NARRA NICKEL MINING AND DEVELOPMENT CORP., et al. v. REDMONT CONSOLIDATED MINES CORP., G.R. No. 195580, April 21, 2014

Remedial law; When is a case deemed moot and academic. A case is said to be moot and/or academic when it “ceases to present a justiciable controversy by virtue of supervening events, so that a declaration thereon would be of no practical use or value.” Thus, the courts “generally decline jurisdiction over the case or dismiss it on the ground of mootness.”

Exceptions to assuming jurisdiction despite the case becoming moot. The “mootness” principle, however, 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 a valid reason to do so. In David v. Macapagal-Arroyo, the Court provided four instances where courts can decide an otherwise moot case, thus: (1) There is a grave violation of the Constitution; (2) The exceptional character of the situation and paramount public interest is involved; (3) When constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; and (4) The case is capable of repetition yet evading review.

Commercial law; Tests to determine the nationality of a corporation. There are two acknowledged tests in determining the nationality of a corporation: the control test and the grandfather rule. Paragraph 7 of DOJ Opinion No. 020, Series of 2005, adopts the 1967 SEC Rules which implemented the requirement of the Constitution and other laws pertaining to the controlling interests in enterprises engaged in the exploitation of natural resources owned by Filipino citizens. 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.

Application of the Grandfather Rule. Based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part of the SEC Rule 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). Stated differently, where the 60-40 Filipino- foreign equity ownership is not in doubt, the Grandfather Rule will not apply.

Existence of doubt. The assertion of petitioners that “doubt” only exists when the stockholdings are less than 60% fails to convince this Court. DOJ Opinion No. 20, which petitioners quoted in their petition, only made an example of an instance where “doubt” as to the ownership of the corporation exists. It would be ludicrous to limit the application of the said word only to the instances where the stockholdings of non-Filipino stockholders are more than 40% of the total stockholdings in a corporation. The corporations interested in circumventing our laws would clearly strive to have “60% Filipino Ownership” at face value. It would be senseless for these applying corporations to state in their respective articles of incorporation that they have less than 60% Filipino stockholders since the applications will be denied instantly. Thus, various corporate schemes and layerings are utilized to circumvent the application of the Constitution.

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