Narra Nickel Mining v. Redmont Consolidated Mines
REITERATIONFacts
The Antecedents: Respondent Redmont Consolidated Mines Corp. (Redmont) became interested in mining and exploring areas in Palawan. Upon inquiry with the Department of Environment and Natural Resources (DENR), Redmont learned that these areas were already covered by Mineral Production Sharing Agreement (MPSA) applications filed by petitioners Narra Nickel Mining and Development Corp. (Narra), Tesoro Mining and Development, Inc. (Tesoro), and McArthur Mining, Inc. (McArthur). Redmont alleged that a significant portion of the capital stock of these petitioners was owned and controlled by MBMI Resources, Inc. (MBMI), a Canadian corporation. Redmont argued that due to MBMI's substantial ownership, petitioners were disqualified from engaging in mining activities through MPSAs, which are reserved for Filipino citizens. Procedural History: Redmont filed petitions with the DENR Panel of Arbitrators (POA) seeking the denial of petitioners' MPSA applications. The POA ruled in favor of Redmont, disqualifying petitioners as foreign corporations and declaring their MPSAs void. Petitioners appealed to the Mines Adjudication Board (MAB), which reversed the POA's decision, finding that the POA lacked jurisdiction and that the issue of nationality should be determined by the Securities and Exchange Commission (SEC). Redmont then appealed to the Court of Appeals (CA), which reversed the MAB and upheld the POA's finding that petitioners were foreign corporations, recommending the rejection of their MPSA applications. The CA denied petitioners' motion for reconsideration. Subsequently, the Office of the President (OP) canceled petitioners' Financial or Technical Assistance Agreements (FTAAs), a decision affirmed by the CA. Petitioners appealed the CA's decision regarding the MPSA applications to this Court. The Petition: Petitioners seek review of the CA's decision, raising several arguments. They contend the case is moot due to the conversion of their MPSA applications to FTAA applications and subsequent granting of FTAAs. They also argue the CA erred in not dismissing the case for lack of jurisdiction, as the POA allegedly lacked jurisdiction to determine their nationality. Furthermore, they claim Redmont engaged in forum shopping. Petitioners dispute the CA's application of the "grandfather rule" to determine their nationality, asserting it contradicts the "control test" mandated by the Foreign Investments Act of 1991. They also challenge the CA's conclusion that their conversion of MPSA applications to FTAAs was suspicious and question the application of the res inter alios acta rule. The core of their argument is that the "control test," not the "grandfather rule," should be applied, and under this test, they are considered Filipino corporations.
Issue(s)
Whether the case is moot and academic due to the conversion of MPSA applications to FTAA applications and the subsequent cancellation of said FTAAs. Whether the Panel of Arbitrators (POA) has jurisdiction to determine the nationality of the petitioners. Whether Redmont engaged in willful forum shopping. Whether the Court of Appeals erred in applying the "grandfather rule" to determine the nationality of the petitioners. Whether the Court of Appeals erred in applying exceptions to the "res inter alios acta" rule. Whether the conversion of MPSA applications to FTAA applications was of a suspicious nature.
Ruling
The Supreme Court denied the petition, affirming the Court of Appeals' Decision dated October 1, 2010, and Resolution dated February 15, 2011. The Court held that the case is not moot, the POA has jurisdiction over disputes involving rights to mining areas, and the "grandfather rule" was correctly applied. The Court also found that the conversion of applications was suspicious and that the "res inter alios acta" rule was properly applied.
Ratio Decidendi
On the issue of mootness: The Court ruled that the case is not moot and academic. It cited exceptions to the mootness principle, including grave violations of the Constitution, paramount public interest, the need for controlling principles, and the capability of repetition yet evading review. The Court found that the intricate corporate layering used by MBMI to circumvent constitutional prohibitions on foreign ownership of natural resources involved paramount public interest and raised questions requiring formulation of controlling principles. The subsequent cancellation of FTAAs by the Office of the President further discredited petitioners' claim of mootness based on conversion of applications. On the jurisdiction of the Panel of Arbitrators (POA): The Court affirmed the CA's ruling that the POA has jurisdiction over disputes involving rights to mining areas, as provided under Section 77 of Republic Act No. 7942 (Philippine Mining Act of 1995). The petitions filed by Redmont against petitioners for denial of MPSA applications constituted a "dispute involving rights to mining areas." While the POA's jurisdiction is limited to resolving such disputes and does not include the approval or rejection of MPSA applications (which rests with the DENR Secretary), its power to determine nationality as a prerequisite for granting mining rights was upheld. On forum shopping: The Court did not explicitly rule on forum shopping as a separate issue but implicitly addressed it by considering the various actions filed by Redmont and the petitioners' attempts to have the case dismissed as moot. The Court's focus remained on the substantive issue of nationality and compliance with mining laws. On the application of the "grandfather rule": The Court held that the "grandfather rule" was the appropriate test to determine the nationality of the petitioners, especially given the "web of corporate layering" employed by MBMI. The Court explained that while the "control test" is generally used, the "grandfather rule" is applied when there is doubt as to the 60-40 Filipino-equity ownership, as was the case here. The Court meticulously detailed the corporate structures of McArthur, Tesoro, and Narra, tracing the ownership through intermediate corporations like Madridejos Mining Corporation (MMC), Sara Marie Mining, Inc. (SMMI), and Patricia Louise Mining & Development Corporation (PLMDC), and concluded that MBMI, a Canadian corporation, effectively owned 60% or more of the equity interests in the petitioners, rendering them foreign corporations. On the "res inter alios acta" rule: The Court found that the CA was justified in applying the exception to the "res inter alios" rule, specifically the admission by a partner or agent (Section 29, Rule 130 of the Rules of Court). The Court reasoned that joint venture agreements, while distinct from partnerships, are "akin" to partnerships in terms of their legal incidents and fiduciary obligations. Given the intricate web of "ventures" entered into by petitioners and MBMI to circumvent legal prohibitions, the Court deemed the relationships to be akin to partnerships, allowing the admission and declarations of MBMI (as a "joint venturer" or "partner") to be admissible against the petitioners. On the suspicious nature of conversion of applications: The Court agreed with the CA and the POA that the conversion of MPSA applications to FTAA applications by petitioners, particularly after Redmont filed its petitions, was "suspicious in nature." The Court viewed this as a strategy to have the case dismissed for being moot. The POA's observation that the filing of FTAA applications indicated petitioners' lack of capability for large-scale mining and their need for foreign financial and technical assistance was cited as evidence of this suspicious conduct.
Main Doctrine
The "grandfather rule" is the prevailing mode of determining the nationality of a corporation for purposes of engaging in the exploration, development, and utilization of natural resources, especially when doubt exists regarding the 60-40 Filipino-equity ownership. The "control test" may be applied, but the grandfather rule prevails when corporate layering is used to circumvent constitutional and statutory prohibitions.