Corpo Cases 1 and 2

Narra Nickel Mining and Dev’t Corp., et al. v. Redmont Consolidated Mines Corp.
,
G.R. No. 195580, 21 April 2014
The “control test” is still the prevailing mode of determining whether or not a
corporation is a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987
Constitution, entitled to undertake the exploration, development and utilization of the
natural resources of the Philippines. When in the mind of the Court there is doubt,
based on the attendant facts and circumstances of the case, in the 60-40 Filipino-equity
ownership in the corporation, then it may apply the “grandfather rule.” Narra Nickel
Mining and Development Corp. vs. Redmont Consolidated Mines Corp., 722 SCRA 382,
G.R. No. 195580 April 21, 2014
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.
PIONEER INSURANCE SURETY CORPORATION v. MORNING STAR et al.

Topic: The Corporation and the State
FACTS:
Morning Start is a travel and tours agency with Benny Wong, Estelita Wong, Arsenio
Chua, Sonny Chua, and Wong Yan Tak as shareholders and members of the board of
directors
International Air Transport Association (IATA) is a Canadian corporation licensed to do
business in the Philippines
IATA appointed Morning Star as an accredited travel agent
IATA and Morning Star entered into a passengers sales agency agreement in which
Morning Star is tasked to report all air transport ticket sales to IATA
Pioneer Insurance Surety Corp. is the surety company of Morning Star
Morning Star accumulated over Php 100m and USD 457k of debt from IATA which was
paid for by Pioneer Insurance
Pioneer Insurance filed a case against Morning Start and its shareholders for a sum of
money
Pioneer’s arguments included:
They included the individual respondents because they, as shareholders and members
of the board of directors, were grossly negligent and were in bad faith when they
handled Morning Star (massive debt was caused by their gross negligence and bad
faith)
Cited Section 31 of the Corporation Code Individual respondents argued that:
The shareholders are separate and distinct from the corporation, hence they cannot be
sued
The regional trial court ruled holding the board of director personally liable. However,
such decision was later on reversed by the court of Appeals. Hence this petition
ISSUE: WON the individual respondents as board of directors should be held liable for
the company’s debt
HELD: NO.This separate corporate personality shields corporate officers acting in good
faith and within the scope of their authority from personal liability except for
situations enumerated by law and jurisprudence. The Court also found that the
individual respondents DID NOT act in bad faith. Bad faith imports a dishonest purpose
or some moral obliquity and conscious doing of a wrong, not simply bad judgement or
negligence Also, individual respondents did no exhibit gross negligence because the
Court found out that the same board of directors were also managing another
corporation which did fairly well compared to Morning Star. The mere fact that Morning
Star incurred huge losses and that it has no assets at the time it contracted the large
financial obligations did not amount to gross negligence by the members of the board of
directors (individual respondents).

Corpo Cases 1 and 2

Uploaded by

Copyright:

Available Formats

Corpo Cases 1 and 2

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Corpo Cases 1 and 2

Uploaded by

Copyright:

Available Formats

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

McArthur Mining, Inc., is composed, among others, by Madridejos Mining Corporation

Narra Nickel Mining and Development Corporation, is composed, among others, by

(1) Is the Grandfather Rule applicable?

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

PIONEER INSURANCE SURETY CORPORATION v. MORNING STAR et al.

You might also like