G.R. No. L-14441 – 125 Phil. 5 – 18 SCRA 924 – Mercantile Law – Corporation Law – Parity Rights – Corporate Nationality – Nationalized Areas of Activity
In 1956, San Jose Petroleum, Inc. (SJP), a mining corporation organized under the laws of Panama, was allowed by the Securities and Exchange Commission (SEC) to sell its shares of stocks in the Philippines. Apparently, the proceeds of such sale shall be invested in San Jose Oil Company, Inc. (SJO), a domestic mining corporation. Pedro Palting opposed the authorization granted to SJP because said tie up between SJP and SJO is violative of the constitution; that SJO is 90% owned by SJP; that the other 10% is owned by another foreign corporation; that a mining corporation cannot be interested in another mining corporation. SJP on the other hand invoked that under the parity rights agreement (Laurel-Langley Agreement), SJP, a foreign corporation, is allowed to invest in a domestic corporation.
ISSUE: Whether or not SJP is correct.
HELD: No. The parity rights agreement is not applicable to SJP. The parity rights are only granted to American business enterprises or enterprises directly or indirectly controlled by US citizens. SJP is a Panamanian corporate citizen. The other owners of SJO are Venezuelan corporations, not Americans. SJP was not able to show contrary evidence. Further, the Supreme Court emphasized that the stocks of these corporations are being traded in stocks exchanges abroad which renders their foreign ownership subject to change from time to time. This fact renders a practical impossibility to meet the requirements under the parity rights. Hence, the tie up between SJP and SJO is illegal, SJP not being a domestic corporation or an American business enterprise contemplated under the Laurel-Langley Agreement.
