piercing of the corporate veil. And indeed, the records do not show the presence of these elements. In fine, there is
no showing that the incorporation, and the separate and distinct personality, of KIC was used to defeat Morales’ right to recover from Kukan, Inc. Judging from the
records, no serious attempt was made to levy on the properties of Kukan, Inc. Morales could not, thus, validly argue that Kukan, Inc. tried to avoid liability or had no
property against which to proceed. The suggestion that KIC is but a continuation and successor of Kukan, Inc., owned and controlled as they are by the
same stockholders, stands without factual basis. It is true that Michael Chan, a.k.a. Chan Kai Kit, owns 40% of the outstanding capital stock of both
corporations. But such circumstance, standing alone, is insufficient to establish identity. There must be at least a substantial identity of stockholders for both
corporations in order to consider this factor to be constitutive of corporate identity. Evidently, the aforementioned case relied upon by Morales cannot justify the
application of the principle of piercing the veil of corporate fiction to the instant case. As shown by the records, the name Michael Chan, the similarity of business
activities engaged in, and incidentally the word "Kukan" appearing in the corporate names provide the nexus between Kukan, Inc. and KIC. As illustrated, these
circumstances are insufficient to establish the identity of KIC as the alter ego or successor of Kukan, Inc

8.) Narra Nickel Mining and Dev. Corp. vs. Redmont Consolidated Mines, G.R. No. 195580, 21 April 2014

Facts: Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a domestic corporation organized and existing under Philippine laws,
took interest in mining and exploring certain areas of the province of Palawan. After inquiring with the Department of Environment and Natural Resources (DENR), it
learned that the areas where it wanted to undertake exploration and mining activities where already covered by Mineral Production Sharing Agreement (MPSA)
applications of petitioners Narra, Tesoro and McArthur. Petitioner McArthur, through its predecessor-in-interest Sara Marie Mining, Inc. (SMMI), filed an application
for an MPSA and Exploration Permit (EP) with the Mines and Geo-Sciences Bureau (MGB), Region IV-B, Office of the Department of Environment and Natural Resources
(DENR). Subsequently, SMMI was issued MPSA-AMA-IVB-153 covering an area of over 1,782 hectares in Barangay Sumbiling, Municipality of Bataraza, Province of
Palawan and EPA-IVB-44 which includes an area of 3,720 hectares in Barangay Malatagao, Bataraza, Palawan. The MPSA and EP were then transferred to Madridejos
Mining Corporation (MMC) and, on November 6, 2006, assigned to petitioner McArthur. Petitioner Narra acquired its MPSA from Alpha Resources and Development
Corporation and Patricia Louise Mining & Development Corporation (PLMDC) which previously filed an application for an MPSA with the MGB, Region IV-B, DENR on
January 6, 1992. Through the said application, the DENR issued MPSA-IV-1-12 covering an area of 3.277 hectares in barangays Calategas and San Isidro, Municipality of
Narra, Palawan. Subsequently, PLMDC conveyed, transferred and/or assigned its rights and interests over the MPSA application in favor of Narra. Another MPSA
application of SMMI was filed with the DENR Region IV-B, labeled as MPSA-AMA-IVB-154 (formerly EPA-IVB-47) over 3,402 hectares in Barangays Malinao and Princesa
Urduja, Municipality of Narra, Province of Palawan. SMMI subsequently conveyed, transferred and assigned its rights and interest over the said MPSA application to
Tesoro. On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3) separate petitions for the denial of petitioners’ applications for
MPSA designated as AMA-IVB-153, AMA-IVB-154 and MPSA IV-1-12. In the petitions, Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and
Narra are owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont reasoned that since MBMI is a considerable stockholder of
petitioners, it was the driving force behind petitioners’ filing of the MPSAs over the areas covered by applications since it knows that it can only participate in mining
activities through corporations which are deemed Filipino citizens. Redmont argued that given that petitioners’ capital stocks were mostly owned by MBMI, they were
likewise disqualified from engaging in mining activities through MPSAs, which are reserved only for Filipino citizens.

Issue: Whether or not the petitioner corporations are Filipino and can validly be issued MPSA and EP.
Held: No. The SEC Rules provide for the manner of calculating the Filipino interest in a corporation for purposes, among others, of determining compliance with
nationality requirements (the ‘Investee Corporation’). Such manner of computation is necessary since the shares in the Investee Corporation may be owned both by
individual stockholders (‘Investing Individuals’) and by corporations and partnerships (‘Investing Corporation’). The said rules thus provide for the determination of
nationality depending on the ownership of the Investee Corporation and, in certain instances, the Investing Corporation.

Under the SEC Rules, there are two cases in determining the nationality of the Investee Corporation. The first case is the ‘liberal rule’, later coined by the SEC as the
Control Test in its 30 May 1990 Opinion, and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, ‘(s)hares belonging to corporations or
partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality.’ Under the liberal Control Test, there is no
need to further trace the ownership of the 60% (or more) Filipino stockholdings of the Investing Corporation since a corporation which is at least 60% Filipino-owned is
considered as Filipino.

The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, “but if the
percentage of Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as
of Philippine nationality.” Under the Strict Rule or Grandfather Rule Proper, the combined totals in the Investing Corporation and the Investee Corporation must be
traced (i.e., “grandfathered”) to determine the total percentage of Filipino ownership. Moreover, the ultimate Filipino ownership of the shares must first be traced to
the level of the Investing Corporation and added to the shares directly owned in the Investee Corporation.

In other words, based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part of the SEC Rule applies only when the 60-40 Filipino-foreign equity
ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with less than 60% Filipino stockholdings [or 59%] invests
in other joint venture corporation which is either 60-40% Filipino-alien or the 59% less Filipino). Stated differently, where the 60-40 Filipino- foreign equity ownership
is not in doubt, the Grandfather Rule will not apply.

9.) Narra Nickel Mining and Dev. Corp. vs. Redmont Consolidated Mines, G.R. No. 195580, 28 January 2015

Facts: Narra and its co-petitioner corporations – Tesoro and MacArthur, filed a motion before the SC to reconsider its April 21, 2014 Decision which upheld the denial
of their MPSA applications. The SC affirmed the CA ruling that there is a doubt to their nationality, and that in applying the Grandfather Rule, the finding is that MBMI,
a 100% Canadian-owned corporation, effectively owns 60% of the common stocks of petitioners by owning equity interests of the petitioners’ other majority corporate
shareholders. Narra, Tesoro and MacArthur argued that the application of the Grandfather Rule to determine their nationality is erroneous and allegedly without basis
in the Constitution, the FIA, the Philippine Mining Act, and the Rules issued by the SEC. These laws and rules supposedly espouse the application of the Control Test in
verifying the Philippine nationality of corporate entities for purposes of determining compliance with Sec. 2, Art. XII of the Constitution that only corporationsor
associations at least 60% of whose capital is owned by such Filipino citizens may enjoy certain rights and privileges, like the exploration and development of natural
resources.

Issue: W/N the application by the SC of the grandfather resulted to the abandonment of the control test

Held: No. The ‘control test’ can be applied jointly with the Grandfather Rule to determine the observance of foreign ownership restriction in nationalized economic
activities. The Control Test and the Grandfather Rule are not incompatible ownership-determinant methods that can only be applied alternative to each other. Rather,
these methods can, if appropriate, be used cumulatively in the determination of the ownership and control of corporations engaged in fully or partly nationalized
activities, as the mining operation involved in this case or the operation of public utilities. The Grandfather Rule, standing alone, should not be used to determine the
Filipino ownership and control in a corporation, as it could result in an otherwise foreign corporation rendered qualified to perform nationalized or partly nationalized
activities. Hence, it is only when the Control Test is first complied with that the Grandfather Rule may be applied. Put in another manner, if the subject corporation’s
Filipino equity falls below the threshold 60%, the corporation is immediately considered foreign-owned, in which case, the need to resort to the Grandfather Rule
disappears. In this case, using the ‘control test’, Narra, Tesoro and MacArthur appear to have satisfied the 60-40 equity requirement. But the nationality of these
corporations and the foreign-owned common investor that funds them was in doubt, hence, the need to apply the Grandfather Rule.

10.) Gamboa vs. Teves, G.R. No. 176579, June 28, 2011

Facts: 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. 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.

Issue: Whether or not the term capital in Section 11, Article XII of the Constitution refers to the common shares of PLDT, a public utility.

Held: Yes. 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)

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.

Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling interest.

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.

Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation. This is exercised through his vote in the
election of directors because it is the board of directors that controls or manages the corporation. 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. In fact, under the Corporation Code only preferred or redeemable shares can be deprived of the right to
vote. 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.

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 shown in PLDTs 2010 GIS, as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par value of preferred shares is P10.00 per
share. In other words, preferred shares have twice the par value of common shares but cannot elect directors and have only 1/70 of the dividends of common shares.
Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the preferred shares. Worse, preferred shares
constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only 22.15%.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

11.) Gamboa vs. Teves, G.R. No. 176579, October 9, 2012

FACTS: Movants Philippine Stock Exchange’s (PSE) President, Manuel V. Pangilinan, Napoleon L. Nazareno, and the Securities and Exchange Commission (SEC) contend
that the term “capital” in Section 11, Article XII of the Constitution has long been settled and defined to refer to the total outstanding shares of stock, whether voting
or non-voting. In fact, movants claim that the SEC, which is the administrative agency tasked to enforce the 60-40 ownership requirement in favor of Filipino citizens in
the Constitution and various statutes, has consistently adopted this particular definition in its numerous opinions. Movants point out that with the 28 June 2011
Decision, the Court in effect introduced a “new” definition or “midstream redefinition” of the term “capital” in Section 11, Article XII of the Constitution.

ISSUE: Whether the term “capital” includes both voting and non-voting shares.

RULING: NO. The Constitution expressly declares as State policy the development of an economy “effectively controlled” by Filipinos. Consistent with such State policy,
the Constitution explicitly reserves the ownership and operation of public utilities to Philippine nationals, who are defined in the Foreign Investments Act of 1991 as
Filipino citizens, or corporations or associations at least 60 percent of whose capital with voting rights belongs to Filipinos. The FIA’s implementing rules explain that
“[f]or 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.” In effect, the FIA clarifies, reiterates and confirms the interpretation that the term “capital”
in Section 11, Article XII of the 1987 Constitution refers to shares with voting rights, as well as with full beneficial ownership. This is precisely because the right to vote
in the election of directors, coupled with full beneficial ownership of stocks, translates to effective control of a corporation.

12.) Roy vs. Herbosa G.R. No. 207246, November 22, 2016

Facts: Before the Court is the Motion for Reconsideration dated January 19, 2017 (the Motion) filed by petitioner Jose M. Roy III (movant) seeking the reversal and
setting aside of the Decision dated November 22, 2016 (the Decision) which denied the movant's petition, and declared that the Securities and Exchange Commission
(SEC) did not commit grave abuse of discretion in issuing Memorandum Circular No. 8, Series of 2013 (SEC-MC No. 8) as the same was in compliance with, and in fealty
to, the decision of the Court in Gamboa v. Finance Secretary Teves (Gamboa Decision) and the resolution denying the Motion for Reconsideration therein (Gamboa
Resolution).

The Motion presents no compelling and new arguments to justify the reconsideration of the Decision.

The Decision has already exhaustively discussed and directly passed upon these grounds. Movant's petition was dismissed based on both procedural and substantive
grounds.

Issue: Whether or not SEC committed grave abuse of discretion amounting to lack or excess of jurisdiction when it issued SEC-MC No. 8.

Held: SEC did not commit grave abuse of discretion amounting to lack or excess of jurisdiction when it issued SEC-MC No. 8. The Court finds SEC-MC No. 8 to have been
issued in fealty to the Gamboa Decision and Resolution.

Pursuant to the Court's constitutional duty to exercise judicial review, the Court has conclusively found no grave abuse of discretion on the part of SEC in issuing SEC-
MC No. 8.

The Decision has painstakingly explained why it considered as obiter dictum that pronouncement in the Gamboa Resolution that the constitutional requirement on
Filipino ownership should "apply uniformly and across the board to all classes of shares, regardless of nomenclature and category, comprising the capital of a
corporation." The Court stated that:

The fallo or decretal/dispositive portions of both the Gamboa Decision and Resolution are definite, clear and unequivocal. While there is a passage in the body of the
Gamboa Resolution that might have appeared contrary to the fallo of the Gamboa Decision, the definiteness and clarity of the fallo of the Gamboa Decision must
control over the obiter dictum in the Gamboa Resolution regarding the application of the 60-40 Filipino-foreign ownership requirement to "each class of shares,
regardless of differences in voting rights, privileges and restrictions."

To the Court's mind and, as exhaustively demonstrated in the Decision, the dispositive portion of the Gamboa Decision was in no way modified by the Gamboa
Resolution.

The heart of the controversy is the interpretation of Section 11, Article XII of the Constitution, which provides: "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."

The Gamboa Decision already held, in no uncertain terms, that what the Constitution requires is full and legal beneficial ownership of 60 percent of the outstanding
capital stock, coupled with 60 percent of the voting rights must rest in the hands of Filipino nationals. And, precisely that is what SEC-MC No. 8 provides; For purposes
of determining compliance with the constitutional or statutory ownership, the required percentage of Filipino ownership shall be applied to both the total number of
outstanding shares of stock entitled to vote in the election of directors; and (b) the total number of outstanding shares of stock, whether or not entitled to vote.

In conclusion, the basic issues raised in the Motion having been duly considered and passed upon by the Court in the Decision and no substantial argument having been
adduced to warrant the reconsideration sought, the Court resolves to deny the Motion with finality.