INTRODUCTION

A. Overview of the Philippine Corporate Law

a. Definition of Corporate Law
This refers to the whole body of laws, principle, and doctrines
covering private corporations in the Philippines. The main laws
or statutory provisions involving corporate law are:
1. The Revised Corporation Code of 2019 or RA 11232 which
took effect on February 23, 2019 [RCC].
2. The RCC is complemented by special provisions on publiclylisted corporations and public
companies under the Securities
Regulations Code of 2000 of RA 8799 [SRC].
3. This is also complemented by the provisions on corporate
rehabilitation and insolvency under Financial Rehabilitation Act
of 2010 or RA 10142 [FRIA].
4. As to mergers and acquisitions, a special law will also be
given emphasis which is the Philippine Competition Act of 2015
or RA 10667 [PCA].
5. There will also be references to other laws, like the Civil Code
of the Philippines (RA 386), the 1987 Philippine Constitution,
Bulk Sales Law, and the previous laws on Corporations such as
B.P. 86 of the Corporation Code of the Philippines (CCP).

b. Brief History of Philippine Corporate Law

Historical Background
Philippine Corporate Law comes from Common Law System
of the United States of America. But prior to the arrival of the
American occupying forces in the Philippines:
Sociedades Anonimas
Under the Spanish colonial administration, similar to AngloSaxon corporations were the
Sociedades Anonimas which was
introduced in the Philippines with the extension in the country
of the Spanish Code of Commerce (Articles 151-159).
A sociedad anonima is considered as a
✓ Commercial partnership, or
✓ Sort of “corporation”
Where upon the execution of a public instrument in which its
articles of agreement appear, and the contribution of funds and
personal property, it becomes a juridical person.
But the concept of a sociedad anonima did not exactly
correspond to the notion of a corporation such as the matter of
distribution of dividends, and those in which equity intervened
for the benefit of creditors.
The concept of a sociedad anonima was sought to be replaced
 upon the arrival of the Americans, as the latter lost no time in
introducing the concept of a corporation.
B. Nature and Attributes of Corporations
a. Corporation, defined
- Revised Corporation Code, sec.2
A corporation is an artificial being created by operation
of law, having the right of succession and the powers, attributes, and properties
expressly authorized by law or incidental to its existence. (Sec. 2, of REPUBLIC ACT NO.
11232 AN ACT PROVIDING FOR THE REVISED CORPORATIONCODE OF THE PHILIPPINES)
1. Attributes of a Corporation
-Const., art. XII, sec. 16
The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the
common good and subject to the test of economic viability.

Meaning:
The power to create corporations is one of the attributes of sovereignty, the exercise
of which is legislative in character. The Legislature, subject to Constitution
may create a particular corporation by direct act, make provisions, by general law,
for the organization upon compliance with certain conditions.
-Civil Code, art. 44
ARTICLE 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 form that of each shareholder, partner or
member.

Meaning:
Under Article 44 of the Civil Code, other than the State and its political subdivisions,
and other corporations, institutions and entities for public interest or purpose, the
law recognizes corporations, partnerships and associations for private interest or
purpose as having granted a juridical personality separate and distinct from that
each shareholder, partner or member.
-NDC v. Philippine Veterans Bank, G.R. No. 84132-33, December 10, 1990
https://www.chanrobles.com/cralaw/1990decemberdecisions.php?id=38
By: Edcel June B. Amado
NDC v. Philippine Veterans Bank
G.R. No. 84132-33, December 10, 1990
Petitioner National Development Corporation
Respondents Philippine Veterans Bank
Ponente CRUZ, J.

Facts:
The particular enactment in question is Presidential Decree No. 1717, which
ordered the rehabilitation of the Agrix Group of Companies to be
administered mainly by the National Development Company. The law outlined
the procedure for filling claims against the Agrix Companies and created a
claims committee to process these claims. Especially relevant to this case,
and noted at the outset, is section 4(1) thereof providing that “all mortgages
and other liens presently attaching to any of the assets of the dissolved
corporations are hereby extinguished.” Earlier, the Agrix Marketing Inc. had
executed in favor of private respondent Philippine Veterans Bank a real
estate mortgage dated July 7, 1978 over three parcels of land situated in Los
Baños, Laguna. During the existence of the mortgage, Agrix went bankrupt.
It was the expressed purpose of salvaging this and the other Agrix
companies that the aforementioned decree was issued by President Marcos.
A claim for the payment of its loan credit was filed by PNB against herein
petitioner, however the latter alleged and invoked that the same was
extinguished by PD 1717.
Issue:
Whether or not Philippine Veterans Bank as creditor of Agrix is still entitled
for payment without prejudice to PD 1717.
Held:
Yes. A mortgage lien is a property right derived from contract and so comes
under the protection of Bill of rights so do interests on loans, as well s
penalties and charges, which are also vested rights once they accrue.

Private property cannot simply be taken by law from one person and given to
another without just compensation and any known public purpose. This is
plain arbitrariness and is not permitted under the constitution.

The court also feels that the decree impairs the obligation of the contract
between Agrix and the private respondent without justification. While it is
true that the police power is superior to the impairment clause, the principle
will apply only where the contract is so related to the public welfare that it
will be considered congenitally susceptible to change by the legislature in
the interest of greater number.

Our finding in sum, is that PD 1717 is an invalid exercise of the police power,
not being in conformity with the traditional requirements of a lawful subject
and a lawful method. The extinction of the mortgage and other liens and of
the interest and other charges pertaining to the legitimate creditors of Agrix
constitutes taking without due process of law, and this is compounded by
 the reduction of the secured creditors to the category of unsecured creditors
in violation of the equal protection clause. Moreover, the new corporation
being neither owned nor controlled by the government, should have been
created only by general and not special law. And in so far as the decree also
interferes with purely private agreements without any demonstrated
connection with the public interest, there is likewise an impairment of the
obligation of the contract.

2. Theories on Formation of a Corporation

i. Theory of Concession
*A corporation owes its life to the State and its birth is purely dependent on
the State's will. "A corporation is an artificial being created by operation of
law" (Aquino book)
*A corporation is simply a
creature of the law and by the State and of limited powers and
capabilities completely within the control of the State.

ii. Theory of Enterprise Entity

*Stresses the underlying commercial enterprise without emphasis on entity-
aggregate distinctions of the components. (Aquino book)
*It premises that any State-grant must presuppose the existence of consent
or common venture among those who will form the corporation.
Although it is within the power of the State to give or deny such grant, the
corporation fiction cannot be created unless there is an enterprise or group
upon which whom it would be given.

3. Tri- level Existence in Corporate Setting

1. "Assets-Only" Level - Aggregation of assets and resources

2. "Business Enterprise" Level - Economic unit or the "going concern"
3. "Juridical Entity" Level - The business or endeavor pursued in the medium of the
corporation (Defines the "Subject Matter" of a contract, Determines the appplicable
law) (Villanueva)
b. Rights and Liabilities of Corporation
1. Constitutional rights
i. Due process
-Albert v. University Publication Co. , G.R. No. L- 19118, January 30, 1965
Albert vs University Publishing
G.R. No. L-19118 13 Scra 84
January 30, 1965
Original Text: https://lawphil.net/judjuris/juri1965/jan1965/gr_l-
19118_1965.html

Facts: In Albert vs. University Publishing Co., Inc., L-9300, April 18, 1958, we
found plaintiff entitled to damages (for breach of contract) but reduced the
amount from P23, 000.00 to P15, 000.00.

Then in Albert vs. University Publishing Co., Inc., L-15275, October 24, 1960, we
held that the judgment for P15,000.00 which had become final and executory,
should be executed to its full amount, since in fixing it, payment already made
had been considered.

15 years ago, Mariano Albert entered into a contract with University Publishing
Co., Inc. through Jose M. Aruego, its President, whereby University would pay
plaintiff for the exclusive right to publish his revised Commentaries on the
Revised Penal Code. The contract stipulated that failure to pay one installment
would render the rest of the payments due. When University failed to pay the
second installment, Albert sued for collection and won.

However, upon execution, it was found that the records of this Commission do
not show the registration of UNIVERSITY PUBLISHING CO., INC., either as a
corporation or partnership. Albert petitioned for a writ of execution against Jose
M. Aruego as the real defendant. University opposed, on the ground that Aruego
was not a party to the case.

Issue: WON the non-registration of University Publishing Co., Inc. in the SEC is an
existing corporation with an independent juridical personality.

Held: No.

Ratio: On account of the non-registration it cannot be considered a corporation,

not even a corporation de facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no
personality separate from Jose M. Aruego; it cannot be sued independently.
 In the case at bar, Aruego represented a non-existent entity and induced not
only Albert but the court to believe in such representation. He signed the
contract as “President” of “University Publishing Co., Inc.,” stating that this was
“a corporation duly organized and existing under the laws of the Philippines”.

“A person acting or purporting to act on behalf of a corporation which has no

valid existence assumes such privileges and obligations and becomes personally
liable for contracts entered into or for other acts performed as such agent.”

Aruego, acting as representative of such non-existent principal, was the real

party to the contract sued upon, and thus assumed such privileges and
obligations and became personally liable for the contract entered into or for
other acts performed as such agent.

The Supreme Court likewise held that the doctrine of corporation by estoppel
cannot be set up against Albert since it was Aruego who had induced him to act
upon his (Aruego’s) willful representation that University had been duly
organized and was existing under the law.
"University Publishing Co., Inc." purported to come to court, answering the
complaint and litigating upon the merits. But as stated, "University Publishing
Co., Inc." has no independent personality; it is just a name. Jose M. Aruego was,
in reality, the one who answered and litigated, through his own law firm as
counsel. He was in fact, if not, in name, the defendant.

In this connection, it must be realized that parties to a suit are "persons who
have a right to control the proceedings, to make defense, to adduce and cross-
examine witnesses, and to appeal from a decision" (67 C.J.S. 887) — and Aruego
was, in reality, the person who had and exercised these rights. Clearly, then,
Aruego had his day in court as the real defendant; and due process of law has
been substantially observed.

By "due process of law" we mean " "a law which hears before it condemns;
which proceeds upon inquiry, and renders judgment only after trial. ... ."

Dispositive: The order appealed from is hereby set aside and the case remanded
ordering the lower court to hold supplementary proceedings for the purpose of
carrying the judgment into effect against University Publishing Co., Inc. and/or
Jose M. Aruego.

ii. Equal protection

Smith Bell & Co. v. Natividad, G.R. 15574, September 17, 1919
SMITH, BELL & CO. v. NATIVIDAD
40 Phil. 136 (1919)
A domestic corporation with the majority of its shareholders
held by British subjects, sought to have a law reserving the
registration of vessels for coastwide shipping only to the
domestic corporations that are wholly-owned by Filipinos or
American citizens as violation of the due process and equal
protection clauses.
Although denying the stand of the domestic corporation, the
Supreme Court acknowledged that corporate entities do
have a right to claim protection under such constitutional
rights because:
The guarantees of the xxx Bill of Rights, are universal in
their application to all persons within the territorial
jurisdiction, without regard to any differences of race, color,
or nationality. The word “person” includes aliens as well as
private corporations likewise are “persons” within the
scope of guaranties in so far as their property is concerned.

CASE DIGEST:
Smith, Bell & Co. was a corporation in Philippine Islands in the 1900s. Majority of
its stockholders were British subjects. It owned a motor vessel known as Bato
which was built for it in the Philippine Islands in 1916 with more than fifteen
tons gross. The Bato was brought to Cebu to transport Smith, Bell & Company's
merchandise between ports in the Islands. It applied for a certificate of
Philippine Registry in Cebu, the home port of the vessel, and filed it before the
Collector of Customs. The Collector refused to issue the certificate, giving as his
reason that all the stockholders of Smith, Bell & Co. Ltd. were not citizens either
of the United States or of the Philippine Islands.

Smith, Bell & Co. aggrieved of the action of the Collector of Customs, it then
filed a writ of mandamus against Joaquin Natividad, the Collector of Customs of
the Port of Cebu, to compel him to issue a certificate of Philippine Registry to
their motor vessel, BATO. Smith, Bell & Co. invoked the provisions of the Jones
Law (Philippine Autonomy of 1916) saying:
"Sec. 3. That no law shall be enacted in said Islands which shall deprive any
person of life, liberty or property without due process of law, or deny to any
person therein the equal protection of the laws."

At that time, the Philippine Legislature enacted Act No. 2751 (the House of
Senate was already organized, given birth in 1916, as from 1906 to 11916, the
Philippine Legislature was unicameral). The first section of this law amended
Section 1172 of the then Administrative Code which reads:
"SEC. 1172, Certificate of Philippine register. – Upon registration of a vessel of
domestic ownership, and of more than fifteen tons gross, a certificate of
Philippine register shall be issued for it, if the vessel is of domestic ownership
and of fifteen gross or less, the taking of the certificate of Philippine register
shall be optional with the owner."

The law at that time said that it would mean ownership vested in some one or
more of the following classes of persons: "(a) Citizens or native inhabitants of
the Philippine Islands, (b) Citizens of the United States residing in the Philippine
Islands, (c) Any corporation or company composed wholly of citizens of the
Philippine Islands or the United States or of both, created under the laws of the
United States, or of any State thereof, or the managing agent or master of the
vessel resides in the Philippine Islands."

ISSUE:
Whether the legislature through Act no. 2761 can deny registry of vessel with
foreign stockholders.

HELD:
Yes. We are inclined to the view that while Smith, Bell & Co. Ltd., a corporation
having alien stockholders, is entitled to the protection afforded by the due-
process of law and equal protection of the laws clause of the Philippine Bill of
Rights, nevertheless, Act No. 2761 of the Philippine Legislature, in denying to
corporations such as Smith, Bell &. Co. Ltd., the right to register vessels in the
Philippines coastwise trade, does not belong to that vicious species of class
legislation which must always be condemned, but does fall within authorized
exceptions, notably, within the purview of the police power, and so does not
offend against the constitutional provision.

The guaranties of the Fourteenth Amendment and so of the first paragraph of

the Philippine Bill of Rights, are universal in their application to all person within
the territorial jurisdiction, without regard to any differences of race, color, or
nationality. The word “person” includes aliens.

Private corporations, likewise, are “persons” within the scope of the guaranties
in so far as their property is concerned. Classification with the end in view of
providing diversity of treatment may be made among corporations, but must be
based upon some reasonable ground and not be a mere arbitrary selection.

A literal application of general principles to the facts before us would, of course,

cause the inevitable deduction that Act No. 2761 is unconstitutional by reason
of its denial to a corporation, some of whole members are foreigners, of the
equal protection of the laws.
 To justify that portion of Act no. 2761 which permits corporations or companies
to obtain a certificate of Philippine registry only on condition that they be
composed wholly of citizens of the Philippine Islands or of the United States or
both, as not infringing Philippine Organic Law, it must be done under some one
of the exceptions.

One of the exceptions to the general rule, most persistent and far reaching in
influence is, broad and comprehensive as it is, nor any other amendment, “was
designed to interfere with the power of the State, sometimes termed its `police
power,’ to prescribe regulations to promote the health, peace, morals,
education, and good order of the people, and legislate so as to increase the
industries of the State, develop its resources and add to its wealth and
prosperity.

From the very necessities of society, legislation of a special character, having

these objects in view, must often be had in certain districts. This is the same
police power which the United States Supreme Court say “extends to so dealing
with the conditions which exist in the state as to bring out of them the greatest
welfare in of its people.”

For quite similar reasons, none of the provision of the Philippine Organic Law
could could have had the effect of denying to the Government of the Philippine
Islands, acting through its Legislature, the right to exercise that most essential,
insistent, and illimitable of powers, the sovereign police power, in the promotion
of the general welfare and the public interest.

Without any subterfuge, the apparent purpose of the Philippine Legislature is

seen to be to enact an anti-alien shipping act. The ultimate purpose of the
Legislature is to encourage Philippine ship-building.

iii. Unreasonable search and seizures

Stonehill v. Diokno, G.R. No. L-19550, June 19, 1967
PRINCIPLE: This case recognized that corporations are protected by the
constitutional guarantee against unreasonable searches and
seizures. However, it ruled that the officers of a corporation
from which documents, papers and things were seized have
no cause of action not assail the legality of the seizures,
regardless of the amount of shares of stock or of the interest
of each of them in said corporation, and whatever offices
they hold therein may be, because the corporation has a
personality separate and distinct from those of said officers.
It held that the legality of a seizure can be contested only
by the party whose rights have been impaired thereby; and
the objection to an unlawful search is purely personal and
cannot be availed of by third parties, such as those officers
of the corporation who interpose it for their personal
interests.

FACTS:

l Stonehill et al, herein petitioners, and the corporations they form were alleged
to have committed acts in “violation of Central Bank Laws, Tariff and Customs
Laws, Internal Revenue (Code) and Revised Penal Code.”
l Respondents issued, on different dates, 42 search warrants against petitioners
personally, and/or corporations for which they are officers directing peace
officers to search the persons of petitioners and premises of their offices,
warehouses and/or residences to search for personal properties “books of
accounts, financial records, vouchers, correspondence, receipts, ledgers,
journals, portfolios, credit journals, typewriters, and other documents showing
all business transactions including disbursement receipts, balance sheets and
profit and loss statements and Bobbins(cigarette wrappers)” as the subject of
the offense for violations of Central Bank Act, Tariff and Customs Laws, Internal
Revenue Code, and Revised Penal Code.
l The documents, papers, and things seized under the alleged authority of the
warrants in question may be split into (2) major groups, namely:

(a) those found and seized in the offices of the aforementioned corporations and
(b) those found seized in the residences of petitioners herein.

l Petitioners averred that the warrant is null and void for being violative of the
constitution and the Rules of court by:

(1) not describing with particularity the documents, books and things to be
seized;
(2) money not mentioned in the warrants were seized;
(3) the warrants were issued to fish evidence for deportation cases filed against
the petitioner;
(4) the searches and seizures were made in an illegal manner; and
(5) the documents paper and cash money were not delivered to the issuing
courts for disposal in accordance with law.

l The prosecution counters that the search warrants are valid and issued in
accordance with law; The defects of said warrants were cured by petitioners
consent; and in any event, the effects are admissible regardless of the
irregularity.
l The Court granted the petition and issued the writ of preliminary injunction.
However, by a resolution, the writ was partially lifted dissolving insofar as paper
and things seized from the offices of the corporations.

ISSUE:

WON the search warrant issued is valid.

HELD:

NO the search warrant is invalid.

l The SC ruled in favor of petitioners.

l The constitution protects the people’s right against unreasonable search and
seizure. It provides; (1) that no warrant shall issue but upon probable cause, to
be determined by the judge in the manner set forth in said provision; and (2)
that the warrant shall particularly describe the things to be seized. In the case at
bar, none of these are met.

l The warrant was issued from mere allegation that petitioners committed a
“violation of Central Bank Laws, Tariff and Customs Laws, Internal Revenue
(Code) and Revised Penal Code.”

l In other words, no specific offense had been alleged in said applications. The
averments thereof with respect to the offense committed were abstract.

l As a consequence, it was impossible for the judges who issued the warrants to
have found the existence of probable cause, for the same presupposes the
introduction of competent proof that the party against whom it is sought has
performed particular acts, or committed specific omissions, violating a given
provision of our criminal laws.

l As a matter of fact, the applications involved in this case do not allege any
specific acts performed by herein petitioners. It would be a legal heresy, of the
highest order, to convict anybody of a “violation of Central Bank Laws, Tariff and
Customs Laws, Internal Revenue (Code) and Revised Penal Code,” — as alleged
in the aforementioned applications — without reference to any determinate
provision of said laws or codes.

l The warrants authorized the search for and seizure of records pertaining to all
business transactions of petitioners regardless of whether the transactions were
legal or illegal.
 l Thus, openly contravening the explicit command of the Bill of Rights — that the
things to be seized be particularly described — as well as tending to defeat its
major objective: the elimination of general warrants.

l However, SC emphasized that petitioners cannot assail the validity of the

search warrant issued against their corporation because petitioners are not the
proper party.

l The petitioners have no cause of action to assail the legality of the contested
warrants and of the seizures made in pursuance thereof, for the simple reason
that said corporations have their respective personalities, separate and distinct
from the personality of herein petitioners, regardless of the amount of shares of
stock or of the interest of each of them in said corporations, and whatever the
offices they hold therein may be.8 Indeed, it is well settled that the legality of a
seizure can be contested only by the party whose rights have been impaired
thereby and that the objection to an unlawful search and seizure is purely
personal and cannot be availed of by third parties.

2. Liability for Torts

-Philippine National Bank v. Court of Appeals, G.R. No. L- 27155, May 18, 1978

Full text link: https://lawphil.net/judjuris/juri1978/may1978/gr_27155_1978.html

By: Ma. Conchita B. Danocup
PNB vs. CA
G.R. No. 27155
May 18, 1978

Word meaning: PICUL =a unit of weight, used in China, Japan, and SE Asia, equal to
approximately 60 kilograms or 133 pounds.

Petitioner
Philippine National Bank
Respondents
Rita Gueco Tapnio, Cecilio Gueco and the Philippine American General Insurance
Company, Inc.
Ponente
Antonio, J.

PHILIPPINE NATIONAL BANK vs. THE COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO
GUECO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC.
Facts:
Philamgen filed a complaint for the recovery of a sum of money against Tapnio for the
amount it paid to PNB on behalf of Tapnio. The latter made PNB as a third-party
defendant on the theory that their failure to pay debt was due to the fault or negligence
of PNB.
Philippine American General Insurance (Philamgen) executed a bond with Tapnio as
principal to Philippine National Bank (PNB). In turn, Philamgen and Tapnio executed an
indemnity agreement to guaranty whatever amount Philamgen would pay to PNB. The
bond was 2,000. The bank wrote a demand letter to Philamgen for the debt of Tapnio in
the amount 2,000 with interest in which Philamgen paid PNB. Consequently, Philamgen
made several demands to Tapnio but to no avail.
Tapnio claims that she is not indebted to the bank at all because she had agreement
with one Tuazon to lease her unused sugar quota consisting of 1,000 piculs at the rate of
P2.80 per picul or for a total of 2,800 which was already in excess of her obligation
guaranteed by Philamgen. Since the quota was mortgage to PNB, the lease had to be
approved by PNB however the board of the directors of the latter required that the
amount be raised to P3.00 per picul. Later, Tuazon informed the bank that he was no
longer interested to continue the lease. The result is that Tapnio lost the sum of 2,800
which she could have paid PNB to cancel her indebtedness.
The trial court and CA ruled that the bank is liable to Tapnio. Hence, this petition.
PNB argued that as an assignee of the sugar quota of Tapnio, it has the right, both under
its own Charter and under the Corporation Law, to safeguard and protect its rights and
interests under the deed of assignment, which include the right to approve or
disapprove the said lease of sugar quota and in the exercise of that authority, its Board
of Directors necessarily had authority to determine and fix the rental price per picul of
the sugar quota subject of the lease between private respondents and Jacobo C. Tuazon.
Issue:
Whether PNB is liable for the damage cause to Tapnio.
Held:
Yes.
While petitioner had the ultimate authority of approving or disapproving the proposed
lease since the quota was mortgaged to the Bank, the latter certainly cannot escape its
responsibility of observing, for the protection of the interest of private respondents, that
degree of care, precaution and vigilance which the circumstances justly demand in
approving or disapproving the lease of said sugar quota. The law makes it imperative
that every person "must in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith, This
petitioner failed to do.
Certainly, it knew that the agricultural year was about to expire, that by its disapproval
of the lease the private respondents would be unable to utilize the sugar quota in
question. In failing to observe the reasonable degree of care and vigilance which the
surrounding circumstances reasonably impose, petitioner is consequently liable for the
damages caused on private respondents.
Under Article 21 of the New Civil Code, "any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage." The afore-cited provisions on human relations
were intended to expand the concept of torts in this jurisdiction by granting adequate
 legal remedy for the untold number of moral wrongs which is impossible for human
foresight to specifically provide in the statutes.
A corporation is civilly liable in the same manner as natural persons for torts, because
"generally speaking, the rules governing the liability of a principal or master for a tort
committed by an agent or servant are the same whether the principal or master be a
natural person or a corporation, and whether the servant or agent be a natural or
artificial person. All of the authorities agree that a principal or master is liable for every
tort which he expressly directs or authorizes, and this is just as true of a corporation as
of a natural person, A corporation is liable, therefore, whenever a tortious act is
committed by an officer or agent under express direction or authority from the
stockholders or members acting as a body, or, generally, from the directors as the
governing body."

Q: Is a corporation liable for torts? A: Yes whenever a tortuous act is committed by an

officer or agent under the express direction or authority of the stockholders or members
acting as a body, or, generally, from the directors as the governing body. (PNB v. CA, G.R.
No. L‐27155, May 18, 1978)

3. Liability for Damages

Filipina Broadcasting Network, Inc. v. Ago Medical and Educational Center- Bicol
Christian College of Medicine and Angelita F. Ago, G.R. No. 141994, January 17, 2005
[G.R. NO. 141994 - January 17, 2005]
FILIPINAS BROADCASTING NETWORK, INC., Petitioner, v. AGO MEDICAL AND
EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and
ANGELITA F. AGO, Respondents.

This is a civil action for damages as a result of the allegedly defamatory remarks of Rima
and Alegre against AMEC.
FACTS:
"Exposé" is a radio documentary program owned by Filipinas Broadcasting Network, Inc.
("FBNI") and hosted by Rima and Alegre.

In 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.

During the broadcast, Rima and Alegre’s made remarks such as "greed for money on the
part of AMEC’s administrators"; "AMEC is a dumping ground, garbage of xxx moral and
physical misfits"; and AMEC students who graduate "will be liabilities rather than assets"
of the society.

Claiming that the broadcasts were defamatory, AMEC and Ago, as Dean of AMEC’s
College of Medicine, filed a complaint for damages against FBNI, Rima and Alegre.
ISSUE/S:
Whether the broadcasts were libelous?
Whether AMEC is entitled to Moral Damages?

RULINGS:
Yes. There is no question that the broadcasts were made public and imputed to AMEC
defects or circumstances tending to cause it dishonor, discredit and contempt. 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.

Yes. AMEC’s claim for moral damages falls under item 7 of Article 2219 of the Civil Code.
This provision expressly authorizes the recovery of moral damages in cases of libel,
slander or any other form of defamation. Article 2219 (7) does not qualify whether the
plaintiff is a natural or juridical person. Therefore, a juridical person such as a
corporation can validly complain for libel or any other form of defamation and claim for
moral damages. Moreover, where the broadcast is libelous per se, the law implies
damages.

In such a case, evidence of an honest mistake or the want of character or reputation of

the party libeled goes only in mitigation of damages. Neither in such a case is the
plaintiff required to introduce evidence of actual damages as a condition precedent to
the recovery of some damages. In this case, the broadcasts are libelous per se. Thus,
AMEC is entitled to moral damages.

RTC
Defendants Hermogenes "Jun" Alegre, Jr. and Filipinas Broasting Network (owner of the
radio station DZRC), are hereby jointly and severally ordered to pay plaintiff Ago Medical
and Educational Center-Bicol Christian College of Medicine (AMEC-BCCM) the amount of
P300,000.00 moral damages, plus P30,000.00 reimbursement of attorney's fees, and to
pay the costs of suit.

CA
The decision appealed from is hereby AFFIRMED, subject to the modification that Mel
Rima is SOLIDARILY ADJUDGED liable with FBNI and Alegre.
The Court of Appeals affirmed the trial court's judgment with modification. The
appellate court made Rima solidarily liable with FBNI and Alegre. The appellate court
 denied Ago's claim for damages and attorney's fees because the broadcasts were
directed against AMEC, and not against her.
SC
Petition is DENIED.

The Decision of 4 January 1999 and Resolution of 26 January 2000 of the Court of
Appeals in CA-G.R. CV No. 40151 is AFFIRMED with the MODIFICATION that the award of
moral damages is reduced from ₱300,000 to ₱150,000 and the award of attorney’s fees
is deleted. Costs against petitioner.

4. Liability for Crimes

People v. Concepcion, G.R. 19190, November 29, 1922
People vs concepcion g.r no. 19190

Facts: the defendant authorized an extension of credit in favor of concepcion, a co-

partnership. Defendant’s wife was a director of the said co-partnership. Defendant was
found guilty of violating sec. 35 of act no. 2747 which provides that “ the national bank
shall not, directly or indirectly, grant loans to any members of the board of directors of
the bank nor to agents of the branch banks” this section was in effect in 1919 but
repealed in Act no. 2938 approved on January 30, 1921.

Issue:
Whether or not the defendant can be convicted of violating sections of act no. 2747,
which were repealed by act no. 2938
Was the granting of a credit of 300,000 to the co- partnership “Puno y Concepcion, S. en
C” by Venancio Concepcion, President of the Philippine National Bank, a “ loan within
the meaning of section 35 of Act no. 2747?

HELD:
In the interpretation and construction, the primary rule is to ascertain and give effect to
the intention of the legislature. Section 49 in relation to section 25 of act no. 2747
provides a punishment for any person who shall violate any provisions of the act.
Defendant contends that the repeal of these sections by act no. 2938 has served to take
away basis for criminal prosecution. The court holds that where an act of the legislature
which penalizes an offense repeals a former act which penalized the same offense, such
repeal does not have the effect of thereafter depriving the courts of jurisdiction to try,
convict and sentence offenders charged with violations of the old law.
The documents of record do not prove that authority to make a loan was given, but only
to show the concession of a credit. The “credit” of an individual means his ability to
borrow money by virtue of the confidence or trust reposed by a lender that he will pay
what he may promise.( donnell vs jones)
A loan means the delivery by one party and receipt by the other party of a given sum of
money, upon an agreement. Express or implied, to repay the sum loaned, with or
without interest. (payne vs Gardiner) The concession of a “credit” necessarily involves
the granting of “loans” up to the limit of the amount fixed in the credit”

ruling :on a review of the evidence of record, with reference to the decision of the trial
court, and the errors assigned by the appellant, and with reference to previous decisions
of this court on the same subject, we are irresistibly led to the conclusion that no
reversible error was committed in the trial of this case, and that the defendant has been
proved guilty beyond reasonable doubt of the crime charged in the information. The
penalty imposed by the trial judge falls within the limits of the punitive provisions of the
law.
Judgment is affirmed, with no costs if this instance against the appelland. So ordered.

Sia v. People, G.R. No. L- 30896, April 28, 1983

FACTS:
Sia was the President and General Manager of the Metal Manufacturing of the
Philippines Inc. (MEMAP)
He obtained 150 M/T Cold Rolled Sheets consigned to Continental Bank and converted it
into personal used instead of selling it and turning over the proceeds
It resulted to a damage of 46,819 php, interest of 28,736.47 php and forfeited deposit of
71,023.60 php
ISSUE: W/N Sia can be criminally charged.

HELD: NO. Acquit.

Sia did not act for and on behalf of MEMAP
For crimes committed by corp. officers criminally charged, existence of criminal liability
for which the petition is being prosecuted must be clear and certain, here it may not be
said to be beyond reasonable doubt
Allegation v. evidence = strictly in harmony
The merchandise was manufactured before sold but although the bank was aware of
this, it was not in the trust agreement

Ching v. Secretary of Justice, G.R. No. 164317, February 6, 2006

Principle: 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
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 cov- ered 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.

Republic Gas Corporation v. Petron Corporation, et. al, G.R. No. 194062, June 17, 2013
FULL TEXT LINK : https://lawphil.net/judjuris/juri2013/jun2013/gr_194062_2013.html
DIGEST BY: MARAIDA KASIM
PETITIONER(S): REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY,
ORLANDO REYES,

FERRER SUAZO and ALVIN U. TV

RESPONDENT(S): PETRON CORPORATION, PILIPINAS SHELL PETROLEUM CORPORATION,

and SHELL

INTERNATIONAL PETROLEUM COMPANY LIMITED

PONENTE: PERALTA, J.
WHEREFORE
CLAUSE:

WHEREFORE, premises considered, the petition is hereby DENIED and the Decision
dated July 2, 2010
and Resolution dated October 11, 2010 of the Court of Appeals in CA-G.R. SP No. 106385
are
AFFIRMED.

FACTS: Petron Corporation and Pilipinas Shell Petroleum Corporation are two of the
largest
bulksuppliers and producers of LPG in the Philippines. Petron is the registered owner in
thePhilippines of the trademarks GASUL and GASUL cylinders used for its LGP products.It
is the sole entity in the Philippines authorized to allow refillers and distributors to
refill,use, sell, and distribute GASUL LPG containers, products and its trademarks.
Pilipinas Shell, on the other hand, is the authorized user in the Philippines of
thetradename, trademarks, symbols or designs of its principal, Shell
InternationalPetroleum Company Limited, including the marks SHELLANE and SHELL
device inconnection with the production, sale and distribution of SHELLANE LPGs. It is
the
onlycorporation in the Philippines authorized to allow refillers and distributors to refill,
use,sell and distribute SHELLANE LGP containers and products.
Republic Gas Corporation ("REGASCO" for brevity), an entity duly licensed to engagein,
conduct and carry on, the business of refilling, buying, selling, distributing andmarketing
at wholesale and retail of Liquefied Petroleum Gas ("LPG").
LPG Dealers Associations received reports that certain entities were engaged in
theunauthorized refilling, sale and distribution of LPG cylinders bearing the
registeredtradenames and trademarks of the petitioners. On February 5, 2004, Genesis
Adarlo,on behalf of Shellane Dealers Association, Inc., Petron Gasul Dealers Association,
Inc.and Totalgaz Dealers Association, filed a letter-complaint in the NBI regarding
thealleged illegal trading of petroleum products and/or underdelivery or underfilling in
thesale of LPG products. NBI Senior Agent Marvin E. De Jemil was assigned to
invesitgatewithin the areas of Caloocan, Malabon, Novaliches and Valenzuela. The
investigationshowed that several persons and/or establishments, including REGASCO,
weresuspected of having violated provisions of B.P. 33. The surveillance revealed
thatREGASCO LPG Refilling Plant in Malabon was engaged in the refilling and sale of
LPGcylinders bearing the registered marks of the petitioners without authority from the
latter. The NBI conducted a test-buy operation on February 19, 2004. They brought with
themfour (4) empty LPG cylinders bearing the trademarks of SHELLANE and GASUL
andincluded the same with the purchase of J&S, a REGASCOs regular customer.
InsideREGASCOs refilling plant, they witnessed that REGASCOs employees carried
theempty LPG cylinders to a refilling station and refilled the LPG empty cylinders.
Moneywas then given as payment for the refilling of the J&Ss empty cylinders which
includedthe four LPG cylinders brought in by De Jemil and his companion. Cash Invoice
No.191391 datedtheAfter leaving February 19,of2004 premises was issued REGASCO as
evidence LPG Refilling Plantfor in the consideration Malabon, they paid.proceeded to
the
NBI headquarters for the proper marking and found them later to beunderrefilled.
Thus, on March 5, 2004, De Jemil applied for the issuance of search warrants in theRTC
of
the City of Manila against the REGASCO LPG Refilling Plant located atAsucena Street,
Longos, Malabon, Metro Manila for alleged violation of B.P. 33, asamended by PD 1865.
After conducting a personal examination under oath of Agent DeJemil and his witness,

Joel Cruz, and upon reviewing their sworn affidavits and otherattached documents,
Presiding Judge Antonio M. Eugenio found probable cause andissued Search Warrants.
Upon the issuance of the said search warrants, Special Investigator Edgardo C.Kawada
and other NBI operatives immediately proceeded to the REGASCO LPGRefilling Station in
Malabon and served the search warrants. They were able to seizeseveral empty and
filled
Shellane and Gasul cylinders as well as other alliedparaphernalia. Subsequently, the NBI
lodged a complaint in the Department of Justiceagainst the private respondents for
alleged violations of Sections 155 and 168 ofRepublic Act (RA) No. 8293.
On January 15, 2006, Assistant City Prosecutor Armando C. Velasco recommended
thedismissal of the complaint. The prosecutor found that there was no proof introduced
bythe petitioners that would show that private respondent REGASCO was engaged
inselling petitioners products or that it imitated and reproduced the registered
trademarksof the petitioners. He further held that he saw no deception on the part of
REGASCO inthe conduct of its business of refilling andmarketing LPG. On appeal, the
Secretary ofthe Department of Justice affirmed the prosecutors dismissal of the
complaint.
Dispensing with the filing of a motion for reconsideration, respondents sought
recourseto
the CA through a petition for certiorari.In a Decision dated July 2, 2010, the CAgranted
respondents certiorari petition, reversing the Resolution of the Department ofJustice.
Petitioners then filed amotion for reconsideration. However, the samewasdenied by the
CA.

RTC DECISION: On January 15, 2006, Assistant City Prosecutor Armando C. Velasco
recommended the dismissal of the complaint.The prosecutor found that there
was no proof introduced by the petitioners that would show that private
respondent REGASCO was engaged in selling petitioner’s products or that it
imitated and reproduced the registered trademarks of the petitioners. He
further held that he saw no deception on the part of REGASCO in the conduct
of its business of refilling and marketing LPG.

CA DECISION: REVESED AND SET ASIDE

ISSUE(S):

Whether sufficient evidence was presented to prove that the crimes of

Trademark Infringement and Unfair Competition as defined and penalized in
Section 155 and Section 168 in relation to Section 170 of Republic Act No. 8293
(The Intellectual Property Code of the Philippines) had been committed.
Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable for the
offense charged.

RULING: Court finds that there is sufficient evidence to warrant the prosecution of
petitioners for trademark infringement and unfair competition, considering
that petitioner Republic Gas Corporation, being a corporation, possesses a
personality separate and distinct from the person of its officers, directors and
stockholders.12 Petitioners, being corporate officers and/or directors, through
whose act, default or omission the corporation commits a crime, may
themselves be individually held answerable for the crime.13 Veritably, the CA
appropriately pointed out that petitioners, being in direct control and
supervision in the management and conduct of the affairs of the corporation,
must have known or are aware that the corporation is engaged in the act of

refilling LPG cylinders bearing the marks of the respondents without authority
or consent from the latter which, under the circumstances, could probably
constitute the crimes of trademark infringement and unfair competition. The
existence of the corporate entity does not shield from prosecution the
corporate agent who knowingly and intentionally caused the corporation to
commit a crime. Thus, petitioners cannot hide behind the cloak of the separate
 corporate personality of the corporation to escape criminal liability. A
corporate officer cannot protect himself behind a corporation where he is the
actual, present and efficient actor.

Cometa v. Court of Appeals, G.R. No. 124062, January 21, 1999

Principle: While it is true that a criminal case can only be filed
against the officers of a corporation and not against the corporation itself, it does not
follow from this, however, that the
corporation cannot be a real party-in-interest for the purpose
of bringing a civil action for malicious prosecution. (Cometa
vs. Court of Appeals, 301 SCRA 459 [1999].)

Revised Corporation Code, Title XVI (Investigations, Offenses, and Penalties)

-open page 63 of pdf file, REVISED CORPORATION CODE

5. Entitlement to Moral Damages

Mambulao Lumber Company v. Philippine National Bank and Anacleto Herado, G.R. No.
L22973, January 30, 1968
PRINCIPLE: MAMBULAO LUMBER v. PNB
22 SCRA 359 (1968)
General Rule: Obviously, an artificial person like Mambulao
Lumber Company cannot experience physical sufferings,
mental anguish, fright, serious anxiety, wounded feelings,
moral shock or social humiliation which are basis of moral
damages.
Exception: A corporation may have a good reputation,
which if besmirched, may also be a ground for the award of
moral damages.
In this case, the same cannot be considered under the
facts considering that Mambulao Lumber Company had
already ceased in its business operation at the time of the
foreclosure of the sale of the chattels.
Simex International Incorporated v. Court of Appeals, G.R. No. 88013, March 19, 1990

G.R. No. 88013 March 19, 1990

Original Text: [https://lawphil.net/judjuris/juri1990/mar1990/gr_88013_1990.html]

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, respondents.

Don P. Porcuincula for petitioner.

San Juan, Gonzalez, San Agustin & Sinense for private respondent.

This case is concerned with the question of damages, specifically moral and exemplary
damages and to ascertain whether the petitioner is entitled to the said damages and, if
so, in what amounts.

RELEVANT FACTS
SIMEX INTERNATIONAL is a private corporation engaged in the exportation of food
products. It buys these products from various local suppliers and then sells them abroad,
particularly in the United States, Canada and the Middle East. Most of its exports are
purchased by the petitioner on credit.

SIMEX was a depositor of the respondent bank and maintained a checking account in its
Quezon City branch. The petitioner deposited to its account in the said bank the amount
of P100,000.00. Subsequently, the petitioner issued several checks against its deposit
but was suprised to learn later that they had been dishonored for insufficient funds.
There was a total of 8 dishonored checks.
As a consequence, several suppliers sent a letter of demand to the petitioner,
threatening prosecution if the dishonored check issued to it was not made good and also
withheld delivery of the order made by the petitioner. One supplier also cancelled the
petitioner’s credit line and demanded that future payments be made by it in cash or
certified check. The petitioner complained to the respondent bank. Investigation
disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had
not been credited to it. The error was rectified only a month after, and the dishonored
checks were paid after they were re-deposited. The petitioner demanded reparation
from the respondent bank for its "gross and wanton negligence." This demand was not
met.
The petitioner then filed a complaint in the then Court of First Instance of Rizal claiming
from the private respondent moral damages in the sum of P1,000,000.00 and exemplary
damages in the sum of P500,000.00, plus 25% attorney's fees, and costs.
After trial, the Court of First Instance held that moral and exemplary damages were not
called for under the circumstances and ordered the defendant to pay nominal damages
in the amount of P20,000.00 plus P5,000.00 attorney's fees and costs. This decision was
affirmed in toto by the Court of Appeals. The respondent court found with the trial court
that the private respondent was guilty of negligence but agreed that the petitioner was
nevertheless not entitled to moral damages.
It is this ruling that is faulted by the Petition.
Issue: Whether or not the bank can be held liable for negligence by reason of its
unjustified dishonor of a check
Held: The depositor expects the bank to treat his account with the utmost fidelity
whether such account consists only of a few hundred pesos or of millions. The bank
must record every single transaction accurately, down to the last centavo, and as
promptly as possible. This has to be done if the account is to reflect at any given time
the amount of money the depositor can dispose of as he sees fit, confident that the
bank will deliver it as and to whomever he directs. A blunder on the part of the bank,
such as the dishonour of a check without good reason, can cause the depositor not a
little embarrassment if not also financial loss and perhaps even civil and criminal
litigation.
ACCORDINGLY, the appealed judgment is MODIFIED and the private respondent is
ordered to pay the petitioner, in lieu of nominal damages, moral damages in the amount
of P20,000.00, and exemplary damages in the amount of P50,000.00 plus the original
award of attorney's fees in the amount of P5,000.00, and costs.

PRINCIPLE:
A bank may be held liable for damages by reason of its unjustified dishonor of a check,
which caused damage to its client’s credit standing. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to
be done if the account is to reflect at any given time the amount of money the depositor
can dispose of as he sees fit, confident that the bank will deliver it as and to whomever
he directs. The bank is a fiduciary of the depositor’s money.
Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational Center- Bicol
Christian College of Medicine and Angelita F. Ago, supra
[G.R. NO. 141994 - January 17, 2005]
FILIPINAS BROADCASTING NETWORK, INC., Petitioner, v. AGO MEDICAL AND
EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and
ANGELITA F. AGO, Respondents.

This is a civil action for damages as a result of the allegedly defamatory remarks of Rima
and Alegre against AMEC.
FACTS:
"Exposé" is a radio documentary program owned by Filipinas Broadcasting Network, Inc.
("FBNI") and hosted by Rima and Alegre.

In 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.

During the broadcast, Rima and Alegre’s made remarks such as "greed for money on the
part of AMEC’s administrators"; "AMEC is a dumping ground, garbage of xxx moral and
physical misfits"; and AMEC students who graduate "will be liabilities rather than assets"
of the society.

Claiming that the broadcasts were defamatory, AMEC and Ago, as Dean of AMEC’s
College of Medicine, filed a complaint for damages against FBNI, Rima and Alegre.

ISSUE/S:
Whether the broadcasts were libelous?
Whether AMEC is entitled to Moral Damages?

RULINGS:
Yes. There is no question that the broadcasts were made public and imputed to AMEC
defects or circumstances tending to cause it dishonor, discredit and contempt. 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.

Yes. AMEC’s claim for moral damages falls under item 7 of Article 2219 of the Civil Code.
This provision expressly authorizes the recovery of moral damages in cases of libel,
slander or any other form of defamation. Article 2219 (7) does not qualify whether the
plaintiff is a natural or juridical person. Therefore, a juridical person such as a
corporation can validly complain for libel or any other form of defamation and claim for
moral damages. Moreover, where the broadcast is libelous per se, the law implies
damages.

In such a case, evidence of an honest mistake or the want of character or reputation of

the party libeled goes only in mitigation of damages. Neither in such a case is the
plaintiff required to introduce evidence of actual damages as a condition precedent to
the recovery of some damages. In this case, the broadcasts are libelous per se. Thus,
AMEC is entitled to moral damages.

RTC
Defendants Hermogenes "Jun" Alegre, Jr. and Filipinas Broasting Network (owner of the
radio station DZRC), are hereby jointly and severally ordered to pay plaintiff Ago Medical
and Educational Center-Bicol Christian College of Medicine (AMEC-BCCM) the amount of
P300,000.00 moral damages, plus P30,000.00 reimbursement of attorney's fees, and to
pay the costs of suit.

CA
The decision appealed from is hereby AFFIRMED, subject to the modification that Mel
Rima is SOLIDARILY ADJUDGED liable with FBNI and Alegre.
The Court of Appeals affirmed the trial court's judgment with modification. The
appellate court made Rima solidarily liable with FBNI and Alegre. The appellate court
denied Ago's claim for damages and attorney's fees because the broadcasts were
directed against AMEC, and not against her.
SC
Petition is DENIED.

The Decision of 4 January 1999 and Resolution of 26 January 2000 of the Court of
Appeals in CA-G.R. CV No. 40151 is AFFIRMED with the MODIFICATION that the award of
moral damages is reduced from ₱300,000 to ₱150,000 and the award of attorney’s fees
is deleted. Costs against petitioner.

BNL Management Corporation v. Reynaldo Uy, G.R. No. 210297, April 3, 2019
NL Management Corporation v. Uy
G.R. No. 210297
April 3, 2019
FACTS:
BNL Management owned six (6) condominium units at the Imperial Bayfront Tower
Condominium, A. Mabini Street, Malate, Manila (Imperial Bayfront). These units were
leased to its clients under separate contracts of lease. BNL Management also held
exclusive rights to three (3) parking spaces of Imperial Bayfront. On December 16, 1996,
BNL Management, through David, wrote a letter to the building administrator of
Imperial Bayfront, acknowledging receipt of the November billing statement. In the
letter, it brought up concerns over: (1) the general cleanliness and maintenance of
common areas; (2) security; (3) building insurance; (4) encroachment on two (2) of the
parking spaces; and (5) the annotation of the parking spaces on the mother title. BNL
Management, through counsel, declared that it would withhold paying monthly dues
and instead deposit them and its arrears in a bank as escrow, which could be withdrawn
by the Imperial Bayfront Tower Condominium Association (the Association) only after it
has complied with the demands in the letter.
In a May 7, 1997 response, Building Administrator Erma Abella explained that the failure
to annotate ownership of the parking spaces was due to BNL Management not
submitting the necessary documents to the Association. It added that the maintenance
issues were due to lack of funds as a result of BNL Management's nonpayment of
association dues. On August 27, 1998, BNL Management requested that it be removed
from the Association's list of delinquent members.
On July 7, 1999, BNL Management received a letter from Sevilla containing a breakdown
of its arrears in the payment of association dues from November 1996 to June 1999. It
received a Second Notice of Billing on August 11, 1999, which informed it of its pending
arrears worth P180,981.80, representing unpaid association dues from November 1996
to August 1999. The Second Notice also contained a warning that after a third notice had
been sent, the Association would terminate utility services. On August 19, 1999, BNL
Management received the Third Notice of Billing. BNL Management again wrote the
Association on August 28, 1999, complaining that the lights in the hallway leading to its
units had been turned off. Sevilla, in turn, informed BNL Management that the power
outage had been sanctioned by the Board of Directors due to its nonpayment of
association dues. On August 30, 1999, the Association sent a Notice informing BNL
Management that should it fail to pay its dues, the water services would be
disconnected from its units. Since the Association refused to restore its electricity and
water, BNL Management and David filed before the Regional Trial Court a Complaint
against Uy, et al., for damages and specific performance with preliminary
mandatory/prohibitory injunction.
ISSUE:
Whether or not BNL Management Corporation and its president are entitled to damages
for the disconnection of their utilities
RULING:
NO. For moral damages to be awarded, the following requisites must be present: Such
damages, to be recoverable, must be the proximate result of a wrongful act or omission
the factual basis for which is satisfactorily established by the aggrieved party. An award
of moral damages would require certain conditions to be met; to wit: (1) First, there
must be an injury, whether physical, mental or psychological, clearly sustained by the
 claimant; (2) second, there must be a culpable act or omission factually established; (3)
third, the wrongful act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) fourth, the award of damages is predicated on any of
the cases stated in Article 2219.
Here, respondents were not found to have committed any culpable act or omission that
would warrant an award of moral damages for petitioner David. Clearly, the injury he
allegedly sustained was caused by his own failure, as president of petitioner BNL
Management, to resolve the corporation's non-payment of dues.

PRINCIPLE: There is no standing doctrine that corporations are, as a matter of right,

entitled to moral damages. The existing rule is that moral damages are not awarded to a
corporation since it is incapable of feelings or mental anguish. Exceptions, if any, only
apply pro hac vice.
c. Corporation, compared with other forms of organization.
1. Single Proprietorship
A single proprietorship is the simplest form of business organization in the Philippines. It
is not encumbered by the strict regulatory laws and rules imposed upon corporations
and partnerships.

Government registration of a single proprietorship business is simple. It is made through

the Bureau of Trade Regulation and Consumer Protection of the Department of Trade
and Industry [DTI].

Single proprietorship, liability of proprietor:

The single proprietor has unlimited liability in the sense that creditors of his business
may proceed not only against the assets and property of his business but after his own
personal assets and property. Creditors with whom he had incurred personal debts may
also run after the assets and property of his single proprietorship business. Simply put,
the law does not make any distinction between his personal affairs and his business
transactions. Before the eyes of the law, they are one and the same, his business being
a mere extension of his person.

The primitive form of business is, of course, that of the individual proprietor. The
individual, as a rule, operates a small business, usually with the limited capital, and is
responsible alone for its success or failure.

Sole Proprietorships

NOT vested with juridical personality to file or defend an action

highest form of unlimited liability

Partnerships and Other Associations (Arts. 1768 and 1775, Civil Code)
 no right of succession (withdrawal, death,incapacity or insolvency of any partner would
automatically bring about the dissolution of the partnership

Can a defective attempt to form a corp. result at least in a partnership?

only with their intent = de facto partnership (liable as general partners) - delectus
personae feature
2. Partnership
Civil Code, Arts. 1767 to 1768
ARTICLE 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession.
(1665a)

ARTICLE 1768. The partnership has a juridical personality separate and distinct from
that of each of the partners, even in case of failure to comply with the requirements of
article 1772, first paragraph. (n)
The partnership is the first step towards a wider field of operation and a more complex
organization. Often, it is a family affair. The business of the individual grows too large for
his sole management and he takes his son or some other member of the family into
partnership. In other cases, two men in the same business unite their capital in order to
secure ad equate capital for the conduct of their business. Whatever the motive and the
circumstances, the partnership is almost invariably a larger business unit than the
proprietorship. It is common in retail trade, in the professions, and to a limited extent,
among manufacturing establishments. As a form of business organization, it is losing
ground.

3. Business Trust- Art. 1442 Civil Code) - no juridical personality and ownership is split
between:
Art. 1442. The principles of the general law of trusts, insofar as they are not in conflict
with this Code, the Code of Commerce, the Rules of Court and special laws are hereby
adopted.
Business trust. — Another form of business organization less widely known is the
business trust, sometimes called the "Massachussets trust."1 The main feature of this
form of organization is that it is formed by a contract and that the title to property and
the conduct of business is in the hands of trustees who act for a large group of
beneficiaries.
*A business trust is a legal instrument that can be used to delegate the authority to
manage a beneficiary stake in a certain business. It can also be used to run the business
itself.

4. Joint Venture- form of partnership and governed by the law on partnership.

It is often characterized as being similar to a partnership in the sense that there exists
among the joint venturers, commonality of interest and mutual right of control, not to
mention the mode by which profits or losses are shared.

Kilosbayan Inc. v. Guingona, G.R. No. 113375, May 5, 1994

Facts: Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by
B.P. Blg. 42) which grants it the authority to hold and conduct “charity sweepstakes
races, lotteries and other similar activities,” the PCSO decided to establish an on- line
lottery system for the purpose of increasing its revenue base and diversifying its sources
of funds. Sometime before March 1993, after learning that the PCSO was interested in
operating an on-line lottery system, the Berjaya Group Berhad became interested to
offer its services and resources to PCSO. Berjaya Group Berhad organized with some
Filipino investors in March 1993 a Philippine corporation known as the Philippine
Gaming Management Corporation (PGMC), which “was intended to be the medium
through which the technical and management services required for the project would be
offered and delivered to PCSO.” KILOSBAYAN submit that the PCSO cannot validly enter
into the assailed Contract of Lease with the PGMC because it is an arrangement wherein
the PCSO would hold and conduct the on-line lottery system in “collaboration” or
“association” with the PGMC, in violation of Section 1(B) of R.A. No. 1169, as amended
by B.P. Blg. 42.
respondents allege that the petitioners have no standing to maintain the instant suit,
citing our resolution in Valmonte vs. Philippine Charity Sweepstakes Office.

Issue:
Whether or not Kilosbayan has standing to maintain instant suit? (locus standi)

Whether or not the contract of lease in the light of Section 1 of RA No. 1169, as
amended by B.P. 42, which prohibits the PCSO from holding and conducting lotteries “ in
collaboration , association or joint venture with any person, association, company, entity,
whether domestic or foreign. “ is legal and valid

Decision:
Issue on the locus standi of the petitioners should, indeed, be resolved in their favor. The
Court finds this petition to be of transcendental importance to the public.

The Court agrees with the petitioners and the challenged Contract of Lease executed by
respondent PCSO and respondent PGMC is declared to be contrary to law and
invalid. On the substantive issue regarding the provision in Section 1 of R.A. No. 1169, as
amending by B.P. Blg. 42, is indisputably clear with respect to its franchise or privilege
"to hold and conduct charity sweepstakes races, lotteries and other similar activities."
Meaning, the PCSO cannot exercise it "in collaboration, association or joint venture"
with any other party. Thus, the challenged Contract of Lease violates the exception
provided for in paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and
is, therefore, invalid for being contrary to law.

Principle: A party’s standing before this Court is a procedural technicality which it may, in
the exercise of its discretion, set aside in view of the importance of the issues raised. In
the landmark Emergency Powers Cases, 29 this Court brushed aside this technicality
because “the transcendental importance to the public of these cases demands that they
be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure.
WHEREFORE, the instant petition is hereby GRANTED and the challenged Contract of
Lease executed on 17 December 1993 by respondent Philippine Charity Sweepstakes
Office (PCSO) and respondent Philippine Gaming Management Corporation (PGMC) is
hereby DECLARED contrary to law and invalid.
The Temporary Restraining Order issued on 11 April 1994 is hereby MADE PERMANENT.

Does the challenged Contract of Lease violate or contravene the exception in Section 1 of R.A. No.
1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and conducting lotteries
"in collaboration, association or joint venture with" another?

We agree with the petitioners that it does, notwithstanding its denomination or designation as a
(Contract of Lease). We are neither convinced nor moved or fazed by the insistence and forceful
arguments of the PGMC that it does not because in reality it is only an independent contractor for
a piece of work, i.e., the building and maintenance of a lottery system to be used by the PCSO in
the operation of its lottery franchise. Whether the contract in question is one of lease or whether
the PGMC is merely an independent contractor should not be decided on the basis of the title or
designation of the contract but by the intent of the parties, which may be gathered from the
provisions of the contract itself. Animus hominis est anima scripti. The intention of the party is the
soul of the instrument. In order to give life or effect to an instrument, it is essential to look to the
intention of the individual who executed it. 62 And, pursuant to Article 1371 of the Civil Code, "to
determine the intention of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered." To put it more bluntly, no one should be deceived by the title or
designation of a contract.
A careful analysis and evaluation of the provisions of the contract and a consideration of
the contemporaneous acts of the PCSO and PGMC indubitably disclose that the contract
is not in reality a contract of lease under which the PGMC is merely an independent
contractor for a piece of work, but one where the statutorily
proscribed collaboration or association, in the least, or joint venture, at the most, exists
between the contracting parties. Collaboration is defined as the acts of working together
in a joint project. 63 Association means the act of a number of persons in uniting together
for some special purpose or business. 64 Joint venture is defined as an association of
persons or companies jointly undertaking some commercial enterprise; generally all
contribute assets and share risks. It requires a community of interest in the performance
of the subject matter, a right to direct and govern the policy in connection therewith, and
duty, which may be altered by agreement to share both in profit and
losses.65
 The PCSO has only its franchise to offer, while the PGMC has access to all managerial and
technical expertise to carry out the terms of the contract. The PCSO and the PGMC
mutually understood that any arrangement between them would necessarily leave to the
PGMC the technical, operations, and management aspects of the on‐line lottery system
while the PCSO would, primarily, provide the franchise.

5. Cooperatives
Rep. Act No. 6938, arts. 3 and 6
REPUBLIC ACT NO. 6938
AN ACT TO ORDAIN A COOPERATIVE CODE OF THE PHILIPPINES
ARTICLE 3. General Concepts. – A cooperative is a duly registered association of persons,
with a common bond of interest, who have voluntarily joined together to achieve a
lawful common social or economic end, making equitable contributions to the capital
required and accepting a fair share of the risks and benefits of the undertaking in
accordance with universally accepted cooperative principles.

ARTICLE 6. Organization of Cooperatives. – A cooperative may be organized and

registered by at least fifteen (15) persons for any or all of the following purposes:

(1) To encourage thrift and savings mobilization among the members;

(2) To generate funds and extend credit to the members for productive and provident
purposes;

(3) To encourage among members systematic production and marketing;

(4) To provide goods and services and other requirements to the members;

(5) To develop expertise and skills among its members;

(6) To acquire lands and provide housing benefits for the members;

(7) To insure against losses of the members;

(8) To promote and advance the economic, social and educational status of the
members;

(9) To establish, own, lease or operate cooperative banks, cooperative wholesale and
retail complexes, insurance and agricultural/industrial processing enterprises, and public
markets;

(10) To coordinate and facilitate the activities of cooperatives; and

 (11) To undertake any all other activities for the effective and efficient implementation of
the provisions of this Code.
d. Advantages and Disadvantages of Corporate Form
Advantages of a business corporation.
The advantages are the following:
(1) The corporation has a legal capacity to act and contract as
a distinct unit in its own name;
(2) It has continuity of existence because of its non-dependence on the lives of those who
compose it;
(3) Its credit is strengthened by such continuity of existence;
(4) Its management is centralized in the board of directors;
(5) Its creation, organization, management, and dissolution
are standardized as they are governed under one general incorporation law;
(6) It makes feasible gigantic financial undertakings since it
enables many individuals to invest their separate funds in the enterprise in order to furnish
large amounts of capital upon which
big business depends;
(7) The shareholders have limited liability;
(8) They are not general agents of the business; and
(9) The shares of stocks can be transferred without the consent of the other stockholders.

Disadvantages of a business corporation.

They are as follows:
(1) The corporation is relatively complicated in formation
and management;
(2) It entails relatively high cost of formation and operations;
(3) Its credit is weakened by the limited liability of the stockholders;
(4) There is ordinarily lack of personal element in view of the
transferability of shares;
(5) There is a greater degree of governmental control and supervision than in any other
forms of business organization;
(6) In large corporations, management and control are separated from ownership;
(7) The stockholders' voting rights have become theoretical
particularly in large corporations because of the use of proxies
and widespread ownership; and
(8) The stockholders have little voice in the conduct of the
business.
C. Classification of Corporation
a. According to function
Rep. Act. No. 10149, sec. 3(f) (o) (p)
(f) Chartered GOCC refers to a GOCC, including Government Financial Institutions, created
and vested with functions by a special law.
(o) Government-Owned or -Controlled Corporation (GOCC) refers to any agency organized as
a stock or nonstock 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 instrumentahties 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: Provided, however, That for purposes of this Act, the term “GOCC”- shall include
GICP/GCE and GFI as defined herein.

(p) Nonchartered GOCC refers to a GOCC organized and operating under Batas Pambansa
Bilang 68, or “The Corporation Code of the Philippines”.

Boy Scouts of the Philippines v. NLRC, G.R. No. 80767, April 22, 1991

There should no longer be any question at this time that employees of government‐owned or
controlled corporations are governed by the civil service law and civil service rules and
regulations.
Section 1, Article XII‐B of the [19731 Constitution specifically provides:
The Civil Service embraces every branch, agency, subdivision and instrumentality of the
Government, including every government‐owned or controlled corporation. . . .
The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:
A Civil Service embracing all branches and subdivisions of the Government shall be provided
by law.1âwphi1
The inclusion of "government‐owned or controlled corporations" within the embrace of the
civil service shows a deliberate effort of the framers to plug an earlier loophole which
allowed government‐owned or controlled corporations to avoid the full consequences of the
all encompassing coverage of the civil service system. The same explicit intent is shown by
the addition of "agency" and "instrumentality" to branches and subdivisions of the
Government. All offices and firms of the government are covered. The amendments
introduced in 1973 are not idle exercises or meaningless gestures. They carry the strong
message that civil service coverage is broad and all‐embracing insofar as employment in the
government in any of its governmental or corporate arms is concerned.25

While the BSP may be seen to be a mixed type of entity, combining aspects of both public
and private entities, we believe that considering the character of its purposes and its
functions, the statutory designation of the BSP as "a public corporation" and the substantial
participation of the Government in the selection of members of the National Executive Board
of the BSP, the BSP, as presently constituted under its charter, is a government‐controlled
corporation within the meaning of Article IX. (B) (2) (1) of the Constitution.
We are fortified in this conclusion when we note that the Administrative Code of 1987
designates the BSP as one of the attached agencies of the Department of Education, Culture
and Sports ("DECS").20 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.21 "Government instrumentality" is in turn defined in the 1987 Administrative Code in
the following manner:
Instrumentality –– refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers, administering special funds, and enjoying operational
autonomy usually through a charter. This term includes regulatory agencies, chartered
institutions and government‐owned or controlled corporations.22 (Emphasis supplied)
The same Code describes a "chartered institution" in the following terms:
Chartered institution –– refers to any agency organized or operating under a special charter,
and vested by law with functions relating to specific constitutional policies or objectives. This
term includes the state universities and colleges, and the monetary authority of the
State.23 (Emphasis supplied)
We believe 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. It follows that the employees
of petitioner BSP are embraced within the Civil Service and are accordingly governed by the
Civil Service Law and Regulations.

Philippine Society for the Prevention of Cruelty to Animals vs. Commission on Audit, G.R.
No. 169752, September 25, 2007
FULL TEXT https://lawphil.net/judjuris/juri2007/sep2007/gr_169752_200
LINK: 7.html

DIGEST BY: Patrata, Hazsle

PETITIONER
: PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO
ANIMALS

RESPONDE COMMISSION ON AUDIT, DIR. RODULFO J. ARIESGA (in his

NT: official capacity as Director of the Commission on Audit), MS.
MERLE M. VALENTIN and MS. SUSAN GUARDIAN (in their
official capacities as Team Leader and Team Member,
respectively, of the audit Team of the Commission on Audit)
PONENTE: AUSTRIA-MARTINEZ, J.:

DOCTRINE:

WHEREFOR
E CLAUSE:

FACTS:
petitioner was incorporated as a juridical entity over one
hundred years ago by virtue of Act No. 1285,... The objects of
the petitioner,... 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
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 one-half (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
Commonwealth Act (C.A.) No. 148
Sec. 2. The full amount of the fines collected for violation of
the laws against cruelty to animals and for the protection of
animals, shall accrue to the general fund of the Municipality
where the offense was committed.
President Manuel L. Quezon issued Executive Order (E.O.) No. 6
Commonwealth Act Numbered One Hundred Forty Eight was
enacted depriving the agents of the Society for the Prevention
of Cruelty to Animals of their power to arrest persons who have
violated... the laws prohibiting cruelty to animals thereby
correcting a serious defect in one of the laws existing in our
statute books.
 2003, an audit team from respondent Commission on Audit
(COA) visited the office of the petitioner to conduct an audit
survey... petitioner demurred on the ground that it was a
private entity not under the jurisdiction of COA

RTC
DECISION:

CA
DECISION:

ISSUE(S): The essential question before this Court is whether the

petitioner qualifies as a government agency that may be
subject to audit by respondent COA.
Petitioner argues: first,... it exercises no governmental
functions because these have been revoked by C.A. No. 148
and E.O.
No. 63... second, nowhere in its charter is it indicated that it is a
public corporation... if it were a government body, there
would... have been no need for the State to grant it tax
exemptions under Republic Act No. 1178, and the fact that it
was so exempted strengthens its position that it is a private
institution
 , the employees of the petitioner are registered and covered by
the Social
Security System at the latter's initiative and not through the
Government Service Insurance System... seventh, no
government appointee or representative sits on the board of...
trustees of the petitioner;... respondents contend that since
the petitioner is a "body politic" created by virtue of a special
legislation and endowed with a governmental purpose, then,
indubitably, the COA may audit

RULING: "charter test" cannot be applied... charter test" as it stands

today provides:
[T]he 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... reading of petitioner's
charter shows that it is not subject to control or supervision by
any agency of the State,... unlike government-owned and -
controlled corporations. No government representative sits on
the board of trustees of the petitioner
Third. The employees of the petitioner are registered and
covered by the Social Security System at the latter's initiative,
and not through the Government Service Insurance System,
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
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,[21] 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.
Authorities are of the view that the purpose alone of the
corporation cannot be taken as a safe guide
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... petition is GRANTED. Petitioner is DECLARED a private
domestic corporation subject to the jurisdiction of the
Securities and Exchange Commission.

Essentially, the "charter test" as it stands today provides:

[T]he 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. xxx (Emphasis supplied) 13

The petitioner is correct in stating that the charter test is predicated, at best, on the legal regime
established by the 1935 Constitution, Section 7, Article XIII, which states:

Sec. 7. The National Assembly 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.14

The foregoing proscription has been carried over to the 1973 and the 1987 Constitutions. Section 16
of Article XII of the present Constitution provides:

Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of
economic viability.

Section 16 is essentially a re-enactment of Section 7 of Article XVI of the 1935 Constitution and
Section 4 of Article XIV of the 1973 Constitution.
Liban v. Gordon (Decision), G.R. No. 175352, July 15, 2009
FULL TEXT
LINK

https://www.chanrobles.com/scdecisions/jurisprudence2
009/jul2009/gr_175352_2009.php#google_vignette

Case Number G.R. No. 175352, July 15, 2009

PETITIONER DANTE V. LIBAN, REYNALDO M. BERNARDO, and

SALVADOR M. VIARI
RESPONDENT RICHARD J. GORDON
PONENTE CARPIO, J
DOCTRINE Classification of Corporation: According to function
WHEREFORE
CLAUSE

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.

FACTS Petitioners filed a petition to declare Richard J. Gordon as

Having Forfeited His Seat in the Senate. Respondent was
elected Chairman of the PNRC during his incumbency as
a member of the Senate of the Philippines. 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 vs
NLRC which held that the PNRC is a government-owned
or controlled corporation. Respondent contends that
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.

RTC
DECISION

NA
CA DECISION NA

ISSUE(S) Whether or not PNRC is a government-owned or

controlled corporation

RULING No, PNRC is not an office in a government -owned or

controlled corporation. The PNRC is a non-profit, donor-

funded, voluntary, humanitarian organization, whose

mission is to bring timely, effective, and compassionate

humanitarian assistance for the most vulnerable without
consideration of nationality, race, religion, gender, social
status, or political affiliation. The PNRC provides six major
services: Blood Services, Disaster Management, Safety
Services, Community Health and Nursing, Social Services
and Voluntary Service. Established as a voluntary
organization for the purpose contemplated in the Geneva
Convention of 27 July 1929. The PNRC cannot be seen as
government-owned or controlled, and neither can the
PNRC volunteers be identified as government personnel
or as instruments of government policy. Otherwise, the
insurgents or separatists will treat PNRC volunteers as
enemies when the volunteers tend to the wounded in the
battlefield or the displaced civilians in conflict areas.
Thus, the PNRC must not only be, but must also be seen
to be, autonomous, neutral and independent in order to
conduct its activities in accordance with the Fundamental
Principles. The PNRC must not appear to be an instrument
or agency that implements government policy; otherwise,
it cannot merit the trust of all and cannot effectively carry
out its mission as a National Red Cross Society. It is
imperative that the PNRC must be autonomous, neutral,
and independent in relation to the State.
Liban v. Gordon (Resolution), G.R. No. 175352, January 18, 2011

Case: Liban v. Gordon (Resolution), G.R. No. 175352, January 18, 2011
FULL TEXT LINK http://source.gosupra.com/docs/decision/3212
DIGEST BY: Floraviel Plazo
PETITIONER DANTE V. LIBAN, REYNALDO M. BERNARDO and SALVADOR M. VIARI
RESPONDENT RICHARD J. GORDON
PONENTE JUSTICE LEONARDO-DE CASTRO

WHEREFORE CLAUSE

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. SO ORDERED.

FACTS

The case involves a Motion for Clarification and/or for Reconsideration filed
by respondent Richard J. Gordon (respondent) of the Decision promulgated
by the Court on July 15, 2009. The Decision held that respondent did not
forfeit his seat in the Senate when he accepted the chairmanship of the
Philippine National Red Cross (PNRC) Board of Governors because 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, the Decision also declared
void certain provisions of the PNRC Charter, stating that the PNRC should
incorporate under the Corporation Code and register with the Securities and
Exchange Commission if it wants to be a private corporation.
In his Motion for Clarification and/or for Reconsideration, respondent raised
the grounds that the issue of the constitutionality of Republic Act (R.A.) No.
95 was not raised by the parties, and therefore, the Court went beyond the
case in deciding such issue. Additionally, respondent argued that the
pronouncement of the Court on the validity of R.A. No. 95 should be
considered obiter since the Court already decided that the petitioners did not
have standing to file the petition.
The PNRC, as a movant-intervenor, filed a Motion for Partial Reconsideration
praying that the Court sustain the constitutionality of its Charter on various
grounds, including the contention that it is a sui generis organization
 performing humanitarian functions as an auxiliary to the government, and
does not strictly qualify as a private corporation.

ISSUE(S) Whether the PNRC should be considered a private corporation or not and
whether the PNRC Charter, R.A. No. 95, as amended, is constitutional.

RULING

The Supreme Court grants the Motions for Clarification and Partial
Reconsideration. It revisits its previous ruling and acknowledges that the
issue of constitutionality of R.A. No. 95 was not raised by the parties and
should not have been decided by the Court. The Court recognizes that the

PNRC is of a sui generis nature, performing humanitarian functions as an

auxiliary to the government and is not strictly private in character.
The Court reiterates the significant public service rendered by the PNRC as a
non-profit, donor-funded, voluntary, humanitarian organization. The PNRC is
a National Society of the International Red Cross and Red Crescent
Movement, and it has a unique status as an auxiliary of the government in the
humanitarian field. The PNRC's structure is distinct, and it acts as a private
institution and a public service organization simultaneously, being linked
with the State and cooperating with public authorities.
The Court emphasizes that the PNRC was created by an Act of Congress after
the Philippines became an independent nation and proclaimed its adherence
to the Geneva Conventions. It serves as the country's voluntary organization
to fulfill its obligations under the Geneva Conventions and is recognized at
the international level.
Based on the foregoing considerations, the Court modifies its Decision by
deleting the second sentence in the dispositive portion, which declared
certain sections of the PNRC Charter void. The PNRC Charter (R.A. No. 95)
remains valid and constitutional in its entirety.

The provisions of R.A. No. 95, as amended by R.A. Nos. 855 and 6373, and further amended by
P.D. Nos. 1264 and 1643, show the historical background and legal basis of the creation of the
PNRC by legislative fiat, as a voluntary organization impressed with public interest. Pertinently R.A.
No. 95, as amended by P.D. 1264, provides:

WHEREAS, during the meeting in Geneva, Switzerland, on 22 August 1894, the nations of the world
unanimously agreed to diminish within their power the evils inherent in war;

WHEREAS, more than one hundred forty nations of the world have ratified or adhered to the
Geneva Conventions of August 12, 1949 for the Amelioration of the Condition of the Wounded and
Sick of Armed Forces in the Field and at Sea, The Prisoners of War, and The Civilian Population in
Time of War referred to in this Charter as the Geneva Conventions;
WHEREAS, the Republic of the Philippines became an independent nation on July 4, 1946, and
proclaimed on February 14, 1947 its adherence to the Geneva Conventions of 1929, and by the
action, indicated its desire to participate with the nations of the world in mitigating the suffering
caused by war and to establish in the Philippines a voluntary organization for that purpose as
contemplated by the Geneva Conventions;

WHEREAS, there existed in the Philippines since 1917 a chapter of the American National Red
Cross which was terminated in view of the independence of the Philippines; and

WHEREAS, the volunteer organizations established in other countries which have ratified or
adhered to the Geneva Conventions assist in promoting the health and welfare of their people in
peace and in war, and through their mutual assistance and cooperation directly and through their
international organizations promote better understanding and sympathy among the people of the
world;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of the
Philippines and pursuant to Proclamation No. 1081 dated September 21, 1972, and General Order
No. 1 dated September 22, 1972, do hereby decree and order that Republic Act No. 95, Charter of
the Philippine National Red Cross (PNRC) as amended by Republic Acts No. 855 and 6373, be
further amended as follows:

Section 1. There is hereby created in the Republic of the Philippines a body corporate and politic to
be the voluntary organization officially designated to assist the Republic of the Philippines in
discharging the obligations set forth in the Geneva Conventions and to perform such other duties as
are inherent upon a national Red Cross Society. The national headquarters of this Corporation shall
be located in Metropolitan Manila. (Emphasis supplied.)

The significant public service rendered by the PNRC can be gleaned from Section 3 of its Charter,
which provides:

Section 3. That the purposes of this Corporation shall be as follows:

(a) To provide volunteer aid to the sick and wounded of armed forces in time of war, in
accordance with the spirit of and under the conditions prescribed by the Geneva
Conventions to which the Republic of the Philippines proclaimed its adherence;

(b) For the purposes mentioned in the preceding sub-section, to perform all duties devolving
upon the Corporation as a result of the adherence of the Republic of the Philippines to the
said Convention;

(c) To act in matters of voluntary relief and in accordance with the authorities of the armed
forces as a medium of communication between people of the Republic of the Philippines and
their Armed Forces, in time of peace and in time of war, and to act in such matters between
similar national societies of other governments and the Governments and people and the
Armed Forces of the Republic of the Philippines;

(d) To establish and maintain a system of national and international relief in time of peace
and in time of war and apply the same in meeting and emergency needs caused by
typhoons, flood, fires, earthquakes, and other natural disasters and to devise and carry on
measures for minimizing the suffering caused by such disasters;
 (e) To devise and promote such other services in time of peace and in time of war as may be
found desirable in improving the health, safety and welfare of the Filipino people;

(f) To devise such means as to make every citizen and/or resident of the Philippines a
member of the Red Cross.

The PNRC is one of the National Red Cross and Red Crescent Societies, which, together with the
International Committee of the Red Cross (ICRC) and the IFRC and RCS, make up the International
Red Cross and Red Crescent Movement (the Movement). They constitute a worldwide humanitarian
movement, whose mission is:

[T]o prevent and alleviate human suffering wherever it may be found, to protect life and health and
ensure respect for the human being, in particular in times of armed conflict and other emergencies,
to work for the prevention of disease and for the promotion of health and social welfare, to
encourage voluntary service and a constant readiness to give help by the members of the
Movement, and a universal sense of solidarity towards all those in need of its protection and
assistance.15

The PNRC works closely with the ICRC and has been involved in humanitarian activities in the
Philippines since 1982. Among others, these activities in the country include:

1. Giving protection and assistance to civilians displaced or otherwise affected by armed

clashes between the government and armed opposition groups, primarily in Mindanao;

2. Working to minimize the effects of armed hostilities and violence on the population;

3. Visiting detainees; and

4. Promoting awareness of international humanitarian law in the public and private sectors. 16

National Societies such as the PNRC act as auxiliaries to the public authorities of their own countries
in the humanitarian field and provide a range of services including disaster relief and health and
social programmes.

The International Federation of Red Cross (IFRC) and Red Crescent Societies (RCS) Position
Paper,17 submitted by the PNRC, is instructive with regard to the elements of the specific nature of
the National Societies such as the PNRC, to wit:

National Societies, such as the Philippine National Red Cross and its sister Red Cross and Red
Crescent Societies, have certain specificities deriving from the 1949 Geneva Convention and the
Statutes of the International Red Cross and Red Crescent Movement (the Movement). They are also
guided by the seven Fundamental Principles of the Red Cross and Red Crescent Movement:
Humanity, Impartiality, Neutrality, Independence, Voluntary Service, Unity and Universality.

A National Society partakes of a sui generis character. It is a protected component of the Red Cross
movement under Articles 24 and 26 of the First Geneva Convention, especially in times of armed
conflict. These provisions require that the staff of a National Society shall be respected and
protected in all circumstances. Such protection is not ordinarily afforded by an international treaty to
ordinary private entities or even non-governmental organisations (NGOs). This sui generis character
is also emphasized by the Fourth Geneva Convention which holds that an Occupying Power cannot
require any change in the personnel or structure of a National Society. National societies are
therefore organizations that are directly regulated by international humanitarian law, in
contrast to other ordinary private entities, including NGOs.

xxxx

In addition, National Societies are not only officially recognized by their public authorities as
voluntary aid societies, auxiliary to the public authorities in the humanitarian field, but also benefit
from recognition at the International level. This is considered to be an element distinguishing
National Societies from other organisations (mainly NGOs) and other forms of humanitarian
response.

x x x. No other organisation belongs to a world-wide Movement in which all Societies have equal
status and share equal responsibilities and duties in helping each other. This is considered to be the
essence of the Fundamental Principle of Universality.

Furthermore, the National Societies are considered to be auxiliaries to the public authorities in the
humanitarian field. x x x.

The auxiliary status of [a] Red Cross Society means that it is at one and the same time a private
institution and a public service organization because the very nature of its work implies
cooperation with the authorities, a link with the State. In carrying out their major functions, Red
Cross Societies give their humanitarian support to official bodies, in general having larger resources
than the Societies, working towards comparable ends in a given sector.

DISPOSITIVE
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.

Funa v. Manila Economic and Cultural Office, G.R. No. 193462, February 4, 2014
FUNA VS MECO (G.R. NO. 193462 FEBRUARY 4, 2014)
Funa vs Manila Economic and Cultural Office

G.R. No. 193462 February 4, 2014

J. Perez

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:

(13) 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.

Conclusion

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.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Manila Economic
and Cultural Office is hereby declared a non-governmental entity. However, the accounts of the
Manila Economic and Cultural Office pertaining to: the verification fees contemplated by Section 7 of
Executive Order No. 1022 issued 1 May 1985, that the former collects on behalf of the Department
of Labor and Employment, and the fees it was authorized to collect under Section 2(6) of Executive
Order No. 15 issued 16 May 2001, are subject to the audit jurisdiction of the COA.

b. According to manner of creation

Revised Corporation Code, sec. 4
SEC. 4. Corporations Created by Special Laws or Charters. – Corporations created by
special laws or charters shall be governed primarily by the provisions of the special law or
charter
creating them or applicable to them, supplemented by the provisions of this Code, insofar as
they are applicable.
c. According to existence of shares
 Revised Corporation Code, sec. 3 and 86
SEC. 3. Classes of Corporations. – Corporations formed or organized under this Code may be
stock or nonstock corporations. Stock corporations are those which have capital stock
divided into shares and are authorized to distribute to the holders of such shares, dividends,
or allotments of the surplus profits on the basis of the shares held. All other corporations are
nonstock corporations.

SEC. 86. Definition. – For purposes of this Code and subject to its provisions on dissolution, a
nonstock corporation is one where no part of its income is distributable as dividends to its
members, trustees, or officers: Provided, That any profit which a nonstock corporation may
obtain incidental to its operations shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the corporation was organized, subject to
the provisions of this Title. The provisions governing stock corporations, when pertinent,
shall be applicable to nonstock corporations, except as may be covered by specific provisions
of this Title.
d. According to number of components
Revised Corporation Code, secs.116
SEC. 116. One Person Corporation. – A One Person Corporation is a corporation with a
single stockholder: Provided, That only a natural person, trust, or an estate may form a One
Person Corporation.
Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies,
and non-chartered government-owned and -controlled corporations may not incorporate as
One Person Corporations: Provided, further, That a natural person who is licensed to exercise
a profession may not organize as a One Person Corporation for the purpose of exercising
such profession except as otherwise provided under special laws.
e. According to legal status
Revised Corporation Code secs. 19 and 20
SEC. 19. De facto Corporations. – The due incorporation of any corporation claiming in good
faith to be a corporation under this Code, and its right to exercise corporate powers, shall
not be inquired into collaterally in any private suit to which such corporation may be a party.
Such inquiry may be made by the Solicitor General in a quo warranto proceeding.

quo war·ran·to
/ˌkwō wəˈran(t)ō/
nounLAW
a writ or legal action requiring a person to show by what warrant an office or franchise is
held, claimed, or exercised.
"rigorous quo warranto proceedings"

SEC. 20. Corporation by Estoppel. – All persons who assume to act as a corporation knowing
it to be without authority to do so shall be liable as general partners for all debts, liabilities
and damages incurred or arising as a result thereof: Provided, however, That when any such
ostensible corporation is sued on any transaction entered by it as a corporation or on any
tort committed by it as such, it shall not be allowed to use its lack of corporate personality as
 a defense. Anyone who assumes an obligation to an ostensible corporation as such cannot
resist performance thereof on the ground that there was in fact no corporation.

f. According to laws of incorporation

Revised Corporation Code, sec. 140

g. According to relationship with other corporations.

h. According to whether they are open to the public or not.
Revised Corporation Code, sec. 95
i. Other classifications
1. Educational
Revised Corporation Code, sec. 105
2. Religious
Revised Corporation Code, sec. 107
3. Eleemosynary
(b) Lay corporation or one organized for a purpose other than for religion. Lay corporations,
in turn, may be either eleemosynary or civil. (3) As to whether they are for charitable
purposes or not: (a) Eleemosynary corporation or one established for or devoted to
charitable purposes or those supported by charity;