Marcopper Mining Corporation vs. Philippine Associated Smelting and Refining Corporation

[SEC-SICD * CASE NO. 05-5340. April 11, 2000.] MARCOPPER MINING CORPORATION , petitioner , vs . PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION , respondent . MARUBENI CORPORATION , intervenor . D E C I S I O N Submitted to this hearing panel for decision is the instant case for Injunction with application for the ancillary remedies of Temporary Restraining Order (TRO) and Writ of Preliminary Injunction filed by petitioner Marcopper Mining Corporation ("Marcopper") against Philippine Associated Smelting And Refining Corporation (PASAR). Marcopper filed this suit in order to enjoin PASAR from holding the special meetings of its Board of Directors and Stockholders both scheduled on 17 May 1995, and any meeting thereafter for the purpose of considering the proposed amendments to PASAR's Articles of Incorporation in order to legally effect the conversion of its existing preferred shares to common "B" shares. Petitioner claims that these special meetings were in furtherance of a conspiracy between and among PASAR, National Development Corporation (NDC), International Finance Corporation (IFC), the Development Bank of the Philippines (DBP) and the Japanese trading companies, to convert PASAR's debt into equity for the purpose of effecting the transfer and control of PASAR's copper smelter from the hands of the Filipinos into the control of the Japanese trading companies, to the damage and prejudice not only of the petitioner and other local mining companies who are stockholders of PASAR but also of PASAR itself and the Filipino nation. Secondly, petitioner wants this Commission to order PASAR to recover from the three Japanese companies, namely: Marubeni Corporation ("Marubeni"), Sumitomo Corporation, and Itochu Corporation, excess dividends allegedly paid to them. With prior leave from this Commission, Marubeni was allowed to intervene in this case. Like PASAR, Marubeni as intervenor filed its own motion to dismiss this case on the grounds of lack of cause of action and jurisdiction. However, both motions were denied. IDcTEA After the respective Answers of the respondent and intervenor were filed, various hearings were conducted on Marcopper's application for preliminary injunction where evidence, both documentary and testimonial were presented by the parties. While the proceedings in this case were going on, the Asset Privatization Trust (APT) offered for sale through public bidding 90% of NDC's total shareholdings in PASAR, together with the National Government's receivables from it, as well as the properties used as collateral for the government-guaranteed loan obligations of PASAR, all in one package, on an "as is, where is" basis. Eventually, on May 3, 1999 in a public bidding which was conducted, the consortium of Carlos G. Dominguez and Copper Smelting Investments Limited submitted the highest bid for the "package". Upon APT's endorsement, the government's Committee on Privatization (COP) approved the sale of NDC's interest in PASAR to the consortium of Dominguez. This development in effect rendered moot and academic the other case filed by Marcopper against PASAR and NDC, docketed as SEC Case No. 01-95-4961 , resulting in the dismissal thereof on March 15, 2000. In the light of the foregoing circumstances and on the basis of the pleadings filed thus far, the issues to be resolved are: (a) whether or not petitioner is entitled to a writ of preliminary injunction to restrain the holding of the board and stockholders meeting of PASAR to discuss the conversion of preferred shares held by Marubeni and the other Japanese trading firms, to common shares, and (b) whether or not payments received by the Japanese agents were cash dividends and not commissions. SCHIac PASAR and Marubeni both argue that the planned conversion of preferred shares into common "B" shares is pursuant to the Subscription Agreement between PASAR and Marubeni, et al., dated September 4, 1980 which provide for such conversion. This convertibility feature of preferred shares was in fact copied into PASAR's Amended Articles of Incorporation which was approved by this Commission. Therefore, this Commission finds that contrary to the fears of Marcopper, the proposed amendments to PASAR'S articles of incorporation have nothing to do with transferring control of PASAR's copper smelter to the Japanese trading companies. In fact, the proposed conversion of the preferred shares into common "B" shares is authorized under PASAR's amended articles of incorporation. Hence, Marcopper has no credible basis to enjoin and prevent the same. Moreover, the issue on the alleged conversion of PASAR's debt into equity under the NDC-proposed privatization and rehabilitation plan which, according to Marcopper, is intended to effect the transfer and control of PASAR to the Japanese trading companies, has been resolved by this Commission already in its Order dated March 15, 2000 in SEC Case No. 01-95-4961 In said Order, this Commission held that the issue has been rendered moot and academic by the sale through public bidding of 90% of NDC's shares in PASAR to the consortium headed by Carlos G. Dominguez and Copper Smelting Investment Ltd. On Marcopper's claim for refund from Marubeni of what is alleged to be excess cash dividends paid by PASAR to the latter, evidence shows that the payments remitted by PASAR to Marubeni from 1994 to 1997 were commissions due the latter pursuant to the Agency Agreement dated September 4, 1980 between them. In fact, Marcopper's claim is belied by the testimony of its own witness, Ms. Betty Siy, who testified that PASAR declared dividends only twice from 1981 to 1997, and those were in 1988 and 1990. This hearing panel notes that Marcopper did not adduce any other evidence to prove that the amounts released to Marubeni were dividends and not agency commission. Its findings, therefore, are for PASAR and Marubeni in that the amounts paid by the former to the latter during the years 1984 to 1997 were commissions arising from the Agency Agreement between them. WHEREFORE, in view of the foregoing considerations, this hearing panel finds, and so holds, that petitioner is not entitled to the relief prayed for in its petition. Consequently, this case is hereby DISMISSED, for lack of merit. SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. (SGD.) JAMES K. ABUGAN Hearing Officer Hearing Officer (SGD.) MALTHIE G. MILITAR Hearing Officer