Stay Order During Rehabilitation

Proceedings Against All Claims

Does Not Cover Criminal Charges
(Panlileo vs RTC, 2011)
Panlileo vs RTC
Case Digest GR 173846 Feb 2 2011
Full Text
Facts:
Upon a petition for Suspension of Payments and Rehabilitation filed by the corporate officers of SIHI,
RTC Branch 24 issued an order staying all claims against the corporation. At the same time however,
there were some criminal charges pending in RTC Branch 51 which were filed by SSS against the
corporate officers of SIHI. Arguing that the stay order issued by Branch 24 should also apply to the
criminal charges pending in Branch 51, the corporate officers filed a motion before Branch 51 to
suspend its proceedings until the petition for rehabilitation was finally resolved.
Issue: W/N an order suspending all claims against a corporation apply as well to criminal charges
filed against its officers
No. Criminal charges are not within the ambit of an order staying enforcement of all claims.
First, the term claim has been construed to refer to debts or demands of a pecuniary nature, or the
assertion to have money paid. The purpose for suspending actions for claims against the corporation
in a rehabilitation proceeding is to enable the management committee or rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extrajudicial interference that might unduly
hinder or prevent the rescue of the debtor company. On the other hand, the prime purpose of a
criminal action is to punish the offender. This being the case, there is no reason why criminal
proceedings should be suspended during corporate rehabilitation. Therefore, the rehabilitation of
SIHI and the settlement of claims against the corporation is not a legal ground for the extinction of
the officers criminal liabilities.
Second, the prosecution of the officers of the corporation has no bearing on the pending
rehabilitation of the corporation, especially since they are charged in their individual capacities. The
liability for the crimes charged is personal to the offender. Such being the case, the purpose of the
law for the issuance of the stay order is not compromised, since the appointed rehabilitation receiver
can still fully discharge his functions as mandated by law.

Third, the motion of the officers to suspend the criminal proceedings cannot prosper simply because
under the new law on corporate rehabilitation, which is the Financial Rehabilitation and Insolvency
Act of 2010, Section 18 thereof explicitly provides that criminal actions against the individual officer
of a corporation are not subject to the Stay or Suspension Order in rehabilitation proceedings. ##
Relevant Laws
Hide
Rule 4, Sec 6 of the Interim Rules of Procedure on Corporate Rehabilitation: Stay Order
Stay Order. If the court finds the petition to be sufficient in form and substance, it
shall, not later than five (5) days from the filing of the petition, issue an Order x x x;
(b) staying enforcement of all claims, whether for money or otherwise and whether such
enforcement is by court action or otherwise, against the debtor, its guarantors and
sureties not solidarily liable with the debtor; x x x
Hide
Sec 18, RA 10142: Inapplicability of Stay or Suspension Order
The Stay or Suspension Order shall not apply:
xxxx
(g) any criminal action against individual debtor or owner, partner, director or officer of
a debtor shall not be affected by any proceeding commenced under this Act.
Hide
A Pending Rehabilitation Proceeding Is Not A Reason to Suspend Criminal Proceedings
(Rosario vs Co, 2008)
The gravamen of the offense punished by B.P. Blg. 22 is the act of making and issuing a
worthless check; that is, a check that is dishonored upon its presentation for payment. It
is designed to prevent damage to trade, commerce, and banking caused by worthless
checks. In Lozano v. Martinez, this Court declared that it is not the nonpayment of an
obligation which the law punishes. The law is not intended or designed to coerce a
debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal
sanctions, the making and circulation of worthless checks. Because of its deleterious
effects on the public interest, the practice is proscribed by the law. The law punishes the
act not as an offense against property, but an offense against public order. The prime
purpose of the criminal action is to punish the offender in order to deter him and others
from committing the same or similar offense, to isolate him from society, to reform and
rehabilitate him or, in general, to maintain social order. Hence, the criminal prosecution
is designed to promote the public welfare by punishing offenders and deterring others.
Consequently, the filing of the case for violation of B.P. Blg. 22 is not a claim that can
be enjoined within the purview of P.D. No. 902-A. True, although conviction of the
accused for the alleged crime could result in the restitution, reparation or
indemnification of the private offended party for the damage or injury he sustained by

reason of the felonious act of the accused, nevertheless, prosecution for violation of B.P.
Blg. 22 is a criminal action.
A criminal action has a dual purpose, namely, the punishment of the offender and
indemnity to the offended party. The dominant and primordial objective of the criminal
action is the punishment of the offender. The civil action is merely incidental to and
consequent to the conviction of the accused. The reason for this is that criminal actions
are primarily intended to vindicate an outrage against the sovereignty of the state and
to impose the appropriate penalty for the vindication of the disturbance to the social
order caused by the offender. On the other hand, the action between the private
complainant and the accused is intended solely to indemnify the former.

Ownership of A Trademark Is Not

Based on An Earlier Filing Date (EY
vs Shen Dar, 2010)
EY Industrial Sales vs Shen Dar
Case Digest GR 184850 Oct 20 2010
Full Text
Facts:
EYIS is a domestic corporation engaged in the production, distribution and sale of air
compressors and other industrial tools and equipment. On the other hand, Shen Dar is a
Taiwan-based foreign manufacturer of air compressors. From 1997 to 2004, EYIS
imported air compressors from Shen Dar. Both of them sought to register the mark
VESPA for use on air compressors, but it was Shen Dar who first filed the application on
June 1997. EYIS application was first granted on 2004, so Shen Dar sought for its
cancellation on the ground of Sec 123 of the Intellectual Property Code which provides
that the registration of a similar mark is prevented with the filing of an earlier
application for registration. On the other hand, EYIS contended that Shen Dar is not
entitled to register the mark VESPA on its products because EYIS has been using it as
the sole assembler and distributor of air compressors since the 1990s. EYIS was able to
prove such fact.
Issue: W/N EYIS is the true owner of the mark VESPA

Yes. EYIS is the true owner because it is the prior and continuous user of the mark
VESPA.
Section 123.1 of the IPC should not be interpreted to mean that ownership is based
upon an earlier filing date. While RA 8293 removed the previous requirement of proof of
actual use prior to the filing of an application for registration of a mark, proof of prior
and continuous use is necessary to establish ownership of a mark. Ownership of a mark
or trade name may be acquired not necessarily by registration but by adoption and use
in trade or commerce.
As between actual use of a mark without registration, and registration of the mark
without actual use thereof, the former prevails over the latter. Hence, EYIS is entitled to
the registration of the mark in its name. ##
Notes
Hide
SECTION 122. How Marks are Acquired.
The rights in a mark shall be acquired through registration made validly in accordance
with the provisions of this law. (Sec. 2-A, R.A. No. 166a)
Hide
SECTION 123. Registrability.
123.1. A mark cannot be registered if it:
a. Consists of immoral, deceptive or scandalous matter, or matter which may disparage
or falsely suggest a connection with persons, living or dead, institutions, beliefs, or
national symbols, or bring them into contempt or disrepute;
b. Consists of the flag or coat of arms or other insignia of the Philippines or any of its
political subdivisions, or of any foreign nation, or any simulation thereof;
c. Consists of a name, portrait or signature identifying a particular living individual
except by his written consent, or the name, signature, or portrait of a deceased
President of the Philippines, during the life of his widow, if any, except by written
consent of the widow;
d. Is identical with a registered mark belonging to a different proprietor or a
mark with an earlier filing or priority date, in respect of:
i. The same goods or services, or
ii. Closely related goods or services, or
iii. If it nearly resembles such a mark as to be likely to deceive or cause confusion;

e. Is identical with, or confusingly similar to, or constitutes a translation of a mark which

is considered by the competent authority of the Philippines to be well-known
internationally and in the Philippines, whether or not it is registered here, as being
already the mark of a person other than the applicant for registration, and used for
identical or similar goods or services:
Provided, That in determining whether a mark is well-known, account shall be taken of
the knowledge of the relevant sector of the public, rather than of the public at large,
including knowledge in the Philippines which has been obtained as a result of the
promotion of the mark;
f. Is identical with, or confusingly similar to, or constitutes a translation of a mark
considered well-known in accordance with the preceding paragraph, which is registered
in the Philippines with respect to goods or services which are not similar to those with
respect to which registration is applied for:
Provided, That use of the mark in relation to those goods or services would indicate a
connection between those goods or services, and the owner of the registered mark:
Provided further, That the interests of the owner of the registered mark are likely to be
damaged by such use;
g. Is likely to mislead the public, particularly as to the nature, quality, characteristics or
geographical origin of the goods or services;
h. Consists exclusively of signs that are generic for the goods or services that they seek
to identify;
i. Consists exclusively of signs or of indications that have become customary or usual to
designate the goods or services in everyday language or in bona fide and established
trade practice;
j. Consists exclusively of signs or of indications that may serve in trade to designate the
kind, quality, quantity, intended purpose, value, geographical origin, time or production
of the goods or rendering of the services, or other characteristics of the goods or
services;
k. Consists of shapes that may be necessitated by technical factors or by the nature of
the goods themselves or factors that affect their intrinsic value;

l. Consists of color alone, unless defined by a given form; or

m. Is contrary to public order or morality.
123.2. As regards signs or devices mentioned in paragraphs (j), (k), and (l), nothing
shall prevent the registration of any such sign or device which has become distinctive in
relation to the goods for which registration is requested as a result of the use that have
been made of it in commerce in the Philippines. The Office may accept as prima facie
evidence that the mark has become distinctive, as used in connection with the
applicants goods or services in commerce, proof of substantially exclusive and
continuous use thereof by the applicant in commerce in the Philippines for five (5) years
before the date on which the claim of distinctiveness is made.
123.3. The nature of the goods to which the mark is applied will not constitute an
obstacle to registration. (Sec. 4, R.A. No. 166a)
Hide
Registration is Only Presumptive of Ownership (Shangri-la vs Developers, 2006)
Registration, without more, does not confer upon the registrant an absolute right to the
registered mark. The certificate of registration is merely a prima facie proof that the
registrant is the owner of the registered mark or trade name. Evidence of prior and
continuous use of the mark or trade name by another can overcome the presumptive
ownership of the registrant and may very well entitle the former to be declared owner in
an appropriate case.
Hide
Registration is Not A Mode of Acquiring Ownership
By itself, registration is not a mode of acquiring ownership. When the applicant is not
the owner of the trademark being applied for, he has no right to apply for registration of
the same. Registration merely creates a prima facie presumption of the validity of the
registration, of the registrants ownership of the trademark and of the exclusive right to
the use thereof. Such presumption, just like the presumptive regularity in the
performance of official functions, is rebuttable and must give way to evidence to the
contrary.
Hide
Actual Use In Commerce is Required to Establish Right of Ownership
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. For a rule widely accepted and firmly entrenched, because it has come

down through the years, is thatactual use in commerce or business is a pre-requisite to

the acquisition of the right of ownership.
Full Text

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
Full Text
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, stepdown 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. ##
Full Text

Grandfather Rule may be Applied

Jointly with the Control Test to
Determine Corporate Ownership (Narra
vs Redmont, 2015)

Narra Nickel Mining vs Redmont

G.R. No. 195580, January 28, 2015
Full Text
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% Canadianowned 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. ##

Grandfather Rule Rules When the

Required 60-40 Filipino-foreign
Equity Ownership is In Doubt
(Narra vs Redmont, 2014)
Full Text
Narra Nickel Mining vs Redmont
Case Digest GR 185590, Apr 21 2014
Facts:
Redmont is a domestic corporation interested in the mining and exploration of some
areas in Palawan. Upon learning that those areas were covered by MPSA applications of
other three (allegedly Filipino) corporations Narra, Tesoro, and MacArthur, it filed a
petition before the Panel of Arbitrators of DENR seeking to deny their permits on the
ground that these corporations are in reality foreign-owned. MBMI, a 100% Canadian
corporation, owns 40% of the shares of PLMC (which owns 5,997 shares of Narra), 40%
of the shares of MMC (which owns 5,997 shares of McArthur) and 40% of the shares of
SLMC (which, in turn, owns 5,997 shares of Tesoro).
Aside from the MPSA, the three corporations also applied for FTAA with the Office of the
President. In their answer, they countered that (1) the liberal Control Test must be used
in determining the nationality of a corporation as based on Sec 3 of the Foreign
Investment Act which as they claimed admits of corporate layering schemes, and that

(2) the nationality question is no longer material because of their subsequent

application for FTAA.
Commercial / Political Law
Hide
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

Hide

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. ##

Full Text
Narra Nickel Mining vs Redmont, 2015: Grandfather Rule may be Applied
Cumulatively with the Control Test in Determining the Ownership of Corporations
Engaged in Nationalized Activities Full Text l Digest
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Using an Extension Telephone to

Eavesdrop is Not Punishable under
the Anti-Wiretapping Law (Gaanan
vs IAC, 1986)

Full Text
Gaanan vs IAC
GR L69809, October 16, 1986
Statutory Construction, Criminal Law
Facts:

Montebon filed a direct assault case against Leonardo Lanconico, which he later decided
to withdraw. His lawyer was Atty. Pintor, who called Lanconico initially to inform
him about his clients proposal to withdraw the complaint. Lanconico then requested
Atty. Gaanan, another lawyer, to secretly listen to the conversation through a telephone
extension. When Atty. Pintor called again to discuss the terms, Atty. Gaanan heard the
former enumerate the conditions which later served as the basis of a robbery/extortion
case against him. Atty. Pintor and Lanconico agreed that the former himself will receive
an amount of money at a certain place. Atty. Pintor was arrested by the time he
received the money.
Lanconico filed a case of robbery/extortion against Atty. Pintor, with an attached
affidavit of Atty. Gaanan stating what he heard. Atty. Pintor in turn charged the two with
violation of the Anti -Wiretapping law for listening to the telephone conversation without
his consent.
Lanconico's Contention:
Pintor's Argument:
Issue: W/N an extension telephone is covered by the term device or
arrangement under RA 4200
Held:
No. A rule in statutory construction states that in order to determine the true intent of
the legislature, the particular clauses and phrases of the statute should not be taken as
detached and isolated expressions, but the whole and every part thereof must be
considered in fixing the meaning of any of its parts.
The phrase device or arrangement in Section 1, although not exclusive to that
enumerated therein, should be construed to comprehend instruments of the same or
similar nature, that is, instruments the use of which would be tantamount to tapping the
main line of a telephone. Hence, an extension telephone is not in the same category as
a dictaphone, dictagraph or the other devices enumerated in RA 4200 because its use
cannot be deemed as tapping the wire or cable of a telephone line. The telephone
extension in this case was not installed for that purpose. It just happened to be there for
ordinary office use.
Second, penal statutes must be construed strictly in favor of the accused. Thus, in case
of doubt such as in this case, the penal statute must be construed as not including an
extension telephone. ##