Gamboa v. Finance Secretary Teves, et al.

G.R. No. 176579 : June 28, 2011

FACTS:
In 1969, General Telephone and Electronics Corporation (GTE), sold 26 percent
of the outstanding common shares of PLDT to Philippine Telecommunications
Investment Corporation (PTIC). In 1977, Prime Holdings, Inc. (PHI) became the
owner of 111,415 shares of stock of PTIC. In 1986, the 111,415 shares of stock of
PTIC held by PHI were sequestered by the Presidential Commission on Good
Government (PCGG). The 111,415 PTIC shares, which represent about 46.125
percent of the outstanding capital stock of PTIC, were later declared by this Court
to be owned by the Republic of the Philippines.
In 1999, First Pacific, a Bermuda-registered 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 through a public bidding
sold the same shares to Parallax Venture who won with a bid of P25.6 billion or
US$510 million.
Thereafter, First Pacific announced that it would exercise its right of first refusal
as a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid
price of Parallax. On 14 February 2007, First Pacific, through its subsidiary,
MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415
PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with the
Philippine Government for the price of P25,217,556,000 or US$510,580,189. The
sale was completed on 28 February 2007.
Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of
46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or
about 6.3 percent of the outstanding common shares of PLDT. With the sale,
First Pacific 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, according to petitioner, violates Section 11, Article XII
of the 1987 Philippine Constitution which limits foreign ownership of the capital of
a public utility to not more than 40 percent.
On 28 February 2007, petitioner filed the instant petition for prohibition,
injunction, declaratory relief, and declaration of nullity of sale of the 111,415 PTIC
shares.
ISSUE: Whether or not the term "capital" in Section 11, Article XII of the
Constitution refers to the total common shares only or to the total outstanding
capital stock of PLDT, a public utility?

RULING:
Section 11, Article XII (National Economy and Patrimony) of the 1987
Constitution mandates the Filipinization of public utilities, to wit:
Section 11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or
to corporations or associations organized under the laws of the Philippines, at
least sixty per centum of whose capital is owned by such citizens; nor shall such
franchise, certificate, or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration, or repeal by
the Congress when the common good so requires. The State shall encourage
equity participation in public utilities by the general public. The participation of
foreign investors in the governing body of any public utility enterprise shall be
limited to their proportionate share in its capital, and all the executive and
managing officers of such corporation or association must be citizens of the
Philippines.
The intent of the framers of the Constitution in imposing limitations and
restrictions on fully nationalized and partially nationalized activities is for Filipino
nationals to be always in control of the corporation undertaking said activities.
Otherwise, if the Trial Court ruling upholding respondent's arguments were to be
given credence, it would be possible for the ownership structure of a public utility
corporation to be divided into one percent (1%) common stocks and ninety-nine
percent (99%) preferred stocks. Following the Trial Court ruling adopting
respondent's arguments, the common shares can be owned entirely by
foreigners thus creating an absurd situation wherein foreigners, who are
supposed to be minority shareholders, control the public utility corporation.
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, and not to the total outstanding capital stock
comprising both common and non-voting preferred shares.
Indisputably, one of the rights of a stockholder is the right to participate in the
control or management of the corporation. This is exercised through his vote in
the election of directors because it is the board of directors that controls or
manages the corporation. In the absence of provisions in the articles of
incorporation denying voting rights to preferred shares, preferred shares have the
same voting rights as common shares. However, preferred shareholders are
often excluded from any control, that is, deprived of the right to vote in the
election of directors and on other matters, on the theory that the preferred
shareholders are merely investors in the corporation for income in the same
manner as bondholders. In fact, under the Corporation Code only preferred or

redeemable shares can be deprived of the right to vote. Common shares cannot
be deprived of the right to vote in any corporate meeting, and any provision in the
articles of incorporation restricting the right of common shareholders to vote is
invalid.
Considering that common shares have voting rights which translate to control, as
opposed to preferred shares which usually have no voting rights, the term
"capital" in Section 11, Article XII of the Constitution refers only to common
shares. However, if the preferred shares also have the right to vote in the election
of directors, then the term "capital" shall include such preferred shares because
the right to participate in the control or management of the corporation is
exercised through the right to vote in the election of directors. In short, the term
"capital" in Section 11, Article XII of the Constitution refers only to shares of stock
that can vote in the election of directors.
This interpretation is consistent with the intent of the framers of the Constitution
to place in the hands of Filipino citizens the control and management of public
utilities. Thus, 60 percent of the "capital" assumes, or should result in, "controlling
interest" in the corporation and thus in the present case, only to common shares,
and not to the total outstanding capital stock (common and non-voting preferred
shares).
Jiao vs. National Labor Relations Commission
G.R. No. 182331. April 18, 2012
FACTS:
The petitioners were regular employees of the Philippine Banking Corporation
(Phil bank), each with at least ten years of service in the company.3 Pursuant to
its Memorandum dated August 28, 1970, Phil bank established a Gratuity Pay
Plan (Old Plan) for its employees. Phil bank merged with Global Business Bank,
Inc. (Global bank),with the former as the surviving corporation and the latter as
the absorbed corporation, but the bank operated under the name Global
Business Bank, Inc. As a result of the merger, complainants respective
positions became redundant. A Special Separation Program (SSP) was
implemented and the petitioners were granted a separation package. As their
positions were included in the redundancy declaration, the petitioners availed of
the SSP, signed acceptance letters and executed quitclaims. In August 2002,
respondent Metropolitan Bank and Trust Company(Metro bank) acquired the
assets and liabilities of Global bank through a Deed of Assignment of Assets
and Assumption of Liabilities. Subsequently, the petitioners filed separate
complaints for non-payment of separation pay with prayer for damages and
attorneys fees before the National Labor Relations Commission (NLRC). The
petitioners insist that Metro bank is liable because it is the parent company of
Global bank and that majority of the latters board of directors are also members
of the formers board of directors.

ISSUE:
Can Metrobank be held liable for the claims of petitioners?
RULING:
No, considering that the petitioners have already waived their right to file an
action for any of their claims in relation to their employment with Global bank, the
question of whether Metro bank can be held liable for these claims is now
academic. However, in order to put to rest any doubt in the petitioners minds as
to Metro banks liabilities, we shall proceed to discuss this issue. We hold that
Metro bank cannot be held liable for the petitioners claims. As a rule, a
corporation that purchases the assets of another will not be liable for the debts of
the selling corporation, provided the former acted in good faith and paid
adequate consideration for such assets, except when any of the following
circumstances is present: (1) where the purchaser expressly or impliedly agrees
to assume the debts; (2) where the transaction amounts to a consolidation or
merger of the corporations; (3) where the purchasing corporation is merely a
continuation of the selling corporation; and (4) where the selling
corporation fraudulently enters into the transaction to escape liability for those
debts.

Nestor Ching and Andrew Wellington vs. Subic Bay Golf And Country Club
G.R. No. 174353; September 10, 2014
FACTS:
Petitioners Nestor Ching and Andrew Wellington own stocks of the Subic Bay
Golf and Country Club, Inc.(SBGCCI). On June 27, 1996, Securities and
Exchange Commission (SEC) approved amendments to SBGCCI Articles of
Incorporation which the petitioners allege make their shares non-proprietary.
Petitioners allege that this change was made without the appropriate disclosure
of SBGCCI to its shareholders. Furthermore, petitioners allege several instances
of fraud committed by SBGCCIs board of directors in its February 26, 2003
complaint. Respondents answered the complaint by refuting allegations made by
petitioners. As a way of defense, respondents underscored petitioners failure to
show that it was authorized by SBGSI to file complaint on said companys behalf
comply with the requisites for filing a derivative suit and an action for receivership
justify their prayer for injunctive relief since the complaint may be considered a
nuisance or harassment suit Thus, respondents prayed for dismissal of the
complaint. On July 28, 2003, the RTC held that the action is a derivative suit and
issued an order dismissing the complaint. Petitioners elevated the case to the
Court of Appeals but the appellate court affirmed the RTC decision.

ISSUE:
WON the petitioners are proper party in interest
WON the complaint is a derivative suit
RULING:
Petitioners did not offer proof that they were authorized to represent SBGSI. The
Court ruling in Cua, Jr. v. Tan elaborated the three (3) types of suit: Individual,
class or representative, and derivative suit. The reliefs prayed for by petitioners,
to wit: (i) enjoining defendants from acting as officers and Board of Directors of
the corporation, (ii) the appointment of receiver, (iii) damages, clearly show that
the complaint was filed to curb the alleged mismanagement of SBGCCI. The
cause of action pleaded by petitioners do not accrue to a single shareholder or a
class of shareholders but to the corporation itself. While there were allegations of
fraud in the subscription, petitioners do not wish to have their subscription
rescinded. Instead, the petitioners asked that the respondents be removed from
the management of the corporation. Petitioners only possible cause of action as
the minority shareholder against the actions of the board is to file the common
law right to file a derivative suit. As minority shareholders, petitioners do not have
any statutory right to override the business judgments of SBGCCIs officers and
board of directors on the ground of the latters alleged lack of qualification to
manage a golf course. The legal standing of the petitioners is not a statutory
right, there being no provision in the Corporation Code or related statutes, but is
instead a product of jurisprudence based on equity. However, a derivative suit
cannot prosper without first complying with the legal requisites for its institution:
Interim Rules Governing Intra-Corporate Controversies. Petitioners failed to
comply with second requisite: exerted all reasonable efforts, and alleges the
same with particularity in the complaint, to exhaust all remedies available under
the articles of incorporation, by-laws, laws or rules governing the corporation or
partnership to obtain the relief he desires
Thus, a complaint which contained no allegation whatsoever of any effort to avail
of intra-corporate remedies allows the court to dismiss it, even motu proprio.
Indeed, even if petitioners thought it was futile to exhaust intra-corporate
remedies, they should have stated the same in the Complaint and specified the
reasons for such opinion. The requirement of this allegation in the Complaint is
not a useless formality which may be disregarded at will.
CLARION PRINTING HOUSE, INC., and YUTINGCO vs. NLRC and MICLAT
G.R. No. 148372: June 27, 2005
FACTS:
Respondent Miclat was employed on a probationary basis as marketing assistant
by petitioner Clarion which is owned by Yutingco.

The EYCO Group of Companies of which CLARION formed part filed with the
SEC a Petition for the Declaration of Suspension of Payment, Formation and
Appointment of Rehabilitation Receiver/ Committee, Approval of Rehabilitation
Plan with Alternative Prayer for Liquidation and Dissolution of Corporation. The
SEC issued an Order approving the creation of an interim receiver for the EYCO
Group of Companies.
The Assistant Personnel Manager of CLARION informed Miclat by telephone that
her employment contract had been terminated. No reason was given for the
termination.
In her Position Paper filed before the labor arbiter, Miclat claimed that assuming
that her termination was necessary, the manner in which it was carried out was
illegal, no written notice thereof having been served on her, and she merely
learned of it only a day before it became effective.
On the other hand, petitioners claimed that they could not be faulted for
retrenching some of its employees including Miclat, they drawing attention to the
EYCO Group of Companies being placed under receivership, notice of which
was sent to its supervisors and rank and file employees via a Memorandum.
The Labor arbiter found that Miclat was illegally dismissed and directed her
reinstatement. The NLRC affirmed the labor arbiters decision. The CA sustained
the resolutions of the NLRC; it also denied petitioners MR of the decision.
RULING:
WHEREFORE, the CA Decision, together (sustaining NLRC) is SET ASIDE and
another rendered declaring the legality of the dismissal of respondent Miclat.
Petitioners are ORDERED, however, to PAY her the following in accordance with
the foregoing discussions: nominal, separation pay; and 13th month pay. Let a
copy of this Decision be furnished the SEC Hearing Panel charged with the
liquidation and dissolution of petitioner corporation for inclusion, in the list of
claims of its creditors, respondent Miclats claims..
On Miclats termination:
According to P.D. No. 902-A, as amended, the appointment of a receiver or
management committee by the SEC presupposes a finding that, inter alia, a
company possesses sufficient property to cover all its debts but foresees the
impossibility of meeting them when they respectively fall due and there is
imminent danger of dissipation, loss, wastage or destruction of assets of other
properties or paralization of business operations.
However, ART. 283 of the Labor Code states:

CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. The

employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy,retrenchment to prevent losses
or the closing or cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this Title,
by serving a written notice on the worker and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. x x x
(Emphasis and underscoring supplied)
CLARION [however] failed to comply with the notice requirement provided for in
Article 283 of the Labor Code.
Stated differently, Miclats termination is justified, because of financial difficulties
of the company, but failure to give the required notice by Clarion is sufficient to
entitle her to payment of 13th month pay, separation pay and others.
**
With the appointment of a management receiver, all claims and proceedings
against CLARION, including labor claims, were deemed suspended during the
existence of the receivership. The labor arbiter, the NLRC, as well as the CA
should not have proceeded to resolve respondents complaint for illegal dismissal
and should instead have directed respondent to lodge her claim before the then
duly-appointed receiver of CLARION. To still require respondent, however, at this
time to refile her labor claim against CLARION under the peculiar circumstances
of the case that 8 years have lapsed since her termination and that all the
arguments and defenses of both parties were already ventilated before the labor
arbiter, NLRC and the CA; and that CLARION is already in the course of
liquidation this Court deems it most expedient and advantageous for both
parties that CLARIONs liability be determined with finality, instead of still
requiring respondent to lodge her claim at this time before the liquidators of
CLARION which would just entail a mere reiteration of what has been already
argued and pleaded. Furthermore, it would be in the best interest of the other
creditors of CLARION that claims against the company be finally settled and
determined so as to further expedite the liquidation proceedings. For the lesser
number of claims to be proved, the sooner the claims of all creditors of CLARION
are processed and settled.

Steelcase, Inc. v. Design International Selections, Inc. (DISI),

G.R. No. 171995, 18 April 2012
FACTS
Steelcase, Inc. (Steelcase) granted Design International Selections, Inc. (DISI)
the right to market, sell, distribute, install, and service its products to end-user
customers within the Philippines.Steelcase argues that Section 3(d) of R.A. No.
7042 or the Foreign Investments Act of 1991 (FIA) expressly states that the
phrase doing business excludes the appointment by a foreign corporation of a
local distributor domiciled in the Philippines which transacts business in its own
name and for its own account. On the other hand, DISI argues that it was
appointed by Steelcase as the latters exclusive distributor of Steelcase products.
The dealership agreement between Steelcase and DISI had been described by
the owner himself as basically a buy and sell arrangement.
ISSUE
Whether Steelcase had been doing business in the Philippines.
RULING
NO. [T]he appointment of a distributor in the Philippines is not sufficient to
constitute doing business unless it is under the full control of the foreign
corporation. On the other hand, if the distributor is an independent entity which
buys and distributes products, other than those of the foreign corporation, for its
own name and its own account, the latter cannot be considered to be doing
business in the Philippines. Here, DISI was an independent contractor which sold
Steelcase products in its own name and for its own account. As a result,
Steelcase cannot be considered to be doing business in the Philippines by its act
of appointing a distributor as it falls under one of the exceptions under R.A. No.
7042.