WEEK 2

24. What is a corporation?

An artificial being created by operation of law having the right of succession and the powers, attributes,
and properties expressly authorized by law or incident to its existence.

25. Define the classes of corporations according to purpose:

a. Public Corporation - It is one created by the State either by general or special act for purposes
of administration of local government or rendering service in the public interest.

i. Municipal Corporation - body politic and corporate constituted by the incorporation

of inhabitants for purposes of local government. It is established by law partly as an agency of the State
to assist in the civil government of the country, but chiefly to regulate and administer the local or
internal affairs of the city, town or district which is incorporated.

ii. Quasi-corporation - It is an entity that exercises some of the functions of a

corporation, but has not been granted separate legal personality. Created by the State for a limited
purpose. Private nature and object, with incidents only that public.

b. Private Corporation - It is one that is formed for some private purpose, benefit, aim, or end,
such as a business corporation formed and organized under a general law on corporation. Created for
private objects.

i. Quasi-public corporation - It is a private corporation that renders public service or

supplies public wants, such as utility companies. It combined the elements of both public and private
Though organized for private profit, they are compelled by law or contract to render public service.

26. Can a private corporation be a GOCC? (Boy Scouts of the Philippines v. COA, G.R. No.

177131, June 7, 2011; GCG Memorandum Order 2013-42) Yes.

BOY SCOUTS OF THE PHILIPPINES v. 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 ("the
COA Resolution"), with the subject "Defining the Commissions 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).Finally, the COA Resolution reads:
NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS
RESOLVED, AS IT DOES HEREBY RESOLVE, to conduct an annual financial audit of the Boy Scouts
of the Philippines in accordance with generally accepted auditing standards, and express an
opinion on whether the financial statements which include the Balance Sheet, the Income
Statement and the Statement of Cash Flows present fairly its financial position and results of
operations.

BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision ,the Boy Scouts of the
Philippines shall be classified among the government corporations belonging to the
Educational, Social, Scientific, Civic and Research Sector under the Corporate Audit Office I, to
be audited, similar to the subsidiary corporations, by employing the team audit approach

ISSUE: Does COA have jurisdiction over BSP?

HELD: After looking at the legislative history of its amended charter and carefully studying the
applicable laws and the arguments of both parties, the Supreme Court found 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. Article
44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose created by law;
their personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law
grants a juridical personality, separate and distinct from that of each shareholder, partner or
member.
The BSP, which is a corporation created for a public interest or purpose, is subject to the law
creating it under Article 45 of the Civil Code, which provides:

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the
laws creating or recognizing them.
Private corporations are regulated by laws of general application on the subject.
Partnerships and associations for private interest or purpose are governed by the provisions of
this Code concerning partnerships.

The purpose of the BSP as stated in its amended charter shows that it was created in order to
implement a State policy declared in Article II, Section 13 of the Constitution, which reads:
Section 13. The State recognizes the vital role of the youth in nation-building and shall promote
and protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate
in the youth patriotism and nationalism, and encourage their involvement in public and civic
affairs.
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. DENIED.
27. Is Philippine National Red Cross (PNRC) classified as an instrumentality of the state?

(Liban v. Gordon, G.R. No. 175352, January 18, 2011) No.

Dante Liban, et al. vs. Richard Gordon - GR No. 175352 Case Digest

FACTS

Petitioners Liban, et al., who were officers of the Board of Directors of the Quezon City Red Cross
Chapter, filed with the Supreme Court what they styled as “Petition to Declare Richard J. Gordon as
Having Forfeited His Seat in the Senate” against respondent Gordon, who was elected Chairman of the
Philippine National Red Cross (PNRC) Board of Governors during his incumbency as Senator.

Petitioners alleged that by accepting the chairmanship of the PNRC Board of Governors, respondent
Gordon ceased to be a member of the Senate pursuant to Sec. 13, Article VI of the Constitution, which
provides that “[n]o Senator . . . may hold any other office or employment in the Government, or any
subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations
or their subsidiaries, during his term without forfeiting his seat.” Petitioners cited the case of
Camporedondo vs. NLRC, G.R. No. 129049, decided August 6, 1999, which held that the PNRC is a GOCC,
in supporting their argument that respondent Gordon automatically forfeited his seat in the Senate
when he accepted and held the position of Chairman of the PNRC Board of Governors.

Formerly, in its Decision dated July 15, 2009, the Court, voting 7-5, [1] held that the office of the PNRC
Chairman is NOT a government office or an office in a GOCC for purposes of the prohibition in Sec. 13,
Article VI of the 1987 Constitution. The PNRC Chairman is elected by the PNRC Board of Governors; he is
not appointed by the President or by any subordinate government official. Moreover, the PNRC is NOT a
GOCC because it is a privately-owned, privately-funded, and privately-run charitable organization and
because it is controlled by a Board of Governors four-fifths of which are private sector individuals.
Therefore, respondent Gordon did not forfeit his legislative seat when he was elected as PNRC Chairman
during his incumbency as Senator.
The Court however held further that the PNRC Charter, R.A. 95, as amended by PD 1264 and 1643, is
void insofar as it creates the PNRC as a private corporation since Section 7, Article XIV of the 1935
Constitution states that “[t]he Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations, unless such corporations are owned or controlled by
the Government or any subdivision or instrumentality thereof.” The Court thus directed the PNRC to
incorporate under the Corporation Code and register with the Securities and Exchange Commission if it
wants to be a private corporation. The Decision read:

WHEREFORE, we declare that the office of the Chairman of the Philippine National Red Cross 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. We also declare that Sections 1, 2, 3, 4(a),
5, 6, 7, 8, 9, 10, 11, 12, and 13 of the Charter of the Philippine National Red Cross, or Republic Act No.
95, as amended by Presidential Decree Nos. 1264 and 1643, are VOID because they create the PNRC as a
private corporation or grant it corporate powers.

Respondent Gordon filed a Motion for Clarification and/or for Reconsideration of the Decision. The
PNRC likewise moved to intervene and filed its own Motion for Partial Reconsideration. They basically
questioned the second part of the Decision with regard to the pronouncement on the nature of the
PNRC and the constitutionality of some provisions of the PNRC Charter.

ISSUE

Whether PNRC 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 1987 Constitution

RULING

NO. A closer look at the nature of the PNRC would show that there is none like it, not just in terms of
structure, but also in terms of history, public service and official status accorded to it by the State and
the international community. There is merit in PNRC’s contention that its structure is sui generis. It is in
recognition of this sui generis character of the PNRC that R.A. No. 95 has remained valid and effective
from the time of its enactment in March 22, 1947 under the 1935 Constitution and during the effectivity
of the 1973 Constitution and the 1987 Constitution. The PNRC Charter and its amendatory laws have not
been questioned or challenged on constitutional grounds, not even in this case before the Court now.

This Court must recognize the country’s adherence to the Geneva Convention and respect the unique
status of the PNRC in consonance with its treaty obligations. The Geneva Convention has the force and
effect of law. Under the Constitution, the Philippines adopts the generally accepted principles of
international law as part of the law of the land. This constitutional provision must be reconciled and
harmonized with Article XII, Section 16 of the Constitution, instead of using the latter to negate the
former. By requiring the PNRC to organize under the Corporation Code just like any other private
corporation, the Decision of July 15, 2009 lost sight of the PNRC’s special status under international
humanitarian law and as an auxiliary of the State, designated to assist it in discharging its obligations
under the Geneva Conventions.

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.

Although the PNRC is neither a subdivision, agency, or instrumentality of the government, nor a GOCC or
a subsidiary thereof 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 not ipso
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.

The sui generis character of PNRC requires us to approach controversies involving the PNRC on a case-
to-case 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.

Thus, R.A. No. 95 remains valid and constitutional in its entirety. The Court MODIFIED the dispositive
portion of the Decision by deleting the second sentence, to now read as follows:

WHEREFORE, we declare that the office of the Chairman of the Philippine National Red Cross 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

28. Distinguish Public v. Private corporation:

a. As to purpose – Public Corporation is for administration of local government, while, Private

Corporation is for private aim, gain or benefits of its members.

b. As to manner of creation – Public Corporation is created by the state either by general or

special act, while, Private Corporation is created by incorporators with recognizance of the state.

c. As to source of right – Public Corporation’s source of right is through legislation, while, Private
Corporation’s source of right is through voluntary agreement of members.

29. What is a government-owned and -controlled corporation (GOCC)?

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 indirectly
through its instrumentalities either wholly, or where applicable as in the case of stock corporations to
the extent of at least 51% of its capital stock. Section 2 (13) of Executive Order No. 292 (Administrative
Code of 1987)
30. What is a GOCC with a charter?

GOCC with a Charter is created by a special charter and governed by the Civil Service Law.

31. What is a GOCC without a charter? (Feliciano v. Commission on Audit, G.R. No. 147402,

January 14, 2004)

GOCCs without original charters refer to corporations created under the Corporation Code but are
owned or controlled by the government. GOCCs without original charters are subject to COA post-audit.

Feliciano v. Commission on Audit

G.R. No. 147402; Jan. 14, 2004

FACTS:

A Special Audit Team from COA Regional Office No. VIII audited the accounts of Leyte Metropolitan
Water District (LMWD). Subsequently, LMWD received a letter from COA dated 19 July 1999 requesting
payment of auditing fees. As General Manager of LMWD, petitioner sent a reply informing COA’s
Regional Director that the water district could not pay the auditing fees. Petitioner theorizes that what
PD 198 created was the Local Waters Utilities Administration ("LWUA") and not the LWDs. Petitioner
claims that LWDs are created "pursuant to" and not created directly by PD 198. Thus, petitioner
concludes that PD 198 is not an "original charter" that would place LWDs within the audit jurisdiction of
COA as defined in Section 2(1), Article IX-D of the Constitution. Petitioner elaborates that PD 198 does
not create LWDs since it does not expressly direct the creation of such entities, but only provides for
their formation on an optional or voluntary basis.8 Petitioner adds that the operative act that creates an
LWD is the approval of the Sanggunian Resolution as specified in PD 198. The COA denied petitioner
Ranulfo C. Feliciano’s request for COA to cease all audit services, and to stop charging auditing fees, to
LMWD. The COA also denied petitioner’s request for COA to refund all auditing fees previously paid by
LMWD.

ISSUES:

Whether a Local Water District (“LWD”) created under PD 198, as amended, is a government-owned or
controlled corporation subject to the audit jurisdiction of COA;

HELD:

The petition lacks merit. LWDs are not private corporations because they are not created under the
Corporation Code. LWDs exist by virtue of PD 198, which constitutes their special charter. The phrase
"government-owned and controlled corporations with original charters" means GOCCs created under
special laws and not under the general incorporation law. There is no difference between the term
"original charters" and "special charters." Since under the Constitution only government-owned or
controlled corporations may have special charters, LWDs can validly exist only if they are government-
owned or controlled. To claim that LWDs are private corporations with a special charter is to admit that
their existence is constitutionally infirm.

32. Does GOCC fall under the classification of a public corporation?

It should be borne in mind that there are two kinds of public corporation, namely, municipal and non-
municipal. A municipal corporation (Public Corporation) in its strict is the body politic constituted by the
inhabitants of a city or town for the purpose of local government thereof. It is the body politic
established by law particularly as an agency of the State to assist in the civil government of the country
chiefly to regulate the local and internal affairs of the city or town that is incorporated (62 C.J.S., p. 61).
Non- municipal corporations (GOCCs), on the other hand, are public corporations created as agencies of
the State for limited purposes to take charge merely of some public or state work other than community
government. (NAWASA v. NAWASA Consolidated Unions, G.R. No. L-18939, August 31, 1964)

33. What are the tests to determine whether a corporation is GOCC or private in nature?

1. The purpose of its creation – If created as an agent of the State to carry out governmental
functions, then it is public, otherwise, it is private.

2. Relation to the State – Created by the state as its own agency or instrumentality in carrying
out governmental functions, it is public, otherwise it is private.

34. What is the charter test? Is there an exception in the charter test? (Philippine Society for

the Prevention of Cruelty to Animals v. Commission on Audit, et al. G.R. No. 169752,

September 25, 2007)

CHARTER TEST provides that 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
CSC, and are compulsory members of the GSIS.

NO. Since the “charter test” had been introduced by the 1935 Constitution and not earlier, it follows that
the test cannot apply to the petitioner, which was incorporated by virtue of Act No. 1285, enacted on
January 19, 1905. Settled is the rule that laws in general have no retroactive effect, unless the contrary
is provided. All statutes are to be construed as having only a prospective operation, unless the purpose
and intention of the legislature to give them a retrospective effect is expressly declared or is necessarily
implied from the language used. In case of doubt, the doubt must be resolved against the retrospective
effect.17

There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when the
law itself so expressly provides; (2) in case of remedial statutes; (3) in case of curative statutes; (4) in
case of laws interpreting others; and (5) in case of laws creating new rights. None of the exceptions is
present in the instant case.

PSPCA VS. COA DIGEST

DECEMBER 21, 2016 ~ VBDIAZ

PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS vs. COA. G.R. No. 169752
September 25, 2007

FACTS:
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of Act No.
1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at the time it was
created, was composed of animal aficionados and animal propagandists. The objects of the petitioner,
as stated in Section 2 of its charter, shall be to enforce laws relating to cruelty inflicted upon animals or
the protection of animals in the Philippine Islands, and generally, to do and perform all things which may
tend in any way to alleviate the suffering of animals and promote their welfare.

At the time of the enactment of Act No. 1285, the original Corporation Law, Act No. 1459, was not yet in
existence. Act No. 1285 antedated both the Corporation Law and the constitution of the SEC.

For the purpose of enhancing its powers in promoting animal welfare and enforcing laws for the
protection of animals, the petitioner was initially imbued under its charter with the power to apprehend
violators of animal welfare laws. In addition, the petitioner was to share 1/2 of the fines imposed and
collected through its efforts for violations of the laws related thereto.

Subsequently, however, the power to make arrests as well as the privilege to retain a portion of the
fines collected for violation of animal-related laws were recalled by virtue of C.A. No. 148. Whereas, the
cruel treatment of animals is now an offense against the State, penalized under our statutes, which the
Government is duty bound to enforce;

When the COA was to perform an audit on them they refuse to do so, by the reason that they are a
private entity and not under the said commission. It argued that COA covers only government entities.
On the other hand, the COA decided that it is a government entity.

ISSUE: WON the said petitioner is a private entity.

RULING:

YES. First, the Court agrees with the petitioner that the “charter test” cannot be applied. Essentially,
the “charter test” provides that 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
CSC, and are compulsory members of the GSIS.

And since the “charter test” had been introduced by the 1935 Constitution and not earlier, it follows
that the test cannot apply to the petitioner, which was incorporated by virtue of Act No. 1285, enacted
on January 19, 1905. Settled is the rule that laws in general have no retroactive effect, unless the
contrary is provided. All statutes are to be construed as having only a prospective operation, unless the
purpose and intention of the legislature to give them a retrospective effect is expressly declared or is
necessarily implied from the language used. In case of doubt, the doubt must be resolved against the
retrospective effect.

There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when the
law itself so expressly provides; (2) in case of remedial statutes; (3) in case of curative statutes; (4) in
case of laws interpreting others; and (5) in case of laws creating new rights. None of the exceptions is
present in the instant case.
 Second, a reading of petitioner’s charter shows that it is not subject to control or supervision by any
agency of the State, unlike GOCCs. No government representative sits on the board of trustees of the
petitioner. Like all private corporations, the successors of its members are determined voluntarily and
solely by the petitioner in accordance with its by-laws, and may exercise those powers generally
accorded to private corporations, such as the powers to hold property, to sue and be sued, to use a
common seal, and so forth. It may adopt by-laws for its internal operations: the petitioner shall be
managed or operated by its officers “in accordance with its by-laws in force.”

Third. The employees of the petitioner are registered and covered by the SSS at the latter’s
initiative, and not through the GSIS, which should be the case if the employees are considered
government employees. This is another indication of petitioner’s nature as a private entity.

Fourth. The respondents contend that the petitioner is a “body politic” because its primary purpose
is to secure the protection and welfare of animals which, in turn, redounds to the public good. This
argument, is not tenable. The fact that a certain juridical entity is impressed with public interest does
not, by that circumstance alone, make the entity a public corporation, inasmuch as a corporation may be
private although its charter contains provisions of a public character, incorporated solely for the public
good. This class of corporations may be considered quasi-public corporations, which are private
corporations that render public service, supply public wants, or pursue other eleemosynary objectives.
While purposely organized for the gain or benefit of its members, they are required by law to discharge
functions for the public benefit. Examples of these corporations are utility, railroad, warehouse,
telegraph, telephone, water supply corporations and transportation companies. It must be stressed that
a quasi-public corporation is a species of private corporations, but the qualifying factor is the type of
service the former renders to the public: if it performs a public service, then it becomes a quasi-public
corporation.

Authorities are of the view that the purpose alone of the corporation cannot be taken as a safe guide,
for the fact is that almost all corporations are nowadays created to promote the interest, good, or
convenience of the public. A bank, for example, is a private corporation; yet, it is created for a public
benefit. Private schools and universities are likewise private corporations; and yet, they are rendering
public service. Private hospitals and wards are charged with heavy social responsibilities. More so with
all common carriers. On the other hand, there may exist a public corporation even if it is endowed with
gifts or donations from private individuals.

The true criterion, therefore, to determine whether a corporation is public or private is found in the
totality of the relation of the corporation to the State. If the corporation is created by the State as the
latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that
corporation is considered public; otherwise, it is private. Applying the above test, provinces, chartered
cities, and barangays can best exemplify public corporations. They are created by the State as its own
device and agency for the accomplishment of parts of its own public works.

Fifth. The respondents argue that since the charter of the petitioner requires the latter to render
periodic reports to the Civil Governor, whose functions have been inherited by the President, the
petitioner is, therefore, a government instrumentality.

This contention is inconclusive. By virtue of the fiction that all corporations owe their very existence
and powers to the State, the reportorial requirement is applicable to all corporations of whatever
nature, whether they are public, quasi-public, or private corporations—as creatures of the State, there is
a reserved right in the legislature to investigate the activities of a corporation to determine whether it
acted within its powers. In other words, the reportorial requirement is the principal means by which the
State may see to it that its creature acted according to the powers and functions conferred upon it.

35. What is the purpose test?

Authorities are of the view that the purpose alone of the corporation cannot be taken as a safe guide,
for the fact is that almost all corporations are nowadays created to promote the interest, good, or
convenience of the public. A bank, for example, is a private corporation; yet, it is created for a public
benefit. Private schools and universities are likewise private corporations; and yet, they are rendering
public service. Private hospitals and wards are charged with heavy social responsibilities. More so with
all common carriers. On the other hand, there may exist a public corporation even if it is endowed with
gifts or donations from private individuals. Please refer to no. 33 answer

36. What is the totality test?

The true criterion, therefore, to determine whether a corporation is public or private is found in the
totality of the relation of the corporation to the State. If the corporation is created by the State as the
latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that
corporation is considered public; otherwise, it is private. Please refer to no. 33 answer

37. Distinguish Public Corporations from GOCC

a. As to purpose (NAWASA v. NAWASA Consolidated Unions, G.R. No. L-18939,

August 31, 1964)

It should be borne in mind that there are two kinds of public corporation, namely, municipal and non-
municipal. A municipal corporation (Public Corporation) in its strict is the body politic constituted by the
inhabitants of a city or town for the purpose of local government thereof. It is the body politic
established by law particularly as an agency of the State to assist in the civil government of the country
chiefly to regulate the local and internal affairs of the city or town that is incorporated (62 C.J.S., p. 61).
Non- municipal corporations (GOCCs), on the other hand, are public corporations created as agencies of
the State for limited purposes to take charge merely of some public or state work other than community
government.

Issue:

Is NAWASA an agency that performs governmental functions and, therefore, essentially a service agency
of the government?

Ruling:

No. NAWASA is not an agency performing governmental functions. Rather, it performs proprietary
functions and as such comes within the coverage of Commonwealth Act No. 44. While under republic
Act No. 1383 the NAWASA is considered as a public corporation it does not show that it was so created
for the government of a portion of the State. It should be borne in mind that there are two kinds of
public corporation, namely, municipal and non-municipal. A municipal corporation in its strict is the
body politic constituted by the inhabitants of a city or town for the purpose of local government thereof.
It is the body politic established by law particularly as an agency of the State to assist in the civil
government of the country chiefly to regulate the local and internal affairs of the city or town that is
incorporated (62 C.J.S., p. 61). Non- municipal corporations, on the other hand, are public corporations
created as agencies of the State for limited purposes to take charge merely of some public or state work
other than community government (Elliot, Municipal Corporations, 3rd ed., p. 7; McQuillin, Mun. Corp.,
3rd ed., Vol. 1, p. 476).

The National Waterworks and Sewerage Authority was not created for purposes of local government. It
was created for the "purpose of consolidating and centralizing all waterworks, sewerage and drainage
system in the Philippines under one control and direction and general supervision." The NAWASA
therefore, though a public corporation, is not a municipal corporation, because it is not an agency of the
State to regulate or administer the local affairs of the town, city, or district which is incorporated.

Moreover, the NAWASA, by its charter, has personality and power separate and distinct from the
government. It is an independent agency of the government although it ids placed, for administrative
purposes, under the Department of Public Works and Communications. It has continuous succession
under its corporate name and sue and be sued in court. It has corporate power to exercised by its board
of directors; it has its own assets and liabilities; and it may charge rates for its services.

b. As to ownership

c. As to manner of creation (Feliciano v. Commission on Audit, supra)

The Constitution authorizes Congress to create government-owned or controlled corporations

through special charters. Since private corporations cannot have special charters, it follows that
Congress can create corporations with special charters only if such corporations are government-owned
or controlled.

The Constitution vests in the COA audit jurisdiction over "government-owned and controlled
corporations with original charters," as well as "government-owned or controlled corporations" without
original charters. GOCCs with original charters are subject to COA pre-audit, while GOCCs without
original charters are subject to COA post-audit. GOCCs without original charters refer to corporations
created under the Corporation Code but are owned or controlled by the government.

(Feliciano v. Commission on Audit, supra) please refer to 37.b answer

d. As to powers that may be exercised

e. As to personality (Philippine Fisheries Development Authority v. CA, G.R. No.

169836, July 31, 2007; NADECO v. Cebu City, G.R. No. 51593, November 5,

1992)

Thus, for an entity to be considered as a GOCC, it must either be organized as a stock or non-
stock corporation. Two requisites must concur before one may be classified as a stock corporation,
namely: (1) that it has capital stock divided into shares, and (2) that it is authorized to distribute
dividends and allotments of surplus and profits to its stockholders. If only one requisite is present, it
cannot be properly classified as a stock corporation. As for non-stock corporations, they must have
members and must not distribute any part of their income to said members.

Indeed, the Authority is not a GOCC but an instrumentality of the government. The Authority has
a capital stock but it is not divided into shares of stocks.12 Also, it has no stockholders or voting shares.
Hence, it is not a stock corporation. Neither it is a non-stock corporation because it has no members.

(Philippine Fisheries Development Authority v. CA, G.R. No. 169836, July 31, 2007; NADECO v.
Cebu City, G.R. No. 51593, November 5, 1992)

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY vs. CENTRAL BOARD OF ASSESSMENT

APPEALS
FACTS:

Petitioner owned the Iloilo Fishing Port Complex which was on reclaimed land and consisted of a
breakwater, landing quay, water and fuel oil supply system, refrigeration building, market hall and a
municipal shed. Petitioner then leased portions of the IFPC to private firms engaged in the fishing
business. Iloilo city then assessed the entire IFPC for Real Property Tax

ISSUE:

Is the entirety of the IFPC subject to the Real Property Tax?

HELD:

NO. The Real Property Tax liability of the IFPC is only on portions leased out to private entities. PFDA is
not a GOCC but is actually an instrumentality of the national government exempt from Real Property
Tax. Given this, it will only be subject to Real Property Tax on the portions of the IFPC which is leased to
private entities. It is not a GOCC since a GOCC must satisfy two requirements: (i) capital stock divided
into shares and (ii) authorized to distribute dividends/profits. PFDA does have capital stock but the same
is not divided into shares and neither is it a non-stock corporation because it does not have members.
(Note: This was the same decision reached in MIAA vs. Paranaque (July 20, 2006) and again in MIAA vs.
Pasay (April 2, 2009) where the property in question was the airport premises. In those cases, the Court
additionally provided that other examples of government instrumentalities vested with corporate
powers or what are known as “government corporate entities” are Philippine Ports Authority, BSP and
University of the Philippines.)