1. THE EXECUTIVE SECRETARY V. CA 429 SCRA 81 (2004)
Republic Act No. 8042, otherwise known as the Migrant Workers
and Overseas Filipinos Act of 1995, took effect on July 15, 1995.
The Omnibus Rules and Regulations Implementing the Migrant Workers
and Overseas Filipino Act of 1995 was, thereafter, published in the
April 7, 1996 issue of the Manila Bulletin. However, even before
the law took effect, the Asian Recruitment Council Philippine
Chapter, Inc. (ARCO-Phil.) filed, on July 17, 1995, a petition for
declaratory relief under Rule 63 of the Rules of Court with the
Regional Trial Court of Quezon City to declare as unconstitutional
Section 2, paragraph (g), Section 6, paragraphs (a) to (j), (l) and
(m), Section 7, paragraphs (a) and (b), and Sections 9 and 10 of
the law, with a plea for the issuance of a temporary restraining
order and/or writ of preliminary injunction enjoining the
respondents therein from enforcing the assailed provisions of the
law.
In a supplement to its petition, the ARCO-Phil. alleged that
Rep. Act No. 8042 was self-executory and that no implementing rules
were needed. It prayed that the court issue a temporary restraining
order to enjoin the enforcement of Section 6, paragraphs (a) to (m)
on illegal recruitment, Section 7 on penalties for illegal
recruitment, and Section 9 on venue of criminal actions for illegal
recruitments, viz:
Viewed in the light of the foregoing discussions, there appears
to be urgent an imperative need for this Honorable Court to
maintain the status quo by enjoining the implementation or
effectivity of the questioned provisions of RA 8042, by way of a
restraining order otherwise, the member recruitment agencies of the
petitioner will suffer grave or irreparable damage or injury. With
the effectivity of RA 8042, a great majority of the duly licensed
recruitment agencies have stopped or suspended their operations for
fear of being prosecuted under the provisions of a law that are
unjust and unconstitutional. This Honorable Court may take judicial
notice of the fact that processing of deployment papers of overseas
workers for the past weeks have come to a standstill at the POEA
and this has affected thousands of workers everyday just because of
the enactment of RA 8042. Indeed, this has far reaching effects not
only to survival of the overseas manpower supply industry and the
active participating recruitment agencies, the countrys economy
which has survived mainly due to the dollar remittances of the
overseas workers but more importantly, to the poor and the needy
who are in dire need of income-generating jobs which can only be
obtained from abroad. The loss or injury that the recruitment
agencies will suffer will then be immeasurable and irreparable. As
of now, even foreign employers have already reduced their manpower
requirements from the Philippines due to their knowledge that RA
8042 prejudiced and adversely affected the local recruitment
agencies.3
On August 1, 1995, the trial court issued a temporary
restraining order effective for a period of only twenty (20) days
therefrom.
After the petitioners filed their comment on the petition, the
ARCO-Phil. filed an amended petition, the amendments consisting in
the inclusion in the caption thereof eleven (11) other corporations
which it alleged were its members and which it represented in the
suit, and a plea for a temporary restraining order enjoining the
respondents from enforcing Section 6 subsection (i), Section 6
subsection (k) and paragraphs 15 and 16 thereof, Section 8, Section
10, paragraphs 1 and 2, and Sections 11 and 40 of Rep. Act No.
8042.
The respondent ARCO-Phil. assailed Section 2(g) and (i), Section
6 subsection (a) to (m), Section 7(a) to (b), and Section 10
paragraphs (1) and (2), quoted as follows:
(g) THE STATE RECOGNIZES THAT THE ULTIMATE PROTECTION TO ALL
MIGRANT WORKERS IS THE POSSESSION OF SKILLS. PURSUANT TO THIS AND
AS SOON AS PRACTICABLE, THE GOVERNMENT SHALL DEPLOY AND/OR ALLOW
THE DEPLOYMENT ONLY OF SKILLED FILIPINO WORKERS.4Sec. 2 subsection
(i, 2nd par.)Nonetheless, the deployment of Filipino overseas
workers, whether land-based or sea-based, by local service
contractors and manning agents employing them shall be encourages
(sic). Appropriate incentives may be extended to them.
II. ILLEGAL RECRUITMENT
SEC. 6. Definition. For purposes of this Act, illegal
recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers
and includes referring, contract services, promising or advertising
for employment abroad, whether for profit or not, when undertaken
by a non-licensee or non-holder of authority contemplated under
Article 13(f) of Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines: Provided, That any such
non-licensee or non-holder who, in any manner, offers or promises
for a fee employment abroad to two or more persons shall be deemed
so engaged. It shall, likewise, include the following acts, whether
committed by any person, whether a non-licensee, non-holder,
licensee or holder of authority:
(a) To charge or accept directly or indirectly any amount
greater than that specified in the schedule of allowable fees
prescribed by the Secretary of Labor and Employment, or to make a
worker pay any amount greater than that actually received by him as
a loan or advance;
(b) To furnish or publish any false notice or information or
document in relation to recruitment or employment;
(c) To give any false notice, testimony, information or document
or commit any act of misrepresentation for the purpose of securing
a license or authority under the Labor Code;
(d) To induce or attempt to induce a worker already employed to
quit his employment in order to offer him another unless the
transfer is designed to liberate a worker from oppressive terms and
conditions of employment;
(e) To influence or attempt to influence any person or entity
not to employ any worker who has not applied for employment through
his agency;
(f) To engage in the recruitment or placement of workers in jobs
harmful to public health or morality or to the dignity of the
Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the
Secretary of Labor and Employment or by his duly authorized
representative;
(h) To fail to submit reports on the status of employment,
placement vacancies, remittance of foreign exchange earnings,
separation from jobs, departures and such other matters or
information as may be required by the Secretary of Labor and
Employment;
(i) To substitute or alter to the prejudice of the worker,
employment contracts approved and verified by the Department of
Labor and Employment from the time of actual signing thereof by the
parties up to and including the period of the expiration of the
same without the approval of the Department of Labor and
Employment;
(j) For an officer or agent of a recruitment or placement agency
to become an officer or member of the Board of any corporation
engaged in travel agency or to be engaged directly or indirectly in
the management of a travel agency;
(k) To withhold or deny travel documents from applicant workers
before departure for monetary or financial considerations other
than those authorized under the Labor Code and its implementing
rules and regulations;
(l) Failure to actually deploy without valid reason as
determined by the Department of Labor and Employment; and
(m) Failure to reimburse expenses incurred by the worker in
connection with his documentation and processing for purposes of
deployment, in cases where the deployment does not actually take
place without the workers fault. Illegal recruitment when committed
by a syndicate or in large scale shall be considered an offense
involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if
carried out by a group of three (3) or more persons conspiring or
confederating with one another. It is deemed committed in large
scale if committed against three (3) or more persons individually
or as a group.
The persons criminally liable for the above offenses are the
principals, accomplices and accessories. In case of juridical
persons, the officers having control, management or direction of
their business shall be liable.
SEC. 7. Penalties.
(a) Any person found guilty of illegal recruitment shall suffer
the penalty of imprisonment of not less than six (6) years and one
(1) day but not more than twelve (12) years and a fine of not less
than two hundred thousand pesos (P200,000.00) nor more than five
hundred thousand pesos (P500,000.00).
(b) The penalty of life imprisonment and a fine of not less than
five hundred thousand pesos (P500,000.00) nor more than one million
pesos (P1,000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein.
Provided, however, That the maximum penalty shall be imposed if
the person illegally recruited is less than eighteen (18) years of
age or committed by a non-licensee or non-holder of authority.
Sec. 8.
Prohibition on Officials and Employees. It shall be unlawful for
any official or employee of the Department of Labor and Employment,
the Philippine Overseas Employment Administration (POEA), or the
Overseas Workers Welfare Administration (OWWA), or the Department
of Foreign Affairs, or other government agencies involved in the
implementation of this Act, or their relatives within the fourth
civil degree of consanguinity or affinity, to engage, directly or
indirectly, in the business of recruiting migrant workers as
defined in this Act. The penalties provided in the immediate
preceding paragraph shall be imposed upon them. (underscoring
supplied)
Sec. 10, pars. 1 & 2.
Money Claims. Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.
The liability of the principal/employer and the
recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and shall be a
condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law,
shall be answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement agency is a
juridical being, the corporate officers and directors and partners
as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims
and damages.
SEC. 11. Mandatory Periods for Resolution of Illegal Recruitment
Cases. The preliminary investigations of cases under this Act shall
be terminated within a period of thirty (30) calendar days from the
date of their filing. Where the preliminary investigation is
conducted by a prosecution officer and a prima facie case is
established, the corresponding information shall be filed in court
within twenty-four (24) hours from the termination of the
investigation. If the preliminary investigation is conducted by a
judge and a prima facie case is found to exist, the corresponding
information shall be filed by the proper prosecution officer within
forty-eight (48) hours from the date of receipt of the records of
the case.
The respondent averred that the aforequoted provisions of Rep.
Act No. 8042 violate Section 1, Article III of the Constitution.5
According to the respondent, Section 6(g) and (i) discriminated
against unskilled workers and their families and, as such, violated
the equal protection clause, as well as Article II, Section 126 and
Article XV, Sections 17 and 3(3) of the Constitution.8 As the law
encouraged the deployment of skilled Filipino workers, only
overseas skilled workers are granted rights. The respondent
stressed that unskilled workers also have the right to seek
employment abroad. According to the respondent, the right of
unskilled workers to due process is violated because they are
prevented from finding employment and earning a living abroad. It
cannot be argued that skilled workers are immune from abuses by
employers, while unskilled workers are merely prone to such abuses.
It was pointed out that both skilled and unskilled workers are
subjected to abuses by foreign employers. Furthermore, the
prohibition of the deployment of unskilled workers abroad would
only encourage fly-by-night illegal recruiters.
According to the respondent, the grant of incentives to service
contractors and manning agencies to the exclusion of all other
licensed and authorized recruiters is an invalid classification.
Licensed and authorized recruiters are thus deprived of their right
to property and due process and to the "equality of the person." It
is understandable for the law to prohibit illegal recruiters, but
to discriminate against licensed and registered recruiters is
unconstitutional.
The respondent, likewise, alleged that Section 6, subsections
(a) to (m) is unconstitutional because licensed and authorized
recruitment agencies are placed on equal footing with illegal
recruiters. It contended that while the Labor Code distinguished
between recruiters who are holders of licenses and non-holders
thereof in the imposition of penalties, Rep. Act No. 8042 does not
make any distinction. The penalties in Section 7(a) and (b) being
based on an invalid classification are, therefore, repugnant to the
equal protection clause, besides being excessive; hence, such
penalties are violative of Section 19(1), Article III of the
Constitution.9 It was also pointed out that the penalty for
officers/officials/employees of recruitment agencies who are found
guilty of economic sabotage or large-scale illegal recruitment
under Rep. Act No. 8042 is life imprisonment. Since recruitment
agencies usually operate with a manpower of more than three
persons, such agencies are forced to shut down, lest their officers
and/or employees be charged with large scale illegal recruitment or
economic sabotage and sentenced to life imprisonment. Thus, the
penalty imposed by law, being disproportionate to the prohibited
acts, discourages the business of licensed and registered
recruitment agencies.
The respondent also posited that Section 6(m) and paragraphs
(15) and (16), Sections 8, 9 and 10, paragraph 2 of the law violate
Section 22, Article III of the Constitution10 prohibiting ex-post
facto laws and bills of attainder. This is because the provisions
presume that a licensed and registered recruitment agency is guilty
of illegal recruitment involving economic sabotage, upon a finding
that it committed any of the prohibited acts under the law.
Furthermore, officials, employees and their relatives are presumed
guilty of illegal recruitment involving economic sabotage upon such
finding that they committed any of the said prohibited acts.
The respondent further argued that the 90-day period in Section
10, paragraph (1) within which a labor arbiter should decide a
money claim is relatively short, and could deprive licensed and
registered recruiters of their right to due process. The period
within which the summons and the complaint would be served on
foreign employees and, thereafter, the filing of the answer to the
complaint would take more than 90 days. This would thereby shift on
local licensed and authorized recruiters the burden of proving the
defense of foreign employers. Furthermore, the respondent asserted,
Section 10, paragraph 2 of the law, which provides for the joint
and several liability of the officers and employees, is a bill of
attainder and a violation of the right of the said corporate
officers and employees to due process. Considering that such
corporate officers and employees act with prior approval of the
board of directors of such corporation, they should not be liable,
jointly and severally, for such corporate acts.
The respondent asserted that the following provisions of the law
are unconstitutional:
SEC. 9. Venue. A criminal action arising from illegal
recruitment as defined herein shall be filed with the Regional
Trial Court of the province or city where the offense was committed
or where the offended party actually resides at the time of the
commission of the offense: Provided, That the court where the
criminal action is first filed shall acquire jurisdiction to the
exclusion of other courts: Provided, however, That the aforestated
provisions shall also apply to those criminal actions that have
already been filed in court at the time of the effectivity of this
Act.
SEC. 10. Money Claims. Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.
Sec. 40.
The departments and agencies charged with carrying out the
provisions of this Act shall, within ninety (90) days after the
effectiviy of this Act, formulate the necessary rules and
regulations for its effective implementation.
According to the respondent, the said provisions violate Section
5(5), Article VIII of the Constitution11 because they impair the
power of the Supreme Court to promulgate rules of procedure.
In their answer to the petition, the petitioners alleged, inter
alia, that (a) the respondent has no cause of action for a
declaratory relief; (b) the petition was premature as the rules
implementing Rep. Act No. 8042 not having been released as yet; (c)
the assailed provisions do not violate any provisions of the
Constitution; and, (d) the law was approved by Congress in the
exercise of the police power of the State. In opposition to the
respondents plea for injunctive relief, the petitioners averred
that:
As earlier shown, the amended petition for declaratory relief is
devoid of merit for failure of petitioner to demonstrate
convincingly that the assailed law is unconstitutional, apart from
the defect and impropriety of the petition. One who attacks a
statute, alleging unconstitutionality must prove its invalidity
beyond reasonable doubt (Caleon v. Agus Development Corporation,
207 SCRA 748). All reasonable doubts should be resolved in favor of
the constitutionality of a statute (People v. Vera, 65 Phil. 56).
This presumption of constitutionality is based on the doctrine of
separation of powers which enjoin upon each department a becoming
respect for the acts of the other departments (Garcia vs. Executive
Secretary, 204 SCRA 516 [1991]). Necessarily, the ancillary remedy
of a temporary restraining order and/or a writ of preliminary
injunction prayed for must fall. Besides, an act of legislature
approved by the executive is presumed to be within constitutional
bounds (National Press Club v. Commission on Elections, 207 SCRA
1).12
After the respective counsels of the parties were heard on oral
arguments, the trial court issued on August 21, 1995, an order
granting the petitioners plea for a writ of preliminary injunction
upon a bond of P50,000. The petitioner posted the requisite bond
and on August 24, 1995, the trial court issued a writ of
preliminary injunction enjoining the enforcement of the following
provisions of Rep. Act No. 8042 pending the termination of the
proceedings:
Section 2, subsections (g) and (i, 2nd par.); Section 6,
subsections (a) to (m), and pars. 15 & 16; Section 7,
subsections (a) & (b); Section 8; Section 9; Section 10; pars.
1 & 2; Section 11; and Section 40 of Republic Act No. 8042,
otherwise known as the Migrant Workers and Overseas Filipinos Act
of 1995. 13
The petitioners filed a petition for certiorari with the Court
of Appeals assailing the order and the writ of preliminary
injunction issued by the trial court on the following grounds:
1. Respondent ARCO-PHIL. had utterly failed to show its clear
right/s or that of its member-agencies to be protected by the
injunctive relief and/or violation of said rights by the
enforcement of the assailed sections of R.A. 8042;
2. Respondent Judge fixed a P50,000 injunction bond which is
grossly inadequate to answer for the damage which
petitioner-officials may sustain, should respondent ARCO-PHIL. be
finally adjudged as not being entitled thereto.14
The petitioners asserted that the respondent is not the real
party-in-interest as petitioner in the trial court. It is
inconceivable how the respondent, a non-stock and non-profit
corporation, could sustain direct injury as a result of the
enforcement of the law. They argued that if, at all, any damage
would result in the implementation of the law, it is the licensed
and registered recruitment agencies and/or the unskilled Filipino
migrant workers discriminated against who would sustain the said
injury or damage, not the respondent. The respondent, as petitioner
in the trial court, was burdened to adduce preponderant evidence of
such irreparable injury, but failed to do so. The petitioners
further insisted that the petition a quo was premature since the
rules and regulations implementing the law had yet to be
promulgated when such petition was filed. Finally, the petitioners
averred that the respondent failed to establish the requisites for
the issuance of a writ of preliminary injunction against the
enforcement of the law and the rules and regulations issued
implementing the same.
On December 5, 1997, the appellate court came out with a
four-page decision dismissing the petition and affirming the
assailed order and writ of preliminary injunction issued by the
trial court. The appellate court, likewise, denied the petitioners
motion for reconsideration of the said decision.
The petitioners now come to this Court in a petition for review
on certiorari on the following grounds:
1. Private respondent ARCO-PHIL. had utterly failed to show its
clear right/s or that of its member-agencies to be protected by the
injunctive relief and/or violation of said rights by the
enforcement of the assailed sections of R.A. 8042;
2. The P50,000 injunction bond fixed by the court a quo and
sustained by the Court of Appeals is grossly inadequate to answer
for the damage which petitioners-officials may sustain, should
private respondent ARCO-PHIL. be finally adjudged as not being
entitled thereto.15
On February 16, 1998, this Court issued a temporary restraining
order enjoining the respondents from enforcing the assailed order
and writ of preliminary injunction.
The Issues
The core issue in this case is whether or not the trial court
committed grave abuse of its discretion amounting to excess or lack
of jurisdiction in issuing the assailed order and the writ of
preliminary injunction on a bond of only P50,000 and whether or not
the appellate court erred in affirming the trial courts order and
the writ of preliminary injunction issued by it.
The petitioners contend that the respondent has no locus standi.
It is a non-stock, non-profit organization; hence, not the real
party-in-interest as petitioner in the action. Although the
respondent filed the petition in the Regional Trial Court in behalf
of licensed and registered recruitment agencies, it failed to
adduce in evidence a certified copy of its Articles of
Incorporation and the resolutions of the said members authorizing
it to represent the said agencies in the proceedings. Neither is
the suit of the respondent a class suit so as to vest in it a
personality to assail Rep. Act No. 8042; the respondent is
service-oriented while the recruitment agencies it purports to
represent are profit-oriented. The petitioners assert that the law
is presumed constitutional and, as such, the respondent was
burdened to make a case strong enough to overcome such presumption
and establish a clear right to injunctive relief.
The petitioners bewail the P50,000 bond fixed by the trial court
for the issuance of a writ of preliminary injunction and affirmed
by the appellate court. They assert that the amount is grossly
inadequate to answer for any damages that the general public may
suffer by reason of the non-enforcement of the assailed provisions
of the law. The trial court committed a grave abuse of its
discretion in granting the respondents plea for injunctive relief,
and the appellate court erred in affirming the order and the writ
of preliminary injunction issued by the trial court.
The respondent, for its part, asserts that it has duly
established its locus standi and its right to injunctive relief as
gleaned from its pleadings and the appendages thereto. Under
Section 5, Rule 58 of the Rules of Court, it was incumbent on the
petitioners, as respondents in the RTC, to show cause why no
injunction should issue. It avers that the injunction bond posted
by the respondent was more than adequate to answer for any injury
or damage the petitioners may suffer, if any, by reason of the writ
of preliminary injunction issued by the RTC. In any event, the
assailed provisions of Rep. Act No. 8042 exposed its members to the
immediate and irreparable damage of being deprived of their right
to a livelihood without due process, a property right protected
under the Constitution.
The respondent contends that the commendable purpose of the law
to eradicate illegal recruiters should not be done at the expense
and to the prejudice of licensed and authorized recruitment
agencies. The writ of preliminary injunction was necessitated by
the great number of duly licensed recruitment agencies that had
stopped or suspended their business operations for fear that their
officers and employees would be indicted and prosecuted under the
assailed oppressive penal provisions of the law, and meted
excessive penalties. The respondent, likewise, urges that the Court
should take judicial notice that the processing of deployment
papers of overseas workers have come to a virtual standstill at the
POEA.
The Courts Ruling
The petition is meritorious.
The Respondent Has Locus Standi
To File the Petition in the RTC in Representation of the Eleven
Licensed and Registered Recruitment Agencies Impleaded in the
Amended Petition
The modern view is that an association has standing to complain
of injuries to its members. This view fuses the legal identity of
an association with that of its members.16 An association has
standing to file suit for its workers despite its lack of direct
interest if its members are affected by the action. An organization
has standing to assert the concerns of its constituents.17
In Telecommunications and Broadcast Attorneys of the Philippines
v. Commission on Elections,18 we held that standing jus tertii
would be recognized only if it can be shown that the party suing
has some substantial relation to the third party, or that the right
of the third party would be diluted unless the party in court is
allowed to espouse the third partys constitutional claims.
In this case, the respondent filed the petition for declaratory
relief under Rule 64 of the Rules of Court for and in behalf of its
eleven (11) licensed and registered recruitment agencies which are
its members, and which approved separate resolutions expressly
authorizing the respondent to file the said suit for and in their
behalf. We note that, under its Articles of Incorporation, the
respondent was organized for the purposes inter alia of promoting
and supporting the growth and development of the manpower
recruitment industry, both in the local and international levels;
providing, creating and exploring employment opportunities for the
exclusive benefit of its general membership; enhancing and
promoting the general welfare and protection of Filipino workers;
and, to act as the representative of any individual, company,
entity or association on matters related to the manpower
recruitment industry, and to perform other acts and activities
necessary to accomplish the purposes embodied therein. The
respondent is, thus, the appropriate party to assert the rights of
its members, because it and its members are in every practical
sense identical. The respondent asserts that the assailed
provisions violate the constitutional rights of its members and the
officers and employees thereof. The respondent is but the medium
through which its individual members seek to make more effective
the expression of their voices and the redress of their
grievances.19
However, the respondent has no locus standi to file the petition
for and in behalf of unskilled workers. We note that it even failed
to implead any unskilled workers in its petition. Furthermore, in
failing to implead, as parties-petitioners, the eleven licensed and
registered recruitment agencies it claimed to represent, the
respondent failed to comply with Section 2 of Rule 6320 of the
Rules of Court. Nevertheless, since the eleven licensed and
registered recruitment agencies for which the respondent filed the
suit are specifically named in the petition, the amended petition
is deemed amended to avoid multiplicity of suits.21
The Assailed Order and Writ of
Preliminary Injunction Is Mooted
By Case Law
The respondent justified its plea for injunctive relief on the
allegation in its amended petition that its members are exposed to
the immediate and irreparable danger of being deprived of their
right to a livelihood and other constitutional rights without due
process, on its claim that a great number of duly licensed
recruitment agencies have stopped or suspended their operations for
fear that (a) their officers and employees would be prosecuted
under the unjust and unconstitutional penal provisions of Rep. Act
No. 8042 and meted equally unjust and excessive penalties,
including life imprisonment, for illegal recruitment and large
scale illegal recruitment without regard to whether the recruitment
agencies involved are licensed and/or authorized; and, (b) if the
members of the respondent, which are licensed and authorized,
decide to continue with their businesses, they face the stigma and
the curse of being labeled "illegal recruiters." In granting the
respondents plea for a writ of preliminary injunction, the trial
court held, without stating the factual and legal basis therefor,
that the enforcement of Rep. Act No. 8042, pendente lite, would
cause grave and irreparable injury to the respondent until the case
is decided on its merits.
We note, however, that since Rep. Act No. 8042 took effect on
July 15, 1995, the Court had, in a catena of cases, applied the
penal provisions in Section 6, including paragraph (m) thereof, and
the last two paragraphs therein defining large scale illegal
recruitment committed by officers and/or employees of recruitment
agencies by themselves and in connivance with private individuals,
and imposed the penalties provided in Section 7 thereof, including
the penalty of life imprisonment.22 The Informations therein were
filed after preliminary investigations as provided for in Section
11 of Rep. Act No. 8042 and in venues as provided for in Section 9
of the said act. In People v. Chowdury,23 we held that illegal
recruitment is a crime of economic sabotage and must be
enforced.
In People v. Diaz,24 we held that Rep. Act No. 8042 is but an
amendment of the Labor Code of the Philippines and is not an
ex-post facto law because it is not applied retroactively. In JMM
Promotion and Management, Inc. v. Court of Appeals,25 the issue of
the extent of the police power of the State to regulate a business,
profession or calling vis--vis the equal protection clause and the
non-impairment clause of the Constitution were raised and we held,
thus:
A profession, trade or calling is a property right within the
meaning of our constitutional guarantees. One cannot be deprived of
the right to work and the right to make a living because these
rights are property rights, the arbitrary and unwarranted
deprivation of which normally constitutes an actionable wrong.
Nevertheless, no right is absolute, and the proper regulation of
a profession, calling, business or trade has always been upheld as
a legitimate subject of a valid exercise of the police power by the
state particularly when their conduct affects either the execution
of legitimate governmental functions, the preservation of the
State, the public health and welfare and public morals. According
to the maxim, sic utere tuo ut alienum non laedas, it must of
course be within the legitimate range of legislative action to
define the mode and manner in which every one may so use his own
property so as not to pose injury to himself or others.
In any case, where the liberty curtailed affects at most the
rights of property, the permissible scope of regulatory measures is
certainly much wider. To pretend that licensing or accreditation
requirements violates the due process clause is to ignore the
settled practice, under the mantle of the police power, of
regulating entry to the practice of various trades or professions.
Professionals leaving for abroad are required to pass rigid written
and practical exams before they are deemed fit to practice their
trade. Seamen are required to take tests determining their
seamanship. Locally, the Professional Regulation Commission has
begun to require previously licensed doctors and other
professionals to furnish documentary proof that they had either
re-trained or had undertaken continuing education courses as a
requirement for renewal of their licenses. It is not claimed that
these requirements pose an unwarranted deprivation of a property
right under the due process clause. So long as professionals and
other workers meet reasonable regulatory standards no such
deprivation exists.
Finally, it is a futile gesture on the part of petitioners to
invoke the non-impairment clause of the Constitution to support
their argument that the government cannot enact the assailed
regulatory measures because they abridge the freedom to contract.
In Philippine Association of Service Exporters, Inc. vs. Drilon, we
held that "[t]he non-impairment clause of the Constitution must
yield to the loftier purposes targeted by the government." Equally
important, into every contract is read provisions of existing law,
and always, a reservation of the police power for so long as the
agreement deals with a subject impressed with the public
welfare.
A last point. Petitioners suggest that the singling out of
entertainers and performing artists under the assailed department
orders constitutes class legislation which violates the equal
protection clause of the Constitution. We do not agree.
The equal protection clause is directed principally against
undue favor and individual or class privilege. It is not intended
to prohibit legislation which is limited to the object to which it
is directed or by the territory in which it is to operate. It does
not require absolute equality, but merely that all persons be
treated alike under like conditions both as to privileges conferred
and liabilities imposed. We have held, time and again, that the
equal protection clause of the Constitution does not forbid
classification for so long as such classification is based on real
and substantial differences having a reasonable relation to the
subject of the particular legislation. If classification is germane
to the purpose of the law, concerns all members of the class, and
applies equally to present and future conditions, the
classification does not violate the equal protection
guarantee.26
The validity of Section 6 of R.A. No. 8042 which provides that
employees of recruitment agencies may be criminally liable for
illegal recruitment has been upheld in People v. Chowdury:27
As stated in the first sentence of Section 6 of RA 8042, the
persons who may be held liable for illegal recruitment are the
principals, accomplices and accessories. An employee of a company
or corporation engaged in illegal recruitment may be held liable as
principal, together with his employer, if it is shown that he
actively and consciously participated in illegal recruitment. It
has been held that the existence of the corporate entity does not
shield from prosecution the corporate agent who knowingly and
intentionally causes the corporation to commit a crime. The
corporation obviously acts, and can act, only by and through its
human agents, and it is their conduct which the law must deter. The
employee or agent of a corporation engaged in unlawful business
naturally aids and abets in the carrying on of such business and
will be prosecuted as principal if, with knowledge of the business,
its purpose and effect, he consciously contributes his efforts to
its conduct and promotion, however slight his contribution may be.
28
By its rulings, the Court thereby affirmed the validity of the
assailed penal and procedural provisions of Rep. Act No. 8042,
including the imposable penalties therefor. Until the Court, by
final judgment, declares that the said provisions are
unconstitutional, the enforcement of the said provisions cannot be
enjoined.
The RTC Committed Grave Abuse of Its Discretion Amounting to
Excess or Lack of Jurisdiction in Issuing the Assailed Order and
the Writ of Preliminary Injunction
The matter of whether to issue a writ of preliminary injunction
or not is addressed to the sound discretion of the trial court.
However, if the court commits grave abuse of its discretion in
issuing the said writ amounting to excess or lack of jurisdiction,
the same may be nullified via a writ of certiorari and
prohibition.
In Social Security Commission v. Judge Bayona,29 we ruled that a
law is presumed constitutional until otherwise declared by judicial
interpretation. The suspension of the operation of the law is a
matter of extreme delicacy because it is an interference with the
official acts not only of the duly elected representatives of the
people but also of the highest magistrate of the land.
In Younger v. Harris, Jr.,30 the Supreme Court of the United
States emphasized, thus:
Federal injunctions against state criminal statutes, either in
their entirety or with respect to their separate and distinct
prohibitions, are not to be granted as a matter of course, even if
such statutes are unconstitutional. No citizen or member of the
community is immune from prosecution, in good faith, for his
alleged criminal acts. The imminence of such a prosecution even
though alleged to be unauthorized and, hence, unlawful is not alone
ground for relief in equity which exerts its extraordinary powers
only to prevent irreparable injury to the plaintiff who seeks its
aid. 752 Beal v. Missouri Pacific Railroad Corp., 312 U.S. 45, 49,
61 S.Ct. 418, 420, 85 L.Ed. 577.
And similarly, in Douglas, supra, we made clear, after
reaffirming this rule, that:
"It does not appear from the record that petitioners have been
threatened with any injury other than that incidental to every
criminal proceeding brought lawfully and in good faith " 319 U.S.,
at 164, 63 S.Ct., at 881.31
The possible unconstitutionality of a statute, on its face, does
not of itself justify an injunction against good faith attempts to
enforce it, unless there is a showing of bad faith, harassment, or
any other unusual circumstance that would call for equitable
relief.32 The "on its face" invalidation of statutes has been
described as "manifestly strong medicine," to be employed
"sparingly and only as a last resort," and is generally
disfavored.33
To be entitled to a preliminary injunction to enjoin the
enforcement of a law assailed to be unconstitutional, the party
must establish that it will suffer irreparable harm in the absence
of injunctive relief and must demonstrate that it is likely to
succeed on the merits, or that there are sufficiently serious
questions going to the merits and the balance of hardships tips
decidedly in its favor.34 The higher standard reflects judicial
deference toward "legislation or regulations developed through
presumptively reasoned democratic processes." Moreover, an
injunction will alter, rather than maintain, the status quo, or
will provide the movant with substantially all the relief sought
and that relief cannot be undone even if the defendant prevails at
a trial on the merits.35 Considering that injunction is an exercise
of equitable relief and authority, in assessing whether to issue a
preliminary injunction, the courts must sensitively assess all the
equities of the situation, including the public interest.36 In
litigations between governmental and private parties, courts go
much further both to give and withhold relief in furtherance of
public interest than they are accustomed to go when only private
interests are involved.37 Before the plaintiff may be entitled to
injunction against future enforcement, he is burdened to show some
substantial hardship.38
The fear or chilling-effect of the assailed penal provisions of
the law on the members of the respondent does not by itself justify
prohibiting the State from enforcing them against those whom the
State believes in good faith to be punishable under the laws:
Just as the incidental "chilling effect" of such statutes does
not automatically render them unconstitutional, so the chilling
effect that admittedly can result from the very existence of
certain laws on the statute books does not in itself justify
prohibiting the State from carrying out the important and necessary
task of enforcing these laws against socially harmful conduct that
the State believes in good faith to be punishable under its laws
and the Constitution.39
It must be borne in mind that subject to constitutional
limitations, Congress is empowered to define what acts or omissions
shall constitute a crime and to prescribe punishments therefor.40
The power is inherent in Congress and is part of the sovereign
power of the State to maintain peace and order. Whatever views may
be entertained regarding the severity of punishment, whether one
believes in its efficiency or its futility, these are peculiarly
questions of legislative policy.41 The comparative gravity of
crimes and whether their consequences are more or less injurious
are matters for the State and Congress itself to determine.42
Specification of penalties involves questions of legislative
policy.43
Due process prohibits criminal stability from shifting the
burden of proof to the accused, punishing wholly passive conduct,
defining crimes in vague or overbroad language and failing to grant
fair warning of illegal conduct.44 Class legislation is such
legislation which denies rights to one which are accorded to
others, or inflicts upon one individual a more severe penalty than
is imposed upon another in like case offending.45 Bills of
attainder are legislative acts which inflict punishment on
individuals or members of a particular group without a judicial
trial. Essential to a bill of attainder are a specification of
certain individuals or a group of individuals, the imposition of a
punishment, penal or otherwise, and the lack of judicial
trial.46
Penalizing unlicensed and licensed recruitment agencies and
their officers and employees and their relatives employed in
government agencies charged with the enforcement of the law for
illegal recruitment and imposing life imprisonment for those who
commit large scale illegal recruitment is not offensive to the
Constitution. The accused may be convicted of illegal recruitment
and large scale illegal recruitment only if, after trial, the
prosecution is able to prove all the elements of the crime
charged.47
The possibility that the officers and employees of the
recruitment agencies, which are members of the respondent, and
their relatives who are employed in the government agencies charged
in the enforcement of the law, would be indicted for illegal
recruitment and, if convicted sentenced to life imprisonment for
large scale illegal recruitment, absent proof of irreparable
injury, is not sufficient on which to base the issuance of a writ
of preliminary injunction to suspend the enforcement of the penal
provisions of Rep. Act No. 8042 and avert any indictments under the
law.48 The normal course of criminal prosecutions cannot be blocked
on the basis of allegations which amount to speculations about the
future.49
There is no allegation in the amended petition or evidence
adduced by the respondent that the officers and/or employees of its
members had been threatened with any indictments for violations of
the penal provisions of Rep. Act No. 8042. Neither is there any
allegation therein that any of its members and/or their officers
and employees committed any of the acts enumerated in Section 6(a)
to (m) of the law for which they could be indicted. Neither did the
respondent adduce any evidence in the RTC that any or all of its
members or a great number of other duly licensed and registered
recruitment agencies had to stop their business operations because
of fear of indictments under Sections 6 and 7 of Rep. Act No. 8042.
The respondent merely speculated and surmised that licensed and
registered recruitment agencies would close shop and stop business
operations because of the assailed penal provisions of the law. A
writ of preliminary injunction to enjoin the enforcement of penal
laws cannot be based on such conjectures or speculations. The Court
cannot take judicial notice that the processing of deployment
papers of overseas workers have come to a virtual standstill at the
POEA because of the assailed provisions of Rep. Act No. 8042. The
respondent must adduce evidence to prove its allegation, and the
petitioners accorded a chance to adduce controverting evidence.
The respondent even failed to adduce any evidence to prove
irreparable injury because of the enforcement of Section 10(1)(2)
of Rep. Act No. 8042. Its fear or apprehension that, because of
time constraints, its members would have to defend foreign
employees in cases before the Labor Arbiter is based on
speculations. Even if true, such inconvenience or difficulty is
hardly irreparable injury.
The trial court even ignored the public interest involved in
suspending the enforcement of Rep. Act No. 8042 vis--vis the eleven
licensed and registered recruitment agencies represented by the
respondent. In People v. Gamboa,50 we emphasized the primary aim of
Rep. Act No. 8042:
Preliminarily, the proliferation of illegal job recruiters and
syndicates preying on innocent people anxious to obtain employment
abroad is one of the primary considerations that led to the
enactment of The Migrant Workers and Overseas Filipinos Act of
1995. Aimed at affording greater protection to overseas Filipino
workers, it is a significant improvement on existing laws in the
recruitment and placement of workers for overseas employment.
Otherwise known as the Magna Carta of OFWs, it broadened the
concept of illegal recruitment under the Labor Code and provided
stiffer penalties thereto, especially those that constitute
economic sabotage, i.e., Illegal Recruitment in Large Scale and
Illegal Recruitment Committed by a Syndicate.51
By issuing the writ of preliminary injunction against the
petitioners sans any evidence, the trial court frustrated, albeit
temporarily, the prosecution of illegal recruiters and allowed them
to continue victimizing hapless and innocent people desiring to
obtain employment abroad as overseas workers, and blocked the
attainment of the salutary policies52 embedded in Rep. Act No.
8042. It bears stressing that overseas workers, land-based and
sea-based, had been remitting to the Philippines billions of
dollars which over the years had propped the economy.
In issuing the writ of preliminary injunction, the trial court
considered paramount the interests of the eleven licensed and
registered recruitment agencies represented by the respondent, and
capriciously overturned the presumption of the constitutionality of
the assailed provisions on the barefaced claim of the respondent
that the assailed provisions of Rep. Act No. 8042 are
unconstitutional. The trial court committed a grave abuse of its
discretion amounting to excess or lack of jurisdiction in issuing
the assailed order and writ of preliminary injunction. It is for
this reason that the Court issued a temporary restraining order
enjoining the enforcement of the writ of preliminary injunction
issued by the trial court.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
assailed decision of the appellate court is REVERSED AND SET ASIDE.
The Order of the Regional Trial Court dated August 21, 1995 in
Civil Case No. Q-95-24401 and the Writ of Preliminary Injunction
issued by it in the said case on August 24, 1995 are NULLIFIED. No
costs.
2. NARRA NICKEL MINING AND DEV. CORP. V. REDMONT CONSOLIDATED
MINES CORP G.R. NO. 195580 (2014)
Sometime in December 2006, respondent Redmont Consolidated Mines
Corp. (Redmont), a domestic corporation organized and existing
under Philippine laws, took interest in mining and exploring
certain areas of the province of Palawan. After inquiring with the
Department of Environment and Natural Resources (DENR), it learned
that the areas where it wanted to undertake exploration and mining
activities where already covered by Mineral Production Sharing
Agreement (MPSA) applications of petitioners Narra, Tesoro and
McArthur.
Petitioner McArthur, through its predecessor-in-interest Sara
Marie Mining, Inc. (SMMI), filed an application for an MPSA and
Exploration Permit (EP) with the Mines and Geo-Sciences Bureau
(MGB), Region IV-B, Office of the Department of Environment and
Natural Resources (DENR).
Subsequently, SMMI was issued MPSA-AMA-IVB-153 covering an area
of over 1,782 hectares in Barangay Sumbiling, Municipality of
Bataraza, Province of Palawan and EPA-IVB-44 which includes an area
of 3,720 hectares in Barangay Malatagao, Bataraza, Palawan. The
MPSA and EP were then transferred to Madridejos Mining Corporation
(MMC) and, on November 6, 2006, assigned to petitioner
McArthur.2
Petitioner Narra acquired its MPSA from Alpha Resources and
Development Corporation and Patricia Louise Mining &
Development Corporation (PLMDC) which previously filed an
application for an MPSA with the MGB, Region IV-B, DENR on January
6, 1992. Through the said application, the DENR issued MPSA-IV-1-12
covering an area of 3.277 hectares in barangays Calategas and San
Isidro, Municipality of Narra, Palawan. Subsequently, PLMDC
conveyed, transferred and/or assigned its rights and interests over
the MPSA application in favor of Narra.
Another MPSA application of SMMI was filed with the DENR Region
IV-B, labeled as MPSA-AMA-IVB-154 (formerly EPA-IVB-47) over 3,402
hectares in Barangays Malinao and Princesa Urduja, Municipality of
Narra, Province of Palawan. SMMI subsequently conveyed, transferred
and assigned its rights and interest over the said MPSA application
to Tesoro.
On January 2, 2007, Redmont filed before the Panel of
Arbitrators (POA) of the DENR three (3) separate petitions for the
denial of petitioners applications for MPSA designated as
AMA-IVB-153, AMA-IVB-154 and MPSA IV-1-12.
In the petitions, Redmont 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. Redmont reasoned that since MBMI is a considerable
stockholder of petitioners, it was the driving force behind
petitioners filing of the MPSAs over the areas covered by
applications since it knows that it can only participate in mining
activities through corporations which are deemed Filipino citizens.
Redmont 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 their Answers, petitioners averred that they were qualified
persons under Section 3(aq) of Republic Act No. (RA) 7942 or the
Philippine Mining Act of 1995 which provided:
Sec. 3 Definition of Terms. As used in and for purposes of this
Act, the following terms, whether in singular or plural, shall
mean:
x x x x
(aq) "Qualified person" means any citizen of the Philippines
with capacity to contract, or a corporation, partnership,
association, or cooperative organized or authorized for the purpose
of engaging in mining, with technical and financial capability to
undertake mineral resources development and duly registered in
accordance with law at least sixty per cent (60%) of the capital of
which is owned by citizens of the Philippines: Provided, That a
legally organized foreign-owned corporation shall be deemed a
qualified person for purposes of granting an exploration permit,
financial or technical assistance agreement or mineral processing
permit.
Additionally, they stated that their nationality as applicants
is immaterial because they also applied for Financial or Technical
Assistance Agreements (FTAA) denominated as AFTA-IVB-09 for
McArthur, AFTA-IVB-08 for Tesoro and AFTA-IVB-07 for Narra, which
are granted to foreign-owned corporations. Nevertheless, they
claimed that the issue on nationality should not be raised since
McArthur, Tesoro and Narra are in fact Philippine Nationals as 60%
of their capital is owned by citizens of the Philippines. They
asserted that though MBMI owns 40% of the shares of PLMC (which
owns 5,997 shares of Narra),3 40% of the shares of MMC (which owns
5,997 shares of McArthur)4 and 40% of the shares of SLMC (which, in
turn, owns 5,997 shares of Tesoro),5 the shares of MBMI will not
make it the owner of at least 60% of the capital stock of each of
petitioners. They added that the best tool used in determining the
nationality of a corporation is the "control test," embodied in
Sec. 3 of RA 7042 or the Foreign Investments Act of 1991. They also
claimed that the POA of DENR did not have jurisdiction over the
issues in Redmonts petition since they are not enumerated in Sec.
77 of RA 7942. Finally, they stressed that Redmont has no
personality to sue them because it has no pending claim or
application over the areas applied for by petitioners.
On December 14, 2007, the POA issued a Resolution disqualifying
petitioners from gaining MPSAs. It held:
[I]t is clearly established that respondents are not qualified
applicants to engage in mining activities. On the other hand,
[Redmont] having filed its own applications for an EPA over the
areas earlier covered by the MPSA application of respondents may be
considered if and when they are qualified under the law. The
violation of the requirements for the issuance and/or grant of
permits over mining areas is clearly established thus, there is
reason to believe that the cancellation and/or revocation of
permits already issued under the premises is in order and open the
areas covered to other qualified applicants.
x x x x
WHEREFORE, the Panel of Arbitrators finds the Respondents,
McArthur Mining Inc., Tesoro Mining and Development, Inc., and
Narra Nickel Mining and Development Corp. as, DISQUALIFIED for
being considered as Foreign Corporations. Their Mineral Production
Sharing Agreement (MPSA) are hereby x x x DECLARED NULL AND
VOID.6
The POA considered petitioners as foreign corporations being
"effectively controlled" by MBMI, a 100% Canadian company and
declared their MPSAs null and void. In the same Resolution, it gave
due course to Redmonts EPAs. Thereafter, on February 7, 2008, the
POA issued an Order7 denying the Motion for Reconsideration filed
by petitioners.
Aggrieved by the Resolution and Order of the POA, McArthur and
Tesoro filed a joint Notice of Appeal8 and Memorandum of Appeal9
with the Mines Adjudication Board (MAB) while Narra separately
filed its Notice of Appeal10 and Memorandum of Appeal.11
In their respective memorandum, petitioners emphasized that they
are qualified persons under the law. Also, through a letter, they
informed the MAB that they had their individual MPSA applications
converted to FTAAs. McArthurs FTAA was denominated as AFTA-IVB-0912
on May 2007, while Tesoros MPSA application was converted to
AFTA-IVB-0813 on May 28, 2007, and Narras FTAA was converted to
AFTA-IVB-0714 on March 30, 2006.
Pending the resolution of the appeal filed by petitioners with
the MAB, Redmont filed a Complaint15 with the Securities and
Exchange Commission (SEC), seeking the revocation of the
certificates for registration of petitioners on the ground that
they are foreign-owned or controlled corporations engaged in mining
in violation of Philippine laws. Thereafter, Redmont filed on
September 1, 2008 a Manifestation and Motion to Suspend Proceeding
before the MAB praying for the suspension of the proceedings on the
appeals filed by McArthur, Tesoro and Narra.
Subsequently, on September 8, 2008, Redmont filed before the
Regional Trial Court of Quezon City, Branch 92 (RTC) a Complaint16
for injunction with application for issuance of a temporary
restraining order (TRO) and/or writ of preliminary injunction,
docketed as Civil Case No. 08-63379. Redmont prayed for the
deferral of the MAB proceedings pending the resolution of the
Complaint before the SEC.
But before the RTC can resolve Redmonts Complaint and
applications for injunctive reliefs, the MAB issued an Order on
September 10, 2008, finding the appeal meritorious. It held:
WHEREFORE, in view of the foregoing, the Mines Adjudication
Board hereby REVERSES and SETS ASIDE the Resolution dated 14
December 2007 of the Panel of Arbitrators of Region IV-B (MIMAROPA)
in POA-DENR Case Nos. 2001-01, 2007-02 and 2007-03, and its Order
dated 07 February 2008 denying the Motions for Reconsideration of
the Appellants. The Petition filed by Redmont Consolidated Mines
Corporation on 02 January 2007 is hereby ordered DISMISSED.17
Belatedly, on September 16, 2008, the RTC issued an Order18
granting Redmonts application for a TRO and setting the case for
hearing the prayer for the issuance of a writ of preliminary
injunction on September 19, 2008.
Meanwhile, on September 22, 2008, Redmont filed a Motion for
Reconsideration19 of the September 10, 2008 Order of the MAB.
Subsequently, it filed a Supplemental Motion for Reconsideration20
on September 29, 2008.
Before the MAB could resolve Redmonts Motion for Reconsideration
and Supplemental Motion for Reconsideration, Redmont filed before
the RTC a Supplemental Complaint21 in Civil Case No. 08-63379.
On October 6, 2008, the RTC issued an Order22 granting the
issuance of a writ of preliminary injunction enjoining the MAB from
finally disposing of the appeals of petitioners and from resolving
Redmonts Motion for Reconsideration and Supplement Motion for
Reconsideration of the MABs September 10, 2008 Resolution.
On July 1, 2009, however, the MAB issued a second Order denying
Redmonts Motion for Reconsideration and Supplemental Motion for
Reconsideration and resolving the appeals filed by petitioners.
Hence, the petition for review filed by Redmont before the CA,
assailing the Orders issued by the MAB. On October 1, 2010, the CA
rendered a Decision, the dispositive of which reads:
WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed
Orders, dated September 10, 2008 and July 1, 2009 of the Mining
Adjudication Board are reversed and set aside. The findings of the
Panel of Arbitrators of the Department of Environment and Natural
Resources that respondents McArthur, Tesoro and Narra are foreign
corporations is upheld and, therefore, the rejection of their
applications for Mineral Product Sharing Agreement should be
recommended to the Secretary of the DENR.
With respect to the applications of respondents McArthur, Tesoro
and Narra for Financial or Technical Assistance Agreement (FTAA) or
conversion of their MPSA applications to FTAA, the matter for its
rejection or approval is left for determination by the Secretary of
the DENR and the President of the Republic of the Philippines.
SO ORDERED.23
In a Resolution dated February 15, 2011, the CA denied the
Motion for Reconsideration filed by petitioners.
After a careful review of the records, the CA found that there
was doubt as to the nationality of petitioners when it realized
that petitioners had a common major investor, MBMI, a corporation
composed of 100% Canadians. Pursuant to the first sentence of
paragraph 7 of Department of Justice (DOJ) Opinion No. 020, Series
of 2005, adopting the 1967 SEC Rules which implemented the
requirement of the Constitution and other laws pertaining to the
exploitation of natural resources, the CA used the "grandfather
rule" to determine the nationality of petitioners. It provided:
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, 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. Thus, if 100,000
shares are registered in the name of a corporation or partnership
at least 60% of the capital stock or capital, respectively, of
which belong to Filipino citizens, all of the shares shall be
recorded as owned by Filipinos. But if less than 60%, or say, 50%
of the capital stock or capital of the corporation or partnership,
respectively, belongs to Filipino citizens, only 50,000 shares
shall be recorded as belonging to aliens.24 (emphasis supplied)
In determining the nationality of petitioners, the CA looked
into their corporate structures and their corresponding common
shareholders. Using the grandfather rule, the CA discovered that
MBMI in effect owned majority of the common stocks of the
petitioners as well as at least 60% equity interest of other
majority shareholders of petitioners through joint venture
agreements. The CA found that through a "web of corporate layering,
it is clear that one common controlling investor in all mining
corporations involved x x x is MBMI."25 Thus, it concluded that
petitioners McArthur, Tesoro and Narra are also in partnership
with, or privies-in-interest of, MBMI.
Furthermore, the CA viewed the conversion of the MPSA
applications of petitioners into FTAA applications suspicious in
nature and, as a consequence, it recommended the rejection of
petitioners MPSA applications by the Secretary of the DENR.
With regard to the settlement of disputes over rights to mining
areas, the CA pointed out that the POA has jurisdiction over them
and that it also has the power to determine the of nationality of
petitioners as a prerequisite of the Constitution prior the
conferring of rights to "co-production, joint venture or
production-sharing agreements" of the state to mining rights.
However, it also stated that the POAs jurisdiction is limited only
to the resolution of the dispute and not on the approval or
rejection of the MPSAs. It stipulated that only the Secretary of
the DENR is vested with the power to approve or reject applications
for MPSA.
Finally, the CA upheld the findings of the POA in its December
14, 2007 Resolution which considered petitioners McArthur, Tesoro
and Narra as foreign corporations. Nevertheless, the CA determined
that the POAs declaration that the MPSAs of McArthur, Tesoro and
Narra are void is highly improper.
While the petition was pending with the CA, Redmont filed with
the Office of the President (OP) a petition dated May 7, 2010
seeking the cancellation of petitioners FTAAs. The OP rendered a
Decision26 on April 6, 2011, wherein it canceled and revoked
petitioners FTAAs for violating and circumventing the "Constitution
x x x[,] the Small Scale Mining Law and Environmental Compliance
Certificate as well as Sections 3 and 8 of the Foreign Investment
Act and E.O. 584."27 The OP, in affirming the cancellation of the
issued FTAAs, agreed with Redmont stating that petitioners
committed violations against the abovementioned laws and failed to
submit evidence to negate them. The Decision further quoted the
December 14, 2007 Order of the POA focusing on the alleged
misrepresentation and claims made by petitioners of being domestic
or Filipino corporations and the admitted continued mining
operation of PMDC using their locally secured Small Scale Mining
Permit inside the area earlier applied for an MPSA application
which was eventually transferred to Narra. It also agreed with the
POAs estimation that the filing of the FTAA applications by
petitioners is a clear admission that they are "not capable of
conducting a large scale mining operation and that they need the
financial and technical assistance of a foreign entity in their
operation, that is why they sought the participation of MBMI
Resources, Inc."28 The Decision further quoted:
The filing of the FTAA application on June 15, 2007, during the
pendency of the case only demonstrate the violations and lack of
qualification of the respondent corporations to engage in mining.
The filing of the FTAA application conversion which is allowed
foreign corporation of the earlier MPSA is an admission that indeed
the respondent is not Filipino but rather of foreign nationality
who is disqualified under the laws. Corporate documents of MBMI
Resources, Inc. furnished its stockholders in their head office in
Canada suggest that they are conducting operation only through
their local counterparts.29
The Motion for Reconsideration of the Decision was further
denied by the OP in a Resolution30 dated July 6, 2011. Petitioners
then filed a Petition for Review on Certiorari of the OPs Decision
and Resolution with the CA, docketed as CA-G.R. SP No. 120409. In
the CA Decision dated February 29, 2012, the CA affirmed the
Decision and Resolution of the OP. Thereafter, petitioners appealed
the same CA decision to this Court which is now pending with a
different division.
Thus, the instant petition for review against the October 1,
2010 Decision of the CA. Petitioners put forth the following errors
of the CA:
I.
The Court of Appeals erred when it did not dismiss the case for
mootness despite the fact that the subject matter of the
controversy, the MPSA Applications, have already been converted
into FTAA applications and that the same have already been
granted.
II.
The Court of Appeals erred when it did not dismiss the case for
lack of jurisdiction considering that the Panel of Arbitrators has
no jurisdiction to determine the nationality of Narra, Tesoro and
McArthur.
III.
The Court of Appeals erred when it did not dismiss the case on
account of Redmonts willful forum shopping.
IV.
The Court of Appeals ruling that Narra, Tesoro and McArthur are
foreign corporations based on the "Grandfather Rule" is contrary to
law, particularly the express mandate of the Foreign Investments
Act of 1991, as amended, and the FIA Rules.
V.
The Court of Appeals erred when it applied the exceptions to the
res inter alios acta rule.
VI.
The Court of Appeals erred when it concluded that the conversion
of the MPSA Applications into FTAA Applications were of "suspicious
nature" as the same is based on mere conjectures and surmises
without any shred of evidence to show the same.31
We find the petition to be without merit.
This case not moot and academic
The claim of petitioners that the CA erred in not rendering the
instant case as moot is without merit.
Basically, 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."32 Thus, the courts "generally decline
jurisdiction over the case or dismiss it on the ground of
mootness."33
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 (David), 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.34
All of the exceptions stated above are present in the instant
case. We of this Court note that a grave violation of the
Constitution, specifically Section 2 of Article XII, is being
committed by a foreign corporation right under our countrys nose
through a myriad of corporate layering under different, allegedly,
Filipino corporations. The intricate corporate layering utilized by
the Canadian company, MBMI, is of exceptional character and
involves paramount public interest since it undeniably affects the
exploitation of our Countrys natural resources. The corresponding
actions of petitioners during the lifetime and existence of the
instant case raise questions as what principle is to be applied to
cases with similar issues. No definite ruling on such principle has
been pronounced by the Court; hence, the disposition of the issues
or errors in the instant case will serve as a guide "to the bench,
the bar and the public."35 Finally, the instant case is capable of
repetition yet evading review, since the Canadian company, MBMI,
can keep on utilizing dummy Filipino corporations through various
schemes of corporate layering and conversion of applications to
skirt the constitutional prohibition against foreign mining in
Philippine soil.
Conversion of MPSA applications to FTAA applications
We shall discuss the first error in conjunction with the sixth
error presented by petitioners since both involve the conversion of
MPSA applications to FTAA applications. Petitioners propound that
the CA erred in ruling against them since the questioned MPSA
applications were already converted into FTAA applications; thus,
the issue on the prohibition relating to MPSA applications of
foreign mining corporations is academic. Also, petitioners would
want us to correct the CAs finding which deemed the aforementioned
conversions of applications as suspicious in nature, since it is
based on mere conjectures and surmises and not supported with
evidence.
We disagree.
The CAs analysis of the actions of petitioners after the case
was filed against them by respondent is on point. The changing of
applications by petitioners from one type to another just because a
case was filed against them, in truth, would raise not a few
sceptics eyebrows. What is the reason for such conversion? Did the
said conversion not stem from the case challenging their
citizenship and to have the case dismissed against them for being
"moot"? It is quite obvious that it is petitioners strategy to have
the case dismissed against them for being "moot."
Consider the history of this case and how petitioners responded
to every action done by the court or appropriate government agency:
on January 2, 2007, Redmont filed three separate petitions for
denial of the MPSA applications of petitioners before the POA. On
June 15, 2007, petitioners filed a conversion of their MPSA
applications to FTAAs. The POA, in its December 14, 2007
Resolution, observed this suspect change of applications while the
case was pending before it and held:
The filing of the Financial or Technical Assistance Agreement
application is a clear admission that the respondents are not
capable of conducting a large scale mining operation and that they
need the financial and technical assistance of a foreign entity in
their operation that is why they sought the participation of MBMI
Resources, Inc. The participation of MBMI in the corporation only
proves the fact that it is the Canadian company that will provide
the finances and the resources to operate the mining areas for the
greater benefit and interest of the same and not the Filipino
stockholders who only have a less substantial financial stake in
the corporation.
x x x x
x x x The filing of the FTAA application on June 15, 2007,
during the pendency of the case only demonstrate the violations and
lack of qualification of the respondent corporations to engage in
mining. The filing of the FTAA application conversion which is
allowed foreign corporation of the earlier MPSA is an admission
that indeed the respondent is not Filipino but rather of foreign
nationality who is disqualified under the laws. Corporate documents
of MBMI Resources, Inc. furnished its stockholders in their head
office in Canada suggest that they are conducting operation only
through their local counterparts.36
On October 1, 2010, the CA rendered a Decision which partially
granted the petition, reversing and setting aside the September 10,
2008 and July 1, 2009 Orders of the MAB. In the said Decision, the
CA upheld the findings of the POA of the DENR that the herein
petitioners are in fact foreign corporations thus a recommendation
of the rejection of their MPSA applications were recommended to the
Secretary of the DENR. With respect to the FTAA applications or
conversion of the MPSA applications to FTAAs, the CA deferred the
matter for the determination of the Secretary of the DENR and the
President of the Republic of the Philippines.37
In their Motion for Reconsideration dated October 26, 2010,
petitioners prayed for the dismissal of the petition asserting that
on April 5, 2010, then President Gloria Macapagal-Arroyo signed and
issued in their favor FTAA No. 05-2010-IVB, which rendered the
petition moot and academic. However, the CA, in a Resolution dated
February 15, 2011 denied their motion for being a mere "rehash of
their claims and defenses."38 Standing firm on its Decision, the CA
affirmed the ruling that petitioners are, in fact, foreign
corporations. On April 5, 2011, petitioners elevated the case to us
via a Petition for Review on Certiorari under Rule 45, questioning
the Decision of the CA. Interestingly, the OP rendered a Decision
dated April 6, 2011, a day after this petition for review was
filed, cancelling and revoking the FTAAs, quoting the Order of the
POA and stating that petitioners are foreign corporations since
they needed the financial strength of MBMI, Inc. in order to
conduct large scale mining operations. The OP Decision also based
the cancellation on the misrepresentation of facts and the
violation of the "Small Scale Mining Law and Environmental
Compliance Certificate as well as Sections 3 and 8 of the Foreign
Investment Act and E.O. 584."39 On July 6, 2011, the OP issued a
Resolution, denying the Motion for Reconsideration filed by the
petitioners.
Respondent Redmont, in its Comment dated October 10, 2011, made
known to the Court the fact of the OPs Decision and Resolution. In
their Reply, petitioners chose to ignore the OP Decision and
continued to reuse their old arguments claiming that they were
granted FTAAs and, thus, the case was moot. Petitioners filed a
Manifestation and Submission dated October 19, 2012,40 wherein they
asserted that the present petition is moot since, in a remarkable
turn of events, MBMI was able to sell/assign all its
shares/interest in the "holding companies" to DMCI Mining
Corporation (DMCI), a Filipino corporation and, in effect, making
their respective corporations fully-Filipino owned.
Again, it is quite evident that petitioners have been trying to
have this case dismissed for being "moot." Their final act, wherein
MBMI was able to allegedly sell/assign all its shares and interest
in the petitioner "holding companies" to DMCI, only proves that
they were in fact not Filipino corporations from the start. The
recent divesting of interest by MBMI will not change the stand of
this Court with respect to the nationality of petitioners prior the
suspicious change in their corporate structures. The new documents
filed by petitioners are factual evidence that this Court has no
power to verify.
The only thing clear and proved in this Court is the fact that
the OP declared that petitioner corporations have violated several
mining laws and made misrepresentations and falsehood in their
applications for FTAA which lead to the revocation of the said
FTAAs, demonstrating that petitioners are not beyond going against
or around the law using shifty actions and strategies. Thus, in
this instance, we can say that their claim of mootness is moot in
itself because their defense of conversion of MPSAs to FTAAs has
been discredited by the OP Decision.
Grandfather test
The main issue in this case is centered on the issue of
petitioners nationality, whether Filipino or foreign. In their
previous petitions, they had been adamant in insisting that they
were Filipino corporations, until they submitted their
Manifestation and Submission dated October 19, 2012 where they
stated the alleged change of corporate ownership to reflect their
Filipino ownership. Thus, there is a need to determine the
nationality of petitioner corporations.
Basically, 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, adopting
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, provides:
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, 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. Thus, if 100,000
shares are registered in the name of a corporation or partnership
at least 60% of the capital stock or capital, respectively, of
which belong to Filipino citizens, all of the shares shall be
recorded as owned by Filipinos. But if less than 60%, or say, 50%
of the capital stock or capital of the corporation or partnership,
respectively, belongs to Filipino citizens, only 50,000 shares
shall be counted as owned by Filipinos and the other 50,000 shall
be recorded as belonging to aliens.
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.
Prior to this recent change of events, petitioners were constant
in advocating the application of the "control test" under RA 7042,
as amended by RA 8179, otherwise known as the Foreign Investments
Act (FIA), rather than using the stricter grandfather rule. The
pertinent provision under Sec. 3 of the FIA provides:
SECTION 3. Definitions. - As used in this Act:
a.) The term Philippine national shall mean a citizen of the
Philippines; or a domestic partnership or association wholly owned
by the citizens of the Philippines; a corporation organized under
the laws of the Philippines of which at least sixty percent (60%)
of the capital stock outstanding and entitled to vote is wholly
owned by Filipinos or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent (60%) of the fund
will accrue to the benefit of Philippine nationals: Provided, That
were a corporation and its non-Filipino stockholders own stocks in
a Securities and Exchange Commission (SEC) registered enterprise,
at least sixty percent (60%) of the capital stock outstanding and
entitled to vote of each of both corporations must be owned and
held by citizens of the Philippines and at least sixty percent
(60%) of the members of the Board of Directors, in order that the
corporation shall be considered a Philippine national. (emphasis
supplied)
The grandfather rule, petitioners reasoned, has no leg to stand
on in the instant case since the definition of a "Philippine
National" under Sec. 3 of the FIA does not provide for it. They
further claim that the grandfather rule "has been abandoned and is
no longer the applicable rule."41 They also opined that the last
portion of Sec. 3 of the FIA admits the application of a "corporate
layering" scheme of corporations. Petitioners claim that the clear
and unambiguous wordings of the statute preclude the court from
construing it and prevent the courts use of discretion in applying
the law. They said that the plain, literal meaning of the statute
meant the application of the control test is obligatory.
We disagree. "Corporate layering" is admittedly allowed by the
FIA; but if it is used to circumvent the Constitution and pertinent
laws, then it becomes illegal. Further, the pronouncement of
petitioners that the grandfather rule has already been abandoned
must be discredited for lack of basis.
Art. XII, Sec. 2 of the Constitution provides:
Sec. 2. All lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be
alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the
State. The State may directly undertake such activities, or it may
enter into co-production, joint venture or production-sharing
agreements with Filipino citizens, or corporations or associations
at least sixty per centum of whose capital is owned by such
citizens. Such agreements may be for a period not exceeding
twenty-five years, renewable for not more than twenty-five years,
and under such terms and conditions as may be provided by law.
x x x x
The President may enter into agreements with Foreign-owned
corporations involving either technical or financial assistance for
large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the
economic growth and general welfare of the country. In such
agreements, the State shall promote the development and use of
local scientific and technical resources. (emphasis supplied)
The emphasized portion of Sec. 2 which focuses on the State
entering into different types of agreements for the exploration,
development, and utilization of natural resources with entities who
are deemed Filipino due to 60 percent ownership of capital is
pertinent to this case, since the issues are centered on the
utilization of our countrys natural resources or specifically,
mining. Thus, there is a need to ascertain the nationality of
petitioners since, as the Constitution so provides, such agreements
are only allowed corporations or associations "at least 60 percent
of such capital is owned by such citizens." The deliberations in
the Records of the 1986 Constitutional Commission shed light on how
a citizenship of a corporation will be determined:
Mr. BENNAGEN: Did I hear right that the Chairmans interpretation
of an independent national economy is freedom from undue foreign
control? What is the meaning of undue foreign control?
MR. VILLEGAS: Undue foreign control is foreign control which
sacrifices national sovereignty and the welfare of the Filipino in
the economic sphere.
MR. BENNAGEN: Why does it have to be qualified still with the
word "undue"? Why not simply freedom from foreign control? I think
that is the meaning of independence, because as phrased, it still
allows for foreign control.
MR. VILLEGAS: It will now depend on the interpretation because
if, for example, we retain the 60/40 possibility in the cultivation
of natural resources, 40 percent involves some control; not total
control, but some control.
MR. BENNAGEN: In any case, I think in due time we will propose
some amendments.
MR. VILLEGAS: Yes. But we will be open to improvement of the
phraseology.
Mr. BENNAGEN: Yes.
Thank you, Mr. Vice-President.
x x x x
MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local
or Filipino equity and foreign equity; namely, 60-40 in Section 3,
60-40 in Section 9, and 2/3-1/3 in Section 15.
MR. VILLEGAS: That is right.
MR. NOLLEDO: In teaching law, we are always faced with the
question: Where do we base the equity requirement, is it on the
authorized capital stock, on the subscribed capital stock, or on
the paid-up capital stock of a corporation? Will the Committee
please enlighten me on this?
MR. VILLEGAS: We have just had a long discussion with the
members of the team from the UP Law Center who provided us with a
draft. The phrase that is contained here which we adopted from the
UP draft is 60 percent of the voting stock.
MR. NOLLEDO: That must be based on the subscribed capital stock,
because unless declared delinquent, unpaid capital stock shall be
entitled to vote.
MR. VILLEGAS: That is right.
MR. NOLLEDO: Thank you.
With respect to an investment by one corporation in another
corporation, say, a corporation with 60-40 percent equity invests
in another corporation which is permitted by the Corporation Code,
does the Committee adopt the grandfather rule?
MR. VILLEGAS: Yes, that is the understanding of the
Committee.
MR. NOLLEDO: Therefore, we need additional Filipino capital?
MR. VILLEGAS: Yes.42 (emphasis supplied)
It is apparent that it is the intention of the framers of the
Constitution to apply the grandfather rule in cases where corporate
layering is present.
Elementary in statutory construction is when there is conflict
between the Constitution and a statute, the Constitution will
prevail. In this instance, specifically pertaining to the
provisions under Art. XII of the Constitution on National Economy
and Patrimony, Sec. 3 of the FIA will have no place of application.
As decreed by the honorable framers of our Constitution, the
grandfather rule prevails and must be applied.
Likewise, paragraph 7, DOJ Opinion No. 020, Series of 2005
provides:
The above-quoted SEC Rules provide for the manner of calculating
the Filipino interest in a corporation for purposes, among others,
of determining compliance with nationality requirements (the
Investee Corporation). Such manner of computation is necessary
since the shares in the Investee Corporation may be owned both by
individual stockholders (Investing Individuals) and by corporations
and partnerships (Investing Corporation). The said rules thus
provide for the determination of nationality depending on the
ownership of the Investee Corporation and, in certain instances,
the Investing Corporation.
Under the above-quoted SEC Rules, there are two cases in
determining the nationality of the Investee Corporation. The first
case is the liberal rule, later coined by the SEC as the Control
Test in its 30 May 1990 Opinion, and pertains to the portion in
said Paragraph 7 of the 1967 SEC Rules which states, (s)hares
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. Under the liberal Control Test, there
is no need to further trace the ownership of the 60% (or more)
Filipino stockholdings of the Investing Corporation since a
corporation which is at least 60% Filipino-owned is considered as
Filipino.
The second case is the Strict Rule or the Grandfather Rule
Proper and pertains to the portion in said 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 Cor