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THIRD DIVISION thus prayed that respondent allow petitioner to inspect its corporate book, render an accounting of all

t its corporate book, render an accounting of all the


transactions it entered into from 1962, and give petitioner all the profits, earnings, dividends, or income
JOSELITO MUSNI PUNO G.R. No. 177066
pertaining to the shares of Carlos L. Puno.[2]
(as heir of the late Carlos Puno),
Petitioner, Present:

YNARES-SANTIAGO, J., Respondent filed a motion to dismiss on the ground that petitioner did not have the legal
Chairperson, personality to sue because his birth certificate names him as Joselito Musni Muno. Apropos, there was
CHICO-NAZARIO,
- versus - VELASCO, JR., yet a need for a judicial declaration that Joselito Musni Puno and Joselito Musni Muno were one and the
NACHURA, and same.
PERALTA, JJ.

The court ordered that the proceedings be held in abeyance, ratiocinating that petitioners
PUNO ENTERPRISES, INC., represented by JESUSA Promulgated:
PUNO, certificate of live birth was no proof of his paternity and relation to Carlos L. Puno.
Respondent. September 11, 2009

x------------------------------------------------------------------------------------x Petitioner submitted the corrected birth certificate with the name Joselito M. Puno, certified by
the Civil Registrar of the City of Manila, and the Certificate of Finality thereof. To hasten the disposition
DECISION of the case, the court conditionally admitted the corrected birth certificate as genuine and authentic and

NACHURA, J.: ordered respondent to file its answer within fifteen days from the order and set the case for pretrial. [3]

Upon the death of a stockholder, the heirs do not automatically become stockholders of the On October 11, 2005, the court rendered a Decision, the dispositive portion of which reads:

corporation; neither are they mandatorily entitled to the rights and privileges of a stockholder. This, we
WHEREFORE, judgment is hereby rendered ordering Jesusa Puno and/or
declare in this petition for review on certiorari of the Court of Appeals (CA) Decision[1] dated October Felicidad Fermin to allow the plaintiff to inspect the corporate books and records of
11, 2006 and Resolution dated March 6, 2007 in CA-G.R. CV No. 86137. the company from 1962 up to the present including the financial statements of the
corporation.

The costs of copying shall be shouldered by the plaintiff. Any expenses to be


The facts of the case follow:
incurred by the defendant to be able to comply with this order shall be the subject of a
bill of costs.
Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno SO ORDERED.[4]
Enterprises, Inc. On March 14, 2003, petitioner Joselito Musni Puno, claiming to be an heir of Carlos L.
Puno, initiated a complaint for specific performance against respondent. Petitioner averred that he is the On appeal, the CA ordered the dismissal of the complaint in its Decision dated October 11, 2006.
son of the deceased with the latters common-law wife, Amelia Puno. As surviving heir, he claimed According to the CA, petitioner was not able to establish the paternity of and his filiation to Carlos L.
entitlement to the rights and privileges of his late father as stockholder of respondent. The complaint Puno since his birth certificate was prepared without the intervention of and the participatory
acknowledgment of paternity by Carlos L. Puno. Accordingly, the CA said that petitioner had no right Petitioner anchors his claim on his being an heir of the deceased stockholder. However, we
to demand that he be allowed to examine respondents books. Moreover, petitioner was not a stockholder agree with the appellate court that petitioner was not able to prove satisfactorily his filiation to the
of the corporation but was merely claiming rights as an heir of Carlos L. Puno, an incorporator of the deceased stockholder; thus, the former cannot claim to be an heir of the latter.
corporation. His action for specific performance therefore appeared to be premature; the proper action
to be taken was to prove the paternity of and his filiation to Carlos L. Puno in a petition for the settlement Incessantly, we have declared that factual findings of the CA supported by substantial evidence,
of the estate of the latter.[5] are conclusive and binding.[8] In an appeal via certiorari, the Court may not review the factual
findings of the CA. It is not the Courts function under Rule 45 of the Rules of Court to review, examine,
Petitioners motion for reconsideration was denied by the CA in its Resolution [6] dated March 6, 2007. and evaluate or weigh the probative value of the evidence presented. [9]

In this petition, petitioner raises the following issues: A certificate of live birth purportedly identifying the putative father is not competent evidence

I. THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING of paternity when there is no showing that the putative father had a hand in the preparation of the
THAT THE JOSELITO PUNO IS ENTITLED TO THE RELIEFS certificate. The local civil registrar has no authority to record the paternity of an illegitimate child on the
DEMANDED HE BEING THE HEIR OF THE LATE CARLOS PUNO,
ONE OF THE INCORPORATORS [OF] RESPONDENT CORPORATION. information of a third person.[10] As correctly observed by the CA, only petitioners mother supplied the
data in the birth certificate and signed the same. There was no evidence that Carlos L. Puno
II. HONORABLE COURT OF APPEALS ERRED IN RULING THAT
FILIATION OF JOSELITO PUNO, THE PETITIONER[,] IS NOT DULY acknowledged petitioner as his son.
PROVEN OR ESTABLISHED.

III. THE HONORABLE COURT ERRED IN NOT RULING THAT As for the baptismal certificate, we have already decreed that it can only serve as evidence of
JOSELITO MUNO AND JOSELITO PUNO REFERS TO THE ONE AND
the administration of the sacrament on the date specified but not of the veracity of the entries with respect
THE SAME PERSON.
to the childs paternity.[11]
IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING
THAT WHAT RESPONDENT MERELY DISPUTES IS THE SURNAME
OF THE PETITIONER WHICH WAS MISSPELLED AND THE In any case, Sections 74 and 75 of the Corporation Code enumerate the persons who are entitled
FACTUAL ALLEGATION E.G. RIGHTS OF PETITIONER AS HEIR OF
CARLOS PUNO ARE DEEMED ADMITTED HYPOTHETICALLY IN to the inspection of corporate books, thus
THE RESPONDENT[S] MOTION TO DISMISS.
Sec. 74. Books to be kept; stock transfer agent. x x x.
V. THE HONORABLE COURT OF APPEALS THEREFORE ERRED I[N]
DECREEING THAT PETITIONER IS NOT ENTITLED TO INSPECT The records of all business transactions of the corporation and the minutes of
THE CORPORATE BOOKS OF DEFENDANT CORPORATION.[7] any meeting shall be open to the inspection of any director, trustee, stockholder or
member of the corporation at reasonable hours on business days and he may demand,
in writing, for a copy of excerpts from said records or minutes, at his expense.

The petition is without merit. Petitioner failed to establish the right to inspect respondent xxxx

corporations books and receive dividends on the stocks owned by Carlos L. Puno. Sec. 75. Right to financial statements. Within ten (10) days from receipt of a
written request of any stockholder or member, the corporation shall furnish to him its
most recent financial statement, which shall include a balance sheet as of the end of
the last taxable year and a profit or loss of statement for said taxable year, showing in Corollary to this is the doctrine that a determination of whether a person, claiming proprietary
reasonable detail its assets and liabilities and the result of its operations. [12] rights over the estate of a deceased person, is an heir of the deceased must be ventilated in a special
proceeding instituted precisely for the purpose of settling the estate of the latter. The status of an
illegitimate child who claims to be an heir to a decedents estate cannot be adjudicated in an ordinary
The stockholders right of inspection of the corporations books and records is based upon his
civil action, as in a case for the recovery of property. [19] The doctrine applies to the instant case, which
ownership of shares in the corporation and the necessity for self-protection. After all, a shareholder has
is one for specific performance to direct respondent corporation to allow petitioner to exercise rights that
the right to be intelligently informed about corporate affairs. [13] Such right rests upon the stockholders
pertain only to the deceased and his representatives.
underlying ownership of the corporations assets and property. [14]

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision
Similarly, only stockholders of record are entitled to receive dividends declared by the
dated October 11, 2006 and Resolution dated March 6, 2007 are AFFIRMED.
corporation, a right inherent in the ownership of the shares. [15]

SO ORDERED.
Upon the death of a shareholder, the heirs do not automatically become stockholders of the
corporation and acquire the rights and privileges of the deceased as shareholder of the corporation. The
stocks must be distributed first to the heirs in estate proceedings, and the transfer of the stocks must be
recorded in the books of the corporation. Section 63 of the Corporation Code provides that no transfer
shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation.[16] During such interim period, the heirs stand as the equitable owners of the stocks, the
executor or administrator duly appointed by the court being vested with the legal title to the stock.[17]Until
a settlement and division of the estate is effected, the stocks of the decedent are held by the administrator
or executor.[18] Consequently, during such time, it is the administrator or executor who is entitled to
exercise the rights of the deceased as stockholder.

Thus, even if petitioner presents sufficient evidence in this case to establish that he is the son
of Carlos L. Puno, he would still not be allowed to inspect respondents books and be entitled to receive
dividends from respondent, absent any showing in its transfer book that some of the shares owned by
Carlos L. Puno were transferred to him. This would only be possible if petitioner has been recognized
as an heir and has participated in the settlement of the estate of the deceased.
EN BANC When CAMEC failed to pay despite the given extension, the bank, now referred to as the
AIIBP, discovered that TCT No. N-130671 was spurious, the property described therein non-
existent, and that the property covered by TCT No. C-52576 had a prior existing mortgage in
favor of one Divina Pablico.
[G.R. No. 141735. June 8, 2005]
On 08 June 1993, the Board of Directors of the AIIBP created an Investigating Committee
to look into the CAMEC transaction, which had cost the bank Six Million Pesos (P6,000,000.00)
in losses.[9] The subsequent events, as found and decided upon by the Court of Appeals, [10] are
as follows:
SAPPARI K. SAWADJAAN, petitioner, vs. THE HONORABLE COURT OF APPEALS, THE
CIVIL SERVICE COMMISSION and AL-AMANAH INVESTMENT BANK OF THE
PHILIPPINES, respondents. On 18 June 1993, petitioner received a memorandum from Islamic Bank [AIIBP] Chairman Roberto F.
De Ocampo charging him with Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and preventively suspending him.
DECISION
CHICO-NAZARIO, J.: In his memorandum dated 8 September 1993, petitioner informed the Investigating Committee that he
could not submit himself to the jurisdiction of the Committee because of its alleged partiality. For his
This is a petition for certiorari under Rule 65 of the Rules of Court of the Decision[1] of the failure to appear before the hearing set on 17 September 1993, after the hearing of 13 September 1993
Court of Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No. 95-2754 of the was postponed due to the Manifestation of even date filed by petitioner, the Investigating Committee
Civil Service Commission (CSC) dated 11 August 1994 and 11 April 1995, respectively, which declared petitioner in default and the prosecution was allowed to present its evidence ex parte.
in turn affirmed Resolution No. 2309 of the Board of Directors of the Al-Amanah Islamic
Investment Bank of the Philippines (AIIBP) dated 13 December 1993, finding petitioner guilty On 08 December 1993, the Investigating Committee rendered a decision, the pertinent portions of
of Dishonesty in the Performance of Official Duties and/or Conduct Prejudicial to the Best which reads as follows:
Interest of the Service and dismissing him from the service, and its Resolution [2] of 15
December 1999 dismissing petitioners Motion for Reconsideration. In view of respondent SAWADJAANS abject failure to perform his duties and assigned tasks as
appraiser/inspector, which resulted to the prejudice and substantial damage to the Bank, respondent
The records show that petitioner Sappari K. Sawadjaan was among the first employees
should be held liable therefore. At this juncture, however, the Investigating Committee is of the
of the Philippine Amanah Bank (PAB) when it was created by virtue of Presidential Decree No.
considered opinion that he could not be held liable for the administrative offense of dishonesty
264 on 02 August 1973. He rose through the ranks, working his way up from his initial
considering the fact that no evidence was adduced to show that he profited or benefited from being
designation as security guard, to settling clerk, bookkeeper, credit investigator, project analyst,
remiss in the performance of his duties. The record is bereft of any evidence which would show that he
appraiser/ inspector, and eventually, loans analyst.[3]
received any amount in consideration for his non-performance of his official duties.
In February 1988, while still designated as appraiser/investigator, Sawadjaan was
assigned to inspect the properties offered as collaterals by Compressed Air Machineries and This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure to perform
Equipment Corporation (CAMEC) for a credit line of Five Million Pesos (P5,000,000.00). The his official duties resulted to the prejudice and substantial damage to the Islamic Bank for which he
properties consisted of two parcels of land covered by Transfer Certificates of Title (TCTs) No. should be held liable for the administrative offense of CONDUCT PREJUDICIAL TO THE BEST
N-130671 and No. C-52576. On the basis of his Inspection and Appraisal Report,[4] the PAB INTEREST OF THE SERVICE.
granted the loan application. When the loan matured on 17 May 1989, CAMEC requested an
extension of 180 days, but was granted only 120 days to repay the loan.[5] Premises considered, the Investigating Committee recommends that respondent SAPPARI
In the meantime, Sawadjaan was promoted to Loans Analyst I on 01 July 1989. [6] SAWADJAAN be meted the penalty of SIX (6) MONTHS and ONE (1) DAY SUSPENSION from
office in accordance with the Civil Service Commissions Memorandum Circular No. 30, Series of
In January 1990, Congress passed Republic Act 6848 creating the AIIBP and repealing 1989.
P.D. No. 264 (which created the PAB). All assets, liabilities and capital accounts of the PAB
were transferred to the AIIBP,[7] and the existing personnel of the PAB were to continue to On 13 December 1993, the Board of Directors of the Islamic Bank [AIIBP] adopted Resolution No.
discharge their functions unless discharged.[8] In the ensuing reorganization, Sawadjaan was 2309 finding petitioner guilty of Dishonesty in the Performance of Official Duties and/or Conduct
among the personnel retained by the AIIBP. Prejudicial to the Best Interest of the Service and imposing the penalty of Dismissal from the Service.
On reconsideration, the Board of Directors of the Islamic Bank [AIIBP] adopted the Resolution No. provisions of this Charter as well as internal rules and regulations necessary for the conduct of its
2332 on 20 February 1994 reducing the penalty imposed on petitioner from dismissal to suspension for Islamic banking business and all matters related to personnel organization, office functions and salary
a period of six (6) months and one (1) day. administration. (Italics ours)

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

Respondent SAWADJAANs reprehensible act is further aggravated when he failed to check and verify
from the Registry of Deeds of Marikina the authenticity of the property located at Mayamot, Antipolo,
Rizal covered by TCT No. N-130671 and which is one of the properties offered as collateral by
CAMEC for its P5 Million loan in 1988. If he only visited and verified with the Register of Deeds of
Marikina the authenticity of TCT No. N-130671 he could have easily discovered that TCT No. N-
130671 is fake and the property described therein non-existent.

...

This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure to perform
his official duties resulted to the prejudice and substantial damage to the ISLAMIC BANK for which
he should be held liable for the administrative offense of CONDUCT PREJUDICIAL TO THE BEST
INTEREST OF THE SERVICE.[49]

From the foregoing, we find that the CSC and the court a quo committed no grave abuse
of discretion when they sustained Sawadjaans dismissal from service. Grave abuse of
discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of
jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner
by reason of passion or personal hostility, and it must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law.[50] The records show that the respondents did none of these; they acted
in accordance with the law.
WHEREFORE, the petition is DISMISSED. The Decision of the Court of Appeals of 30
March 1999 affirming Resolutions No. 94-4483 and No. 95-2754 of the Civil Service
Commission, and its Resolution of 15 December 1999 are hereby AFFIRMED. Costs against
the petitioner.
SO ORDERED.
Davide, Jr., C.J., Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,
Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, and Garcia,
JJ., concur.
Puno, J., on official leave.
EN BANC

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

Petitioner,
Present:
- versus -

CORONA, C.J.,

FINANCE SECRETARY MARGARITO B. CARPIO,


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

CHAIRMAN ANTHONI SALIM OF FIRST PERALTA,


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

In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the
remaining 54 percent of the outstanding capital stock of PTIC. On 20 November 2006, the Inter-
Agency Privatization Council (IPC) of the Philippine Government announced that it would sell the
111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public
bidding to be conducted on 4 December 2006. Subsequently, the public bidding was reset to 8
CARPIO, J.:
December 2006, and only two bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio
Capital, submitted their bids. Parallax won with a bid of P25.6 billion or US$510 million.

Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder
The Case and buy the 111,415 PTIC shares by matching the bid price of Parallax. However, First Pacific failed
to do so by the 1 February 2007 deadline set by IPC and instead, yielded its right to PTIC itself which
was then given by IPC until 2 March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific,
through its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415
This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with the Philippine
the sale of shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the Government for the price of P25,217,556,000 or US$510,580,189. The sale was completed on 28
government of the Republic of the Philippines to Metro Pacific Assets Holdings, Inc. (MPAH), an February 2007.
affiliate of First Pacific Company Limited (First Pacific).

Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of
The Antecedents 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
The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance
percent.3
Telephone Company (PLDT), are as follows:1

On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John
On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a
P. Sevilla, and PCGG Commissioner Ricardo Abcede allege the following relevant facts:
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 On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment
by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 shares of stock holdings. PTIC held 26,034,263 PLDT common shares, or 13.847 percent of the total PLDT
of PTIC held by PHI were sequestered by the Presidential Commission on Good Government (PCGG). outstanding common shares. PHI, on the other hand, was incorporated in 1977, and became the owner
The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of of 111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three
PTIC, were later declared by this Court to be owned by the Republic of the Philippines. 2 Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415
PTIC shares held by PHI were sequestered by the PCGG, and subsequently declared by this Court as
part of the ill-gotten wealth of former President Ferdinand Marcos. The sequestered PTIC shares
were reconveyed to the Republic of the Philippines in accordance with this Courts decision4 which On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief,
became final and executory on 8 August 2006. and declaration of nullity of sale of the 111,415 PTIC shares. Petitioner claims, among others, that the
sale of the 111,415 PTIC shares would result in an increase in First Pacifics common shareholdings in
The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMos common
the outstanding common shares of stock of PLDT, and designated the Inter-Agency Privatization shareholdings in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56
Council (IPC), composed of the Department of Finance and the PCGG, as the disposing entity. An percent which is over the 40 percent constitutional limit.6 Petitioner asserts:
invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20
November 2006, a pre-bid conference was held, and the original deadline for bidding scheduled on 4
December 2006 was reset to 8 December 2006. The extension was published in nine different
newspapers. If and when the sale is completed, First Pacifics equity in PLDT will go up from 30.7 percent
to 37.0 percent of its common or voting- stockholdings, x x x. Hence, the consummation of
the sale will put the two largest foreign investors in PLDT First Pacific and Japans
NTT DoCoMo, which is the worlds largest wireless telecommunications firm, owning 51.56
During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder percent of PLDT common equity. x x x With the completion of the sale, data culled from the
with a bid of P25,217,556,000. The government notified First Pacific, the majority owner of PTIC official website of the New York Stock Exchange (www.nyse.com) showed that those foreign
shares, of the bidding results and gave First Pacific until 1 February 2007 to exercise its right of first entities, which own at least five percent of common equity, will collectively own 81.47
refusal in accordance with PTICs Articles of Incorporation. First Pacific announced its intention to percent of PLDTs common equity. x x x
match Parallaxs bid.
x x x as the annual disclosure reports, also referred to as Form 20-K reports
x x x which PLDT submitted to the New York Stock Exchange for the
period 2003-2005, revealed that First Pacific and several other foreign
entities breached the constitutional limit of 40 percent ownership as early as
On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a
public hearing on the particulars of the then impending sale of the 111,415 PTIC shares. 2003. x x x7
Respondents Teves and Sevilla were among those who attended the public hearing. The HR
Committee Report No. 2270 concluded that: (a) the auction of the governments 111,415 PTIC shares
bore due diligence, transparency and conformity with existing legal procedures; and (b) First Pacifics
intended acquisition of the governments 111,415 PTIC shares resulting in First Pacifics 100% Petitioner raises the following issues: (1) whether the consummation of the then impending sale of
ownership of PTIC will not violate the 40 percent constitutional limit on foreign ownership of a 111,415 PTIC shares to First Pacific violates the constitutional limit on foreign ownership of a public
public utility since PTIC holds only 13.847 percent of the total outstanding common shares of utility; (2) whether public respondents committed grave abuse of discretion in allowing the sale of the
PLDT.5 On 28 February 2007, First Pacific completed the acquisition of the 111,415 shares of stock of 111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to foreigners in
PTIC. excess of 40 percent of the entire subscribed common capital stock violates the constitutional limit on
foreign ownership of a public utility.8

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding
for the sale of 111,415 PTIC shares or 46 percent of the outstanding capital stock of PTIC (the On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene
remaining 54 percent of PTIC shares was already owned by First Pacific and its affiliates); (b) Parallax and Admit Attached Petition-in-Intervention. In the Resolution of 28 August 2007, the Court granted
offered the highest bid amounting to P25,217,556,000; (c) pursuant to the right of first refusal in favor the motion and noted the Petition-in-Intervention.
of PTIC and its shareholders granted in PTICs Articles of Incorporation, MPAH, a First Pacific
affiliate, exercised its right of first refusal by matching the highest bid offered for PTIC shares on 13
February 2007; and (d) on 28 February 2007, the sale was consummated when MPAH paid
IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares. Petitioners-in-intervention join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin
Respondent Pangilinan denies the other allegations of facts of petitioner. and/or nullify the sale by respondents of the 111,415 PTIC shares to First Pacific or assignee.
Petitioners-in-intervention claim that, as PLDT subscribers, they have a stake in the outcome of the
controversy x x x where the Philippine Government is completing the sale of government owned assets
in [PLDT], unquestionably a public utility, in violation of the nationality restrictions of the Philippine While direct resort to this Court may be justified in a petition for prohibition, 11 the Court shall
Constitution. nevertheless refrain from discussing the grounds in support of the petition for prohibition since on 28
February 2007, the questioned sale was consummated when MPAH paid IPC P25,217,556,000 and the
government delivered the certificates for the 111,415 PTIC shares.

The Issue However, since the threshold and purely legal issue on the definition of the term capital in Section 11,
Article XII of the Constitution has far-reaching implications to the national economy, the Court treats
the petition for declaratory relief as one for mandamus. 12

In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for declaratory relief as
This Court is not a trier of facts. Factual questions such as those raised by petitioner, 9 which
one for mandamus considering the grave injustice that would result in the interpretation of a banking
indisputably demand a thorough examination of the evidence of the parties, are generally beyond this
Courts jurisdiction. Adhering to this well-settled principle, the Court shall confine the resolution of the law. In that case, which involved the crime of rape committed by a foreign tourist against a Filipino
instant controversy solely on the threshold and purely legal issue of whether the term capital in minor and the execution of the final judgment in the civil case for damages on the tourists dollar
deposit with a local bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting
Section 11, Article XII of the Constitution refers to the total common shares only or to the total
foreign currency deposits from attachment, garnishment or any other order or process of any court,
outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a
inapplicable due to the peculiar circumstances of the case. The Court held that injustice would result
public utility.
especially to a citizen aggrieved by a foreign guest like accused x x x that would negate Article 10 of
the Civil Code which provides that in case of doubt in the interpretation or application of laws, it is
presumed that the lawmaking body intended right and justice to prevail. The Court therefore required
respondents Central Bank of the Philippines, the local bank, and the accused to comply with the writ of
The Ruling of the Court execution issued in the civil case for damages and to release the dollar deposit of the accused to satisfy
the judgment.

The petition is partly meritorious.


In Alliance of Government Workers v. Minister of Labor,14 the Court similarly brushed aside the
procedural infirmity of the petition for declaratory relief and treated the same as one for mandamus.
In Alliance, the issue was whether the government unlawfully excluded petitioners, who were
Petition for declaratory relief treated as petition for mandamus government employees, from the enjoyment of rights to which they were entitled under the law.
Specifically, the question was: Are the branches, agencies, subdivisions, and instrumentalities of the
Government, including government owned or controlled corporations included among the four
employers under Presidential Decree No. 851 which are required to pay their employees x x x a
thirteenth (13th) month pay x x x ? The Constitutional principle involved therein affected all
At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only government employees, clearly justifying a relaxation of the technical rules of procedure, and certainly
the petition for prohibition is within the original jurisdiction of this court, which however is not requiring the interpretation of the assailed presidential decree.
exclusive but is concurrent with the Regional Trial Court and the Court of Appeals. The actions for
declaratory relief,10 injunction, and annulment of sale are not embraced within the original jurisdiction
of the Supreme Court. On this ground alone, the petition could have been dismissed outright.
In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus
if the issue involved has far-reaching implications. As this Court held in Salvacion:
country deserve, as a matter of basic fairness, a categorical ruling from this Court on the extent of their
participation in the capital of public utilities and other nationalized businesses.
The Court has no original and exclusive jurisdiction over a petition for declaratory
relief. However, exceptions to this rule have been recognized. Thus, where the petition
has far-reaching implications and raises questions that should be resolved, it may be
treated as one for mandamus.15 (Emphasis supplied) Despite its far-reaching implications to the national economy, this purely legal issue has remained
unresolved for over 75 years since the 1935 Constitution. There is no reason for this Court to evade
this ever recurring fundamental issue and delay again defining the term capital, which appears not only
in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production and
joint venture agreements for the development of our natural resources,19 in Section 7, Article XII on
ownership of private lands,20 in Section 10, Article XII on the reservation of certain investments to
In the present case, petitioner seeks primarily the interpretation of the term capital in Section 11, Filipino citizens,21 in Section 4(2), Article XIV on the ownership of educational institutions, 22 and in
Article XII of the Constitution. He prays that this Court declare that the term capital refers to common Section 11(2), Article XVI on the ownership of advertising companies. 23
shares only, and that such shares constitute the sole basis in determining foreign equity in a public
utility. Petitioner further asks this Court to declare any ruling inconsistent with such interpretation
unconstitutional.

Petitioner has locus standi


The interpretation of the term capital in Section 11, Article XII of the Constitution has far-reaching
implications to the national economy. In fact, a resolution of this issue will determine whether
Filipinos are masters, or second class citizens, in their own country. What is at stake here is whether
Filipinos or foreigners will have effective control of the national economy. Indeed, if ever there is a There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the
legal issue that has far-reaching implications to the entire nation, and to future generations of Filipinos, subject sale, which he claims to violate the nationality requirement prescribed in Section 11, Article
it is the threshhold legal issue presented in this case. XII of the Constitution. If the sale indeed violates the Constitution, then there is a possibility that
PLDTs franchise could be revoked, a dire consequence directly affecting petitioners interest as a
stockholder.

The Court first encountered the issue on the definition of the term capital in Section 11, Article XII of
the Constitution in the case of Fernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case
involved the same public utility (PLDT) and substantially the same private respondents. Despite the More importantly, there is no question that the instant petition raises matters of transcendental
importance and novelty of the constitutional issue raised therein and despite the fact that the petition importance to the public. The fundamental and threshold legal issue in this case, involving the national
involved a purely legal question, the Court declined to resolve the case on the merits, and instead economy and the economic welfare of the Filipino people, far outweighs any perceived impediment in
denied the same for disregarding the hierarchy of courts.17 There, petitioner Fernandez assailed on a the legal personality of the petitioner to bring this action.
pure question of law the Regional Trial Courts Decision of 21 February 2003 via a petition for review
under Rule 45. The Courts Resolution, denying the petition, became final on 21 December 2004.

The instant petition therefore presents the Court with another opportunity to finally settle this purely
In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of
legal issue which is of transcendental importance to the national economy and a fundamental
transcendental importance to the public, thus:
requirement to a faithful adherence to our Constitution. The Court must forthwith seize such
opportunity, not only for the benefit of the litigants, but more significantly for the benefit of the entire
Filipino people, to ensure, in the words of the Constitution, a self-reliant and independent national
economy effectively controlled by Filipinos.18 Besides, in the light of vague and confusing positions
taken by government agencies on this purely legal issue, present and future foreign investors in this In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of
mandamus is to obtain the enforcement of a public duty, the people are regarded as the real
parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested or associations organized under the laws of the Philippines, at least sixty per centum of
in the execution of the laws, he need not show that he has any legal or special interest in the whose capital is owned by such citizens; nor shall such franchise, certificate, or
result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed authorization be exclusive in character or for a longer period than fifty years. Neither shall
on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, any such franchise or right be granted except under the condition that it shall be subject to
in connection with the rule that laws in order to be valid and enforceable must be published in the amendment, alteration, or repeal by the Congress when the common good so requires. The
Official Gazette or otherwise effectively promulgated. In ruling for the petitioners legal standing, the State shall encourage equity participation in public utilities by the general public. The
Court declared that the right they sought to be enforced is a public right recognized by no less than the participation of foreign investors in the governing body of any public utility enterprise shall
fundamental law of the land. 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
Legaspi v. Civil Service Commission, while reiterating Taada, further declared that when a mandamus supplied)
proceeding involves the assertion of a public right, the requirement of personal interest is
satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general public
which possesses the right.

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been
involved under the questioned contract for the development, management and operation of the Manila The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus:
International Container Terminal, public interest [was] definitely involved considering the
important role [of the subject contract] . . . in the economic development of the country and the
magnitude of the financial consideration involved. We concluded that, as a consequence, the
disclosure provision in the Constitution would constitute sufficient authority for upholding the
petitioners standing. (Emphasis supplied) Section 5. No franchise, certificate, or any other form of authorization for the operation
of a public utility shall be granted except to citizens of the Philippines or to corporations
or associations organized under the laws of the Philippines at least sixty per centum of
the capital of which is owned by such citizens, nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty years. Neither shall
Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public any such franchise or right be granted except under the condition that it shall be subject to
importance, the petitioner has the requisite locus standi. amendment, alteration, or repeal by the National Assembly when the public interest so
requires. The State shall encourage equity participation in public utilities by the general
public. The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in the capital thereof. (Emphasis
Definition of the Term Capital in supplied)

Section 11, Article XII of the 1987 Constitution

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates
the Filipinization of public utilities, to wit:
The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935
Constitution, viz:

Section 11. No franchise, certificate, or any other form of authorization for the operation Section 8. No franchise, certificate, or any other form of authorization for the operation
of a public utility shall be granted except to citizens of the Philippines or to corporations of a public utility shall be granted except to citizens of the Philippines or to corporations
or other entities organized under the laws of the Philippines sixty per centum of the directors. It is undisputed that PLDTs non-voting preferred shares are held mostly by Filipino
capital of which is owned by citizens of the Philippines, nor shall such franchise, citizens.30 This arose from Presidential Decree No. 217,31 issued on 16 June 1973 by then President
certificate, or authorization be exclusive in character or for a longer period than fifty years. Ferdinand Marcos, requiring every applicant of a PLDT telephone line to subscribe to non-voting
No franchise or right shall be granted to any individual, firm, or corporation, except under the preferred shares to pay for the investment cost of installing the telephone line. 32
condition that it shall be subject to amendment, alteration, or repeal by the Congress when the
public interest so requires. (Emphasis supplied)

Petitioners-in-intervention basically reiterate petitioners arguments and adopt petitioners definition of


the term capital.33 Petitioners-in-intervention allege that the approximate foreign ownership of
common capital stock of PLDT x x x already amounts to at least 63.54% of the total outstanding
common stock, which means that foreigners exercise significant control over PLDT, patently violating
Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us the 40 percent foreign equity limitation in public utilities prescribed by the Constitution.
that the Filipinization provision in the 1987 Constitution is one of the products of the spirit of
nationalism which gripped the 1935 Constitutional Convention. 25 The 1987 Constitution provides for
the Filipinization of public utilities by requiring that any form of authorization for the operation of
public utilities should be granted only to citizens of the Philippines or to corporations or associations Respondents, on the other hand, do not offer any definition of the term capital in Section 11, Article
organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such XII of the Constitution. More importantly, private respondents Nazareno and Pangilinan of PLDT do
citizens. The provision is [an express] recognition of the sensitive and vital position of public not dispute that more than 40 percent of the common shares of PLDT are held by foreigners.
utilities both in the national economy and for national security. 26 The evident purpose of the
citizenship requirement is to prevent aliens from assuming control of public utilities, which may be
inimical to the national interest.27 This specific provision explicitly reserves to Filipino citizens control
of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to conserve and
develop our patrimony28 and ensure a self-reliant and independent national In particular, respondent Nazarenos Memorandum, consisting of 73 pages, harps mainly on the
economy effectively controlled by Filipinos.29 procedural infirmities of the petition and the supposed violation of the due process rights of the
affected foreign common shareholders. Respondent Nazareno does not deny petitioners allegation of
foreigners dominating the common shareholdings of PLDT. Nazarenostressed mainly that the
petition seeks to divest foreign common shareholders purportedly exceeding 40% of the total
common shareholdings in PLDT of their ownership over their shares. Thus, the foreign natural
Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum and juridical PLDT shareholders must be impleaded in this suit so that they can be
nationality requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a heard.34 Essentially, Nazareno invokes denial of due process on behalf of the foreign common
corporation to be granted authority to operate a public utility, at least 60 percent of its capital must be shareholders.
owned by Filipino citizens.

While Nazareno does not introduce any definition of the term capital, he states that among the factual
The crux of the controversy is the definition of the term capital. Does the term capital in Section 11, assertions that need to be established to counter petitioners allegations is the uniform
Article XII of the Constitution refer to common shares or to the total outstanding capital stock interpretation by government agencies (such as the SEC), institutions and corporations (such as
(combined total of common and non-voting preferred shares)? the Philippine National Oil Company-Energy Development Corporation or PNOC-EDC) of
including both preferred shares and common shares in controlling interest in view of testing
compliance with the 40% constitutional limitation on foreign ownership in public utilities. 35

Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only
to common shares because such shares are entitled to vote and it is through voting that control over a
corporation is exercised. Petitioner posits that the term capital in Section 11, Article XII of the Similarly, respondent Manuel V. Pangilinan does not define the term capital in Section 11, Article XII
Constitution refers to the ownership of common capital stock subscribed and outstanding, which class of the Constitution. Neither does he refute petitioners claim of foreigners holding more than 40 percent
of shares alone, under the corporate set-up of PLDT, can vote and elect members of the board of
of PLDTs common shares. Instead, respondent Pangilinan focuses on the procedural flaws of the The forty percent (40%) foreign equity limitation in public utilities prescribed by the
petition and the alleged violation of the due process rights of foreigners. Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares,
Respondent Pangilinan emphasizes in his Memorandum (1) the absence of this Courts jurisdiction over considering that it is through voting that control is being exercised. x x x
the petition; (2) petitioners lack of standing; (3) mootness of the petition; (4) non-availability of
declaratory relief; and (5) the denial of due process rights. Moreover, respondent Pangilinan alleges
that the issue should be whether owners of shares in PLDT as well as owners of shares in companies
holding shares in PLDT may be required to relinquish their shares in PLDT and in those companies
Obviously, the intent of the framers of the Constitution in imposing limitations and
without any law requiring them to surrender their shares and also without notice and trial. restrictions on fully nationalized and partially nationalized activities is for Filipino nationals
to be always in control of the corporation undertaking said activities. Otherwise, if the Trial
Courts ruling upholding respondents arguments were to be given credence, it would be
possible for the ownership structure of a public utility corporation to be divided into one
Respondent Pangilinan further asserts that Section 11, [Article XII of the Constitution] imposes no percent (1%) common stocks and ninety-nine percent (99%) preferred stocks. Following the
nationality requirement on the shareholders of the utility company as a condition for keeping Trial Courts ruling adopting respondents arguments, the common shares can be owned
their shares in the utility company. According to him, Section 11 does not authorize taking one entirely by foreigners thus creating an absurd situation wherein foreigners, who are supposed
persons property (the shareholders stock in the utility company) on the basis of another partys alleged to be minority shareholders, control the public utility corporation.
failure to satisfy a requirement that is a condition only for that other partys retention of another piece
of property (the utility company being at least 60% Filipino-owned to keep its franchise).36

xxxx

The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla,
Commissioner Ricardo Abcede, and Chairman Fe Barin, is likewise silent on the definition of the term
capital. In its Memorandum37 dated 24 September 2007, the OSG also limits its discussion on the Thus, the 40% foreign ownership limitation should be interpreted to apply to both the
supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of
beneficial ownership and the controlling interest.
interested parties, and lack of basis for injunction. The OSG does not present any definition or
interpretation of the term capital in Section 11, Article XII of the Constitution. The OSG contends that
the petition actually partakes of a collateral attack on PLDTs franchise as a public utility, which in
effect requires a full-blown trial where all the parties in interest are given their day in court. 38
xxxx

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine
Stock Exchange (PSE), does not also define the term capital and seeks the dismissal of the petition on Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities
the following grounds: (1) failure to state a cause of action against Lim; (2) the PSE allegedly prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e.,
implemented its rules and required all listed companies, including PLDT, to make proper and timely common shares. Furthermore, ownership of record of shares will not suffice but it must be
disclosures; and (3) the reliefs prayed for in the petition would adversely impact the stock market. 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
In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of
admitted, there is, therefore, a violation of Section 11, Article XII of the Constitution.
record of PLDT, contended that the term capital in the 1987 Constitution refers to shares entitled to
vote or the common shares. Fernandez explained thus:
Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial
Court to support the proposition that the meaning of the word capital as used in Section 11,
Article XII of the Constitution allegedly refers to the sum total of the shares subscribed and
paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether equity only on the basis of PLDTs outstanding common shares is without legal basis. The
as common or preferred, cannot stand in the face of a clear legislative policy as stated in the language of the Constitution should be understood in the sense it has in common use.
FIA which took effect in 1991 or way after said opinions were rendered, and as clarified by
the above-quoted Amendments. In this regard, suffice it to state that as between the law and xxxx
an opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said
Opinions are merely advisory and cannot prevail over the clear intent of the framers of the
Constitution.
17. But even assuming that resort to the proceedings of the Constitutional Commission is
necessary, there is nothing in the Record of the Constitutional Commission (Vol. III) which
petitioner misleadingly cited in the Petition x x x which supports petitioners view that only
In the same vein, the SECs construction of Section 11, Article XII of the Constitution is at common shares should form the basis for computing a public utilitys foreign equity.
best merely advisory for it is the courts that finally determine what a law means. 39
xxxx

18. In addition, the SEC the government agency primarily responsible for implementing the
On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Corporation Code, and which also has the responsibility of ensuring compliance with the
Arellano, Helen Y. Dee, Magdangal B. Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray Constitutions foreign equity restrictions as regards nationalized activities x x x has
C. Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando B. Vea, argued that the term categorically ruled that both common and preferred shares are properly considered in
capital in Section 11, Article XII of the Constitution includes preferred shares since the Constitution determining outstanding capital stock and the nationality composition thereof. 40
does not distinguish among classes of stock, thus:

16. The Constitution applies its foreign ownership limitation on the corporations capital, without
distinction as to classes of shares. x x x
We agree with petitioner and petitioners-in-intervention. The term capital in Section 11, Article XII of
the Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in
the present case only to common shares,41 and not to the total outstanding capital stock comprising
both common and non-voting preferred shares.
In this connection, the Corporation Code which was already in force at the time the present
(1987) Constitution was drafted defined outstanding capital stock as follows: The Corporation Code of the Philippines42 classifies shares as common or preferred, thus:

Section 137. Outstanding capital stock defined. The term outstanding capital stock, as used in Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided
this Code, means the total shares of stock issued under binding subscription agreements to into classes or series of shares, or both, any of which classes or series of shares may have such
subscribers or stockholders, whether or not fully or partially paid, except treasury shares. rights, privileges or restrictions as may be stated in the articles of incorporation:
Provided, That no share may be deprived of voting rights except those classified and
issued as preferred or redeemable shares, unless otherwise provided in this Code:
Provided, further, That there shall always be a class or series of shares which have complete
Section 137 of the Corporation Code also does not distinguish between common and preferred voting rights. Any or all of the shares or series of shares may have a par value or have no par
shares, nor exclude either class of shares, in determining the outstanding capital stock (the value as may be provided for in the articles of incorporation: Provided, however, That banks,
capital) of a corporation. Consequently, petitioners suggestion to reckon PLDTs foreign
trust companies, insurance companies, public utilities, and building and loan associations 7. Investment of corporate funds in another corporation or business in accordance
shall not be permitted to issue no-par value shares of stock. with this Code; and

Preferred shares of stock issued by any corporation may be given preference in the 8. Dissolution of the corporation.
distribution of the assets of the corporation in case of liquidation and in the distribution of
dividends, or such other preferences as may be stated in the articles of incorporation which Except as provided in the immediately preceding paragraph, the vote necessary to approve a
are not violative of the provisions of this Code: Provided, That preferred shares of stock may particular corporate act as provided in this Code shall be deemed to refer only to stocks with
be issued only with a stated par value. The Board of Directors, where authorized in the voting rights.
articles of incorporation, may fix the terms and conditions of preferred shares of stock or any
series thereof: Provided, That such terms and conditions shall be effective upon the filing of a
certificate thereof with the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable
and the holder of such shares shall not be liable to the corporation or to its creditors in respect
thereto: Provided; That shares without par value may not be issued for a consideration less Indisputably, one of the rights of a stockholder is the right to participate in the control or management
than the value of five (P5.00) pesos per share: Provided, further, That the entire consideration of the corporation.43 This is exercised through his vote in the election of directors because it is the
received by the corporation for its no-par value shares shall be treated as capital and shall not board of directors that controls or manages the corporation. 44 In the absence of provisions in the
be available for distribution as dividends. 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
A corporation may, furthermore, classify its shares for the purpose of insuring compliance
the preferred shareholders are merely investors in the corporation for income in the same manner as
with constitutional or legal requirements.
bondholders.45 In fact, under the Corporation Code only preferred or redeemable shares can be
deprived of the right to vote.46 Common shares cannot be deprived of the right to vote in any corporate
Except as otherwise provided in the articles of incorporation and stated in the certificate of meeting, and any provision in the articles of incorporation restricting the right of common shareholders
stock, each share shall be equal in all respects to every other share. to vote is invalid.47

Where the articles of incorporation provide for non-voting shares in the cases allowed by this
Code, the holders of such shares shall nevertheless be entitled to vote on the following
matters:
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
1. Amendment of the articles of incorporation; 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
2. Adoption and amendment of by-laws; 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
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially only to shares of stock that can vote in the election of directors.
all of the corporate property;

4. Incurring, creating or increasing bonded indebtedness;


This interpretation is consistent with the intent of the framers of the Constitution to place in the hands
5. Increase or decrease of capital stock; of Filipino citizens the control and management of public utilities. As revealed in the deliberations of
the Constitutional Commission, capital refers to the voting stock or controlling interest of a
6. Merger or consolidation of the corporation with another corporation or other corporation, to wit:
corporations;
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and
foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15.
MR. NOLLEDO. Therefore, we need additional Filipino capital?

MR. VILLEGAS. That is right.


MR. VILLEGAS. Yes.48

MR. NOLLEDO. In teaching law, we are always faced with this question: Where do we base
the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or xxxx
on the paid-up capital stock of a corporation? Will the Committee please enlighten me on
this?
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.

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

MR. AZCUNA. Hence, without the Davide amendment, the committee report would read:
MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared
corporations or associations at least sixty percent of whose CAPITAL is owned by such
delinquent, unpaid capital stock shall be entitled to vote. citizens.

MR. VILLEGAS. That is right. MR. VILLEGAS. Yes.

MR. NOLLEDO. Thank you. MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the
capital to be owned by citizens.

With respect to an investment by one corporation in another corporation, say, a corporation


with 60-40 percent equity invests in another corporation which is permitted by the
MR. VILLEGAS. That is right.
Corporation Code, does the Committee adopt the grandfather rule?

MR. AZCUNA. But the control can be with the foreigners even if they are the minority.
MR. VILLEGAS. Yes, that is the understanding of the Committee.
Let us say 40 percent of the capital is owned by them, but it is the voting capital,
whereas, the Filipinos own the nonvoting shares. So we can have a situation where the
corporation is controlled by foreigners despite being the minority because they have the members of the Board of Directors of each of both corporations must be citizens of the
voting capital. That is the anomaly that would result here. Philippines, in order that the corporation, shall be considered a Philippine national. (Emphasis
supplied)

MR. BENGZON. No, the reason we eliminated the word stock as stated in the 1973 and
1935 Constitutions is that according to Commissioner Rodrigo, there are associations In explaining the definition of a Philippine national, the Implementing Rules and Regulations of the
that do not have stocks. That is why we say CAPITAL. Foreign Investments Act of 1991 provide:

MR. AZCUNA. We should not eliminate the phrase controlling interest. b. Philippine national shall mean a citizen of the Philippines or a domestic partnership or
association wholly owned by the citizens of the Philippines; or a corporation organized
under the laws of the Philippines of which at least sixty percent [60%] of the capital
stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or
MR. BENGZON. In the case of stock corporations, it is assumed.49 (Emphasis supplied) a trustee of funds for pension or other employee retirement or separation benefits, where the
trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the
benefit of the Philippine nationals; Provided,that where a corporation its non-Filipino
stockholders own stocks in a Securities and Exchange Commission [SEC] registered
enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of
both corporations must be owned and held by citizens of the Philippines and at least sixty
percent [60%] of the members of the Board of Directors of each of both corporation must be
Thus, 60 percent of the capital assumes, or should result in, controlling interest in the corporation. citizens of the Philippines, in order that the corporation shall be considered a Philippine
Reinforcing this interpretation of the term capital, as referring to controlling interest or shares entitled national. The control test shall be applied for this purpose.
to vote, is the definition of a Philippine national in the Foreign Investments Act of 1991, 50 to wit:

Compliance with the required Filipino ownership of a corporation shall be determined


SEC. 3. Definitions. - As used in this Act: on the basis of outstanding capital stock whether fully paid or not, but only such stocks
which are generally entitled to vote are considered.

a. The term Philippine national shall mean a citizen of the Philippines; or a domestic
partnership or association wholly owned by citizens of the Philippines; or a corporation For stocks to be deemed owned and held by Philippine citizens or Philippine nationals,
organized under the laws of the Philippines of which at least sixty percent (60%) of the mere legal title is not enough to meet the required Filipino equity. Full beneficial
capital stock outstanding and entitled to vote is owned and held by citizens of the ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks,
Philippines; or a corporation organized abroad and registered as doing business in the the voting rights of which have been assigned or transferred to aliens cannot be
Philippines under the Corporation Code of which one hundred percent (100%) of the capital considered held by Philippine citizens or Philippine nationals.
stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for
pension or other employee retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine
nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in Individuals or juridical entities not meeting the aforementioned qualifications are
a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent considered as non-Philippine nationals. (Emphasis supplied)
(60%) of the capital stock outstanding and entitled to vote of each of both corporations must
be owned and held by citizens of the Philippines and at least sixty percent (60%) of the
In the example given, only the foreigners holding the common shares have voting rights in the election
of directors, even if they hold only 100 shares. The foreigners, with a minuscule equity of less than
0.001 percent, exercise control over the public utility. On the other hand, the Filipinos, holding more
than 99.999 percent of the equity, cannot vote in the election of directors and hence, have no control
over the public utility. This starkly circumvents the intent of the framers of the Constitution, as well as
Mere legal title is insufficient to meet the 60 percent Filipino-owned capital required in the
the clear language of the Constitution, to place the control of public utilities in the hands of Filipinos. It
Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60
also renders illusory the State policy of an independent national economy effectively controlled by
percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the
outstanding capital stock must rest in the hands of Filipino nationals in accordance with the Filipinos.
constitutional mandate. Otherwise, the corporation is considered as non-Philippine national[s].

The example given is not theoretical but can be found in the real world, and in fact exists in the
Under Section 10, Article XII of the Constitution, Congress may reserve to citizens of the Philippines present case.
or to corporations or associations at least sixty per centum of whose capital is owned by such citizens,
or such higher percentage as Congress may prescribe, certain areas of investments. Thus, in numerous
laws Congress has reserved certain areas of investments to Filipino citizens or to corporations at least
sixty percent of the capital of which is owned by Filipino citizens. Some of these laws are: (1) Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors.
Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives PLDTs Articles of Incorporation expressly state that the holders of Serial Preferred Stock shall not
Act or R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; be entitled to vote at any meeting of the stockholders for the election of directors or for any other
(4) Philippine Overseas Shipping Development Act or R.A. No. 7471; (5) Domestic Shipping purpose or otherwise participate in any action taken by the corporation or its stockholders, or to
Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. receive notice of any meeting of stockholders.51
No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term capital in Section 11,
Article XII of the Constitution is also used in the same context in numerous lawsreserving certain
areas of investments to Filipino citizens.
On the other hand, holders of common shares are granted the exclusive right to vote in the election of
directors. PLDTs Articles of Incorporation52 state that each holder of Common Capital Stock shall
have one vote in respect of each share of such stock held by him on all matters voted upon by the
To construe broadly the term capital as the total outstanding capital stock, including both common stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for
and non-voting preferred shares, grossly contravenes the intent and letter of the Constitution that the the election of directors and for all other purposes.53
State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.
A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily
equates to control of the public utility.
In short, only holders of common shares can vote in the election of directors, meaning only common
shareholders exercise control over PLDT. Conversely, holders of preferred shares, who have no voting
rights in the election of directors, do not have any control over PLDT. In fact, under PLDTs Articles of
We shall illustrate the glaring anomaly in giving a broad definition to the term capital. Let us assume Incorporation, holders of common shares have voting rights for all purposes, while holders of preferred
that a corporation has 100 common shares owned by foreigners and 1,000,000 non-voting preferred shares have no voting right for any purpose whatsoever.
shares owned by Filipinos, with both classes of share having a par value of one peso (P1.00) per share.
Under the broad definition of the term capital, such corporation would be considered compliant with
the 40 percent constitutional limit on foreign equity of public utilities since the overwhelming
majority, or more than 99.999 percent, of the total outstanding capital stock is Filipino owned. This is It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common
obviously absurd. shares of PLDT. In fact, based on PLDTs 2010 General Information Sheet (GIS),54which is a
document required to be submitted annually to the Securities and Exchange Commission, 55 foreigners
hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common
shares.56 In other words, foreigners hold 64.27% of the total number of PLDTs common shares, while To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises
Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is the sole right to vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos
clear that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the own only 35.73% of PLDTs common shares, constituting a minority of the voting stock, and thus do
allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting
Article XII of the Constitution. rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn;63 (5) preferred
shares have twice the par value of common shares; and (6) preferred shares constitute 77.85% of the
authorized capital stock of PLDT and common shares only 22.15%. This kind of ownership and
control of a public utility is a mockery of the Constitution.
Moreover, the Dividend Declarations of PLDT for 2009,57 as submitted to the SEC, shows that per
share the SIP58 preferred shares earn a pittance in dividends compared to the common shares. PLDT
declared dividends for the common shares at P70.00 per share, while the declared dividends for the
preferred shares amounted to a measly P1.00 per share.59 So the preferred shares not only cannot vote Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current stock market
in the election of directors, they also have very little and obviously negligible dividend earning value of P2,328.00 per share,64 while PLDT preferred shares with a par value of P10.00 per share have
capacity compared to common shares. a current stock market value ranging from only P10.92 to P11.06 per share,65 is a glaring confirmation
by the market that control and beneficial ownership of PLDT rest with the common shares, not with
the preferred shares.

As shown in PLDTs 2010 GIS,60 as submitted to the SEC, the par value of PLDT common shares
is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other words,
preferred shares have twice the par value of common shares but cannot elect directors and have only Indisputably, construing the term capital in Section 11, Article XII of the Constitution to include both
1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by voting and non-voting shares will result in the abject surrender of our telecommunications industry to
Filipinos while foreigners own only a minuscule 0.56% of the preferred shares. 61 Worse, preferred foreigners, amounting to a clear abdication of the States constitutional duty to limit control of public
shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only utilities to Filipino citizens. Such an interpretation certainly runs counter to the constitutional provision
22.15%.62 This undeniably shows that beneficial interest in PLDT is not with the non-voting preferred reserving certain areas of investment to Filipino citizens, such as the exploitation of natural resources
shares but with the common shares, blatantly violating the constitutional requirement of 60 percent as well as the ownership of land, educational institutions and advertising businesses. The Court should
Filipino control and Filipino beneficial ownership in a public utility. never open to foreign control what the Constitution has expressly reserved to Filipinos for that would
be a betrayal of the Constitution and of the national interest. The Court must perform its solemn duty
to defend and uphold the intent and letter of the Constitution to ensure, in the words of the
Constitution, a self-reliant and independent national economy effectively controlled by Filipinos.
The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands
of Filipinos in accordance with the constitutional mandate. Full beneficial ownership of 60 percent of
the outstanding capital stock, coupled with 60 percent of the voting rights, is constitutionally required
for the States grant of authority to operate a public utility. The undisputed fact that the PLDT preferred Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving
shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT to Filipinos specific areas of investment, such as the development of natural resources and ownership
common shares earn, grossly violates the constitutional requirement of 60 percent Filipino control and of land, educational institutions and advertising business, is self-executing. There is no need for
Filipino beneficial ownership of a public utility. legislation to implement these self-executing provisions of the Constitution. The rationale why these
constitutional provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus:
In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of
the dividends, of PLDT. This directly contravenes the express command in Section 11, Article XII of x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a
the Constitution that [n]o franchise, certificate, or any other form of authorization for the operation of a constitutional mandate, the presumption now is that all provisions of the constitution are self-
public utility shall be granted except to x x xcorporations x x x organized under the laws of the executing. If the constitutional provisions are treated as requiring legislation instead of self-
Philippines, at least sixty per centum of whose capital is owned by such citizens x x x. executing, the legislature would have the power to ignore and practically nullify the mandate
of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has
always been, that
x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his
land to an alien, and as both the citizen and the alien have violated the law, none of them
. . . in case of doubt, the Constitution should be considered self-executing rather than non-self- should have a recourse against the other, and it should only be the State that should be
executing. . . . Unless the contrary is clearly intended, the provisions of the Constitution allowed to intervene and determine what is to be done with the property subject of the
should be considered self-executing, as a contrary rule would give the legislature violation. We have said that what the State should do or could do in such matters is a matter
discretion to determine when, or whether, they shall be effective. These provisions would of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun
be subordinated to the will of the lawmaking body, which could make them entirely Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has not definitely
meaningless by simply refusing to pass the needed implementing statute. (Emphasis supplied) decided what policy should be followed in cases of violations against the constitutional
prohibition, courts of justice cannot go beyond by declaring the disposition to be null
and void as violative of the Constitution. x x x (Emphasis supplied)
In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later
Chief Justice, agreed that constitutional provisions are presumed to be self-executing. Justice Puno
stated:

Courts as a rule consider the provisions of the Constitution as self-executing, rather than as To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the
requiring future legislation for their enforcement. The reason is not difficult to discern. For if 1935 Constitution, or over the last 75 years, not one of the constitutional provisions expressly
they are not treated as self-executing, the mandate of the fundamental law ratified by reserving specific areas of investments to corporations, at least 60 percent of the capital of which is
the sovereign people can be easily ignored and nullified by Congress. Suffused with owned by Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions
wisdom of the ages is the unyielding rule that legislative actions may give breath to miserably failed to effectively reserve to Filipinos specific areas of investment, like the operation by
constitutional rights but congressional inaction should not suffocate them. corporations of public utilities, the exploitation by corporations of mineral resources, the ownership by
corporations of real estate, and the ownership of educational institutions. All the legislatures that
convened since 1935 also miserably failed to enact legislations to implement these vital constitutional
provisions that determine who will effectively control the national economy, Filipinos or foreigners.
This Court cannot allow such an absurd interpretation of the Constitution.

Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests,
searches and seizures, the rights of a person under custodial investigation, the rights of an
This Court has held that the SEC has both regulatory and adjudicative functions. 69 Under its regulatory
accused, and the privilege against self-incrimination. It is recognized that legislation is
functions, the SEC can be compelled by mandamus to perform its statutory duty when it unlawfully
unnecessary to enable courts to effectuate constitutional provisions guaranteeing the
neglects to perform the same. Under its adjudicative or quasi-judicial functions, the SEC can be also be
fundamental rights of life, liberty and the protection of property. The same treatment is
accorded to constitutional provisions forbidding the taking or damaging of property for public compelled by mandamus to hear and decide a possible violation of any law it administers or enforces
use without just compensation. (Emphasis supplied) when it is mandated by law to investigate such violation.

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or
disapprove the Articles of Incorporation of any corporation where the required percentage of
ownership of the capital stock to be owned by citizens of the Philippines has not been complied
Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly with as required by existing laws or the Constitution. Thus, the SEC is the government agency
the provisions of the 1935, 1973 and 1987 Constitutions limiting land ownership to Filipinos. tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article
In Soriano v. Ong Hoo,68 this Court ruled: XII of the Constitution on the ownership of public utilities. This Court, in a petition for declaratory
relief that is treated as a petition for mandamus as in the present case, can direct the SEC to perform its
statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to do based on
the 2010 GIS that respondent PLDT submitted to the SEC.
Under Section 5(m) of the Securities Regulation Code,71 the SEC is vested with the power and function
to suspend or revoke, after proper notice and hearing, the franchise or certificate of registration
of corporations, partnerships or associations, upon any of the grounds provided by law. The SEC
is mandated under Section 5(d) of the same Code with the power and function to investigate x x x the
activities of persons to ensure compliance with the laws and regulations that SEC administers or
enforces. The GIS that all corporations are required to submit to SEC annually should put the SEC on
guard against violations of the nationality requirement prescribed in the Constitution and existing laws.
This Court can compel the SEC, in a petition for declaratory relief that is treated as a petition for
mandamus as in the present case, to hear and decide a possible violation of Section 11, Article XII of
the Constitution in view of the ownership structure of PLDTs voting shares, as admitted by
respondents and as stated in PLDTs 2010 GIS that PLDT submitted to SEC.

WHEREFORE, we PARTLY GRANT the petition and rule that the term capital in Section 11,
Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the election of
directors, and thus in the present case only to common shares, and not to the total outstanding capital
stock (common and non-voting preferred shares). Respondent Chairperson of the Securities and
Exchange Commission is DIRECTED to apply this definition of the term capital in determining the
extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company,
and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate
sanctions under the law.

SO ORDERED.
TEODORA T. LUY, WALDERICO F. ARIO, MELCHOR
S. BUCOY, EDITA H. CINCO, RUDY I. LIMBAROC,
Republic of the Philippines PETER MONTOJO, MARLYN S. ATILANO, REGIDOR
Supreme Court MEDALLO, EDWIN O. DEMASUAY, DENNIS M.
Manila SUICANO, ROSALINA Q. ATILANO, ESTRELLA
FELICIANO, IMELDA T. DAGALEA, MARILYN
RUFINO, JOSE AGUSTIN, EFREN RIVERA, CRISALDO
SECOND DIVISION
VALERO, SAFIA HANDANG, LUCENA R. MEDINA,
DANNY BOY B. PANGASIAN, ABDURASA HASIL,
ROEL ALTA, JOBERT BELTRAN, EDNA FAUSTO,
VIVIAN T. RAMIREZ, ALBERTO B. DIGNO, DANILO G.R. No. 168208 TAJMAHAR HADJULA, ELENA MAGHANOY, ERIC B.
M. CASQUITE, JUMADIYA A. KADIL, FAUJIA SALIH,
QUITIOL, JESSE D. FLORES, GEMMA CANILLAS,
ANTONIO FABIAN, ROMEL DANAG, GINA Present:
ERNITO CANILLAS, MARILOU JAVIER, MARGANI
PANTASAN, ARTHUR MATUGAS, VIRGILIA OSARIO,
MADDIN, RICHARD SENA, FE D. CANOY, GEORGE
ORLANDO EBRADA, ROSANA CABATO, WILFREDO
SALUD, EDGARDO BORGONIA, JR., ANTONIO
LUNA, LILIA BARREDO, ISABEL ALBERTO, NORA CARPIO, J., Chairperson,
ATILANO, JOSE CASTRO, and LIBERATO
BONIAO, PILAR OSARIO, LYDIA ESLIT, AMMAN BRION,
BAGALANON,
SALI, AKMAD AKIL, ROGELIO LAZARO, ISABEL PEREZ,
Petitioners,
CONCILLADO, MARLON ABIAL, HERMOCILLO SERENO, and
NAPALCRUZ, WALTER BUHIAN, ELISEO REYES, JJ.
- versus -
AMATORIO, JOSE CASTRO, JAMIL LAGBAY, MA.
EVELYN SANTOS, LEDENIA T. BARON, ELSA MAR FISHING CO., INC., MIRAMAR FISHING CO.,
AMATORIO, SARAH F. BUCOY, EXPEDITO L. Promulgated:
INC., ROBERT BUEHS AND JEROME SPITZ.
RELUYA, ARNULFO ALFARO, EDGARDO F. Respondents.
BORGONIA, DANILO R. MANINGO, ABDUSAID H. June 13, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DAMBONG, LORINDA M. MUTIA, DOMINADOR DEL
ROSARIO, JOEL E. TRONO, HUSSIN A. JAWAJI, JUL- DECISION
ASNAM JAKARIA, LUZVIMINDA A. NOLASCO,
VILMA G. GASCO, MORITA S. MARMETO, PROCESA
SERENO, J.:
JUANICO, ANTONIO A. MONDRAGON, JR., JESSICA
F. QUIACHON, PACITA G. MEDINA, ARNEL S.
SANTOS, ANECITA T. TARAS, TOMINDAO T. TARAS,
NULCA C. SABDANI, AKMAD A. SABDANI, ROWENA Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
J. GARCIA, LINA P. CASAS, MARLYN G. FRANCISCO, Court, seeking a review of the Court of Appeals (CA) 19 March 2004 and 12 May 2005 Resolutions in
MERCEDITA MAQUINANO, NICOLAS T. RIO,
TERESITA A. CASINAS, VIRGILIO F. IB-IB, CA-G.R. SP NO. 82651. The appellate court had dismissed the Petition for Review on the ground that
PANTALEON S. ROJAS, JR., EVELYN V. BEATINGO, it lacked a Verification and Certification against forum shopping.
MATILDE G. HUSSIN, ESPERANZA I. LLEDO,
ADOLFINA DELA MERCED, LAURA E. SANTOS,
ROGACIANA MAQUILING, ALELIE D. SAMSON, The pertinent facts are as follows:
SHIRLEY L. ALVAREZ, MAGDALENA A. MARCOS,
VIRGINIA S. ESPINOSA, ANTONIO C. GUEVARA,
AUGUSTA S. DE JESUS, SERVILLA A. BANCALE, On 28 June 2001, respondent Mar Fishing Co., Inc. (Mar Fishing), engaged in the business of
PROSERFINA GATINAO, RASMA A. FABRIGA,
ROLANDO D. GATINAO, ANALISA G. MEA, SARAH A. fishing and canning of tuna, sold its principal assets to co-respondent Miramar Fishing Co., Inc.
SALCEDO, ALICIA M. JAYAG, FERNANDO G. (Miramar) through public bidding.[1] The proceeds of the sale were paid to the Trade and Investment
CABEROY, ROMEO R. PONCE, EDNA S. PONCE,
2. Dismissing these case [sic] as against Miramar Fishing
Corporation of the Philippines (TIDCORP) to cover Mar Fishings outstanding obligation in the amount
Company, Inc., as well as against Robert Buehs and Jerome Spitz,
of ₱897,560,041.26.[2] In view of that transfer, Mar Fishing issued a Memorandum dated 23 October for lack of cause of action;
2001 informing all its workers that the company would cease to operate by the end of the month. [3] On
3. Dismissing all other charges and claims of the
29 October 2001 or merely two days prior to the months end, it notified the Department of Labor and complainants, for lack of merit.
Employment (DOLE) of the closure of its business operations. [4]
SO ORDERED.
Thereafter, Mar Fishings labor union, Mar Fishing Workers Union NFL and Miramar entered
into a Memorandum of Agreement.[5] The Agreement provided that the acquiring company, Miramar,
shall absorb Mar Fishings regular rank and file employees whose performance was satisfactory, without Aggrieved, petitioners pursued the action before the NLRC, which modified the LAs Decision.
loss of seniority rights and privileges previously enjoyed. [6] Noting that Mar Fishing notified the DOLE only two days before the business closed, the labor court
considered petitioners dismissal as ineffectual.[12] Hence, it awarded, apart from separation pay, full back
Unfortunately, petitioners, who worked as rank and file employees, were not hired or given wages to petitioners from the time they were terminated on 31 October 2001 until the date when the LA
separation pay by Miramar. [7]
Thus, petitioners filed Complaints for illegal dismissal with money claims upheld the validity of their dismissal on 30 July 2002. [13]
before the Arbitration Branch of the National Labor Relations Commission (NLRC).
Additionally, the NLRC pierced the veil of corporate fiction and ruled that Mar Fishing and

In its 30 July 2002 Decision, the Labor Arbiter (LA) found that Mar Fishing had necessarily Miramar were one and the same entity, since their officers were the same.[14]Hence, both companies

closed its operations, considering that Miramar had already bought the tuna canning plant. [8] By reason were ordered to solidarily pay the monetary claims.[15]

of the closure, petitioners were legally dismissed for authorized cause.[9] In addition, even if Mar Fishing
reneged on notifying the DOLE within 30 days prior to its closure, that failure did not make the On reconsideration, the NLRC modified its ruling by imposing liability only on Mar Fishing.
dismissals void. Consequently, the LA ordered Mar Fishing to give separation pay to its workers.[10] The labor court held that petitioners had no cause of action against Miramar, since labor contracts cannot
be enforced against the transferee of an enterprise in the absence of a stipulation in the contract that the

The LA held thus:[11] transferee assumes the obligation of the transferor. [16] Hence, the dispositive portion reads:[17]

WHEREFORE, in view of the foregoing considerations, judgment is hereby WHEREFORE, foregoing premises considered, the assailed resolution
rendered in these cases: is MODIFIED in that only Mar Fishing Company, Inc. through its responsible
officers, is ordered to pay complainants their separation pay, and full backwages from
1. Ordering Mar Fishing Company, Inc., through its the date they were terminated from employment until 30 July 2002, subject to
president, treasurer, manager or other proper officer or computation during execution stage of proceedings at the appropriate Regional
representative, to pay the complainants their respective separation Arbitration Branch.
pay, as computed in page 12 to 33 hereof, all totaling SIX
MILLION THREE HUNDRED THIRTY SIX THOUSAND SO ORDERED.
FIVE HUNDRED EIGHTY SEVEN & 77/100 PESOS
(₱6,336,587.77);
Despite the award of separation pay and back wages, petitioners filed a Rule 65 Petition before
the CA. This time, they argued that both Mar Fishing and Miramar should be made liable for their
separation pay, and that their back wages should be up to the time of their actual reinstatement. However, missing documentary attachments with the Motion for Reconsideration amounted to substantial
[18]
finding that only 3 of the 228 petitioners signed the Verification and Certification against forum compliance.
shopping, the CA instantly dismissed the action for certiorari against the 225 other petitioners without
ruling on the substantive aspects of the case.[19] However, this very case does not involve a failure to attach the Annexes. Rather, the procedural
infirmity consists of omission the failure to sign a Verification and Certification against forum shopping.
[20]
By means of a Manifestation with Omnibus Motion, petitioners submitted a Verification and Addressing this defect squarely, we have already resolved that because of noncompliance with the
Certification against forum shopping executed by 161 signatories. In the said pleading, petitioners asked requirements governing the certification of non-forum shopping, no error could be validly attributed to
[21]
the CA to reconsider by invoking the rule that technical rules do not strictly apply to labor cases. Still, the CA when it ordered the dismissal of the special civil action for certiorari.[27] The lack of certification
the CA denied petitioners contentions and held thus:[22] against forum shopping is not curable by mere amendment of a complaint, but shall be a cause for the
dismissal of the case without prejudice.[28] Indeed, the general rule is that subsequent compliance
Anent the liberality in application of the rules, as alleged by petitioners, the with the requirements will not excuse a party's failure to comply in the first instance. [29] Thus, on
same deserves scant consideration. x x x.
procedural aspects, the appellate court correctly dismissed the case.
xxx. While litigation is not a game of technicalities, and that the rules of
procedure should not be enforced strictly at the cost of substantial justice, still it does
not follow that the Rules of Court may be ignored at will and at random to the However, this Court has recognized that the merit of a case is a special circumstance or
prejudice of the orderly presentation, assessment and just resolution of the issues. compelling reason that justifies the relaxation of the rule requiring verification and certification of non-
xxx.
forum shopping.[30] In order to fully resolve the issue, it is thus necessary to determine whether technical
rules were brushed aside at the expense of substantial justice.[31] This Court will then delve into the issue
Before this Court, 124 petitioners raise the issue of whether the CA gravely erred in dismissing on (1) the solidary liability of Mar Fishing and Miramar to pay petitioners monetary claims and (2) the
their Petition for Review on the ground that their pleading lacked a Verification and Certification against reckoning period for the award of back wages.
forum shopping.[23]
For a dismissal based on the closure of business to be valid, three (3) requirements must be
The Rules of Court provide that a petition for certiorari must be verified and accompanied by a established. Firstly, the cessation of or withdrawal from business operations must be bona fide in
[24] character. Secondly, there must be payment to the employees of termination pay amounting to at least
sworn certification of non-forum shopping. Failure to comply with these mandatory requirements
[25] one-half (1/2) month pay for each year of service, or one (1) month pay, whichever is higher. Thirdly,
shall be sufficient ground for the dismissal of the petition. Considering that only 3 of the 228 named
petitioners signed the requirement, the CA dismissed the case against them, as they did not execute a the company must serve a written notice on the employees and on the DOLE at least one (1) month
Verification and Certification against forum shopping. before the intended termination.[32]

Petitioners invoke substantial compliance with procedural rules when their Manifestation In their Petition for Review on Certiorari, petitioners did not dispute the conclusion of the LA
already contains a Verification and Certification against forum shopping executed by 161 signatories. and the NLRC that Mar Fishing had an authorized cause to dismiss its workers. Neither did petitioners
They heavily rely on Jaro v. Court of Appeals,[26] citing Piglas-Kamao v. National Labor Relations challenge the computation of their separation pay.
Commission and Cusi-Hernandez v. Diaz, in which we discussed that the subsequent submission of the
Rather, they questioned the holding that only Mar Fishing was liable for their monetary plants, offices and facilities are situated in the same compound, it is our
considered opinion that these facts are not sufficient to justify the piercing of the
claims.[33] corporate veil of Acrylic. (Emphasis supplied.)

Basing their conclusion on the Memorandum of Agreement and Supplemental Agreement


between Miramar and Mar Fishings labor union, as well as the General Information Sheets and Company Having been found by the trial courts to be a separate entity, Mar Fishing and not Miramar is
Profiles of the two companies, petitioners assert that Miramar simply took over the operations of Mar required to compensate petitioners. Indeed, the back wages and retirement pay earned from the former
Fishing. In addition, they assert that these companies are one and the same entity, given the commonality employer cannot be filed against the new owners or operators of an enterprise. [40]
of their directors and the similarity of their business venture in tuna canning plant operations. [34]
Evidently, the assertions of petitioners fail on both procedural and substantive aspects.
At the fore, the question of whether one corporation is merely an alter ego of another is purely Therefore, no special reasons exist to reverse the CAs dismissal of the case due to their failure to abide
one of fact generally beyond the jurisdiction of this Court.[35] In any case, given only these bare by the mandatory procedure for filing a petition for review on certiorari. Given the correctness of the
reiterations, this Court sustains the ruling of the LA as affirmed by the NLRC that Miramar and Mar appellate courts ruling and the lack of appropriate remedies, this Court will no longer dwell on the exact
Fishing are separate and distinct entities, based on the marked differences in their stock computation of petitioners claims for back wages, which have been sufficiently threshed out by the LA
ownership.[36] Also, the fact that Mar Fishings officers remained as such in Miramar does not by itself and the NLRC. Judicial review of labor cases does not go beyond an evaluation of the sufficiency of the
warrant a conclusion that the two companies are one and the same. As this Court held in Sesbreo v. Court evidence upon which labor officials' findings rest.[41]
of Appeals, the mere showing that the corporations had a common director sitting in all the boards
without more does not authorize disregarding their separate juridical personalities.[37] While we sympathize with the situation of the workers in this case, we cannot disregard, absent
compelling reasons, the factual determinations and the legal doctrines that support the findings of the
Neither can the veil of corporate fiction between the two companies be pierced by the rest of courts a quo. Generally, the findings of fact and the conclusion of the labor courts are not only accorded
petitioners submissions, namely, the alleged take-over by Miramar of Mar Fishings operations and the great weight and respect, but are even clothed with finality and deemed binding on this Court, as long as
evident similarity of their businesses. At this point, it bears emphasizing that since piercing the veil of they are supported by substantial evidence.[42]
corporate fiction is frowned upon, those who seek to pierce the veil must clearly establish that the
separate and distinct personalities of the corporations are set up to justify a wrong, protect a fraud, or On a final note, this Court reminds the parties seeking the ultimate relief of certiorari to observe
perpetrate a deception.[38] This, unfortunately, petitioners have failed to do. In Indophil Textile Mill the rules, since nonobservance thereof cannot be brushed aside as a mere technicality. [43] Procedural
[39]
Workers Union vs. Calica, we ruled thus: rules are not to be belittled or simply disregarded, for these prescribed procedures ensure an orderly and
speedy administration of justice.[44]
In the case at bar, petitioner seeks to pierce the veil of corporate entity of
Acrylic, alleging that the creation of the corporation is a devi[c]e to evade the
application of the CBA between petitioner Union and private respondent IN VIEW THEREOF, the assailed 19 March 2004 and 12 May 2005 Resolutions of the Court
company. While we do not discount the possibility of the similarities of the
businesses of private respondent and Acrylic, neither are we inclined to apply the of Appeals in CA-GR SP NO. 82651 are AFFIRMED. Hence, the 04 July 2005 Petition for Review
doctrine invoked by petitioner in granting the relief sought. The fact that the filed by petitioners is hereby DENIED for lack of merit. SO ORDERED.
businesses of private respondent and Acrylic are related, that some of the
employees of the private respondent are the same persons manning and
providing for auxiliary services to the units of Acrylic, and that the physical
Republic of the Philippines

Supreme Court
x-----------------------------------------------------------------------------------------x
Manila

DECISION
SECOND DIVISION

PERALTA, J.:

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

Petitioners, Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court praying for
Present: the annulment of the Decision[1] and Resolution[2] of the Court of Appeals (CA) dated December 20,
2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953. The assailed Decision reversed
and set aside the Resolutions dated May 30, 2003 [3] and September 26, 2003[4] of the National Labor
CARPIO, J., Chairperson,
Relations Commission (NLRC) in CA No. 029059-01, while the disputed Resolution denied petitioners'
- versus - NACHURA,
Motion for Reconsideration.
PERALTA,

ABAD, and The present petition arose from various complaints filed by herein respondents charging petitioners with
_____________,** JJ. illegal dismissal, unfair labor practice and illegal deductions and praying for the award of premium pay

DIOSDADO GARCIA, LUISITO GARCIA, RODANTE ROMERO, REX for holiday and rest day, holiday pay, service leave pay, 13 th month pay, moral and exemplary damages
BARTOLOME, FELICIANO GASCO, JR., DANILO ROJO, EDGAR and attorney's fees.
SANFUEGO, AMADO GALANTO, EUTIQUIO LUGTU, JOEL
GRAMATICA, MIEL CERVANTES, TERESITA CABANES, ROE DELA Promulgated:
CRUZ, RICHELO BALIDOY, VILMA PORRAS, MIGUELITO Respondents alleged in their respective position papers and other related pleadings that they were
SALCEDO, CRISTINA GARCIA, MARIO NAZARENO, DINDO employees of Prince Transport, Inc. (PTI), a company engaged in the business of transporting passengers
TORRES, ESMAEL RAMBOYONG, ROBETO*MANO, ROGELIO
by land; respondents were hired either as drivers, conductors, mechanics or inspectors, except for
BAGAWISAN, ARIEL SNACHEZ, ESTAQULO VILLAREAL, NELSON
MONTERO, GLORIA ORANTE, HARRY TOCA, PABLITO respondent Diosdado Garcia (Garcia), who was assigned as Operations Manager; in addition to their
MACASAET and RONALD GARCITA regular monthly income, respondents also received commissions equivalent to 8 to 10% of their wages;
January 12, 2011
Respondents. sometime in October 1997, the said commissions were reduced to 7 to 9%; this led respondents and other
employees of PTI to hold a series of meetings to discuss the protection of their interests as employees;
these meetings led petitioner Renato Claros, who is the president of PTI, to suspect that respondents are 1. Dismissing the complaints for Unfair Labor Practice, non-payment of
about to form a union; he made known to Garcia his objection to the formation of a union; in December holiday pay and holiday premium, service incentive leave pay and 13 th month pay;
1997, PTI employees requested for a cash advance, but the same was denied by management which
Dismissing the complaint of Edgardo Belda for refund of boundary-hulog;
resulted in demoralization on the employees' ranks; later, PTI acceded to the request of some, but not
2. Dismissing the complaint for illegal dismissal against the respondents
all, of the employees; the foregoing circumstances led respondents to form a union for their mutual aid Prince Transport, Inc. and/or Prince Transport Phils. Corporation, Roberto
Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy, Mario Feranil and Peter
and protection; in order to block the continued formation of the union, PTI caused the transfer of all Buentiempo;
union members and sympathizers to one of its sub-companies, Lubas Transport (Lubas); despite such
3. Declaring that the complainants named below are illegally dismissed by
transfer, the schedule of drivers and conductors, as well as their company identification cards, were Lubas Transport; ordering said Lubas Transport to pay backwages and separation pay
issued by PTI; the daily time records, tickets and reports of the respondents were also filed at the PTI in lieu of reinstatement in the following amount:

office; and, all claims for salaries were transacted at the same office; later, the business of Lubas Complainants Backwages Separation Pay
(1) Diosdado Garcia P222,348.70 P79,456.00
deteriorated because of the refusal of PTI to maintain and repair the units being used therein, which
(2) Feliciano Gasco, Jr. 203,350.00 54,600.00
resulted in the virtual stoppage of its operations and respondents' loss of employment. (3) Pablito Macasaet 145,250.00 13,000.00
(4) Esmael Ramboyong 221,500.00 30,000.00
Petitioners, on the other hand, denied the material allegations of the complaints contending that herein (5) Joel Gramatica 221,500.00 60,000.00
respondents were no longer their employees, since they all transferred to Lubas at their own (6) Amado Galanto 130,725.00 29,250.00
(7) Miel Cervantes 265,800.00 60,000.00
request; petitioners have nothing to do with the management and operations of Lubas as well as the (8) Roberto Mano 221,500.00 50,000.00
control and supervision of the latter's employees;petitioners were not aware of the existence of any union (9) Roe dela Cruz 265,800.00 60,000.00
(10) Richelo Balidoy 130,725.00 29,250.00
in their company and came to know of the same only in June 1998 when they were served a copy of the (11) Vilma Porras 221,500.00 70,000.00
(12) Miguelito Salcedo 265,800.00 60,000.00
summons in the petition for certification election filed by the union; that before the union was registered
(13) Cristina Garcia 130,725.00 35,100.00
on April 15, 1998, the complaint subject of the present petition was already filed; that the real motive in (14) Luisito Garcia 145,250.00 19,500.00
(15) Rogelio Bagawisan 265,800.00 60,000.00
the filing of the complaints was because PTI asked respondents to vacate the bunkhouse where they (16) Rodante H. Romero 221,500.00 60,000.00
(respondents) and their respective families were staying because PTI wanted to renovate the same. (17) Dindo Torres 265,800.00 50,000.00
(18) Edgar Sanfuego 221,500.00 40,000.00
(19) Ronald Gacita 221,500.00 40,000.00
Subsequently, the complaints filed by respondents were consolidated. (20) Harry Toca 174,300.00 23,400.00
(21) Amado Galanto 130,725.00 17,550.00
(22) Teresita Cabaes 130,725.00 17,550.00
On October 25, 2000, the Labor Arbiter rendered a Decision,[5] the dispositive portion of which reads as (23) Rex Bartolome 301,500.00 30,000.00
(24) Mario Nazareno 221,500.00 30,000.00
follows: (25) Eustaquio Villareal 145,250.00 19,500.00
(26) Ariel Sanchez 265,800.00 60,000.00
(27) Gloria Orante 263,100.00 60,000.00
WHEREFORE, judgment is hereby rendered:
(28) Nelson Montero 264,600.00 60,000.00
(29) Rizal Beato 295,000.00 40,000.00
(30) Eutiquio Lugtu 354,000.00 48,000.00
(31) Warlito Dickensomn 295,000.00 40,000.00
(32) Edgardo Belda 354,000.00 84,000.00 42. Danilo Laurel P357,960.00 P72,000.00
(33) Tita Go 295,000.00 70,000.00
(34) Alex Lodor 295,000.00 50,000.00 As regards all other aspects, the Decision appealed from is SUSTAINED.
(35) Glenda Arguilles 295,000.00 40,000.00
(36) Erwin Luces 354,000.00 48,000.00
(37) Jesse Celle 354,000.00 48,000.00 SO ORDERED.[7]
(38) Roy Adorable 295,000.00 40,000.00
(39) Marlon Bangcoro 295,000.00 40,000.00
(40)Edgardo Bangcoro 354,000.00 36,000.00 Respondents filed a Motion for Reconsideration, but the NLRC denied it in its

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) Resolution[8] dated September 26, 2003.
of the total monetary award; and

6. Ordering the dismissal of the claim for moral and exemplary damages for Respondents then filed a special civil action for certiorari with the CA assailing the Decision and
lack merit. Resolution of the NLRC.
SO ORDERED.[6]

On December 20, 2004, the CA rendered the herein assailed Decision which granted respondents'
The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the absence of evidence
petition. The CA ruled that petitioners are guilty of unfair labor practice; that Lubas is a mere
to show that they violated respondents right to self-organization. The Labor Arbiter also held that Lubas
instrumentality, agent conduit or adjunct of PTI; and that petitioners act of transferring respondents
is the respondents employer and that it (Lubas) is an entity which is separate, distinct and independent
employment to Lubas is indicative of their intent to frustrate the efforts of respondents to organize
from PTI. Nonetheless, the Labor Arbiter found that Lubas is guilty of illegally dismissing respondents
themselves into a union. Accordingly, the CA disposed of the case as follows:
from their employment.
WHEREFORE, the Petition for Certiorari is hereby GRANTED. Accordingly, the
Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI should also be held subject decision is hereby REVERSED and SET ASIDE and another one ENTERED
finding the respondents guilty of unfair labor practice and ordering them to reinstate
equally liable as Lubas. the petitioners to their former positions without loss of seniority rights and with full
backwages.

In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor Arbiter and disposed With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in
as follows: the computation of petitioner's claim for backwages and with respect to the portion
ordering the refund of Edgardo Belda's boundary-hulog in the amount of P446,862.00,
the NLRC decision is affirmed and maintained.
WHEREFORE, premises considered, the appeal is hereby PARTIALLY
GRANTED. Accordingly, the Decision appealed from is SUSTAINED subject to the SO ORDERED.[9]
modification that Complainant-Appellant Edgardo Belda deserves refund of his
boundary-hulog in the amount of P446,862.00; and that Complainants-Appellants
Danilo Rojo and Danilo Laurel should be included in the computation of
Complainants-Appellants claim as follows: Petitioners filed a Motion for Reconsideration, but the CA denied it via its Resolution[10] dated February
24, 2005.
Complainants Backwages Separation Pay
41. Danilo Rojo P355,560.00 P48,000.00 Hence, the instant petition for review on certiorari based on the following grounds:
judgment is based on misapprehension of facts which circumstances are not present in this case.
A Petitioners also emphasize that the NLRC and the Labor Arbiter concurred in their factual findings which
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
GIVING DUE COURSE TO THE RESPONDENTS' PETITION FOR CERTIORARI were based on substantial evidence and, therefore, should have been accorded great weight and respect
by the CA.
1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE
FINDINGS OF THE LABOR ARBITER AND AFFIRMED BY THE NLRC
Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction nor committed error
2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE in re-evaluating the NLRCs factual findings since such findings are not in accord with the evidence on
PETITION record and the applicable law or jurisprudence.
3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE
COURSE TO THE PETITION WITH RESPECT TO RESPONDENTS REX
BARTOLOME, FELICIANO GASCO, DANILO ROJO, EUTIQUIO The Court agrees with respondents.
LUGTU, AND NELSON MONTERO AS THEY FAILED TO FILE AN
APPEAL TO THE NLRC
The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the Rules
B
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT of Court has been settled as early as this Courts decision in St. Martin Funeral Homes v. NLRC.[12] In
PETITIONERS PRINCE TRANSPORT, INC. AND MR. RENATO CLAROS AND said case, the Court held that the proper vehicle for such review is a special civil action
LUBAS TRANSPORT ARE ONE AND THE SAME CORPORATION AND THUS,
LIABLE IN SOLIDUM TO RESPONDENTS. for certiorari under Rule 65 of the said Rules, and that the case should be filed with the CA in strict
observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9 of
Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA pursuant to the exercise of its
original jurisdiction over petitions for certiorari is specifically given the power to pass upon the
C
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN evidence, if and when necessary, to resolve factual issues. [13] Section 9 clearly states:
ORDERING THE REINSTATEMENT OF RESPONDENTS TO THEIR
PREVIOUS POSITION WHEN IT IS NOT ONE OF THE ISSUES RAISED IN
RESPONDENTS' PETITION FOR CERTIORARI.[11] xxxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases
Petitioners assert that factual findings of agencies exercising quasi-judicial functions like the NLRC are falling within its original and appellate jurisdiction, including the power to grant and
conduct new trials or further proceedings. x x x
accorded not only respect but even finality; that the CA should have outrightly dismissed the petition
filed before it because in certiorari proceedings under Rule 65 of the Rules of Court it is not within the
province of the CA to evaluate the sufficiency of evidence upon which the NLRC based its
However, equally settled is the rule that factual findings of labor officials, who are deemed to have
determination, the inquiry being limited essentially to whether or not said tribunal has acted without or
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
in excess of its jurisdiction or with grave abuse of discretion. Petitioners assert that the CA can only pass
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant evidence
upon the factual findings of the NLRC if they are not supported by evidence on record, or if the impugned
which a reasonable mind might accept as adequate to justify a conclusion.[14] But these findings are not
infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence under justifiable circumstances, considering especially that although it is obligatory, it is not
on record, they may be examined by the courts.[15] The CA can grant the petition for certiorari if it finds jurisdictional.[21]
that the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial
evidence.[16] It is within the jurisdiction of the CA, whose jurisdiction over labor cases has been expanded In a number of cases, the Court has consistently held that when all the petitioners share a common interest
to review the findings of the NLRC.[17] and invoke a common cause of action or defense, the signature of only one of them in the certification
against forum shopping substantially complies with the rules. [22] In the present case, there is no question
In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are that respondents share a common interest and invoke a common cause of action. Hence, the signature of
generally binding on the appellate court, unless there was a showing that they were arrived at arbitrarily respondent Garcia is a sufficient compliance with the rule governing certificates of non-forum shopping.
or in disregard of the evidence on record. In respondents' petition for certiorari with the CA, these factual In the first place, some of the respondents actually executed a Special Power of Attorney authorizing
findings were reexamined and reversed by the appellate court on the ground that they were not in accord Garcia as their attorney-in-fact in filing a petition for certiorari with the CA.[23]
with credible evidence presented in this case. To determine if the CA's reexamination of factual findings
and reversal of the NLRC decision are proper and with sufficient basis, it is incumbent upon this Court The Court, likewise, does not agree with petitioners' argument that the CA should not have given due
to make its own evaluation of the evidence on record. [18] course to the petition filed before it with respect to some of the respondents, considering that these
respondents did not sign the verification attached to the Memorandum of Partial Appeal earlier filed with
After a thorough review of the records at hand, the Court finds that the CA did not commit error in the NLRC. Petitioners assert that the decision of the Labor Arbiter has become final and executory with
arriving at its own findings and conclusions for reasons to be discussed hereunder. respect to these respondents and, as a consequence, they are barred from filing a petition
for certiorari with the CA.
Firstly, petitioners posit that the petition filed with the CA is fatally defective, because the attached
verification and certificate against forum shopping was signed only by respondent Garcia. With respect to the absence of some of the workers signatures in the verification, the verification
requirement is deemed substantially complied with when some of the parties who undoubtedly have
The Court does not agree. sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the
same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have
While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs been made in good faith or are true and correct, and not merely speculative. Moreover, respondents'
in a case and the signature of only one of them is insufficient, the Court has stressed that the rules on Partial Appeal shows that the appeal stipulated as complainants-appellants Rizal Beato, et al., meaning
forum shopping, which were designed to promote and facilitate the orderly administration of justice, that there were more than one appellant who were all workers of petitioners.
should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate
objective.[19] Strict compliance with the provision regarding the certificate of non-forum shopping In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified, may
underscores its mandatory nature in that the certification cannot be altogether dispensed with or its be given due course even without a verification if the circumstances warrant the suspension of the rules
requirements completely disregarded.[20] It does not, however, prohibit substantial compliance therewith in the interest of justice.[24] Indeed, the absence of a verification is not jurisdictional, but only a formal
defect, which does not of itself justify a court in refusing to allow and act on a case.[25] Hence, the failure
of some of the respondents to sign the verification attached to their Memorandum of Appeal filed with
the NLRC is not fatal to their cause of action. What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, petitioner
company admitted that Lubas is one of its sub-companies.[28] In addition, PTI, in its letters to its
Petitioners also contend that the CA erred in applying the doctrine of piercing the corporate veil with employees who were transferred to Lubas, referred to the latter as its New City Operations Bus.[29]
respect to Lubas, because the said doctrine is applicable only to corporations and Lubas is not a
corporation but a single proprietorship; that Lubas had been found by the Labor Arbiter and the NLRC Moreover, petitioners failed to refute the contention of respondents that despite the latters transfer to
to have a personality which is separate and distinct from that of PTI; that PTI had no hand in the Lubas of their daily time records, reports, daily income remittances of conductors, schedule of drivers
management and operation as well as control and supervision of the employees of Lubas. and conductors were all made, performed, filed and kept at the office of PTI. In fact, respondents
identification cards bear the name of PTI.
The Court is not persuaded.
It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving
On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI. A different groups of employees transferred by PTI to other companies, the Labor Arbiter handling the
settled formulation of the doctrine of piercing the corporate veil is that when two business enterprises cases found that these companies and PTI are one and the same entity; thus, making them solidarily
are owned, conducted and controlled by the same parties, both law and equity will, when necessary to liable for the payment of backwages and other money claims awarded to the complainants therein. [30]
protect the rights of third parties, disregard the legal fiction that these two entities are distinct and treat
them as identical or as one and the same.[26] In the present case, it may be true that Lubas is a single Petitioners likewise aver that the CA erred and committed grave abuse of discretion when it ordered
proprietorship and not a corporation. However, petitioners attempt to isolate themselves from and hide petitioners to reinstate respondents to their former positions, considering that the issue of reinstatement
behind the supposed separate and distinct personality of Lubas so as to evade their liabilities is precisely was never brought up before it and respondents never questioned the award of separation pay to them.
what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy.
The Court is not persuaded.
Thus, the Court agrees with the observations of the CA, to wit:
It is clear from the complaints filed by respondents that they are seeking reinstatement. [31]
As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come
that it was Prince Transport who made the decision to transfer its employees to the
former? Besides, Prince Transport never regarded Lubas Transport as a separate entity. In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the relief
In the aforesaid letter, it referred to said entity as Lubas operations. Moreover, in said
letter, it did not transfer the employees; it assigned them. Lastly, the existing funds sought, but may add a general prayer for such further or other reliefs as may be deemed just and equitable.
and 201 file of the employees were turned over not to a new company but a new Under this rule, a court can grant the relief warranted by the allegation and the proof even if it is not
management.[27]
specifically sought by the injured party; the inclusion of a general prayer may justify the grant of a
remedy different from or together with the specific remedy sought, if the facts alleged in the complaint
The Court also agrees with respondents that if Lubas is indeed an entity separate and independent from and the evidence introduced so warrant.[32]
PTI why is it that the latter decides which employees shall work in the former?
Moreover, in BPI Family Bank v. Buenaventura,[33] this Court ruled that the general prayer is broad
enough to justify extension of a remedy different from or together with the specific remedy sought. Even
without the prayer for a specific remedy, proper relief may be granted by the court if the facts alleged in
the complaint and the evidence introduced so warrant. The court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for. The prayer in the complaint for other reliefs
equitable and just in the premises justifies the grant of a relief not otherwise specifically prayed for. [34] In
the instant case, aside from their specific prayer for reinstatement, respondents, in their separate
complaints, prayed for such reliefs which are deemed just and equitable.

As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent reason to depart
from the findings of the CA that respondents transfer of work assignments to Lubas was designed by
petitioners as a subterfuge to foil the formers right to organize themselves into a union. Under Article
248 (a) and (e) of the Labor Code, an employer is guilty of unfair labor practice if it interferes with,
restrains or coerces its employees in the exercise of their right to self-organization or if it discriminates
in regard to wages, hours of work and other terms and conditions of employment in order to encourage
or discourage membership in any labor organization.

Indeed, evidence of petitioners' unfair labor practice is shown by the established fact that, after
respondents' transfer to Lubas, petitioners left them high and dry insofar as the operations of Lubas was
concerned. The Court finds no error in the findings and conclusion of the CA that petitioners withheld
the necessary financial and logistic support such as spare parts, and repair and maintenance of the
transferred buses until only two units remained in running condition. This left respondents virtually
jobless.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals, dated December 20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953,
are AFFIRMED.

SO ORDERED.