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Narra Nickel Mining and Dev’t Corp., et al. v. Redmont

Consolidated Mines Corp., G.R. No. 195580, 21 April 2014

18
APR
[VELASCO, JR., J.]

FACTS

Redmont Consolidated Mines, Inc. (Redmont) filed before the Panel of Arbitrators (POA) of the DENR
separate petitions for denial of McArthur Mining, Inc. (McArthur), Tesoro and Mining and Development,
Inc. (Tesoro), and Narra Nickel Mining and Development Corporation (Narra) applications Mineral
Production Sharing Agreement (MPSA) on the ground that they are not “qualified persons” and thus
disqualified from engaging in mining activities through MPSAs reserved only for Filipino citizens.

McArthur Mining, Inc., is composed, among others, by Madridejos Mining Corporation (Filipino) owning
5,997 out of 10,000 shares, and MBMI Resources, Inc. (Canadian) owning 3,998 out of 10,000 shares; MBMI
also owns 3,331 out of 10,000 shares of Madridejos Mining Corporation;

Tesoro and Mining and Development, Inc., is composed, among others, by Sara Marie Mining, Inc.
(Filipino) owning 5,997 out of 10,000 shares, and MBMI Resources, Inc. (Canadian) owning 3,998 out of
10,000 shares; MBMI also owns 3,331 out of 10,000 shares of Sara Marie Mining, Inc.;

Narra Nickel Mining and Development Corporation, is composed, among others, by Patricia Louise
Mining & Development Corporation (Filipino) owning 5,997 out of 10,000 shares, and MBMI Resources,
Inc. (Canadian) owning 3,998 out of 10,000 shares; MBMI also owns 3,396 out of 10,000 shares of Patricia
Louise Mining & Development Corporation;

ISSUES

(1) Is the Grandfather Rule applicable?

(2) Whether McArthur, Tesoro and Narra are Filipino nationals.

RULINGS

(1) YES.

The instant case presents a situation which exhibits a scheme employed by stockholders to circumvent the
law, creating a cloud of doubt in the Court’s mind. To determine, therefore, the actual participation, direct
or indirect, of MBMI, the grandfather rule must be used.

The Strict Rule or the Grandfather Rule pertains to the portion in 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.

(2) NO.

[P]etitioners 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. xxx Noticeably, the ownership of the “layered” corporations boils down to xxx group
wherein MBMI has joint venture agreements with, practically exercising majority control over the
corporations mentioned. In effect, whether looking at the capital structure or the underlying relationships
between and among the corporations, petitioners are NOT Filipino nationals and must be considered
foreign since 60% or more of their capital stocks or equity interests are owned by MBMI.

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Posted by Jhez on April 18, 2016 in Commercial Law, Corporation Law, Investment Law

Tags: grandfather, granfathered, layered, nationality, rule

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