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DLSU Commercial Law Review Digest GO2 (2015-2016)

#21 Narra Nickel Mining and Dev. Corp et.al vs. Redmont Consolidated Mines
G.R. No. 195580, 21 April 2014
Topic: Grandfather rule- when to apply
Ponente: Velasco, Jr.
Doctrine: There are two acknowledged tests in determining the nationality of a corporation: the
control test and the grandfather rule. Generally, the control/ liberal test applies. The grandfather
rule only applies if there is doubt. Doubt exists when stockholdings are less than 60% or the
corporations interested in circumventing our laws would strive to have 60% Filipino ownership
at face value and corporate schemes and layering are utilized to circumvent the application of the
Constitution.
Facts:
1. December 2006- Redmont, a domestic corporation, took interest in mining and exploring
certain areas of Palawan.Upon inquiry to DENR, Redmont learned that areas it wanted to
explore where already covered by application for Mineral Production Sharing Agreement
(MPSA) by Narra, Tesoro and McArthur.
2. 2 January 2007- Redmont filed before the Panel of Arbitrators (POA) of DENR 3
separate petitions for denial of Narra, McArthur/SMMI and Tesoro. It alleged that at least
60% of the capital stock of the 3 companies are owned and controlled by MBMI, a 100%
Canadian corporation. They should be disqualified since mining activities are only
reserved for Filipino citizens.Narra et.al. stated in their answers that they were qualified
under Section 3 of RA No. 7942 or the Philippine Mining Act of 1995.
3. 14 December 2007- POA disqualified Narra et.al. from gaining MPSAs. McArthur and
Tesoro filed a joint Notice of Appeal and Memorandum of Appeal with the Mines
Adjudication Board (MAB). Narra filed separately.
4. Pending resolution of appeal with MAB, Redmont filed a complaint with SEC, seeking
revocation of the certificates of registration of petitioners.Redmont also filed before RTC
of QC injunction with application for issuance of a TRO and/or writ of preliminary
investigation on 8 September 2008.
5. 10 September 2008- MAB ruled in favor of Narra et.al. 16 September 2008- RTC granted
Redmonts application for a TRO.
6. 22 and 29 September 2008- Redmont filed MR and supplemental MR, respectively of 10
September 2008 order of MAB.
7. 6 October 2008- RTC granted writ of preliminary injunction
8. 1 July 2009- MAB denied Redmonts MRs

9. 1 October 2010- CA partially granted Narra et.al. are foreign operations and application
for MPSA and FTAA should be recommended/determined by DENR Secretary and RP
President.
10. 15 February 2011- CA denied MR of Narra et.al.
Issue: Whether or not CAs ruling that Narra et.al. are foreign corporations based on the
Grandfather Rule in contrary to law, particularly the express mandate of the Foreign
Investments Act of 1991 and FIA Rules.
Ruling:
No.
The Grandfather rule only applies when there is doubt. Doubt exists when stockholdings are less
than 60% or the corporations interested in circumventing our laws would strive to have 60%
Filipino ownership at face value, as in the case of Narra et.al. Various corporate schemes and
layering are utilized to circumvent the application of the Constitution. In this case, the SC found
serious doubt as to the nationality of the corporations involved due to the following:
a.
b.
c.
d.

Presence of a common major investor, a 100% Canadian corporation


Similarities of the corporate structures of the corporations
Presence of the same nominal shareholders in the corporations and
Paid-in capital of the corporate owners being paid only by the foreign investor.

Disposition: Wherefore, premises considered, the instant petition is DENIED. The assailed
court of appeals decision dated 1 October 2010 and Resolution dated 15 February 2011 are
hereby affirmed.