‘Grandfather Rule’ Rules When the Required 60-

40 Filipino-foreign Equity Ownership is In

Doubt (Narra vs Redmont, 2014)

Narra Nickel Mining vs Redmont

Case Digest GR 185590, Apr 21 2014
Facts:
Redmont is a domestic corporation interested in the mining and exploration of some areas in
Palawan. Upon learning that those areas were covered by MPSA applications of other three
(allegedly Filipino) corporations – Narra, Tesoro, and MacArthur, it filed a petition before the Panel of
Arbitrators of DENR seeking to deny their permits on the ground that these corporations are in reality
foreign-owned. MBMI, a 100% Canadian corporation, owns 40% of the shares of PLMC (which
owns 5,997 shares of Narra), 40% of the shares of MMC (which owns 5,997 shares of McArthur)
and 40% of the shares of SLMC (which, in turn, owns 5,997 shares of Tesoro).

Aside from the MPSA, the three corporations also applied for FTAA with the Office of the
President. In their answer, they countered that (1) the liberal Control Test must be used in
determining the nationality of a corporation as based on Sec 3 of the Foreign Investment Act
– which as they claimed admits of corporate layering schemes, and that (2) the nationality question
is no longer material because of their subsequent application for FTAA.

Commercial / Political Law

Issue 1: W/N the Grandfather Rule must be applied in this case

Remedial Law
Issue 2: W/N the case has become moot as a result of the MPSA conversion to FTAA

Narra Nickel Mining vs Redmont

G.R. No. 195580, January 28, 2015
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Facts:
Narra and its co-petitioner corporations – Tesoro and MacArthur, filed a motion before the SC to
reconsider its April 21, 2014 Decision which upheld the denial of their MPSA applications. The SC
affirmed the CA ruling that there is a doubt to their nationality, and that in applying the Grandfather
Rule, the finding is that MBMI, a 100% Canadian-owned corporation, effectively owns 60% of the
common stocks of petitioners by owning equity interests of the petitioners’ other majority corporate
shareholders. Narra, Tesoro and MacArthur argued that the application of the Grandfather Rule to
determine their nationality is erroneous and allegedly without basis in the Constitution, the FIA, the
Philippine Mining Act, and the Rules issued by the SEC. These laws and rules supposedly espouse
the application of the Control Test in verifying the Philippine nationality of corporate entities for
purposes of determining compliance with Sec. 2, Art. XII of the Constitution that only corporations or
associations at least 60% of whose capital is owned by such Filipino citizens may enjoy certain
rights and privileges, like the exploration and development of natural resources.
Issue: W/N the application by the SC of the grandfather resulted to the abandonment of the ‘control test’
Held:
No. The ‘control test’ can be applied jointly with the Grandfather Rule to determine the observance
of foreign ownership restriction in nationalized economic activities. The Control Test and the
Grandfather Rule are not incompatible ownership-determinant methods that can only be applied
alternative to each other. Rather, these methods can, if appropriate, be used cumulatively in the
determination of the ownership and control of corporations engaged in fully or partly nationalized
activities, as the mining operation involved in this case or the operation of public utilities.

The Grandfather Rule, standing alone, should not be used to determine the Filipino ownership and
control in a corporation, as it could result in an otherwise foreign corporation rendered qualified to
perform nationalized or partly nationalized activities. Hence, it is only when the Control Test is first
complied with that the Grandfather Rule may be applied. Put in another manner, if the subject
corporation’s Filipino equity falls below the threshold 60%, the corporation is immediately considered
foreign-owned, in which case, the need to resort to the Grandfather Rule disappears.

In this case, using the ‘control test’, Narra, Tesoro and MacArthur appear to have satisfied the 60-40
equity requirement. But the nationality of these corporations and the foreign-owned common
investor that funds them was in doubt, hence, the need to apply the Grandfather Rule. ##
Government May be Estopped When Injustice is
Perpetrated As a Result of Its Own Acts (SM
Land vs BCDA, 2015)
SM Land vs BCDA
GR 203655 March 18, 2015 En Banc
GR 203655 August 13, 2014
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Facts:
When BCDA opened for disposition its Bonifacio South Property pursuant to RA 7227, SMLI offered
to undertake the development of said property by submitting a succession of unsolicited proposals to
BCDA. BCDA then entered into negotiations with SMLI until the BCDA finally accepted the terms of
the final unsolicited proposal. Their agreement was thereafter reduced into writing through the
issuance of the Certification of Successful Negotiations in 2010.

It was agreed that BCDA accepted SMLI’s unsolicited proposal and declared SMLI eligible to enter
into the proposed Joint Venture activity. It also “agreed to subject SMLI’s Original Proposal to
Competitive Challenge pursuant to NEDA Joint Venture Guidelines, which competitive challenge
process shall be immediately implemented following the Terms of Reference. Moreover, said
Certification provides that the BCDA shall commence the activities for the solicitation for comparative
proposals. Years later however, the BCDA through the issuance of Supplemental Notice No.
5 terminated the competitive challenge for the selection of BCDA’s joint venture partner for the
development of a portion of Fort Bonifacio.

SMLI, through a petition for CPM, argued that BCDA’s unilateral termination of the competitive
challenge is a violation of SMLI’s rights as an original proponent and constitutes abandonment of
BCDA’s contractual obligations. BCDA, on the other hand, responded that it is justifiable since
NEDA JV Guidelines is a mere guideline and not a law, and that the Government has a right to
terminate the competitive challenge when the terms are disadvantageous to public interest.

Issue 1: W/N the NEDA JV Guidelines has the binding effect and force of law
Yes. Administrative issuances, such as the NEDA JV Guidelines, duly promulgated pursuant to the
rule-making power granted by statute, have the force and effect of law. Being an issuance in
compliance with an executive edict, the NEDA JV Guidelines has the same binding effect as if it
were issued by the President himself, who parenthetically is a member of NEDA. As such, no
agency or instrumentality covered by the JV Guidelines can validly deviate from the mandatory
procedures set forth therein, even if the other party acquiesced therewith or not.

Read more

Issue 2: W/N BCDA committed grave abuse of discretion in issuing Supplemental Notice No. 5
Yes. Being an instrumentality of the government, it is incumbent upon the BCDA to abide by the
laws, rules and regulations, and perform its obligations with utmost good faith. It cannot, under the
guise of protecting the public interest, disregard the clear mandate of the NEDA JV Guidelines and
unceremoniously disregard the very commitments it made to the prejudice of the SMLI that
innocently relied on such promises.

It is in instances such as this––where an agency, instrumentality or officer of the government evades

the performance of a positive duty enjoined by law–wherein the exercise of judicial power is
warranted. Consistent with the Court’s solemn obligation to afford protection by ensuring that grave
abuses of discretion on the part of a branch or instrumentality of the government do not go
unchecked, the Petition for Certiorari must be granted and the corresponding injunctive relief be
made permanent.

Issue 3: W/N the BCDA is in estoppel

Yes. Although as a general rule, the government cannot be estopped by the mistakes or errors of its
officials or agents, such will not apply if injustice is perpetrated.

To allow BCDA to renege on its statutory and contractual obligations would cause grave prejudice to
petitioner, who already invested time, effort, and resources in the study and formulation of the
proposal, in the adjustment thereof, as well as in the negotiations. To permit BCDA to suddenly
cancel the procurement process and strip SMLI of its earlier-enumerated rights as an Original
Proponent at this point––after the former has already benefited from SMLI’s proposal through the
acquisition of information and ideas for the development of the subject property––would unjustly
enrich the agency through the efforts of petitioner. What is worse, to do so would be contrary to
BCDA’s representations and assurances that it will respect SMLI’s earlier acquired rights, which
statements SMLI reasonably and innocently believed. All told, the BCDA’s acceptance of the
unsolicited proposal and the successful in-depth negotiation cannot be written off as mere mistake or
error that respondents claim to be reversible and not susceptible to the legal bar of estoppel. The
subsequent cancellation of the Competitive Challenge on grounds that infringe the contractual rights
of SMLI and violate the NEDA JV Guidelines cannot be shrouded with legitimacy by invoking the
estoppel rule. ##
Just Compensation Should be Determined at the
Time of Judicial Demand When Property Was
Illegally Taken (DPWH vs Heracleo, 2015
Velasco DISSENT)
Secretary of DPWH vs Heracleo
Case Digest GR 179334 Apr 21 2015
Facts:
Spouses “Heracleo” are the co-owners of a land which is among the private properties traversed by
MacArthur Highway in Bulacan, a government project undertaken sometime in 1940. The taking
was taken without the requisite expropriation proceedings and without their consent. In 1994,
Heracleo demanded the payment of the fair market value of the property. The DPWH offered to pay
0.70 centavos per sqm., as recommended by the appraiser committee of Bulacan. Unsatisfied,
Heracleo filed a complaint for recovery of possession with damages. Favorable decisions were
rendered by the RTC and the CA, with valuation of P 1,500 per sqm and 6% interest per annum from
the time of filing of the until full payment. The SC Division reversed the CA ruling and held that
computation should be based at the time the property was taken in 1940, which is 0.70 per sqm. But
because of the contrasting opinions of the members of the Division and transcendental importance
of the issue, the case was referred to the En Banc for resolution.

Issue 1: W/N the taking of private property without due process should be nullified
No. The government’s failure to initiate the necessary expropriation proceedings prior to actual
taking cannot simply invalidate the State’s exercise of its eminent domain power, given that the property
subject of expropriation is indubitably devoted for public use, and public policy imposes upon the
public utility the obligation to continue its services to the public. To hastily nullify said expropriation in
the guise of lack of due process would certainly diminish or weaken one of the State’s inherent
powers, the ultimate objective of which is to serve the greater good.
Thus, the non-filing of the case for expropriation will not necessarily lead to the return of the property
to the landowner. What is left to the landowner is the right of compensation.

Issue 2: W/N compensation is based on the market value of the property at the time of taking
Yes. While it may appear inequitable to the private owners to receive an outdated valuation, the
long-established rule is that the fair equivalent of a property should be computed not at the time of
payment, but at the time of taking. This is because the purpose of ‘just compensation’ is not to
reward the owner for the property taken but to compensate him for the loss thereof. The owner should
be compensated only for what he actually loses, and what he loses is the actual value of the
property at the time it is taken.
Issue 3: W/N the principle of equity should be applied in this case
No. The Court must adhere to the doctrine that its first and fundamental duty is the application of the
law according to its express terms, interpretation being called for only when such literal application is
impossible. To entertain other formula for computing just compensation, contrary to those
established by law and jurisprudence, would open varying interpretation of economic policies – a
matter which this Court has no competence to take cognizance of. Equity and equitable principles
only come into full play when a gap exists in the law and jurisprudence.

Velasco Dissent:
The State’s power of eminent domain is not absolute; the Constitution is clear that no person shall
be deprived of life, liberty and property without due process of law. As such, failure of the
government to institute the necessary proceedings should lead to failure of taking an individual’s
property. In this case, since the property was already taken, the complainants must be equitably
compensated for the loss thereof.

For purposes of “just” compensation, the value of the land should be determined from the time the
property owners filed the initiatory complaint, earning interest therefrom. To hold otherwise would
validate the State’s act as one of expropriation in spite of procedural infirmities which, in turn, would
amount to unjust enrichment on its part. To continue condoning such acts would be licensing the
government to continue dispensing with constitutional requirements in taking private property.
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Stock Distribution Scheme Consistent with the

Constitution’s Agrarian Reform (Hacienda
Luisita vs PARC, 2011)
Hacienda Luisita vs PARC
Case Digest GR 171101 July 5 2011 Nov 22 2011
Facts:
In 1988, RA 6657 or the CARP law was passed. It is a program aimed at redistributing public and
private agricultural lands to farmers and farmworkers who are landless. One of the lands covered by
this law is the Hacienda Luisita, a 6,443-hectare mixed agricultural-industrial-residential expanse
straddling several municipalities of Tarlac. Hacienda Luisita was bought in 1958 from the Spanish
owners by the Tarlac Development Corporation (TADECO), which is owned and/or controlled by
Jose Cojuanco Sr., Group. Back in 1980, the Martial Law administration filed an expropriation suit
against TADECO to surrender the Hacienda to the then Ministry of Agrarian Reform (now DAR) so
that the land can be distributed to the farmers at cost. The RTC rendered judgment ordering
TADECO to surrender Hacienda Luisita to the MAR.

In 1988, the OSG moved to dismiss the government’s case against TADECO. The CA dismissed it,
but the dismissal was subject to the condition that TADECO shall obtain the approval of FWB (farm
worker beneficiaries) to the SDP (Stock Distribution Plan) and to ensure its implementation.

Sec 31 of the CARP Law allows either land transfer or stock transfer as two alternative modes in
distributing land ownership to the FWBs. Since the stock distribution scheme is the preferred option
of TADECO, it organized a spin-off corporation, the Hacienda Luisita Inc. (HLI), as vehicle to
facilitate stock acquisition by the farmers.

After conducting a follow-up referendum and revision of terms of the Stock Distribution Option
Agreement (SDOA) proposed by TADECO, the Presidential Agrarian Reform Council (PARC), led by
then DAR Secretary Miriam Santiago, approved the SDP of TADECO/HLI through Resolution 89-12-
2 dated Nov 21, 1989.
From 1989 to 2005, the HLI claimed to have extended those benefits to the farmworkers. Such claim
was subsequently contested by two groups representing the interests of the farmers – the HLI
Supervisory Group and the AMBALA. In 2003, each of them wrote letter petitions before the DAR
asking for the renegotiation of terms and/or revocation of the SDOA. They claimed that they haven’t
actually received those benefits in full, that HLI violated the terms, and that their lives haven’t really
improved contrary to the promise and rationale of the SDOA.

The DAR created a Special Task Force to attend to the issues and to review the terms of the SDOA
and the Resolution 89-12-2. Adopting the report and the recommendations of the Task Force, the
DAR Sec recommended to the PARC (1) the revocation of Resolution 89-12-2 and (2) the acquisition
of Hacienda Luisita through compulsory acquisition scheme. Consequently, the PARC revoked the
SDP of TADECO/HLI and subjected those lands covered by the SDP to the mandated land
acquisition scheme under the CARP law. These acts of the PARC was assailed by HLI via Rule 65.
On the other hand, FARM, an intervenor, asks for the invalidation of Sec. 31 of RA 6657, insofar as
it affords the corporation, as a mode of CARP compliance, to resort to stock transfer in lieu of
outright agricultural land transfer. For FARM, this modality of distribution is an anomaly to be
annulled for being inconsistent with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII
of the Constitution.
 Administrative Law
Issue 1: W/N PARC has the authority to revoke the Stock Distribution Plan or SDP

Constitutional Law
Issue 2: W/N the Court may exercise its power of judicial review over the constitutionality of Sec 31 of RA
6657

Statutory Construction
Issue 3: W/N Sec 31 of RA 6657 is consistent with the Constitution’s concept of agrarian reform

* The SC, through a resolution dated Nov 21 2011 of the motion for reconsideration filed by HLI,
affirmed the revocation of HLI’s SDP and the placing of Hacienda Luisita under the compulsory land
distribution scheme of the CARP law. It was also held that the date of taking was Nov 21 1989, when
the PARC, by Resolution 89-12-2, approved the SDP of HLI. ##

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Mere Similarity in Classification Not Equate

with Relatedness of Goods or Services (Taiwan
vs Kolin Electronics, 2015)
Taiwan Kolin vs Kolin Electronics
Case Digest GR 209843 March 25 2015
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Facts:
Taiwan Kolin Corp sought to register the trademark “KOLIN” in Class 9 on the following combination
of goods: television sets, cassette recorder, VCD Amplifiers, camcorders and other audio/video
electronic equipment, flat iron, vacuum cleaners, cordless handsets, videophones, facsimile
machines, teleprinters, cellular phones and automatic goods vending machine.

Kolin Electronics opposed the application on the ground that the trademark “KOLIN” is identical, if
not confusingly similar, with its registered trademark “KOLIN” which covers the following products
under Class 9 of the Nice Classification (NCL): automatic voltage regulator, converter, recharger,
stereo booster, AC-DC regulated power supply, step-down transformer, and PA amplified AC-DC.
Kolin Electronics argued that the products are not only closely-related because they fall under the
same classification, but also because they are inherently similar for being electronic products and
are plugged into electric sockets and perform a useful function.

Issue: W/N the products are closely-related

Held:
No, the products are not related and the use of the trademark KOLIN on them would not likely cause
confusion. To confer exclusive use of a trademark, emphasis should be on the similarity or
relatedness of the goods and/or services involved and not on the arbitrary classification or general
description of their properties or characteristics.
First, products classified under Class 9 can be further classified into five categories. Accordingly, the
goods covered by the competing marks between Taiwan Kolin and Kolin Electronics fall under
different categories. Taiwan Kolin’s goods are categorized as audio visual equipments, while Kolin
Electronics’ goods fall under devices for controlling the distribution and use of electricity. Thus, it is
erroneous to assume that all electronic products are closely related and that the coverage of one
electronic product necessarily precludes the registration of a similar mark over another.

Second, the ordinarily intelligent buyer is not likely to be confused. The distinct visual and aural
differences between the two trademarks “KOLIN”, although appear to be minimal, are sufficient to
distinguish between one brand or another. The casual buyer is predisposed to be more cautious,
discriminating, and would prefer to mull over his purchase because the products involved are various
kind of electronic products which are relatively luxury items and not considered affordable. They are
not ordinarily consumable items such as soy sauce, ketsup or soap which are of minimal cost.
Hence, confusion is less likely. ##

Illegal Termination is Inconsistent with

Resignation (Fonterra vs Largado, 2015)
Fonterra Brand Phils, Inc. vs Largado and Estrellado
Case Digest GR 205300 March 18 2015
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Facts:
Fonterra contracted the services of Zytron to provide for trade merchandising representatives
(TMRs) in the marketing and promotion of its milk and dairy products. Among those TMRs whose
services were engaged are Largado and Estrellado, who are the respondents in this case. After 4
years, Fonterra terminated its contract with Zytron and entered into an agreement for manpower
supply with AC Sicat. Desirous of continuing their work as TMRs in Fonterra, Largado and Estrellado
submitted their job application with AC Sicat, a legitimate job contracting company. AC Sicat hired
their services as TMRs for a term of 5 months.

When their 5-month contract with AC Sicat were about to expire, they allegedly sought renewal
thereof, which was allegedly refused. This prompted them to file for complaints of illegal dismissal,
regularization, nonpayment of service incentive leave, 13thmonth pay, and actual and moral
damages against Fonterra, Zytron and AC Sicat.

Issue 1: W/N Largado and Estrellado were illegally terminated by Zytron

No. When Largado and Estrella refused to renew their contract with Zytron by applying with AC
Sicat, they effectively resigned from Zytron. Hence, they were not illegally dismissed because they
voluntary terminated their employment with the latter.
Issue 2: W/N Largado and Estrellado were illegally terminated by AC Sicat
No. There is no illegal dismissal to speak of since AC Sicat is a legitimate job contractor and their
termination is merely brought about by the expiration of their employment contracts with AC Sicat.
First, Largado and Estrellado were hired as fixed-term or project employees of AC Sicat. The
determining factor of such employment is not the duty of the employee but the day certain agreed
upon by the parties for the commencement and termination of the employment relationship. Second,
the non-renewal of their contracts by AC Sicat is a management prerogative, and failure of
respondents to prove that such was done in bad faith militates against their contention that they
were illegally dismissed.

Hence, the expiration of their contract with AC Sicat simply caused the natural cessation of their
fixed-term employment thereat. ##

Circumstantial Evidence Must Show Culpability

Belongs Only to the Accused to the Exclusion of
Others (Zabala vs People, 2015)
 Kyle Zabala vs People
Case Digest GR 210670 Jan 26 2015
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Facts:
Alas accused Zabala of theft. During the trial, Alas testified that he and Zabala were not only
neighbors, but kumpares as well, and would often invite the latter to drinking sessions inside his
house. At times, he would also call Zabala to repair his vehicle and allow Zabala to follow him to his
bedroom to get cash whenever spare parts are to be bought for the repair of his vehicle. One day
when he returned from work, he found that his P68k which he kept in an envelope inside his closet
was missing. There were only five persons living in the house that time, he together with his parents,
his 9-year old son, and his aunt.

Witness Pinon also testified that, being Zabala’s girlfriend, she were with him at the store which was
near Alas’ house at that time. She saw Zabala climb the fence, scale and enter Alas house, and
noticed that when he returned, he had a bulge in his pocket. Day after that, they went to Greenhills,
where Zabala bought two Nokia phones worth about P8,500.

Issue 1: W/N the corpus delicti of the crime was established in this case
No. In theft, corpus delicti has two elements, namely: (1) that the property was lost by the owner,
and (2) that it was lost by felonious taking.
First, nobody saw Zabala entered the room of Alas where the money was hidden. Pinon merely saw
that Zabala scaled the fence of Alas house and entered it. Second, all that Pinon saw was the bulge
in Zabala’s pocket; her testimony does not show that the bulge was the P68k which was supposedly
stolen. These testimonies failed to prove the fact that the P68k was lost and that Zabala unlawfully
took it. Hence, the evidence presented was not sufficient to prove the fact of the crime of theft.

Issue 2: W/N the circumstantial evidence presented is sufficient to prove Zabala’s guilt beyond
reasonable doubt
No. The rule in circumstantial evidence cases is that the evidence must exclude the possibility that
some other person committed the crime.
In this case, the prosecution failed to adduce evidence that at the time the theft was committed,
there was no other person inside the house of Alas, or that no other person could have taken the
money from the closet of Alas. They failed to prove that culpability could only belong to Zabala, and
not to some other person. Hence, Zabala must be acquitted in the absence of proof beyond
reasonable doubt. ##

Relevant Laws
Existence of a Priorly-Issued Title Must be
Established in Order to Grant Reconstitution
under RA 26 (Rep vs Sanchez, 2014)
Republic vs Heirs of Donato Sanchez
Case Digest GR 212388 Dec 10 2014
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Facts:
When Spouses Sanchez died intestate, their Heirs executed a deed of extrajudicial partition over a
lot of which owner’s copy of the OCT is missing. Since they cannot register the Deed without the
OCT, they sought for the reconstitution, pursuant to RA 26, of the said OCT. They alleged in their
petition that OCT 45361 covers a lot that was issued in the name of their predecessors-in-interest –
Spouses Sanchez – pursuant to Decree 418121 which was in relation to a court decision in 1930.
Among the evidences presented are: (1) a certification from the RD that the copies of the OCT and
the decree which issued it cannot be found among its records, (2) the court decision in 1930
adjudicating the lot in the name of spouses Sanchez, and (3) certified true copy of the Registrar’s
Index Card containing the notation that the OTC was listed under the name of one of the spouse
Sanchez. Since there is no copy of the OCT in the RD records, there was no certification from the
RD that the OCT was either lost or destroyed.

Issue 1: W/N reconstitution of OCT 45361 should be granted

No. Under RA 26, a petition for reconstitution of lost or destroyed title requires, as a condition
precedent, that a certificate of title has indeed been issued. Here, the court decision and the
Registrar’s Index Card containing the notation on OCT No. 45361 do not cite nor mention that
Decree No. 418121 was issued to support the issuance of the said OCT. Since there was no clear
and convincing evidence adduced to prove the existence of the OTC, RA 26 cannot apply.
For obvious reasons, reconstitution cannot be made on a title that never existed in the first place.

Issue 2: W/N reconstitution of OCT is proper when the only evidences presented to support its
existence are derivative titles
No. Assuming that there was sufficient evidence to prove the existence of the OCT considering the
totality of evidence presented, still, reconstitution of the OCT is not warranted. Under Sec 15 of RA
26, before a certificate of title which has been lost or destroyed may be reconstituted, it must first be
proved by the claimants that the certificate of title was still in force at the time it was lost or
destroyed, among others.
First, the mere existence of the derivative titles which contain the notations that “the name of the
registered owner of OCT 45361 is not available as per certification of the RD” clearly shows that the
OCT which the Heirs seek to be reconstituted is no longer in force, rendering the procedure, if
granted, a mere superfluity

Second, the necessary certification from the RD that said OCT was in force at the time it was lost or
destroyed is lacking. The presentation of alleged derivative titles will not suffice to replace this
certification because the titles do not authenticate the issuance of OCT No. 45361 having been
issued by the RD without any basis from its official records. Hence, the OCT cannot be reconstituted
because clearly it was no longer in force.

Notes:
The proper procedure when seeking the reconstitution of an Original Certificate of Title is to file a
petition for the cancellation of the decree, re-issuance of the decree and issuance of OCT pursuant
to the re-issued decree.

Lower Courts Must Observe Judicial Courtesy

When Issue is Pending Resolution By A Higher
Court (Nicart vs Titong, 2014)
Conrado Nicart, as Gov of Eastern Samar vs Titong and Abrugar
Case Digest GR 207682 Dec 10 2014
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Facts:
Titong and Abrugar, together with 93 others, were appointed as department heads by the then
Governor Evardone of Samar a few days before the end of his term.Their appointments were
disapproved by the CSC Regional Office for violation of CSC rules and for not having met the
requirements laid down in Nazareno vs City of Dumaguete case. Titong and Abrugar filed a petition
for review before the CSC Main, which granted and declared their appointments as valid. The new
Governor Nicart sought for reconsideration, but it was denied. Before the CA, he appealed arguing
that their appointments cannot be valid since there was no need to fill up the positions and that their
appointments were en masse.
Meanwhile, the CSC Main issued a writ of execution ordering Gov Nicart and the provincial
government to pay the salaries and emoluments of Titong and Abrugar. Gov Nicart refused, so they
filed a petition for mandamus before the RTC even while the case before the CA was still pending.

The RTC decided the petition on the basis of the CSC memo circular 82 which states that the non-
issuance of a restraining order or injunction would make the CSC resolution executory pending
appeal. Since there was no TRO or injunction, and its opinion that the CA decision would not
constitute res judicata or in any way affect the petition for mandamus, the RTC issued a writ of
mandamus and went even further in deciding that the appointments were valid.

Issue: W/N it is proper for the RTC to take cognizance of the petition for mandamus even while
the issues involved is still pending resolution before the CA
Held:
No. First, it is erroneous for the RTC to opine that the CA decision would not affect the petition
before it because clearly, the mandamus petition heavily relies on the validity or invalidity of the
appointments which issue is yet to be resolved by the CA. Second, even while there is no
preliminary injunction or TRO issued by the higher court, ordinarily it would be proper for a lower
court or a court of origin to suspend the proceedings on the precept of judicial courtesy. Hence, the
RTC erred when it decided on the mandamus petition for disregarding such principle. ##
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Execution Pending Appeal Not Applicable in

Expropriation Proceedings (Curata vs PPA,
2014)
Curata vs Philippine Ports Authority
Case Digest GR 154211-12 June 22 2009
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Facts:
EO 385 and EO 431 Series of 1990 delineated the Batangas Port Zone and placed it under the
Philippine Ports Authority for administrative jurisdiction of its proper zoning, planning, development,
and utilization. Pursuant thereto, the PPA instituted a complaint for expropriation of 185 lots before
the RTC. Owned by some 231 individuals or entities, the 185 lots, with a total area of about
1,298,340 sqm, were intended for the development of Phase II of the BPZ. The PPA alleged that,
per evaluation of the Land Acquisition Committee for Phase II of the BPZ project, the lots had a fair
market value of P 336.83 per sqm. Prior to the filing of the complaint, PPA offered PhP 336.40 per
sqm as just compensation, but the lot owners rejected the offer. PPA prayed to be placed in
possession upon its deposit of the amount equivalent to the assessed value for real estate taxation
of the lots in question.

After proceedings, the RTC issued a compensation order directing PPA to pay the lot owners the
amount of P 5,500 per sqm as just compensation. Upon motion, the RTC granted the issuance of a
writ of execution pending appeal and issued the writ of execution thereafter. Subsequently, the
sheriff served the Notice of Garnishment to the LBP Batangas City Branch.

Issue 1: W/N execution pending appeal is applicable to expropriation proceedings

No. Discretionary execution of judgments pending appeal under Sec. 2(a) of Rule 39 simply does not
apply to eminent domain proceedings. Since PPAs monies, facilities and assets are government
properties, they are exempt from execution whether by virtue of a final judgment or pending appeal.
It is a universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit the claimant’s action only up to the completion of proceedings
anterior to the stage of execution and that the power of the Courts ends when the judgment is
rendered, since government funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments. This is based on obvious considerations of public policy.
Disbursements of public funds must be covered by the corresponding appropriation as required by
law. The functions and public services rendered by the State cannot be allowed to be paralyzed or
disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated
by law. (Commissioner of Public Highways vs San Diego, 1970)

Issue 2: W/N RA 8974 is a substantial law that cannot be reapplied retroactively

Yes. The appropriate standard of just compensation inclusive of the manner of payment thereof and
the initial compensation to the lot owners is a substantive, not merely a procedural, matter. This is
because the right of the owner to receive just compensation prior to acquisition of possession by the
State of the property is a proprietary right. RA 8974, which specifically prescribes the new standards
in determining the amount of just compensation in expropriation cases relating to national
government infrastructure projects, as well as the payment of the provisional value as a prerequisite
to the issuance of a writ of possession, is a substantive law.

Further, there is nothing in RA No. 8974 which expressly provides that it should have retroactive
effect. Neither is retroactivity necessarily implied from RA No. 8974 or in any of its
provisions. Hence, it cannot be applied retroactively in relation to this case.
Note:
RA 8974 amended Rule 67 effective November 26, 2000, but only with regard to the expropriation
of right-of-way sites and locations for national government infrastructure projects. On the other hand,
in all other expropriation cases outside of right-of-way sites or locations for national government
infrastructure projects, the provisions of Rule 67 of the Rules of Court shall still govern. #
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Coco Levy Fund Belongs Not to the Coco

Farmers in Their Private Capacities But to the
Government (Cocofed vs Rep, 2012)
Cocofed vs Republic
Case Digest GR 177857-58 Jan 24 2012
→ Full Text ←
Facts:
In 1971, RA 6260 created the Coconut Investment Company (CIC) to administer the Coconut
Investment Fund, a fund to be sourced from levy on the sale of copra. The copra seller was, or ought
to be, issued COCOFUND receipts. The fund was placed at the disposition of COCOFED, the
national association of coconut producers having the largest membership.

When martial law started in 1972, several presidential decrees were issued to improve the coconut
industry through the collection and use of the coconut levy fund:

PD 276 established the Coconut Consumers Stabilization Fund (CCSF) and declared the proceeds
of the CCSF levy as trust fund, to be utilized to subsidize the sale of coconut-based products, thus
stabilizing the price of edible oil.

PD 582 created the Coconut Industry Development Fund (CIDF) to finance the operation of a hybrid
coconut seed farm.

In 1973, PD 232 created the Philippine Coconut Authority (PCA) to accelerate the growth and
development of the coconut and palm oil industry.

Then came P.D. No. 755 in July 1975, providing under its Section 1 the policy to provide readily
available credit facilities to the coconut farmers at preferential rates. Towards achieving this, Section
2 of PD 755 authorized PCA to utilize the CCSF and the CIDF collections to acquire a commercial
bank and deposit the CCSF levy collections in said bank, interest free, the deposit withdrawable only
when the bank has attained a certain level of sufficiency in its equity capital. It also decreed that all
levies PCA is authorized to collect shall not be considered as special and/or fiduciary funds or form part
of the general funds of the government.
Both P.D. Nos. 961 and 1468 also provide that the CCSF shall not be construed by any law as a
special and/or trust fund, the stated intention being that actual ownership of the said fund shall pertain
to coconut farmers in their private capacities.
Shortly before the issuance of PD 755 however, PCA had already bought from Peping Cojuangco
72.2% of the outstanding capital stock of FUB / UCPB. In that contract, it was also stipulated that
Danding Cojuanco shall receive equity in FUB amounting to 10%, or 7.22 % of the 72.2%, as
consideration for PCA’s buy-out of what Danding Conjuanco claim as his exclusive and personal
option to buy the FUB shares.

The PCA appropriated, out of its own fund, an amount for the purchase of the said 72.2% equity. It
later reimbursed itself from the coconut levy fund.

While the 64.98% (72.2 % – 7.22%) portion of the option shares ostensibly pertained to the farmers,
the corresponding stock certificates supposedly representing the farmers equity were in the name of
and delivered to PCA. There were, however, shares forming part of the 64.98% portion, which ended
up in the hands of non-farmers. The remaining 27.8% of the FUB capital stock were not covered by
any of the agreements.

Through the years, a part of the coconut levy funds went directly or indirectly to various projects
and/or was converted into different assets or investments. Of particular relevance to this was their
use to acquire the FUB / UCPB, and the acquisition by UCPB, through the CIIF and holding
companies, of a large block of San Miguel Corporation (SMC) shares.

Issue 1: W/N the mandate provided under PD 755, 961 and 1468 that the CCSF shall not be
construed by any law as a special and/or trust fund is valid
No. The coconut levy funds can only be used for the special purpose and the balance thereof should
revert back to the general fund.

Article VI, Section 29 (3) of the Constitution provides that all money collected on any tax levied for a special
purpose shall be treated as a special fund and paid out for such purpose only, and if the purpose for which
a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred
to the general funds of the Government. Here, the CCSF were sourced from forced exactions with
the end-goal of developing the entire coconut industry. Therefore, the subsequent reclassification of
the CCSF as a private fund to be owned by private individuals in their private capacities under P.D.
Nos. 755, 961 and 1468 is unconstitutional.
Not only is it unconstitutional, but the mandate is contrary to the purpose or policy for which the coco
levy fund was created.

Issue 2:
W/N the coco levy fund may be owned by the coconut farmers in their private capacities

No. The coconut levy funds are in the nature of taxes and can only be used for public purpose. They
cannot be used to purchase shares of stocks to be given for free to private individuals. Even if the
money is allocated for a special purpose and raised by special means, it is still public in character.

Accordingly, the presidential issuances which authorized the PCA to distribute, for free, the shares of
stock of the bank it acquired to the coconut farmers under such rules and regulations the PCA may
promulgate is unconstitutional.

It is unconstitutional because first, it have unduly delegated legislative power to the PCA, and
second, it allowed the use of the CCSF to benefit directly private interest by the outright and
unconditional grant of absolute ownership of the FUB/UCPB shares paid for by PCA entirely with the
CCSF to the undefined “coconut farmers”, which negated or circumvented the national policy or
public purpose declared by P.D. No. 755.

Hence, the so-called Farmers’ shares do not belong to the coconut farmers in their private
capacities, but to the Government. The coconut levy funds are special public funds and any property
purchased by means of the coconut levy funds should likewise be treated as public funds or public
property, subject to burdens and restrictions attached by law to such property. ##

→ Full Text ←

Promotional Appointment from Commissioner to

Chairman Does Not Constitute Reappointment
(Funa vs Villar, 2012)
 Funa vs Villar
Case Digest GR 192791 April 24 2012
→ Full Text ←
Facts:
On February 15, 2001, Pres Arroyo appointed Carague as Chairman of the COA for a term of 7
years. Carague’s term of office started on February 2, 2001 to end on February 2, 2008. On
February 7, 2004, Villar was appointed as the third member of the COA for a term of 7 years starting
February 2, 2004 until February 2, 2011.

Following the retirement of Carague on February 2, 2008 and during the fourth year of Villar as COA
Commissioner, Villar was designated as Acting Chairman of COA from February 4, 2008 to April 14,
2008. Subsequently, on April 18, 2008, Villar was nominated and appointed as Chairman of the
COA. Shortly thereafter, the Commission on Appointments confirmed his appointment. He was to
serve as Chairman of COA, as expressly indicated in the appointment papers, until the expiration of
the original term of his office as COA Commissioner or on February 2, 2011.

Issue 1: W/N a promotional appointment from the position of Commissioner to Chairman is

constitutionally permissible and does NOT constitute reappointment as barred by the Article
IX (D), Sec 1 (2) of the Constitution
Yes. A commissioner who resigns after serving in the Commission for less than seven years is
eligible for an appointment to the position of Chairman for the unexpired portion of the term of the
departing chairman. Such appointment is not covered by the ban on reappointment, provided that
the aggregate period of the length of service as commissioner and the unexpired period of the term
of the predecessor will not exceed 7 years and provided further that the vacancy in the position of
Chairman resulted from death, resignation, disability or removal by impeachment.

Reappointment found in Sec. 1(2), Art. IX(D) means a movement to one and the same office
(Commissioner to Commissioner or Chairman to Chairman). On the other hand, an appointment
involving a movement to a different position or office (Commissioner to Chairman) would constitute a
new appointment and, hence, not, in the strict legal sense, a reappointment barred under the
Constitution.

Issue 2: W/N the appointment of Villar to the position of COA Chairman which is made vacant
by the expiration of term of the predecessor is valid
No. The Constitution clearly provides that if the vacancy results from the expiration of the term of the
predecessor, the appointment of a COA member shall be for a fixed 7-year term.

Here, the vacancy in the position of COA chairman left by Carague in February 2, 2008 resulted
from the expiration of his 7-year term. Under that circumstance, there can be no unexpired portion of
the term of the predecessor to speak of. Hence, in light of the 7-year aggregate rule, Villar’s
appointment to a full term is not valid as he will be allowed to serve more than seven 7 years under
the constitutional ban.

Villar had already served 4 years of his 7-year term as COA Commissioner. A shorter term, however,
to comply with the 7-year aggregate rule would also be invalid as the corresponding appointment
would effectively breach the clear purpose of the Constitution of giving to every appointee so
appointed subsequent to the first set of commissioners, a fixed term of office of 7 years.

Notes:
A. One of the doctrinal guidelines outlined in Matibag vs Benipayo has been effectively abandoned by the
Court’s pronouncement in this case.
Read more

B. Article IX (D), Sec 1 (2) of the Constitution is re-outlined as follows:

Options of Landowner Under Art 449-450 If the

Builder and Third Party Purchasers Were In Bad
Faith (BPI vs Sanchez, 2014)
BPI vs Sanchez
Case Digest GR 179518 Nov 19 2014
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Facts:
The Sanchezes entered into an agreement with Garcia (doing business in the name of TSEI) to sell
for P 1.850 million their parcel of land, with an earnest money of 50k. They agreed that Garcia shall
pay the purchase price in cash once the property is vacated. The Sanchezes entrusted to Garcia the
owner’s copy of TCT because it was agreed that he shall take care of all the documentations
necessary for the transaction.

Immediately after the property was vacated, Garcia took possession and began constructing
townhouses thereon without the Sanchezes’ knowledge and consent. While these developments
were ongoing, Garcia failed to pay the purchase price. Subsequently, the Sanchezes were given six
checks representing the amount of the purchase price. Four of these checks were postdated, thus
further delaying their overdue payment. To properly document the check payments, they made an
agreement stipulating that if one of the checks were dishonored, the Sanchezes may rescind the
contract.

The last two checks were dishonored, so the Sanchezes rescinded the contract and demanded from
Garcia the return of the TCT. However, Garcia refused to return the documents and vacate the
property.

Meanwhile, the Sanchezes found out that Garcia/TSEI were selling townhouses situated in the
property. So they informed the HLURB, the City Building Official and the RD in Quezon City, of the
illegal constructions being made thereon. The HLURB issued a Cease and Decease Order enjoining
Garcia / TSEI from further developing and selling the townhouses. Such orders were left unheeded.
In fact, Garcia were already able to sell many of the units to different individuals and entities, and
even mortgaged the property. Consequently, the Sanchezes filed before the RTC a complaint for
rescission, restitution and damages with TRO.

The purchasers and mortgagee who are the intervenors in this case were found by the court to be in
bad faith. On the other hand, the Sanchezes were held to be in good faith and not negligent.

Issue 1: W/N rescission of the contract was barred by the subsequent transfer of the property
No. Under Article 1191 of the Civil Code, rescission is available to a party in a reciprocal obligation
where one party fails to comply with it. As an exception to this rule, Article 1385 provides that
rescission shall not take place if the subject matter of the prior agreement is already in the hands of
a third party who did not act in bad faith.
Here, the failure of Garcia/TSEI to pay the consideration for the sale of the property entitled the
Sanchezes to rescind the Agreement. And in view of the finding that the intervenors acted in bad
faith in purchasing the property from Garcia, the subsequent transfer in their favor did not and
cannot bar rescission.

Issue 2: W/N Article 449 – 450 of the Civil Code is applicable to the Sanchezes
Yes. Bad faith on the part of the purchasers leads to the application of Art 449-450.
Consequently, the Sanchezes have the following options: (1) acquire the property with the
townhouses and other buildings and improvements that may be thereon without indemnifying TSEI
or the intervenors; (2) demand from TSEI or the intervenors to demolish what has been built on
the property at the expense of TSEI or the intervenors; or (3) ask the intervenors to pay the price of
the land.

As such, the Sanchezes must choose from among these options within 30 days from finality of the
decision. Should the Sanchezes opt to ask from the intervenors the value of the land, the case shall
be remanded to the RTC for the sole purpose of determining the fair market value of the lot at the
time the same were taken from the Sanchezes. If the Sanchezes decide to appropriate the
townhouses, other structures and improvements as their own pursuant to Art 449, then the
intervenors-purchasers shall be ordered to vacate said premises within a reasonable time from
notice of the finality of the decision by the Sanchezes. They have a right to recover their investment
in the townhouses from Garcia and TSEI. If the Sanchezes do not want to make use of the
townhouses and improvements on the subject lot, then the purchasers can be ordered to demolish
said townhouses or if they don’t demolish the same within a reasonable time, then it can be
demolished at their expense. On the 3rd option, if the Sanchezes do not want to appropriate the
townhouses or have the same demolished, then they can ask that the townhouse purchasers pay
to them the fair market value of the respective areas allotted to their respective townhouses subject
of their deeds of sale. ##

Relevant Provisions
Rescission and Exceptions
Builders in Bad Faith

Ownership of A Trademark Is Not Based on An

Earlier Filing Date (EY vs Shen Dar, 2010)
EY Industrial Sales vs Shen Dar
Case Digest GR 184850 Oct 20 2010
→ Full Text ←
Facts:
EYIS is a domestic corporation engaged in the production, distribution and sale of air compressors
and other industrial tools and equipment. On the other hand, Shen Dar is a Taiwan-based foreign
manufacturer of air compressors. From 1997 to 2004, EYIS imported air compressors from Shen
Dar. Both of them sought to register the mark VESPA for use on air compressors, but it was Shen
Dar who first filed the application on June 1997. EYIS application was first granted on 2004, so Shen
Dar sought for its cancellation on the ground of Sec 123 of the Intellectual Property Code which
provides that the registration of a similar mark is prevented with the filing of an earlier application for
registration. On the other hand, EYIS contended that Shen Dar is not entitled to register the mark
VESPA on its products because EYIS has been using it as the sole assembler and distributor of air
compressors since the 1990s. EYIS was able to prove such fact.
Issue: W/N EYIS is the true owner of the mark VESPA
Yes. EYIS is the true owner because it is the prior and continuous user of the mark VESPA.
Section 123.1 of the IPC should not be interpreted to mean that ownership is based upon an earlier
filing date. While RA 8293 removed the previous requirement of proof of actual use prior to the filing
of an application for registration of a mark, proof of prior and continuous use is necessary to
establish ownership of a mark. Ownership of a mark or trade name may be acquired not necessarily
by registration but by adoption and use in trade or commerce.

As between actual use of a mark without registration, and registration of the mark without actual use
thereof, the former prevails over the latter. Hence, EYIS is entitled to the registration of the mark in
its name. ##

Notes
Sec 122: How Marks are Acquired
Sec 123: Registrability
Registration is Only Presumptive of Ownership (Shangri-la vs Developers, 2006)
Registration is Not A Mode of Acquiring Ownership
Actual Use In Commerce is Required to Establish Right of Ownership