Opinion ID: 365630
Heading Depth: 1
Heading Rank: 2

Heading: corco

Text: 5 CORCO, incorporated under the laws of Puerto Rico, is in the business of operating a petroleum refinery and petrochemical facilities. 2 Its physical plant is located in Puerto Rico. 3 Prior to 1971 CORCO's executive offices were also located there. From 1971 to 1975 the offices were in New York City. In 1975, Tesoro Petroleum Corporation, headquartered in San Antonio, successfully tendered for a controlling share of CORCO's common stock. 4 In contemplation of a merger of the two companies, Tesoro had CORCO's executive offices moved to San Antonio in 1976. The merger plans have since been shelved, but CORCO's executive offices have remained in San Antonio. 5 6 Although all of CORCO's production facilities are located in Puerto Rico, almost all of its executive officers live and office in San Antonio. The management of CORCO is divided into six departments: Planning and Economics, Operations, Marine Transportation, Refined Products Marketing, Petrochemicals Marketing, and Environmental Affairs. Each department is headed by a vice president. The vice presidents report to the executive vice president who in turn is responsible to the president and chief executive officer. Both the president and executive vice president work out of San Antonio. Of the six department heads, four live in San Antonio; one, vice president of Refined Products Marketing, lives in McLean, Virginia; and one, senior vice president of Operations, lives in Puerto Rico. There are two other vice presidents, the general counsel and secretary and the comptroller and treasurer; both live in San Antonio. Directly below the vice president level of management is a group of general managers and directors. Both the director of Personnel and director of Public Affairs live in San Antonio. There are three general managers Joint Ventures, Operations and Supplies, and Refined Products Liaison. All three live in San Antonio. 7 An analysis of the jobs performed by CORCO's management reveals that the company's physical operations are controlled from San Antonio. This is best seen by an explanation of the process through which CORCO purchases feedstocks for its facilities and ultimately sells its products to customers. 8 A starting point in describing the process is the CORCO Operating Team. The function of the team is to prepare what is called the Operating Plan. The plan outlines how the refining and petrochemical facilities should operate for the upcoming 60 or 90 day period, the amount of each product that should be produced, and the facility that should produce it. Because of constant changes in the market the plan must continually be updated. This is accomplished at the weekly or semi-weekly meetings of the team. The team consists of the heads of all the departments or their designated representatives. 9 Input into the plan necessarily comes from all departments. The general manager for Supplies and Refined Products Liaison reports on the availability of raw materials and their prices. Marine Transportation must find available means for transporting the raw materials to Puerto Rico and some of the finished product to off-island customers. Both the Petrochemical and Refined Products Marketing departments estimate the quantities of products that can be sold. The Operations department estimates the quantities of the different products that can be produced. The Planning and Economics department is charged with assimilating all of these factors, supplies, transportation, production and sales, and coming up with a plan that will result in the most profitable mix of products and quantities. 10 The bankruptcy court found that the Operating Plan is not a statement of general policy but rather a detailed production schedule. We agree. The people in charge of operations at the refinery are not authorized to substantially deviate from the production schedule in the plan. Because of the upstream and downstream effect of any substantial deviation on the rest of CORCO's operation, changes must be cleared through San Antonio and the appropriate changes made in the transportation needs and marketing aspects of CORCO's business. There is, of course, some delegated authority to make adjustments in production. The refinery is given latitude to cope with emergencies, and in some instances the plan delegates options for the Puerto Rico personnel to choose from. 6 This limited delegation of authority, however, does not alter the basic fact that the purchase of feedstocks, the refining process, and the transportation of both is directed from San Antonio. 7 11 The financial heart of CORCO is located in San Antonio. 8 The comptroller and treasurer works out of San Antonio. He is charged with the normal responsibilities of a comptroller and treasurer: managing bank accounts, payment of taxes and preparation of financial reports. In addition, all of CORCO's expenses, except for those directly related to the refinery in Puerto Rico, are paid out of the San Antonio office. The weekly $20,000,000 bill for feedstocks is paid from San Antonio. The payroll for the refinery workers is prepared in Puerto Rico. 12 CORCO's financing is run by people who work in San Antonio. Although many of CORCO's loan agreements are negotiated and executed in New York, the people responsible for the negotiations work out of San Antonio. The only significant task relating to the financial management of CORCO that is performed in Puerto Rico is the maintenance of the corporate books, the corporate audit, and the billing of customers. CORCO maintains its original books in Puerto Rico as required by Puerto Rican law. 9 CORCO's tax returns, however, are prepared in San Antonio. 13 In addition to the location of CORCO's physical plant in Puerto Rico, most of its products are sold to customers located in Puerto Rico. CORCO's sales team is divided into two departments, refined products and petrochemicals. CORCO's largest refined products customer is PRWRA, which purchased over 9,000,000 barrels of oil in 1977 for an approximate price of $132,700,000. 10 An employee stationed in Puerto Rico, the general manager of marketing, 11 services CORCO's account with PRWRA. This general manager, however, does not have the authority to commit CORCO to delivery of residual fuel oil to PRWRA. After PRWRA has informed CORCO's general manager that it wants to purchase fuel, the vice-president for Refined Products Marketing is informed, who then checks with the operating team to determine the availability of the product. Based on the information the vice-president receives, he either approves or disapproves of the sale. Only this vice-president is authorized to bind CORCO in a sales agreement. 14 CORCO sold $198,000,000 worth of gasoline to other customers in Puerto Rico during 1977. The contracts for these sales are negotiated in the home offices of companies that sell gasoline in Puerto Rico. Of the five gasoline contracts, four were negotiated and executed in the mainland and only one in Puerto Rico. CORCO's Virginia office is responsible for negotiating the contracts and servicing the accounts. 15 The sale of refined products to mainland customers resulted in revenues of $190,000,000 in 1977. Most of these sales were made to customers on the Northeast coast of the United States. People working out of CORCO's Virginia office are responsible for these sales. No sales are actually consummated, however, until the Virginia office has checked with San Antonio on the availability of the products. 16 The petrochemical marketing department is stationed in San Antonio. Over 80% Of the petrochemicals produced by CORCO are either sold to CORCO's joint venturers located in Puerto Rico or to CORCO's refinery for refining into gasoline. 12 Most of the remaining production is sold to mainland customers. For sales of $110,000,000 in 1977, all but $9,000,000 were sold off-island. The contracts for the petrochemical sales were negotiated either at the home office of the purchasers or in San Antonio. 17 This overview of CORCO's operation reveals that production is centered in Puerto Rico and that management is centered in San Antonio. CORCO's supplies come from off-island sources, but a majority of CORCO's production is sold to customers located in Puerto Rico. 13 With this factual basis we consider the location of CORCO's principal place of business.