NARRA NICKEL MINING VS REDMONT (G.R. NO.

195580 APRIL 21,  2014)

Narra Nickel Mining and Development Corp. vs Redmont Consolidated Mines Corporation
G.R. No. 195580 April 21, 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.
Jose M. Roy III vs. Securities and Exchange Commission, et al. G.R. No. 207246, 22 November 2016

The Supreme Court, in a recent case entitled “Jose M. Roy III vs. Securities and Exchange Commission, et al.”,
docketed as G.R. No. 207246 and promulgated on 22 November 2016, upheld the validity of SEC Memorandum Circular
No. 8 Series of 2013 (“SEC MC No. 8-2013”), which prescribes the guidelines in determining compliance with the foreign
equity restriction in nationalized activities. Under SEC MC No. 8-2013, the required percentage of Filipino ownership
mandated by the 1987 Constitution shall be applied to both a) the total number of the outstanding shares of stock
entitled to vote in the election of directors and b) the total number of outstanding shares of stock, whether or not
entitled to vote in the election of directors.
The Supreme Court rejected the contention that the Filipino ownership requirement shall apply separately to
each class of shares, whether common, preferred non-voting, preferred voting or any other class of shares. 
  It declared that SEC MC No. 8-2013 is consistent with the Supreme Court’s earlier pronouncement in the case
of “Gamboa vs. Finance Secretary Teves”, 652 SCRA 690 (2011) that full beneficial ownership of 60% of the outstanding
capital stock, coupled with 60% of the voting rights, is required for purposes of complying with the requirements of the
Philippine Constitution.

ROY III v. HERBOSA

G.R. No. 207246, April 18, 2017

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.

BUSTOS VS. MILLIANS SHOE

2017-04-24, GR Number: G.R. No. 185024

Summary: A close corporation is liable under the obligations imposed by corporation code only when there are findings
that, if it meets the criteria of a close corporation. Otherwise, the obligations of a close corporations cannot be effected
against a stock corporation

Doctrine: Sec. 96. Definition and applicability of Title. - A close corporation, within the meaning of this Code, is one
whose articles of incorporation provide that: (1) All the corporation's issued stock of all classes, exclusive of treasury
shares, shall be held of record by not more than a specified number of persons, not exceeding twenty (20); (2) all the
issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title; and (3)
The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of
its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the
meaning of this Code.

Facts: Spouses Fernando and Amelia Cruz owned a 464-square-meter lot covered by Transfer Certificate of Title (TCT)
No. N-126668. On 6 January 2004, the City Government of Marikina levied the property for nonpayment of real estate
taxes. The Notice of Levy was annotated on the title on 8 January 2004. On 14 October 2004, the City Treasurer of
Marikina auctioned off the property, with petitioner Joselito Hernand M. Bustos emerging as the winning bidder.
Petitioner then applied for the cancellation of TCT No. N-126668. On 13 July 2006, the Regional Trial Court,
Marikina City, Branch 273, rendered a final and executory Decision ordering the cancellation of the previous title and the
issuance of a new one under the name of petitioner.
  Meanwhile, notices of Lis Pendens were annotated on TCT No. N-126668 on 9 February 2005. These markings
indicated that SEC Corp. Case No. 036-04, which was filed before the RTC and involved the rehabilitation proceedings for
MSI, covered the subject property and included it in the Stay Order issued by the RTC dated 25 October 2004.
  On 26 September 2006, petitioner moved for the exclusion of the subject property from the Stay Order. He
claimed that the lot belonged to Spouses Cruz who were mere stockholders and officers of MSL He further argued that
since he had won the bidding of the property on 14 October 2004, or before the annotation of the title on 9 February
2005, the auctioned property could no longer be part of the Stay Order.

Issue: Whether the property of the spouses is liable to the debts of MSI.
 
Ruling: No. To be considered a close corporation, an entity must abide by the requirements laid out in Section 96 of the
Corporation Code, which reads:
  Sec. 96. Definition and applicability of Title. - A close corporation, within the meaning of this Code, is one whose
articles of incorporation provide that: (1) All the corporation's issued stock of all classes, exclusive of treasury shares,
shall be held of record by not more than a specified number of persons, not exceeding twenty (20); (2) all the issued
stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title; and (3) The
corporation shall not list in any stock exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of
its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the
meaning of this Code.  
Here, neither the CA nor the RTC showed its basis for finding that MSI is a close corporation. The courts a quo
did not at all refer to the Articles of Incorporation of MSI. The Petition submitted by respondent in the rehabilitation
proceedings before the RTC did not even include those Articles of Incorporation among its attachments.
Instead of treating the corporation as close corporation, the SC applied the general doctrine of separate
juridical personality, which provides that a corporation has a legal personality separate and distinct from that of
people comprising it. By virtue of that doctrine, stockholders of a corporation enjoy the principle of limited liability: the
corporate debt is not the debt of the stockholder. Thus, being an officer or a stockholder of a corporation does not make
one's property the property also of the corporation.
  As regards to the issue on time bar rule, Rule 4, Section 6 of the Interim Rules of Procedure on Corporate
Rehabilitation, directs creditors of the debtor to file an opposition to petitions for rehabilitation within 10 days before
the initial hearing of rehabilitation proceedings. Since petitioner does not hold any claim over the properties owned by
MSI, the time-bar rule does not apply to him.
Dispositive: WHEREFORE, the Petition for review on certiorari filed by petitioner Joselito Hernand M. Bustos
is GRANTED. The Decision dated 12 June 2008 and Resolution dated 27 October 2008 of the Court of Appeals in C.A.-G.R.
SP. No. 100298 are REVERSED and SETASIDE.

CHING VS SEC. OF JUSTICE

GR No. 164317, February 6, 2006

Lessons Applicable: Corp. Officers or employees, through whose act, default or omission the corp. commits a crime, are
themselves individually guilty of the crime (Corporate Law)

FACTS:
 Sept-Oct 1980: PBMI, through Ching, Senior VP of Philippine Blooming Mills, Inc. (PBMI), applied with the Rizal
Commercial Banking Corporation (RCBC) for the issuance of commercial letters of credit to finance its
importation of assorted goods
 RCBC approved the application, and irrevocable letters of credit were issued in favor of Ching. 
 The goods were purchased and delivered in trust to PBMI.  
 Ching signed 13 trust receipts as surety, acknowledging delivery of the goods
 Under the receipts, Ching agreed to hold the goods in trust for RCBC, with authority to sell but not by
way of conditional sale, pledge or otherwise
 In case such goods were sold, to turn over the proceeds thereof as soon as received, to apply
against the relative acceptances and payment of other indebtedness to respondent bank.
 In case the goods remained unsold within the specified period, the goods were to be returned to
RCBC without any need of demand. 
 goods, manufactured products or proceeds thereof, whether in the form of money or bills,
receivables, or accounts separate and capable of identification - RCBC’s property
 When the trust receipts matured, Ching failed to return the goods to RCBC, or to return their value amounting
toP6,940,280.66 despite demands.
 RCBC filed a criminal complaint for estafa against petitioner in the Office of the City Prosecutor of
Manila.
 December 8, 1995: no probable cause to charge petitioner with violating P.D. No. 115, as
petitioner’s liability was only civil, not criminal, having signed the trust receipts as surety
 RCBC appealed the resolution to the Department of Justice (DOJ) via petition for review
 On July 13, 1999:  reversed the assailed resolution of the City Prosecutor
 execution of said receipts is enough to indict the Ching as the official responsible for violation of P.D. No.
115
 April 22, 2004: CA dismissed the petition for lack of merit and on procedural grounds
 Ching filed a petition for certiorari, prohibition and mandamus with the CA

ISSUE: W/N Ching should be held criminally liable.

HELD: YES.  DENIED for lack of merit

 There is no dispute that it was the Ching executed the 13 trust receipts.  
 law points to him as the official responsible for the offense
 Since a corporation CANNOT be proceeded against criminally because it CANNOT commit crime in which
personal violence or malicious intent is required, criminal action is limited to the corporate agents guilty
of an act amounting to a crime and never against the corporation itself
 execution by Ching of receipts is enough to indict him as the official responsible for violation of PD 115
 RCBC is estopped to still contend that PD 115 covers only goods which are ultimately destined for sale
and not goods, like those imported by PBM, for use in manufacture. 
 Moreover, PD 115 explicitly allows the prosecution of corporate officers ‘without prejudice to the civil
liabilities arising from the criminal offense’ thus, the civil liability imposed on respondent in RCBC vs.
Court of Appeals case is clearly separate and distinct from his criminal liability under PD 115
 Ching’s being a Senior Vice-President of the Philippine Blooming Mills does not exculpate him from any liability
 The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under paragraph 1(b), Article
315 of the Revised Penal Code, or estafa with abuse of confidence.  It may be committed by a corporation or
other juridical entity or by natural persons. However, the penalty for the crime is imprisonment for the periods
provided in said Article 315.
 law specifically makes the officers, employees or other officers or persons responsible for the offense, without
prejudice to the civil liabilities of such corporation and/or board of directors, officers, or other officials or
employees responsible for the offense 
 rationale: officers or employees are vested with the authority and responsibility to devise means
necessary to ensure compliance with the law and, if they fail to do so, are held criminally accountable;
thus, they have a responsible share in the violations of the law
 If the crime is committed by a corporation or other juridical entity, the directors, officers, employees or other
officers thereof responsible for the offense shall be charged and penalized for the crime, precisely because of
the nature of the crime and the penalty therefor.  A corporation cannot be arrested and imprisoned; hence,
cannot be penalized for a crime punishable by imprisonment.  However, a corporation may be charged and
prosecuted for a crime if the imposable penalty is fine. Even if the statute prescribes both fine and
imprisonment as penalty, a corporation may be prosecuted and, if found guilty, may be fined
 When a criminal statute designates an act of a corporation or a crime and prescribes punishment therefor, it
creates a criminal offense which, otherwise, would not exist and such can be committed only by the corporation.
But when a penal statute does not expressly apply to corporations, it does not create an offense for which a
corporation may be punished.  On the other hand, if the State, by statute, defines a crime that may be
committed by a corporation but prescribes the penalty therefor to be suffered by the officers, directors, or
employees of such corporation or other persons responsible for the offense, only such individuals will suffer
such penalty. Corporate officers or employees, through whose act, default or omission the corporation commits
a crime, are themselves individually guilty of the crime.  The principle applies whether or not the crime requires
the consciousness of wrongdoing. It applies to those corporate agents who themselves commit the crime and to
those, who, by virtue of their managerial positions or other similar relation to the corporation, could be deemed
responsible for its commission, if by virtue of their relationship to the corporation, they had the power to
prevent the act.  Benefit is not an operative fact.
Coastal Pacific Trading, Inc. vs. Southern Rolling Mills Co.
G.R. No. 118692, July 28, 2006

FACTS: Southern Rolling Mills was renamed into Visayan Integrated Steel Corp (VISCO). On Dec. 11,
1961-VISCO obtained a loan from DBP amounting to P836,000. It was secured by a Real Estate
Mortgage covering VISCO's 3 parcels of land including the machinery and equipments therein. Second
Loan: VISCO entered a Loan Agreement with respondent banks ( referred as "Consortium") to finance
its importation for various raw materials. VISCO executed a second mortgage over the previous
properties mentioned, however they were unrecorded VISCO was unable to pay its second mortgage with
the consortium, which resulted in the latter acquiring 90% of the equity of VISCO giving the Consortium
the control and management of VISCO. Despite the acquisition, VISCO still remained indebted to the
Consortium.
Transaction to Coastal: Between 1964 to 1965, VISCO entered a processing agreement with Coastal
wherein Coastal delivered 3,000 metric tons of hot rolled steel coils which VISCO would process into
block iron sheets. However, VISCO was only able to return 1,600 metric tons of those sheets.
On the loan to DBP: To pay its first mortgage with DBP, VISCO sold 2 of its generators to FILMAG
Phils, Inc. DBP executed a Deed of Assignment of the mortgage in favor of the consortium. The
Consortium foreclosed the mortgage and was the highest bidder in an auction sale of VISCO's properties.
The Consortium later sold the properties in favor of National Steel Corporation.
Coastal files a civil action for Annulment or Rescission of Sale, Damages with Preliminary Injunction.
Coastal imputes bad faith on the action of the Consortium, the latter being able to sell the properties of
VISCO despite the attachment of the properties, placing them beyond the reach of VISCO's other
creditors.
The lower court ruled in favor of VISCO, declaring the sale valid and legal. The CA affirmed this.

ISSUE1: Whether the consortium disposed VISCO's assets in fraud of creditors?

HELD: Yes. What the consortium did was to pay to them the proceeds from the sale of the generator sets
which in turn they used to pay DBP. Due to the Deed of Assignment issued by DBP, the respondent banks
recovered what they remitted to DBP & it allowed the Consortium to acquire DBP's primary lien on the
mortgaged properties. Allowing them as unsecured creditors (as the mortgage was unrecorded) to
foreclose on the assets of the corporation without regard to inferior claims

ISSUE2: Whether petitioner is entitled to moral damages?

HELD: No. As a rule, a corporation is not entitled to moral damages because, not being a natural person, it
cannot experience physical suffering or sentiments like wounded feelings, serious anxiety, mental anguish
and moral shock. The only exception to this rule is when the corporation has a good reputation that is
debased, resulting in its humiliation in the business realm. In the present case, the records do not show
any evidence that the name or reputation of petitioner has been sullied as a result of the Consortium's
fraudulent acts. Accordingly, moral damages are not warranted.
Petitioner was able to recover exemplary damages.
 DUTCH MOVERS, INC. ET AL VS EDILBERTO LEQUIN, ET AL
G.R No. 210032, April 25, 2017

FACTS: This case is an offshoot of the illegal dismissal Complaint filed by Edilberto Lequin (Lequin), Christopher Salvador,
Reynaldo Singsing, and Raffy Mascardo (respondents) against Dutch Movers, Inc. (DMI), and/or spouses Cesar Lee and
Yolanda Lee (petitioners), its alleged President/Owner, and Manager respectively. Respondents stated that DMI,
employed Lequin as truck and the rest of respondents as helpers. Cesar Lee, through the Supervisor Nazario Furio,
informed them that DMI would cease its hauling operation for no reason; as such, they requested DMI to issue a formal
notice regarding the matter but to no avail. Later, upon respondents' request, the DOLE NCR issued a certification
revealing that DMI did not file any notice of business closure. Thus, respondents argued that they were illegally
dismissed as their termination was without cause and only on the pretext of closure.

Labor Arbiter dismissed the case for lack of cause of action.  NLRC reversed and set aside the LA decision and ruled that
respondents were illegally dismissed because DMI simply placed them on standby, and no longer provide them with
work which said decision become final and executory.

Respondents filed a Motion for Writ of Execution. Pending resolution of the motions, respondents filed a Manifestation
and Motion to Implead stating that upon investigation, they discovered that DMI no longer operates. They, nonetheless,
insisted that petitioners who managed and operated DMI, and consistently represented to respondents that they were
the owners of DMI continue to work at Toyota Alabang, which they (petitioners) also own and operate. They further
averred that the Articles of Incorporation (AOI) of DMI ironically did not include petitioners as its directors or officers;
and those named directors and officers were persons unknown to them. They likewise claimed that per inquiry with the
SEC and the DOLE, they learned that DMI did not file any notice of business closure; and the creation and operation of
DMI was attended with fraud making it convenient for petitioners to evade their legal obligations to them. Respondents
prayed that petitioners, and the officers named in DMI’s AOI, which included Edgar Smith and Millicent Smith be
impleaded and be held solidarily liable with DMI in paying the judgment awards.

ISSUES:
 Whether or not petitioners should be held solidarily liable for the judgement award?
 Whether or not there is legal basis to pierce the veil of corporate fiction of Dutch Movers, Inc?

RULING: Applying the cases of Valderrama v. National Labor Relations Commission, and David v. Court of Appeals, the
Court held that the principle of immutability of judgment, or the rule that once a judgment has become final and
executory, the same can no longer be altered or modified and the court's duty is only to order its execution, is not
absolute. One of its exceptions is when there is a supervening event occurring after the judgment becomes final and
executory, which renders the decision unenforceable. Supervening events transpired in this case after the NLRC Decision
became final and executory, which rendered its execution impossible and unjust. Like in Valderrama, during the
execution stage, ceased its operation, and the same did not file any formal notice regarding it. Added to this, in their
Opposition to the Motion to Implead, spouses Smith revealed that they only lent their names to petitioners, and they
were included as incorporators just to assist the latter in forming DMI; after such undertaking, spouses Smith
immediately transferred their rights in DMI to petitioners, which proved that petitioners were the ones in control of
DMI, and used the same in furthering their business interests.

The Court is not unmindful of the basic tenet that a corporation has a separate and distinct personality from its
stockholders, and from other corporations it may be connected with. However, such personality may be disregarded, or
the veil of corporate fiction may be pierced attaching personal liability against responsible person if the corporation's
personality "is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device to
defeat the labor laws x x x. Here, the veil of corporate fiction must be pierced and accordingly, petitioners should be
held personally liable for judgment awards because the peculiarity of the situation shows that they controlled DMI; they
actively participated in its operation such that DMI existed not as a separate entities but only as business conduit of
petitioners.

Employer-Employee Relationship
Maricalum Mining Corporation vs Ely G . Florentino et al.
G.R. No. 221813, July 23, 2018

Facts: In 1992, respondent G Holdings Inc. bought 90% of petitioner Maricalum Mining Corporation’s shares and
thereafter immediately took possession of its Sipalay Mining Complex and took full control of its management and
operations. In 1999, the Sipalay General Hospital, Inc. was duly incorporated. Afterwards, some of Maricalum Mining's
employees retired and formed several manpower cooperatives each of which executed identical sets of Memorandum
of Agreement with Maricalum Mining wherein they undertook, among others, to provide the latter with a steady supply
of workers, machinery and equipment for a monthly fee. In 2001, Maricalum Mining decided to stop its mining
operations to avert continuing losses. Its properties were foreclosed and sold to G Holdings as the highest bidder. In
2010, some of Maricalum Mining's workers and Sipalay General Hospital's employees jointly filed a Complaint with the
Labor Arbiter (LA) against G Holdings, and the cooperatives for illegal dismissal, underpayment and nonpayment of
salaries and benefits, and damages. Complainants posited that: the Sipalay Hospital is "among the assets" of Maricalum
Mining acquired by G Holdings; and their payroll were prepared by G Holdings' accounting department. Correspondingly,
G Holdings maintained that: it was Maricalum Mining who entered into an agreement with the manpower cooperatives
for the employment of complainants' services. The LA ruled in favor of complainants and held that G Holdings connived
with Marcalum Mining in orchestrating the formation of manpower cooperatives to circumvent complainants' labor
standards rights. On appeal, the NLRC imposed the liability of paying the monetary awards imposed by the LA against
Maricalum Mining, instead of G Holdings, on the ground that it was Maricalum Mining who entered into service
contracts with each of the manpower cooperatives. The Court of Appeals affirmed the decision of the NLRC.

Issue: Whether or not there is employer-employee relationship between G Holdings and the employees of Sipalay
Hospital.

Ruling: NO. In this case, the Supreme Court applied the four-fold test: a) the selection and engagement of the employee;
b) the payment of wages; c) the power of dismissal; and d) the power to control the employee's conduct, or the so-
called "control test." Complainant failed to show that their services were selected and engaged by either Maricalum
Mining or G Holdings. However, the cash vouchers and notices of termination are reasonable enough to draw an
inference that G Holdings and Maricalum Mining may have had a hand in the complainants' payment of salaries and
dismissal. Further, in order to determine the presence or absence of an employment relationship between G Holdings
and the employees of Sipalay Hospital by using the control test, the Court examined Sipalay Hospital's Articles of
Incorporation imparting its 'primary purpose, to wit: “ To own, manage, lease or operate hospitals or clinics offering and
providing medical services and facilities to the general public, provided that purely professional, medical or surgical
services shall be performed by duly qualified physicians or surgeons who may or may not be connected with the
corporation and who shall be freely and individually contracted by patients.” It is immediately apparent that Sipalay
Hospital, even if its facilities are located inside the Sipalay Mining Complex, does not limit its medical services only to the
employees and officers of Maricalum Mining and/or G Holdings. Moreover, G Holdings is a holding company primarily
engaged in investing substantially in the stocks of another company-not in directing and managing the latter's daily
business operations. Because of this corporate attribute, the Court can reasonably draw an inference that G Holdings
does not have a considerable ability to control
means and methods of work of Sipalay Hospital employees. Markedly, the records are simply bereft of any evidence that
G Holdings had, in fact, used its ownership to control the daily operations of Sipalay Hospital as well as the working
methods of the latter's employees.
 NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., AND MCARTHUR
MINING, INC., Petitioners, v. REDMONT CONSOLIDATED MINES CORP., Respondent.
G.R. No. 195580, January 28, 2015

The Control Test can be, as it has been, 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, as it were,
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. On the other hand, a corporation that complies with the 60-40 Filipino to foreign equity requirement can be
considered a Filipino corporation if there is no doubt as to who has the “beneficial ownership” and “control” of the
corporation. In that instance, there is no need for a dissection or further inquiry on the ownership of the corporate
shareholders in both the investing and investee corporation or the application of the Grandfather Rule. As a corollary
rule, even if the 60- 40 Filipino to foreign equity ratio is apparently met by the subject or investee corporation, a resort
to the Grandfather Rule is necessary if doubt exists as to the locus of the “beneficial ownership” and “control.” In this
case, a further investigation as to the nationality of the personalities with the beneficial ownership and control of the
corporate shareholders in both the investing and investee corporations is necessary. As explained in the April 21, 2012
Decision, the “doubt” that demands the application of the Grandfather Rule in addition to or in tandem with the Control
Test is not confined to, or more bluntly, does not refer to the fact that the apparent Filipino ownership of the
corporation’s equity falls below the 60% threshold. Rather, “doubt” refers to various indicia that the “beneficial
ownership” and “control” of the corporation do not in fact reside in Filipino shareholders but in foreign stakeholders

FACTS: 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
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. Petitioners
Narra, Tesoro and McArthur applied for an MPSA and Exploration Permit which was subsequently issued. Redmont filed
before the Panel of Arbitrators (POA) of the DENR three (3) separate petitions for the denial of petitioners’ applications
for MPSA. 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. Petitioners averred that they were qualified persons under Section 39 (aq) of Republic Act No. (RA) 7942 or the
Philippine Mining Act of 1995. They stated that their nationality as applicants is immaterial because they also applied for
Financial or Technical Assistance Agreements (FTAA) which are granted to foreign-owned corporations. Nevertheless,
they claimed that the issue on nationality should not be raised since McArthur, Tesoro and Narra are in fact Philippine
Nationals as 60% of their capital is owned by citizens of the Philippines.
POA issued a Resolution disqualifying petitioners from gaining MPSAs considering petitioners as foreign
corporations being "effectively controlled" by MBMI, a 100% Canadian company and declared their MPSAs null and void.
Pending the resolution of the appeal filed by petitioners with the MAB, Redmont filed a Complaint with the Securities
and Exchange Commission (SEC), seeking the revocation of the certificates for registration of petitioners on the ground
that they are foreign-owned or controlled corporations engaged in mining in violation of Philippine laws.
CA found that there was doubt as to the nationality of petitioners when it realized that petitioners had a
common major investor, MBMI, a corporation composed of 100% Canadians. Pursuant to the first sentence of paragraph
7 of Department of Justice (DOJ) Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which implemented the
requirement of the Constitution and other laws pertaining to the exploitation of natural resources, the CA used the
"grandfather rule" to determine the nationality of petitioners.

ISSUE: Whether the Petitioners are foreign corporations. (YES)

RULING: Admittedly, an ongoing quandary obtains as to the role of the Grandfather Rule in determining compliance with
the minimum Filipino equity requirement vis-à-vis the Control Test. This confusion springs from the erroneous
assumption that the use of one method forecloses the use of the other.
As exemplified by the above rulings, opinions, decisions and this Court’s April 21, 2014 Decision, the Control Test
can be, as it has been, 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, as it were,
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.
On the other hand, a corporation that complies with the 60-40 Filipino to foreign equity requirement can be
considered a Filipino corporation if there is no doubt as to who has the “beneficial ownership” and “control” of the
corporation. In that instance, there is no need for a dissection or further inquiry on the ownership of the corporate
shareholders in both the investing and investee corporation or the application of the Grandfather Rule. As a corollary
rule, even if the 60-40 Filipino to foreign equity ratio is apparently met by the subject or investee corporation, a resort to
the Grandfather Rule is necessary if doubt exists as to the locus of the “beneficial ownership” and “control.” In this case,
a further investigation as to the nationality of the personalities with the beneficial ownership and control of the
corporate shareholders in both the investing and investee corporations is necessary.
As explained in the April 21, 2012 Decision, the “doubt” that demands the application of the Grandfather Rule in
addition to or in tandem with the Control Test is not confined to, or more bluntly, does not refer to the fact that the
apparent Filipino ownership of the corporation’s equity falls below the 60% threshold. Rather, “doubt” refers to various
indicia that the “beneficial ownership” and “control” of the corporation do not in fact reside in Filipino shareholders but
in foreign stakeholders. As provided in DOJ Opinion No. 165, Series of 1984, which applied the pertinent provisions of
the Anti-Dummy Law in relation to the minimum Filipino equity requirement in the Constitution, “significant indicators
of the dummy status” have been recognized in view of reports “that some Filipino investors or businessmen are being
utilized or [are] allowing themselves to be used as dummies by foreign investors” specifically in joint ventures for
national resource exploitation. These indicators are:
1. That the foreign investors provide practically all the funds for the joint investment undertaken by these
Filipino businessmen and their foreign partner;
2. That the foreign investors undertake to provide practically all the technological support for the joint venture;
3. That the foreign investors, while being minority stockholders, manage the company and prepare all economic
viability studies.
 MARICALUM MINING CORPORATION Petitioner, -versus- ELY G. FLORENTINO et al, Respondents
G.R. No. 221813, JULY 23, 2018,

A subsidiary company's separate corporate personality may be disregarded only when the evidence shows that such
separate personality was being used by its parent or holding corporation to perpetrate a fraud or evade an existing
obligation. Concomitantly, employees of a corporation have no cause of action for labor-related claims against another
unaffiliated corporation, which does not exercise control over them.

FACTS: On October 2, 1992, the National Government thru the Asset Privatization Trust (APT) executed a Purchase and
Sale Agreement (PSA) with G Holdings, a domestic corporation primarily engaged in the business of owning and holding
shares of stock of different companies. G Holding bought 90% of Maricalum Mining's shares and financial claims in the
form of company notes. In exchange, the PSA obliged G Holdings to pay APT the amount of P673,161,280.00, with a
down payment of P98,704,000.00 and with the balance divided into four tranches payable in installment over a period
of ten years.7 Concomitantly, G Holdings also assumed Maricalum Mining's liabilities in the form of company notes. The
said financial liabilities were converted into three (3) Promissory Notes (PNs) totaling P550,000,000.00
(P114,715,360.00, P186,550,560.00 and P248,734,080.00), which were secured by mortgages over some of Maricalum
Mining's properties. These PNs obliged Maricalum Mining to pay G Holdings the stipulated amount of P550,000,000.00.
Upon the signing of the PSA and paying the stipulated down payment, G Holdings immediately took physical
possession of Maricalum Mining's Sipalay Mining Complex, as well as its facilities, and took full control of the latter's
management and operations. On January 26, 1999, the Sipalay General Hospital, Inc. (Sipalay Hospital) was duly
incorporated to provide medical services and facilities to the general public. Afterwards, some of Maricalum Mining's
employees retired and formed several manpower cooperatives In 2000, each of the said cooperatives executed identical
sets of Memorandum of Agreement with Maricalum Mining wherein they undertook, among others, to provide the
latter with a steady supply of workers, machinery and equipment for a monthly fee.
On June 1, 2001, Maricalum Mining's Vice President and Resident Manager Jesus H. Bermejo wrote a
Memorandum to the cooperatives informing them that Maricalum Mining has decided to stop its mining and milling
operations effective July 1, 2001 in order to avert continuing losses brought about by the low metal prices and high cost
of production.
In July 2001, the properties of Maricalum Mining, which had been mortgaged to secure the PNs, were
extrajudicially foreclosed and eventually sold to G Holdings as the highest bidder on December 3, 2001.
On September 23, 2010, some of Maricalum Mining's workers, including complainants, and some of Sipalay
General Hospital's employees jointly filed a Complaint15 with the LA against G Holdings, its president, and officer-in-
charge, and the cooperatives and its officers for illegal dismissal, underpayment and nonpayment of salaries,
underpayment of overtime pay, underpayment of premium pay for holiday, nonpayment of separation pay,
underpayment of holiday pay, nonpayment of service incentive leave pay, nonpayment of vacation and sick leave,
nonpayment of 13th month pay, moral and exemplary damages, and attorneys fees.
On December 2, 2010, complainants and CeMPC Chairman Alejandro H. Sitchon surprisingly filed his complaint
for illegal dismissal and corresponding monetary claims with the LA against G Holdings, its officer--in-charge and CeMPC.
Thereafter, the complaints were consolidated by the LA.
After the hearings were concluded, complainants presented their Position Paper claiming that: they have not
received any increase in wages since they were allegedly rehired; except for Sipalay Hospital's employees, they worked
as an augmentation force to the security guards charged with securing Maricalum Mining's assets which were acquired
by G Holdings; Maricalum Mining's assets have been exposed to pilferage by some of its rank-and-file employees whose
claims for collective bargaining benefits were undergoing litigation; the Sipalay Hospital is purportedly "among the
assets" of Maricalum Mining acquired by G Holdings; the payrolls for their wages were supposedly prepared by G
Holdings' accounting department; since the second half of April 2007, they have not been paid their salary; and some of
their services were dismissed without any due process.
Based on these factual claims, complainants posited that: the manpower cooperatives were mere alter egos of G
Holdings organized to subvert the "tenurial rights" of the complainants; G Holdings implemented a retrenchment
scheme to dismiss the caretakers it hired before the foreclosure of Maricalum Mining's assets; and G Holdings was their
employer because it allegedly had the power to hire, pay wages, control working methods and dismiss them.
LA ruled in favor of complainants. It held that G Holdings is guilty of labor-only contracting with the manpower
cooperatives thereby making all of them solidarily and directly liable to complainants.
NLRC modified and ruled that it was Maricalum Mining-not G Holdings-who entered into service contracts by
way of a Memorandum of Agreement with each of the manpower cooperatives. CA affirmed.

ISSUE: Whether G Holdings is liable. (NO)

RULING: The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: (a) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; (b) fraud cases or
when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or (c) alter ego cases, where a
corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation. This principle is basically applied only to determine established liability. However,
piercing of the veil of corporate fiction is frowned upon and must be done with caution. This is because a corporation is
invested by law with a personality separate and distinct from those of the persons composing it as well as from that of
any other legal entity to which it may be related.
A parent or holding company is a corporation which owns or is organized to own a substantial portion of another
company's voting shares of stock enough to control or influence the latter's management, policies or affairs thru election
of the latter's board of directors or otherwise. However, the term "holding company" is customarily used
interchangeably with the term "investment company" which, in turn, is defined by Section 4 (a) of Republic Act (R.A.)
No. 262961 as "any issuer (corporation) which is or holds itself out as being engaged primarily, or proposes to engage
primarily, in the business of investing, reinvesting, or trading in securities."
In other words, a "holding company" is organized and is basically conducting its business by investing
substantially in the equity securities of another company for the purposes of controlling their policies (as opposed to
directly engaging in operating activities) and "holding" them in a conglomerate or umbrella structure along with other
subsidiaries. Significantly, the holding company itself-being a separate entity-does not own the assets of and does not
answer for the liabilities of the subsidiary or affiliate. The management of the subsidiary or affiliate still rests in the
hands of its own board of directors and corporate officers. It is in keeping with the basic rule 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. The corporate form was created to allow shareholders to invest without
incurring personal liability for the acts of the corporation.
While the veil of corporate fiction may be pierced under certain instances, mere ownership of a subsidiary does
not justify the imposition of liability on the parent company. It must further appear that to recognize a parent and a
subsidiary as separate entities would aid in the consummation of a wrong. Thus, a holding corporation has a separate
corporate existence and is to be treated as a separate entity; unless the facts show that such separate corporate
existence is a mere sham, or has been used as an instrument for concealing the truth.
In the case at bench, complainants mainly harp their cause on the alter ego theory. Under this theory, piercing
the veil of corporate fiction may be allowed only if the following elements concur:
1) Control-not mere stock control, but complete domination-not only of finances, but of policy and business
practice in respect to the transaction attacked, must have been such that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own;
2) Such control must have been used by the defendant to commit a fraud or a wrong, to perpetuate the
violation of a statutory or other positive legal duty, or a dishonest and an unjust act in contravention of plaintiffs
legal right; and
3) The said control and breach of duty must have proximately caused the injury or unjust loss complained of.