ISSUE: W/N Quasha should be criminally liable

NATIONALITY OF CORPORATIONS
24.) PEOPLE V. QUASHA (1953)/ G.R. NO. L-6055/ JUNE 12, 1953

Lessons Applicable: Public Utilities (Corporate Law)

FACTS:

William H. Quasha, a member of the Philippine bar, committed a

crime of falsification of a public and commercial document for causing it to
appear that Arsenio Baylon, a Filipino citizen, had subscribed to and was
the owner of 60.005 % of the subscribed capital stock of Pacific Airways
Corp. (Pacific) when in reality the money paid belongs to an American
citizen whose name did not appear in the article of incorporation,to
circumvent the constitutional mandate that no corp. shall be authorize to
operate as a public utility in the Philippines unless 60% of its capital stock is
owned by Filipinos.
Found guilty after trial and sentenced to a term of
imprisonment and a fine
Quasha appealed to this Court
Primary purpose: to carry on the business of a common carrier by air,
land or water
Baylon did not have the controlling vote because of the difference in
voting power between the preferred shares and the common shares
ART. 171. Falsification by public officer, employee, or notary or
ecclesiastic minister. The penalty of prision mayor and a fine not to
exceed 5,000 pesos shall be imposed upon any public officer, employee, or
notary who, taking advantage of his official position, shall falsify a document
by committing any of the following acts:
4. Making untruthful statements in a narration of facts.
ART. 172. Falsification by private individuals and use of falsified
documents. The penalty of prision correccional in its medium and
maximum period and a fine of not more than 5,000 pesos shall be imposed
upon:
1. Any private individual who shall commit any of the falsifications
enumerated in the next preceding article in any public or official document or
letter of exchange or any other kind of commercial document.

HELD: NO. Acquitted.

falsification consists in not disclosing in the articles of incorporation
that Baylon was a mere trustee ( or dummy as the prosecution chooses to
call him) of his American co-incorporators, thus giving the impression that
Baylon was the owner of the shares subscribed to by him
For the mere formation of the corporation such revelation was not
essential, and the Corporation Lawdoes not require it
The moment for determining whether a corporation is entitled to
operate as a public utility is when it applies for a franchise, certificate, or any
other form of authorization for that purpose.
that can be done after the corporation has already come into
being and not while it is still being formed
so far as American citizens are concerned, the said act has ceased to
be an offense within the meaning of the law, so that defendant can no longer
be held criminally liable therefor.
25.) LA BUGAL BLAAN TRIBAL ASSOCIATION INC VS RAMOS
G.R. NO. 127882, 27 JANUARY 2004, EN BANC (CARPIO-MORALES, J.)
LA BUGAL BLAAN TRIBAL ASSOCIATION INC., et. al. v. VICTOR O.
RAMOS, Secretary Department of Environment and Natural Resources;
HORACIO RAMOS, Director, Mines and Geosciences Bureau (MGBDENR); RUBEN TORRES, Executive Secretary; and WMC (PHILIPPINES)
INC.
The constitutional provision allowing the President to enter into FTAA is
a exception to the rule that participation in the nations natural
resources is reserved exclusively to Filipinos. Provision must be
construed strictly against their enjoyment by non-Filipinos.
FACTS:
RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the
effectivity of RA 7942, or on March 30, 1995, the President signed a Financial
and Technical Assistance Agreement (FTAA) with WMCP, a corporation
organized under Philippine laws, covering close to 100,000 hectares of land in
South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On
August 15, 1995, the Environment Secretary Victor Ramos issued DENR

Administrative Order 95-23, which was later repealed by DENR Administrative

Order 96-40, adopted on December 20, 1996.

RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting

fully foreign owned corporations to exploit the Philippine natural resources.

Petitioners prayed that RA 7942, its implementing rules, and the FTAA
between the government and WMCP be declared unconstitutional on ground
that they allow fully foreign owned corporations like WMCP to exploit, explore
and develop Philippine mineral resources in contravention of Article XII
Section 2 paragraphs 2 and 4 of the Charter.

Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine
which states that All lands of the public domain, waters, minerals, coal,
petroleum, and other minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna,
and other natural resources are owned by the State. The same section also
states that, the exploration and development and utilization of natural
resources shall be under the full control and supervision of the State.

In January 2001, WMC - a publicly listed Australian mining and exploration

company - sold its whole stake in WMCP to Sagittarius Mines, 60% of which is
owned by Filipinos while 40% of which is owned by Indophil Resources, an
Australian company. DENR approved the transfer and registration of the FTAA
in Sagittarius name but Lepanto Consolidated assailed the same. The latter
case is still pending before the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the
DENR to accept, consider and evaluate proposals from foreign owned
corporations or foreign investors for contracts or agreements involving wither
technical or financial assistance for large scale exploration, development and
utilization of minerals which upon appropriate recommendation of the (DENR)
Secretary, the President may execute with the foreign proponent. WMCP
likewise contended that the annulment of the FTAA would violate a treaty
between the Philippines and Australia which provides for the protection of
Australian investments.
ISSUES:
1.
Whether or not the Philippine Mining Act is unconstitutional
for allowing fully foreign-owned corporations to exploit the Philippine
mineral resources.
2.
Whether or not the FTAA between the government and
WMCP is a service contract that permits fully foreign owned
companies to exploit the Philippine mineral resources.
HELD:
First Issue: RA 7942 is Unconstitutional

Conspicuously absent in Section 2 is the provision in the 1935 and 1973

Constitution authorizing the State to grant licenses, concessions, or leases for
the exploration, exploitation, development, or utilization of natural resources.
By such omission, the utilization of inalienable lands of the public domain
through license, concession or lease is no longer allowed under the 1987
Constitution.
Under the concession system, the concessionaire makes a direct equity
investment for the purpose of exploiting a particular natural resource within a
given area. The concession amounts to complete control by the
concessionaire over the countrys natural resource, for it is given exclusive
and plenary rights to exploit a particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase management or
other forms of assistance in the 1973 Charter. The present Constitution now
allows only technical and financial assistance. The management and the
operation of the mining activities by foreign contractors, the primary feature of
the service contracts was precisely the evil the drafters of the 1987
Constitution sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an
exception to the rule that participation in the nations natural resources is
reserved exclusively to Filipinos. Accordingly, such provision must be
construed strictly against their enjoyment by non-Filipinos. Therefore, RA 7942
is invalid insofar as the said act authorizes service contracts. Although the
statute employs the phrase financial and technical agreements in
accordance with the 1987 Constitution, its pertinent provisions actually treat

these agreements as service contracts that grant beneficial ownership to

foreign contractors contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign
contractor manages the mineral resources just like the foreign contractor in a
service contract. By allowing foreign contractors to manage or operate all the
aspects of the mining operation, RA 7942 has, in effect, conveyed beneficial
ownership over the nations mineral resources to these contractors, leaving
the State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a
circumvention of the constitutionally ordained 60-40% capitalization
requirement for corporations or associations engaged in the exploitation,
development and utilization of Philippine natural resources.
When parts of a statute are so mutually dependent and connected as
conditions, considerations, inducements or compensations for each other as
to warrant a belief that the legislature intended them as a whole, then if some
parts are unconstitutional, all provisions that are thus dependent, conditional
or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations
are limited only to merely technical or financial assistance to the State for
large scale exploration, development and utilization of minerals, petroleum
and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise
unconstitutional since the agreement itself is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the
exclusive right to explore, exploit, utilize and dispose of all minerals and byproducts that may be produced from the contract area. Section 1.2 of the
same agreement provides that EMCP shall provide all financing, technology,
management, and personnel necessary for the Mining Operations.
These contractual stipulations and related provisions in the FTAA taken
together, grant WMCP beneficial ownership over natural resources that

properly belong to the State and are intended for the benefit of its citizens.
These stipulations are abhorrent to the 1987 Constitution. They are precisely
the vices that the fundamental law seeks to avoid, the evils that it aims to
suppress. Consequently, the contract from which they spring must be struck
down.
Detailed Digest of Gamboa vs. Finance Secretary, G.R. No. 176579, June 28,
2011
26.) WILSON P. GAMBOA VS. FINANCE SECRETARY TEVES
G.R. No. 176579, promulgated June 28, 2011
FACTS:
This is a petition to nullify the sale of shares of stock of Philippine
Telecommunications Investment Corporation (PTIC) by the government of the
Republic of the Philippines, acting through the Inter-Agency Privatization
Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of
First Pacific Company Limited (First Pacific), a Hong Kong-based investment
management and holding company and a shareholder of the Philippine Long
Distance Telephone Company (PLDT).
The petitioner questioned the sale on the ground that it also involved
an indirect sale of 12 million shares (or about 6.3 percent of the outstanding
common shares) of PLDT owned by PTIC to First Pacific. With the this sale,
First Pacifics common shareholdings in PLDT increased from 30.7 percent to
37 percent, thereby increasing the total common shareholdings of foreigners
in PLDT to about 81.47%. This, according to the 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%.
ISSUE:
Does the term capital in Section 11, Article XII of the Constitution
refer to the total common shares only, or to the total outstanding capital stock
(combined total of common and non-voting preferred shares) of PLDT, a public
utility?
HELD:

[The Court partly granted the petition and held that 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 of a public utility, or in the instant
case, to the total common shares of PLDT.]
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. (Emphasis supplied)
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 [of
PLDT].
xxx

xxx

xxx

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. xxx.
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.
xxx

xxx

xxx

Mere legal title is insufficient to meet the 60 percent Filipino-owned

capital required in the Constitution. Full beneficial ownership of 60 percent of
the outstanding capital stock, coupled with 60 percent of the voting rights, is
required. The legal and beneficial ownership of 60 percent of the outstanding
capital stock must rest in the hands of Filipino nationals in accordance with the
constitutional mandate. Otherwise, the corporation is considered as nonPhilippine national[s].
xxx

xxx

xxx

To construe broadly the term capital as the total outstanding capital

stock, including both common and non-voting preferred shares, grossly
contravenes the intent and letter of the Constitution that the State shall
develop a self-reliant and independent national economy effectively
controlled by Filipinos. A broad definition unjustifiably disregards who owns
the all-important voting stock, which necessarily equates to control of the
public utility.
We shall illustrate the glaring anomaly in giving a broad definition to
the term capital. Let us assume that a corporation has 100 common shares
owned by foreigners and 1,000,000 non-voting preferred shares owned by
Filipinos, with both classes of share having a par value of one peso ( P1.00)

per share. Under the broad definition of the term capital, such corporation
would be considered compliant with the 40 percent constitutional limit on
foreign equity of public utilities since the overwhelming majority, or more than
99.999 percent, of the total outstanding capital stock is Filipino owned. This is
obviously absurd.
In the example given, only the foreigners holding the common shares
have voting rights in the election of directors, even if they hold only 100
shares. The foreigners, with a minuscule equity of less than 0.001 percent,
exercise control over the public utility. On the other hand, the Filipinos, holding
more than 99.999 percent of the equity, cannot vote in the election of directors
and hence, have no control over the public utility. This starkly circumvents the
intent of the framers of the Constitution, as well as the clear language of the
Constitution, to place the control of public utilities in the hands of Filipinos. It
also renders illusory the State policy of an independent national
economy effectively controlled by Filipinos.
The example given is not theoretical but can be found in the real
world, and in fact exists in the present case.
xxx

xxx

xxx

[O]nly holders of common shares can vote in the election of directors

[of PLDT], meaning only common shareholders exercise control over PLDT.
Conversely, holders of preferred shares, who have no voting rights in the
election of directors, do not have any control over PLDT. In fact, under PLDTs
Articles of Incorporation, holders of common shares have voting rights for all
purposes, while holders of preferred shares have no voting right for any
purpose whatsoever.
It must be stressed, and respondents do not dispute, that foreigners
hold a majority of the common shares of PLDT. In fact, based on PLDTs 2010
General Information Sheet (GIS), which is a document required to be
submitted annually to the Securities and Exchange Commission, foreigners
hold 120,046,690 common shares of PLDT whereas Filipinos hold only
66,750,622 common shares. In other words, foreigners hold 64.27% of the
total number of PLDTs common shares, while Filipinos hold only 35.73%.
Since holding a majority of the common shares equates to control, it is clear
that foreigners exercise control over PLDT. Such amount of control

unmistakably exceeds the allowable 40 percent limit on foreign ownership of

public utilities expressly mandated in Section 11, Article XII of the Constitution.
As shown in PLDTs 2010 GIS, as submitted to the SEC, the par
value of PLDT common shares is P5.00 per share, whereas the par value of
preferred shares is P10.00 per share. In other words, preferred shares have
twice the par value of common shares but cannot elect directors and have
only 1/70 of the dividends of common shares. Moreover, 99.44% of the
preferred shares are owned by Filipinos while foreigners own only a minuscule
0.56% of the preferred shares. Worse, preferred shares constitute 77.85% of
the authorized capital stock of PLDT while common shares constitute only
22.15%. This undeniably shows that beneficial interest in PLDT is not with the
non-voting preferred shares but with the common shares, blatantly violating
the constitutional requirement of 60 percent Filipino control and Filipino
beneficial ownership in a public utility.
The legal and beneficial ownership of 60 percent of the outstanding
capital stock must rest in the hands of Filipinos in accordance with the
constitutional mandate. Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights, is
constitutionally required for the States grant of authority to operate a public
utility. The undisputed fact that the PLDT preferred shares, 99.44% owned by
Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT
common shares earn, grossly violates the constitutional requirement of 60
percent Filipino control and Filipino beneficial ownership of a public utility.
In short, Filipinos hold less than 60 percent of the voting stock, and
earn less than 60 percent of the dividends, of PLDT. This directly contravenes
the express command in Section 11, Article XII of the Constitution that [n]o
franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to x x x corporations x x x organized
under the laws of the Philippines, at least sixty per centum of whose capital is
owned by such citizens x x x.
To repeat, (1) foreigners own 64.27% of the common shares of PLDT,
which class of shares exercises the sole right to vote in the election of
directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73%
of PLDTs common shares, constituting a minority of the voting stock, and thus
do not exercise control over PLDT; (3) preferred shares, 99.44% owned by

Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the
dividends that common shares earn; (5) preferred shares have twice the par
value of common shares; and (6) preferred shares constitute 77.85% of the
authorized capital stock of PLDT and common shares only 22.15%. This kind
of ownership and control of a public utility is a mockery of the Constitution.
Incidentally, the fact that PLDT common shares with a par value
of P5.00 have a current stock market value of P2,328.00 per share, while
PLDT preferred shares with a par value of P10.00 per share have a current
stock market value ranging from only P10.92 to P11.06 per share, is a glaring
confirmation by the market that control and beneficial ownership of PLDT rest
with the common shares, not with the preferred shares.
xxx

xxx

xxx

WHEREFORE, we PARTLY GRANT the petition and rule that the

term capital in Section 11, Article XII of the 1987 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 (common and non-voting preferred shares). Respondent Chairperson of
the Securities and Exchange Commission is DIRECTED to apply this
definition of the term capital in determining the extent of allowable foreign
ownership in respondent Philippine Long Distance Telephone Company, and if
there is a violation of Section 11, Article XII of the Constitution, to impose the
appropriate sanctions under the law.
27.) GAMBOA VS TEVES, GR NO. 176579, OCTOBER 9 2012
***(Classmates, please note that this is a resolution by the Supreme Court En
Banc giving the definitions and interpretations of words and provisions of law.
Please refer to the June 28, 2011 case for the facts and issues)
ISSUE: Whether or not the Court made an erroneous interpretation of the
term capital in its 2011 decision?
HELD: NO!
The Court said that the Constitution is clear in expressing its State policy of
developing an economy effectively controlled by Filipinos. Asserting the

ideals that our Constitutions Preamble want to achieve, that is - to conserve

and develop our patrimony , hence, the State should fortify a Filipinocontrolled economy. In the 2011 decision, the Court finds no wrong in the
construction of the term capital which refers to the shares with voting rights,
as well as with full beneficial ownership (Art. 12, sec. 10) which implies that
the right to vote in the election of directors, coupled with benefits, is
tantamount to an effective control. Therefore, the Courts interpretation of the
term capital was not erroneous. Thus, the motion for reconsideration is
denied.
Opinion of the Supreme Court through Justice Carpio as ponente:
The term CAPITAL to determine nationality of a corporation:
1. For more than 75 years since the 1935 Constitution, the Court has not
interpreted or defined the term capital found in various economic
provisions of the 1935, 1973 and 1987 Constitutions. There has never
been a judicial precedent interpreting the term capital in the 1935, 1973
and 1987 Constitutions, until now.
2. The VOTING CONTROL TEST and BENEFICIAL OWNERSHIP TEST
are the methods of determining capital:
2.1. (1) sixty percent (60%) of their respective outstanding capital stock
entitled to vote is owned by a Philippine national; and (2) at least
60% of their respective board of directors are Filipino citizens.
2.2. 60-40 ownership requirement in favor of Filipino citizens in the
Constitution is not complied with unless the corporation satisfies
the criterion of beneficial ownership and that in applying the same
the primordial consideration is situs of control.
2.2.1.
Section 19. Article II, 1987 Constitution. The State shall
develop a self-reliant and independent national economy
effectively controlled by Filipinos
2.2.2.
Right to elect directors, coupled with beneficial ownership,
translates to effective control.
2.3. the 60-40 ownership requirement in favor of Filipino citizens in the
Constitution to engage in certain economic activities applies not
only to voting control of the corporation, but also to the beneficial
ownership of the corporation
2.4. Grandfather Rule must be applied to accurately determine the
actual participation, both direct and indirect, of foreigners in a
corporation engaged in a nationalized activity or business.

2.5.

the 60-40 ownership requirement in favor of Filipino citizens must

apply separately to each class of shares, whether common,
preferred non-voting, preferred voting or any other class of shares
2.5.1.
at least 60 percent of the common shares and at least 60
percent of the preferred non-voting shares must be owned
by Filipinos
3. Definition of a Philippine National:
3.1. Investment Incentives Act of 1967 to the adoption of the Omnibus
Investments Code of 1981, to the enactment of the Omnibus
Investments Code of 1987, and to the passage of the present
Foreign Investments Act of 1991, or for more than four decades,
the statutory definition of the term Philippine national has been
uniform and consistent: it means a Filipino citizen, or a domestic
corporation at least 60% of the voting stock is owned by Filipinos.
Likewise, these same statutes have uniformly and consistently
required that only Philippine nationals could own and operate
public utilities in the Philippines
SEC legal officers do not have the power to create opinions. Such opinions do
not have the force and effect of SEC rules and regulations; and are ultra vires
on the part of the legal officers. Only the collegial body of the SEC can adopt
such rules and regulations. Even such previous of opinions of the SEC En
Banc are not binding to new opinions, nor do such opinions bind the final
interpretation of the Court.
Example by Justice Carpio:
Let us assume that a corporation has 100 common shares
owned by foreigners and 1,000,000 non-voting preferred shares
owned by Filipinos, with both classes of share having a par
value of one peso (P1.00) per share. Under the broad definition
of the term capital, such corporation would be considered
compliant with the 40 percent constitutional limit on foreign
equity of public utilities since the overwhelming majority, or
more than 99.999 percent, of the total outstanding capital stock
is Filipino owned. This is obviously absurd.
In the example given, only the foreigners holding the common
shares have voting rights in the election of directors, even if

they hold only 100 shares. The foreigners, with a minuscule

equity of less than 0.001 percent, exercise control over the
public utility. On the other hand, the Filipinos, holding more than
99.999 percent of the equity, cannot vote in the election of
directors and hence, have no control over the public utility. This
starkly circumvents the intent of the framers of the Constitution,
as well as the clear language of the Constitution, to place the
control of public utilities in the hands of Filipinos.
Further, even if foreigners who own more than forty percent of
the voting shares elect an all-Filipino board of directors, this
situation does not guarantee Filipino control and does not in
any way cure the violation of the Constitution.
The original case was remanded to the SEC for final inquiry and investigation,
as it is proper since the SEC is the government agency which determines
whether PLDT is truly Filipino owned corporation as within the context of the
Constitution. The Supreme Court only mandated the SEC to make a ruling in
the definition given to the SEC by the Supreme Court. The Court did not make
a ruling whether or not PLDT is a corporation with Philippine Nationality, that is
for the SEC to decide.
28.) NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO
MINING AND DEVELOPMENT, INC., AND MCARTHUR MINING, INC.,
PETITIONERS, VS. REDMONT CONSOLIDATED MINES CORP
G.R. NO. 195580 APRIL 21, 2014
FACTS:
Sometime in December 2006, respondent Redmont Consolidated Mines Corp.
(Redmont), a domestic corporation organized and existing under Philippine
laws, took interest in mining and exploring certain areas of the province of
Palawan. After inquiring with the Department of Environment and Natural
Resources (DENR), it learned that the areas where it wanted to undertake
exploration and mining activities where already covered by Mineral Production
Sharing Agreement (MPSA) applications of petitioners Narra, Tesoro and
McArthur.

Petitioner McArthur Narra and Tesoro, filed an application for an MPSA and
Exploration Permit (EP) which was subsequently issued.
On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of
the DENR three (3) separate petitions for the denial of petitioners applications
for MPSA.
Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and
Narra are owned and controlled by MBMI Resources, Inc. (MBMI), a 100%
Canadian corporation. Redmont reasoned that since MBMI is a considerable
stockholder of petitioners, it was the driving force behind petitioners filing of
the MPSAs over the areas covered by applications since it knows that it can
only participate in mining activities through corporations which are deemed
Filipino citizens. Redmont argued that given that petitioners capital stocks
were mostly owned by MBMI, they were likewise disqualified from engaging in
mining activities through MPSAs, which are reserved only for Filipino citizens.
Petitioners averred that they were qualified persons under Section 3(aq) of
Republic Act No. (RA) 7942 or the Philippine Mining Act of 1995. They stated
that their nationality as applicants is immaterial because they also applied for
Financial or Technical Assistance Agreements (FTAA) denominated as AFTAIVB-09 for McArthur, AFTA-IVB-08 for Tesoro and AFTA-IVB-07 for Narra,
which are granted to foreign-owned corporations. Nevertheless, they claimed
that the issue on nationality should not be raised since McArthur, Tesoro and
Narra are in fact Philippine Nationals as 60% of their capital is owned by
citizens of the Philippines.
On December 14, 2007, the POA issued a Resolution disqualifying petitioners
from gaining MPSAs. The POA considered petitioners as foreign corporations
being "effectively controlled" by MBMI, a 100% Canadian company and
declared their MPSAs null and void.
Pending the resolution of the appeal filed by petitioners with the MAB,
Redmont filed a Complaint with the Securities and Exchange Commission
(SEC), seeking the revocation of the certificates for registration of petitioners
on the ground that they are foreign-owned or controlled corporations engaged
in mining in violation of Philippine laws.

CA found that there was doubt as to the nationality of petitioners when it

realized that petitioners had a common major investor, MBMI, a corporation
composed of 100% Canadians. Pursuant to the first sentence of paragraph 7
of Department of Justice (DOJ) Opinion No. 020, Series of 2005, adopting the
1967 SEC Rules which implemented the requirement of the Constitution and
other laws pertaining to the exploitation of natural resources, the CA used the
"grandfather rule" to determine the nationality of petitioners.
In determining the nationality of petitioners, the CA looked into their corporate
structures and their corresponding common shareholders. Using the
grandfather rule, the CA discovered that MBMI in effect owned majority of the
common stocks of the petitioners as well as at least 60% equity interest of
other majority shareholders of petitioners through joint venture agreements.
The CA found that through a "web of corporate layering, it is clear that one
common controlling investor in all mining corporations involved x x x is MBMI."
Thus, it concluded that petitioners McArthur, Tesoro and Narra are also in
partnership with, or privies-in-interest of, MBMI.
ISSUE:
Whether or not Narra, Tesoro and McArthur are foreign corporations
HELD:
Yes. There are two acknowledged tests in determining the nationality of a
corporation: the control test and the grandfather rule. Paragraph 7 of DOJ
Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which
implemented the requirement of the Constitution and other laws pertaining to
the controlling interests in enterprises engaged in the exploitation of natural
resources owned by Filipino citizens, provides:
Shares belonging to corporations or partnerships at least 60% of the capital of
which is owned by Filipino citizens shall be considered as of Philippine
nationality (CONTROL TEST), but if the percentage of Filipino ownership in
the corporation or partnership is less than 60%, only the number of shares
corresponding to such percentage shall be counted as of Philippine nationality
(GRANDFATHER RULE). Thus, if 100,000 shares are registered in the name
of a corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be

recorded as owned by Filipinos. But if less than 60%, or say, 50% of the
capital stock or capital of the corporation or partnership, respectively, belongs
to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos
and the other 50,000 shall be recorded as belonging to aliens.
The grandfather rule, petitioners reasoned, has no leg to stand on in the
instant case since the definition of a "Philippine National" under Sec. 3 of the
FIA does not provide for it. They further claim that the grandfather rule "has
been abandoned and is no longer the applicable rule." They also opined that
the last portion of Sec. 3 of the FIA admits the application of a "corporate
layering" scheme of corporations. Petitioners claim that the clear and
unambiguous wordings of the statute preclude the court from construing it and
prevent the courts use of discretion in applying the law. They said that the
plain, literal meaning of the statute meant the application of the control test is
obligatory.
SC disagreed. "Corporate layering" is admittedly allowed by the FIA; but if it is
used to circumvent the Constitution and pertinent laws, then it becomes illegal.
Further, the pronouncement of petitioners that the grandfather rule has already
been abandoned must be discredited for lack of basis.
Petitioners McArthur, Tesoro and Narra are not Filipino since MBMI, a 100%
Canadian corporation, owns 60% or more of their equity interests. Such
conclusion is derived from grandfathering petitioners corporate owners,
namely: MMI, SMMI and PLMDC. The "control test" is still the prevailing mode
of determining whether or not a corporation is a Filipino corporation, within the
ambit of Sec. 2, Art. II of the 1987 Constitution, entitled to undertake the
exploration, development and utilization of the natural resources of the
Philippines. When in the mind of the Court there is doubt, based on the
attendant facts and circumstances of the case, in the 60-40 Filipino-equity
ownership in the corporation, then it may apply the "grandfather rule."
------ wla no. 29 --------30.) ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR VS. LRC(J. FELIX; 20
DECEMBER 1957)
FACTS:

Rodis executed a deed of sale over a parcel of land in favor of the Roman
Catholic Apostolic Administratorof Davao, a corporation sole, with Msgr.
Thibault, a Canadian Citizen, as the actual incumbent. When the Roman
Catholic Administrator presented the deed of sale for registration at the
Register of Deeds of Davao, the latterrequired that the corporation sole
prepare an affidavit declaring that 60% of the members were Filipino
citizens.In spite of assurance by the corporation sole that the totality of the
Catholic population of Davao would become the owner of the property,
the Register of Deeds still had some doubts as to the registerability of the
document, and referred the matter to the Land Registration Commissioner.
The Land Registration Commissioner found that the corporation sole was not
qualified to acquire private lands in the Philippines because of the requirement
that 60% of the corporation was actually owned or controlled by Filipino
citizens; as the present incumbent of the corporation was a Canadian citizen,
the LRC found that the corporation sole was not compliant. Consequently the
corporation sole instituted an action for Mandamus with the Supreme Court
alleging that the sale in favor is in favor of the Catholic Church, which is
qualified to acquire private agricultural lands for the establishment and
maintenance of places of worship, and prayed that the registration be
recognized.
ISSUE: Whether or not the Roman Catholic Apostolic Administrator of Davao
Inc. is entitled to acquire private properties.
HELD: Yes. A corporation sole, the bishops or archbishops who sit as the
incumbent are merely administrators of the church properties, and they only
hold these in trust for the church. Consequently, upon the death of the
incumbent of the corporation sole, the church properties acquired will pass on
to his successor in office. The Court also finds that here is no provision of law
that confers ownership of the church properties on to the Pope, or even to the
corporation sole or heads of the corporation sole who are mere administrators
of said properties; rather, ownership of these properties fall and develop upon
the congregation. While the Catholic congregation does follow the guidance of
the Pope, there cannot be said to be a merger of personalities between the
Pope and the Catholic Church, and it cannot be said that the political and civil
rights of the Catholics are affected by their relationship with the Pope; the fact
that the clergy derive their authorities from the Vatican does not mean that the
Pope bestows his own citizenship to each priest. To allow the theory that all of
the Churches around the world would follow the citizenship of the Pope would

lead to the absurdity that each member of the Catholic Church would be a
citizen of the Vatican or of Italy. As such, it cannot be said that the citizenship
of the corporation sole, as created under Philippine laws, is altered by the
citizenship of whoever is the incumbent head. The Corporation Law
recognized that corporation soles as those which are organized and
composed of a single individual for the administration of the properties not
used exclusively for religious worship of the church. The successor in office
will become the corporation on ascension to office. Furthermore, the
Corporation Law also recognized that the corporation sole can purchase real
property, although there are restrictions as to the power to sell or mortgage
depending on the rules, regulations and discipline of the church concerned. As
such, the Court finds it absurd that the corporation sole can purchase
properties but would not be able to register properties in its name. While the
Constitution prohibits foreigners from taking, acquiring, exploiting or
developing the natural resources of the country, the Court finds that the
provisions relating to these are not applicable to corporation
soles because they are merely administrators of the properties titled in their na
me. Furthermore, the administration of these properties is for the benefit of the
members of the congregation, which is overwhelmingly comprised of Filipinos.
As the acquisition of the properties is for the benefit of the congregation, the
Roman Catholic Apostolic Administrator of Davao cannot be deprived of the
right to acquire by purchase or donation real properties for charitable,
benevolent and educational purposes, nor of the right to register these
properties in its name in the Register of Deeds of Davao.
31.) CHAVEZ V. PEA AND AMARI
FACTS:
In 1973, the Comissioner on Public Highways entered into a contract to
reclaim areas of Manila Bay with the Construction and Development
Corportion of the Philippines (CDCP).
PEA (Public Estates Authority) was created by President Marcos under P.D.
1084, tasked with developing and leasing reclaimed lands. These lands were
transferred to the care of PEA under P.D. 1085 as part of the Manila Cavite
Road and Reclamation Project (MCRRP). CDCP and PEA entered into an
agreement that all future projects under the MCRRP would be funded and
owned by PEA.
By 1988, President Aquino issued Special Patent No. 3517 transferring lands
to PEA. It was followed by the transfer of three Titles (7309, 7311 and 7312)

by the Register of Deeds of Paranaque to PEA covering the three reclaimed

islands known as the FREEDOM ISLANDS.
Subsquently, PEA entered into a joint venture agreement (JVA) with AMARI, a
Thai-Philippine corporation to develop the Freedom Islands. Along with
another 250 hectares, PEA and AMARI entered the JVA which would later
transfer said lands to AMARI. This caused a stir especially when Sen. Maceda
assailed the agreement, claiming that such lands were part of public domain
(famously known as the mother of all scams).
Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus, a
writ of preliminary injunction and a TRO against the sale of reclaimed lands by
PE A to AMARI and from implementing the JVA. Following these events, under
President Estradas admin, PEA and AMARI entered into an Amended JVA
and Mr. Chaves claim that the contract is null and void.
ISSUE:
w/n: the transfer to AMARI lands reclaimed or to be reclaimed as part of the
stipulations in the (Amended) JVA between AMARI and PEA violate Sec. 3 Art.
XII of the 1987 Constitution
w/n: the court is the proper forum for raising the issue of whether the amended
joint venture agreement is grossly disadvantageous to the government.
HELD:
On the issue of Amended JVA as violating the constitution:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands,
now covered by certificates of title in the name of PEA, are alienable lands of
the public domain. PEA may lease these lands to private corporations but may
not sell or transfer ownership of these lands to private corporations. PEA may
only sell these lands to Philippine citizens, subject to the ownership limitations
in the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable
natural resources of the public domain until classified as alienable or
disposable lands open to disposition and declared no longer needed for public
service. The government can make such classification and declaration only
after PEA has reclaimed these submerged areas. Only then can these lands
qualify as agricultural lands of the public domain, which are the only natural
resources the government can alienate. In their present state, the 592.15
hectares of submerged areas are inalienable and outside the commerce of
man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation,

ownership of 77.34 hectares110 of the Freedom Islands, such transfer is void
for being contrary to Section 3, Article XII of the 1987 Constitution which
prohibits private corporations from acquiring any kind of alienable land of the
public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of
290.156 hectares111 of still submerged areas of Manila Bay, such transfer is
void for being contrary to Section 2, Article XII of the 1987 Constitution which
prohibits the alienation of natural resources other than agricultural lands of the
public domain.
PEA may reclaim these submerged areas. Thereafter, the government can
classify the reclaimed lands as alienable or disposable, and further declare
them no longer needed for public service. Still, the transfer of such reclaimed
alienable lands of the public domain to AMARI will be void in view of Section 3,
Article XII of the 1987Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.

this agreement, PNCC shall pay Radstock the reduced amount of

P6,185,000,000.00 in full settlement of PNCCs guarantee of CDCP Minings
debt allegedly totaling P17,040,843,968.00 (judgment debt as of 31 July
2006). To satisfy its reduced obligation, PNCC undertakes to (1) "assign to a
third party assignee to be designated by Radstock all its rights and interests"
to the listed real properties of PNCC; (2) issue to Radstock or its assignee
common shares of the capital stock of PNCC issued at par value which shall
comprise 20% of the outstanding capital stock of PNCC; and (3) assign to
Radstock or its assignee 50% of PNCCs 6% share, for thenext 27 years, in
the gross toll revenues of the Manila North Tollways Corporation. Strategic
Alliance Development Corporation (STRADEC)moved for reconsideration.
STRADEC alleged that it has a claim against PNCC as a bidder of the
National Governments shares, receivables, securities and interests in PNCC.

32.) STRATEGIC ALLIANCE VS. RADSTOCK SECURITIESDECEMBER 4, 2009

HELD:
Radstock is a private corporation incorporated in the British Virgin Islands. Its
office address is at Suite
14021Duddell Street, Central Hongkong. As a foreign corporation, with
unknown owners whose nationalities are also unknown, Radstock is not
qualified to own land inthe Philippines pursuant to Section 7, in relation to
Section3, Article XII of the Constitution. Consequently, Radstock is also
disqualified to own the rights to ownership of lands in the Philippines. Contrary
tothe OGCCs claim, Radstock cannot own the rights to ownership of any land
in the Philippines because Radstock cannot lawfully own the land itself.
Otherwise, there will be a blatant circumvention of the Constitution, which
prohibits a foreign private corporation from owning land in the Philippines. In
addition, Radstock cannot transfer the rights to ownership of land in the
Philippines if it cannot own the land itself. It is basic that an assignor or seller
cannot assign or sell something he does not own at the time the ownership, or
the rights to the ownership, are to be transferred to the assignee or buyer.

FACTS:
Construction Development Corporation of the Philippines (CDCP) was
incorporated in 1966. It was granted a franchise to construct, operate and
maintain toll facilities in the North and South Luzon Tollways and Metro Manila
Expressway. CDCP Mining Corporation (CDCP Mining), an affiliate of CDCP,
obtained loans from Marubeni Corporation of Japan(Marubeni). A CDCP
official issued letters of guarantee for the loans although there was no CDCP
Board Resolution authorizing the issuance of such letters of guarantee. CDCP
Mining secured the Marubeni loans when CDCP and CDCP Mining were still
privately owned and managed. In 1983, CDCPs name was changed to
Philippine National Construction Corporation (PNCC) in order to reflect thatthe
Government already owned 90.3% of PNCC and only9.70% is under private
ownership. Meanwhile, the Marubeni loans to CDCP Mining remained unpaid.
On 20 October 2000 and 22 November 2000, the PNCC Board of Directors
(PNCC Board) passed Board Resolutions admitting PNCCs liability to
Marubeni. Previously, for two decades the PNCC Board consistently refused
to admit any liability for the Marubeni loans. In January 2001, Marubeni
assigned its entire credit toRadstock Securities Limited (Radstock), a foreign
corporation. Radstock immediately sent a notice and demand letter to
PNCC.PNCC and Radstock entered into a Compromise Agreement. Under

ISSUE: Whether or not the Compromise Agreement between PNCC and

Radstock is valid in relation to the Constitution, existing laws, and public policy