SUPREME COURT, 3rd Division (Baguio)GR 195580, LawPhil April 21, 2014

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT,
INC., and MCARTHUR MINING, INC., petitioners, vs. REDMONT CONSOLIDATED MINES CORP.,
Respondent
Portion in Syllabus: NATURAL RESOURCES – Art. XII, Sec. 2-5, 7
FACTS

 Dec. 2006: Redmont, a domestic corporation organized and existing under PH laws, took interest in
mining and exploring certain areas of Palawan, but learned that said areas were already covered by
Mineral Production Sharing Agreement (MPSA) applications by petitioners Narra, Tesoro and
McArthur
o McArthur filed for an MPSA and Exploration Permit (EP) through Sara Marie Mining Inc.
(SMMI, petitioner’s predecessor-in-interest) with the Mines and Geo-Sciences Bureau
(MGB), Region IV-B of the Office of the DENR; SMMI was issued MPSA-AMA-IVB-153 1
and EPA-IVB-442, w/c were transferred to Madridejos Mining Corporation (MMC) and on
November 6. 2006 to McArthur
o Narra acquired its MPSA from Alpha Resources and Development Corporation and Patricia
Louise Mining & Development Corporation (PLMDC) w/c filed application for an MPSA w/
the MGB, Region IV-B, on January 6 1992; through said application DENR issued MPSA-
IV-1-123 but rights and interests over the MPSA application were transferred to Narra
o Another MPSA application of SMMI was filed labeled MPSA-AMA-IVB-154 4; SMMI
subsequently transferred its rights and interests of it to Tesoro
 Jan. 2, 2007: Redmont filed to the Panel of Arbitrators (POA) of the DENR three petitioners for
denial of the petitioners’ applications for MPSA as designated
o Alleged that at least 60% of McArthur’s, Tesoro’s and Narra’s respective capital stocks (C/S)
were owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian
corporation, and further reasoned that said foreign entity was the driving force behind all
these filings since it can only participate in mining activities thru Filipino deemed
corporations, but such a driving force renders the three petitioners disqualified
o Petitioners averred that (1) they were qualified persons under Sec. 3(aq) 5 of RA 7942 or the
PH Mining Act of 1995; (2) that their nationality as applicants is immaterial due to having
applied for FTAAs and that said issue cannot be raised since they are in fact PH Nationals w/
1 Covers an area of over 1782 hectares in Brgy. Sumbiling, Municipality of Bataraza, Palawan

2 Includes area of 3720 hectares in Brgy. Malatagao, Bataraza, Palawan

3 Covering area of 3277 hectares in brgys. Calategas and San Isidro, Narra, Palawan

4 Formerly EPA-IVB-47; over 3402 hectares in brgys. Malinao and Princess Urduja, Narra,
Palawan

5 “qualified person” means any citizen of PH w/ capacity to contract, or a

corporation/partnership/assoc./coop organized or authorized for purpose of mining, w/
technical and financial capacity to undertake mineral resources development and duly
registered in accordance w/ law at least 60% of the C/S owned by citizens; provided, a legally
organized foreign-owned corporation will be deemed qualified
SUPREME COURT, 3rd Division (Baguio)GR 195580, LawPhil April 21, 2014

60% of their C/S owned by PH citizens, citing as well that the “control test” was the best tool
to determine their nationality; and (4) that Redmont had no personality to sue them
 Dec. 14: POA issued a Resolution disqualifying petitioners from gaining MPSAs as they are not
qualified applicants, but adding that Redmont’s application for an EPA over the areas may be
considered if and when they are qualified
o McArhtur and Tesoro filed a joint Notice of Appeal and Memorandum of Appeal w/ the
Mines Adjudication Board, while Narra filed separately; respectively emphasized that they
are qualified and that (thru a letter) informed MAB that they had their MPSA applications
convered to FTAAs
 Pending resolution of MAB, Redmont filed a Complaint to SEC, seeking revocation of the
certificates of registrations from petitioners; filed a Manifestation and Motion to Suspend Proceeding
before the MAB on Sept. 1, 2008 praying the suspension of appeal proceedings for petitioners
 Sept. 8, 2008: Redmont filed to the QC Br. 92 RTC a Complaint for injunction w/ application for the
issuance of a TRO and/or writ of preliminary injunction 6; prior to RTC’s decision the MAB issued an
Order on the 10th finding the appeal meritorious, therefore reversing and setting aside the POA’s
Resolution
 Sept. 16: RTC granted Redmont’s application for a TRO and setting the case for issuance of a writ of
preliminary injunction on Sept. 19
 Sept. 22: Redmont filed a Motion for Reconsideration of the MAB’s Sept. 10 Order, subsequently
filing a Supplemental Motion for Reconsideration on the 29th
o Before MAB could resolve the matters, Redmont filed to RTC a Supplemental Complaint, to
w/c they granted the issuance of a preliminary injunction that would have MAB dispose of
the petitioners’ appeals
o July 1, 2009: MAB issued a 2nd Order denying Redmont’s Motion for Reconsideration and
Supplemental Motion for Reconsideration, and resolving petitioners’ appeals
 Redmont filed for petition of review before the CA, which they partially granted on October 1, 2010,
upholding the POA’s findings as well as reversing and setting aside the MAB’s Order
o Feb. 15, 2011: CA denied petitoners’ Motion for Reconsideration, citing that they used the
“grandfather rule7” to properly determine their nationality, and finding that they are privies-
in-interest of their common controlling investor MBMI; in addition, viewed the conversion of
MPSA into FTAAs as suspicious in nature and that POA’s declaration of petitioners’ MPSAs
as being void is highly improper8
o As petition was pending however, Redmont filed to the Office of the President (OP) dated
May 7, 2010 seeking cancellation of petitioners’ FTAAs, w/c rendered a decision on April 6,
2011 cancelling and revoking FTAAs in question for circumventing the Constitution; Motion
for Reconsideration was denied, then filed for review on certiorari of OP’s decision to the CA
w/c they affirmed
 Petitioners raise the ff. errors on the part of the CA:
o Not dismissing the case for mootness

6 Docketed as Civil Case No. 08-63379

7 Pursuant to sentence 1, Par. 7 of DOJ Opinion No. 020, Series of 2005: when nationality of a
corporation is in doubt, look into their corporate structure and go through any “web(s) of
corporate layering”

8 Only the DENR Secretary is vested w/ power to approve or reject applications for an MPSA
SUPREME COURT, 3rd Division (Baguio)GR 195580, LawPhil April 21, 2014

o Not dismissing for lack of jurisdiction

o Not dismissing on account of Redmont’s willful forum shopping
o Ruling that petitioners are foreign based on the “grandfather rule” is contrary to law
o Applying the exceptions to the res inter alios acta rule
o Concluding that conversion of MPSA applications to FTAAs were of “suspicious nature”

ISSUE
Are the petitioners considered foreign based corporations?
RULING
YES. The CA’s using of the “grandfather rule” to see through petitioners’ “web of corporate layering” shows
that petitioners are indeed foreign corporations that are not deemed qualified to engage in mining activities
on Filipino soil in the manner w/c they desire to do so.

ANALYSIS
A case is said to be moot when it “ceases to present a justiciable controversy…”, but the “mootness”
principle does accept certain exceptions and the mere raising of an issue of “mootness” will not deter the
courts from trying a case when there is valid reason to do so. Court provided 4 instances 9 where decision of
an otherwise moot case can be done: (1) grave violation of Constitution; (2) exceptional character of the
situation and paramount public interest; (3) constitutional issue raised requires formulation of controlling
principles to guide the bench; and (4) case is capable of repetition yet evading review. All of the exceptions
are present in the case at bar, as the petitioners have utilized a “myriad of corporate layering under different,
allegedly, Filipino corporations… by the Canadian company, MBMI, is of exceptional character and of
paramount public interest”; the disposition of the issues or errors in the instant case may and will serve as a
guide to the bench; and that it is capable of repetition yet evading review since MBMI may keep utilizing
this technique to circumvent Philippine law to gain access to our soil.
The changing of applications by the petitioners from one type to another just because a case was filed
against them, in truth, would raise not a few skeptic’s eyebrows, as it seems quite obvious that it was their
strategy all along to have the case rendered moot and dismissed. Considering the history of the case, w/c
even included a sale of MBMI’s shares and interest in the petitioner “holding companies” to DMCI only
proves that they were in fact not Filipino corporations to begin with, and that the recent divesting interest by
MBMI will not change Court’s stand. The only thing that remains clear is the fact that the OP declared
petitioners having violated several mining laws and made misrepresentations and falsehood in their
applications for FTAAs. You can even say that their claim of mootness is moot in itself.
Petitioners were constantly advocating that the “control test” under RA 7042 as amended by RA
10
8179 must be applied to the case, rather than the stricter “grandfather rule”, reasoning that it has no leg to
stand as not only does the definition of a “PH National” under said RA not provide for it, but also that it has
been abandoned and is no longer the applicable rule. However, “corporate layering” is provided for by the
FIA, but if it used to circumvent the Constitution and pertinent laws it becomes illegal, and their claim on
the grandfather rule being abandoned was discredited for lack of basis. Fortunately, the deliberations in the
Records of the 1986 Constitutional Commission managed to shed light on how a corporation’s citizenship
9 David v. Macapagal-Arroyo

10 Foreign Investments Act

SUPREME COURT, 3rd Division (Baguio)GR 195580, LawPhil April 21, 2014

will be determined, in that based on the framers’ intentions, the grandfather rule must be applied in cases
where corporate layering is present, such as this one. Based as well on the SEC Rule and DOJ Opinion, the
rule applies only when the 60-40 Filipino-foreign equity ownership is in doubt, and after a scrutiny of the
evidence, the rule was applied and through it managed to find that the petitioners are not Filipino at all since
MBMI owns 60% or more of their equity interests.
Petitioners questioned CA’s ruling of the res inter alios acta 11 and “admission by privies” under ROC by
pointing out that statements made by MBMI should not be admitted since it is not a party and that it is not a
partner of theirs. However, a partnership is defined as two or more persons binding themselves to contribute
to a common fund w/ intention of dividing profits amongst themselves, while joint ventures are deemed to
be “akin” to partnerships, as it is difficult to distinguish between them; however, based on the case’s
incidents and records it can be assumed that the relationships entered between petitioners and MBMI are no
simply joint venture agreements as corporations are prohibited from entering into partnership agreements,
yet as their intricate web of “ventures” suggests, their relationship must be deemed a partnership as it has its
elements present. As such, the CA is justified in stating that MBMI did have a joint interest with the
petitioners, so they did not err in their decision on that part.
The POA has jurisdiction to settle disputes over rights to mining areas w/c definitely involve petitions filed
by Redmont against the petitioners, as he is simply asserting the right of Filipinos over mining areas in the
Philippines against foreign-owned mining corporations. Such claim constitutes a “dispute”, w/c w/ regard to
rights to mining areas, refers to any adverse claim, protest or opposition to an application for mineral
agreement. The provisions12 provided for lead to the conclusion that the power of the POA to resolve any
adverse claim, opposition or protest relative to mining rights ins confined only to such in relation to the
applications for the grant of mineral rights. Furthermore, 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 it can be resorted to the courts.
Whatever the POA’s decision may be, it will eventually reach the court system via a resort to the CA and this
Court as a final recourse.
Finally, as for petitioners’ reasoning that they cannot be considered as foreign-owned since the transfer of
shares supposedly cured the “defect” of their previous nationality, the Court declared that said sale of
MBMI’s shareholdings to DMCI holds no bearing and is disregarded. The manifestation can no longer be
consider as it is being tackled on a different pending case altogether before this Court.
CONCLUSION
Instant Petition is DENIED; assailed CA Decision dated 10/01/10 and Resolution dated 02/15/11 are
AFFIRMED.

11 Admission by co-partner or agent rule

12 Sec. 38, 41, 43, 77, 219 of RA 7942