Grandfather Rule Rules When the Required 60-40 Filipino-

foreign Equity Ownership is In Doubt (Narra vs Redmont,

2014)

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

Yes. It is the intention of the framers of the Constitution to apply the Grandfather Rule in cases
where corporate layering is present.

First, as a rule in statutory construction, 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. Corporate layering is admittedly allowed by the FIA, but if it is used to
circumvent the Constitution and other pertinent laws, then it becomes illegal.

Second, under the SEC Rule1 and DOJ Opinion2 , the Grandfather Rule must be applied when the
60-40 Filipino-foreign equity ownership is in doubt. Doubt is present in the Filipino equity
ownership of Narra, Tesoro, and MacArthur since their common investor, the 100% Canadian-
owned corporation MBMI, funded them.

Under the Grandfather Rule, it is not enough that the corporation does have the required 60%
Filipino stockholdings at face value. To determine the percentage of the ultimate Filipino
ownership, it must first be traced to the level of the investing corporation and added to the
shares directly owned in the investee corporation. Applying this rule, it turns out that the
Canadian corporation owns more than 60% of the equity interests of Narra, Tesoro and
MacArthur. Hence, the latter are disqualified to participate in the exploration, development and
utilization of the Philippines natural resources.
1 DOJ Opinion No. 020 Series of 2005 (paragraph 7)
2 SEC Opinion May 13, 1990

Remedial Law

Issue 2: W/N the case has become moot as a result of the MPSA conversion to FTAA
No. There are certain exceptions to mootness principle 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.

The SC noted that a grave violation of the Constitution is being committed by a foreign
corporation 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. 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.

Grandfather Rule may be Applied Jointly with the Control

Test to Determine Corporate Ownership (Narra vs
Redmont, 2015)

G.R. No. 195580, January 28, 2015

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 corporations 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. ##

Related:
GR 195580 Narra Nickel vs Redmont, 2014 Case Digest

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
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 SMLIs unsolicited proposal and declared SMLI eligible to enter
into the proposed Joint Venture activity. It also agreed to subject SMLIs 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 BCDAs joint venture
partner for the development of a portion of Fort Bonifacio.

SMLI, through a petition for CPM, argued that BCDAs unilateral termination of the competitive
challenge is a violation of SMLIs rights as an original proponent and constitutes abandonment of
BCDAs 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.

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 thiswhere an agency, instrumentality or officer of the government

evades the performance of a positive duty enjoined by lawwherein the exercise of judicial power
is warranted. Consistent with the Courts 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 pointafter the former has already benefited from SMLIs proposal through the
acquisition of information and ideas for the development of the subject propertywould unjustly
enrich the agency through the efforts of petitioner. What is worse, to do so would be contrary to
BCDAs representations and assurances that it will respect SMLIs earlier acquired rights, which
statements SMLI reasonably and innocently believed. All told, the BCDAs 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

Velasco Dissent GR 179334 Apr 21 2015
Summary
The States 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 individuals
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 States 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.

Stock Distribution Scheme Consistent with the

Constitutions 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 governments 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
havent actually received those benefits in full, that HLI violated the terms, and that their lives
havent 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) therevocation 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 mandatedland 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.

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
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 Kolins 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
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, 13 th month 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

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 Zabalas 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 Zabalas 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 Zabalas 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. ##
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
Facts:
When Spouses Sanchez died intestate, their Heirs executed a deed of extrajudicial partition over
a lot of which owners 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 Registrars 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
Registrars 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.

1. Within the premise that a decree has been validly issued, the proper procedure is to file a
petition for the cancellation of the Old decree, reissuance of the decree and issuance of
OCT pursuant to the reissued decree.

Why should a decree be canceled and re-issued when the same is valid and intact? Within the
context of this discussion, there is no dispute that a decree has been validly issued. And in fact,
in some instances, a copy of such decree is intact. What is not known is whether or not an OCT
is issued pursuant to that decree. If such decree is valid, why is there a need to have it cancelled
and re-issued?

This is because Section 39 of PD 1529 states that: The original certificate of title shall be a true
copy of the decree of registration. This provision is significant because it contemplates an OCT
which is an exact replica of the decree. If the old decree will not be canceled and no new decree
issued, the corresponding OCT issued today will bear the signature of the present Administrator
while the decree upon which it was based shall bear the signature of the past Administrator. This
is not consistent with the clear intention of the law which states that the OCT shall be true copy
of the decree of registration. Ostensibly, therefore, the cancellation of the old decree and the
issuance of a new one is necessary.

2. As long as the decree issued in an ordinary or cadastral registration case has not yet been
entered, meaning, it has not yet been transcribed in the Registration Book of the
concerned Registrar of Deeds, such decree has not yet attained finality and therefore may
still be subject to cancellation in the same land registration case.

Upon cancellation of such decree, the decree owner (adjudicatee or his heirs) may then pray for
the issuance of a new decree number and, consequently, pray for the issuance of an original
certificate of title based on the newly issued decree of registration.

For as long as a decree has not yet been transcribed (entered in registration book of the RD), the
court which adjudicated and ordered for the issuance of such decree continues to be clothed with
jurisdiction. The reason for this is that the judgment is merely declaratory in character and does
not need to be asserted or enforced against the adverse party. Furthermore, the issuance of a
decree is a ministerial duty both of the judge and of the Land Registration Commission; failure of
the court or of the clerk to issue the decree for the reason that no motion therefore has been
filed cannot prejudice the owner, or the person in whom the land is ordered to be registered. (Sta
Ana vs Menla)

Unlike ordinary civil actions, the adjudication of land in a cadastral or land registration
proceeding does not become final, in the sense of incontrovertibility, until after the expiration of
one (1) year after the entry of the final decree of registration. As long as a final decree has not
been entered by the Land Registration Commission (now NLTDRA) and the period of one (1) year
has not elapsed from the date of entry of such decree, the title is not finally adjudicated and the
decision in the registration proceeding continues to be under the control and sound discretion of
the court rendering it. (Gomez vs CA, 1988)
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
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
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
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 claimants 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.

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

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 thatall 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 PCAs 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. #

Promotional Appointment from Commissioner to Chairman

Does Not Constitute Reappointment (Funa vs Villar, 2012)

Funa vs Villar
Case Digest GR 192791 April 24 2012
Facts:
On February 15, 2001, Pres Arroyo appointed Carague as Chairman of the COA for a term of 7
years. Caragues 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,
Villars 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 Courts pronouncement in this case.
In Matibag vs Benipayo, the Court outlined the following formulations in which the constitutional
ban on reappointment may apply:

3. The first situation is where an ad interim appointee after confirmation by the Commission
on Appointments serves his full 7-year term. Such person cannot be reappointed whether
as a member or as chairman because he will then be actually serving more than 7 years.
4. The second situation is where the appointee, after confirmation, serves part of his term
and then resigns before his 7-year term of office ends. Such person cannot be reappointed
whether as a member or as chair to a vacancy arising from retirement because a
reappointment will result in the appointee serving more than 7 years.
5. The third situation is where the appointee is confirmed to serve the unexpired portion of
someone who died or resigned, and the appointee completes the unexpired term. Such
person cannot be reappointed whether as a member or as chair to a vacancy arising from
retirement because a reappointment will result in the appointee also serving more than 7
years.
6. The fourth situation is where the appointee has previously served a term of less than 7
years, and a vacancy arises from death or resignation. Even if it will not result in his
serving more than seven years, a reappointment of such person to serve an unexpired
term is also prohibited because his situation will be similar to those appointed under the
second sentence of Sec. 1(20), Art. IX-C of the Constitution [referring to the first set of
appointees (the 5 and 3 year termers) whose term of office are less than 7 years but are
barred from being reappointed under any situation].

The fourth formulation is basically predicated on the postulate that reappointment of any kind is
prohibited under any and all circumstances. Since the principles laid down in this case is contrary
to that, the constitutional ban on reappointment under the fourth situation depicted in the
Matibag vs Benipayo case is now therefore effectively abandoned. As held by the Court, a
promotional appointment from the position of Commissioner to that of Chairman is
constitutionally permissible and not barred by Sec. 1(2), Art. IX (D) of the Constitution.
B. Article IX (D), Sec 1 (2) of the Constitution is re-outlined as follows:
1. The appointment of members of any of the three constitutional commissions, after the
expiration of the uneven terms of office of the first set of commissioners, shall always be for a
fixed term of seven (7) years; an appointment for a lesser period is void and unconstitutional.

The appointing authority cannot validly shorten the full term of seven (7) years in case of the
expiration of the term as this will result in the distortion of the rotational system prescribed by
the Constitution.

2. Appointments to vacancies resulting from certain causes (death, resignation, disability or

impeachment) shall only be for the unexpired portion of the term of the predecessor, but such
appointments cannot be less than the unexpired portion as this will likewise disrupt the
staggering of terms laid down under Sec. 1(2), Art. IX(D).

3. Members of the Commission, e.g. COA, COMELEC or CSC, who were appointed for a full term of
seven years and who served the entire period, are barred from reappointment to any position in
the Commission. Corollarily, the first appointees in the Commission under the Constitution are
also covered by the prohibition against reappointment.

4. 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 seven (7) years and provided further that the
vacancy in the position of Chairman resulted from death, resignation, disability or removal by
impeachment. The Court clarifies that 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.

5. Any member of the Commission cannot be appointed or designated in a temporary or acting

capacity. ##

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

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 owners 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 dont 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. ##

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
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