SURRENDER OF THE CERTIFICATES OF STOCK BY THE TRANSFEREE TO THE

CORPORATION NOT A REQUISITE BEFORE REGISTRATION OF THE TRANSFER

MAY BE MADE IN THE CORPORATE BOOKS

Anna Teng vs Securities Exchange Commission and Ting Ping Lay

G.R. No. 184332; February 17, 2016
Reyes, J.

FACTS: Private respondent Ting Ping Lay purchased 480 shares of TCL Sales
Corporation (TCL) from Peter Chiu (Chiu); 1400 shares from his brother Teng Ching Lay
(Teng Ching) who was also the president and operations manager of TCL; and 1440
shares from Ismaelita Maluto. Upon Teng Ching's death, his son Henry Teng (Henry)
took over the management of TCL. To protect his shareholdings with TCL, private
respondent Ting Ping on August 31, 1989 requested TCL's Corporate Secretary, herein
petitioner Anna Teng, to enter the transfer in the Stock and Transfer Book of TCL for the
proper recording of his acquisition. He also demanded the issuance of new certificates of
stock in his favor. TCL and Teng, however, refused despite repeated demands. Because
of their refusal, Ting Ping filed a petition for mandamus with the SEC against TCL and
petitioner Teng. SEC granted private respondent Ting Ping’s petition ordering TCL and
petitioner Teng to record in the books of the corporation the shares in issue, ordering
the same also to issue corresponding new certificates of stocks in the name of private
respondent Ting Ping, and to pay moral damages and attorney’s fees. Such decision
was appealed by TCL and petitioner Teng to the SEC en banc. The latter affirmed the
SEC decision with modification holding petitioner Teng solely liable for the payment of
moral damages and attorney’s fees. Consequently, TCL and petitioner Teng filed for the
petition for review with the Court of Appeals but the appellate court dismissed the
petition. Aggrieved, TCL and petitioner Teng filed a petition for review on certiorari under
Rule 45 before the Supreme Court (SC) but the same was denied affirming the SEC
decision. After the finality of the SC’s decision, the SEC issued a writ of execution
addressed to the sheriff of the RTC of Manila. However, petitioner Teng filed a complaint
for interpleader to compel Henry and respondent Ting Ping to interplead and settle the
issue of ownership over the 1,400 shares which were previously owned by Teng Ching.
Thus, the implementation of the writ of execution by the sheriff was held in abeyance.
The RTC of Manila ruled that Henry has better right to portion of the shares of stock in
issue. Thereafter, an Ex Parte Motion for the issuance of Alias writ of Execution was filed
by respondent Ting Ping where he sought the partial satisfaction of SEC en banc Order.
The SEC granted the motion filed and issued the alias writ of execution. However,
respondent Teng and TCL filed their respective motions to quash the alias writ of
execution, which was opposed by respondent Ting Ping, who also expressed his
willingness to surrender the original stock certifiactes of Chiu and Maluto to expedite
transfer of the shares in his favor. However, petitioner Teng pointed out that that the
annexes in Ting Ping's opposition did not include the subject certificates of stock,
surmising that they could have been lost or destroyed. The SEC denied the motions to
quash. Consequently, petitioner Teng filed a petition for certiorari and prohibition under
Rule 65 before the CA. The appellate court dismissed the said petition. Hence, petitioner
Teng filed a petition for review on certiorari before the Supreme Court assailing primarily
that the CA gravely erred in declaring that surrender of the stock certifcates is not a
requirement to record transfer thereof in the corporate books and issue new stock
certificates.
ISSUE: Is the surrender of the certificates of stock by the transferee to the corporation a
requisite before registration of the transfer may be made in the corporate books?

HELD: NO. Section 63 of the Corporation Code provided the minimum requisites for the
valid transfer of stocks, namely: (a) there must be delivery of the stock certificate; (b) the
certificate must be endorsed by the owner or his attorney-in-fact or other persons legally
authorized to make the transfer; and (c) to be valid against third parties, the transfer
must be recorded in the books of the corporation. However, the delivery contemplated in
Section 63 pertains to the delivery of the certificate of shares by the transferor to the
transferee, that is, from the original stockholder named in the certificate to the person or
entity the stockholder was transferring the shares to, whether by sale or some other valid
form of absolute conveyance of ownership. Shares of stocks may be transferred by
delivery to the transferee of the certificate properly indorsed. In the case at bar, the
delivery or surrender adverted to by Teng, which is from respondent Ting Ping to TCL, is
not a requisite before the conveyance may be recorded in its books. To compel Ting
Ping to deliver to the corporation the certificates as a condition for the registration ofthe
transfer would amount to a restriction on the right of Ting Ping to have the stocks
transferred to his name, which is not sanctioned by law. The only limitation imposed by
Section 63 is when the corporation holds any unpaid claim against the shares intended
to be transferred. Therefore, the surrender of the certificates of stock by the transferee to
the corporation is not a requisite before registration of the transfer may be made in the
corporate books.
CORPORATE OFFICER MAY BE INCLUDED AS JUDGMENT OBLIGOR IN A
LABOR CASE EVEN FOR THE FIRST TIME ONLY AFTER THE DECISION OF THE
LABOR ARBITER HAD BECOME FINAL AND EXECUTORY

Jose Emmanuel P. Guillermo vs Crisanto P. Uson

G.R. No. 198967; March 7, 2016
Peralta, J.

FACTS: Respondent Crisanto P. Uson, an accounting clerk of Royal Class Venture was
allegedly dismissed from his employment and thereafter, filed with the Sub-Regional
Arbitration Branch No. 1, Dagupan City, of the NLRC a complaint for illegal dismissal
against Royal Class Venture. The latter made no appearance and the Labor Arbiter then
rendered a decision in favor of the respondent. No appeal was filed. Consequently, upon
Uson’s motion, a Writ of Execution was issued to implement Labor Arbiter’s decision.
But with the judgment not being satisfied, an alias writ of execution and thereafter,
second alias writ of execution were issued. Then, respondent Uson filed a motion for
alias of writ of execution and to hold directors and officers of Royal Class Venture liable
for the satisfaction of the decision quoting the portion of sheriffs return which states that
the present business address of Royal Class Venture was erected with an establishment
owned by the family corporation of petitioner Jose Emmanuel Guillermo who is one of
the stockholders of Royal Class venture who received the said writs. The Labor Arbiter
issued an order granting the motion filed by respondent Uson and holding the officers of
the corporation jointly and severally liable for the obligations of the corporation to the
employees. By way of special appearance, petitioner Guillermo filed a motion for
reconsideration/to set aside order but the same was not granted and at the same time,
an order sustaining the findings of the labor arbiters was issued. Petitioner Guillermo
filed a motion for reconsideration for the same order but was promptly denied. On the
other hand, respondent Uson filed a Motion for Alias Writ of Execution to which petitioner
Guillermo filed a comment and opposition. The Labor Arbiter issued an order granting
respondent Uson’s said motion and rejecting petitioner Guillermo’s comment and
opposition. By filing a Memorandum of Appeal with prayer for a writ of preliminary
injunction, petitioner Guillermo brought the case to NLRC which thereafter dismissed the
appeal and denied the prayer for injunction. Consequently, petitioner Guillermo filed a
Petition for Certiorari before the Court of appeals but denied. Hence, this instant petition.

ISSUE: May an officer of a corporation be included as judgment obligor in a labor case

for the first time only after the decision of the Labor Arbiter had become final and
executor?

HELD: YES. In an earlier labor cases of Claparols vs Court of Industrial Relations and
A.C. Ransom Labor Union-CCLU vs NLRC, persons who were not originally impleaded
in the case were, even during execution, held to be solidarily liable with the employer
corporation for the latter’s unpaid obligations to complainant-employees. Liability
attached, especially to the responsible officers, even after final judgment and during
execution, when there was a failure to collect from the employer corporation, the
judgment debt awarded to its workers. In the case at bar, it was stated in the verified
position paper of respondent Uson that he was illegally dismissed by President/General
Manager of Royal Class Venture Corporation Guillermo when respondent Uson exposed
the practice of petitioner Guillermo of dictating and undervaluing the shares of stock of
the corporation. The statement, which is uncontroverted by the corporation or petitioner
Guillermo despite service of summons and notices is a proof that petitioner Guillermo is
the responsible officer for the illegal dismissal of respondent Uson. Because of this, he is
solidarily liable for the unpaid obligations of the corporations to its employees. Thus, an
officer of a corporation may be included as judgment obligor in a labor case for the first
time only after the decision of the Labor Arbiter had become final and executor.
THE COINED PHRASE “FAMILY BANK” IS A ARBITRARY MARK THAT CAN BE
LEGALLY APPROPRIATED AS TRADEMARK

GSIS Family Savings Bank-Thrift Bank vs BPI Family Bank

G.R. No. 175278; September 23, 2015
Jardeleza, J.

FACTS: In 1987, the Government Service Insurance System (GSIS) acquired petitioner
GSIS Family Savings Bank-Thrift Bank from the Commercial Bank of Manila transferring
its management and control from the latter to the former. Petitioner sought Securities
and Exchange Commission (SEC) approval to change its corporate name to "GSIS
Family Bank, a Thrift Bank” from its former name Royal Savings Bank. Petitioner
likewise applied with the DTI and BSP for authority to use "GSIS Family Bank, a Thrift
Bank" as its business name which were duly approved. Thus, petitioner operates under
the corporate name "GSIS Family Bank – a Thrift Bank," pursuant to the DTI Certificate
of Registration and the Monetary Board Circular approval. Respondent BPI Family Bank
was a product of the merger between the Family Bank and Trust Company (FBTC) and
the Bank of the Philippine Islands (BPI). On June 27, 1969, the Gotianum family
registered with the SEC the corporate name "Family First Savings Bank," which was
amended to "Family Savings Bank," and then later to "Family Bank and Trust
Company."12 Since its incorporation, the bank has been commonly known as "Family
Bank." In 1985, Family Bank merged with BPI, and the latter acquired all the rights,
privileges, properties, and interests of Family Bank, including the right to use names,
such as "Family First Savings Bank," "Family Bank," and "Family Bank and Trust
Company." BPI Family Savings Bank then registered with the Bureau of Domestic Trade
the trade or business name "BPI Family Bank," and acquired a reputation and goodwill
under the name. After reaching respondent’s attention that petitioner is using or
attempting to use the name “Family Bank”, respondent petitioned the SEC Company
Registration and Monitoring Department (SEC CRMD) to disallow or prevent the
registration of the name “GSIS Family Bank” or any other corporate name with the words
“Family Bank” in it and claiming the exclusive ownership to the name “Family Bank”. The
petition includes a prayer that an order be issued directing petitioner or any other
corporation to change its corporate name if the names have already been registered with
the SEC. In a decision, the SEC CRMD finding the existence of confusing similarity
between the corporate names BPI Family Bank and GSIS Family Bank and that BPI has
the prior right to the use of the name in issue, respondent GSIS FAMILY BANK is
directed to refrain from using the word "Family" as part of its name and make good its
commitment to change its name by deleting or dropping the subject word from its
corporate name. Petitioner appealed the decision to the SEC En Banc, which denied the
appeal, and upheld the SEC CRMD in the SEC En Banc Decision. Petitioner elevated
the SEC En Banc Decision to the Court of Appeals. The appellate court dismissed the
petition filed. Hence this petition averring that CA gravely erred in affirming the SEC
resolution finding “Family” as not generic.

ISSUE: Is the use by GSIS-Family Bank in its corporate name of the words "Family
Bank" as deceptive and confusingly similar to the name BPI Family Bank?

HELD: YES. In Philips Export B.V. v. Court of Appeals, the two requisites must be prove
to have the right of exclusive use of corporate name namely: that the complainant
corporation acquired a prior right over the use of such corporate name; and the
proposed name is either identical or deceptive or confusingly similar to that of any
existing corporation or to any other name already protected by law; or patently
deceptive, confusing or contrary to existing law. In this case, respondent was
incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family Bank.
Petitioner, on the other hand, was incorporated as GSIS Family – Thrift Bank only in
2002, or at least seventeen (17) years after respondent started using its name. This
Court ruled that respondent has the prior right over the use of the corporate name. On
the issue of confusing similarity, the only words that distinguish the two names in issue
are "BPI," "GSIS," and "Thrift." The first two words are merely the acronyms of the
proper names by which the two corporations identify themselves; and the third word
simply describes the classification of the bank. The overriding consideration in
determining whether a person, using ordinary care and discrimination, might be misled is
the circumstance that both petitioner and respondent are engaged in the same business
of banking. The likelihood of confusion is accentuated in cases where the goods or
business of one corporation are the same or substantially the same to that of another
corporation. Moreover, under the facts of this case, the word "family" cannot be
separated from the word "bank." “Family bank” is a coined phrase, neither being generic
nor descriptive, merely suggestive and may properly be regarded as arbitrary which can
be legally appropriated as a trademark. Thus, the use by petitioner in its corporate name
of the words "Family Bank" is deceptive and confusingly similar to the name of
respondent.
USEFUL ARTICLE, LIKE HATCH DOORS CAN ONLY BE COPYRIGHTABLE WHEN
ITS AESTHETIC ASPECT CAN STAND INDEPENDENTLY FROM ITS UTILITARIAN
PURPOSE.

Sison Olaño, Sergio T. Ong, Marilyn O. Go and Jap Fuk Hai vs Lim Eng Co
G.R. No. 195835; March 14, 2016
Reyes, J.

FACTS: Respondent Lim Eng Co is the chairman of LEC Steel Manufacturing

Corporation (LEC) which was invited by the architects of the Manansala Project
(Project), a high end residential building in Makati City to submit designs/drawings and
specifications for interior and exterior hatch doors. LEC submitted final shop
plans/drawings and thereafter copied and transferred to the title block of Ski-First Joint
Venture (SKI-FB), the Project’s contractor. LEC was thereafter subcontracted by SKI-FB
to manufacture and install interior and exterior hatch doors for the 7th and 22nd floor of the
Project based on the final shop plans/drawings. Sometime thereafter, LEC learned that
Metrotech, the corporation which petitioners were the officers and/or directors, was also
subcontracted to install interior and exterior hatch doors for the Project’s 23 rd to 41st
floors. LEC demanded Metrotech to cease from infringing its intellectual property rights.
Metrotech, however, insisted that no copyright infringement was committed because
the hatch doors it manufactured were patterned in accordance with the drawings
provided by SKI-FB. Then, LEC deposited with the National Library the final shop
plans/drawings of the designs and specifications for the interior and exterior hatch doors
of the Project. LEC was thereafter issued a certificate of Copyright Registration and
deposit for the said hatch doors and the copyright pertains to class work “I” under
Section 172 of R.A. 8293. Another certificate of copyright registration and deposit was
issued for LEC classifying copyright for hatch doors under Section 172(h) of the same
Act. With assistance of NBI, an application for search warrant was granted for the
premises of Metrotech and a confiscation was then conducted. Respondent Lim Eng Co
then filed a complaint-affidavit before the DOJ against the DOJ for copyright
infringement. In the meantime, the RTC quashed the search warrant because copyright
infringement was not established. The petitioners admitted manufacturing hatch doors
for the Project but denied that they committed copyright infringement and averred
that the hatch doors they manufactured were functional inventions. The
investigating prosecutor dismissed the respondent’s complaint based on inadequate
evidence. Respondent then filed a petition for review before the DOJ but was also
denied in due course. Upon respondent’s motion for reconsideration, the DOJ reversed
and set aside its previous resolution and directed the Chief State prosecutor to file
appropriate information against petitioners. Petitioners moved for reconsideration and
this time granted the said motion. The respondent thereafter filed a motion for
reconsideration of the foregoing resolution but it was denied. As a result, respondent
filed petition for certiorari before CA which granted said petition. Petitioners then filed
motion for reconsideration but was denied by the CA and just reiterated its initial ruling.
Hence, this present appeal.

ISSUE: Are the hatch doors designed by LEC copyrightable under our laws?

HELD: NO. The Court held in Pearl and Dean (Philippines), Incorporated v. Shoemart,
Incorporated that Copyright, in the strict sense of the term, is purely a statutory
right which can cover only the works falling within the statutory enumeration or
description. Since the hatch doors cannot be considered as either
illustrations, maps, plans, sketches, charts and three-dimensional works relative to
geography, topography, architecture or science, to be properly classified as a
copyrightable class “I” work, what was copyrighted were their sketches/drawings
only, and not the actual hatch doors themselves. A hatch door, by its nature is an
object of utility. It is intrinsically a useful article, which, as a whole, is not eligible for
copyright. The only instance when a useful article may be the subject of copyright
protection is when it incorporates a design element that is physically or
conceptually separable from the underlying product. In the present case, LEC’s hatch
doors bore no design elements that are physically and conceptually separable,
independent and distinguishable from the hatch door itself. The allegedly distinct set of
hinges and distinct jamb, were related and necessary hence, not physically or
conceptually separable from the hatch door’s utilitarian function as an apparatus for
emergency egress. Without them, the hatch door will not function. Thus, LEC’s hatch
doors are not copyrightable.
ACQUITTAL OF THE ACCUSED FOLLOWS IF THE ALLEGEDLY INFRINGING
MARK IS NOT LIKELY TO CAUSE CONFUSION
Victor P. Diaz vs People of the Philippines and Levi Strauss (Phils) Inc.
G.R. No. 180677; February 18, 2013
Bersamin, J.

FACTS: Levi Strauss and Company (Levi’s), a foreign corporation engaged in apparel
business is the owner of registered trademarks and designs of Levi’s jeans like LEVI’S
501, the arcuate design, the two-horse brand, the two-horse patch, the two-horse patch
with pattern arcuate, and the composite tab arcuate. Respondent Levi Strauss
Philippines, Inc. (Levi’s Philippines), a licensee of Levi’s hired a private investigation
group to verify the information that petitioner Diaz was selling counterfeit LEVI’S 501
jeans in his tailoring shops in Almanza and Talon, Las Piñas City. After surveillance and
purchase of jeans from the tailoring shops of Diaz that established that the jeans bought
from the tailoring shops of Diaz were counterfeit or imitations of LEVI’S 501, respondent
Levi’s Philippines sought the assistance of the NBI for purposes of applying a search
warrant against Diaz at his tailoring shops and when searched was made, they seized
several fake LEVI’S 501 jeans from them. Respondent Levi’s Philippines claimed that it
did not authorize selling and making of the seized jeans and that each of the jeans were
mere imitations of genuine LEVI’s 501 jeans. DOJ filed two information in the RTC
charging Diaz with violation of Section 155,in relation to Section 170 of RA 8293 or the
Intellectual Property of the Philippines. Petitioner Diaz admitted being owner of the
shops searched but denied criminal liability stating that he did not manufacture Levi’s
jeans, and that he used the label “LS Jeans Tailoring” in the jeans that he made and sold
which was registered with the Intellectual Property Office and that his shops received
clothes for sewing or repair and offered made-to-order jeans, whose styles or designs
were done in accordance with instructions of the customers. The RTC rendered decision
finding Diaz guilty as charged. Diaz appealed, but the CA dismissed the appeal on the
ground that Diaz had not filed his appellant’s brief on time despite being granted his
requested several extension periods. Upon denial of his motion for reconsideration, Diaz
is now before the Court to plead for his acquittal.

ISSUE: Can petitioner be acquitted of the charges against him?

HELD: YES. In the case Emerald Garment Manufacturing Corporation vs Court of

Appeals involving an alleged trademark infringement of jeans products, the court applied
holistic test to determine that there is no infringement. In this case, The holistic test is
applicable here considering that the herein criminal cases also involved trademark
infringement in relation to jeans products. Accordingly, the jeans trademarks of Levi’s
Philippines and Diaz must be considered as a whole in determining the likelihood of
confusion between them. The maong pants or jeans made and sold by Levi’s
Philippines, which included LEVI’S 501, were very popular in the Philippines. The
consuming public knew that the original LEVI’S 501 jeans were under a foreign brand
and quite expensive. Such jeans could be purchased only in malls or boutiques as
ready-to-wear items, and were not available in tailoring shops like those of Diaz’s as well
as not acquired on a “made-to-order” basis. Under the circumstances, the consuming
public could easily discern if the jeans were original or fake LEVI’S 501, or were
manufactured by other brands of jeans. Moreover, Diaz used the trademark “LS JEANS
TAILORING” for the jeans he produced and sold in his tailoring shops. His trademark
was visually and aurally different from the trademark “LEVI STRAUSS & CO” appearing
on the patch of original jeans under the trademark LEVI’S 501. Given the foregoing, it
should be plain that there was no likelihood of confusion between the trademarks
involved. Thereby, the evidence of guilt did not satisfy the quantum of proof required for
a criminal conviction, which is proof beyond reasonable doubt. Thus, the petitioner can
be acquitted of the charges against him.
GRANDFATHER RULE MAY BE APPLIED JOINTLY WITH THE CONTROL TEST TO
DETERMINE CORPORATE OWNERSHIP

Narra Nickel Mining and Development Corporation, Tesoro Mining and

Development Corporation, Inc., and Mcarthur Mining Inc vs Redmont
Consolidated Mines Corp.
G.R. No. 195580, January 28, 2015
Velasco Jr., J.

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. In their Answers, petitioners averred that they were qualified persons
under Section 3(aq) of Republic Act No. (RA) 7942 or the Philippine Mining Act of 1995.
Then, the POA issued resolution disqualifying petitioners from gaining MPSAs.
Aggrieved by the Resolution and Order of the POA, McArthur and Tesoro filed a joint
Notice of Appeal and Memorandum of Appeal9 with the Mines Adjudication Board (MAB)
while Narra separately filed its Notice of Appeal and Memorandum of Appeal. The MAB
issued and order finding the appeal as meritorious. Respondent Redmont filed a Motion
for reconsideration and supplememtal motion for reconsideration but were denied by the
MAB. Thereafter, this petition for review was filed by petitioner Redmont before the CA
assailing the orders of MAB. The petition was partially granted as it found a doubt on the
nationality of the petitioners and also upheld the POA’s decision that petitioners are
foreign corporation. However, while petition was pending before CA, respondent
Redmont filed with the Office of the President (OP) a petition seeking the cancellation of
petitioners’ FTAA. The OP rendered decision wherein in cancelled and revoked
petitioners FTAA. Motion for reconsideration was filed but denied making petitioners to
file petition for review on certiorari before the CA. CA affirmed decision of OP. Hence
this instant petition.

ISSUE: Does application of the Grandfather rule resulted to the abandonment of the
control test?

HELD: NO. The ‘control test’ can be applied jointly with the Grandfather Rule to
determine the observance of foreign ownership restriction in nationalized economic
activities. The Control Test and the Grandfather Rule are not incompatible ownership-
determinant methods that can only be applied alternative to each other.  Rather, these
methods can, if appropriate, be used cumulatively in the determination of the ownership
and control of corporations engaged in fully or partly nationalized activities, as the mining
operation involved in this case or the operation of public utilities. The Grandfather Rule,
standing alone, should not be used to determine the Filipino ownership and control in a
corporation, as it could result in an otherwise foreign corporation rendered qualified to
perform nationalized or partly nationalized activities. Hence, it is only when the Control
Test is first complied with that the Grandfather Rule may be applied.  Put in another
manner, if the subject corporation’s Filipino equity falls below the threshold 60%, the
corporation is immediately considered foreign-owned, in which case, the need to resort
to the Grandfather Rule disappears. In this case, using the ‘control test’, Narra, Tesoro
and MacArthur appear to have satisfied the 60-40 equity requirement.  But the
nationality of these corporations and the foreign-owned common investor that funds
them was in doubt, hence, the need to apply the Grandfather Rule.