Right to Recover Damages

1. PETRON CORPORATION VS. NATIONAL COLLEGE OFBUSINESS AND ARTS

G.R. NO. 155683 February 16, 2007 516 SCRA 168

FACTS: In 1969, the V. Mapa properties, then owned by Felipe and Enrique Monserrat, Jr., were
mortgaged to the Development Bank of the Philippines (DBP) as part of the security for the P5.2
million loan of Manila Yellow Taxicab Co., Inc. (MYTC) and Monserrat Enterprises Co. MYTC, for
its part, mortgaged four parcels of land. Felipe’s ½ undivided interest in the V. Mapa properties
was levied upon in execution of a money judgment. DBP challenged the levy through a
thirdparty claim asserting that the V. Mapa properties were mortgaged to it and were, for that
reason, exempt from levy or attachment. The RTC quashed it. MYTC and the Monserrats got DBP
to accept a dacion en pago arrangement whereby MYTC conveyed to the bank the four
mortgaged Quiapo properties as full settlement of their loan obligation. But despite this
agreement, DBP did not release the V. Mapa properties from the mortgage. Felipe, acting for
himself and as Enrique’s attorney-in-fact, sold the V. Mapa properties to respondent NCBA. Part
of the agreement was that Felipe and Enrique would secure the release of the titles to the
properties free of all liens and encumbrances including DBP’s mortgage lien and Filoil’s levy on
or before July 31, 1982. But the Monserrats failed to comply with this undertaking. Thus, on
February 3, 1983, NCBA caused the annotation of an affidavit of adverse claim on the TCTs
covering the V. Mapa properties. NCBA filed a complaint against Felipe and Enrique for specific
performance. NCBA impleaded DBP as an additional defendant in order to compel it to release
the V. Mapa properties from mortgage.

During the pendency of Civil Case No. 83-16617, Enrique’s ½ undivided interest in the V. Mapa
properties was levied on in execution of a judgment holding him liable to Petron (then known as
Petrophil Corporation) on a 1972 promissory note. The final deeds of sale of Enrique’s and
Felipe’s shares in the V. Mapa properties were awarded to Petron in 1986. Sometime later, the
Monserrats’ TCTs were cancelled and new ones were issued to Petron. Thus it was that, towards
the end of 1987, Petron intervened in NCBA’s suit against Felipe, Enrique and DBP (Civil Case No.
83-16617) to assert its right to the V. Mapa properties. The RTC rendered judgment, it ruled
among other things, that Petron never acquired valid title to the V. Mapa properties as the levy
and sale thereof were void and that NCBA was now the lawful owner of the properties.
Moreover, the RTC held Petron, DBP, Felipe and Enrique jointly and severally liable to NCBA for
exemplary damages and attorney’s fees On appeal, the CA affirmed in toto the decision of the
RTC.

ISSUE/S: Whether petitioner Petron Corporation (Petron) should be held liable to pay attorney’s
fees and exemplary damages to respondent National College of Business and Arts (NCBA).

RULING: No. Article 2208 lays down the rule that in the absence of stipulation, attorney’s fees
cannot be recovered except in the following instances: xxxxxx xxx (5) Where the defendant
acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and
demandable claim; xxx xxx xxx Here, the RTC held Petron liable to NCBA for attorney’s fees
under Article 2208(5), which allows such an award “where the defendant acted in gross and
 evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just, and demandable claim.”
However, the only justification given for this verdict was that Petron had no reason to claim the
V. Mapa properties because, in the RTC’s opinion, the levy and sale thereof were void. This was
sorely inadequate and it was erroneous for the CA to have upheld that ruling built on such a
flimsy foundation. Article 2208(5) contemplates a situation where one refuses unjustifiably and
in evident bad faith to satisfy another’s plainly valid, just and demandable claim, compelling the
latter needlessly to seek redress from the courts. In such a case, the law allows recovery of
money the plaintiff had to spend for a lawyer’s assistance in suing the defendant – expenses the
plaintiff would not have incurred if not for the defendant’s refusal to comply with the most basic
rules of fair dealing. It does not mean, however, that the losing party should be made to pay
attorney’s fees merely because the court finds his legal position to be erroneous and upholds
that of the other party, for that would be an intolerable transgression of the policy that no one
should be penalized for exercising the right to have contending claims settled by a court of law.
No gross and evident bad faith could be imputed to Petron merely for intervening in NCBA’s suit
against DBP and the Monserrats in order to assert what it believed (and had good reason to
believe) were its rights and to have the disputed ownership of the V. Mapa properties settled
decisively in a single lawsuit. With respect to the award of exemplary damages, the rule in this
jurisdiction is that the plaintiff must show that he is entitled to moral, temperate or
compensatory damages before the court may even consider the question of whether exemplary
damages should be awarded. In other words, no exemplary damages may be awarded without
the plaintiff’s right to moral, temperate, liquidated or compensatory damages having first been
established. Therefore, in view of our ruling that Petron cannot be made liable to NCBA for
compensatory damages (i.e., attorney’s fees), Petron cannot be held liable for exemplary
damages either.

2. ASSET PRIVATIZATION TRUST, petitioner, vs. COURT OF APPEALS

G.R. NO. 121171 December 29, 1998

FACTS: Republic Act No. 1828 authorized the development, exploration and utilization of the
mineral deposits in the Surigao Mineral Reservation. By virtue of which, a Memorandum of
Agreement was drawn, whereby the Republic thru the Surigao Mineral Reservation Board,
granted MMIC the exclusive right to explore, develop and exploit nickel, cobalt and other
minerals in the Surigao mineral reservation. MMIC is a domestic corporation engaged in mining
with respondents Jesus S. Cabarrus, Sr. as President and among its original stockholders. The
Government undertook to support the financing of MMIC by purchase of MMIC debenture and
extension of guarantees. MMIC, PNB and DBP executed a Mortgage Trust Agreement whereby
MMIC, as mortgagor, agreed to constitute a mortgage in favor of PNB and DBP as mortgagees,
over all MMIC’s assets, subject of real estate and chattel mortgage executed by the mortgagor,
and additional assets described and identified, which the mortgagor may acquire whether in
substitution of, in replenishment, or in addition thereto. Article IV of the Mortgage Trust
Agreement provides for Events of Default, which expressly includes the event that the
MORTGAGOR shall fail to pay any amount secured by this Mortgage Trust Agreement when due.
Article V of the Mortgage Trust Agreement prescribes in detail, and in addition to the
enumerated events of defaults, circumstances by which the mortgagor may
be declared in default, the procedure therefor, waiver of period to foreclose, authority of
Trustee before, during and after foreclosure, including taking possession of the mortgaged
properties. In various request for advances/remittances of loans of huge amounts, , MMIC
invariably committed to pay either on demand or under certain terms the loans and
accommodations secured from or guaranteed by both DBP and PNB. By 1984, DBP and PNB’s
financial exposure both in loans and in equity in MMIC had reached tremendous proportions,
and MMIC was having a difficult time meeting its financial obligations. DBP and PNB as
mortgagees of MMIC assets, decided to exercise their right to extrajudicially foreclose the
mortgages in accordance with the Mortgage Trust Agreement. The foreclosed assets were sold
to PNB as the lone bidder and were assigned to three newly formed corporations, namely,
Nonoc Mining Corporation, Maricalum Mining and Industrial Corporation, and Island Cement
Corporation. In 1986, these assets were transferred to the Asset Privatization Trust (APT). Jesus
S. Cabarrus, Sr., together with the other stockholders of MMIC, filed a derivative suit against
DBP and PNB. In the course of the trial, private respondents and petitioner APT, as successor of
the DBP and PNB’s interest in MMIC, mutually agreed to submit the case to arbitration by
entering into a “Compromise and Arbitration Agreement’.

ISSUE/S: Whether or not the filing of the derivative suit was proper and the award of damages
was with legal basis.

RULING: The civil case being a derivative suit, MMIC should have been impleaded as a party. It
was not joined as a party plaintiff or party defendant at any stage of the proceedings. As it is, the
award of damages to MMIC, which was not a party before the Arbitration Committee, is a
complete nullity. Settled is the doctrine that in a derivative suit, the corporation is the real party
in interest while the stockholder filing suit for the corporation’s behalf is only nominal party. The
corporation should be included as a party in the suit. An individual stockholder is permitted to
institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect
or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the
ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is
regarded as a nominal party, with the corporation as the real party in interest.
It is a condition sine qua non that the corporation be impleaded as a party because- Not only is
the corporation an indispensible party, but it is also the present rule that it must be served with
process. The reason given is that the judgment must be made binding upon the corporation and
in order that the corporation may get the benefit of the suit and may not bring a subsequent
suit against the same defendants for the same cause of action. The arbiters, likewise, exceeded
their authority in awarding moral damages to Jesus Cabarrus, Sr. Cabarrus’ cause of action for
the seizure of the assets belonging to IEI, of which he is the majority stockholder, having been
ventilated in a complaint he previously filed with the RTC, from which he obtained actual
damages, he was barred res judicata from filing a similar case in another court, this time asking
for moral damages which he failed to get from the earlier case. It is a basic postulate that s
corporation has a personality separate and distinct from its stockholders. The properties
foreclosed belonged to MMIC, not to its stockholders. Hence, if wrong was committed in the
foreclosure, it was done against the corporation. Another reason is that Jesus S. Cabarrus, Sr.
cannot directly claim those damages for himself that would result in the appropriation by, and
 the distribution to, him part of the corporation’s assets before the dissolution of the corporation
and the liquidation of its debts and liabilities.

3. MAMBULAO LUMBER COMPANY, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK

G.R, NO. L-22973 January 30, 1968

FACTS: Plaintiff applied for an industrial loan of P155,000 with the Naga Branch of defendant
PNB and the former offered real estate, machinery, logging and transportation equipments as
collaterals. The application, however, was approved for a loan of P100,000 only. To secure the
payment of the loan, the plaintiff mortgaged to defendant PNB a parcel of land. PNB released
from the approved loan the sum of P27,500, for which the plaintiff signed a promissory note
wherein it promised to pay to the PNB the said sum in five equal yearly. The plaintiff failed to
pay the amortizations on the amounts released to and received by it. It was found that the
plaintiff had already stopped operation about the end of 1957 or early part of 1958. Plaintiff
sent separate letters protesting against the foreclosure of the real estate and chattel mortgages
on the grounds that they could not be effected unless a Court's order was issued against it
(plaintiff) for said purpose and that the foreclosure proceedings, according to the terms of the
mortgage contracts, should be made in Manila. Several employees of the PNB arrived in the
compound and they informed Luis Salgado, Chief Security Guard of the premises, that the
properties therein had been auctioned and bought by the PNB, which in turn sold them to
Mariano Bundok. On the following day, two trucks and men of Mariano Bundok arrived but
Salgado did not permit them to take out any equipment from inside the compound of the
plaintiff. Thru the intervention, however, of the local police and PC soldiers, the trucks of
Mariano Bundok
were able finally to haul the properties originally mortgaged by the plaintiff to the PNB, which
were bought by it at the foreclosure sale and subsequently sold to Mariano Bundok.

ISSUE/S: Whether or not moral damages may be awarded to a corporation.

RULING: Herein appellant's claim for moral damages seems to have no legal or factual basis.
Obviously, an artificial person like herein Appellant Corporation cannot experience physical
sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social
humiliation which are the basis of moral damages. A corporation may have a good reputation
which, if besmirched, may also be a ground for the award of moral damages. The same cannot
be considered under the facts of this case, however, not only because it is admitted that herein
appellant had already ceased in its business operation at the time of the foreclosure sale of the
chattels, but also for the reason that whatever adverse effect the foreclosure sale of the chattels
could have upon its reputation or business standing would undoubtedly be the same whether
the sale was conducted at Jose Panganiban. Camarines Norte, or in Manila which is the place
agreed upon by the parties in the mortgage contract. But for the wrongful acts of herein
appellee bank and the deputy sheriff of Camarines Norte in proceeding with the sale in utter
disregard of the agreement to have the chattels sold in Manila as provided for in the mortgage
 contract, to which their attentions were timely called by herein appellant, and in disposing of
the chattels in gross for the miserable amount of P4,200.00, herein appellant should be awarded
exemplary damages in the sum of P10,000.00. The circumstances of the case also warrant the
award of P3,000.00 as attorney's fees for herein appellant.

4. HANIL DEVELOPMENT CO., LTD., petitioner, vs. COURT OF APPEALS

G.R. No. 113176. July 30, 2001

FACTS: In the early seventies, the Ministry of Public Works and Highways (MPWH for brevity)
awarded petitioner Hanil Development Co., Ltd. the contract to construct the 200-kilometer
Iligan-Cagayan de Oro-Butuan Highway Project. On November 14, 1976, Hanil sub-let the rock-
blasting work portion of the contract to private respondent M.R. Escobar Explosive Engineers,
Inc.. By express stipulation of the parties, Escobar will be compensated. Escobar commenced its
blasting works. It continued its services until terminated by Hanil on December 15, 1978. It It
claimed, however, that Hanil still partially owes it one million three hundred forty one thousand
seven hundred twenty-seven and 40/100 (P1,341,727.40) pesos for blastings done in the B-2, B-
3 and C-1 areas. The claim was predicated on the theory that the rocks it caused to explode in
the contested areas were solid in nature, and therefore the volume should be computed using
the crosssection approach pursuant to the above-quoted paragraph 9(a). It appears that all the
payments it received were fixed based on the joint survey method under paragraph 9(b).
Escobar stressed that Hanil was always paid by the MPWH using the cross-section system.
Consequently, Escobar instituted Civil Case No. 35966 for recovery of a sum of money with
damages against Hanil . The CFI handed down a Decision ordering Hanil to pay for the value of
rocks blasted by Escobar.

ISSUE/S: Whether or not the award of moral damages and other damages is proper.

RULING: No. Hanil failed to prove the actual value of pecuniary injury which it sustained as a
consequence of Escobar’s institution of an unfounded civil suit. The testimony of one of its
witnesses, presented in the CFI, to the effect that; “the filing of the complaint affected Hanil’s
reputation and that it affected the management and engineers working in the site,” is not
enough proof. The institution of the suit, unfounded though it may be, does not always lead to
pecuniary loss as to warrant an award of actual or temperate damages. So, too, must its
demand for payment of moral damages fail. The rule is that moral damages can not be granted
in favor of a corporation. Being an artificial person and having existence only in legal
contemplation, a corporation has no feelings, no emotions, no senses. It cannot, therefore,
experience physical suffering, mental anguish, fright, serious anxiety, wounded feelings or moral
shock or social humiliation, which can be suffered only by one having a nervous system. Hanil’s
prayer for exemplary damages must likewise be denied. It must be remembered that this kind of
damages cannot be recovered as a matter of right. Its allowance rests in the sound discretion of
the court, and only upon a showing of its legal foundation. Under the Civil Code, the claimant
must first establish that he is entitled to moral, temperate, compensatory or liquidated damages
 before it may be imposed in his favor. Hanil failed to do so, hence, it cannot claim exemplary
damages.

Right against Unreasonable Searches and Seizures

5. BACHE & CO. (PHIL.), INC. AND FREDERICK E. SEGGERMAN VS. HON. JUDGE VIVENCIO M. RUIZ
G.R. NO. L-32409 February 27, 1971

FACTS: Respondent Misael P. Vera, Commissioner of Internal Revenue, wrote a letter addressed
to respondent Judge Vivencio M. Ruiz requesting the issuance of a search warrant against
petitioners for violation of Section 46(a) of the National Internal Revenue Code and authorizing
Revenue Examiner Rodolfo de Leon, one of herein respondents, to make and file the application
for search warrant which was attached to the letter. The following day, respondent De Leon and
his witness went to the court and brought with them the following papers:  respondent Vera's
aforesaid letter-request;  an application for search warrant already filled up but still unsigned
by respondent De Leon;  an affidavit of respondent Logronio subscribed before respondent De
Leon;  a deposition in printed form of respondent Logronio already accomplished and signed by
him but not yet subscribed; and  a search warrant already accomplished but still unsigned by
respondent Judge. Three days later, the BIR agents served the search warrant petitioners at the
offices of petitioner corporation. Petitioners' lawyers protested the search on the ground that
no formal complaint or transcript of testimony was attached to the warrant.
Petitioners filed a petition that the search warrant be quashed, dissolved or recalled. After
hearing, the court, presided over by respondent Judge, issued an order dismissing the petition
for dissolution of the search warrant. In the meantime, the Bureau of Internal Revenue made tax
assessments on petitioner corporation in the total sum of P2,594,729.97, partly, if not entirely,
based on the documents thus seized.

ISSUE/S: Whether or not the issuance of the search warrant was proper.

HELD: The right of the people to be secure in their persons, houses, papers and effects against
unreasonable searches and seizures shall not be violated, and no warrants shall issue but upon
probable cause, to be determined by the judge after examination under oath or affirmation of
the complainant and the witnesses he may produce, and particularly describing the place to be
searched, and the persons or things to be seized." Personal examination by the judge of the
complainant and his witnesses is necessary to enable him to determine the existence or
nonexistence of a probable cause, pursuant to Art. III, Sec. 1, par. 3, of the Constitution, and Sec.
3, Rule 126 of the Revised Rules of Court, both of which prohibit the issuance of warrants except
"upon probable cause." The determination of whether or not a probable cause exists calls for
the exercise of judgment after a judicial appraisal of facts and should not be allowed to be
 delegated in the absence of any rule to the contrary. In the case at bar, no personal examination
at all was conducted by respondent Judge of the complainant and his witness. While it is true
that the complainant's application for search warrant and the witness' printed-form deposition
were subscribed and sworn to before respondent Judge, the latter did not ask either of the two
any question the answer to which could possibly be the basis for determining whether or not
there was probable cause against herein petitioners. The search warrant in question was issued
for at least four distinct offenses under the Tax Code. The first is the violation of Sec. 46(a), Sec.
72 and Sec. 73 (the filing of income tax returns), which are interrelated. The second is the
violation of Sec. 53 (withholding of income taxes at source). The third is the violation of Sec. 208
(unlawful pursuit of business or occupation); and the fourth is the violation of Sec. 209 (failure
to make a return of receipts, sales, business or gross value of output actually removed or to pay
the tax due thereon). The documents, papers and effects sought to be seized are described in
Search Warrant No. 2-M-70 in this manner: "Unregistered and private books of account; records
of bank deposits and withdrawals; and records of foreign remittances, covering the years 1966
to 1970." The description does not meet the requirement in Art III, Sec. 1, of the Constitution,
and of Sec. 3, Rule 126 of the Revised Rules of Court, that the warrant should particularly
describe the things to be seized. A corporation is, after all, but an association of individuals
under an assumed name and with a distinct legal entity. In organizing itself as a collective body it
waives no constitutional immunities appropriate to such body. Its property cannot be taken
without compensation. It can only be proceeded against by due process of law, and is protected,
under the 14th Amendment, against unlawful discrimination . . ."

Right to Represent

6. SULO NG BAYAN, INC., VS. GREGORIO ARANETA, INC.

G.R. NO. L-31061 August 17, 1976

FACTS: Plaintiff Sulo ng Bayan, Inc. filed an accion de reivindicacion with the court to recover the
ownership and possession of a large tract of land. The complaint specifically alleged that plaintiff
is a corporation organized and existing under the laws of the Philippines, with its principal office
and place of business at San Jose del Monte, Bulacan; that its membership is composed of
natural persons residing at San Jose del Monte, Bulacan; that the members of the plaintiff
corporation, through themselves and their predecessors-in interest, had pioneered in the
clearing of the afore-mentioned tract of land, cultivated the same since the Spanish regime and
continuously possessed the said property openly and publicly under concept of ownership
adverse against the whole world; that defendant-appellee Gregorio Araneta, Inc., sometime in
the year 1958, through force and intimidation, ejected the members of the plaintiff corporation
from their possession of the aforementioned vast tract of land; that upon investigation
conducted by the members and officers of plaintiff corporation, they found out for the first time
in the year 1961 that the land in question "had been either fraudulently or erroneously included,
by direct or constructive fraud, in Original Certificate of Title No. 466 of the Land Records of the
province of Bulacan", issued on May 11, 1916, which title is fictitious, non-existent and devoid of
legal efficacy due to the fact that "no original survey nor plan whatsoever" appears to have been
submitted as a basis thereof and that the court which issued the decree of registration did not
acquire jurisdiction over the land registration case because no notice of such proceedings was
given to the members of the plaintiff corporation who were then in actual possession of said
properties; that as a consequence of the nullity of the original title, all subsequent titles derived
therefrom, Transfer Certificate of Title No. 4986 issued in the name of Hacienda Caretas, Inc.,
and another transfer certificate of title in the name of Paradise Farms, Inc., are therefore void.

ISSUE/S: Whether or not Plaintiff Corporation (non- stock) may institute an action in behalf of its
individual members for the recovery of certain parcels of land allegedly owned by said
members.

HELD: NO. It is a doctrine well-established and obtains both at law and in equity that a
corporation is a distinct legal entity to be considered as separate and apart from the individual
stockholders or members who compose it, and is not affected by the personal rights, obligations
and transactions of its stockholders or members. The property of the corporation is its property
and not that of the stockholders, as owners, although they have equities in it. Conversely, a
corporation ordinarily has no interest in the individual property of its stockholders unless
transferred to the corporation, "even in the case of a one-man corporation". It must be noted,
however, that the juridical personality of the corporation, as separate and distinct from the
persons composing it, is but a legal fiction introduced for the purpose of convenience and to sub
serve the ends of justice. This separate personality of the corporation may be disregarded, or
the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or
illegality, or to work an injustice, or where necessary to achieve equity. It has not been claimed
that the members have assigned or transferred whatever rights they may have on the land in
question to the plaintiff corporation. Absent any showing of interest, therefore, a corporation,
like plaintiff-appellant herein, has no personality to bring an action for and in behalf of its
stockholders or members for the purpose of recovering property which belongs to said
stockholders or members in their personal capacities. It is fundamental that there cannot be a
cause of action without an antecedent primary legal right conferred by law upon a person.
Evidently, there can be no wrong without a corresponding right, and no breach of duty by one
person without a corresponding right belonging to some other person. Thus, the essential
elements of a cause of action are legal right of the plaintiff, correlative obligation of the
defendant, an act or omission of the defendant in violation of the aforesaid legal right. Clearly,
no right of action exists in favor of plaintiff corporation, for as shown heretofore it does not
have any interest in the subject matter of the case which is material and direct so as to entitle it
to file the suit as a real party in interest. In order that a class suit may prosper, the following
requisites must be present: 1. that the subject matter of the controversy is one of common or
general interest to many persons; and 2. that the parties are so numerous that it is
impracticable to bring them all before the court. Here, there is only one party plaintiff, and the
plaintiff corporation does not even have an interest in the subject matter of the controversy,
and cannot, therefore, represent its members or stockholders who claim to own in their
individual capacities ownership of the said property. Moreover, as correctly stated by the
appellees, a class suit does not lie in actions for the recovery of property where several persons
claim ownership of their respective portions of the property, as each one could allege and prove
 his respective right in a different way for each portion of the land, so that they cannot all be held
to have identical title through acquisitive prescription.

Right to Free Speech and Exercise of Religion

7. Diocese of Bacolod vs COMELEC

GR No 205728 January 21, 2015

FACTS: Bishop Vicente M. Navarra posted two (2) tarpaulins, each with approximately six feet
(6′) by ten feet (10′) in size, for public viewing within the vicinity of San Sebastian Cathedral of
Bacolod. One of the tarpaulins stated: “Conscience Vote” and lists of candidates as either “(Anti-
RH) Team Buhay” with a check mark or “(Pro-RH) Team Patay” with an “X” mark. The electoral
candidates were classified according to their vote on the adoption of the RH Law. Those who
voted for the passing of the law were classified as comprising “Team Patay,” while those who
voted against it form “Team Buhay. When the said tarpaulin came to the attention of Comelec,
it sent a letter to Bishop Navarra ordering the immediate removal of the tarpaulin because it
was in violation of Comelec Resolution No. 9615 as the lawful size for election propaganda
material is only two feet (2’) by three feet (3’); otherwise, it will be constrained to file an
election offense against the latter. Concerned about the imminent threat of prosecution for
their exercise of free speech, Bishop Navarra, et al. prayed for the Court to declare the
questioned orders of Comelec as unconstitutional, and permanently restraining the latter from
enforcing them after notice and hearing.

ISSUE: Whether or not the controversial tarpaulin is an election propaganda which the Comelec
has the power to regulate; otherwise its prohibition shall constitute an abridgment of freedom
of speech.

RULING: It is not election propaganda. While the tarpaulin may influence the success or failure
of the named candidates and political parties, this does not necessarily mean it is election
propaganda. The tarpaulin was not paid for or posted “in return for consideration” by any
candidate, political party, or party-list group. Personal opinions, unlike sponsored messages, are
not covered by the second paragraph of Sec. 1(4) of Comelec Resolution No. 9615 defining
“political advertisement” or “election propaganda.”

The caricature, though not agreeable to some, is still protected speech. That petitioners chose
to categorize them as purveyors of death or of life on the basis of a single issue—and a complex
piece of legislation at that—can easily be interpreted as an attempt to stereotype the
candidates and party- list organizations. Not all may agree to the way their thoughts were
expressed, as in fact there are other Catholic dioceses that chose not to follow the example of
petitioners.
 But, the Bill of Rights enumerated in our Constitution is an enumeration of our fundamental
liberties. It is not a detailed code that prescribes good conduct. It provides space for all to be
guided by their conscience, not only in the act that they do to others but also in judgment of the
acts of others.

Corporate Criminal Liability

8. Ching vs Secretary of Justice

GR No 164317 February 6, 2006

FACTS: Ching was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI).
Sometime in September to October 1980, PBMI, through petitioner, applied with the Rizal
Commercial Banking Corporation (respondent bank) for the issuance of commercial letters
of credit to finance its importation of assorted goods. Under the receipts, petitioner agreed
to hold the goods in trust for the said bank, with authority to sell but not by way of
conditional sale, pledge or otherwise; and in case such goods were sold, to turn over the
proceeds thereof as soon as received, to apply against the relative acceptances and
payment of other indebtedness to respondent bank. In case the goods remained unsold
within the specified period, the goods were to be returned to respondent bank without any
need of demand. Thus, said “goods, manufactured products or proceeds thereof, whether
in the form of money or bills, receivables, or accounts separate and capable of
identification” were respondent bank’s property. When the trust receipts matured,
petitioner failed to return the goods to respondent bank, or to return their value amounting
to P6,940,280.66 despite demands. Thus, the bank filed a criminal complaint for
estafa6 against petitioner in the Office of the City Prosecutor of Manila.

Issue: Whether or not Ching is liable for Estafa

Held: In the case at bar, the transaction between petitioner and respondent bank falls under
the trust receipt transactions envisaged in P.D. No. 115. Respondent bank imported the
goods and entrusted the same to PBMI under the trust receipts signed by petitioner, as
entrustee, with the bank as entruster. The failure of person to turn over the proceeds of the
sale of the goods covered by the trust receipt to the entruster or to return said goods, if not
sold, is a public nuisance to be abated by the imposition of penal sanctions.—It must be
stressed that P.D. No. 115 is a declaration by legislative authority that, as a matter of public
policy, the failure of person to turn over the proceeds of the sale of the goods covered by a
trust receipt or to return said goods, if not sold, is a public nuisance to be abated by the
imposition of penal sanctions.
 Failure of the entrustee to turn over the proceeds of the sale of the goods covered by the
trust receipts to the entruster or to return said goods if they were not disposed of in
accordance with the terms of the trust receipt is a crime under P.D. No. 115, without need
of proving intent to defraud.—In Colinares v. Court of Appeals, the Court declared that
there are two possible situations in a trust receipt transaction. The first is covered by the
provision which refers to money received under the obligation involving the duty to deliver
it (entregarla) to the owner of the merchandise sold. The second is covered by the provision
which refers to merchandise received under the obligation to return it (devolvera) to the
owner. Thus, failure of the entrustee to turn over the proceeds of the sale of the goods
covered by the trust receipts to the entruster or to return said goods if they were not
disposed of in accordance with the terms of the trust receipt is a crime under P.D. No. 115,
without need of proving intent to defraud. The law punishes dishonesty and abuse of
confidence in the handling of money or goods to the prejudice of the entruster, regardless
of whether the latter is the owner or not. A mere failure to deliver the proceeds of the sale
of the goods, if not sold, constitutes a criminal offense that causes prejudice, not only to
another, but more to the public interest.

9. Filipinas Broadcasting Network vs Ago Medical and Educational Center

GR No. 141994 January 17, 2005

Fact: Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima) and
Hermogenes Jun Alegre (Alegre). Expos is aired every morning over DZRC-AM which is
owned by Filipinas Broadcasting Network, Inc. (FBNI). Expos is heard over Legazpi City,
the Albay municipalities and other Bicol areas. In the morning of 14 and 15 December
1989, Rima and Alegre exposed various alleged complaints from students, teachers and
parents against Ago Medical and Educational Center-Bicol Christian College of Medicine
(AMEC) and its administrators. Claiming that the broadcasts were defamatory, AMEC
and Angelita Ago (Ago), as Dean of AMECs College of Medicine, filed a complaint for
damages against FBNI, Rima and Alegre on 27 February 1990. The complaint further
alleged that AMEC is a reputable learning institution. With the supposed expose, FBNI,
Rima and Alegre transmitted malicious imputations, and as such, destroyed plaintiffs
(AMEC and Ago) reputation. AMEC and Ago included FBNI as defendant for allegedly
failing to exercise due diligence in the selection and supervision of its employees,
particularly Rima and Alegre. On 14 December 1992, the trial court rendered a
Decision ] finding FBNI and Alegre liable for libel except Rima. In holding FBNI liable for
libel, the trial court found that FBNI failed to exercise diligence in the selection and
supervision of its employees. The Court of Appeals affirmed the trial courts judgment
with modification. The appellate court made Rima solidarily liable with FBNI and Alegre.

Issue: Whether or not the broadcasts are libelous

Held: A libel is a public and malicious imputation of a crime, or of a vice or defect, real or
imaginary, or any act or omission, condition, status, or circumstance tending to cause the
dishonor, discredit, or contempt of a natural or juridical person, or to blacken the memory of
one who is dead.

Every defamatory imputation is presumed malicious. Rima and Alegre failed to show adequately
their good intention and justifiable motive in airing the supposed gripes of the students. As
hosts of a documentary or public affairs program, Rima and Alegre should have presented the
public issues free from inaccurate and misleading information. Hearing the students alleged
complaints a month before the expos, they had sufficient time to verify their sources and
information. However, Rima and Alegre hardly made a thorough investigation of the students
alleged gripes. Neither did they inquire about nor confirm the purported irregularities in AMEC
from the Department of Education, Culture and Sports. Alegre testified that he merely went to
AMEC to verify his report from an alleged AMEC official who refused to disclose any information.
Alegre simply relied on the words of the students because they were many and not because
there is proof that what they are saying is true. This plainly shows Rima and Alegres reckless
disregard of whether their report was true or not. Had the comments been an expression of
opinion based on established facts, it is immaterial that the opinion happens to be mistaken, as
long as it might reasonably be inferred from the facts. However, the comments of Rima and
Alegre were not backed up by facts. Therefore, the broadcasts are not privileged and remain
libelous per se. The broadcasts also violate the Radio Code of the Kapisanan ng mga Brodkaster
sa Pilipinas, Ink. (Radio Code). Item I(B) of the Radio Code provides: B. PUBLIC AFFAIRS, PUBLIC
ISSUES AND COMMENTARIES 1. x x x 4. Public affairs program shall present public issues free
from personal bias, prejudice and inaccurate and misleading information. x x x Furthermore, the
station shall strive to present balanced discussion of issues. x x x. xxx 7. The station shall be
responsible at all times in the supervision of public affairs, public issues and commentary
programs so that they conform to the provisions and standards of this code. 8. It shall be the
responsibility of the newscaster, commentator, host and announcer to protect public interest,
general welfare and good order in the presentation of public affairs and public issues.[36] The
broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the code of
ethical conduct governing practitioners in the radio broadcast industry. The Radio Code is a
voluntary code of conduct imposed by the radio broadcast industry on its own members. The
Radio Code is a public warranty by the radio broadcast industry that radio broadcast
practitioners are subject to a code by which their conduct are measured for lapses, liability and
sanctions. The public has a right to expect and demand that radio broadcast practitioners live up
to the code of conduct of their profession, just like other professionals. A professional code of
conduct provides the standards for determining whether a person has acted justly, honestly and
with good faith in the exercise of his rights and performance of his duties as required by Article
19 of the Civil Code. A professional code of conduct also provides the standards for determining
whether a person who willfully causes loss or injury to another has acted in a manner contrary
to morals or good customs under Article 21 of the Civil Code.
II. CLASSIFICATION OF CORPORATION

Private vs Public Corporation

10. BOY SCOUTS OF THE PHILIPPINES, vs. COMMISSION ON AUDIT

G.R. No. 177131 June 7, 2011

FACTS: This case arose when the COA issued Resolution No. 99-011on August 19, 1999 with the
subject "Defining the Commission’s policy with respect to the audit of the Boy Scouts of the
Philippines." In its whereas clauses, the COA Resolution stated that the BSP was created as a
public corporation under Commonwealth Act No. 111, as amended by Presidential Decree No.
460. and Republic Act No. 7278; that in Boy Scouts of the Philippines v. National Labor Relations
Commission, the Supreme Court ruled that the BSP, as constituted under its charter, was a
"government-controlled corporation within the meaning of Article IX (B) (2) (1) of the
Constitution"; and that "the BSP is appropriately regarded as a government instrumentality
under the 1987 Administrative Code. The COA Resolution also cited its constitutional mandate
under Section 2(1), Article IX (D). The BSP sought reconsideration of the COA Resolution. The
BSP believes that the cited case has been superseded by RA 7278. The 1987 Administrative Code
itself, of which the BSP vs. NLRC relied on for some terms, defines government-owned and
controlled corporations as agencies organized as stock or non-stock corporations which the BSP,
under its present charter, is not.

ISSUE/S: Whether or not Boy Scouts of the Philippines is a government-owned or controlled

corporation or instrumentality, agency, or subdivision of the government.

RULING: After looking at the legislative history of its amended charter and carefully studying the
applicable laws and the arguments of both parties, we find that the BSP is a public corporation
and its funds are subject to the COA’s audit jurisdiction. The BSP Charter (Commonwealth Act
No. 111, approved on October 31, 1936), entitled "An Act to Create a Public Corporation to be
known as the Boy Scouts of the Philippines and to define its Powers and Purposes" created the
BSP as a "public corporation". There are three classes of juridical persons under Article 44 of the
Civil Code and the BSP, as presently constituted under Republic Act No. 7278, falls under the
second classification. Evidently, the BSP, which was created by a special law to serve a public
 purpose in pursuit of a constitutional mandate, comes within the class of "public corporations"
defined by paragraph 2, Article 44 of the Civil Code and governed by the law which creates it,
pursuant to Article 45 of the same Code. The BSP is a public corporation or a government agency
or instrumentality with juridical personality, which does not fall within the constitutional
prohibition in Article XII, Section 16, notwithstanding the amendments to its charter. Not all
corporations, which are not government owned or controlled, are ipso facto to be considered
private corporations as there exists another distinct class of corporations or chartered
institutions which are otherwise known as "public corporations." These corporations are treated
by law as agencies or instrumentalities of the government which are not subject to the tests of
ownership or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative relationship
to the government or any of its Departments or Offices. Further Section 16, Article XII should not
be construed so as to prohibit Congress from creating public corporations. In fact, Congress has
enacted numerous laws creating public corporations or government agencies or
instrumentalities vested with corporate powers. Moreover, Section 16, Article XII, which relates
to National Economy and Patrimony, could not have tied the hands of Congress in creating
public corporations to serve any of the constitutional policies or objectives. The Court is fortified
that the Administrative Code of 1987 designates the BSP as one of the attached agencies of the
Department of Education, Culture and Sports ("DECS"). An "agency of the Government" is
defined as referring to any of the various units of the Government including a department,
bureau, office, instrumentality, government-owned or -controlled corporation, or local
government or distinct unit therein. The Court believes that the BSP is appropriately regarded as
"a government instrumentality" under the 1987 Administrative Code. It thus appears that the
BSP may be regarded as both a "government controlled corporation with an original charter"
and as an "instrumentality" of the Government within the meaning of Article IX (B) (2) (1) of the
Constitution.

11. DANTE V. LIBAN, REYNALDO M. BERNARDO, and SALVADOR M. VIARI, vs. RICHARD J.
GORDON
G.R. No. 175352 July 15, 2009& January 18, 2011

FACTS: Petitioners are officers of the Board of Directors of the Quezon City Red Cross Chapter
while respondent is Chairman of the Philippine National Red Cross (PNRC) Board of Governors.
During respondent’s incumbency as a member of the Senate of the Philippines, he was elected
Chairman of the PNRC during the 23 February 2006 meeting of the PNRC Board of Governors.
Petitioners allege that by accepting the chairmanship of the PNRC Board of Governors,
respondent has ceased to be a member of the Senate as provided in Section 13, Article VI of the
Constitution. Petitioners cite Camporedondo v. NLRC which held that the PNRC is a government-
owned or controlled corporation. Petitioners claim that in accepting and holding the position of
Chairman of the PNRC Board of Governors, respondent has automatically forfeited his seat in
the Senate, pursuant to Flores v. Drilon. Respondent further insists that the PNRC is not a
government-owned or controlled corporation and that the prohibition under Section 13, Article
VI of the Constitution does not apply in the present case since volunteer service to the PNRC is
neither an office nor an employment. In their Reply, petitioners claim that their petition is
neither an action for quo warranto nor an action for declaratory relief. Petitioners maintain that
the present petition is a taxpayer’s suit questioning the unlawful disbursement of funds,
considering that respondent has been drawing his salaries and other compensation as a Senator
even if he is no longer entitled to his office. Petitioners point out that this Court has jurisdiction
over this petition since it involves a legal or constitutional issue which is of transcendental
importance.

ISSUE/S: Whether the office of the PNRC Chairman is a government office or an office in a
government-owned or controlled corporation for purposes of the prohibition in Section 13,
Article VI of the Constitution.

RULING: July 15, 2009 Decision The PNRC is not government-owned but privately owned. The
vast majority of the thousands of PNRC members are private individuals, including students.
Under the PNRC Charter, those who contribute to the annual fund campaign of the PNRC are
entitled to membership in the PNRC for one year. Thus, any one between 6 and 65 years of age
can be a PNRC member for one year upon contributing P35, P100, P300, P500 or P1,000 for the
year.20 Even foreigners, whether residents or not, can be members of the PNRC. Thus, the PNRC
is a privately owned, privately funded, and privately run charitable organization. The PNRC is not
a government-owned or controlled corporation. The Constitution recognizes two classes of
corporations. The first refers to private corporations created under a general law. The second
refers to government-owned or controlled corporations created by special charters. The
Constitution emphatically prohibits the creation of private corporations except by general law
applicable to all citizens. The purpose of this constitutional provision is to ban private
corporations created by special charters, which historically gave certain individuals, families or
groups special privileges denied to other citizens. In short, Congress cannot enact a law creating
a private corporation with a special charter. Such legislation would be unconstitutional. Private
corporations may exist only under a general law. If the corporation is private, it must necessarily
exist under a general law. Stated differently, only corporations created under a general law can
qualify as private corporations. Under existing laws, the general law is the Corporation Code,
except that the Cooperative Code governs the incorporation of cooperatives.
Just like the Local Water Districts, the PNRC was created through a special charter. However,
unlike the Local Water Districts, the elements of government ownership and control are clearly
lacking in the PNRC. Thus, although the PNRC is created by a special charter, it cannot be
considered a government-owned or controlled corporation in the absence of the essential
elements of ownership and control by the government. In sum, we hold that the office of the
PNRC Chairman is not a government office or an office in a government-owned or controlled
corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution.
However, since the PNRC Charter is void insofar as it creates the PNRC as a private corporation,
the PNRC should incorporate under the Corporation Code and register with the Securities and
Exchange Commission if it wants to be a private corporation. January 18, 2011 Decision The
PNRC, as a National Society of the International Red Cross and Red Crescent Movement, can
neither “be classified as an instrumentality of the State, so as not to lose its character of
neutrality” as well as its independence, nor strictly as a private corporation since it is regulated
by international humanitarian law and is treated as an auxiliary of the State. Based on the
 above, the sui generis status of the PNRC is now sufficiently established. Although it is neither a
subdivision, agency, or instrumentality of the government, nor a government-owned or -
controlled corporation or a subsidiary thereof, as succinctly explained in the Decision of July 15,
2009, so much so that respondent, under the Decision, was correctly allowed to hold his
position as Chairman thereof concurrently while he served as a Senator, such a conclusion does
notipso facto imply that the PNRC is a “private corporation” within the contemplation of the
provision of the Constitution, that must be organized under the Corporation Code. As correctly
mentioned by Justice Roberto A. Abad, the sui generis character of PNRC requires us to
approach controversies involving the PNRC on a case-tocase basis. In sum, the PNRC enjoys a
special status as an important ally and auxiliary of the government in the humanitarian field in
accordance with its commitments under international law. This Court cannot all of a sudden
refuse to recognize its existence, especially since the issue of the constitutionality of the PNRC
Charter was never raised by the parties. It bears emphasizing that the PNRC has responded to
almost all national disasters since 1947, and is widely known to provide a substantial portion of
the country’s blood requirements. Its humanitarian work is unparalleled. The Court should not
shake its existence to the core in an untimely and drastic manner that would not only have
negative consequences to those who depend on it in times of disaster and armed hostilities but
also have adverse effects on the image of the Philippines in the international community. The
sections of the PNRC Charter that were declared void must therefore stay.

12. FRANCISCA S. BALUYOT vs. PAUL E. HOLGANZA

G.R. No. 136374 February 9, 2000

FACTS: During a spot audit conducted on March 21, 1977 by a team of auditors from the
Philippine National Red Cross (PNRC) headquarters, a cash shortage of P154, 350.13 was
discovered in the funds of its Bohol chapter. Petitioner Francisca S. Baluyot was held
accountable for the shortage. Thereafter, on January 8, 1998, private respondent Paul E.
Holganza, in his capacity as a member of the board of directors of the Bohol chapter, filed an
affidavitcomplaint charging petitioner of malversation under Article 217 of the Revised Penal
Code. On February 6, 1998, public respondent issued an Order requiring petitioner to file her
counter-affidavit to the charges of malversation and dishonesty within ten days from notice,
with a warning that her failure to comply would be construed as a waiver on her part to refute
the charges, and that the case would be resolved based on the evidence on record. On March
14, 1998, petitioner filed her counter-affidavit;raising principally the defense that public
respondent had no jurisdiction over the controversy. She argued that the Ombudsman had
authority only over government-owned or controlled corporations, which the PNRC was not, or
so she claimed.

ISSUE/S: Whether or not PNRC is a private voluntary organization.

RULING: Resolving the issue set out in the opening paragraph of this opinion, we rule that the
Philippine National Red Cross (PNRC) is a government owned and controlled corporation, with
an original charter under Republic Act No. 95, as amended. The test to determine whether a
corporation is government owned or controlled or private in nature is simple. “Is it created by its
 own charter for the exercise of a public function, or by incorporation under the general
corporation law?” Those with special charters are government corporations subject to its
provisions, and its employees are under the jurisdiction of the Civil Service Commission, and are
compulsory members of the Government Service Insurance System. The PNRC was not
"impliedly converted to a private corporation" simply because its charter was amended to vest
in it the authority to secure loans, be exempted from payment of all duties, taxes, fees and
other charges of all kinds on all importations and purchases for its exclusive use, on donations
for its disaster relief work and other services and in its benefits and fund raising drives, and be
allotted one lottery draw a year by the Philippine Charity Sweepstakes Office for the support of
its disaster relief operation in addition to its existing lottery draws for blood program. Clearly
then, public respondent has jurisdiction over the matter, pursuant to Section 13, of Republic Act
No. 6770, otherwise known as "The Ombudsman Act of 1989", to wit: Sec. 13.Mandate. — The
Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints
filed in any form or manner against officers or employees of the Government, or of any
subdivision, agency or instrumentality thereof, including government-owned or controlled
corporations, and enforce their administrative, civil and criminal liability in ever case where the
evidence warrants in order to promote efficient service by the Government to the people.

13. THE VETERANS FEDERATION OF THE PHILIPPINES represented by Esmeraldo R. Acorda, vs.
Hon. ANGELO T. REYES
G. R. No. 155027.February 28, 2006

FACTS: Petitioner VFP was created under Rep. Act No. 2640, a statute approved on 18 June
1960. On 15 April 2002, petitioner’s incumbent president received a letter which tended to
show that there is an organizational and management relationship between Veterans
Federation of the Philippines and the Philippine Veterans Bank which for many years have been
inadvertently overlooked. On 10 June 2002, respondent DND Secretary issued the assailed DND
Department Circular No. 04. In a letter addressed to the President of petitioner, respondent
DND Secretary reiterated his instructions in his earlier letter of 13 April 2002. Thereafter,
petitioner’s President received a letter dated 23 August 2002 from respondent Undersecretary,
informing him that Department Order No. 129 dated 23 August 2002 directed "the conduct of a
Management Audit of the Veterans Federation of the Philippines." The letter went on to state
that respondent DND Secretary "believes that the mandate given by said law can be
meaningfully exercised if this department can better appreciate the functions, responsibilities
and situation on the ground and this can be done by undertaking a thorough study of the
Subsequently, the Secretary General of the VFP sent an undated letter to respondent DND
Secretary, with notice to respondent Undersecretary for Civil Relations and Administration,
complaining about the alleged broadness of the scope of the management audit and requesting
the suspension thereof until such time that specific areas of the audit shall have been agreed
upon. The request was, however, denied by the Undersecretary. Petitioner thus filed Certiorari
with Prohibition under Rule 65 of the 1997 Rules of Civil Procedure.

ISSUE/S: Is the VFP a Private non-government Corporation

 RULING: The Supreme Court is constrained to rule that petitioner is in fact a public corporation.
Before responding to petitioner’s allegations one by one, here are the more evident reasons
why the VFP is a public corporation: 1) Rep. Act No. 2640 is entitled "An Act to Create a Public
Corporation to be Known as the Veterans Federation of the Philippines, Defining its Powers, and
for Other Purposes." 2) Any action or decision of the Federation or of the Supreme Council shall
be subject to the approval of the Secretary of Defense. 3) The VFP is required to submit annual
reports of its proceedings for the past year, including a full, complete and itemized report of
receipts and expenditures of whatever kind, to the President of the Philippines or to the
Secretary of National Defense. 4) Under Executive Order No. 37 dated 2 December 1992, the
VFP was listed as among the government-owned and controlled corporations that will not be
privatized. 5) In Ang Bagong Bayani – OFW Labor Party v. COMELEC this Court held in a minute
resolution that the "VFP [Veterans Federation Party] is an adjunct of the government, as it is
merely an incarnation of the Veterans Federation of the Philippines.

14. MANILA INTERNATIONAL AIRPORT AUTHORITY, vs. COURT OF APPEALS,

G.R. No. 155650. July 20, 2006

FACTS: Petitioner Manila International Airport Authority operates the Ninoy Aquino
International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903,
otherwise known as the Revised Charter of the Manila International Airport Authority (“MIAA
Charter”). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E.
Marcos. Subsequently, Executive Order Nos. 909 and 298 amended the MIAA Charter. As
operator of the international airport, MIAA administers the land, improvements and equipment
within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of
land, including the runways and buildings then under the Bureau of Air Transportation. The
MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed
of through sale or any other mode unless specifically approved by the President of the
Philippines. The Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061.
The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real
estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with
respondent City of Parañaque to pay the real estate tax imposed by the City. MIAA then paid
some of the real estate tax already due. On 28 June 2001, MIAA received Final Notices of Real
Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001. On 17
July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants
of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to
sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax
delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.

ISSUE: Whether MIAA is a government-owned or controlled corporation.

RULING: The Supreme Court ruled that MIAA’s Airport Lands and Buildings are exempt from real
estate tax imposed by local governments. First, MIAA is not a government-owned or controlled
corporation but an instrumentality of the National Government and thus exempt from local
taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and
 thus exempt from real estate tax. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not
exempt from real estate tax. Respondents claim that the deletion of the phrase “any
government-owned or controlled so exempt by its charter” in Section 234(e) of the Local
Government Code withdrew the real estate tax exemption of government-owned or controlled
corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code
enumerating the entities exempt from real estate tax. There is no dispute that a government-
owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a
government owned or controlled corporation. MIAA is a government instrumentality vested
with corporate powers to perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with corporate powers.
When the law vests in a government instrumentality corporate powers, the instrumentality does
not become a corporation. Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain, police authority and the levying of fees and charges. At the same time, MIAA
exercises “all the powers of a corporation under the Corporation Law, insofar as these powers
are not inconsistent with the provisions of this Executive Order.” MIAA is a Mere Trustee of the
Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.
Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to
hold title to real properties owned by the Republic. Under Section 2(10) and (13) of the
Introductory Provisions of the Administrative Code, which governs the legal relation and status
of government units, agencies and offices within the entire government machinery, MIAA is a
government instrumentality and not a government owned or controlled corporation. Under
Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a
taxable person because it is not subject to “taxes, fees or charges of any kind” by local
governments. The only exception is when MIAA leases its real property to a “taxable person” as
provided in Section 234(a) of the Local Government Code, in which case the specific real
property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and
Buildings leased to taxable persons like private parties are subject to real estate tax by the City
of Parañaque.

15. FUNA vs MECO

GR No. 193462 February 4, 2014

Facts: On 23 August 2010, petitioner sent a letter to the COA requesting for a “copy of the latest
financial and audit report” of the MECO invoking, for that purpose, his “constitutional right to
information on matters of public concern.” The petitioner made the request on the belief that
the MECO, being under the “operational supervision” of the Department of Trade and Industry
(DTI), is a government owned and controlled corporation (GOCC) and thus subject to the audit
jurisdiction of the COA. Petitioner’s letter was received by COA Assistant Commissioner Jaime P.
Naranjo, the following day. On 25 August 2010, Assistant Commissioner Naranjo issued a
memorandum referring the petitioner’s request to COA Assistant Commissioner Emma M.
Espina for “further disposition.” In this memorandum, however, Assistant Commissioner
 Naranjo revealed that the MECO was “not among the agencies audited by any of the three
Clusters of the Corporate Government Sector.”

Issue: Whether or not MECO is a GOCC covered by the auditing power of COA.

Held: No. Government instrumentalities are agencies of the national government that, by
reason of some “special function or jurisdiction” they perform or exercise, are allotted
“operational autonomy” and are “not integrated within the department framework.” Subsumed
under the rubric “government instrumentality” are the following entities:

1. regulatory agencies,

2. Chartered institutions,

3. government corporate entities or government instrumentalities with corporate

powers (GCE/GICP), and

4. GOCCs

The Administrative Code defines a GOCC: Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested with functions relating to public needs
whether governmental or proprietary in nature, and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent
of at least fifty-one (51) per cent of its capital stock: . . . .

The above definition is, in turn, replicated in the more recent Republic Act No. 10149 or the GOCC
Governance Act of 2011 m, to wit:

(o) Government-Owned or -Controlled Corporation (GOCC) refers to any agency organized as a stock or
non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government of the Republic of the Philippines directly or
through its instrumentalities either wholly or, where applicable as in the case of stock corporations, to
the extent of at least a majority of its outstanding capital stock: . . . .

GOCCs, therefore, are “stock or non-stock” corporations “vested with functions relating to public needs”
that are “owned by the Government directly or through its instrumentalities.” By definition, three
attributes thus make an entity a GOCC: first, its organization as stock or non-stock corporation; second,
the public character of its function; and third, government ownership over the same.

Possession of all three attributes is necessary to deem an entity a GOCC.

In this case, there is not much dispute that the MECO possesses the first and second attributes. It is the
third attribute, which the MECO lacks.

The MECO is not a GOCC or government instrumentality. It is a sui generis private entity especially
entrusted by the government with the facilitation of unofficial relations with the people in Taiwan
without jeopardizing the country’s faithful commitment to the One China policy of the PROC. However,
despite its non-governmental character, the MECO handles government funds in the form of the
“verification fees” it collects on behalf of the DOLE and the “consular fees” it collects under Section 2 (6)
of EO No. 15, s. 2001. Hence, under existing laws, the accounts of the MECO pertaining to its collection
of such “verification fees” and “consular fees” should be audited by the COA.