How to determine the nationality of a corporation

The Constitution and various laws reserve certain areas of activities to Philippine citizens or to corporations that have a minimum percentage of Filipino ownership.  For example, with respect to corporations, ownership of land is limited to corporations “at least sixty per centum of whose capital is owned” by Philippine citizens.  If 60% of the capital of a Philippine corporation is owned by individuals who are Philippine citizens, then there would be no issue on whether the Philippine corporation is a Philippine national qualified to own land.  On the other hand, an issue would arise if 60% of the capital of the Philippine corporation is owned, in turn, by another Philippine corporation that has foreign stockholders.

If a Philippine corporation has corporate stockholders, how does one determine whether such Philippine corporation is a Philippine national?  Two tests have been employed in the Philippines:  (a)  the grandfather rule;  and (b)  the control test.

To illustrate how these tests are applied, let’s take a Philippine corporation (called “Corporation X”) with the following ownership structure:

(a) non-Philippine citizens own 40% of the capital stock outstanding and entitled to vote of Corporation X;

(b) another Philippine corporation (called “Corporation Y”) owns 60% of the capital stock outstanding and entitled to vote of Corporation X.

On other hand, Corporation Y has the following ownership structure:

(a) non-Philippine citizens own 40% of the capital stock outstanding and entitled to vote of Corporation Y;

(b) Philippine citizens own 60% of the capital stock outstanding and entitled to vote of Corporation Y.

Let’s also assume that Philippine citizens constitute at least 60% of the members of the board of directors of each of Corporation X and Corporation Y.

Philippine Laws: June 2010

The last month of President GMA’s term saw her approving 19 laws, all on June 3, 2010. Of these, only Republic Act No. 10123 seem particularly significant as it created 5 additional branches of the Regional Trial Court in the 11th Judicial Region to be stationed at the Province of Sarangani. Unfortunately, there is not much to discuss here except to note that the Province of Sarangani is home of our world-renowned boxing hero-turned- Congressman. The other laws approved involved the naming of National Roads (6) and National High Schools (11), and the renaming of a library. Here’s hoping the new administration will pass more interesting and society-changing legislation.

June 2010 Philippine Supreme Court Decisions on Legal and Judicial Ethics

Here are selected June 2010 rulings of the Supreme Court of the Philippines on legal and judicial ethics:

Attoney; grossly immoral act. Respondent’ acts of converting his secretary into a mistress; contracting two marriages with Shirley and Leny, are grossly immoral which no civilized society in the world can countenance. The subsequent detention and torture of the complainant is gross misconduct which only a beast may be able to do. In fine, by engaging himself in acts which are grossly immoral and acts which constitute gross misconduct, respondent has ceased to possess the qualifications of a lawyer. Rosario T. Mecaral vs. Atty. Danilo S. Velasquez, A.C. No. 8392, June 29, 2010.

Attorney; representation within bounds of the law. Canon 19 of the Code provides that a lawyer shall represent his client with zeal within the bounds of the law. For this reason, Rule 15.07 of the Code requires a lawyer to impress upon his client compliance with the law and principles of fairness. A lawyer must employ only fair and honest means to attain the lawful objectives of his client. It is his duty to counsel his clients to use peaceful and lawful methods in seeking justice and refrain from doing an intentional wrong to their adversaries. Rural Bank of Calape, Inc. (RBCI), Bohol vs. Atty. James Benedict Florido, A.C. No. 5736, June 18, 2010.

Court personnel; dishonesty and falsification of public document. Dishonesty is defined as intentionally making a false statement on any material fact in securing one’s examination, appointment, or registration. Dishonesty is a serious offense which reflects a person’s character and exposes the moral decay which virtually destroys honor, virtue, and integrity. It is a malevolent act that has no place in the judiciary, as no other office in the government service exacts a greater demand for moral righteousness from an employee than a position in the judiciary. A birth certificate, being a public document, serves as prima facie evidence of filiation. The making of a false statement therein constitutes dishonesty and falsification of a public document. Anonymous vs. Emma B. Curamen, A.M. No. 08-2549. June 18, 2010.

Court personnel; gross misconduct. Pagulayan indeed committed the transgression Judge Beltran charged. What Pagulayan did is the nightmare of every decisionmaker and magistrate who is usually the last to know that somebody has used his or her name to ask for money – “para kay Fiscal o para kay Judge” as mulcters reputedly always say. Pagulayan’s misconduct, it must be stressed, brought dishonor to the administration of justice in particular and, to the public service in general. Indeed, Pagulayan failed to live up to the standards of honesty and integrity required in the public service. In the words of the Constitution, public office is a public trust and Pagulayan betrayed this trust. Under Civil Service rules, gross misconduct is a grave offense and punishable by dismissal. Judge Orlando D. Beltran vs. Vilma C. Pagulayan, Interpreter III, RTC, Branch 2, Tuguegarao City, Cagayan, A.M. No. P-05-2014, June 29, 2010.

June 2010 Philippine Supreme Court Decisions on Criminal Law and Procedure

Here are selected June 2010 rulings of the Supreme Court of the Philippines on criminal law and procedure:

Criminal Law

1. Revised Penal Code

Aggravating circumstance; evident premeditation. In order for evident premeditation to be appreciated, the following requisites must be proven: (1) the time when the offender determined to commit the crime; (2) an act manifestly indicating that the culprit has clung to his determination; and (3) a sufficient lapse of time between the determination and execution, to allow him to reflect upon the consequences of his act and to allow his conscience to overcome the resolution of his will. In the instant case, appellant uttered the words “iyang mama na iyan, may araw din siya sa akin.” Even conceding that these utterances were in the form of a threat, it still cannot be presumed that at the time they were made, there was indeed a determination to kill and that appellants had indeed clung to that determination, planning and meditating on how to kill the victim. People of the Philippines vs. Jonel Falabrica Serenas, et al, G.R. No. 188124, June 29, 2010.

Aggravating circumstance; evident premeditation. For evident premeditation to be considered, the following must be established: (1) the time when the accused determined (conceived) to commit the crime; (2) an overt act manifestly indicating that he clung to his determination to commit the crime (kill his victim); and (3) a sufficient lapse of time between the decision to commit the crime and the execution thereof to allow the accused to reflect upon the consequences of his act. Premeditation presupposes a deliberate planning of the crime before executing it. The execution of the criminal act, in other words, must be preceded by cool thought and reflection. In this case, there was a showing of a plan or preparation to kill, or proof that the accused meditated and reflected upon his decision to execute the crime. People of the Philippines vs. Albert Sanchez y Galera, G.R. No. 188610, June 29, 2010.

Aggravating circumstance; treachery. There is treachery when the offender commits any of the crimes against persons, employing means, methods or forms which tend directly and specially to ensure its execution, without risk to himself arising from the defense, which the offended party might make. For treachery to be appreciated, two conditions must concur: (a) the employment of means, methods or manner of execution that would ensure the offender’s safety from any defense or retaliatory act on the part of the offended party; and (b) the offender’s deliberate or conscious choice of means, method or manner of execution. People of the Philippines vs. Albert Sanchez y Galera, G.R. No. 188610, June 29, 2010.

Aggravating circumstance; treachery. The essence of treachery is the sudden attack by an aggressor without the slightest provocation on the part of the victim, depriving the latter of any real chance to defend himself, thereby ensuring the commission of the crime without risk to the aggressor. Jurisprudence teaches that there is treachery when an adult person attacks and causes the death of a child of tender years. As the Supreme Court elucidated in People vs. Cabarrubias, the killing of a child is characterized by treachery even if the manner of assault is not shown. For, the weakness of the victim due to his tender years results in the absence of any danger to the accused. People of the Philippines vs. Albert Sanchez y Galera, G.R. No. 188610, June 29, 2010.

June 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are selected June 2010 rulings of the Supreme Court of the Philippines on labor law and procedure:

Labor Law

Acceptance of Benefits, render moot claim under other policies.  As in the case of Capili v. National Labor Relations Commission [273 SCRA 576], a claim for benefit under the company’s retirement plan becomes moot when the employee accepts retirement benefits on the basis of Article 287 of the Labor Code.  By Yuson’s acceptance of her retirement benefits through a compromise agreement entered into with her employer, she is deemed to have opted to retire under Article 287. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S. Yuson, G.R. No. 170369, June 16, 2010.

Approval for company’s early retirement program; management prerogative.  Approval of applications for the early retirement program (“ERP”) is within the employer’s management prerogatives.  The exercise of management prerogative is valid as long as it is not done in a malicious, harsh, oppressive, vindictive, or wanton manner. In the present case, the Court sees no bad faith on the part of the employer.  The 21 August 2001 memorandum clearly states that petitioner, on its discretion, was offering ERP to its employees.  The memorandum also states that the reason for the ERP was to prevent further losses.  Petitioner did not abuse its discretion when it excluded respondent in the ERP because the latter is already about to retire.  To allow respondent to avail of the ERP would have been contrary to the purpose of the program. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S. Yuson, G.R. No. 170369, June 16, 2010.

Constructive dismissal; definition; transfer as management prerogative. Constructive dismissal is defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely, or when there is a demotion in rank or a diminution of pay. It exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.

Here, there was no diminution of petitioner’s salary and other benefits.  There was no evidence that she was harassed or discriminated upon, or that respondents made it difficult for her to continue with her other duties.  Absent any evidence of bad faith, it is within the exercise of respondents’ management prerogative to transfer some of petitioner’s duties, if, in their judgment, this would be more beneficial to the corporation.  Estrella Velasco vs. Transit Automotive Supply, Inc. and Antonio de Dios, G.R. No. 171327, June 18, 2010.

Constructive dismissal; off-detailing; resignation; notice requirement. The company evidently placed petitioner on floating status after being relieved of her position.  But, as the Court has repeatedly ruled, such act of “off-detailing” does not amount to a dismissal so long as the floating status does not continue beyond a reasonable time.  In this case, the employee’s floating status ran up to more than six months as of August 16, 2002. For this reason, the company may be considered to have constructively dismissed the employee from work as of that date. Hence, petitioner’s purported resignation on October 15, 2002 could not have been legally possible.

The company claims that it gave petitioner notices on August 23, 2002 and September 2, 2002, asking her to explain her failure to report for work and informing her that the company would treat such failure as lack of interest in her continued employment.  But these notices cannot possibly take the place of the notices required by law as they came more than six months after the company placed her on floating status, at which time, the employee is already deemed to have been constructively dismissed her from work.  Elsa S. Mali-on v. Equitable General Services Inc., G.R. No. 185269, June 29, 2010.

June 2010 Philippine Supreme Court Decisions on Civil Law

Here are selected June 2010 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Compensation. The Civil Code provides that compensation shall take place when two persons, in their own right, are creditors and debtors of each other. In order for compensation to be proper, it is necessary that: (i) each one of the obligors is bound principally and that he be at the same time a principal creditor of the other; (ii) both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (iii) the two debts are due: (iv) the debts are liquidated and demandable; and (v) over neither of them be any retention or controversy, commenced by third parties and communicated in due time to the debtor.

In this case, petitioners failed to properly discharge their burden to show that the debts are liquidated and demandable. Consequently, legal compensation is inapplicable.

A claim is liquidated when the amount and time of payment is fixed. If acknowledged by the debtor, although not in writing, the claim must be treated as liquidated. When the defendant, who has an unliquidated claim, sets it up by way of counterclaim, and a judgment is rendered liquidating such claim, it can be compensated against the plaintiff’s claim from the moment it is liquidated by judgment. Selwyn F. Lao, et al. vs. Special Plans, Inc., G.R. No. 164791, June 29, 2010 .

Contracts; Consideration; Adequacy of Price. Without directly saying so, the trial court held that the petitioners cannot sue upon the oral sale since in its own words: “[petitioners] have not paid in full Armando Gabriel, Sr. or his estate, so that the sale transaction between Armando Gabriel Sr. and [petitioners] [has] no adequate consideration.”

The trial court’s posture is patently flawed. For starters, they equated incomplete payment of the purchase price with inadequacy of price or what passes as lesion, when both are different civil law concepts with differing legal consequences, the first being a ground to rescind an otherwise valid and enforceable contract. Perceived inadequacy of price, on the other hand, is not a sufficient ground for setting aside a sale freely entered into, save perhaps when the inadequacy is shocking to the conscience. Anthony Orduña, et al. vs. Eduardo J. Fuentebella, et al., G.R. No. 176841, June 29, 2010.

Contracts; Autonomy of Parties. Unless the terms of a contract are against the law, morals, good customs, and public policy, such contract is law between the parties and its terms bind them. In Felsan Realty & Development Corporation v. Commonwealth of Australia, the Court regarded as valid and binding a provision in the lease contract that allowed the lessee to pre-terminate the same when fire damaged the leased building, rendering it uninhabitable or unsuitable for living. In this case, paragraph VIII of the lease contract between DBS and the Martins permitted rescission by either party should the leased property become untenantable because of natural causes. The Court similarly found the following provision enforeceable and binding: `In case of damage to the leased premises or any portion thereof by reason of fault or negligence attributable to the LESSEE, its agents, employees, customers, or guests, the LESSEE shall be responsible for undertaking such repair or reconstruction. In case of damage due to fire, earthquake, lightning, typhoon, flood, or other natural causes, without fault or negligence attributable to the LESSEE, its agents, employees, customers or guests, the LESSOR shall be responsible for undertaking such repair or reconstruction. In the latter case, if the leased premises become untenantable, either party may demand for the rescission of this contract and in such case, the deposit referred to in paragraph III shall be returned to the LESSEE immediately.’ Felicidad T. Martin, et al. vs. DBS Bank Philippines, Inc., et al. G.R. No. 174632 & G.R. No. 174804, June 16, 2010.