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G.R. No.

195580 April 21, 2014 which previously filed an application for an MPSA with
the MGB, Region IV-B, DENR on January 6, 1992.
NARRA NICKEL MINING AND DEVELOPMENT CORP., Through the said application, the DENR issued MPSA-IV-
TESORO MINING AND DEVELOPMENT, INC., and 1-12 covering an area of 3.277 hectares in barangays
MCARTHUR MINING, INC., Petitioners, Calategas and San Isidro, Municipality of Narra,
vs. Palawan. Subsequently, PLMDC conveyed, transferred
REDMONT CONSOLIDATED MINES CORP., Respondent. and/or assigned its rights and interests over the MPSA
application in favor of Narra.
DECISION
Another MPSA application of SMMI was filed with the
VELASCO, JR., J.: DENR Region IV-B, labeled as MPSA-AMA-IVB-154
(formerly EPA-IVB-47) over 3,402 hectares in Barangays
Before this Court is a Petition for Review on Certiorari Malinao and Princesa Urduja, Municipality of Narra,
under Rule 45 filed by Narra Nickel and Mining Province of Palawan. SMMI subsequently conveyed,
Development Corp. (Narra), Tesoro Mining and transferred and assigned its rights and interest over the
Development, Inc. (Tesoro), and McArthur Mining Inc. said MPSA application to Tesoro.
(McArthur), which seeks to reverse the October 1, 2010
Decision1 and the February 15, 2011 Resolution of the On January 2, 2007, Redmont filed before the Panel of
Court of Appeals (CA). Arbitrators (POA) of the DENR three (3) separate
petitions for the denial of petitioners applications for
The Facts MPSA designated as AMA-IVB-153, AMA-IVB-154 and
MPSA IV-1-12.
Sometime in December 2006, respondent Redmont
Consolidated Mines Corp. (Redmont), a domestic In the petitions, Redmont alleged that at least 60% of
corporation organized and existing under Philippine the capital stock of McArthur, Tesoro and Narra are
laws, took interest in mining and exploring certain areas owned and controlled by MBMI Resources, Inc. (MBMI),
of the province of Palawan. After inquiring with the a 100% Canadian corporation. Redmont reasoned that
Department of Environment and Natural Resources since MBMI is a considerable stockholder of petitioners,
(DENR), it learned that the areas where it wanted to it was the driving force behind petitioners filing of the
undertake exploration and mining activities where MPSAs over the areas covered by applications since it
already covered by Mineral Production Sharing knows that it can only participate in mining activities
Agreement (MPSA) applications of petitioners Narra, through corporations which are deemed Filipino
Tesoro and McArthur. citizens. Redmont argued that given that petitioners
capital stocks were mostly owned by MBMI, they were
Petitioner McArthur, through its predecessor-in-interest likewise disqualified from engaging in mining activities
Sara Marie Mining, Inc. (SMMI), filed an application for through MPSAs, which are reserved only for Filipino
an MPSA and Exploration Permit (EP) with the Mines citizens.
and Geo-Sciences Bureau (MGB), Region IV-B, Office of
the Department of Environment and Natural Resources In their Answers, petitioners averred that they were
(DENR). qualified persons under Section 3(aq) of Republic Act
No. (RA) 7942 or the Philippine Mining Act of 1995
Subsequently, SMMI was issued MPSA-AMA-IVB-153 which provided:
covering an area of over 1,782 hectares in Barangay
Sumbiling, Municipality of Bataraza, Province of Sec. 3 Definition of Terms. As used in and for purposes
Palawan and EPA-IVB-44 which includes an area of of this Act, the following terms, whether in singular or
3,720 hectares in Barangay Malatagao, Bataraza, plural, shall mean:
Palawan. The MPSA and EP were then transferred to
Madridejos Mining Corporation (MMC) and, on xxxx
November 6, 2006, assigned to petitioner McArthur.2
(aq) "Qualified person" means any citizen of the
Petitioner Narra acquired its MPSA from Alpha Philippines with capacity to contract, or a corporation,
Resources and Development Corporation and Patricia partnership, association, or cooperative organized or
Louise Mining & Development Corporation (PLMDC) authorized for the purpose of engaging in mining, with

1
technical and financial capability to undertake mineral xxxx
resources development and duly registered in
accordance with law at least sixty per cent (60%) of the WHEREFORE, the Panel of Arbitrators finds the
capital of which is owned by citizens of the Philippines: Respondents, McArthur Mining Inc., Tesoro Mining and
Provided, That a legally organized foreign-owned Development, Inc., and Narra Nickel Mining and
corporation shall be deemed a qualified person for Development Corp. as, DISQUALIFIED for being
purposes of granting an exploration permit, financial or considered as Foreign Corporations. Their Mineral
technical assistance agreement or mineral processing Production Sharing Agreement (MPSA) are hereby x x x
permit. DECLARED NULL AND VOID.6

Additionally, they stated that their nationality as The POA considered petitioners as foreign corporations
applicants is immaterial because they also applied for being "effectively controlled" by MBMI, a 100%
Financial or Technical Assistance Agreements (FTAA) Canadian company and declared their MPSAs null and
denominated as AFTA-IVB-09 for McArthur, AFTA-IVB- void. In the same Resolution, it gave due course to
08 for Tesoro and AFTA-IVB-07 for Narra, which are Redmonts EPAs. Thereafter, on February 7, 2008, the
granted to foreign-owned corporations. Nevertheless, POA issued an Order7 denying the Motion for
they claimed that the issue on nationality should not be Reconsideration filed by petitioners.
raised since McArthur, Tesoro and Narra are in fact
Philippine Nationals as 60% of their capital is owned by Aggrieved by the Resolution and Order of the POA,
citizens of the Philippines. They asserted that though McArthur and Tesoro filed a joint Notice of Appeal8 and
MBMI owns 40% of the shares of PLMC (which owns Memorandum of Appeal9 with the Mines Adjudication
5,997 shares of Narra),3 40% of the shares of MMC Board (MAB) while Narra separately filed its Notice of
(which owns 5,997 shares of McArthur)4 and 40% of the Appeal10 and Memorandum of Appeal.11
shares of SLMC (which, in turn, owns 5,997 shares of
Tesoro),5 the shares of MBMI will not make it the In their respective memorandum, petitioners
owner of at least 60% of the capital stock of each of emphasized that they are qualified persons under the
petitioners. They added that the best tool used in law. Also, through a letter, they informed the MAB that
determining the nationality of a corporation is the they had their individual MPSA applications converted
"control test," embodied in Sec. 3 of RA 7042 or the to FTAAs. McArthurs FTAA was denominated as AFTA-
Foreign Investments Act of 1991. They also claimed that IVB-0912 on May 2007, while Tesoros MPSA
the POA of DENR did not have jurisdiction over the application was converted to AFTA-IVB-0813 on May 28,
issues in Redmonts petition since they are not 2007, and Narras FTAA was converted to AFTA-IVB-
enumerated in Sec. 77 of RA 7942. Finally, they stressed 0714 on March 30, 2006.
that Redmont has no personality to sue them because it
has no pending claim or application over the areas Pending the resolution of the appeal filed by petitioners
applied for by petitioners. with the MAB, Redmont filed a Complaint15 with the
Securities and Exchange Commission (SEC), seeking the
On December 14, 2007, the POA issued a Resolution revocation of the certificates for registration of
disqualifying petitioners from gaining MPSAs. It held: petitioners on the ground that they are foreign-owned
or controlled corporations engaged in mining in
[I]t is clearly established that respondents are not violation of Philippine laws. Thereafter, Redmont filed
qualified applicants to engage in mining activities. On on September 1, 2008 a Manifestation and Motion to
the other hand, [Redmont] having filed its own Suspend Proceeding before the MAB praying for the
applications for an EPA over the areas earlier covered suspension of the proceedings on the appeals filed by
by the MPSA application of respondents may be McArthur, Tesoro and Narra.
considered if and when they are qualified under the
law. The violation of the requirements for the issuance Subsequently, on September 8, 2008, Redmont filed
and/or grant of permits over mining areas is clearly before the Regional Trial Court of Quezon City, Branch
established thus, there is reason to believe that the 92 (RTC) a Complaint16 for injunction with application
cancellation and/or revocation of permits already for issuance of a temporary restraining order (TRO)
issued under the premises is in order and open the and/or writ of preliminary injunction, docketed as Civil
areas covered to other qualified applicants. Case No. 08-63379. Redmont prayed for the deferral of

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the MAB proceedings pending the resolution of the WHEREFORE, the Petition is PARTIALLY GRANTED. The
Complaint before the SEC. assailed Orders, dated September 10, 2008 and July 1,
2009 of the Mining Adjudication Board are reversed and
But before the RTC can resolve Redmonts Complaint set aside. The findings of the Panel of Arbitrators of the
and applications for injunctive reliefs, the MAB issued Department of Environment and Natural Resources that
an Order on September 10, 2008, finding the appeal respondents McArthur, Tesoro and Narra are foreign
meritorious. It held: corporations is upheld and, therefore, the rejection of
their applications for Mineral Product Sharing
WHEREFORE, in view of the foregoing, the Mines Agreement should be recommended to the Secretary of
Adjudication Board hereby REVERSES and SETS ASIDE the DENR.
the Resolution dated 14 December 2007 of the Panel of
Arbitrators of Region IV-B (MIMAROPA) in POA-DENR With respect to the applications of respondents
Case Nos. 2001-01, 2007-02 and 2007-03, and its Order McArthur, Tesoro and Narra for Financial or Technical
dated 07 February 2008 denying the Motions for Assistance Agreement (FTAA) or conversion of their
Reconsideration of the Appellants. The Petition filed by MPSA applications to FTAA, the matter for its rejection
Redmont Consolidated Mines Corporation on 02 or approval is left for determination by the Secretary of
January 2007 is hereby ordered DISMISSED.17 the DENR and the President of the Republic of the
Philippines.
Belatedly, on September 16, 2008, the RTC issued an
Order18 granting Redmonts application for a TRO and SO ORDERED.23
setting the case for hearing the prayer for the issuance
of a writ of preliminary injunction on September 19, In a Resolution dated February 15, 2011, the CA denied
2008. the Motion for Reconsideration filed by petitioners.

Meanwhile, on September 22, 2008, Redmont filed a After a careful review of the records, the CA found that
Motion for Reconsideration19 of the September 10, there was doubt as to the nationality of petitioners
2008 Order of the MAB. Subsequently, it filed a when it realized that petitioners had a common major
Supplemental Motion for Reconsideration20 on investor, MBMI, a corporation composed of 100%
September 29, 2008. Canadians. Pursuant to the first sentence of paragraph
7 of Department of Justice (DOJ) Opinion No. 020,
Before the MAB could resolve Redmonts Motion for Series of 2005, adopting the 1967 SEC Rules which
Reconsideration and Supplemental Motion for implemented the requirement of the Constitution and
Reconsideration, Redmont filed before the RTC a other laws pertaining to the exploitation of natural
Supplemental Complaint21 in Civil Case No. 08-63379. resources, the CA used the "grandfather rule" to
determine the nationality of petitioners. It provided:
On October 6, 2008, the RTC issued an Order22 granting
the issuance of a writ of preliminary injunction Shares belonging to corporations or partnerships at
enjoining the MAB from finally disposing of the appeals least 60% of the capital of which is owned by Filipino
of petitioners and from resolving Redmonts Motion for citizens shall be considered as of Philippine nationality,
Reconsideration and Supplement Motion for but if the percentage of Filipino ownership in the
Reconsideration of the MABs September 10, 2008 corporation or partnership is less than 60%, only the
Resolution. number of shares corresponding to such percentage
shall be counted as of Philippine nationality. Thus, if
On July 1, 2009, however, the MAB issued a second 100,000 shares are registered in the name of a
Order denying Redmonts Motion for Reconsideration corporation or partnership at least 60% of the capital
and Supplemental Motion for Reconsideration and stock or capital, respectively, of which belong to Filipino
resolving the appeals filed by petitioners. citizens, all of the shares shall be recorded as owned by
Filipinos. But if less than 60%, or say, 50% of the capital
Hence, the petition for review filed by Redmont before stock or capital of the corporation or partnership,
the CA, assailing the Orders issued by the MAB. On respectively, belongs to Filipino citizens, only 50,000
October 1, 2010, the CA rendered a Decision, the shares shall be recorded as belonging to aliens.24
dispositive of which reads: (emphasis supplied)

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In determining the nationality of petitioners, the CA negate them. The Decision further quoted the
looked into their corporate structures and their December 14, 2007 Order of the POA focusing on the
corresponding common shareholders. Using the alleged misrepresentation and claims made by
grandfather rule, the CA discovered that MBMI in effect petitioners of being domestic or Filipino corporations
owned majority of the common stocks of the and the admitted continued mining operation of PMDC
petitioners as well as at least 60% equity interest of using their locally secured Small Scale Mining Permit
other majority shareholders of petitioners through joint inside the area earlier applied for an MPSA application
venture agreements. The CA found that through a "web which was eventually transferred to Narra. It also
of corporate layering, it is clear that one common agreed with the POAs estimation that the filing of the
controlling investor in all mining corporations involved x FTAA applications by petitioners is a clear admission
x x is MBMI."25 Thus, it concluded that petitioners that they are "not capable of conducting a large scale
McArthur, Tesoro and Narra are also in partnership mining operation and that they need the financial and
with, or privies-in-interest of, MBMI. technical assistance of a foreign entity in their
operation, that is why they sought the participation of
Furthermore, the CA viewed the conversion of the MBMI Resources, Inc."28 The Decision further quoted:
MPSA applications of petitioners into FTAA applications
suspicious in nature and, as a consequence, it The filing of the FTAA application on June 15, 2007,
recommended the rejection of petitioners MPSA during the pendency of the case only demonstrate the
applications by the Secretary of the DENR. violations and lack of qualification of the respondent
corporations to engage in mining. The filing of the FTAA
With regard to the settlement of disputes over rights to application conversion which is allowed foreign
mining areas, the CA pointed out that the POA has corporation of the earlier MPSA is an admission that
jurisdiction over them and that it also has the power to indeed the respondent is not Filipino but rather of
determine the of nationality of petitioners as a foreign nationality who is disqualified under the laws.
prerequisite of the Constitution prior the conferring of Corporate documents of MBMI Resources, Inc.
rights to "co-production, joint venture or production- furnished its stockholders in their head office in Canada
sharing agreements" of the state to mining rights. suggest that they are conducting operation only
However, it also stated that the POAs jurisdiction is through their local counterparts.29
limited only to the resolution of the dispute and not on
the approval or rejection of the MPSAs. It stipulated The Motion for Reconsideration of the Decision was
that only the Secretary of the DENR is vested with the further denied by the OP in a Resolution30 dated July 6,
power to approve or reject applications for MPSA. 2011. Petitioners then filed a Petition for Review on
Certiorari of the OPs Decision and Resolution with the
Finally, the CA upheld the findings of the POA in its CA, docketed as CA-G.R. SP No. 120409. In the CA
December 14, 2007 Resolution which considered Decision dated February 29, 2012, the CA affirmed the
petitioners McArthur, Tesoro and Narra as foreign Decision and Resolution of the OP. Thereafter,
corporations. Nevertheless, the CA determined that the petitioners appealed the same CA decision to this Court
POAs declaration that the MPSAs of McArthur, Tesoro which is now pending with a different division.
and Narra are void is highly improper.
Thus, the instant petition for review against the October
While the petition was pending with the CA, Redmont 1, 2010 Decision of the CA. Petitioners put forth the
filed with the Office of the President (OP) a petition following errors of the CA:
dated May 7, 2010 seeking the cancellation of
petitioners FTAAs. The OP rendered a Decision26 on I.
April 6, 2011, wherein it canceled and revoked
petitioners FTAAs for violating and circumventing the The Court of Appeals erred when it did not dismiss the
"Constitution x x x[,] the Small Scale Mining Law and case for mootness despite the fact that the subject
Environmental Compliance Certificate as well as matter of the controversy, the MPSA Applications, have
Sections 3 and 8 of the Foreign Investment Act and E.O. already been converted into FTAA applications and that
584."27 The OP, in affirming the cancellation of the the same have already been granted.
issued FTAAs, agreed with Redmont stating that
petitioners committed violations against the II.
abovementioned laws and failed to submit evidence to

4
The Court of Appeals erred when it did not dismiss the 1.) There is a grave violation of the Constitution;
case for lack of jurisdiction considering that the Panel of
Arbitrators has no jurisdiction to determine the 2.) The exceptional character of the situation and
nationality of Narra, Tesoro and McArthur. paramount public interest is involved;

III. 3.) When constitutional issue raised requires


formulation of controlling principles to guide the bench,
The Court of Appeals erred when it did not dismiss the the bar, and the public; and
case on account of Redmonts willful forum shopping.
4.) The case is capable of repetition yet evading
IV. review.34

The Court of Appeals ruling that Narra, Tesoro and All of the exceptions stated above are present in the
McArthur are foreign corporations based on the instant case. We of this Court note that a grave
"Grandfather Rule" is contrary to law, particularly the violation of the Constitution, specifically Section 2 of
express mandate of the Foreign Investments Act of Article XII, is being committed by a foreign corporation
1991, as amended, and the FIA Rules. right under our countrys nose through a myriad of
corporate layering under different, allegedly, Filipino
V. corporations. The intricate corporate layering utilized by
the Canadian company, MBMI, is of exceptional
The Court of Appeals erred when it applied the character and involves paramount public interest since
exceptions to the res inter alios acta rule. it undeniably affects the exploitation of our Countrys
natural resources. The corresponding actions of
VI. petitioners during the lifetime and existence of the
instant case raise questions as what principle is to be
The Court of Appeals erred when it concluded that the applied to cases with similar issues. No definite ruling
conversion of the MPSA Applications into FTAA on such principle has been pronounced by the Court;
Applications were of "suspicious nature" as the same is hence, the disposition of the issues or errors in the
based on mere conjectures and surmises without any instant case will serve as a guide "to the bench, the bar
shred of evidence to show the same.31 and the public."35 Finally, the instant case is capable of
repetition yet evading review, since the Canadian
We find the petition to be without merit. company, MBMI, can keep on utilizing dummy Filipino
corporations through various schemes of corporate
This case not moot and academic layering and conversion of applications to skirt the
constitutional prohibition against foreign mining in
The claim of petitioners that the CA erred in not Philippine soil.
rendering the instant case as moot is without merit.
Conversion of MPSA applications to FTAA applications
Basically, a case is said to be moot and/or academic
when it "ceases to present a justiciable controversy by We shall discuss the first error in conjunction with the
virtue of supervening events, so that a declaration sixth error presented by petitioners since both involve
thereon would be of no practical use or value."32 Thus, the conversion of MPSA applications to FTAA
the courts "generally decline jurisdiction over the case applications. Petitioners propound that the CA erred in
or dismiss it on the ground of mootness."33 ruling against them since the questioned MPSA
applications were already converted into FTAA
The "mootness" principle, however, does accept certain applications; thus, the issue on the prohibition relating
exceptions and the mere raising of an issue of to MPSA applications of foreign mining corporations is
"mootness" will not deter the courts from trying a case academic. Also, petitioners would want us to correct
when there is a valid reason to do so. In David v. the CAs finding which deemed the aforementioned
Macapagal-Arroyo (David), the Court provided four conversions of applications as suspicious in nature,
instances where courts can decide an otherwise moot since it is based on mere conjectures and surmises and
case, thus: not supported with evidence.

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We disagree.
On October 1, 2010, the CA rendered a Decision which
The CAs analysis of the actions of petitioners after the partially granted the petition, reversing and setting
case was filed against them by respondent is on point. aside the September 10, 2008 and July 1, 2009 Orders
The changing of applications by petitioners from one of the MAB. In the said Decision, the CA upheld the
type to another just because a case was filed against findings of the POA of the DENR that the herein
them, in truth, would raise not a few sceptics petitioners are in fact foreign corporations thus a
eyebrows. What is the reason for such conversion? Did recommendation of the rejection of their MPSA
the said conversion not stem from the case challenging applications were recommended to the Secretary of the
their citizenship and to have the case dismissed against DENR. With respect to the FTAA applications or
them for being "moot"? It is quite obvious that it is conversion of the MPSA applications to FTAAs, the CA
petitioners strategy to have the case dismissed against deferred the matter for the determination of the
them for being "moot." Secretary of the DENR and the President of the Republic
of the Philippines.37
Consider the history of this case and how petitioners
responded to every action done by the court or In their Motion for Reconsideration dated October 26,
appropriate government agency: on January 2, 2007, 2010, petitioners prayed for the dismissal of the
Redmont filed three separate petitions for denial of the petition asserting that on April 5, 2010, then President
MPSA applications of petitioners before the POA. On Gloria Macapagal-Arroyo signed and issued in their
June 15, 2007, petitioners filed a conversion of their favor FTAA No. 05-2010-IVB, which rendered the
MPSA applications to FTAAs. The POA, in its December petition moot and academic. However, the CA, in a
14, 2007 Resolution, observed this suspect change of Resolution dated February 15, 2011 denied their motion
applications while the case was pending before it and for being a mere "rehash of their claims and
held: defenses."38 Standing firm on its Decision, the CA
affirmed the ruling that petitioners are, in fact, foreign
The filing of the Financial or Technical Assistance corporations. On April 5, 2011, petitioners elevated the
Agreement application is a clear admission that the case to us via a Petition for Review on Certiorari under
respondents are not capable of conducting a large scale Rule 45, questioning the Decision of the CA.
mining operation and that they need the financial and Interestingly, the OP rendered a Decision dated April 6,
technical assistance of a foreign entity in their operation 2011, a day after this petition for review was filed,
that is why they sought the participation of MBMI cancelling and revoking the FTAAs, quoting the Order of
Resources, Inc. The participation of MBMI in the the POA and stating that petitioners are foreign
corporation only proves the fact that it is the Canadian corporations since they needed the financial strength of
company that will provide the finances and the MBMI, Inc. in order to conduct large scale mining
resources to operate the mining areas for the greater operations. The OP Decision also based the cancellation
benefit and interest of the same and not the Filipino on the misrepresentation of facts and the violation of
stockholders who only have a less substantial financial the "Small Scale Mining Law and Environmental
stake in the corporation. Compliance Certificate as well as Sections 3 and 8 of the
Foreign Investment Act and E.O. 584."39 On July 6,
xxxx 2011, the OP issued a Resolution, denying the Motion
for Reconsideration filed by the petitioners.
x x x The filing of the FTAA application on June 15, 2007,
during the pendency of the case only demonstrate the Respondent Redmont, in its Comment dated October
violations and lack of qualification of the respondent 10, 2011, made known to the Court the fact of the OPs
corporations to engage in mining. The filing of the FTAA Decision and Resolution. In their Reply, petitioners
application conversion which is allowed foreign chose to ignore the OP Decision and continued to reuse
corporation of the earlier MPSA is an admission that their old arguments claiming that they were granted
indeed the respondent is not Filipino but rather of FTAAs and, thus, the case was moot. Petitioners filed a
foreign nationality who is disqualified under the laws. Manifestation and Submission dated October 19,
Corporate documents of MBMI Resources, Inc. 2012,40 wherein they asserted that the present petition
furnished its stockholders in their head office in Canada is moot since, in a remarkable turn of events, MBMI was
suggest that they are conducting operation only able to sell/assign all its shares/interest in the "holding
through their local counterparts.36 companies" to DMCI Mining Corporation (DMCI), a

6
Filipino corporation and, in effect, making their but if the percentage of Filipino ownership in the
respective corporations fully-Filipino owned. corporation or partnership is less than 60%, only the
number of shares corresponding to such percentage
Again, it is quite evident that petitioners have been shall be counted as of Philippine nationality. Thus, if
trying to have this case dismissed for being "moot." 100,000 shares are registered in the name of a
Their final act, wherein MBMI was able to allegedly corporation or partnership at least 60% of the capital
sell/assign all its shares and interest in the petitioner stock or capital, respectively, of which belong to Filipino
"holding companies" to DMCI, only proves that they citizens, all of the shares shall be recorded as owned by
were in fact not Filipino corporations from the start. Filipinos. But if less than 60%, or say, 50% of the capital
The recent divesting of interest by MBMI will not stock or capital of the corporation or partnership,
change the stand of this Court with respect to the respectively, belongs to Filipino citizens, only 50,000
nationality of petitioners prior the suspicious change in shares shall be counted as owned by Filipinos and the
their corporate structures. The new documents filed by other 50,000 shall be recorded as belonging to aliens.
petitioners are factual evidence that this Court has no
power to verify. The first part of paragraph 7, DOJ Opinion No. 020,
stating "shares belonging to corporations or
The only thing clear and proved in this Court is the fact partnerships at least 60% of the capital of which is
that the OP declared that petitioner corporations have owned by Filipino citizens shall be considered as of
violated several mining laws and made Philippine nationality," pertains to the control test or
misrepresentations and falsehood in their applications the liberal rule. On the other hand, the second part of
for FTAA which lead to the revocation of the said FTAAs, the DOJ Opinion which provides, "if the percentage of
demonstrating that petitioners are not beyond going the Filipino ownership in the corporation or partnership
against or around the law using shifty actions and is less than 60%, only the number of shares
strategies. Thus, in this instance, we can say that their corresponding to such percentage shall be counted as
claim of mootness is moot in itself because their Philippine nationality," pertains to the stricter, more
defense of conversion of MPSAs to FTAAs has been stringent grandfather rule.
discredited by the OP Decision.
Prior to this recent change of events, petitioners were
Grandfather test constant in advocating the application of the "control
test" under RA 7042, as amended by RA 8179,
The main issue in this case is centered on the issue of otherwise known as the Foreign Investments Act (FIA),
petitioners nationality, whether Filipino or foreign. In rather than using the stricter grandfather rule. The
their previous petitions, they had been adamant in pertinent provision under Sec. 3 of the FIA provides:
insisting that they were Filipino corporations, until they
submitted their Manifestation and Submission dated SECTION 3. Definitions. - As used in this Act:
October 19, 2012 where they stated the alleged change
of corporate ownership to reflect their Filipino a.) The term Philippine national shall mean a citizen of
ownership. Thus, there is a need to determine the the Philippines; or a domestic partnership or association
nationality of petitioner corporations. wholly owned by the citizens of the Philippines; a
corporation organized under the laws of the Philippines
Basically, there are two acknowledged tests in of which at least sixty percent (60%) of the capital stock
determining the nationality of a corporation: the outstanding and entitled to vote is wholly owned by
control test and the grandfather rule. Paragraph 7 of Filipinos or a trustee of funds for pension or other
DOJ Opinion No. 020, Series of 2005, adopting the 1967 employee retirement or separation benefits, where the
SEC Rules which implemented the requirement of the trustee is a Philippine national and at least sixty percent
Constitution and other laws pertaining to the (60%) of the fund will accrue to the benefit of Philippine
controlling interests in enterprises engaged in the nationals: Provided, That were a corporation and its
exploitation of natural resources owned by Filipino non-Filipino stockholders own stocks in a Securities and
citizens, provides: Exchange Commission (SEC) registered enterprise, at
least sixty percent (60%) of the capital stock
Shares belonging to corporations or partnerships at outstanding and entitled to vote of each of both
least 60% of the capital of which is owned by Filipino corporations must be owned and held by citizens of the
citizens shall be considered as of Philippine nationality, Philippines and at least sixty percent (60%) of the

7
members of the Board of Directors, in order that the and conditions provided by law, based on real
corporation shall be considered a Philippine national. contributions to the economic growth and general
(emphasis supplied) welfare of the country. In such agreements, the State
shall promote the development and use of local
The grandfather rule, petitioners reasoned, has no leg scientific and technical resources. (emphasis supplied)
to stand on in the instant case since the definition of a
"Philippine National" under Sec. 3 of the FIA does not The emphasized portion of Sec. 2 which focuses on the
provide for it. They further claim that the grandfather State entering into different types of agreements for
rule "has been abandoned and is no longer the the exploration, development, and utilization of natural
applicable rule."41 They also opined that the last resources with entities who are deemed Filipino due to
portion of Sec. 3 of the FIA admits the application of a 60 percent ownership of capital is pertinent to this case,
"corporate layering" scheme of corporations. since the issues are centered on the utilization of our
Petitioners claim that the clear and unambiguous countrys natural resources or specifically, mining. Thus,
wordings of the statute preclude the court from there is a need to ascertain the nationality of
construing it and prevent the courts use of discretion in petitioners since, as the Constitution so provides, such
applying the law. They said that the plain, literal agreements are only allowed corporations or
meaning of the statute meant the application of the associations "at least 60 percent of such capital is
control test is obligatory. owned by such citizens." The deliberations in the
Records of the 1986 Constitutional Commission shed
We disagree. "Corporate layering" is admittedly allowed light on how a citizenship of a corporation will be
by the FIA; but if it is used to circumvent the determined:
Constitution and pertinent laws, then it becomes illegal.
Further, the pronouncement of petitioners that the Mr. BENNAGEN: Did I hear right that the Chairmans
grandfather rule has already been abandoned must be interpretation of an independent national economy is
discredited for lack of basis. freedom from undue foreign control? What is the
meaning of undue foreign control?
Art. XII, Sec. 2 of the Constitution provides:
MR. VILLEGAS: Undue foreign control is foreign control
Sec. 2. All lands of the public domain, waters, minerals, which sacrifices national sovereignty and the welfare of
coal, petroleum and other mineral oils, all forces of the Filipino in the economic sphere.
potential energy, fisheries, forests or timber, wildlife,
flora and fauna, and other natural resources are owned MR. BENNAGEN: Why does it have to be qualified still
by the State. With the exception of agricultural lands, all with the word "undue"? Why not simply freedom from
other natural resources shall not be alienated. The foreign control? I think that is the meaning of
exploration, development, and utilization of natural independence, because as phrased, it still allows for
resources shall be under the full control and supervision foreign control.
of the State. The State may directly undertake such
activities, or it may enter into co-production, joint MR. VILLEGAS: It will now depend on the interpretation
venture or production-sharing agreements with Filipino because if, for example, we retain the 60/40 possibility
citizens, or corporations or associations at least sixty in the cultivation of natural resources, 40 percent
per centum of whose capital is owned by such citizens. involves some control; not total control, but some
Such agreements may be for a period not exceeding control.
twenty-five years, renewable for not more than twenty-
five years, and under such terms and conditions as may MR. BENNAGEN: In any case, I think in due time we will
be provided by law. propose some amendments.

xxxx MR. VILLEGAS: Yes. But we will be open to


improvement of the phraseology.
The President may enter into agreements with Foreign-
owned corporations involving either technical or Mr. BENNAGEN: Yes.
financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, Thank you, Mr. Vice-President.
and other mineral oils according to the general terms

8
xxxx 3 of the FIA will have no place of application. As
decreed by the honorable framers of our Constitution,
MR. NOLLEDO: In Sections 3, 9 and 15, the Committee the grandfather rule prevails and must be applied.
stated local or Filipino equity and foreign equity;
namely, 60-40 in Section 3, 60-40 in Section 9, and 2/3- Likewise, paragraph 7, DOJ Opinion No. 020, Series of
1/3 in Section 15. 2005 provides:

MR. VILLEGAS: That is right. The above-quoted SEC Rules provide for the manner of
calculating the Filipino interest in a corporation for
MR. NOLLEDO: In teaching law, we are always faced purposes, among others, of determining compliance
with the question: Where do we base the equity with nationality requirements (the Investee
requirement, is it on the authorized capital stock, on the Corporation). Such manner of computation is necessary
subscribed capital stock, or on the paid-up capital stock since the shares in the Investee Corporation may be
of a corporation? Will the Committee please enlighten owned both by individual stockholders (Investing
me on this? Individuals) and by corporations and partnerships
(Investing Corporation). The said rules thus provide for
MR. VILLEGAS: We have just had a long discussion with the determination of nationality depending on the
the members of the team from the UP Law Center who ownership of the Investee Corporation and, in certain
provided us with a draft. The phrase that is contained instances, the Investing Corporation.
here which we adopted from the UP draft is 60 percent
of the voting stock. Under the above-quoted SEC Rules, there are two cases
in determining the nationality of the Investee
MR. NOLLEDO: That must be based on the subscribed Corporation. The first case is the liberal rule, later
capital stock, because unless declared delinquent, coined by the SEC as the Control Test in its 30 May 1990
unpaid capital stock shall be entitled to vote. Opinion, and pertains to the portion in said Paragraph 7
of the 1967 SEC Rules which states, (s)hares belonging
MR. VILLEGAS: That is right. to corporations or partnerships at least 60% of the
capital of which is owned by Filipino citizens shall be
MR. NOLLEDO: Thank you. considered as of Philippine nationality. Under the
liberal Control Test, there is no need to further trace the
With respect to an investment by one corporation in ownership of the 60% (or more) Filipino stockholdings
another corporation, say, a corporation with 60-40 of the Investing Corporation since a corporation which
percent equity invests in another corporation which is is at least 60% Filipino-owned is considered as Filipino.
permitted by the Corporation Code, does the
Committee adopt the grandfather rule? The second case is the Strict Rule or the Grandfather
Rule Proper and pertains to the portion in said
MR. VILLEGAS: Yes, that is the understanding of the Paragraph 7 of the 1967 SEC Rules which states, "but if
Committee. the percentage of Filipino ownership in the corporation
or partnership is less than 60%, only the number of
MR. NOLLEDO: Therefore, we need additional Filipino shares corresponding to such percentage shall be
capital? counted as of Philippine nationality." Under the Strict
Rule or Grandfather Rule Proper, the combined totals in
MR. VILLEGAS: Yes.42 (emphasis supplied) the Investing Corporation and the Investee Corporation
must be traced (i.e., "grandfathered") to determine the
It is apparent that it is the intention of the framers of total percentage of Filipino ownership.
the Constitution to apply the grandfather rule in cases
where corporate layering is present. Moreover, the ultimate Filipino ownership of the shares
must first be traced to the level of the Investing
Elementary in statutory construction is when there is Corporation and added to the shares directly owned in
conflict between the Constitution and a statute, the the Investee Corporation x x x.
Constitution will prevail. In this instance, specifically
pertaining to the provisions under Art. XII of the xxxx
Constitution on National Economy and Patrimony, Sec.

9
In other words, based on the said SEC Rule and DOJ To establish the actual ownership, interest or
Opinion, the Grandfather Rule or the second part of the participation of MBMI in each of petitioners corporate
SEC Rule applies only when the 60-40 Filipino-foreign structure, they have to be "grandfathered."
equity ownership is in doubt (i.e., in cases where the
joint venture corporation with Filipino and foreign As previously discussed, McArthur acquired its MPSA
stockholders with less than 60% Filipino stockholdings application from MMC, which acquired its application
[or 59%] invests in other joint venture corporation from SMMI. McArthur has a capital stock of ten million
which is either 60-40% Filipino-alien or the 59% less pesos (PhP 10,000,000) divided into 10,000 common
Filipino). Stated differently, where the 60-40 Filipino- shares at one thousand pesos (PhP 1,000) per share,
foreign equity ownership is not in doubt, the subscribed to by the following:44
Grandfather Rule will not apply. (emphasis supplied)
Name Nationality Number of Shares
After a scrutiny of the evidence extant on record, the Amount Subscribed Amount Paid
Court finds that this case calls for the application of the Madridejos Mining
grandfather rule since, as ruled by the POA and affirmed Corporation Filipino 5,997 PhP 5,997,000.00
by the OP, doubt prevails and persists in the corporate PhP 825,000.00
ownership of petitioners. Also, as found by the CA, MBMI Resources, Inc. Canadian 3,998 PhP
doubt is present in the 60-40 Filipino equity ownership 3,998,000.0 PhP 1,878,174.60
of petitioners Narra, McArthur and Tesoro, since their Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP
common investor, the 100% Canadian corporation 1,000.00
MBMI, funded them. However, petitioners also claim Fernando B. Esguerra Filipino 1 PhP 1,000.00
that there is "doubt" only when the stockholdings of PhP 1,000.00
Filipinos are less than 60%.43 Manuel A. Agcaoili Filipino 1 PhP 1,000.00
PhP 1,000.00
The assertion of petitioners that "doubt" only exists Michael T. Mason American 1 PhP
when the stockholdings are less than 60% fails to 1,000.00 PhP 1,000.00
convince this Court. DOJ Opinion No. 20, which Kenneth Cawkell Canadian 1 PhP
petitioners quoted in their petition, only made an 1,000.00 PhP 1,000.00
example of an instance where "doubt" as to the Total 10,000 PhP 10,000,000.00 PhP
ownership of the corporation exists. It would be 2,708,174.60
ludicrous to limit the application of the said word only (emphasis supplied)
to the instances where the stockholdings of non-Filipino Interestingly, looking at the corporate structure of
stockholders are more than 40% of the total MMC, we take note that it has a similar structure and
stockholdings in a corporation. The corporations composition as McArthur. In fact, it would seem that
interested in circumventing our laws would clearly MBMI is also a major investor and "controls"45 MBMI
strive to have "60% Filipino Ownership" at face value. It and also, similar nominal shareholders were present,
would be senseless for these applying corporations to i.e. Fernando B. Esguerra (Esguerra), Lauro L. Salazar
state in their respective articles of incorporation that (Salazar), Michael T. Mason (Mason) and Kenneth
they have less than 60% Filipino stockholders since the Cawkell (Cawkell):
applications will be denied instantly. Thus, various
corporate schemes and layerings are utilized to Madridejos Mining Corporation
circumvent the application of the Constitution.
Name Nationality Number of Shares
Obviously, the instant case presents a situation which Amount Subscribed Amount Paid
exhibits a scheme employed by stockholders to Olympic Mines &
circumvent the law, creating a cloud of doubt in the Development
Courts mind. To determine, therefore, the actual
participation, direct or indirect, of MBMI, the Corp.
grandfather rule must be used.
Filipino 6,663 PhP 6,663,000.00
McArthur Mining, Inc. PhP 0

MBMI Resources,

10
Inc. Thus, as demonstrated in this first corporation,
McArthur, when it is "grandfathered," company layering
Canadian 3,331 PhP 3,331,000.00 PhP was utilized by MBMI to gain control over McArthur. It
2,803,900.00 is apparent that MBMI has more than 60% or more
Amanti Limson Filipino 1 PhP 1,000.00 PhP equity interest in McArthur, making the latter a foreign
1,000.00 corporation.
Fernando B.
Esguerra Tesoro Mining and Development, Inc.

Filipino 1 PhP 1,000.00 PhP 1,000.00 Tesoro, which acquired its MPSA application from
Lauro Salazar Filipino 1 PhP 1,000.00 PhP SMMI, has a capital stock of ten million pesos (PhP
1,000.00 10,000,000) divided into ten thousand (10,000)
Emmanuel G. common shares at PhP 1,000 per share, as
Hernando demonstrated below:

Filipino 1 PhP 1,000.00 PhP 1,000.00 [[reference =


Michael T. Mason American 1 PhP http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/ju
1,000.00 PhP 1,000.00 risprudence/2014/april2014/195580.pdf]]
Kenneth Cawkell Canadian 1 PhP
1,000.00 PhP 1,000.00 Name
Total 10,000 PhP 10,000,000.00 PhP
2,809,900.00 Nationality
(emphasis supplied)
Number of
Noticeably, Olympic Mines & Development Corporation
(Olympic) did not pay any amount with respect to the Shares
number of shares they subscribed to in the corporation,
which is quite absurd since Olympic is the major Amount
stockholder in MMC. MBMIs 2006 Annual Report sheds
light on why Olympic failed to pay any amount with Subscribed
respect to the number of shares it subscribed to. It
states that Olympic entered into joint venture Amount Paid
agreements with several Philippine companies, wherein
it holds directly and indirectly a 60% effective equity Sara Marie
interest in the Olympic Properties.46 Quoting the said Mining, Inc.
Annual report:
Filipino 5,997 PhP 5,997,000.00 PhP 825,000.00
On September 9, 2004, the Company and Olympic MBMI
Mines & Development Corporation ("Olympic") entered Resources, Inc.
into a series of agreements including a Property
Purchase and Development Agreement (the Transaction Canadian 3,998 PhP 3,998,000.00 PhP
Documents) with respect to three nickel laterite 1,878,174.60
properties in Palawan, Philippines (the "Olympic Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP
Properties"). The Transaction Documents effectively 1,000.00
establish a joint venture between the Company and Fernando B.
Olympic for purposes of developing the Olympic Esguerra
Properties. The Company holds directly and indirectly
an initial 60% interest in the joint venture. Under Filipino 1 PhP 1,000.00 PhP 1,000.00
certain circumstances and upon achieving certain Manuel A.
milestones, the Company may earn up to a 100% Agcaoili
interest, subject to a 2.5% net revenue royalty.47
(emphasis supplied) Filipino 1 PhP 1,000.00 PhP 1,000.00

11
Michael T. Mason American 1 PhP
1,000.00 PhP 1,000.00 Filipino 1 PhP 1,000.00 PhP 1,000.00
Kenneth Cawkell Canadian 1 PhP Lauro Salazar Filipino 1 PhP 1,000.00 PhP
1,000.00 PhP 1,000.00 1,000.00
Total 10,000 PhP 10,000,000.00 PhP Emmanuel G.
2,708,174.60 Hernando
(emphasis supplied)
Filipino 1 PhP 1,000.00 PhP 1,000.00
Except for the name "Sara Marie Mining, Inc.," the table Michael T. Mason American 1 PhP
above shows exactly the same figures as the corporate 1,000.00 PhP 1,000.00
structure of petitioner McArthur, down to the last Kenneth Cawkell Canadian 1 PhP
centavo. All the other shareholders are the same: 1,000.00 PhP 1,000.00
MBMI, Salazar, Esguerra, Agcaoili, Mason and Cawkell. Total 10,000 PhP 10,000,000.00 PhP
The figures under "Nationality," "Number of Shares," 2,809,900.00
"Amount Subscribed," and "Amount Paid" are exactly (emphasis supplied)
the same. Delving deeper, we scrutinize SMMIs
corporate structure: After subsequently studying SMMIs corporate
structure, it is not farfetched for us to spot the glaring
Sara Marie Mining, Inc. similarity between SMMI and MMCs corporate
structure. Again, the presence of identical stockholders,
[[reference = namely: Olympic, MBMI, Amanti Limson (Limson),
http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/ju Esguerra, Salazar, Hernando, Mason and Cawkell. The
risprudence/2014/april2014/195580.pdf]] figures under the headings "Nationality," "Number of
Shares," "Amount Subscribed," and "Amount Paid" are
Name exactly the same except for the amount paid by MBMI
which now reflects the amount of two million seven
Nationality hundred ninety four thousand pesos (PhP 2,794,000).
Oddly, the total value of the amount paid is two million
Number of eight hundred nine thousand nine hundred pesos (PhP
2,809,900).
Shares
Accordingly, after "grandfathering" petitioner Tesoro
Amount and factoring in Olympics participation in SMMIs
corporate structure, it is clear that MBMI is in control of
Subscribed Tesoro and owns 60% or more equity interest in Tesoro.
This makes petitioner Tesoro a non-Filipino corporation
Amount Paid and, thus, disqualifies it to participate in the
exploitation, utilization and development of our natural
Olympic Mines & resources.
Development
Narra Nickel Mining and Development Corporation
Corp.
Moving on to the last petitioner, Narra, which is the
Filipino 6,663 PhP 6,663,000.00 PhP 0 transferee and assignee of PLMDCs MPSA application,
MBMI Resources, whose corporate structures arrangement is similar to
Inc. that of the first two petitioners discussed. The capital
stock of Narra is ten million pesos (PhP 10,000,000),
Canadian 3,331 PhP 3,331,000.00 PhP which is divided into ten thousand common shares
2,794,000.00 (10,000) at one thousand pesos (PhP 1,000) per share,
Amanti Limson Filipino 1 PhP 1,000.00 PhP shown as follows:
1,000.00
Fernando B.
Esguerra

12
[[reference = American 1 PhP 1,000.00 PhP 1,000.00
http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/ju Kenneth Cawkell Canadian 1 PhP
risprudence/2014/april2014/195580.pdf]] 1,000.00 PhP 1,000.00
Total 10,000 PhP 10,000,000.00 PhP
Name 2,800,000.00
(emphasis supplied)
Nationality Again, MBMI, along with other nominal stockholders,
i.e., Mason, Agcaoili and Esguerra, is present in this
Number of corporate structure.

Shares Patricia Louise Mining & Development Corporation

Amount Using the grandfather method, we further look and


examine PLMDCs corporate structure:
Subscribed
Name Nationality
Amount Paid Number of Shares

Patricia Louise Amount Subscribed Amount Paid


Mining & Palawan Alpha South Resources Development
Corporation Filipino 6,596 PhP 6,596,000.00
Development PhP 0
MBMI Resources,
Corp. Inc.

Filipino 5,997 PhP 5,997,000.00 PhP Canadian 3,396 PhP 3,396,000.00 PhP
1,677,000.00 2,796,000.00
MBMI Higinio C. Mendoza, Jr. Filipino 1 PhP 1,000.00
Resources, Inc. PhP 1,000.00
Fernando B. Esguerra Filipino 1 PhP 1,000.00
Canadian 3,998 PhP 3,996,000.00 PhP PhP 1,000.00
1,116,000.00 Henry E. Fernandez Filipino 1 PhP 1,000.00
Higinio C. PhP 1,000.00
Mendoza, Jr. Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP
1,000.00
Filipino 1 PhP 1,000.00 PhP 1,000.00 Manuel A. Agcaoili Filipino 1 PhP 1,000.00
Henry E. PhP 1,000.00
Fernandez Bayani H. Agabin Filipino 1 PhP 1,000.00
PhP 1,000.00
Filipino 1 PhP 1,000.00 PhP 1,000.00 Michael T. Mason American 1 PhP
Manuel A. 1,000.00 PhP 1,000.00
Agcaoili Kenneth Cawkell Canadian 1 PhP
1,000.00 PhP 1,000.00
Filipino 1 PhP 1,000.00 PhP 1,000.00 Total 10,000 PhP 10,000,000.00 PhP
Ma. Elena A. 2,708,174.60
Bocalan (emphasis supplied)
Yet again, the usual players in petitioners corporate
Filipino 1 PhP 1,000.00 PhP 1,000.00 structures are present. Similarly, the amount of money
Bayani H. Agabin Filipino 1 PhP 1,000.00 paid by the 2nd tier majority stock holder, in this case,
PhP 1,000.00 Palawan Alpha South Resources and Development Corp.
Robert L. (PASRDC), is zero.
McCurdy

13
Studying MBMIs Summary of Significant Accounting corporate owners, namely: MMI, SMMI and PLMDC.
Policies dated October 31, 2005 explains the reason Going further and adding to the picture, MBMIs
behind the intricate corporate layering that MBMI Summary of Significant Accounting Policies statement
immersed itself in: regarding the "joint venture" agreements that it
entered into with the "Olympic" and "Alpha" groups
JOINT VENTURES The Companys ownership interests in involves SMMI, Tesoro, PLMDC and Narra. Noticeably,
various mining ventures engaged in the acquisition, the ownership of the "layered" corporations boils down
exploration and development of mineral properties in to MBMI, Olympic or corporations under the "Alpha"
the Philippines is described as follows: group wherein MBMI has joint venture agreements
with, practically exercising majority control over the
(a) Olympic Group corporations mentioned. In effect, whether looking at
the capital structure or the underlying relationships
The Philippine companies holding the Olympic Property, between and among the corporations, petitioners are
and the ownership and interests therein, are as follows: NOT Filipino nationals and must be considered foreign
since 60% or more of their capital stocks or equity
Olympic- Philippines (the "Olympic Group") interests are owned by MBMI.

Sara Marie Mining Properties Ltd. ("Sara Marie") 33.3% Application of the res inter alios acta rule

Tesoro Mining & Development, Inc. (Tesoro) 60.0% Petitioners question the CAs use of the exception of
the res inter alios acta or the "admission by co-partner
Pursuant to the Olympic joint venture agreement the or agent" rule and "admission by privies" under the
Company holds directly and indirectly an effective Rules of Court in the instant case, by pointing out that
equity interest in the Olympic Property of 60.0%. statements made by MBMI should not be admitted in
Pursuant to a shareholders agreement, the Company this case since it is not a party to the case and that it is
exercises joint control over the companies in the not a "partner" of petitioners.
Olympic Group.
Secs. 29 and 31, Rule 130 of the Revised Rules of Court
(b) Alpha Group provide:

The Philippine companies holding the Alpha Property, Sec. 29. Admission by co-partner or agent.- The act or
and the ownership interests therein, are as follows: declaration of a partner or agent of the party within the
scope of his authority and during the existence of the
Alpha- Philippines (the "Alpha Group") partnership or agency, may be given in evidence against
such party after the partnership or agency is shown by
Patricia Louise Mining Development Inc. ("Patricia") evidence other than such act or declaration itself. The
34.0% same rule applies to the act or declaration of a joint
owner, joint debtor, or other person jointly interested
Narra Nickel Mining & Development Corporation with the party.
(Narra) 60.4%
Sec. 31. Admission by privies.- Where one derives title
Under a joint venture agreement the Company holds to property from another, the act, declaration, or
directly and indirectly an effective equity interest in the omission of the latter, while holding the title, in relation
Alpha Property of 60.4%. Pursuant to a shareholders to the property, is evidence against the former.
agreement, the Company exercises joint control over
the companies in the Alpha Group.48 (emphasis Petitioners claim that before the above-mentioned Rule
supplied) can be applied to a case, "the partnership relation must
be shown, and that proof of the fact must be made by
Concluding from the above-stated facts, it is quite safe evidence other than the admission itself."49 Thus,
to say that petitioners McArthur, Tesoro and Narra are petitioners assert that the CA erred in finding that a
not Filipino since MBMI, a 100% Canadian corporation, partnership relationship exists between them and
owns 60% or more of their equity interests. Such MBMI because, in fact, no such partnership exists.
conclusion is derived from grandfathering petitioners

14
Partnerships vs. joint venture agreements corporations or partnerships for certain transactions in
order to form "pseudo partnerships."
Petitioners claim that the CA erred in applying Sec. 29,
Rule 130 of the Rules by stating that "by entering into a Obviously, as the intricate web of "ventures" entered
joint venture, MBMI have a joint interest" with Narra, into by and among petitioners and MBMI was executed
Tesoro and McArthur. They challenged the conclusion to circumvent the legal prohibition against corporations
of the CA which pertains to the close characteristics of entering into partnerships, then the relationship
created should be deemed as "partnerships," and the
"partnerships" and "joint venture agreements." Further, laws on partnership should be applied. Thus, a joint
they asserted that before this particular partnership can venture agreement between and among corporations
be formed, it should have been formally reduced into may be seen as similar to partnerships since the
writing since the capital involved is more than three elements of partnership are present.
thousand pesos (PhP 3,000). Being that there is no
evidence of written agreement to form a partnership Considering that the relationships found between
between petitioners and MBMI, no partnership was petitioners and MBMI are considered to be
created. partnerships, then the CA is justified in applying Sec. 29,
Rule 130 of the Rules by stating that "by entering into a
We disagree. joint venture, MBMI have a joint interest" with Narra,
Tesoro and McArthur.
A partnership is defined as two or more persons who
bind themselves to contribute money, property, or Panel of Arbitrators jurisdiction
industry to a common fund with the intention of
dividing the profits among themselves.50 On the other We affirm the ruling of the CA in declaring that the POA
hand, joint ventures have been deemed to be "akin" to has jurisdiction over the instant case. The POA has
partnerships since it is difficult to distinguish between jurisdiction to settle disputes over rights to mining areas
joint ventures and partnerships. Thus: which definitely involve the petitions filed by Redmont
against petitioners Narra, McArthur and Tesoro.
[T]he relations of the parties to a joint venture and the Redmont, by filing its petition against petitioners, is
nature of their association are so similar and closely asserting the right of Filipinos over mining areas in the
akin to a partnership that it is ordinarily held that their Philippines against alleged foreign-owned mining
rights, duties, and liabilities are to be tested by rules corporations. Such claim constitutes a "dispute" found
which are closely analogous to and substantially the in Sec. 77 of RA 7942:
same, if not exactly the same, as those which govern
partnership. In fact, it has been said that the trend in Within thirty (30) days, after the submission of the case
the law has been to blur the distinctions between a by the parties for the decision, the panel shall have
partnership and a joint venture, very little law being exclusive and original jurisdiction to hear and decide the
found applicable to one that does not apply to the following:
other.51
(a) Disputes involving rights to mining areas
Though some claim that partnerships and joint ventures
are totally different animals, there are very few rules (b) Disputes involving mineral agreements or permits
that differentiate one from the other; thus, joint
ventures are deemed "akin" or similar to a partnership. We held in Celestial Nickel Mining Exploration
In fact, in joint venture agreements, rules and legal Corporation v. Macroasia Corp.:53
incidents governing partnerships are applied.52
The phrase "disputes involving rights to mining areas"
Accordingly, culled from the incidents and records of refers to any adverse claim, protest, or opposition to an
this case, it can be assumed that the relationships application for mineral agreement. The POA therefore
entered between and among petitioners and MBMI are has the jurisdiction to resolve any adverse claim,
no simple "joint venture agreements." As a rule, protest, or opposition to a pending application for a
corporations are prohibited from entering into mineral agreement filed with the concerned Regional
partnership agreements; consequently, corporations Office of the MGB. This is clear from Secs. 38 and 41 of
enter into joint venture agreements with other the DENR AO 96-40, which provide:

15
Arbitrators as provided for in Section 38 hereof, the
Sec. 38. same shall be evaluated and endorsed by the Director
to the Secretary for consideration/approval within
xxxx fifteen days from receipt of such endorsement.
(emphasis supplied)
Within thirty (30) calendar days from the last date of
publication/posting/radio announcements, the It has been made clear from the aforecited provisions
authorized officer(s) of the concerned office(s) shall that the "disputes involving rights to mining areas"
issue a certification(s) that the under Sec. 77(a) specifically refer only to those disputes
publication/posting/radio announcement have been relative to the applications for a mineral agreement or
complied with. Any adverse claim, protest, opposition conferment of mining rights.
shall be filed directly, within thirty (30) calendar days
from the last date of publication/posting/radio The jurisdiction of the POA over adverse claims, protest,
announcement, with the concerned Regional Office or or oppositions to a mining right application is further
through any concerned PENRO or CENRO for filing in elucidated by Secs. 219 and 43 of DENR AO 95-936,
the concerned Regional Office for purposes of its which read:
resolution by the Panel of Arbitrators pursuant to the
provisions of this Act and these implementing rules and Sec. 219. Filing of Adverse
regulations. Upon final resolution of any adverse claim, Claims/Conflicts/Oppositions.- Notwithstanding the
protest or opposition, the Panel of Arbitrators shall provisions of Sections 28, 43 and 57 above, any adverse
likewise issue a certification to that effect within five (5) claim, protest or opposition specified in said sections
working days from the date of finality of resolution may also be filed directly with the Panel of Arbitrators
thereof. Where there is no adverse claim, protest or within the concerned periods for filing such claim,
opposition, the Panel of Arbitrators shall likewise issue a protest or opposition as specified in said Sections.
Certification to that effect within five working days
therefrom. Sec. 43. Publication/Posting of Mineral Agreement.-

xxxx xxxx

No Mineral Agreement shall be approved unless the The Regional Director or concerned Regional Director
requirements under this Section are fully complied with shall also cause the posting of the application on the
and any adverse claim/protest/opposition is finally bulletin boards of the Bureau, concerned Regional
resolved by the Panel of Arbitrators. office(s) and in the concerned province(s) and
municipality(ies), copy furnished the barangays where
Sec. 41. the proposed contract area is located once a week for
two (2) consecutive weeks in a language generally
xxxx understood in the locality. After forty-five (45) days
from the last date of publication/posting has been
Within fifteen (15) working days form the receipt of the made and no adverse claim, protest or opposition was
Certification issued by the Panel of Arbitrators as filed within the said forty-five (45) days, the concerned
provided in Section 38 hereof, the concerned Regional offices shall issue a certification that
Director shall initially evaluate the Mineral Agreement publication/posting has been made and that no adverse
applications in areas outside Mineral reservations. claim, protest or opposition of whatever nature has
He/She shall thereafter endorse his/her findings to the been filed. On the other hand, if there be any adverse
Bureau for further evaluation by the Director within claim, protest or opposition, the same shall be filed
fifteen (15) working days from receipt of forwarded within forty-five (45) days from the last date of
documents. Thereafter, the Director shall endorse the publication/posting, with the Regional Offices
same to the secretary for consideration/approval within concerned, or through the Departments Community
fifteen working days from receipt of such endorsement. Environment and Natural Resources Officers (CENRO) or
Provincial Environment and Natural Resources Officers
In case of Mineral Agreement applications in areas with (PENRO), to be filed at the Regional Office for resolution
Mineral Reservations, within fifteen (15) working days of the Panel of Arbitrators. However previously
from receipt of the Certification issued by the Panel of published valid and subsisting mining claims are

16
exempted from posted/posting required under this Provincial Environment and Natural Resources Officers
Section. (PENRO), to be filed at the Regional Office for resolution
of the Panel of Arbitrators. However, previously
No mineral agreement shall be approved unless the published valid and subsisting mining claims are
requirements under this section are fully complied with exempted from posted/posting required under this
and any opposition/adverse claim is dealt with in Section.
writing by the Director and resolved by the Panel of
Arbitrators. (Emphasis supplied.) No mineral agreement shall be approved unless the
requirements under this section are fully complied with
It has been made clear from the aforecited provisions and any opposition/adverse claim is dealt with in
that the "disputes involving rights to mining areas" writing by the Director and resolved by the Panel of
under Sec. 77(a) specifically refer only to those disputes Arbitrators. (Emphasis supplied.)
relative to the applications for a mineral agreement or
conferment of mining rights. These provisions lead us to conclude that the power of
the POA to resolve any adverse claim, opposition, or
The jurisdiction of the POA over adverse claims, protest, protest relative to mining rights under Sec. 77(a) of RA
or oppositions to a mining right application is further 7942 is confined only to adverse claims, conflicts and
elucidated by Secs. 219 and 43 of DENRO AO 95-936, oppositions relating to applications for the grant of
which reads: mineral rights.

Sec. 219. Filing of Adverse POAs jurisdiction is confined only to resolutions of such
Claims/Conflicts/Oppositions.- Notwithstanding the adverse claims, conflicts and oppositions and it has no
provisions of Sections 28, 43 and 57 above, any adverse authority to approve or reject said applications. Such
claim, protest or opposition specified in said sections power is vested in the DENR Secretary upon
may also be filed directly with the Panel of Arbitrators recommendation of the MGB Director. Clearly, POAs
within the concerned periods for filing such claim, jurisdiction over "disputes involving rights to mining
protest or opposition as specified in said Sections. areas" has nothing to do with the cancellation of
existing mineral agreements. (emphasis ours)
Sec. 43. Publication/Posting of Mineral Agreement
Application.- Accordingly, as we enunciated in Celestial, the POA
unquestionably has jurisdiction to resolve disputes over
xxxx MPSA applications subject of Redmonts petitions.
However, said jurisdiction does not include either the
The Regional Director or concerned Regional Director approval or rejection of the MPSA applications, which is
shall also cause the posting of the application on the vested only upon the Secretary of the DENR. Thus, the
bulletin boards of the Bureau, concerned Regional finding of the POA, with respect to the rejection of
office(s) and in the concerned province(s) and petitioners MPSA applications being that they are
municipality(ies), copy furnished the barangays where foreign corporation, is valid.
the proposed contract area is located once a week for
two (2) consecutive weeks in a language generally Justice Marvic Mario Victor F. Leonen, in his Dissent,
understood in the locality. After forty-five (45) days asserts that it is the regular courts, not the POA, that
from the last date of publication/posting has been has jurisdiction over the MPSA applications of
made and no adverse claim, protest or opposition was petitioners.
filed within the said forty-five (45) days, the concerned
offices shall issue a certification that This postulation is incorrect.
publication/posting has been made and that no adverse
claim, protest or opposition of whatever nature has It is basic that the jurisdiction of the court is determined
been filed. On the other hand, if there be any adverse by the statute in force at the time of the
claim, protest or opposition, the same shall be filed commencement of the action.54
within forty-five (45) days from the last date of
publication/posting, with the Regional offices Sec. 19, Batas Pambansa Blg. 129 or "The Judiciary
concerned, or through the Departments Community Reorganization
Environment and Natural Resources Officers (CENRO) or

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Act of 1980" reads: Whatever may be the decision of the POA will
eventually reach the court system via a resort to the CA
Sec. 19. Jurisdiction in Civil Cases.Regional Trial Courts and to this Court as a last recourse.
shall exercise exclusive original jurisdiction:
Selling of MBMIs shares to DMCI
1. In all civil actions in which the subject of the litigation
is incapable of pecuniary estimation. As stated before, petitioners Manifestation and
Submission dated October 19, 2012 would want us to
On the other hand, the jurisdiction of POA is declare the instant petition moot and academic due to
unequivocal from Sec. 77 of RA 7942: the transfer and conveyance of all the shareholdings
and interests of MBMI to DMCI, a corporation duly
Section 77. Panel of Arbitrators. organized and existing under Philippine laws and is at
least 60% Philippine-owned.56 Petitioners reasoned
x x x Within thirty (30) days, after the submission of the that they now cannot be considered as foreign-owned;
case by the parties for the decision, the panel shall have the transfer of their shares supposedly cured the
exclusive and original jurisdiction to hear and decide the "defect" of their previous nationality. They claimed that
following: their current FTAA contract with the State should stand
since "even wholly-owned foreign corporations can
(c) Disputes involving rights to mining areas enter into an FTAA with the State."57 Petitioners stress
that there should no longer be any issue left as regards
(d) Disputes involving mineral agreements or permits their qualification to enter into FTAA contracts since
they are qualified to engage in mining activities in the
It is clear that POA has exclusive and original jurisdiction Philippines. Thus, whether the "grandfather rule" or the
over any and all disputes involving rights to mining "control test" is used, the nationalities of petitioners
areas. One such dispute is an MPSA application to which cannot be doubted since it would pass both tests.
an adverse claim, protest or opposition is filed by
another interested applicant.1wphi1 In the case at bar, The sale of the MBMI shareholdings to DMCI does not
the dispute arose or originated from MPSA applications have any bearing in the instant case and said fact should
where petitioners are asserting their rights to mining be disregarded. The manifestation can no longer be
areas subject of their respective MPSA applications. considered by us since it is being tackled in G.R. No.
Since respondent filed 3 separate petitions for the 202877 pending before this Court.1wphi1 Thus, the
denial of said applications, then a controversy has question of whether petitioners, allegedly a Philippine-
developed between the parties and it is POAs owned corporation due to the sale of MBMI's
jurisdiction to resolve said disputes. shareholdings to DMCI, are allowed to enter into FTAAs
with the State is a non-issue in this case.
Moreover, the jurisdiction of the RTC involves civil
actions while what petitioners filed with the DENR In ending, the "control test" is still the prevailing mode
Regional Office or any concerned DENRE or CENRO are of determining whether or not a corporation is a Filipino
MPSA applications. Thus POA has jurisdiction. corporation, within the ambit of Sec. 2, Art. II of the
1987 Constitution, entitled to undertake the
Furthermore, the POA has jurisdiction over the MPSA exploration, development and utilization of the natural
applications under the doctrine of primary jurisdiction. resources of the Philippines. When in the mind of the
Euro-med Laboratories v. Province of Batangas55 Court there is doubt, based on the attendant facts and
elucidates: circumstances of the case, in the 60-40 Filipino-equity
ownership in the corporation, then it may apply the
The doctrine of primary jurisdiction holds that if a case "grandfather rule."
is such that its determination requires the expertise,
specialized training and knowledge of an administrative WHEREFORE, premises considered, the instant petition
body, relief must first be obtained in an administrative is DENIED. The assailed Court of Appeals Decision dated
proceeding before resort to the courts is had even if the October 1, 2010 and Resolution dated February 15,
matter may well be within their proper jurisdiction. 2011 are hereby AFFIRMED.

SO ORDERED.

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