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