Case No.

15
Narra Nickel and Mining Development vs. Redmond
Development
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 Narra and Tesoro,
filed an application for an MPSA and Exploration Permit (EP)
which was subsequently issued.
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. 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) denominated as AFTAIVB-09 for McArthur, AFTA-IVB-08 for Tesoro and AFTA-IVB-07
for Narra, which are granted to foreign-owned corporations.
Nevertheless, they claimed that the issue on nationality
should not be raised since McArthur, Tesoro and Narra are in

fact Philippine Nationals as 60% of their capital is owned by

citizens of the Philippines.
On December 14, 2007, the POA issued a Resolution
disqualifying petitioners from gaining MPSAs. The POA
considered 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.
In determining the nationality of petitioners, the CA looked
into their corporate structures and their corresponding
common shareholders. Using the grandfather rule, the CA
discovered that MBMI in effect owned majority of the
common stocks of the petitioners as well as at least 60%
equity interest of other majority shareholders of petitioners
through joint venture agreements. The CA found that through
a "web of corporate layering, it is clear that one common
controlling investor in all mining corporations involved x x x
is MBMI." Thus, it concluded that petitioners McArthur, Tesoro
and Narra are also in partnership with, or privies-in-interest
of, MBMI.
ISSUE:
Whether or not the Court of Appeals ruling that Narra, Tesoro
and McArthur are foreign corporations based on the
"Grandfather Rule" is contrary to law, particularly the express
mandate of the Foreign Investments Act of 1991, as
amended, and the FIA Rules.

HELD:
No. There are two acknowledged tests in determining the
nationality of a corporation: the control test and the
grandfather rule. Paragraph 7 of 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 controlling interests in enterprises engaged in the
exploitation of natural resources owned by Filipino citizens,
provides:
Shares 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 (CONTROL TEST),
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 (GRANDFATHER RULE). Thus, if 100,000
shares are registered in the name of a corporation or
partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the
shares shall be recorded as owned by Filipinos. But if less
than 60%, or say, 50% of the capital stock or capital of the
corporation or partnership, respectively, belongs to Filipino
citizens, only 50,000 shares shall be counted as owned by
Filipinos and the other 50,000 shall be recorded as belonging
to aliens.
The grandfather rule, petitioners reasoned, has no leg to
stand on in the instant case since the definition of a
"Philippine National" under Sec. 3 of the FIA does not provide
for it. They further claim that the grandfather rule "has been
abandoned and is no longer the applicable rule." They also
opined that the last portion of Sec. 3 of the FIA admits the
application of a "corporate layering" scheme of corporations.
Petitioners claim that the clear and unambiguous wordings of
the statute preclude the court from construing it and prevent
the courts use of discretion in applying the law. They said
that the plain, literal meaning of the statute meant the
application of the control test is obligatory.
SC disagreed. "Corporate layering" is admittedly allowed by
the FIA; but if it is used to circumvent the Constitution and
pertinent laws, then it becomes illegal. Further, the
pronouncement of petitioners that the grandfather rule has

already been abandoned must be discredited for lack of

basis.
Petitioners McArthur, Tesoro and Narra are not Filipino since
MBMI, a 100% Canadian corporation, owns 60% or more of
their equity interests. Such conclusion is derived from
grandfathering petitioners corporate owners, namely: MMI,
SMMI and PLMDC. The "control test" is still the prevailing
mode of determining whether or not a corporation is a
Filipino corporation, within the ambit of Sec. 2, Art. II of the
1987 Constitution, entitled to undertake the exploration,
development and utilization of the natural resources of the
Philippines. When in the mind of the Court there is doubt,
based on the attendant facts and circumstances of the case,
in the 60-40 Filipino-equity ownership

Case No. 16
Gamboa vs. Teves
GR No. 176579, October 9, 2012
Facts:
The issue started when petitioner Gamboa questioned the
indirect sale of shares involving almost 12 million shares of
the Philippine Long Distance Telephone Company (PLDT)
owned by PTIC to First Pacific. Thus, First Pacifics common
shareholdings in PLDT increased from 30.7 percent to 37
percent, thereby increasing the total common shareholdings
of foreigners in PLDT to about 81.47%. The petitioner
contends that it violates the Constitutional provision on
filipinazation of public utility, stated in 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%. Then, in 2011, the court ruled the case in favor of the
petitioner, hence this new case, resolving the motion for
reconsideration for the 2011 decision filed by the
respondents.

Issue: Whether or not the Court made an erroneous

interpretation of the term capital in its 2011 decision?
Held/Reason: The Court said that the Constitution is clear in
expressing its State policy of developing an economy
effectively controlled by Filipinos. Asserting the ideals that
our Constitutions Preamble want to achieve, that is to
conserve and develop our patrimony, hence, the State should
fortify a Filipino-controlled economy. In the 2011 decision, the
Court finds no wrong in the construction of the term capital
which refers to the shares with voting rights, as well as with
full beneficial ownership (Art. 12, sec. 10) which implies that
the right to vote in the election of directors, coupled with
benefits, is tantamount to an effective control. Therefore, the
Courts interpretation of the term capital was not erroneous.
Thus, the motion for reconsideration is denied.

Case No. 17
PSPCA vs Commission on Audit
G.R. No. 169752 September 25, 2007
Facts:
PSPCA was incorporated as a juridical entity by virtue of Act
No. 1285 by the Philippine Commission in order to enforce
laws relating to the cruelty inflicted upon animals and for the
protection of and to perform all things which may tend to
alleviate the suffering of animals and promote their welfare.
In order to enhance its powers, PSPCA was initially imbued
with (1) power to apprehend violators of animal welfare laws
and (2) share 50% of the fines imposed and collected
through its efforts pursuant to the violations of related laws.
However, Commonwealth Act No. 148 recalled the said
powers. President Quezon then issued Executive Order No. 63
directing the Commission of Public Safety, Provost Marshal
General as head of the Constabulary Division of the
Philippine Army, Mayors of chartered cities and every
municipal president to detail and organize special officers to
watch, capture, and prosecute offenders of criminal-cruelty
laws.

On December 1, 2003, an audit team from the Commission

on Audit visited petitioners office to conduct a survey. PSPCA
demurred on the ground that it was a private entity and not
under the CoAs jurisdiction, citing Sec .2(1), Art. IX of the
Constitution.
Issues:
WON the PSPCA is subject to CoAs Audit Authority.
Held:
No. The charter test cannot be applied. It is predicated on the
legal regime established by the 1935 Constitution, Sec.7, Art.
XIII. Since the underpinnings of the charter test had been
introduced by the 1935 Constitution and not earlier, the test
cannot be applied to PSPCA which was incorporated on
January 19, 1905. Laws, generally, have no retroactive effect
unless the contrary is provided. There are a few exceptions:
(1) when expressly provided; (2) remedial statutes; (3)
curative statutes; and (4) laws interpreting others.
None of the exceptions apply in the instant case.
The mere fact that a corporation has been created by a
special law doesnt necessarily qualify it as a public
corporation. At the time PSPCA was formed, the Philippine Bill
of 1902 was the applicable law and no proscription similar to
the charter test can be found therein. There was no
restriction on the legislature to create private corporations in
1903. The amendments introduced by CA 148 made it clear
that PSPCA was a private corporation, not a government
agency.
PSPCAs charter shows that it is not subject to control or
supervision by any agency of the State. Like all private
corporations, the successors of its members are determined
voluntarily and solely by the petitioner, and may exercise
powers generally accorded to private corporations.
PSPCAs employees are registered and covered by the SSS at
the latters initiative and not through the GSIS.
The fact that a private corporation is impressed with public
interest does not make the entity a public corporation. They
may be considered quasi-public corporations which are
private corporations that render public service, supply public
wants and pursue other exemplary objectives. The true
criterion to determine whether a corporation is public or

private is found in the totality of the relation of the corporate

to the State. It is public if it is created by the latters own
agency or instrumentality, otherwise, it is private.

Case No. 18
Funa vs MECO
Facts:
The Manila Economic and Cultural Office (MECO) was
organized on 16 December 1997 as a non-stock, non-profit
corporation under Batas Pambansa 68 or the Corporation
Code. The purposes underlying the incorporation of MECO, as
stated in its articles of incorporation, are as follows:
1. To establish and develop the commercial and industrial
interests of Filipino nationals here and abroad, and assist on
all measures designed to promote and maintain the trade
relations of the country with the citizens of other foreign
countries;
2. To receive and accept grants and subsidies that are
reasonably necessary in carrying out the corporate. To
receive and accept grants and subsidies that are
reasonably necessary in carrying out the corporate
purposes provided they are not subject to conditions
defeatist for or incompatible with said purpose;
3. To acquire by purchase, lease or by any gratuitous title real
and personal properties as may be necessary for the use and
need of the corporation, and to dispose of the same in like
manner when they are no longer needed or useful; and
4. To do and perform any and all acts which are
deemed reasonably necessary to carry out the purposes.
On 23 August 2010, petitioner sent a letter to the COA
requesting for a "copy of the latest financial and audit
report" of the MECO invoking, for that purpose, his
"constitutional right to information on matters of public
concern." The petitioner made the request on the belief
that
the
MECO,
being
under
the
"operational
supervision" of the Department of Trade and Industry
(DTI), is a government owned and controlled corporation
(GOCC) and thus subject to the audit jurisdiction of the COA.

On 25 August 2010, Assistant Commissioner Naranjo issued a

memorandum referring the petitioners request to COA
Assistant Commissioner for disposition. In this memorandum,
however, Assistant Commissioner revealed that the MECO
was "not among the agencies audited by any of the three
Clusters of the Corporate Government Sector."
Taking the 25 August 2010 memorandum as an
admission that the COA had never audited and
examined the accounts of the MECO, the petitioner filed the
instant petition for mandamus on 8 September 2010.
Petitioner filed the suit in his capacities as "taxpayer,
concerned citizen, a member of the Philippine Bar and law
book author. He impleaded both the COA and the MECO.
Petitioner posits that by failing to audit the accounts of the
MECO, the COA is neglecting its duty under Section 2(1),
Article IX-D of the Constitution to audit the accounts of an
otherwise bona fide GOCC or government instrumentality. It
is the adamant claim of the petitioner that the MECO is
a GOCC without an original charter or, at least, a
government instrumentality, the funds of which partake the
nature of public funds. According to petitioner, the MECO
possesses all the essential characteristics of a GOCC
and an instrumentality under the Executive Order No. (EO)
292, s. 1987 or the Administrative Code: it is a non-stock
corporation vested with governmental functions relating to
public needs; it is controlled by the government thru a
board
of
directors appointed by the President of the
Philippines; and while not integrated within the executive
departmental framework, it is nonetheless under the
operational and policy supervision of the DTI.
Issue:
Whether or not MECO us a GOCC.
Held:
The MECO is not a GOCC or government instrumentality. The
Administrative Code defines a GOCC: (13) Governmentowned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly
or through its instrumentalities either wholly, or, where

applicable as in the case of stock corporations, to the extent

of at least fifty-one (51) per cent of its capital stock: x x x.
By definition, three attributes thus make an entity a GOCC:
first, its organization as stock or non-stock corporation;
second, the public character of its function; and third,
government ownership over the same. In this case, there
is not much dispute that the MECO possesses the first
and second attributes. It is the third attribute, which the
MECO lacks.
The MECO Is Not Owned or Controlled by the Government
Organization as a non-stock corporation and the mere
performance of functions with a public aspect, however, are
not by themselves sufficient to consider the MECO as a
GOCC. In order to qualify as a GOCC, a corporation
must also, if not more importantly, be owned by the
government. The government owns a stock or non-stock
corporation
if it
has
controlling
interest
in
the
corporation. In a stock corporation, the controlling interest of
the government is assured by its ownership of at least fiftyone percent (51%) of the corporate capital stock. In a nonstock corporation, like the MECO, jurisprudence teaches
that the controlling interest of the government is
affirmed when "at least majority of the members are
government
officials holding
such
membership
by
appointment or designation" or there is otherwise
"substantial
participation
of
the government in the
selection" of the corporations governing board.
The MECO Is Not a Government Instrumentality; It Is a Sui
Generis Entity. The categorical exclusion of the MECO from a
GOCC makes it easier to exclude the same from any other
class of government instrumentality. The other government
instrumentalities i.e., the regulatory agencies, chartered
institutions and GCE/GICP are all, by explicit or implicit
definition, creatures of the law. The MECO cannot be any
other instrumentality because it was, as mentioned earlier,
merely incorporated under the Corporation Code. It
is
evident, from the peculiar circumstances surrounding its
incorporation, that the MECO was not intended to
operate as any other ordinary corporation. And it is not.
Despite its private origins, and perhaps deliberately so, the
MECO was "entrusted" by the government with the

"delicate and precarious" responsibility of pursuing

"unofficial" relations with the people of a foreign land
whose government the Philippines is bound not to
recognize. The intricacy involved in such undertaking is
the possibility that, at any given time in fulfilling the
purposes for which it was incorporated, the MECO may find
itself engaged in dealings or activities that can directly
contradict the Philippines commitment to the One China
policy of the PROC. Such a scenario can only truly be
avoided if the executive department exercises some form of
oversight, no matter how limited, over the operations of this
otherwise private entity. Indeed, from hindsight, it is clear
that the MECO is uniquely situated as compared with other
private corporations. From its over-reaching corporate
objectives, its special duty and authority to exercise certain
consular functions, up to the oversight by the executive
department over its operationsall the while maintaining its
legal status as a non-to the oversight by the executive
department over its operationsall the while maintaining its
legal status as a non-governmental entitythe MECO is, for
all intents and purposes, sui generis.

Case No 19
CIR vs Club Filipino
Facts:
The Club Filipino, is a civic corporation organized under the
laws of the Philippines with an original authorized capital
stock of P22,000, which was subsequently increased to
P200,000to operate and maintain a golf course, tennis,
gymnasiums, bowling alleys, billiard tables and pools, and all
sorts of games not prohibited by general laws and general
ordinances ,and develop and nurture sports of any kind and
any denomination for recreation and healthy training of its
members and shareholders" (sec. 2, Escritura de
Incorporacion(Deed of Incorporation) del Club Filipino, Inc.).
There is noprovision either in the articles or in the by-laws
relative to dividends and their distribution, although it is
covenanted that upon its dissolution, the Club's remaining

assets, after paying debts, shall be donated to a charitable

Phil. Institution in Cebu(Art. 27, Estatutos del (Statutes of
the) Club).
The Club owns and operates a club house, a bowling alley, a
golf course (on a lot leased from the government), and a barrestaurant where it sells wines and liquors, soft drinks, meals
and short orders to its members and their guests. The barrestaurant was a necessary incident to the operation of the
club and its golf-course. The club is operated mainly with
funds derived from membership fees and dues. Whatever
profits it had, were used to defray its overhead expenses and
to improve its golf-course. In 1951, as a result of a capital
surplus, arising from the re-valuation of its real properties,
the value or price of which increased, the Club declared stock
dividends; but no actual cash dividends were distributed to
the stockholders. In 1952, a BIR agent discovered that the
Club has never paid percentage tax on the gross receipts of
its bar and restaurant, although it secured licenses. In a
letter, the Collector assessed against and demanded from
the Club P12,068.84 as fixed and percentage taxes,
surcharge and compromise penalty. Also, the Collector
denied the Clubs request to cancel the assessment.
On appeal, the CTA reversed the Collector and ruled that the
Club is not liable for the assessed tax liabilities of P12,068.84
allegedly due from it as a keeper of bar and restaurant as it is
a non-stock corporation. Hence, the Collector filed the instant
petition for review.
ISSUE:
WON the Club is a stock corporation
HELD:
NO. It is a non-stock corporation. The facts that the capital
stock of the Club is divided into shares, does not detract from
the finding of the trial court that it is not engaged in the
business of operator of bar and restaurant.
What is determinative of whether or not the Club is engaged
in such business is its object or purpose, as stated in its
articles and by- laws.
The actual purpose is not controlled by the corporate form or
by the commercial aspect of the business prosecuted, but
maybe shown by extrinsic evidence, including the by-laws
and the method of operation. From the extrinsic evidence
adduced, the CTA concluded that the Club is not engaged in

the business as a bar keeper and restaurateur .For a stock

corporation to exist, two requisites must be complied with: 1.
a capital stock divided into shares and 2.an authority to
distribute to the holders of such shares, dividends or
allotments of the surplus profits on the basis of the shares
held (sec. 3, Act No. 1459).Nowhere in its articles of
incorporation or by-laws could be found an authority for the
distribution of its dividends or surplus profits. Strictly
speaking, it cannot, therefore, be considered a stock
corporation, within the contemplation of the corpo law
ISSUE:
WON the Club is liable for the payment of P12,068.84, as
fixed and percentage taxes and surcharges prescribed in
sec.182, 183 and 191 of the Tax Code, in connection with the
operation of its bar and restaurant; and for P500 as
compromise penalty.
HELD:
NO. A tax is a burden, and, as such, it should not be deemed
imposed upon fraternal, civic, non-profit, nonstock
organizations, unless the intent to the contrary is manifest
and patent" (Collector v. BPOE Elks Club, et al.), which is not
the case here. Having found as a fact that the Club was
organized to develop and cultivate sports of all class and
denomination, for the healthful recreation and entertainment
of its stockholders and members; that upon its dissolution, its
remaining assets, after paying debts, shall be donated to a
charitable Phil. Institution in Cebu; that it is operated mainly
with funds derived from membership fees and dues; that the
Club's bar and restaurant catered only to its members and
their guests; that there was in fact no cash dividend
distribution to its stockholders and that whatever was
derived on retail from its bar and restaurant was used to
defray its overall overhead expenses and to improve its golfcourse (cost-plus-expenses-basis), it stands to reason that
the Club is not engaged in the business of an operator of bar
and restaurant
Case No. 20
Concept Builders vs NLRC
[GR 108734, 29 May 1996]

Facts: Concept Builders, Inc., (CBI) a domestic corporation,

with principal office at 355 Maysan Road, Valenzuela, Metro
Manila, is engaged in the construction business while
Norberto Marabe; Rodolfo Raquel, Cristobal Riego, Manuel
Gillego, Palcronio Giducos, Pedro Aboigar, Norberto
Comendador, Rogelio Salut, Emilio Garcia, Jr., Mariano Rio,
Paulina Basea, Alfredo Albera, Paquito Salut, Domingo
Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana,
Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe
Basilan, and Ruben Robalos were employed by said company
as laborers, carpenters and riggers. On November 1981,
Marabe, et. al. were served individual written notices of
termination of employment by CBI, effective on 30 November
1981. It was stated in the individual notices that their
contracts of employment had expired and the project in
which they were hired had been completed. The National
Labor Relations Commission (NLRC) found it to be, the fact,
however, that at the time of the termination of Marabe,
et.al.'s employment, the project in which they were hired had
not yet been finished and completed. CBI had to engage the
services of sub-contractors whose workers performed the
functions of Marabe, et. al. Aggrieved, Marabe, et. al. filed a
complaint for illegal dismissal, unfair labor practice and nonpayment of their legal holiday pay, overtime pay and
thirteenth-month pay against CBI. On 19 December 1984, the
Labor Arbiter rendered judgment ordering CBI to reinstate
Marabe et. al. and to pay them back wages equivalent to 1
year or 300 working days. On 27 November 1985, the NLRC
dismissed the motion for reconsideration filed by CBI on the
ground that the said decision had already become final and
executory.
On 16 October 1986, the NLRC Research and Information
Department made the finding that Marabe, et. al.'s back
wages amounted to P199,800.00. On 29 October 1986, the
Labor Arbiter issued a writ of execution directing the sheriff
to execute the Decision, dated 19 December 1984. The writ
was partially satisfied through garnishment of sums from
CBI's debtor, the Metropolitan Waterworks and Sewerage
Authority, in the amount of P81,385.34. Said amount was
turned over to the cashier of the NLRC. On 1 February 1989,
an Alias Writ of Execution was issued by the Labor Arbiter
directing the sheriff to collect from CBI the sum of

P117,414.76, representing the balance of the judgment

award, and to reinstate Marabe, et. al. to their former
positions. On 13 July 1989, the sheriff issued a report stating
that he tried to serve the alias writ of execution on petitioner
through the security guard on duty but the service was
refused on the ground that CBI no longer occupied the
premises. On 26 September 1986, upon motion of Marabe,
et. al., the Labor Arbiter issued a second alias writ of
execution. The said writ had not been enforced by the special
sheriff because, as stated in his progress report dated 2
November 1989, that all the employees inside CBI's premises
claimed that they were employees of Hydro Pipes Philippines,
Inc. (HPPI) and not by CBI; that levy was made upon personal
properties he found in the premises; and that security guards
with high-powered guns prevented him from removing the
properties he had levied upon. The said special sheriff
recommended that a "break-open order" be issued to enable
him to enter CBI's premises so that he could proceed with the
public auction sale of the aforesaid personal properties on 7
November 1989. On 6 November 1989, a certain Dennis
Cuyegkeng filed a third-party claim with the Labor Arbiter
alleging that the properties sought to be levied upon by the
sheriff were owned by HPPI, of which he is the Vice-President.
On 23 November 1989, Marabe, et. al. filed a "Motion for
Issuance of a Break-Open Order," alleging that HPPI and CBI
were owned by the same incorporator/stockholders. They
also alleged that petitioner temporarily suspended its
business operations in order to evade its legal obligations to
them and that Marabe, et. al. were willing to post an
indemnity bond to answer for any damages which CBI and
HPPI may suffer because of the issuance of the break-open
order. On 2 March 1990, the Labor Arbiter issued an Order
which denied Marabe, et. al.'s motion for break-open order.
Marabe, et. al. then appealed to the NLRC. On 23 April 1992,
the NLRC set aside the order of the Labor Arbiter, issued a
break-open order and directed Marabe, et. al. to file a bond.
Thereafter, it directed the sheriff to proceed with the auction
sale of the properties already levied upon. It dismissed the
third-party claim for lack of merit. CBI moved for
reconsideration but the motion was denied by the NLRC in a
Resolution, dated 3 December 1992. Hence, the petition.

Issue: Whether the NLRC was correct in issuing the breakopen order to levy the HPPI properties located at CBI
amd/or HPPIs premises at 355 Maysan Road, Valenzuela,
Metro Manila.
Held: It is a fundamental principle of corporation law that a
corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be
connected. But, this separate and distinct personality of a
corporation is merely a fiction created by law for convenience
and to promote justice. So, when the notion of separate
juridical 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, this separate personality of
the corporation may be disregarded or the veil of corporate
fiction pierced. This is true likewise when the corporation is
merely an adjunct, a business conduit or an alter ego of
another corporation. The conditions under which the juridical
entity may be disregarded vary according to the peculiar
facts and circumstances of each case. No hard and fast rule
can be accurately laid down, but certainly, there are some
probative factors of identity that will justify the application of
the doctrine of piercing the corporate veil, to wit: (1) Stock
ownership by one or common ownership of both
corporations; (2) Identity of directors and officers; (3) The
manner of keeping corporate books and records; and (4)
Methods of conducting the business. The SEC en banc
explained the "instrumentality rule" which the courts have
applied in disregarding the separate juridical personality of
corporations as "Where one corporation is so organized and
controlled and its affairs are conducted so that it is, in fact, a
mere instrumentality or adjunct of the other, the fiction of
the corporate entity of the "instrumentality" may be
disregarded. The control necessary to invoke the rule is not
majority or even complete stock control but such domination
of instances, policies and practices that the controlled
corporation has, so to speak, no separate mind, will or
existence of its own, and is but a conduit for its principal. It
must be kept in mind that the control must be shown to have
been exercised at the time the acts complained of took place.
Moreover, the control and breach of duty must proximately
cause the injury or unjust loss for which the complaint is

made." The test in determining the applicability of the

doctrine of piercing the veil of corporate fiction is as (1)
Control, not mere majority or complete stock control, but
complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so
that the corporate entity as to this transaction had at the
time no separate mind, will or existence of its own; (2) Such
control must have been used by the defendant to commit
fraud or wrong, to perpetuate the violation of a statutory or
other positive legal duty or dishonest and unjust act in
contravention of plaintiff's legal rights; and (3) The aforesaid
control and breach of duty must proximately cause the injury
or unjust loss complained of. The absence of any one of these
elements prevents "piercing the corporate veil." In applying
the "instrumentality" or "alter ego" doctrine, the courts are
concerned with reality and not form, with how the
corporation operated and the individual defendant's
relationship to that operation. Thus the question of whether a
corporation is a mere alter ego, a mere sheet or paper
corporation, a sham or a subterfuge is purely one of fact.
Here, while CBI claimed that it ceased its business operations
on 29 April 1986, it filed an Information Sheet with the
Securities and Exchange Commission on 15 May 1987,
stating that its office address is at 355 Maysan Road,
Valenzuela, Metro Manila. On the other hand, HPPI, the thirdparty claimant, submitted on the same day, a similar
information sheet stating that its office address is at 355
Maysan Road, Valenzuela, Metro Manila. Further, both
information sheets were filed by the same Virgilio O. Casio
as the corporate secretary of both corporations. Both
corporations had the same president, the same board of
directors, the same corporate officers, and substantially the
same subscribers. From the foregoing, it appears that, among
other things, the CBI and the HPPI shared the same address
and/or premises. Under these circumstances, it cannot be
said that the property levied upon by the sheriff were not of
CBI's. Clearly, CBI ceased its business operations in order to
evade the payment to Marabe, et. al. of back wages and to
bar their reinstatement to their former positions. HPPI is
obviously a business conduit of CBI and its emergence was

skillfully orchestrated to avoid the financial liability that

already attached to CBI.
Case No 21
Kukan International vs Reyes
Case No 22
Naseco Guards Asso vs Naseco
Case No. 23
G Holdings vs Namawu
Facts:
NAMAWU was the exclusive bargaining agent of the rankand-file employees of Maricalum Mining Corporation (MMC),
an entity operating a copper mine and mill complex. MMC
was incorporated by the DBP and PNB on account of their
foreclosure of MMCs assets. Later, DBP and PNB transferred
it to the National Government for disposition or privatization
because it had become a non-performing asset. On October
1992, pursuant to a Purchase and Sale Agreement (PSA)
executed between petitioner and APT, petitioner brought
90% of MMCs shares and financial claims. Upon signing of
PSA and full satisfaction of the stipulated down payment,
petitioner immediately took physical possession of the mine
and its facilities and took full control of the management and
operation of MMC. Four years after, a labor dispute arose
between MMC and NAMAWU with the latter filing with the
NCMB of a notice of strike. LA ruled in favor of NAMAWU. It
ruled that the lay-off implement by MMC is illegal and it
committed ULP. On petition with this Court, we sustained the
decision of LA. A partial writ of execution was issued. The writ
was not fully satisfied because of MMCs resisted its
enforcement. On October 2002, GHI filed with RTC a Special
Civil Action for Contempt with issuance of TRO. GHI

contented that the property were subject of a Deed of Real

Estate and Chattel Mortgage executed MMC in favor of
petitioner. RTC issued a TRO. On appeal to CA, CA set aside
the RTC issuance of writ. Hence, this petition.
Issue:
Whether RTC can validly issued TRO to prevent the execution
issued by labor tribunal.
Ruling:
It is settled that a RTC can validly issue a TRO and, later, a
writ of preliminary injunction to prevent enforcement of a writ
of execution raised by a labor tribunal on the basis of a thirdpartys claim of ownership over the properties levied upon.
While, as a rule, no temporary or permanent injunction or
restraining order in any case involving or growing out of a
labor dispute shall be issued by any court where the writ of
execution issued by a labor tribunal is sought to be enforced
upon the property of a stranger to the labor dispute, even
upon a mere prima facie showing of ownership of such
claimant a separate action for injunctive relief against such
levy may be maintained in court, since said action neither
involves nor grows out of labor disputes insofar as the third
party is concerned.
Case No. 24
PEA-PGTWO vs. NLRC
Case No. 25
Heirs of Uy vs International Exchange Bank
Case No. 26
Lanuza, Jr. vs. BF Corporation
Case No. 27
WPM International vs Labayen