Narra Nickel v. Redmont.
corporation or partnership is less than 60%, only the number of shares corresponding
J. Velasco,
Facts:
- Respondent Redmont, a domestic corporation, took interest in mining and exploring
certain areas of the province of Palawan. After inquiring with the DENR, it learned that
the areas where it wanted to undertake exploration and mining activities where
already covered by Mineral Production Sharing Agreement (MPSA) applications of
petitioners Narra, Tesoro and McArthur.
- Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3) separate
petitions for the denial of petitioners’ applications for MPSA
- Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra
are owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian
corporation and that since MBMI is a considerable stockholder of petitioners, it was
the driving force behind petitioners’ filing of the MPSAs
- Redmont argued that given that petitioners’ capital stocks were mostly owned by
MBMI, they were likewise disqualified
- Petitioners averred that they were qualified persons under Section 3(aq) of the Phil.
Mining Act “Qualified person" means any citizen of the Philippines with capacity to
contract, or a corporation at least sixty per cent (60%) of the capital of which is owned
by citizens of the Philippines”
- Additionally, they stated that their nationality as applicants is immaterial because they
also applied for Financial or Technical Assistance Agreements (FTAA) which are
granted to foreign-owned corporations. Nevertheless, they claimed that the issue on
nationality should not be raised since McArthur, Tesoro and Narra are in fact Philippine
Nationals as 60% of their capital is owned by citizens of the Philippines. They asserted
that though MBMI owns 40% of the shares of PLMC (Narra), MMC (McArthur), and
SLMC (Tesoro)
- The shares of MBMI will not make it the owner of at least 60% of the capital stock of
each of petitioners. They added that the best tool used in determining the nationality of
a corporation is the "control test,"
Issue:
- WON the control test or the grandfather rule should be used
Ruling:
- Grandfather rule. there are two acknowledged tests in determining the nationality of a
corporation: the control test and the grandfather rule. Par. 7 of DOJ Opinion No. 020,
Series of 2005 provides: Shares belonging to corporations or partnerships at least
60% of the capital of which is owned by Filipino citizens shall be considered as of
Philippine nationality, 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
- The first part of paragraph 7"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," pertains to the control test or the liberal rule. On the other hand,
the second part which provides, "if the percentage of the Filipino ownership in the
to such percentage shall be counted as Philippine nationality," pertains to the stricter,
more stringent grandfather rule
- Art. XII, Sec. 2 of the Constitution provides: 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
- 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
- After a scrutiny of the evidence extant on record, the Court finds that this case calls for
the application of the grandfather rule since, as ruled by the POA and affirmed by the
OP, doubt prevails and persists in the corporate ownership of petitioners
- Concluding from the above-stated facts, it is quite safe to say that petitioners
McArthur, Tesoro and Narra are not Filipino since MBMI, a 100% Canadian
corporation, owns 60% or more of their equity interests. Such conclusion is derived
from grandfathering petitioners’ corporate owners, namely: MMI, SMMI and PLMDC
Gamboa v. Teves
Facts:
- The Philippine Legislature enacted Act No. 3436 which
granted PLDT a franchise and the right to engage in
telecommunications business
- General Telephone and Electronics Corporation (GTE),
an American company and a major PLDT stockholder,
sold 26 percent of the outstanding common shares of
PLDT to PTIC.
- Prime Holdings, Inc. (PHI) was incorporated by several
persons. PHI became the owner of 111,415 shares of
stock of PTIC by virtue of three Deeds of Assignment
executed by PTIC
- The 111,415 shares of stock of PTIC held by PHI were
sequestered by the PCGG which represent about 46.125
percent of the outstanding capital stock of PTIC
- First Pacific, a Bermuda-registered, Hong Kong-based
investment firm, acquired the remaining 54 percent of
the outstanding capital stock of PTIC. On 20 November
 2006, the Inter-Agency Privatization Council (IPC) of
the Philippine Government announced that it would sell
the 111,415 PTIC shares, or 46.125 percent of the
outstanding capital stock of PTIC, through a public
bidding
- First Pacific, through its subsidiary, MPAH, entered into
a Conditional Sale and Purchase Agreement of the
111,415 PTIC shares, or 46.125 percent of the
outstanding capital stock of PTIC
- Since PTIC is a stockholder of PLDT, the sale by the
Philippine Government of 46.125 percent of PTIC
shares is actually an indirect sale of 12 million shares or
about 6.3 percent of the outstanding common shares of
PLDT. With the sale, First Pacifics common
shareholdings in PLDT increased from 30.7 percent
to 37 percent, thereby increasing the common
shareholdings of foreigners in PLDT to about 81.47
percent. This violates Section 11, Article XII of the
1987 Philippine Constitution which limits foreign
ownership of the capital of a public utility to not more
than 40 percent
Issue:
- 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
Ruling:
- The 1987 Constitution provides for the Filipinization of
public utilities by requiring that any form of
authorization for the operation of public utilities should
be granted only to citizens of the Philippines or to
corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose
capital is owned by such citizens.
- SC agree with petitioner and petitioners-in-intervention.
The term capital in Sec 11, Art XII of the Constitution
refers only to shares of stock entitled to vote in the
election of directors, and thus in the present case only to
common shares,41 and not to the total outstanding capital
stock comprising both common and non-voting
preferred shares
- Indisputably, one of the rights of a stockholder is the
right to participate in the control or management of the
corporation.43 This is exercised through his vote in the
election of directors because it is the board of directors
that controls or manages the corporation. However,
preferred shareholders are often excluded from
any control, that is, deprived of the right to vote in the
election of directors and on other matters, on the theory
that the preferred shareholders are merely investors in
the corporation for income in the same manner as
bondholders
San Juan Structural Steel v. CA
Facts:
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