Documente Academic
Documente Profesional
Documente Cultură
2016
University of Santo Tomas
Digested by: DC 2016 Members
Editors:
Tricia Lacuesta
Lorenzo Gayya
Cristopher Reyes
Macky Siazon
Janine Arenas
Ninna Bonsol
Lloyd Javier
MERCANTILE
LAW
Supreme Court decisions penned by Associate Justice
Presbitero J. Velasco, Jr.
Table of Contents
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CORPORATION LAW
Nationality of Corporations
Grandfather Rule
NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., and
MCARTHUR MINING, INC. v. REDMONT CONSOLIDATED MINES CORP.
G.R. No. 195580 April 21, 2014, Velasco Jr., J.
There are two acknowledged tests in determining the nationality of a corporation: the control test and
the grandfather rule. The grandfather rule applies only when the 60-40 Filipino-foreign equity ownership is in
doubt.
Facts:
Redmont, a domestic corporation, learned that the areas where it wanted to undertake exploration
and mining activities were already covered by Mineral Production Sharing Agreement (MPSA) applications of
Narra, Tesoro and McArthur. Redmont filed before the Panel of Arbitrators (POA) of the DENR three separate
petitions for the denial of petitioners applications for MPSA. It alleged that at least 60% of the capital stock
of McArthur, Tesoro and Narra are owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian
corporation. It also argued that given that petitioners capital stocks were mostly owned by MBMI, they were
likewise disqualified from engaging in mining activities through MPSAs, which are reserved only for Filipino
citizens. In a resolution issued by POA, petitioners were disqualified from gaining MPSAs for being
considered as foreign corporations. On appeal to the Mines Adjudication Board, the latter reversed and set
aside the resolution of the POA denying also the motion for reconsideration filed by Redmont. However, the
CA upheld the findings of the POA.
Issue:
Whether petitioners are foreign corporations
Ruling:
Yes. The first part of paragraph 7, DOJ Opinion No. 020, stating "shares belonging to corporations or
partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of
Philippine nationality, pertains to the control test or the liberal rule. On the other hand, the second part of
the DOJ Opinion which provides, "if the percentage of the Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted
as Philippine nationality," pertains to the stricter, more stringent grandfather rule. The grandfather rule or
the second part applies only when the 60-40 Filipino-foreign equity ownership is in doubt (i.e., in cases where
the joint venture corporation with Filipino and foreign stockholders with less than 60% Filipino
stockholdings [or 59%] invests in other joint venture corporation which is either 60-40% Filipino-alien or the
59% less Filipino).
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Insolvency
PHILIPPINE NATIONAL BANK and EQUITABLE PCI BANK v. HONORABLE COURT OF APPEALS
G.R. No. 165571, January 20, 2009, Velasco, Jr., J.
There are two kinds of insolvency contemplated in it: actual insolvency, i.e., the corporations assets are
not enough to cover its liabilities; and technical insolvency defined under Sec. 3-12, i.e., the corporation has
enough assets but it foresees its inability to pay its obligations for more than one year.
Facts:
Philippine National Bank (PNB) and Equitable PCI Bank are members of the consortium of creditor
banks constituted pursuant to the Mortgage Trust Indenture (MTI) by and between Rizal Commercial
Banking Corporation-Trust and Investments Division, acting as trustee for the consortium, and ASB
Development Corporation (ASBDC, formerly Tiffany Tower Realty Corporation). Under the MTI, petitioners
granted a loan of PhP1,081,000,000 to ASBDC secured by a mortgage of five parcels of land with
improvements. Private respondents filed with the SEC a verified petition for rehabilitation. Private
respondents stated that they possess sufficient properties to cover their obligations but foresee inability to
pay them within a period of one year. Finding the petition sufficient in form and substance, the SEC Hearing
Panel issued an order suspending for 60 days all actions for claims against the ASB Group and appointing
Atty. Monico V. Jacob as interim receiver of the ASB Group. Atty. Jacob was later replaced by Atty. Fortunato
Cruz. The consortium of creditor banks, which included petitioners, filed their opposition praying for the
dismissal of the petition. The ASB Group submitted a rehabilitation plan but the consortium of creditor banks
moved for its disapproval. However, the Hearing Panel denied the opposition of the banks and held that the
ASB Group complied with the requirements of Sec. 4-1 of the Rules of Procedure on Corporate Recovery,
which allows debtors who are technically insolvent to file a petition for rehabilitation. The creditors filed a
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