THIRD DIVISION
G.R. No. 195580, April 21, 2014
NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., AND MCARTHUR MINING, INC., Petitioners, v. REDMONT CONSOLIDATED MINES CORP., Respondent.
D E C I S I O N
VELASCO JR., J.:
Sec. 3 Definition of Terms. As used in and for purposes of this Act, the following terms, whether in singular or plural, shall mean:
x x x x
(aq) “Qualified person” means any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and financial capability to undertake mineral resources development and duly registered in accordance with law at least sixty per cent (60%) of the capital of which is owned by citizens of the Philippines: Provided, That a legally organized foreign–owned corporation shall be deemed a qualified person for purposes of granting an exploration permit, financial or technical assistance agreement or mineral processing permit.
[I]t is clearly established that respondents are not qualified applicants to engage in mining activities. On the other hand, [Redmont] having filed its own applications for an EPA over the areas earlier covered by the MPSA application of respondents may be considered if and when they are qualified under the law. The violation of the requirements for the issuance and/or grant of permits over mining areas is clearly established thus, there is reason to believe that the cancellation and/or revocation of permits already issued under the premises is in order and open the areas covered to other qualified applicants.
x x x x
WHEREFORE, the Panel of Arbitrators finds the Respondents, McArthur Mining Inc., Tesoro Mining and Development, Inc., and Narra Nickel Mining and Development Corp. as, DISQUALIFIED for being considered as Foreign Corporations. Their Mineral Production Sharing Agreement (MPSA) are hereby x x x DECLARED NULL AND VOID.6
WHEREFORE, in view of the foregoing, the Mines Adjudication Board hereby REVERSES and SETS ASIDE the Resolution dated 14 December 2007 of the Panel of Arbitrators of Region IV–B (MIMAROPA) in POA–DENR Case Nos. 2001–01, 2007–02 and 2007–03, and its Order dated 07 February 2008 denying the Motions for Reconsideration of the Appellants. The Petition filed by Redmont Consolidated Mines Corporation on 02 January 2007 is hereby ordered DISMISSED.17
WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed Orders, dated September 10, 2008 and July 1, 2009 of the Mining Adjudication Board are reversed and set aside. The findings of the Panel of Arbitrators of the Department of Environment and Natural Resources that respondents McArthur, Tesoro and Narra are foreign corporations is upheld and, therefore, the rejection of their applications for Mineral Product Sharing Agreement should be recommended to the Secretary of the DENR.
With respect to the applications of respondents McArthur, Tesoro and Narra for Financial or Technical Assistance Agreement (FTAA) or conversion of their MPSA applications to FTAA, the matter for its rejection or approval is left for determination by the Secretary of the DENR and the President of the Republic of the Philippines.
SO ORDERED.23
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, 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. 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 recorded as belonging to aliens.24 (emphasis supplied)
The filing of the FTAA application on June 15, 2007, during the pendency of the case only demonstrate the violations and lack of qualification of the respondent corporations to engage in mining. The filing of the FTAA application conversion which is allowed foreign corporation of the earlier MPSA is an admission that indeed the respondent is not Filipino but rather of foreign nationality who is disqualified under the laws. Corporate documents of MBMI Resources, Inc. furnished its stockholders in their head office in Canada suggest that they are conducting operation only through their local counterparts.29
I.
The Court of Appeals erred when it did not dismiss the case for mootness despite the fact that the subject matter of the controversy, the MPSA Applications, have already been converted into FTAA applications and that the same have already been granted.II.
The Court of Appeals erred when it did not dismiss the case for lack of jurisdiction considering that the Panel of Arbitrators has no jurisdiction to determine the nationality of Narra, Tesoro and McArthur.III.
The Court of Appeals erred when it did not dismiss the case on account of Redmont’s willful forum shopping.IV.
The Court of Appeals’ ruling that Narra, Tesoro and McArthur are foreign corporations based on the “Grandfather Rule” is contrary to law, particularly the express mandate of the Foreign Investments Act of 1991, as amended, and the FIA Rules.V.
The Court of Appeals erred when it applied the exceptions to the res inter alios acta rule.VI.
The Court of Appeals erred when it concluded that the conversion of the MPSA Applications into FTAA Applications were of “suspicious nature” as the same is based on mere conjectures and surmises without any shred of evidence to show the same.31
1.) There is a grave violation of the Constitution;
2.) The exceptional character of the situation and paramount public interest is involved;
3.) When constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; and
4.) The case is capable of repetition yet evading review.34
The filing of the Financial or Technical Assistance Agreement application is a clear admission that the respondents are not capable of conducting a large scale mining operation and that they need the financial and technical assistance of a foreign entity in their operation that is why they sought the participation of MBMI Resources, Inc. The participation of MBMI in the corporation only proves the fact that it is the Canadian company that will provide the finances and the resources to operate the mining areas for the greater benefit and interest of the same and not the Filipino stockholders who only have a less substantial financial stake in the corporation.
x x x x
x x x The filing of the FTAA application on June 15, 2007, during the pendency of the case only demonstrate the violations and lack of qualification of the respondent corporations to engage in mining. The filing of the FTAA application conversion which is allowed foreign corporation of the earlier MPSA is an admission that indeed the respondent is not Filipino but rather of foreign nationality who is disqualified under the laws. Corporate documents of MBMI Resources, Inc. furnished its stockholders in their head office in Canada suggest that they are conducting operation only through their local counterparts.36
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, 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. 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.
SECTION 3. Definitions. – As used in this Act:
a.) The term Philippine national shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by the citizens of the Philippines; a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That were a corporation and its non–Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors, in order that the corporation shall be considered a Philippine national. (emphasis supplied)
Sec. 2. All lands of the public domain, waters, 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. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co–production, joint venture or production–sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty–five years, renewable for not more than twenty–five years, and under such terms and conditions as may be provided by law.
x x x x
The President may enter into agreements with Foreign–owned corporations involving either technical or financial assistance for large–scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. (emphasis supplied)
Mr. BENNAGEN: Did I hear right that the Chairman’s interpretation of an independent national economy is freedom from undue foreign control? What is the meaning of undue foreign control?
MR. VILLEGAS: Undue foreign control is foreign control which sacrifices national sovereignty and the welfare of the Filipino in the economic sphere.
MR. BENNAGEN: Why does it have to be qualified still with the word “undue”? Why not simply freedom from foreign control? I think that is the meaning of independence, because as phrased, it still allows for foreign control.
MR. VILLEGAS: It will now depend on the interpretation because if, for example, we retain the 60/40 possibility in the cultivation of natural resources, 40 percent involves some control; not total control, but some control.
MR. BENNAGEN: In any case, I think in due time we will propose some amendments.
MR. VILLEGAS: Yes. But we will be open to improvement of the phraseology.
Mr. BENNAGEN: Yes.
Thank you, Mr. Vice–President.
x x x x
MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60–40 in Section 3, 60–40 in Section 9, and 2/3–1/3 in Section 15.
MR. VILLEGAS: That is right.
MR. NOLLEDO: In teaching law, we are always faced with the question: ‘Where do we base the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid–up capital stock of a corporation’? Will the Committee please enlighten me on this?
MR. VILLEGAS: We have just had a long discussion with the members of the team from the UP Law Center who provided us with a draft. The phrase that is contained here which we adopted from the UP draft is ‘60 percent of the voting stock.’
MR. NOLLEDO: That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS: That is right.
MR. NOLLEDO: Thank you.
With respect to an investment by one corporation in another corporation, say, a corporation with 60–40 percent equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?
MR. VILLEGAS: Yes, that is the understanding of the Committee.
MR. NOLLEDO: Therefore, we need additional Filipino capital?
MR. VILLEGAS: Yes.42 (emphasis supplied)
The above–quoted SEC Rules provide for the manner of calculating the Filipino interest in a corporation for purposes, among others, of determining compliance with nationality requirements (the ‘Investee Corporation’). Such manner of computation is necessary since the shares in the Investee Corporation may be owned both by individual stockholders (‘Investing Individuals’) and by corporations and partnerships (‘Investing Corporation’). The said rules thus provide for the determination of nationality depending on the ownership of the Investee Corporation and, in certain instances, the Investing Corporation.
Under the above–quoted SEC Rules, there are two cases in determining the nationality of the Investee Corporation. The first case is the ‘liberal rule’, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, ‘(s)hares 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.’ Under the liberal Control Test, there is no need to further trace the ownership of the 60% (or more) Filipino stockholdings of the Investing Corporation since a corporation which is at least 60% Filipino–owned is considered as Filipino.
The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, “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.” Under the Strict Rule or Grandfather Rule Proper, the combined totals in the Investing Corporation and the Investee Corporation must be traced (i.e., “grandfathered”) to determine the total percentage of Filipino ownership.
Moreover, the ultimate Filipino ownership of the shares must first be traced to the level of the Investing Corporation and added to the shares directly owned in the Investee Corporation x x x.
x x x x
In other words, based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part of the SEC Rule applies only when the 60–40 Filipino–foreign equity ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with less than 60% Filipino stockholdings [or 59%] invests in other joint venture corporation which is either 60–40% Filipino–alien or the 59% less Filipino). Stated differently, where the 60–40 Filipino–foreign equity ownership is not in doubt, the Grandfather Rule will not apply. (emphasis supplied)
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Madridejos Mining Corporation | Filipino | 5,997 | PhP 5,997,000.00 | PhP 825,000.00 |
MBMI Resources, Inc. | Canadian | 3,998 | PhP 3,998,000.00 | PhP 1,878,174.60 |
Lauro L. Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP 10,000,000.00 | PhP 2,708,174.60 (emphasis supplied) |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Olympic Mines & Development Corp. | Filipino | 6,663 | PhP 6,663,000.00 | PhP 0 |
MBMI Resources, Inc. | Canadian | 3,331 | PhP 3,331,000.00 | PhP 2,803,900.00 |
Amanti Limson | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Lauro Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Emmanuel G. Hernando | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP 10,000,000.00 | PhP 2,809,900.00 (emphasis supplied) |
On September 9, 2004, the Company and Olympic Mines & Development Corporation (“Olympic”) entered into a series of agreements including a Property Purchase and Development Agreement (the Transaction Documents) with respect to three nickel laterite properties in Palawan, Philippines (the “Olympic Properties”). The Transaction Documents effectively establish a joint venture between the Company and Olympic for purposes of developing the Olympic Properties. The Company holds directly and indirectly an initial 60% interest in the joint venture. Under certain circumstances and upon achieving certain milestones, the Company may earn up to a 100% interest, subject to a 2.5% net revenue royalty.47 (emphasis supplied)
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Sara Marie Mining, Inc. | Filipino | 5,997 | PhP 5,997,000.00 | PhP 825,000.00 |
MBMI Resources, Inc. | Canadian | 3,998 | PhP 3,998,000.00 | PhP 1,878,174.60 |
Lauro L. Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP 10,000,000.00 | PhP 2,708,174.60 (emphasis supplied) |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Olympic Mines & Development Corp. | Filipino | 6,663 | PhP 6,663,000.00 | PhP 0 |
MBMI Resources, Inc. | Canadian | 3,331 | PhP 3,331,000.00 | PhP 2,803,900.00 |
Amanti Limson | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Lauro Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Emmanuel G. Hernando | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP 10,000,000.00 | PhP 2,809,900.00 (emphasis supplied) |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Patricia Louise Mining & Development Corp. | Filipino | 5,997 | PhP 5,997,000.00 | PhP 1,677,000.00 |
MBMI Resources, Inc. | Canadian | 3,998 | PhP 3,996,000.00 | PhP 1,116,000.00 |
Higinio C. Mendoza, Jr. | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Henry E. Fernandez | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Ma. Elena A. Bocalan | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Bayani H. Agabin | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Robert L. McCurdy | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP 10,000,000.00 | PhP 2,800,000.00 (emphasis supplied) |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Palawan Alpha South Resources Development Corporation | Filipino | 6,596 | PhP 6,596,000.00 | PhP 0 |
MBMI Resources, Inc. | Canadian | 3,396 | PhP 3,396,000.00 | PhP 2,796,000.00 |
Higinio C. Mendoza, Jr. | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Henry E. Fernandez | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Lauro L. Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Bayani H. Agabin | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP 10,000,000.00 | PhP 2,708,174.60 (emphasis supplied) |
JOINT VENTURES The Company’s ownership interests in various mining ventures engaged in the acquisition, exploration and development of mineral properties in the Philippines is described as follows:
(a) Olympic Group
The Philippine companies holding the Olympic Property, and the ownership and interests therein, are as follows:
Olympic– Philippines (the “Olympic Group”) Sara Marie Mining Properties Ltd. (“Sara Marie”) 33.3% Tesoro Mining & Development, Inc. (Tesoro) 60.0%
Pursuant to the Olympic joint venture agreement the Company holds directly and indirectly an effective equity interest in the Olympic Property of 60.0%. Pursuant to a shareholders’ agreement, the Company exercises joint control over the companies in the Olympic Group.
(b) Alpha Group
The Philippine companies holding the Alpha Property, and the ownership interests therein, are as follows:
Alpha– Philippines (the “Alpha Group”) Patricia Louise Mining Development Inc. (“Patricia”) 34.0% Narra Nickel Mining & Development Corporation (Narra) 60.4%
Under a joint venture agreement the Company holds directly and indirectly an effective equity interest in the Alpha Property of 60.4%. Pursuant to a shareholders’ agreement, the Company exercises joint control over the companies in the Alpha Group.48 (emphasis supplied)
Sec. 29. Admission by co–partner or agent.– The act or declaration of a partner or agent of the party within the scope of his authority and during the existence of the partnership or agency, may be given in evidence against such party after the partnership or agency is shown by evidence other than such act or declaration itself. The same rule applies to the act or declaration of a joint owner, joint debtor, or other person jointly interested with the party.
Sec. 31. Admission by privies.– Where one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former.
[T]he relations of the parties to a joint venture and the nature of their association are so similar and closely akin to a partnership that it is ordinarily held that their rights, duties, and liabilities are to be tested by rules which are closely analogous to and substantially the same, if not exactly the same, as those which govern partnership. In fact, it has been said that the trend in the law has been to blur the distinctions between a partnership and a joint venture, very little law being found applicable to one that does not apply to the other.51
Within thirty (30) days, after the submission of the case by the parties for the decision, the panel shall have exclusive and original jurisdiction to hear and decide the following:
(a) Disputes involving rights to mining areas
(b) Disputes involving mineral agreements or permits
The phrase “disputes involving rights to mining areas” refers to any adverse claim, protest, or opposition to an application for mineral agreement. The POA therefore has the jurisdiction to resolve any adverse claim, protest, or opposition to a pending application for a mineral agreement filed with the concerned Regional Office of the MGB. This is clear from Secs. 38 and 41 of the DENR AO 96–40, which provide:Sec. 38.It has been made clear from the aforecited provisions that the “disputes involving rights to mining areas” under Sec. 77(a) specifically refer only to those disputes relative to the applications for a mineral agreement or conferment of mining rights.
x x x x
Within thirty (30) calendar days from the last date of publication/posting/radio announcements, the authorized officer(s) of the concerned office(s) shall issue a certification(s) that the publication/posting/radio announcement have been complied with. Any adverse claim, protest, opposition shall be filed directly, within thirty (30) calendar days from the last date of publication/posting/radio announcement, with the concerned Regional Office or through any concerned PENRO or CENRO for filing in the concerned Regional Office for purposes of its resolution by the Panel of Arbitrators pursuant to the provisions of this Act and these implementing rules and regulations. Upon final resolution of any adverse claim, protest or opposition, the Panel of Arbitrators shall likewise issue a certification to that effect within five (5) working days from the date of finality of resolution thereof. Where there is no adverse claim, protest or opposition, the Panel of Arbitrators shall likewise issue a Certification to that effect within five working days therefrom.
x x x x
No Mineral Agreement shall be approved unless the requirements under this Section are fully complied with and any adverse claim/protest/opposition is finally resolved by the Panel of Arbitrators.
Sec. 41.
x x x x
Within fifteen (15) working days form the receipt of the Certification issued by the Panel of Arbitrators as provided in Section 38 hereof, the concerned Regional Director shall initially evaluate the Mineral Agreement applications in areas outside Mineral reservations. He/She shall thereafter endorse his/her findings to the Bureau for further evaluation by the Director within fifteen (15) working days from receipt of forwarded documents. Thereafter, the Director shall endorse the same to the secretary for consideration/approval within fifteen working days from receipt of such endorsement.
In case of Mineral Agreement applications in areas with Mineral Reservations, within fifteen (15) working days from receipt of the Certification issued by the Panel of Arbitrators as provided for in Section 38 hereof, the same shall be evaluated and endorsed by the Director to the Secretary for consideration/approval within fifteen days from receipt of such endorsement. (emphasis supplied)
The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is further elucidated by Secs. 219 and 43 of DENR AO 95–936, which read:Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.– Notwithstanding the provisions of Sections 28, 43 and 57 above, any adverse claim, protest or opposition specified in said sections may also be filed directly with the Panel of Arbitrators within the concerned periods for filing such claim, protest or opposition as specified in said Sections.
Sec. 43. Publication/Posting of Mineral Agreement.–
x x x x
The Regional Director or concerned Regional Director shall also cause the posting of the application on the bulletin boards of the Bureau, concerned Regional office(s) and in the concerned province(s) and municipality(ies), copy furnished the barangays where the proposed contract area is located once a week for two (2) consecutive weeks in a language generally understood in the locality. After forty–five (45) days from the last date of publication/posting has been made and no adverse claim, protest or opposition was filed within the said forty–five (45) days, the concerned offices shall issue a certification that publication/posting has been made and that no adverse claim, protest or opposition of whatever nature has been filed. On the other hand, if there be any adverse claim, protest or opposition, the same shall be filed within forty–five (45) days from the last date of publication/posting, with the Regional Offices concerned, or through the Department’s Community Environment and Natural Resources Officers (CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to be filed at the Regional Office for resolution of the Panel of Arbitrators. However previously published valid and subsisting mining claims are exempted from posted/posting required under this Section.
No mineral agreement shall be approved unless the requirements under this section are fully complied with and any opposition/adverse claim is dealt with in writing by the Director and resolved by the Panel of Arbitrators. (Emphasis supplied.)
It has been made clear from the aforecited provisions that the “disputes involving rights to mining areas” under Sec. 77(a) specifically refer only to those disputes relative to the applications for a mineral agreement or conferment of mining rights.
The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is further elucidated by Secs. 219 and 43 of DENRO AO 95–936, which reads:Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.– Notwithstanding the provisions of Sections 28, 43 and 57 above, any adverse claim, protest or opposition specified in said sections may also be filed directly with the Panel of Arbitrators within the concerned periods for filing such claim, protest or opposition as specified in said Sections.
Sec. 43. Publication/Posting of Mineral Agreement Application.–
x x x x
The Regional Director or concerned Regional Director shall also cause the posting of the application on the bulletin boards of the Bureau, concerned Regional office(s) and in the concerned province(s) and municipality(ies), copy furnished the barangays where the proposed contract area is located once a week for two (2) consecutive weeks in a language generally understood in the locality. After forty–five (45) days from the last date of publication/posting has been made and no adverse claim, protest or opposition was filed within the said forty–five (45) days, the concerned offices shall issue a certification that publication/posting has been made and that no adverse claim, protest or opposition of whatever nature has been filed. On the other hand, if there be any adverse claim, protest or opposition, the same shall be filed within forty–five (45) days from the last date of publication/posting, with the Regional offices concerned, or through the Department’s Community Environment and Natural Resources Officers (CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to be filed at the Regional Office for resolution of the Panel of Arbitrators. However, previously published valid and subsisting mining claims are exempted from posted/posting required under this Section.
No mineral agreement shall be approved unless the requirements under this section are fully complied with and any opposition/adverse claim is dealt with in writing by the Director and resolved by the Panel of Arbitrators. (Emphasis supplied.)
These provisions lead us to conclude that the power of the POA to resolve any adverse claim, opposition, or protest relative to mining rights under Sec. 77(a) of RA 7942 is confined only to adverse claims, conflicts and oppositions relating to applications for the grant of mineral rights. POA’s jurisdiction is confined only to resolutions of such adverse claims, conflicts and oppositions and it has no authority to approve or reject said applications. Such power is vested in the DENR Secretary upon recommendation of the MGB Director. Clearly, POA’s jurisdiction over “disputes involving rights to mining areas” has nothing to do with the cancellation of existing mineral agreements. (emphasis ours)
Sec. 19. Jurisdiction in Civil Cases.—Regional Trial Courts shall exercise exclusive original jurisdiction:
1. In all civil actions in which the subject of the litigation is incapable of pecuniary estimation.
Section 77. Panel of Arbitrators.—
x x x Within thirty (30) days, after the submission of the case by the parties for the decision, the panel shall have exclusive and original jurisdiction to hear and decide the following:
(c) Disputes involving rights to mining areas
(d) Disputes involving mineral agreements or permits
The doctrine of primary jurisdiction holds that if a case is such that its determination requires the expertise, specialized training and knowledge of an administrative body, relief must first be obtained in an administrative proceeding before resort to the courts is had even if the matter may well be within their proper jurisdiction.
Endnotes:
1 Penned by Associate Justice Ruben C. Ayson and concurred in by Associate Justices Amelita G. Tolentino and Normandie B. Pizzaro.
2Rollo, p. 573.
3 Id. at 86.
4 Id. at 82.
5 Id. at 84.
6 Id. at 139–140.
7 Id. at 379.
8 Id. at 378.
9 Id. at 390.
10 Id. at 411.
11 Id. at 414.
12 Id. at 353.
13 Id. at 367, see application on p. 368.
14 Id. at 334–337.
15 Id. at 438.
16 Id. at 460.
17 Id. at 202.
18 Id. at 473.
19 Id. at 486.
20 Id. at 522.
21 Id. at 623.
22 Id. at 629.
23 Id. at 95–96.
24 Department of Justice Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules.
25Rollo, p. 89.
26 Id. at 573–590, O.P. Case No. 10–E–229, penned by Executive Secretary Paquito N. Ochoa, Jr.
27 Id. at 587.
28 Id.
29 Id. at 588.
30 Id. at 591–594.
31 Id. at 20–21.
32David v. Macapagal–Arroyo, G.R. No. 171396, etc., May 3, 2006, 489 SCRA 160.
33 Id.
34 Id.
35 Id.
36Rollo, pp. 138–139.
37 Id. at 95–96.
38 Id. at 101.
39 Id. at 587.
40 Id. at 679–689.
41 Id. at 33.
42 “Proposed Resolution No. 533– Resolution to Incorporate in the Article on National Economy and Patrimony a Provision on Ancestral Lands,” III Record, Constitutional Commission, R.C.C. No. 55 (August 13, 1986).
43Rollo, p. 44, quoting DOJ Opinion No. 20.
44 Id. at 82.
45 Id.
46 Id. at 83.
47 Id.
48 Id. at 87–88.
49 Id. at 48.
50 CIVIL CODE, Art. 1767.
51 §4, 46 Am Jur 2d, pp. 24–25.
52 §30, 46 Am Jur 2d – “law relating to dissolution and termination of partnerships is applicable to joint ventures”; §17, 46 Am Jur 2d – “In other words, an agreement to combine money, effort, skill, and knowledge, and to purchase land for the purpose of reselling or dealing with it at a profit, is a partnership agreement, or a joint venture having in general the legal incidents of a partnership”; §50, 46 Am Jur 2d – “The relationship between joint venturers, like that existing between partners, is fiduciary in character and imposes upon all the participants the obligation of loyalty to the joint concern and of the utmost good faith, fairness, and honesty in their dealings with each other with respect to matters pertaining to the enterprise”; §57 – “It has already been pointed out that the rights, duties, and liabilities of joint venturers are governed, in general, by rules which are similar or analogous to those which govern the corresponding rights, duties, and liabilities of partners, except as they are limited by the fact that the scope of a joint venture is narrower than that of the ordinary partnership. As in the case of partners, joint venturers may be jointly and severally liable to third parties for the debts of the venture”; §58, 46 Am Jur 2d – “It has also been held that the liability for torts of parties to a joint venture agreement is governed by the law applicable to partnerships.”
53 G.R. Nos. 169080, 172936, 176226 & 176319, December 19, 2007, 541 SCRA 166.
54Lee, et al. v. Presiding Jusge, et al., G.R. No. 68789, November 10, 1986; People v. Paderna, No. L–28518, January 29, 1968.
55 G.R. No. 148106, July 17, 2006.
56Rollo, p. 684.
57 Id. at 687.
LEONEN, J.:
WHEREFORE, the Panel of Arbitrators finds the Respondents McArthur Mining Inc., Tesoro Mining and Development, Inc., and Narra Nickel Mining and Development Corp. as, DISQUALIFIED for being considered as Foreign Corporations. Their Mineral Production Sharing Agreement (MPSA) are hereby as [sic], they are DECLARED NULL AND VOID.
Accordingly, the Exploration Permit Applications of Petitioner Redmont Consolidated Mines Corporation shall be GIVEN DUE COURSE, subject to compliance with the provisions of the Mining Law and its implementing rules and regulations.11
[W]hether or not an applicant for an MPSA meets the qualifications imposed by law, more particularly the nationality requirement, is a matter that is addressed to the sound discretion of the competent body or agency, in this case the [Securities and Exchange Commission]. In the interest of orderly procedure and administrative efficiency, it is imperative that the DENR, including the Panel, accord full faith and confidence to the contents of Appellants’ Articles of Incorporation, which have undergone thorough evaluation and scrutiny by the SEC. Unless the SEC or the courts promulgate a ruling to the effect that the Appellant corporations are not Filipino corporations, the Board cannot conclude otherwise. This proposition is borne out by the legal presumptions that official duty has been regularly performed, and that the law has been obeyed in the preparation and approval of said documents.16
First action: On August 14, 2008, Redmont filed a complaint for revocation of the certificates of registration of Narra, Tesoro, and McArthur with the Securities and Exchange Commission (SEC).25 This complaint became the subject of another case (G.R. No. 205513), which was consolidated but later de–consolidated with the present petition, G.R. No. 195580.
In view of this complaint, Redmont filed on September 1, 2008 a manifestation and motion to suspend proceeding[s] before the MAB.26
In a letter–resolution dated September 3, 2009, the SEC’s Compliance and Enforcement Department (CED) ruled in favor of Narra, Tesoro, and McArthur. It applied the Control Test per Section 3 of Republic Act No. 7042, as amended by Republic Act No. 8179, the Foreign Investments Act (FIA), and held that Narra, Tesoro, and McArthur as well as their co–respondents in that case satisfied the requisite Filipino equity ownership.27 Redmont then filed an appeal with the SEC En Banc.
In a decision dated March 25, 2010,28 the SEC En Banc set aside the SEC–CED’s letter–resolution with respect to Narra, Tesoro, and McArthur as the appeal from the MAB’s September 10, 2008 order was then pending with the Court of Appeals, Seventh Division.29 The SEC En Banc considered the assertion that Redmont has been engaging in forum shopping:It is evident from the foregoing that aside from identity of the parties x xx, the issue(s) raised in the CA Case and the factual foundations thereof x x x are substantially the same as those obtaining the case at bar. Yet, Redmont did not include this CA Case in the Certification Against Forum Shopping attached to the instant Appeal.30However, with respect to the other respondent–appellees in that case (Sara Marie Mining, Inc., Patricia Louise Mining and Development Corp., Madridejos Mining Corp., Bethlehem Nickel Corp., San Juanico Nickel Corp., and MBMI Resources Inc.), the complaint was remanded to the SEC–CED for further proceedings with the reminder for it to “consider every piece already on record and, if necessary, to conduct further investigation in order to ascertain, consistent with the Grandfather Rule, the true, actual Filipino and foreign participation in each of these five (5) corporations.”31
Asserting that the SEC En Banc had already made a definite finding that Redmont has been engaging in forum shopping, Sara Marie Mining, Inc., Patricia Louise Mining and Development Corp., and Madridejos Mining Corp. filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules of Civil Procedure. This petition was docketed as CA–G.R. SP No. 113523.
In a decision dated May 23, 2012, the Court of Appeals, Former Tenth Division, found that “there was a deliberate attempt not to disclose the pendency of CA–GR SP No. 109703.”32 It concluded that “the partial dismissal of the case before the SEC is unwarranted. It should have been dismissed in its entirety and with prejudice to the complainant.”33 The dispositive portion of the decision reads:WHEREFORE, the Petition is GRANTED. The Decision dated March 25, 2010 of the Securities and Exchange Commission En Banc is REVERSED and SET ASIDE. Accordingly, the complaint for revocation filed by Redmont Consolidated Mines is DISMISSED with prejudice.34 (Emphasis supplied)On January 22, 2013, the Court of Appeals, Former Tenth Division, issued a resolution35 denying Redmont’s motion for reconsideration.
Aggrieved, Redmont filed the petition for review on certiorari which became the subject of G.R. No. 205513, initially lodged with this court’s First Division. Through a November 27, 2013 resolution, G.R. No. 205513 was consolidated with G.R. No. 195580. Subsequently however, this court’s Third Division de–consolidated the two (2) cases.
Second Action: On September 8, 2008, Redmont filed a complaint for injunction (of the MAB proceedings pending the resolution of the complaint before the SEC) with application for issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction with the Regional Trial Court, Branch 92, Quezon City.36 The Regional Trial Court issued a TRO on September 16, 2008. By then, however, the MAB had already ruled in favor of Narra, Tesoro, and McArthur.37
Third Action: On May 7, 2010, Redmont filed with the Office of the President a petition seeking the cancellation of the financial or technical assistance agreement (FTAA) applications of Narra, Tesoro, and McArthur. In a decision dated April 6, 2011,38 the Office of the President ruled in favor of Redmont. In a resolution dated July 6, 2011,39 the Office of the President denied the motion for reconsideration of Narra, Tesoro, and McArthur. As noted by the ponencia, Narra, Tesoro, and McArthur then filed an appeal with the Court of Appeals. As this appeal has been denied, they filed another appeal with this court, which appeal is pending in another division.40
Section 77. Panel of Arbitrators – x x x Within thirty (30) working days, after the submission of the case by the parties for decision, the panel shall have exclusive and original jurisdiction to hear and decide on the following:
(a) Disputes involving rights to mining areas;
(b) Disputes involving mineral agreements or permit;
(c) Disputes involving surface owners, occupants and claimholders / concessionaires; and
(d) Disputes pending before the Bureau and the Department at the date of the effectivity of this Act.
Accordingly, as We enunciated in Celestial, the POA unquestionably has jurisdiction to resolve disputes over MPSA applications subject of Redmont’s petitions. However, said jurisdiction does not include either the approval or rejection of the MPSA applications which is vested only upon the Secretary of the DENR. Thus, the finding of the POA, with respect to the rejection of the petitioners’ MPSA applications being that they are foreign corporation [sic], is valid.52
We now come to the meat of the case which revolves mainly around the question of jurisdiction by the Panel of Arbitrators: Does the Panel of Arbitrators have jurisdiction over the complaint for declaration of nullity and/or termination of the subject contracts on the ground of fraud, oppression and violation of the Constitution? This issue may be distilled into the more basic question of whether the Complaint raises a mining dispute or a judicial question.
A judicial question is a question that is proper for determination by the courts, as opposed to a moot question or one properly decided by the executive or legislative branch. A judicial question is raised when the determination of the question involves the exercise of a judicial function; that is, the question involves the determination of what the law is and what the legal rights of the parties are with respect to the matter in controversy.
On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b) mineral agreements, FTAAs, or permits, and (c) surface owners, occupants and claimholders/concessionaires. Under Republic Act No. 7942 (otherwise known as the Philippine Mining Act of 1995), the Panel of Arbitrators has exclusive and original jurisdiction to hear and decide these mining disputes. The Court of Appeals, in its questioned decision, correctly stated that the Panel’s jurisdiction is limited only to those mining disputes which raise questions of fact or matters requiring the application of technological knowledge and experience. 54 (Emphasis supplied)
We see nothing in sections 61 and 73 of the Mining Law that indicates a legislative intent to confer real judicial power upon the Director of Mines. The very terms of section 73 of the Mining Law, as amended by Republic Act No. 4388, in requiring that the adverse claim must "state in full detail the nature, boundaries and extent of the adverse claim” show that the conflicts to be decided by reason of such adverse claim refer primarily to questions of fact. This is made even clearer by the explanatory note to House Bill No. 2522, later to become Republic Act 4388, that “sections 61 and 73 that refer to the overlapping of claims are amended to expedite resolutions of mining conflicts * * *.” The controversies to be submitted and resolved by the Director of Mines under the sections refer therfore [sic] only to the overlapping of claims and administrative matters incidental thereto.56 (Emphasis supplied)
Clearly, POA’s jurisdiction over “disputes involving rights to mining areas” has nothing to do with the cancellation of existing mineral agreements.58
Section 2. All lands of the public domain, waters, 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. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co–production, joint venture, or production–sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty–five years, renewable for not more than twenty–five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of waterpower, beneficial use may be the measure and limit of the grant.
The State shall protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small–scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign–owned corporations involving either technical or financial assistance for large–scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. (Emphasis supplied)
Section 19. The State shall develop a self–reliant and independent national economy effectively controlled by Filipinos. (Emphasis supplied)
Section 3. Definition of Terms. – As used in and for purposes of this Act, the following terms, whether in singular or plural, shall mean:
x x x x
(aq) “Qualified person” means any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and financial capability to undertake mineral resources development and duly registered in accordance with law at least sixty per centum (60%) of the capital of which is owned by citizens of the Philippines: Provided, That a legally organized foreign–owned corporation shall be deemed a qualified person for purposes of granting an exploration permit, financial or technical assistance agreement or mineral processing permit. (Emphasis supplied)
(t) “Foreign–owned corporation” means any corporation, partnerships, association, or cooperative duly registered in accordance with law in which less than fifty per centum (50%) of the capital is owned by Filipino citizens.
Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces or potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty–five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit of the grant. (Emphasis supplied)
Section 9. The disposition, exploration, development, of exploitation, or utilization of any of the natural resources of the Philippines shall be limited to citizens of the Philippines, or to corporations or association at least sixty per centum of the capital of which is owned by such citizens. The Batasang Pambansa, in the national interest, may allow such citizens, corporations, or associations to enter into service contracts for financial, technical, management, or other forms of assistance with any foreign person or entity for the exploitation, development, exploitation, or utilization of any of the natural resources. Existing valid and binding service contracts for financial, the technical, management, or other forms of assistance are hereby recognized as such. (Emphasis supplied)
The purpose of the sixty per centum requirement is obviously to ensure that corporations or associations allowed to acquire agricultural land or to exploit natural resources shall be controlled by Filipinos; and the spirit of the Constitution demands that in the absence of capital stock, the controlling membership should be composed of Filipino citizens.75 (Emphasis supplied)
It should be emphatically stated that the provisions of our Constitution which limit to Filipinos the rights to develop the natural resources and to operate the public utilities of the Philippines is one of the bulwarks of our national integrity. The Filipino people decided to include it in our Constitution in order that it may have the stability and permanency that its importance requires. It is written in our Constitution so that it may neither be the subject of barter nor be impaired in the give and take of politics. With our natural resources, our sources of power and energy, our public lands, and our public utilities, the material basis of the nation’s existence, in the hands of aliens over whom the Philippine Government does not have complete control, the Filipinos may soon find themselves deprived of their patrimony and living as it were, in a house that no longer belongs to them.77 (Emphasis supplied)
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, 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. 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 a Filipino citizens, all of the said shares shall be recorded as owned by Filipinos. But if less than 60%, or, say, only 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 shares shall be recorded as belonging to aliens.80
The above–quoted SEC Rules provide for the manner of calculating the Filipino interest in a corporation for purposes, among others of determining compliance with nationality requirements (the “Investee Corporation”). Such manner of computation is necessary since the shares of the Investee Corporation may be owned both by individual stockholders (“Investing Individuals”) and by corporations and partnerships (“Investing Corporation”). The determination of nationality depending on the ownership of the Investee Corporation and in certain instances, the Investing Corporation.
Under the above–quoted SEC Rules, there are two cases in determining the nationality of the Investee Corporation. The first case is the ‘liberal rule’, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, ‘(s)hares 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.’ Under the liberal Control Test, there is no need to further trace the ownership of the 60% (or more) Filipino stockholdings of the Investing Corporation since a corporation which is at least 60% Filipino–owned is considered as Filipino.
The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, ‘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.’ Under the Strict Rule or Grandfather Rule Proper, the combined totals in the Investing Corporation and the Investee Corporation must be traced (i.e., ‘grandfathered’) to determine the total percentage of Filipino ownership.81
[T]he Grandfather Rule or the second part of the SEC Rule applies only when the 60–40 Filipino–foreign equity ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with less than 60% Filipino stockholdings [or 59%] invests in another joint venture corporation which is either 60–40% Filipino–alien or 59% less Filipino. Stated differently, where the 60–40 Filipino–foreign equity ownership is not in doubt, the Grandfather Rule will not apply.82
(Emphasis supplied)
x x x. It is quite clear x x x that the “Grandfather Rule” , which was evolved and applied by the SEC in several cases, will not apply in cases where the 60–40 Filipino–alien equity ownership in a particular natural resource corporation is not in doubt.84
Opinion No. 84, s. 1988 cited in your query is not meant to overrule the aforesaid SEC rule.85 There is nothing in said Opinion that precludes the application of the said SEC rule in appropriate cases. It is quite clear from said SEC rule that the ‘Grandfather Rule’, which was evolved and applied by the SEC in several cases, will not apply in cases where the 60–40 Filipino–alien equity ownership in a particular natural resource corporation is not in doubt.86
[T]the Commission En Banc, on the basis of the Opinion of the Department of Justice No. 18, S. 1989 dated January 19, 1989 voted and decided to do away with the strict application/computation of the so–called “Grandfather Rule” Re: Far Southeast Gold Resources, Inc. (FSEGRI), and instead applied the so–called “Control Test” method of determining corporate nationality.95 (Emphasis supplied)
GFPC, which is 60% Filipino owned, is considered a Filipino company. Consequently, its investment in Jericho is considered that of a Filipino. The 60% Filipino equity requirement therefore would still be met by Jericho.
Considering that under the proposed set–up Jericho’s capital stock will be owned by 60% Filipino, it is still qualified to hold mining claims or rights or enter into mineral production sharing agreements with the Government.97
SEC. 3. Definitions. – As used in this Act:Thus, under the Foreign Investments Act, a “Philippine national” is any of the following:
a) the term “Philippine National” shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines or a corporation organized abroad and registered as doing business in the Philippine under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non–Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national; (as amended by R.A. 8179). (Emphasis supplied)
RULE I
DEFINITIONS
SECTION 1. DEFINITION OF TERMS. — For the purposes of these Rules and Regulations:
x x x x
b.Philippine national shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which 100% of the capital stock outstanding and entitled to vote is wholly owned by Filipinos; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefits of the Philippine nationals; Provided, that where a corporation and its non–Filipino stockholders own stocks in Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The Control Test shall be applied for this purpose.
Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered.
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.
Individuals or juridical entities not meeting the aforementioned qualifications are considered as non–Philippine nationals. (Emphasis supplied)
It is settled that when the activity or business of a corporation falls within any of the partly nationalized provisions of the Constitution or a special law, the “control test” must also be applied to determine the nationality of a corporation on the basis of the nationality of the stockholders who control its equity.
The control test was laid down by the Department of Justice (DOJ) in its Opinion No. 18 dated January 19, 1989. It determines the nationality of a corporation with alien equity based on the percentage of capital owned by Filipino citizens. It reads:Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as Philippine nationality, 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.In a catena of opinions, the SEC, “the government agency tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities,” has consistently applied the control test.
The FIA likewise adheres to the control test. This intent is evident in the May 21, 1991 deliberations of the Bicameral Conference Committee (Committees on Economic Affairs of the Senate and House of Representatives), to wit:CHAIRMAN TEVES. x x x. On definition of terms, Ronnie, would you like anything to say here on the definition of terms of Philippine national?This intent is even more apparent in the Implementing Rules and Regulations (IRR) of the FIA. In defining a “Philippine national,” Section 1(b) of the IRR of the FIA categorically states that for the purposes of determining the nationality of a corporation the control test should be applied.
HON. RONALDO B. ZAMORA. I think we’ve – we have already agreed that we are adopting here the control test. Wasn’t that the result of the –
CHAIRMAN PATERNO. No. I thought that at the last meeting, I have made it clear that the Senate was not able to make a decision for or against the grandfather rule and the control test, because we had gone into caucus and we had voted but later on the agreement was rebutted and so we had to go back to adopting the wording in the present law which is not clearly, by its language, a control test formulation.
HON. ANGARA. Well, I don’t know. Maybe I was absent, Ting, when that happened but my recollection is that we went into caucus, we debated [the] pros and cons of the control versus the grandfather rule and by actual vote the control test bloc won. I don’t know when subsequent rejection took place, but anyway even if the – we are adopting the present language of the law I think by interpretation, administrative interpretation, while there may be some differences at the beginning, the current interpretation of this is the control test. It amounts to the control test.
CHAIRMAN TEVES. That’s what I understood, that we could manifest our decision on the control test formula even if we adopt the wordings here by the Senate version.
x x x x
CHAIRMAN PATERNO. The most we can do is to say that we have explained – is to say that although the House Panel wanted to adopt language which would make clear that the control test is the guiding philosophy in the definition of [a] Philippine national, we explained to them the situation in the Senate and said that we would be – was asked them to adopt the present wording of the law cognizant of the fact that the present administrative interpretation is the control test interpretation. But, you know, we cannot go beyond that.
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee. [sic]
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase “voting stock or controlling interest.”
The cardinal rule in the interpretation of laws is to ascertain and give effect to the intention of the legislator. Therefore, the legislative intent to apply the control test in the determination of nationality must be given effect.101 (Emphasis supplied)
Such doubt, we believe, exists in the instant case because the foreign investor, MBMI, provided practically all the funds of the remaining appellee–corporations.104
We are aware of the Commission’s prevailing policy of applying the so–called “Control Test” in determining the extent of foreign equity in a corporation. Since the 1990s, the Commission En Banc, on the basis of DOJ Opinion No. 18, series of 1989 dated January 19, 1989, voted and decided to do away with the strict application/computation of the “Grandfather Rule,” and instead applied the “Control Test” method of determining corporate nationality. x x x105
However, we now opine that the Control Test must not be applied in determining if a corporation satisfies the Constitution’s citizenship requirements in certain areas of activities. x x x.106
Indeed, the framers of the Constitution intended for the “Grandfather Rule” to apply in case a 60%–40% Filipino–Foreign equity corporation invests in another corporation engaging in an activity where the Constitution restricts foreign participation.113
x x x x
The Control Test creates a legal fiction where if 60% of the shares of an investing corporation are owned by Philippine citizens then all of the shares or 100% of that corporation’s shares are considered Filipino owned for purposes of determining the extent of foreign equity in an investee corporation engaging in an activity restricted to Philippine citizens.114
In other words, Philippine citizenship is being unduly attributed to foreign individuals who own the rest of the shares in a 60% Filipino equity corporation investing in another corporation. Thus, applying the Control Test effectively circumvents the Constitutional mandate that corporations engaging in certain activities must be 60% owned by Filipino citizens. The words of the Constitution clearly provide that we must look at the citizenship of the individual/natural person who ultimately owns and controls the shares of stocks of the corporation engaging in the nationalized/partly–nationalized activity. This is what the framers of the constitution intended. In fact, the Mining Act strictly adheres to the text of the Constitution and does not provide for the application of the Control Test. Indeed, the application of the Control Test has no constitutional or statutory basis. Its application is only by mere administrative fiat.115 (Emphasis supplied)
In this case, we find nothing to show that the sale between the sisters Lozada and their nephew Antonio violated the public policy prohibiting aliens from owning lands in the Philippines. Even as Dr. Lozada advanced the money for the payment of Antonio’s share, at no point were the lots registered in Dr. Lozada’s name. Nor was it contemplated that the lots be under his control for they are actually to be included as capital of Damasa Corporation. According to their agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively. Under Republic Act No. 7042, particularly Section 3, a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines, is considered a Philippine National. As such, the corporation may acquire disposable lands in the Philippines. Neither did petitioner present proof to belie Antonio’s capacity to pay for the lots subjects of this case.127 (Emphasis supplied)
This SEC en banc ruling conforms to our 28 June 2011 Decision that 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.132
[T]he opinions of the SEC en banc, as well as of the DOJ, interpreting the law are neither conclusive nor controlling and thus, do not bind the Court. It is hornbook doctrine that any interpretation of the law that administrative or quasi–judicial agencies make is only preliminary, never conclusive on the Court. The power to make a final interpretation of the law, in this case the term “capital” in Section 11, Article XII of the 1987 Constitution, lies with this Court, not with any other government entity.133
MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60–40 in Section 3, 60–40 in Section 9, and 2/3–1/3 in Section 15.
MR. VILLEGAS: That is right.
MR. NOLLEDO: In teaching law, we are always faced with this question: “Where do we base the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid–up capital stock of a corporation” ? Will the Committee please enlighten me on this?
MR. VILLEGAS: We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is contained here which we adopted from the UP draft is “60 percent of voting stock.”
MR. NOLLEDO: That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS: That is right.
MR. NOLLEDO: Thank you.
With respect to an investment by one corporation in another corporation, say, a corporation with 60–40 percent equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the Grandfather Rule?
MR. VILLEGAS: Yes, that is the understanding of the Committee.
MR. NOLLEDO: Therefore, we need additional Filipino capital?
MR. VILLEGAS: Yes.136 (Emphasis supplied)
A foolproof yardstick in constitutional construction is the intention underlying the provision under consideration. Thus, it has been held that the Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in the light of the history of the times, and the condition and circumstances under which the Constitution was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make the words consonant to that reason and calculated to effect that purpose.138
While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may be had only when other guides fail as said proceedings are powerless to vary the terms of the Constitution when the meaning is clear. Debates in the constitutional convention “are of value as showing the views of the individual members, and as indicating the reasons for their votes, but they give us no light as to the views of the large majority who did not talk, much less of the mass of our fellow citizens whose votes at the polls gave that instrument the force of fundamental law. We think it safer to construe the constitution from what appears upon its face.” The proper interpretation therefore depends more on how it was understood by the people adopting it than in the framers’s understanding thereof. 140 (Emphasis supplied)
The meaning of constitutional provisions should be determined from a contemporary reading of the text in relation to the other provisions of the entire document. We must assume that the authors intended the words to be read by generations who will have to live with the consequences of the provisions. The authors were not only the members of the Constitutional Commission but all those who participated in its ratification. Definitely, the ideas and opinions exchanged by a few of its commissioners should not be presumed to be the opinions of all of them. The result of the deliberations of the Commission resulted in a specific text, and it is that specific text—and only that text—which we must read and construe.
The preamble establishes that the “sovereign Filipino people” continue to “ordain and promulgate” the Constitution. The principle that “sovereignty resides in the people and all government authority emanates from them” is not hollow. Sovereign authority cannot be undermined by the ideas of a few Constitutional Commissioners participating in a forum in 1986 as against the realities that our people have to face in the present.
There is another, more fundamental, reason why reliance on the discussion of the Constitutional Commissioners should not be accepted as basis for determining the spirit behind constitutional provisions. The Constitutional Commissioners were not infallible. Their statements of fact or status or their inferences from such beliefs may be wrong. x x x.141
The intention of the framers of the Constitution, even assuming we could discover what it was, when it is not adequately expressed in the Constitution, that is to say, what they meant when they did not say it, surely that has no binding force upon us. If we look behind or beyond what they set down in the document, prying into what else they wrote and what they said, anything we may find is only advisory. They may sit in at our councils. There is no reason why we should eavesdrop on theirs.147 (Emphasis provided)
Provided, That where a corporation and its non–Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national[.]
[T]he Grandfather Rule or the second part of the SEC Rule applies only when the 60–40 Filipino–foreign equity ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with less than 60% Filipino stockholdings [or 59%] invests in another joint venture corporation which is either 60–40% Filipino–alien or 59% less Filipino. Stated differently, where the 60–40 Filipino–foreign equity ownership is not in doubt, the Grandfather Rule will not apply.151 (Emphasis supplied)
A: 60% X: 40%
/
B: 60% Y: 40%
/
C
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.159
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 non–Philippine national[s].”162
SRC Rule 3 – Definition of Terms Used in the Rules and Regulations
- As used in the rules and regulations adopted by the Commission under the Code, unless the context otherwise requires:
- Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote, or to direct the voting of such security; and/or investment returns or power, which includes the power to dispose of, or to direct the disposition of such security; provided, however, that a person shall be deemed to have an indirect beneficial ownership interest in any security which is:
- held by members of his immediate family sharing the same household;
- held by a partnership in which he is a general partner;
- held by a corporation of which he is a controlling shareholder; or
- subject to any contract, arrangement or understanding which gives him voting power or investment power with respect to such securities; provided however, that the following persons or institutions shall not be deemed to be beneficial owners of securities held by them for the benefit of third parties or in customer or fiduciary accounts in the ordinary course of business, so long as such shares were acquired by such persons or institutions without the purpose or effect of changing or influencing control of the issuer:
- a broker dealer;
- an investment house registered under the Investment Houses Law;
- a bank authorized to operate as such by the Bangko Sentral ng Pilipinas;
- an insurance company subject to the supervision of the Office of the Insurance Commission;
- an investment company registered under the Investment Company Act;
- a pension plan subject to regulation and supervision by the Bureau of Internal Revenue and/or the Office of the Insurance Commission or relevant authority; and
- a group in which all of the members are persons specified above.
All securities of the same class beneficially owned by a person, regardless of the form such beneficial ownership takes, shall be aggregated in calculating the number of shares beneficially owned by such person.
A person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership, within thirty (30) days, including, but not limited to, any right to acquire, through the exercise of any option, warrant or right; through the conversion of any security; pursuant to the power to revoke a trust, discretionary account or similar arrangement; or pursuant to automatic termination of a trust, discretionary account or similar arrangement. (Emphasis supplied)
[T]o what extent must the word “indirectly” be carried? Must we trace the ownership or control of these various corporations ad infinitum for the purpose of determining whether the American ownership–control–requirement is satisfied? Add to this the admitted fact that the shares of stock of the PANTEPEC and PANCOASTAL which are allegedly owned or controlled directly by citizens of the United States, are traded in the stock exchange in New York, and you have a situation where it becomes a practical impossibility to determine at any given time, the citizenship of the controlling stock required by the law.163
- That the foreign investor provides practically all the funds for the joint investment undertaken by Filipino businessmen and their foreign partner.
- That the foreign investors undertake to provide practically all the technological support for the joint venture.
- That the foreign investors, while being minority stockholders, manage the company and prepare all economic viability studies.166
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Patricia Louise Mining and Development Corp. | Filipino | 5,997 | P 5,997,000.00 | P 1,667,000.00 |
MBMI Resources, Inc. | Canadian | 3,996 | P 3,996,000.00 | P 1,116,000.00 |
Higinio C. Mendoza, Jr. | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Henry E. Fernandez | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Ma. Elena A. Bocalan | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Michael T. Mason | American | 1 | P 1,000.00 | P 1,000.00 |
Robert L. McCurdy | Canadian | 1 | P 1,000.00 | P 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Bayani H. Agabin | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Total | 10,000 | P 10,000,000.00 | P 2,800,000.00 |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Palawan Alpha South Resources Development Corporation | Filipino | 6,596 | PhP 6,596,000.00 | PhP 0 |
MBMI Resources, Inc. | Canadian | 3,396 | PhP 3,396,000.00 | PhP 2,796,000.00 |
Higinio C. Mendoza, Jr. | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Henry E. Fernandez | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Lauro L. Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Bayani H. Agabin | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP10,000,000.00 | PhP 2,804,000.00 |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Sara Marie Mining, Inc. | Filipino | 5,997 | PhP 5,997,000.00 | PhP 825,000.00 |
MBMI Resources, Inc. | Canadian | 3,998 | PhP 3,998,000.00 | PhP 1,878,174.60 |
Lauro L. Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP10,000,000.00 | PhP 2,708,174.60 |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Olympic Mines & Development Corp. | Filipino | 6,663 | PhP 6,663,000.00 | PhP 0 |
MBMI Resources, Inc. | Canadian | 3,331 | PhP 3,331,000.00 | PhP 2,803,900.00 |
Amanti Limson | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Lauro Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Emmanuel G. Hernando | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP10,000,000.00 | PhP 2,809,900.00 |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Madridejos Mining Corp. | Filipino | 5,997 | P 5,997,000.00 | P 825,000.00 |
MBMI Resources, Inc. | Canadian | 3,998 | P 3,998,000.00 | P 1,878,174.60 |
Lauro L. Salazar | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Manuel A. Agcaoili | Filipino | 1 | P 1,000.00 | P 1,000.00 |
Michael T. Mason | American | 1 | P 1,000.00 | P 1,000.00 |
Kenneth Cawkel | Canadian | 1 | P 1,000.00 | P 1,000.00 |
Total | 10,000 | P 10,000,000.00 | P 2,708,174.60 |
Name | Nationality | Number of Shares | Amount Subscribed | Amount Paid |
Olympic Mines & Development Corp. | Filipino | 6,663 | PhP 6,663,000.00 | PhP 0 |
MBMI Resources, Inc. | Canadian | 3,331 | PhP 3,331,000.00 | PhP 2,803,900.00 |
Amanti Limson | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Fernando B. Esguerra | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Lauro Salazar | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Emmanuel G. Hernando | Filipino | 1 | PhP 1,000.00 | PhP 1,000.00 |
Michael T. Mason | American | 1 | PhP 1,000.00 | PhP 1,000.00 |
Kenneth Cawkell | Canadian | 1 | PhP 1,000.00 | PhP 1,000.00 |
| Total | 10,000 | PhP10,000,000.00 | PhP 2,809,900.00 |
Forum shopping is committed by a party who institutes two or more suits in different courts, either simultaneously or successively, in order to ask the courts to rule on the same or related causes or to grant the same or substantially the same reliefs, on the supposition that one or the other court would make a favorable disposition or increase a party’s chances of obtaining a favorable decision or action. It is an act of malpractice for it trifles with the courts, abuses their processes, degrades the administration of justice and adds to the already congested court dockets. What is critical is the vexation brought upon the courts and the litigants by a party who asks different courts to rule on the same or related causes and grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different for a upon the same issues, regardless of whether the court in which one of the suits was brought has no jurisdiction over the action.179 (Emphasis supplied)
To determine whether a party violated the rule against forum shopping, the most important factor to ask is whether the elements of litis pendentia are present, or whether a final judgment in one case will amount to res judicata in another; otherwise stated, the test for determining forum shopping is whether in the two (or more) cases pending, there is identity of parties, rights or causes of action, and reliefs sought.181
Section 5. Certification against forum shopping. — The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi–judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non–compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. (n)
Endnotes:
1 Section 3 (a) of Republic Act No. 7042, as amended by Republic Act No. 8179, the Foreign Investments Act; Section 3 (aq) and (t) of Republic Act No. 7942, the Philippine Mining Act.
2Gonzales v. Climax Mining Ltd., 492 Phil. 682 (2005) [Per J. Tinga, Second Division]; Philex Mining Corp. v. Zaldivia, 150 Phil. 547 (1972) [Per J. Reyes, J.B.L., En Banc]; Gamboa v. Teves, G.R. No. 176579, June 28, 2011, 652 SCRA 690 [Per J. Carpio, En Banc]; and Heirs of Gamboa v. Teves, G.R. No. 176579, October 9, 2012, 682 SCRA 397 [Per J. Carpio, En Banc].
3 Seventh Division, Ayson, J., ponente with Tolentino and Pizarro JJ., concurring.
4 Rollo, p. 67.
5 Id. at 68.
6 Id.
7 Id. at 67–68.
8 Id. at 68–69.
9 Id. at 69–71.
10 Id. at 131–140.
11 Id. at 139–140.
12 Id. at 191–202.
13 Id. at 199–200.
14 Id. at 191–202.
15 Id. at 199.
16 Id. at 200–201.
17 Id. at 66–96.
18 Id. at 5–6.
19 Id. at 80.
20 Id. at 81.
21 Id. at 91.
22 565 Phil. 466 (2007) [Per J. Velasco, Second Division].
23 Rollo, p. 94.
24 Id. at 97–113.
25 Id. at 299–314.
26 Id. at 72–73.
27 SEC En Banc Case No. 09–09–177. Available at
28 Id.
29 Id. at 13.
30 Id. at 8.
31 Id.
32Rollo of G.R. No. 205513, p. 54.
33 Id. at 55.
34 Id. at 55–56.
35 Id. at 58–60.
36Rollo, p. 73.
37 Id. at 76.
38 Id. at 573–590.
39 Id. at 591–594.
40 Ponencia, p. 8.
41Rollo, pp. 20–21.
42 1987 Const., art. XII, sec. 5, et al.
43 1987 Const., art. II, sec. 16 as well as art. XII, sec. 6 (use of property as a social function).
44 “[M]ining activities which rely heavily on manual labor using simple implements and methods and do not use explosives or heavy mining equipment.” Rep. Act No. 7076, sec. 3 (b).
45 G.R. No. 176579, October 9, 2012, 682 SCRA 397 [Per J. Carpio, En Banc]
46 Id. at 435.
47 Commonwealth Act No. 108, as amended, Sec. 1.
48 Id.
49 CONST., art XII, sec. 16.
50 565 Phil. 466 (2007) [Per J. Velasco, Jr., Second Division].
51 Id. at 499.
52Ponencia, p. 28.
53 492 Phil. 682 (2005) [Per J. Tinga, Second Division].
54 Id. at 692–693, citation omitted.
55 150 Phil. 547 (1972) [Per J. Reyes, J.B.L, En Banc].
56 d. at 553–554.
57 Celestial Nickel Mining Exploration Corporation v. Macroasia Corp., 565 Phil. 466, 499 (2007) [Per J. Velasco, Jr., Second Division].
58 Id. at 501–502.
59Ponencia, p. 12.
60Rollo, p. 80.
61 Id. at 199.
62 Rep. Act 7942, sec. 77 (a).
63 Rep. Act No. 7942, sec. 77 (b).
64 Rep. Act No. 7942, sec. 77 (c).
65 Rep. Act No. 7942, sec. 77 (d).
66 Const., art. XII, sec. 2.
67 Const., art. II, sec. 19.
68 Sec. 17, DAO No. 2005–15.
69 Rep. Act No. 7942, sec. 26 (a).
70 Rep. Act No. 7942, sec. 26 (b).
71 Rep. Act No. 7942, sec. 26 (c).
72 Rep. Act No. 7942, sec. 55.
73 Rep. Act No. 7942, sec 3 (aq).
74 97 Phil. 58 (1955) [Per J. Reyes, J.B.L., En Banc].
75 Id. at 61. 76 150–B Phil. 140 (1972) [Per J. Reyes, J.B.L., En Banc].
77 Id. at 170.
78 The case involving the FTAA but related to the current controversy was not consolidated with this case or with G.R. No. 205513.
79 Rollo, pp. 29–43.
80 As quoted in DOJ Opinion No. 18, series of 1989.
81 DOJ Opinion No. 20, series of 2005, p. 4.
82 DOJ Opinion No. 20, series of 2005, p. 5.
83 DOJ Opinion No. 20, series of 2005, p. 5.
84 DOJ Opinion No. 20, series of 2005, p. 5.
85 Referring to paragraph 7 of the 1967 SEC Rules.
86 DOJ Opinion No. 18, series of 1989, p. 2.
87 DOJ Opinion No. 18, series of 1989, p. 1.
88 DOJ Opinion No. 84, series of 1988, p. 3.
89 DOJ Opinion No. 84, series of 1988, p. 3.
90 SEC Opinion, May 4, 1987 addressed to Atty. Justiniano Ascano.
91 DOJ Opinion No. 84, series of 1988, pp. 3–4.
92 DOJ Opinion No. 84, series of 1988, p. 3.
93 DOJ Opinion No. 18, series of 1989.
94 DOJ Opinion No. 20, series of 2005.
95 SEC Opinion, May 30, 1990 Opinion addressed to Mr. Johnny M. Araneta,
96 SEC Opinion, May 30, 1990 Opinion addressed to Mr. Johnny M. Araneta.
97 SEC Opinion, May 30, 1990 Opinion addressed to Mr. Johnny M. Araneta.
98 SEC Opinion, May 30, 1990 Opinion addressed to Mr. Johnny M. Araneta.
99Gamboa v. Teves, G.R. No. 176579, June 28, 2011, 652 SCRA 690, 774 [Per J. Carpio, En Banc], J. Velasco, Jr., dissenting opinion.
100 Id., citing SEC Opinion dated November 6, 1989 addressed to Attys. Barbara Anne C. Migollos and Peter Dunnely A. Barot; SEC Opinion dated December 14, 1989 addressed to Atty. Maurice C. Nubla; SEC Opinion dated January 2, 1990 addressed to Atty. Eduardo F. Hernandez; SEC Opinion dated May 30, 1990 addressed to Gold Fields Philippines Corporation; SEC Opinion dated September 21, 1990 addressed to Carag, Caballes, Jamora, Rodriguez & Somera Law Offices; SEC Opinion dated March 23, 1993 addressed to Mr. Francis F. How; SEC Opinion dated April 14, 1993 addressed to Director Angeles T. Wong of the Philippine Overseas Employment Administration; SEC Opinion dated November 23, 1993 addressed to Mssrs. Dominador Almeda and Renato S. Calma; SEC Opinion dated December 7, 1993 addressed to Roco Bunag Kapunan Migallos & Jardaleza; SEC Opinion No. 49–04 dated December 22, 2004 addressed to Atty. Priscilla B. Valer; SEC Opinion No. 17–07 dated September 27, 2007 addressed to Mr. Reynaldo G. David; SEC Opinion No. 18–07 dated November 28, 2007 addressed to Mr. Rafael C. Bueno, Jr.; SEC–OGC Opinion No. 20–07 dated November 28, 2007 addressed to Atty. Amado M. Santiago, Jr., SEC–OGC Opinion No. 21–07 dated November 28, 2007 addressed to Atty. Navato Jr.; SEC–OGC Opinion No. 03–08 dated January 15, 2008 addressed to Attys. Ruby Rose J. Yusi and Rudyard S. Arbolado; SEC–OGC Opinion No. 09–09 dated April 28, 2009 addressed to Villaraza Cruz Marcelo Angangco; SEC–OGC Opinion No. 08–10 dated February 8, 2010 addressed to Mr. Teodoro B. Quijano; SEC–OGC Opinion No. 23–10 dated August 18, 2010 addressed to Attys. Teodulo G. San Juan, Jr. and Erdelyn C. Go.
101 Id. at 774–777, citations omitted.
102 DOJ Opinion No. 20, series of 2005, p. 5.
103 SEC En Banc case No. 09–09–177.
104 SEC En Banc case No. 09–09–177, p. 10.
105 SEC–OGC Opinion No. 10–31, p. 8.
106 SEC–OGC Opinion No. 10–31, p. 9.
107 SEC–OGC Opinion No. 10–31, pp. 3–4.
108 SEC–OGC Opinion No. 10–31, p. 5.
109 125 Phil. 5 (1966) [Per J. Barrera, En Banc].
110 SEC–OGC Opinion No. 10–31, p. 7.
111 SEC–OGC Opinion No. 10–31, p. 7.
112 SEC–OGC Opinion No. 10–31, p. 7.
113 SEC–OGC Opinion No. 10–31, p. 7, citing J. Bernas, The Intent of the 1986 Constitution Writers 813 (1995).
114 SEC–OGC Opinion No. 10–31, p. 9.
115 SEC–OGC Opinion No. 10–31, p. 9.
116 90 Phil. 744 (1952) [Per J. Paras, En Banc].
117 89 Phil. 54 (1951) [Per C.J. Paras, En Banc].
118Davis Winship v. Philippine Trust Co., 90 Phil. 744, 747 (1952) [Per J. Paras, En Banc].
119Clark v. Uebersee Finanz Korporation, December 8, 1947, 92 Law. Ed. Advance Opinions, No. 4, pp. 148–153.
120Filipinas Compania de Seguros v. Christern, Huenefeld and Co., Inc., 89 Phil. 54, 56 (1951) [Per C.J. Paras, En Banc].
121 Rep. Act No. 5186, sec. 2.
122 Sec. 3. Definition of Terms. For purposes of this Act:
x x x x
(f) “Philippine National” shall mean a citizen of the Philippines; or a partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty per cent of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine National and at least sixty per cent of the fund will accrue to the benefit of Philippine Nationals: Provided, That where a corporation and its non–Filipino stockholders own stock in a registered enterprise, at least sixty per cent of the capital stock outstanding and entitled to vote of both corporations must be owned and held by the citizens of the Philippines and at least sixty per cent of the members of the Board of Directors of both corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine National.
123 Art. 14. “Philippine national” shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty per cent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty per cent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non–Filipino stockholders own stock in a registered enterprise, at least sixty per cent (60%) of the capital stock outstanding and entitled to vote of both corporations must be owned and held by the citizens of the Philippines and at least sixty per cent (60%) of the members of the Board of Directors of both corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine national.
124 Art. 15. “Philippine national” shall mean a citizen of the Philippines or a diplomatic partnership or association wholly–owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty per cent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty per cent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a registered and its non–Filipino stockholders own stock in a registered enterprise, at least sixty per cent (60%) of the capital stock outstanding and entitled to vote of both corporations must be owned and held by the citizens of the Philippines and at least sixty per cent (60%) of the members of the Board of Directors of both corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine national.
125 This court’s October 9, 2012 resolution in Gamboa v. Teves (G.R. No. 176579, October 9, 2012, 682 SCRA 397 [Per J. Carpio, En Banc]) spoke of Executive Order No. 226, the Omnibus Investments Code of 1987 as the FIA’s “predecessor statute” (Id. at 430–431).
126 603 Phil. 410 (2009) [Per J. Quisumbing, Second Division].
127 Id. at 431–432.
128 G.R. No. 176579, June 28, 2011, 652 SCRA 690 [Per J. Carpio, En Banc].
129 “[T]he Court shall confine the resolution of the instant controversy solely on the threshold and purely legal issue of whether the term “capital” in Section 11, Article XII of the Constitution refers 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.” Id. at 705. “The crux of the controversy is the definition of the term “capital.” Does the term “capital” in Section 11, Article XII of the Constitution refer to common shares or to total outstanding capital stock (combined total of common and non–voting shares)?” Id. at 717.
130 Id. at 723 and 726.
131 G.R. No. 176579, October 9, 2012, 682 SCRA 397 [Per J. Carpio, En Banc].
132 Id. at 423.
133Gamboa v. Teves, G.R. No. 176579, October 9, 2012, 682 SCRA 397, 425 [Per J. Carpio, En Banc].
134 Ponencia, p. 14.
135 The SEC En Banc decision in Redmont also cites this exchange to assert that “it was the intent of the framers of the 1987 Constitution to adopt the Grandfather Rule.” Redmont v. McArthur, SEC En Banc Case No. 09–09–177, p. 12. Available at .
136 Record of the Constitutional Commission of 1986, Proceedings and Debates, Vol. 3, pp. 255–256.
137 G.R. No. 83896, February 22, 1991, 194 SCRA 317 [Per C.J. Fernando, En Banc, JJ. Narvasa, Melencio–Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla, Bidin, Medialdea, Regalado, and Davide, Jr., concurring; J. Paras x x x concur because cabinet members like the members of the Supreme Court are not supermen; JJ. Sarmiento and Grino–Aquino, No part].
138 Id. at 325.
139 Id. at 337–338.
140 Id.
141 See discussion in J. Leonen’s dissenting opinion, Imbong v. Ochoa, G.R. No. 204819, April 8, 2014, p. 35, citations omitted.
142 The fiftieth member, Commissioner Lino Brocka, resigned.
143 Rep. Act No. 5186, the Investment Incentives Act; and Pres. Decree No. 1789, the Omnibus Investments Code of 1981 (also Exec. Order No. 226, the Omnibus Investments Code of 1987). See Gamboa v. Teves (G.R. No. 176579, October 9, 2012, 682 SCRA 397, 430–431 [Per J. Carpio, En Banc]).
144 SEC–OGC Opinion No. 10–31, p. 5; Palting v. San Jose Petroleum, G.R. No. L–14441, December 17, 1966, 18 SCRA 924 [Per J. Barrerra, En Banc]; SEC–OGC Opinion No. 10–31, p. 7.
145J.M. Tuason and Co., Inc. v. Land Tenure Administration, G.R. No. L–21064, February 18, 1970, 31 SCRA 413 [Per J. Fernando, En Banc].
146 C. P. Curtis, Lions Under the Throne 2, Houghton Mifflin (1947).
147 See J. Mendoza, separate dissenting opinion, in Ang Bagong Bayani–OFW Labor Party v. Commission on Elections, 412 Phil. 308, 363 (2001) [Per J. Panganiban, En Banc].
148Gamboa v. Teves, G.R. No. 176579, October 9, 2012, 682 SCRA 397, 435 [Per J. Carpio, En Banc].
149 Sec. 8. List of Investment Areas Reserved to Philippine Nationals (Foreign Investment
Negative List). – The Foreign Investment Negative List shall have two (2) components lists; A, and B.
a) List A shall enumerate the areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws.
b) List B shall contain the areas of activities and enterprises regulated pursuant to law:
1) which are defense–related activities, requiring prior clearance and authorization from Department of National Defense (DND) to engage in such activity, such as the manufacture, repair, storage and/or distribution of firearms, ammunition, lethal weapons, military ordinance, explosives, pyrotechnics and similar materials; unless such manufacturing or repair activity is specifically authorized, with a substantial export component, to a non–Philippine national by the Secretary of National Defense; or
2) which have implications on public health and morals, such as the manufacture and distribution of dangerous drugs; all forms of gambling; nightclubs, bars, beerhouses, dance halls; sauna and steam bathhouses and massage clinics.
“Small and medium–sized domestic market enterprises, with paid–in equity capital less than the equivalent two hundred thousand US dollars (US$200,000) are reserved to Philippine nationals, Provided that if: (1) they involve advanced technology as determined by the Department of Science and Technology or (2) they employ at least fifty (50) direct employees, then a minimum paid–in capital of one hundred thousand US dollars (US$100,000.00) shall be allowed to non–Philippine nationals.
Amendments to List B may be made upon recommendation of the Secretary of National Defense, or the Secretary of Health, or the Secretary of Education, Culture and Sports, endorsed by the NEDA, approved by the President, and promulgated by a Presidential Proclamation.
Transitory Foreign Investment Negative List” established in Sec. 15 hereof shall be replaced at the end of the transitory period by the first Regular Negative List to be formulated and recommended by NEDA, following the process and criteria provided in Sections 8 of this Act. The first Regular Negative List shall be published not later than sixty (60) days before the end of the transitory period provided in said section, and shall become immediately effective at the end of the transitory period. Subsequent Foreign Investment Negative Lists shall become effective fifteen (15) days after publication in a newspaper of general circulation in the Philippines: Provided, however, That each Foreign Investment Negative List shall be prospective in operation and shall in no way affect foreign investment existing on the date of its publication.
Amendments to List B after promulgation and publication of the first Regular Foreign Investment Negative List at the end of the transitory period shall not be made more often than once every two (2) years”. (As amended by Rep. Act No. 8179)
150 Ponencia, p. 17.
151 DOJ Opinion No. 20, series of 2005, p. 5.
152 Ponencia, p. 17.
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156 CONST., art. II, sec. 19.
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158Gamboa v. Teves, G.R. No. 176579, June 28, 2011, 652 SCRA 690, 723 and 726 [Per J. Carpio, En Banc].
159 Id. at 725.
160 Register of Deeds of Rizal v. Ung Siu Si Temple, 97 Phil. 58 (1955) [Per J. Reyes, J.B.L., En Banc].
161Gamboa v. Teves, G.R. No. 176579, June 28, 2011, 652 SCRA 690 [Per J. Carpio, En Banc].
162 Id. at 730.
163Palting v. San Jose Petroleum, 125 Phil. 5, 19 (1966) [Per J. Barrera, En Banc].
164 “[T]he term “Philippine National” shall mean x x x a corporation x x x of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines.”
165Gamboa v. Teves, G.R. No. 176579, June 28, 2011, 652 SCRA 690, 730 [Per J. Carpio, En Banc].
166 DOJ Opinion No. 165, series of 1984, p. 5.
167 G.R. No. 176579, June 28, 2011, 652 SCRA 690 [Per J. Carpio, En Banc].
168 Id. at 723 and 726.
169Rollo, pp. 66–96.
170 Id. at 86.
171 Id. at 86–87.
172 Id. at 84.
173 Id. at 84–85.
174 Id. at 82.
175 Id. at 82–83.
176 Id. at 83.
177 Id.
178 457 Phil. 740 (2003) [Per J. Bellosillo, Second Division].
179 Id. at 747–748, citing Santos v. Commission on Elections, 447 Phil. 760 (2003) [Per J. Ynares–Santiago, En Banc]; Young v. Keng Seng, 446 Phil. 823 (2003) [Per J. Panganiban, Third Division]; Executive Secretary v. Gordon, 359 Phil. 266 (1998) [Per J. Mendoza, En Banc]; Joy Mart Consolidated Corp. v. Court of Appeals, Seventh Division, G.R. No. 88705, June 11, 1992, 209 SCRA 738 [Per J. Griño–Aquino, First Division]; and Villanueva v. Adre, 254 Phil. 882 (1989) [Per J. Sarmiento, Second Division].
180 G.R. No. 186730, June 13, 2012, 672 SCRA 419 [Per J. Reyes, Second Division], citing Young v. John Keng Seng, 446 Phil. 823, 833 (2003) [Per J. Panganiban, Third Division].
181 d. at 428
182 Id.
183 Id. at 429, citing Villarica Pawnshop, Inc. v. Gernale, G.R. No. 163344, March 20, 2009, 582 SCRA 67, 78–79 [Per J. Austria–Martinez, Third Division].
184Luzon Development Bank v. Conquilla, 507 Phil. 509, 523 (2005) [Per J. Panganiban, Third Division], citing Allied Banking Corporation v. CA, G.R. No. 108089, January 10, 1994, 229 SCRA 252, 258 [Per J. Davide, Jr., First Division].
185 Arising from Redmont’s petition with the Office of the President.
186 RULES OF COURT, Rule 7, Sec. 5.