CASE DIGEST: CALTEX V PALOMAR

Caltex vs Palomar
G.R. No. L-19650
29 September 1966

Facts:
In the year 1960, Caltex conceived a promotional scheme and called it "Caltex Hooded Pump Contest".
It calls for participants to estimate the actual number of liters a hooded gas pump at each Caltex Station will
dispense during a specified period. For the priviledge to participate, no fees or consideration, nor purchase
of Caltex products were required.

Forseeing the extensive use of mails relative to the contest, representations were made by Caltex with
the postal authorities for the contest to be cleared in advanced for mailing. The acting Postmaster General
opined that the scheme falls within the purview of sections 1954, 1982 and 1983 of the Revised
Administrative Code and declined to grant the requested clearance.

Issues:
W/N construction should be employed in this case and W/N the contest violates the provisions of the
Postal Law

Held:
Yes. Construction of a law is in order if what is in issue is an inquiry into the intended meaning of the
words used in a certain law. As defined in Black's Law Dictionary: Construction is the art or process of
discovering and expounding the meaning and intention of the author's of the law with respect to a given
case, where that intention is rendered doubtful, amongst others, by reason of the fact that the given case is
not explicitly provided for in the law. In the present case, the prohibitive provisions of the Postal Law
inescapably require an inquiry into the intended meaning of the words therein. This is as much as question
of construction or interpretation as any other. The Court is tasked to look beyond the fair exterior, to the
substance, in order to unmask the real element and pernicious tendencies that the law is seeking to
prevent.

Lottery extends to all schemes for the distribution of prize by chance. The three essential elements of
a lottery are: (1) consideration, (2) prize, and (3) chance. Gift enterprise is commonly applied to a sporting
artifice under which goods are sold for their market value but by way of inducement, each purchaser is
given a chance to win a prize. Gratuitous distribution of property by lot or chance does not constitute lottery.
In the present case, the element of consideration is not observed. No payment or purchase of a
merchandise was required for the priviledge to participate.

Aisporna v Court of Appeals and the People of the Philippines

G.R. No. L-39419
12 April 1982
TOPIC: Statutory Construction, Doctrine of Associated Words (Noscitur a Sociis)

FACTS:
Petitioner Aisporna was charged for violation of Section 189 of the Insurance Act.
Petitioner’s husband, Rodolfo S. Aisporna (Rodolfo) was duly licensed by the Insurance Commission as
agent to Perla Compania de Seguros. Thru Rodolfo, a 12- month Personal Accident Policy was issued by
Perla with beneficiary to Ana M. Isidro for P50,000. The insured died by violence during lifetime of policy.

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Subsequently, petitioner was charged because the aforementioned policy was issued with her active
participation, which is not allowed because she did not possess a certificate of authority to act as agent from
the office of the Insurance Commission.
Petitioner contended that being the wife of Rodolfo, she naturally helped him in his work, and that the policy
was merely a renewal and was issued because her husband was not around when Isidro called by
telephone. Instead, appellant left a note on top of her husband’s desk.
The trial court found petitioner guilty as charged. On appeal, the trial court’s decisions was affirmed by
respondent appellate court, finding petitioner guilty of a violation of the first paragraph of Sec 189 of the
insurance act.

ISSUE:
Whether or not a person can be convicted of having violated the first paragraph of Section 189 of the
Insurance Act without reference to the second paragraph of the same section.

RULING:
The petition is meritorious. Petition appealed from is reversed, and accused is acquitted of the crime
charged. A perusal of the provision in question shows that the first paragraph thereof prohibits a person
from acting as agent, sub-agent or broker in the solicitation or procurement of applications for insurance
without first procuring a certificate of authority so to act from the Insurance Commissioner, while its second
paragraph defines who an insurance agent is within the intent of this section and, finally, the third paragraph
thereof prescribes the penalty to be imposed for its violation.
The definition of an insurance agent as found in the second paragraph of Section 189 is intended to define
the word “agent” mentioned in the first and second paragraphs of the aforesaid section. More significantly,
in its second paragraph, it is explicitly provided that the definition of an insurance agent is within the intent of
Section 189.
Applying the definition of an insurance agent in the second paragraph to the agent mentioned in the first and
second paragraphs would give harmony to the aforesaid three paragraphs of Section 189. Legislative intent
must be ascertained from a consideration of the statute as a whole. The particular words, clauses and
phrases should not be studied as detached and isolated expressions, but the whole and every part of the
statute must be considered in fixing the meaning of any of its parts and in order to produce harmonious
whole. A statute must be so construed as to harmonize and give effect to all its provisions whenever
possible. More importantly the doctrine of associated words (Noscitur a Sociis) provides that where a
particular word or phrase in a statement is ambiguous in itself or is equally susceptible of various meanings,
its true meaning may be made clear and specific by considering the company in which it is found or with
which it is associated.
Considering that the definition of an insurance agent as found in the second paragraph is also applicable to
the agent mentioned in the first paragraph, to receive compensation by the agent is an essential element for
a violation of the first paragraph of the aforesaid section.
In the case at bar, the information does not allege that the negotiation of an insurance contracts by the
accused with Eugenio Isidro was one for compensation. This allegation is essential, and having been
omitted, a conviction of the accused could not be sustained. It is well-settled in Our jurisprudence that to
warrant conviction, every element of the crime must be alleged and proved.
The accused did not violate Section 189 of the Insurance Act.

CASE DIGEST (Commercial Law): CHINA BANKING CORP vs. Ortega

G.R. No. L-34964 January 31, 1973

Facts:
Petitioner refuses to comply with a court process garnishing the bank deposit of a judgment debtor by
invoking the provisions of Republic Act No. 1405 (Secrecy of Bank Deposits Act) which allegedly prohibits
the disclosure of any information relative to bank deposits.
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Issue:
Whether or not a banking institution may validly refuse to comply with a court process garnishing the bank
deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405.

Held:
No. It is sufficiently clear from the foregoing discussion of the conference committee report of the two
houses of Congress that the prohibition against examination of or inquiry into a bank deposit under Republic
Act 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real
inquiry in such a case, and if the existence of the deposit is disclosed the disclosure is purely incidental to
the execution process. It is hard to conceive that it was ever within the intention of Congress to enable
debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank

CASE DIGEST: BOARD OF ADMINISTRATORS OF PVA V BAUTISTA

BOARD OF ADMINISTRATORS OF PVA V BAUTISTA
G.R. No. L-37867

Facts:
In 1955, private respondent Gasilao, a war veteran during the World War II, filed a claim for disability before
the public petitioners under Section 9 of RA 65. The claim was denied. Meanwhile, the said act was
amended by RA 1362, including now benefits for the pensioner’s unmarried children below 18 years.
Another amendment was made in 1957, increasing the life pension of the veteran but retaining the same
benefits for his children.
In 1968, after 12 years following the disapproved claim, it was reconsidered and the claim was finally
approved. The respondent, thereafter, requested from the petitioners that his claim be made retroactive
from the time his original claim was disapproved. The petitioners did not act on his request. Private
respondent claims that he was deprived of his right to the pension from the time his claim was disapproved
until the time of reconsideration. He filed a petition before the lower court and was granted.
The petitioners through the Solicitor General challenged the decision of the lower court. Hence, this petition.

Issue:
Whether or not the claim for pension works in the retroactive.

Held:
Yes. Taking September 25, 1946 as the point of reference, the original claim of the respondent was within
10 years, as prescribed by law. It would be more in consonance with the spirit and intention of the law that
the benefits therein granted be received and enjoyed at the earliest possible time by according retroactive
effect to the grant of the pension award. If the pension awards are made effective only upon approval of the
corresponding application which would be dependent on the discretion of the Board of Administrators which
as noted above had been abused through inaction extending to nine years, even to twelve years, the noble
and humanitarian purposes for which the law had enacted could easily be thwarted or defeated.

PCFI v. National Telecommunications Commission

G.R. No. L-63318 November 25, 1983

FACTS:
Private respondent PLDT filed an application with the NTC for the approval of a revised schedule for its
Subscriber Investment Plan (SIP). The NTC issued an ex-parte order provisionally approving the revised

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schedule which, however, was set aside by this Court on August 31, 1982. The Court therein ruled that
“there was a necessity of a hearing by the Commission before it should have acted on the application of the
PLDT”. On November 22, 1982, the NTC rendered the questioned decision permanently approving PLDT’s
new and increased SIP rates. It is the submission of the petitioner that the SIP schedule presented by the
PLDT is pre-mature and, therefore, illegal and baseless, because the NTC has not yet promulgated the
required rules and regulations implementing Section 2 of Presidential Decree No. 217.

ISSUE:
Whether or not respondent acted with grave abuse of discretion when it approved the Revised Subscriber
Investment Plan (SIP) of respondent PLDT in the absence of specific rules and regulations implementing
Presidential Decree No. 217.

HELD:
There is merit in the contention of petitioner that it is the duty of respondent NTC to promulgate rules and
regulations. In the separate opinion of Justice Abad Santos, it is said that the case involves a simple
problem of statutory construction – that of Section 2 of Presidential Decree No. 217. The decision sustained
the petitioner’s contention that it is the duty of NTC to first promulgate rules and regulations. The resolution
does not subscribe to the view that the NTC should or must promulgate rules and regulations because the
decree must be given its ordinary meaning; the word used is the permissive “may” and not the mandatory
“shall.” The non-unanimous resolution thus relies on the canons index animi sermo est (speech is the
indication of intent) and a verba legis non est recedendum (from the words of the statute there should be no
departure). Any lawyer of modest sophistication knows that canons of statutory construction march in pairs
of opposite. Thus with the canons above mentioned we have the following opposite: verba intentioni, non e
contra, debent inservire (words ought to be more subservient to the intent and not the intent to the words). It
is an elementary rule in statutory construction that the word “may” in a statute is permissive while the word
“shall” is mandatory. The rule, however, is not absolute. The literal interpretation of the words of an act
should not prevail if it creates a result contrary to the apparent intention of the legislature and if the words
are sufficiently flexible to admit of a construction which will effectuate the legislative intention. In the case at
bar compelling reasons dictate that the provision of the decree should be construed as mandatory rather
than merely directory. There is no justification for the rate increase of the revised schedule of PLDT’s SIP. It
is untimely, considering the present economic condition obtaining in the country. The approved rate defeats
the purpose of the decree which is to spread ownership among the wide base of investors. Accordingly, the
decision of NTC is annulled and set aside.

CASE DIGEST: NATIONAL FEDERATION OF LABOR (NFL) VS EISMA

NFL v. Eisma
G.R. No. L-61236
January 31, 1984

Facts:
On 1982, the National Federation of Labor, certified by the Ministry of Labor as the sole exclusive
collective bargaining representative of the monthly paid employees of the respondent Zamboanga Wood
Products, Inc., charged the respondent firm before the same office of the Ministry of Labor for
underpayment. Petitioners declared a strike against the respondent, after the latter terminated the president
of the union. Respondent firm filed a complaint before the respondent Judge against the members and
officers of the union for obstruction and prayed for preliminary injunction and/or restraining order. The
petitioners assail the jurisdiction of the Court, pursuant to Article 217 of the Labor Code of the Philippines,
as amended, and filed a motion for dismissal of the complaint.

Issue:
Whether or not the respondent Judge has jurisdiction on Labor related cases.
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Held:
The issuance of Presidential Decree No. 1691 and the enactment of Batas Pambansa Blg. 130,
made clear that the exclusive and original jurisdiction for damages would once again be vested in labor
arbiters. Hence, the respondent Judge is devoid of jurisdiction.

Paat vs CA Admin Law Digest

Leonardo Paat
vs
Court of Appeals, et. Al.
GR No. 111107, 10 January 1997
266 SCRA 167

FACTS
The truck of private respondent Victoria de Guzman was seized by the DENR personnel while on its
way to Bulacan because the driver could not produce the required documents for the forest product found
concealed in the truck. Petitioner Jovito Layugan, CENRO ordered the confiscation of the truck and required
the owner to explain. Private respondents failed to submit required explanation. The DENR Regional
Executive Director Rogelio Baggayan sustained Layugan’s action for confiscation and ordered the forfeiture
of the truck. Private respondents brought the case to the DENR Secretary. Pending appeal, private
respondents filed a replevin case before the RTC against petitioner Layugan and Baggayan. RTC granted
the same. Petitioners moved to dismiss the case contending, inter alia, that private respondents had no
cause of action for their failure to exhaust administrative remedies. The trial court denied their motion.
Hence, this petition for review on certiorari. Petitioners aver that the trial court could not legally entertain the
suit for replevin because the truck was under administrative seizure proceedings.

ISSUE
Whether or not the instant case falls within the exception of the doctrine.

HELD
The Court held in the negative. The Court has consistently held that before a party is allowed to
seek the intervention of the court, it is a pre-condition that he should have availed of all the means of
administrative processed afforded him. Hence, if a remedy within the administrative machinery can still be
resorted to by giving the administrative officer concerned every opportunity to decide on a matter that
comes within his jurisdiction then such remedy should be exhausted first before court’s judicial power can
be sought. The premature invocation of court’ intervention is fatal to one’s cause of action.

The doctrine is a relative one and its flexibility is called upon by the peculiarity and uniqueness of the
factual and circumstantial settings of a case. Hence, it is disregarded (1) when there is violation of due
process, (2) when the issue involved is purely a legal question, (3) when the administrative action is patently
illegal amounting to lack or excess of jurisdiction, (4) when there is estoppels on the part of the
administrative agency concerned, (5) when there is irreparable injury, (6) when the respondent is a
department secretary whose acts as an alter ego of the President bears the implied and assumed approval
of the latter, (7) when to require exhaustion of administrative remedies would be unreasonable, (8) when it
would amount to nullification of a claim, (9) when the subject matter is a private land in land case
proceedings, (10) when the rule does not provide a plain, speedy and adequate remedy, and (11) when
there are circumstances indicating the urgency of judicial intervention.

A suit for replevin cannot be sustained against the petitioners for the subject truck taken and retained by
them for administrative forfeiture proceedings in pursuant to Sections 68-A of OD 705, as amended.
Dismissal of the replevin suit for lack of cause of action in view of the private respondents’ failure to exhaust
5
administrative remedies should have been the proper course of action by the lower court instead of
assuming jurisdiction over the case and consequently issuing the writ ordering the return of the truck.

People of the Philippines vs. M. Mapa

G.R. No. L-22301
August 30, 1967
En Banc

Facts:
The accused was convicted in violation of Sec. 878 in connection to Sec. 2692 of the Revised
Administrative Code as amended by Commonwealth Act No. 56 and further amended by R.A. 4. On August
13, 1962, the accused was discovered to have in its possession and control a home-made revolver cal. 22
with no license permit. In the court proceeding, the accused admitted that he owns the gun and affirmed that
it has no license. The accused further stated that he is a secret agent appointed by Gov. Leviste of
Batangas and showed evidences of appointment. In his defense, the accused presented the case of People
vs. Macarandang, stating that he must acquitted because he is a secret agent and which may qualify into
peace officers equivalent to municipal police which is covered by Art. 879.

Issue:
Whether or not holding a position of secret agent of the Governor is a proper defense to illegal possession
of firearms.

Ruling:
The Supreme Court in its decision affirmed the lower court’s decision. It stated that the law is explicit that
except as thereafter specifically allowed, "it shall be unlawful for any person to . . . possess any firearm,
detached parts of firearms or ammunition therefor, or any instrument or implement used or intended to be
used in the manufacture of firearms, parts of firearms, or ammunition." The next section provides that
"firearms and ammunition regularly and lawfully issued to officers, soldiers, sailors, or marines [of the Armed
Forces of the Philippines], the Philippine Constabulary, guards in the employment of the Bureau of Prisons,
municipal police, provincial governors, lieutenant governors, provincial treasurers, municipal treasurers,
municipal mayors, and guards of provincial prisoners and jails," are not covered "when such firearms are in
possession of such officials and public servants for use in the performance of their official duties.
The Court construed that there is no provision for the secret agent; including it in the list therefore the
accused is not exempted.

LEVERIZA et al vs. IAC, Mobil oil and CAA

G.R. No. L-66614
January 25, 1988

FACTS: Around three contracts of lease resolve the basic issues in the instant case:

Contract A — a lease contract of April 2, 1965 between the Republic of the Philippines, represented by Civil
Aeronautics Administration (CAA) and. Leveriza over a parcel of land containing an area of 4,502 square
meters, for 25 years.

Contract B — a lease contract (in effect a sublease) of May 21, 1965 between Leveriza and Mobil Oil
Philippines, Inc., over the same parcel of land, but reduced to 3,000 square meters for 25 years; and

6
Contract C — a lease contract of June 1, 1968 between defendant CAA and plaintiff Mobil Oil over the
same parcel of land, but reduced to 3,000 square meters, for 25 years.

There is no dispute among the parties that the subject matter of the three contracts of lease above
mentioned, Contract A, Contract B, and Contract C, is the same parcel of land, with the noted difference
that while in Contract A, the area leased is 4,502 square meters, in Contract B and Contract C, the area has
been reduced to 3,000 square meters.

It is important to note, for a clear understanding of the issues involved, that it appears that defendant CAA
as LESSOR, leased the same parcel of land, for durations of time that overlapped to two lessees, to wit: (1)
Leveriza and Mobil Oil, and the latter, as LESSEE, leased the same parcel of land from two lessors, to wit:
(1) Leveriza and (2) CAA for durations of time that also overlapped.

Leveriza, the lessee in Contract A and the lessor in Contract B, is now deceased. This is the reason why her
successor-in-interest, her heirs, are sued. For purposes of brevity, these defendants shall be referred to
hereinafter as Defendants Leveriza.

Mobil Oil seeks the rescission or cancellation of Contract A and Contract B on the ground that Contract A
from which Contract B is derived and depends has already been cancelled by the defendant CAA and
maintains that Contract C with the defendant CAA is the only valid and subsisting contract insofar as the
parcel of land, subject to the present litigation is concerned.

Defendants Leverizas’ claim that Contract A which is their contract with CAA has never been legally
cancelled and still valid and subsisting; that it is Contract C between plaintiff and defendant CAA which
should be declared void.

CAA asserts that Contract A is still valid and subsisting because its cancellation by Jurado was ineffective
and asks the court to annul Contract A because of the violation committed by Leveriza in leasing the parcel
of land to plaintiff by virtue of Contract B without the consent of CAA. CAA further asserts that Contract C
not having been approved by the Director of Public Works and Communications is not valid.

After trial, the lower courts rendered judgment:

1. Declaring Contract A as having been validly cancelled on June 28, 1966, and has therefore ceased to
have any effect as of that date;

2. Declaring that Contract B has likewise ceased to have any effect as of June 28, 1966 because of the
cancellation of Contract A;

3. Declaring that Contract C was validly entered into on June 1, 1968, and that it is still valid and subsisting;

CAA filed a Motion for Reconsideration, averring that because the lot lease was properly registered in the
name of the Republic of the Philippines, it was only the President of the Philippines or an officer duly
designated by him who could execute the lease contract pursuant to Sec. 567 of the Revised Administrative
Code; that the Airport General Manager has no authority to cancel Contract A, the contract entered into
between the CAA and Leveriza, and that Contract C between the CAA and Mobil was void for not having
been approved by the Secretary of Public Works and Communications. Said motion was however denied.

On appeal, the IAC affirmed in toto the decision of the lower court. Hence this petition for Review on
certiorari.

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ISSUE: There is no dispute that Contract A at the time of its execution was a valid contract. The issue
therefore is whether or not said contract is still subsisting after its cancellation by CAA on the ground of a
sublease executed by petitioners with Mobil Oil (CONTRACT B) without the consent of CAA and the
execution of another contract of lease between CAA and Mobil Oil (CONTRACT C)

The issue narrows down to: WON there is a valid ground for the cancellation of Contract A

HELD: The petition is DISMISSED for lack of merit and the decision of the Court of Appeals appealed from
is AFFIRMED in toto.

YES

Contract A was entered into by CAA as the lessor and the Leverizas as the lessee specifically “for the
purpose of operating and managing a gasoline station by the latter, to serve vehicles going in and out of the
airport.”

As regards prior consent of the lessor to the transfer of rights to the leased premises, the provision of
paragraph 7 of said Contract reads in full:

7. The Party of the Second part may transfer her rights to the leased premises but in such eventuality, the
consent of the Party of the First Part shall first be secured. In any event, such transfer of rights shall have to
respect the terms and conditions of this agreement.

Paragraph 8 provides the sanction for the violation of the above-mentioned terms and conditions of the
contract. Said paragraph reads:

8. Failure on the part of the Party of the Second Part to comply with the terms and conditions herein agreed
upon shall be sufficient for revocation of this contract by the Party of the First Part without need of judicial
demand.

It is not disputed that the Leverizas (lessees) entered into a contract of sublease (Contract B) with Mobil Oil
without the consent of CAA (lessor). The cancellation of the contract was made in a letter by Jurado, Airport
General Manager of CAA addressed to Rosario Leveriza.

Respondent Leverizas and the CAA assailed the validity of such cancellation, claiming that the Airport
General Manager had no legal authority to make the cancellation. They maintain that it is only the (1)
Secretary of Public Works and Communications, acting for the President, or by delegation of power, the (2)
Director of CCA who could validly cancel the contract. Petitioners argue that cancelling or setting aside a
contract approved by the Secretary is, in effect, repealing an act of the Secretary which is beyond the
authority of the Administrator.

Such argument is untenable. The terms and conditions under which such revocation or cancellation may be
made, have already been specifically provided for in Contract “A” which has already been approved by the
Department Head, It is evident that in the implementation of aforesaid contract, the approval of said
Department Head is no longer necessary if not redundant

NOTES:

1. It is further contended that even granting that such cancellation was effective, a subsequent billing by the
Accounting Department of the CAA has in effect waived or nullified the rescission of Contract “A.”

8
The billing of the petitioners by the Accounting Department of the CAA if indeed it transpired, after the
cancellation of Contract “A” is obviously an error. However, this Court has already ruled that the mistakes of
government personnel should not affect public interest.

2. Petitioners further assail the interpretation of Contract “A”, claiming that Contract “B” was a mere
sublease to Mobil Oil and requires no prior consent of CAA to perfect the same. Citing Article 1650 of the
Civil Code, they assert that the prohibition to sublease must be expressed and cannot be merely implied or
inferred.

As correctly found by the Court of Appeals, petitioners in asserting the non- necessity for a prior consent
interprets the first sentence of paragraph 7 of Contract “A” to refer to an assignment of lease under Article
1649 of the Civil Code and not to a mere sublease. A careful scrutiny of said paragraph of Contract “A”
clearly shows that it speaks of transfer of rights of Rosario Leveriza to the leased premises and not to
assignment of the lease.

2. Petitioners likewise argued that it was contemplated by the parties to Contract “A” that Mobil Oil would be
the owner of the gasoline station it would construct on the leased premises during the period of the lease,
hence, it is understood that it must be given a right to use and occupy the lot in question in the form of a
sub-lease.

In Contract “A”, it was categorically stated that it is the lessee (petitioner) who will manage and operate the
gasoline station. The fact that Mobil Oil was mentioned in that contract was clearly not intended to give
approval to a sublease between petitioners and said company but rather to insure that in the arrangements
to be made between them, it must be understood that after the expiration of the lease contract, whatever
improvements have been constructed in the leased premises shall be relinquished to CAA. Thus, this Court
held that “the primary and elementary rule of construction of documents is that when the words or language
thereof is clear and plain or readily understandable by any ordinary reader thereof, there is absolutely no
room for interpretation or construction anymore.

3. <ADMINISTRATIVE LAW>Finally, petitioners contend that the administrator of CAA cannot execute
without approval of the Department Secretary, a valid contract of lease over real property owned by the
Republic of the Philippines, citing the Revised Administrative Code, which provide that Under 567 of the
Revised Administrative Code, such contract of lease must be executed:

(1) by the President of the Philippines, or

(2) by an officer duly designated by him or

(3) by an officer expressly vested by law.

On the other hand, respondent CAA avers that the CAA Administrator has the authority to lease real
property belonging to the RP under its administration even without the approval of the Secretary of Public
Works and Communications, which authority is expressly vested in it by law, more particularly Section 32
(24) of Republic Act 776, which reads:

Sec. 32. Powers and Duties of the Administrator. — Subject to the general control and supervision of the
Department Head, the Administrator shall have, among others, the following powers and duties:

xxx xxx xxx

9
(24) To administer, operate, manage, control, maintain and develop the Manila International Airport and all
government aerodromes except those controlled or operated by the Armed Forces of the Philippines
including such power and duties as: … (b) to enter into, make and execute contracts of any kind with any
person, firm, or public or private corporation or entity; (c) to acquire, hold, purchase, or lease any personal
or real property; right of ways, and easements which may be proper or necessary: Provided, that no real
property thus acquired and any other real property of the Civil Aeronautics Administration shall be sold
without the approval of the President of the Philippines. …

There is no dispute that the Revised Administrative Code is a general law while Republic Act 776 is a
special law nor in the fact that the real property subject of the lease in Contract “C” is real property
belonging to the Republic of the Philippines.

It is readily apparent that in the case at bar, the CAA has the authority to enter into Contracts of Lease for
the government under the third category (Art. 567. )Thus, as correctly ruled by the Court of Appeals, the
CAA has the power to execute the deed or contract involving leases of real properties belonging to the RP,
not because it is an entity duly designated by the President but because the said authority to execute the
same is, by law expressly vested in it, which in this case is RA 776.

Under the above-cited Section 32 (par. 24) of Republic Act 776, the Administrator (Director) of the CAA by
reason of its creation and existence, administers properties belonging to the RP and it is on these properties
that the Administrator must exercise his vast power and discharge his duty to enter into, make and execute
contract of any kind with any person, firm, or public or private corporation or entity and to acquire, hold,
purchase, or lease any personal or real property, right of ways and easements which may be proper or
necessary. (The exception, however, is the sale of properties acquired by CAA or any other real properties
of the same which must have the approval of the President of the Philippines.) The Court of appeals took
cognizance of the striking absence of such proviso in the other transactions contemplated in paragraph (24)
and is convinced as we are, that the Director of the CAA does not need the prior approval of the President
or the Secretary of Public Works and Communications in the execution of Contract “C.”

In this regard, this Court, ruled that another basic principle of statutory construction mandates that general
legislation must give way to special legislation on the same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are not applicable; that specific statute prevails over a
general; and that where two statutes are of equal theoretical application to a particular case, the one
designed therefor specially should prevail.

CASE DIGEST: DAOANG V MUNICIPAL JUDGE

Daoang v Municipal Judge
G.R. No. L-34568
28 March 1988

Facts:
Petitioners are grandchildren of private respondents Agonoy. Private respondents filed a petition before
the MTC of San Nicolas seeking adoption of two minors. Petitioners filed an opposition to the adoption
invoking the provisions of the Civil Code. That the respondents have a legitimate child, the mother of the
petitioners, now deceased, as such they are not qualified to adopt as per Article 335 of the aforesaid Code.
The petition for adoption was granted. Hence, this petition.

Issue:
Whether or not private respondents are disqualified to adopt under paragraph 1 of Art. 335.

10
Held:
No. The provision invoked by the petitioners is clear and unambiguous. Therefore, no construction or
interpretation should be made. To add “grandchildren” in this article where no such word is included would
be in violation to the legal maxim that what is expressly included would naturally exclude what is not
included.

Case Digest: G.R. No. L-2348. February 27, 1950. 85 Phil 522
Gregorio Perfecto, plaintiff-appellee, vs. Bibiano Meer, Collector of Internal Revenue, defendant-appellant.

Facts: In April, 1947 the Collector of Internal Revenue required plaintiff-appellee to pay income tax upon his
salary as member of this Court during the year 1946. After paying the amount, he instituted this action in the
Manila Court of First Instance contending that the assessment was illegal, his salary not being taxable for
the reason that imposition of taxes thereon would reduce it in violation of the Constitution.

Issue: Whether or not the imposition of an income tax upon this salary in 1946 amount to a diminution
thereof.

Ruling: The Supreme Court held that unless and until the Legislature approves an amendment to the
Income Tax Law expressly taxing "that salaries of judges thereafter appointed", salaries of judges are not
included in the word "income" taxed by the Income Tax Law. Two paramount circumstances may
additionally be indicated, to wit: First, when the Income Tax Law was first applied to the Philippines 1913,
taxable "income" did not include salaries of judicial officers when these are protected from diminution. That
was the prevailing official belief in the United States, which must be deemed to have been transplanted
here; and second, when the Philippine Constitutional Convention approved (in 1935) the prohibition against
diminution off the judges’ compensation, the Federal principle was known that income tax on judicial
salaries really impairs them.

Case Digest: G.R. No. L-6355-56. August 31, 1953. 93 Phil 696
Pastor M. Endencia and Fernando Jugo, plaintiffs-appellees, vs. Saturnino David, as Collector of
Internal Revenue, defendant-appellant.

Facts: This is a joint appeal from the decision of the Court of First Instance of Manila declaring section 13 of
Republic Act No. 590 unconstitutional, and ordering the appellant Saturnino David as Collector of Internal
Revenue to re-fund to Justice Pastor M. Endencia the sum of P1,744.45, representing the income tax
collected on his salary as Associate Justice of the Court of Appeals in 1951, and to Justice Fernando Jugo
the amount of P2,345.46, representing the income tax collected on his salary from January 1,1950 to
October 19, 1950, as Presiding Justice of the Court of Appeals, and from October 20, 1950 to December
31,1950, as Associate Justice of the Supreme Court, without special pronouncement as to costs.

Issue: Whether or not Republic Act No. 590, particularly section 13, can justify and legalize the collection of
income tax on the salary of judicial officers.

Ruling: No. The Supreme Court reiterated the doctrine laid down in the case of Perfecto vs. Meer, to the
effect that the collection of income tax on the salary of a judicial officer is a diminution thereof and so
violates the Constitution. It is further held that the interpretation and application of the Constitution and of
statutes is within the exclusive province and jurisdiction of the Judicial department, and that in enacting a
law, the Legislature may not legally provide therein that it be interpreted in such a way that it may not violate
a Constitutional prohibition, thereby tying the hands of the courts in their task of later interpreting said

11
statute, especially when the interpretation sought and provided in said statute runs counter to a previous
interpretation already given in a case by the highest court of the land.

G.R. No. L-30642 (April 30, 1985)

Floresca vs. Philex Mining Corporation

FACTS:
Several miners, who, while working at the copper mines underground operations at Tuba, Benguet on June
28, 1967, died as a result of the cave-in that buried them in the tunnels of the mine. The heirs of the
deceased claimed their benefits pursuant to the Workmen’s Compensation Act before the Workmen’s
Compensation Commission. They also petitioned before the regular courts and sue Philex for additional
damages, pointing out in the complaint 'gross and brazen negligence on the part of Philex in failing to take
necessary security for the protection of the lives of its employees working underground'. Philex invoked that
they can no longer be sued because the petitioners have already claimed benefits under the Workmen’s
Compensation Act, which, Philex insists, holds jurisdiction over provisions for remedies.

ISSUE:
Whether or not the heirs of the deceased have a right of selection between availing themselves of the
worker’s right under the Workmen’s Compensation Act and suing in the regular courts under the Civil Code
for higher damages (actual, moral and exemplary) from the employers by virtue of that negligence or fault of
the employers or whether they may avail themselves cumulatively of both actions.

RULING:
The court held that although the other petitioners had received the benefits under the Workmen’s
Compensation Act, such may not preclude them from bringing an action before the regular court because
they became cognizant of the fact that Philex has been remiss in its contractual obligations with the
deceased miners only after receiving compensation under the Act. Had petitioners been aware of said
violation of government rules and regulations by Philex, and of its negligence, they would not have sought
redress under the Workmen’s Compensation Commission which awarded a lesser amount for
compensation. The choice of the first remedy was based on ignorance or a mistake of fact, which nullifies
the choice as it was not an intelligent choice. The case should therefore be remanded to the lower court for
further proceedings. However, should the petitioners be successful in their bid before the lower court, the
payments made under the Workmen’s Compensation Act should be deducted from the damages that may
be decreed in their favor.

SARMIENTO V. MISON, G. R. No. 79974 December 17, 1987 (CASE DIGEST)

CONSTITUTIONAL LAW I CASE DIGEST

POLITICAL LAW
POWERS OF THE EXECUTIVE

Ulpiano P. Sarmiento III and Juanito G. Arcilla v. Salvador Mison in his capacity as COMMISSIONER OF
THE BUREAU OF CUSTOMS and Guillermo Carague in his capacity as SECRETARY OF THE
DEPARTMENT OF BUDGET
G.R. No. 79974, December 17, 1987
Padilla, J.:

FACTS:
Respondent Salvador Mison was appointed as the Commissioner of the Bureau of Customs by then
President (Corazon) Aquino. The said appointment made by the President is being questioned by petitioner

12
Ulpiano Sarmiento III and Juanito Arcilla who are both taxpayers, members of the bar, and both
Constitutional law professors, stating that the said appointment is not valid since the appointment was not
submitted to the Commission On Appointment (COA) for approval. Under the Constitution, the appointments
made for the "Heads of Bureau" requires the confirmation from COA.

ISSUE:

WHETHER OR NOT the appointment made by the President without the confirmation from COA is valid.

HELD:

Yes, under the 1987 Constitution, Heads of Bureau are removed from the list of officers that needed
confirmation from the Commission On Appointment. It enumerated the four (4) groups whom the President
shall appoint:

 Heads of the Executive Departments, Ambassadors, other public minister or consuls, Officers of the
Armed Forces from the rank of Colonel or Naval Captain, and Other officers whose appointments are
vested in him in him in this Constitution;
The above-mentioned circumstance is the only instance where the appointment made by the President that
requires approval from the COA and the following instances are those which does not require approval from
COA:
 All other Officers of the Government whose appointments are not otherwise provided by law;
 Those whom the President may be authorized by law to appoint; and
 Officers lower in rank whose appointments the Congress may by law vest in the President alone.

Francisco vs. House of Representatives, G.R. No 160261, November 10, 2003

SEPTEMBER 16, 2018

FACTS:
In late 2001 House of Representatives (HOR) of the 12th Congress adopted its Rules of Procedure in
Impeachment Proceedings. The new rules superseded impeachment Rules of the 11th Congress. Secs. 16
and 17 of these Rules state that impeachment proceedings are deemed initiated (1) if House Committee on
Justice deems the complaint sufficient in substance, or (2) if the House itself affirms or overturns the
findings of the House Committee on Justice on the substance of the complaint, or (3) by filing or
endorsement before the HOR Secretary General by one-thirds of the members of the House.

A few months later, HoR passed a resolution directing the Committee on Justice to conduct an investigation,
in aid of legislation, on the manner of disbursements and expenditures by Chief Justice Davide of the
Judiciary Development Fund (JDF).”

In June 2003, former President Estrada files the first impeachment complaint against Chief Justice Davide
and 7 Associate Justices of SC for “culpable violation of the Constitution, betrayal of public trust and other
high crimes.” The complaint was referred to the House Committee on Justice on August 5, 2003 in
accordance with Section 3(2) of Article XI of the Constitution.

On October 13, 2003, the HOR Committee on Justice found the first impeachment complaint “sufficient in
form.” However, it also voted to dismiss the same on October 22, 2003 for being insufficient in substance.
Ten days later, on October 23,2003, Teodoro and Fuentebella filed a second impeachment complaint
against CJ Davide, founded on the alleged results of the legislative inquiry on the JDF. The second

13
impeachment complaint was accompanied by a “resolution of Endorsement/Impeachment” signed by at
least one-third of all the Members of the House of Representatives.

Several petitions were filed with the SC by members of the bar, members of the House of Representatives,
as well as private individuals, all asserting their rights, among others, as taxpayers to stop the illegal
spending of public funds for the impeachment proceedings against the Chief Justice. The petitioners
contend that Article XI, Section 3 (5) of the 1987 Constitution bars the filing of the second impeachment
complaint. The constitutional provision states that “(n)o impeachment proceedings shall be initiated against
the same official more than once within a period of one year.”

Speaker Jose de Venecia submitted a manifestaiton to the SC stating that the High Court does not have
jurisdiction to hear the case as it would mean an encroachment on the power of HoR, a co-equal branch of
government.

ISSUES/HELD:

1.) Whether the filing of the second impeachment complaint violates Sec. 3(5), Article XI of the
Constitution—YES

2) Whether Sec. 16 & 17 of Rule V of the Rules of Procedure in Impeachment Proceedings approved by the
HoR are unconstitutional – YES

3.) Whether or not the certiorari jurisdiction of the court may be invoked – YES

RATIO:

1. The second impeachment complaint falls under the one-year bar under the Constitution.

2. Sec 16 and 17 of House Impeachment Rule V are unconstitutional.

The Supreme Court employed three principles in deciding the case:

1) Whenever possible, the words in the Constitution must be given their ordinary meaning (verbal egis);

2) If there is ambiguity, the Constitution must be interpreted according to the intent of the framers; and

3) The Constitution must be interpreted as a whole.

Applying these principles, to “initiate” in its ordinary acceptation means simply to begin. The records of the
debates by the framers affirm this textual interpretation. From the records of the Constitutional Convention
and the amicus curiae briefs of its two members (Maambong and Regalado), the term “to initiate” in Sec
3(5), Art. XI of the Constitution refers to the filing of the impeachment complaint coupled with taking initial
action by Congress on the complaint.

By contrast, Secs. 16 and 17 state that impeachment proceedings are deemed initiated (1) if House
Committee on Justice deems the complaint sufficient in substance, or (2) if the House itself affirms or
overturns the findings of the House Committee on Justice on the substance of the complaint, or (3) by filing
or endorsement before the HOR Secretary General by one-thirds of the members of the House.

14
In this light, Secs. 16 and 17 of the House Rules of Procedure for Impeachment are unconstitutional
because the rules clearly contravene Sec. 3 (5), Art. XI since the rules give the term “initiate” a different
meaning from filing and referral.

Hence, the second impeachment complaint by Teodoro and Fuentebella violates the constitutional one-year
ban.

3. The certiorari jurisdiction of the court may be invoked.

The Supreme Court, in exercising its expanded power of judicial review, only carried out its duty as stated in
Section 1, Article VIII, which mandates the judicial department to look into cases where there has been a
grave abuse of discretion on the part of the different branches of government. Here, it only reviewed the
constitutionality of the Rules of Impeachment against the one-year ban explicitly stated in the Constitution.
Consequently, the contention that judicial review over the case would result in a crisis is unwarranted.

The judiciary, with the Supreme Court at its helm as the final arbiter, effectively checks on the other
departments in the exercise of its power to determine the law. It must declare executive and legislative acts
void if they violate the Constitution. The violation of Article XI, Section 3(5) of the Constitution is thus within
the competence of the Court to decide.

G.R. No. 202242 April 16, 2013 FRANCISCO I. CHAVEZ vs. JUDICIAL AND BAR COUNCIL,
G.R. No. 202242 April 16, 2013
FRANCISCO I. CHAVEZ, Petitioner,
vs.
JUDICIALAND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C. TUPAS,
JR.,Respondents.
MENDOZA, J.:

NATURE:
The case is a motion for reconsideration filed by the JBC in a prior decision rendered July 17, 2012 that
JBC’s action of allowing more than one member of the congress to represent the JBC to be unconstitutional

FACTS:
In 1994, instead of having only seven members, an eighth member was added to the JBC as two
representatives from Congress began sitting in the JBC – one from the House of Representatives and one
from the Senate, with each having one-half (1/2) of a vote. Then, the JBC En Banc, in separate meetings
held in 2000 and 2001, decided to allow the representatives from the Senate and the House of
Representatives one full vote each. Senator Francis Joseph G. Escudero and Congressman Niel C. Tupas,
Jr. (respondents) simultaneously sit in the JBC as representatives of the legislature. It is this practice that
petitioner has questioned in this petition. it should mean one representative each from both Houses which
comprise the entire Congress. Respondent contends that the phrase “ a representative of congress” refers
that both houses of congress should have one representative each, and that these two houses are
permanent and mandatory components of “congress” as part of the bicameral system of legislature. Both
houses have their respective powers in performance of their duties. Art VIII Sec 8 of the constitution
provides for the component of the JBC to be 7 members only with only one representative from congress.

ISSUE:
Whether the JBC’s practice of having members from the Senate and the House of Representatives making
8 instead of 7 sitting members to be unconstitutional as provided in Art VIII Sec 8 of the constitution.

15
HELD: Yes. The practice is unconstitutional; the court held that the phrase “a representative of congress”
should be construed as to having only one representative that would come from either house, not both. That
the framers of the constitution only intended for one seat of the JBC to be allotted for the legislative.
It is evident that the definition of “Congress” as a bicameral body refers to its primary function in government
– to legislate. In the passage of laws, the Constitution is explicit in the distinction of the role of each house in
the process. The same holds true in Congress’ non-legislative powers. An inter-play between the two
houses is necessary in the realization of these powers causing a vivid dichotomy that the Court cannot
simply discount. This, however, cannot be said in the case of JBC representation because no liaison
between the two houses exists in the workings of the JBC. Hence, the term “Congress” must be taken to
mean the entire legislative department. The Constitution mandates that the JBC be composed of seven (7)
members only.

FALLO: The motion was denied.

Case Digest: Aglipay vs Ruiz GR No L-45459

By ResIpsaLoquitor - April 25, 2014
Aglipay vs. Ruiz
GR No. L-45459 March 13, 1937

Facts:
The Director of Post announced that he would order the issues of postage stamps commemorating the
celebration of City of Manila of the 33rd International Eucharistic Congress organized by the Roman
Catholic Church pursuant to Act No. 4052 for the purpose of appropriating funds for the making of new
postage stamps. Aglipay requested Atty. Vicente Sotto to denounce the matter to the President. It was
alleged that Ruiz is in direct violation of the Constitution by issuing and selling postage stamps
commemorative of the 33rd International Eucharistic Congress. That such act was violative of Art. VI, Sec.
23 (3) of the Philippines, to wit:
No public money or property shall ever be appropriated, applied, or used, directly or indirectly, for the use,
benefit, or support of any sect, church, denomination, secretarian, institution, or system of religion, or for the
use, benefit, or support of any priest, preacher, minister, or other religious teacher or dignitary as such,
except when such priest, preacher, minister, or dignitary is assigned to the armed forces or to any penal
institution, orphanage, or leprosarium.
The prohibition herein expressed is a direct corollary of the principle of separation of church and state.

Issue:
Is the production and selling of the International Eucharistic Congress commemorative stamps violation of
the separation of Church and State and Art. VI, Sec. 23 (3)?

Ruling:
No, we are much impressed with the vehement appeal of counsel for the petitioner to maintain inviolate the
complete separation of church and state and curb any attempt to infringe by indirection a constitutional
inhibition. Indeed, in the Philippines, once the scene of religious intolerance and prescription, care should be
taken that at this stage of our political development nothing is done by the Government or its officials that
may lead to the belief that the Government is taking sides or favoring a particular religious sect or institution.
But, upon very serious reflection, examination of Act No. 4052, and scrutiny of the attending circumstances,
we have come to the conclusion that there has been no constitutional infraction in the case at bar, Act No.
4052 grants the Director of Posts, with the approval of the Secretary of Public Works and Communications,
discretion to misuse postage stamps with new designs "as often as may be deemed advantageous to the
Government.”

16
Act No. 4052 contemplates no religious purpose. What it gives is the discretionary powers to determine
when the issuance of special postage stamps would be advantageous to the government.

CASE DIGEST: ATTY. ROMULO B. MACALINTAL v. PRESIDENTIAL ELECTORAL TRIBUNAL (G.R.

No. 191618; NOVEMBER 23, 2010)

FACTS: Atty. Romulo Macalintal questions the constitutionality of the Presidential Electoral Tribunal(PET)
as an illegal and unauthorized progeny of Section 4, Article VII of the Constitution.

ISSUES: Whether the creation of the Presidential Electoral Tribunal is unconstitutional for being a violation
of paragraph 7, Section 4 of Article VII of the 1987 Constitution

Whether the designation of members of the supreme court as members of the presidential electoral tribunal
is unconstitutional for being a violation of Section 12, Article VIII of the 1987 Constitution

HELD:
First Issue: Petitioner, a prominent election lawyer who has filed several cases before this Court involving
constitutional and election law issues, including, among others, the constitutionality of certain provisions of
Republic Act (R.A.) No. 9189 (The Overseas Absentee Voting Act of 2003),cannot claim ignorance of: (1)
the invocation of our jurisdiction under Section 4, Article VII of the Constitution; and (2) the unanimous
holding thereon. Unquestionably, theoverarching frameworkaffirmed inTecson v. Commission on Electionsis
that the Supreme Court has original jurisdiction to decide presidential and vice-presidential election protests
while concurrentlyacting as an independent Electoral Tribunal.
Verba legisdictates that wherever possible, the words used in the Constitution must be given their ordinary
meaning except where technical terms are employed, in which case the significance thus attached to them
prevails. However, where there is ambiguity or doubt, the words of the Constitution should be interpreted in
accordance with the intent of its framers orratio legis et anima. A doubtful provision must be examined in
light of the history of the times, and the condition and circumstances surrounding the framing of the
Constitution. Last,ut magis valeat quam pereat the Constitution is to be interpreted as a whole.

By the same token, the PET is not a separate and distinct entity from the Supreme Court, albeit it has
functions peculiar only to the Tribunal. It is obvious that the PET was constituted in implementation of
Section 4, Article VII of the Constitution, and it faithfully complies not unlawfully defies the constitutional
directive. The adoption of a separate seal, as well as the change in the nomenclature of the Chief Justice
and the Associate Justices into Chairman and Members of the Tribunal, respectively, was designed simply
to highlight the singularity and exclusivity of the Tribunals functions as a special electoral court. the PET, as
intended by the framers of the Constitution, is to be an institution independent,but not separate, from the
judicial department,i.e., the Supreme Court.

Second Issue: It is also beyond cavil that when the Supreme Court, as PET, resolves a presidential or vice-
presidential election contest, it performs what is essentially a judicial power. In the landmark case of Angara
v. Electoral Commission,Justice Jose P. Laurel enucleated that "it would be inconceivable if the Constitution
had not provided for a mechanism by which to direct the course of government along constitutional
channels." In fact,Angara pointed out that "[t]he Constitution is a definition of the powers of government."
And yet, at that time, the 1935 Constitution did not contain the expanded definition of judicial power found in
Article VIII, Section 1, paragraph 2 of the present Constitution. DENIED.

17
CASE DIGEST: ESTRADA V. ESCRITOR
Published by paul on August 12, 2013 | Leave a response
ALEJANDRO ESTRADA, petitioner v. SOLEDAD S. ESCRITOR, respondentA.M. No. P-02-1651
August 4, 2003

Facts:

Escritor is a court interpreter since 1999 in the RTC of Las Pinas City. She has been living with Quilapio, a
man who is not her husband, for more than twenty five years and had a son with him as well. Respondent’s
husband died a year before she entered into the judiciary while Quilapio is still legally married to another
woman.

Complainant Estrada requested the Judge of said RTC to investigate respondent. According to complainant,
respondent should not be allowed to remain employed therein for it will appear as if the court allows such
act.

Respondent claims that their conjugal arrangement is permitted by her religion—the Jehovah’s Witnesses
and the Watch Tower and the Bible Trace Society. They allegedly have a ‘Declaration of Pledging
Faithfulness’ under the approval of their congregation. Such a declaration is effective when legal
impediments render it impossible for a couple to legalize their union.

Issue:
Whether or Not the State could penalize respondent for such conjugal arrangement.

Held:
No. The State could not penalize respondent for she is exercising her right to freedom of religion. The free
exercise of religion is specifically articulated as one of the fundamental rights in our Constitution. As
Jefferson put it, it is the most inalienable and sacred of human rights. The State’s interest in enforcing its
prohibition cannot be merely abstract or symbolic in order to be sufficiently compelling to outweigh a free
exercise claim. In the case at bar, the State has not evinced any concrete interest in enforcing the
concubinage or bigamy charges against respondent or her partner. Thus the State’s interest only amounts
to the symbolic preservation of an unenforced prohibition. Furthermore, a distinction between public and
secular morality and religious morality should be kept in mind. The jurisdiction of the Court extends only to
public and secular morality.

The Court further states that our Constitution adheres the benevolent neutrality approach that gives room
for accommodation of religious exercises as required by the Free Exercise Clause. This benevolent
neutrality could allow for accommodation of morality based on religion, provided it does not offend
compelling state interests. Assuming arguendo that the OSG has proved a compelling state interest, it has
to further demonstrate that the state has used the least intrusive means possible so that the free exercise is
not infringed any more than necessary to achieve the legitimate goal of the state. Thus the conjugal
arrangement cannot be penalized for it constitutes an exemption to the law based on her right to freedom of
religion.

Gamboa v. Teves etal., GR No. 176579, October 9, 2012

Facts:
The issue started when petitioner Gamboa questioned the indirect sale of shares involving almost 12 million
shares of the Philippine Long Distance Telephone Company (PLDT) owned by PTIC to First Pacific. Thus,
First Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby
increasing the total common shareholdings of foreigners in PLDT to about 81.47%. The petitioner contends
18
that it violates the Constitutional provision on filipinazation of public utility, stated in Section 11, Article XII of
the 1987 Philippine Constitution, which limits foreign ownership of the capital of a public utility to not more
than 40%. Then, in 2011, the court ruled the case in favor of the petitioner, hence this new case, resolving
the motion for reconsideration for the 2011 decision filed by the respondents.

Issue: Whether or not the Court made an erroneous interpretation of the term ‘capital’ in its 2011 decision?

Held/Reason: The Court said that the Constitution is clear in expressing its State policy of developing an
economy ‘effectively controlled’ by Filipinos. Asserting the ideals that our Constitution’s Preamble want to
achieve, that is – to conserve and develop our patrimony, hence, the State should fortify a Filipino-controlled
economy. In the 2011 decision, the Court finds no wrong in the construction of the term ‘capital’ which refers
to the ‘shares with voting rights, as well as with full beneficial ownership’ (Art. 12, sec. 10) which implies that
the right to vote in the election of directors, coupled with benefits, is tantamount to an effective control.
Therefore, the Court’s interpretation of the term ‘capital’ was not erroneous. Thus, the motion for
reconsideration is denied.

Narra Nickel Mining and Development Corp. vs Redmont Consolidated Mines Corporation
G.R. No. 195580 April 21, 2014

Facts: Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a
domestic corporation organized and existing under Philippine laws, took interest in mining and exploring
certain areas of the province of Palawan. After inquiring with the Department of Environment and Natural
Resources (DENR), it learned that the areas where it wanted to undertake exploration and mining activities
where already covered by Mineral Production Sharing Agreement (MPSA) applications of petitioners Narra,
Tesoro and McArthur. Petitioner McArthur, through its predecessor-in-interest Sara Marie Mining, Inc.
(SMMI), filed an application for an MPSA and Exploration Permit (EP) with the Mines and Geo-Sciences
Bureau (MGB), Region IV-B, Office of the Department of Environment and Natural Resources (DENR).
Subsequently, SMMI was issued MPSA-AMA-IVB-153 covering an area of over 1,782 hectares in Barangay
Sumbiling, Municipality of Bataraza, Province of Palawan and EPA-IVB-44 which includes an area of 3,720
hectares in Barangay Malatagao, Bataraza, Palawan. The MPSA and EP were then transferred to
Madridejos Mining Corporation (MMC) and, on November 6, 2006, assigned to petitioner McArthur.
Petitioner Narra acquired its MPSA from Alpha Resources and Development Corporation and Patricia
Louise Mining & Development Corporation (PLMDC) which previously filed an application for an MPSA with
the MGB, Region IV-B, DENR on January 6, 1992. Through the said application, the DENR issued MPSA-
IV-1-12 covering an area of 3.277 hectares in barangays Calategas and San Isidro, Municipality of Narra,
Palawan. Subsequently, PLMDC conveyed, transferred and/or assigned its rights and interests over the
MPSA application in favor of Narra. Another MPSA application of SMMI was filed with the DENR Region IV-
B, labeled as MPSA-AMA-IVB-154 (formerly EPA-IVB-47) over 3,402 hectares in Barangays Malinao and
Princesa Urduja, Municipality of Narra, Province of Palawan. SMMI subsequently conveyed, transferred and
assigned its rights and interest over the said MPSA application to Tesoro. On January 2, 2007, Redmont
filed before the Panel of Arbitrators (POA) of the DENR three (3) separate petitions for the denial of
petitioners’ applications for MPSA designated as AMA-IVB-153, AMA-IVB-154 and MPSA IV-1-12. In the
petitions, Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra are owned
and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont reasoned that
since MBMI is a considerable stockholder of petitioners, it was the driving force behind petitioners’ filing of
the MPSAs over the areas covered by applications since it knows that it can only participate in mining
activities through corporations which are deemed Filipino citizens. Redmont argued that given that
petitioners’ capital stocks were mostly owned by MBMI, they were likewise disqualified from engaging in
mining activities through MPSAs, which are reserved only for Filipino citizens.

Issue: Whether or not the petitioner corporations are Filipino and can validly be issued MPSA and EP.
19
Held: No. The SEC Rules provide for the manner of calculating the Filipino interest in a corporation for
purposes, among others, of determining compliance with nationality requirements (the ‘Investee
Corporation’). Such manner of computation is necessary since the shares in the Investee Corporation may
be owned both by individual stockholders (‘Investing Individuals’) and by corporations and partnerships
(‘Investing Corporation’). The said rules thus provide for the determination of nationality depending on the
ownership of the Investee Corporation and, in certain instances, the Investing Corporation.

Under the SEC Rules, there are two cases in determining the nationality of the Investee Corporation. The
first case is the ‘liberal rule’, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and
pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, ‘(s)hares belonging to
corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be
considered as of Philippine nationality.’ Under the liberal Control Test, there is no need to further trace the
ownership of the 60% (or more) Filipino stockholdings of the Investing Corporation since a corporation
which is at least 60% Filipino-owned is considered as Filipino.

The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said
Paragraph 7 of the 1967 SEC Rules which states, “but if the percentage of Filipino ownership in the
corporation or partnership is less than 60%, only the number of shares corresponding to such percentage
shall be counted as of Philippine nationality.” Under the Strict Rule or Grandfather Rule Proper, the
combined totals in the Investing Corporation and the Investee Corporation must be traced (i.e.,
“grandfathered”) to determine the total percentage of Filipino ownership. Moreover, the ultimate Filipino
ownership of the shares must first be traced to the level of the Investing Corporation and added to the
shares directly owned in the Investee Corporation.

In other words, based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part of
the SEC Rule applies only when the 60-40 Filipino-foreign equity ownership is in doubt (i.e., in cases where
the joint venture corporation with Filipino and foreign stockholders with less than 60% Filipino stockholdings
[or 59%] invests in other joint venture corporation which is either 60-40% Filipino-alien or the 59% less
Filipino). Stated differently, where the 60-40 Filipino- foreign equity ownership is not in doubt, the
Grandfather Rule will not apply.

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