DOJ Opinion No. 163, s. 1990

DOJ OPINION NO. 163 , s. 1990 September 4, 1990 Undersecretary Lilia R. Bautista Acting Vice-Chairman and Managing Head Board of Investments 385 Gil J. Puyat Avenue Makati, Metro Manila Madam : This refers to your request for opinion on whether or not under the circumstances stated hereinafter, the Board of Investments ("BOI") can deny the application for tax and duty-free importation of capital equipment filed by Mauritius Pulp and Paper Packaging Corporation ("Mauritius") under Article 39(c) of Executive Order No. 226, otherwise known as the Omnibus Investments Code, by applying the doctrine of "piercing the veil of corporate identity". prcd It appears that Mauritius is a corporation organized and registered with the Securities and Exchange Commission on January 10, 1989 and with the BOI on September 12, 1989 as a non-pioneer new export producer of corrugated carton boxes; that two of its stockholders, namely, Ms. Teresita Ng, and Mr. Rufino Yap own more than 50% of the shares of stock thereof; that the aforesaid individuals are likewise stockholders and officers of Johannesburg Packing Corporation ("Johannesburg"), which is engaged in the same business as Mauritius, the BOI had recommended to the Bureau of Customs the revocation of Johannesburg's authority to operate a customs bonded manufacturing warehouse; and that on December 14, 1989, the Central Bank issued Memorandum to Authorized Agent Banks (MAAB) No. 10 which requires that all applications to open letters of credit and/or to purchase foreign exchange for whatever purpose and under any mode or terms of payment, including no dollar imports, as well as applications for the issuance of release certificates that may be filed by, among others, Johannesburg, Rufino Yap and Teresita Ng shall be referred to the Central Bank, through its Current Imports and Classification Department, for appropriate action. You suspect that Mauritius might have been organized merely to save Johannesburg from the consequential effects of the aforestated Central Bank's MAAB No. 10 since Mauritius was organized only after the BOI recommendation to the Bureau of Customs (BOC) to revoke Johannesburg's customs warehouse license. Thus, your present query. With regret, we are unable to give you the desired opinion inasmuch as the facts on hand are insufficient for a thorough appreciation of the issue/s involved in this case. Under established precedents, the Secretary of Justice does not render opinion on questions the resolution of which hinges upon factual matters which are not readily discernible from the query (Secretary of Justice Opns. No. 67, s. 1984; No. 5, s. 1985; and No. 117, s. 1988). The determination of whether or not the aforestated circumstances warrant the" piercing of the corporate veil" of Mauritius necessitates further investigation on the real relationship among said corporation, Ms. Teresita Ng, Mr. Rufino Yap and Johannesburg and the motives behind its creation. It must be established, for instance, that Mauritius' affairs are conducted as to make it merely an instrumentality, conduit or adjunct of Johannesburg, Ms. Teresita Ng or Mr. Rufino Yap such that the former is a dummy and serves no business purpose but is intended only as a blind (see Koppel Phil. Inc. vs. Yatco, 77 Phil 496; Liddel & Co., Inc. vs. Collector of Internal Revenue, 112 Phil. 524). It may also be necessary to look into the assets of the two corporations (Claparols vs. Court of Industrial Relations, 65 SCRA 613) and their set of officers, their offices and financing schemes (Commissioner of Internal Revenue vs. Norton & Harrison Company, 11 SCRA 714). Incidentally, it has been held that the power to "pierce the corporate veil" is a judicial prerogative (Cruz vs. Dalisay, 152 SCRA 486). One other reason for us to refrain from ruling herein is that the instant case involves the substantial interest of private parties to which the opinions of this Office have no binding effect, such opinions being merely advisory in nature. Thus, the said parties may refuse to be bound by any opinion of the Department in this case, especially if adverse to its interests and decide instead to litigate the matter in court. Pursuant to settled precedents, the Secretary of Justice declines opinion on matters which are justiciable in nature or might subsequently be the subject of a judicial controversy (Id, Opns. Nos. 291 and 299, s. 1956; Nos. 92 and 112, s. 1971; No. 110, s. 1979; and No. 71, s. 1985). prcd Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary