PARTNERSHIP

ARSENIO T. MENDIOLA, petitioner,

vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS.,
INC. and/or CELLMARK AB, respondents.
G.R. No. 159333, July 31, 2006

FACST: Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized under the laws of
California, USA. Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest
Resources (Phils.), Inc."5 with Arsenio T. Mendiola. The Side Agreement outlines the business
relationship of the parties with regard to the Philippine operations of Pacfor. Pacfor will establish a
Pacfor representative office in the Philippines, to be known as Pacfor Phils, and Arsemio will be its
President.
Arsenio wrote Pacfor, seeking confirmation of his 50% equity of Pacfor Phils however, Pacfor
replied that Arsenio is not a part-owner of Pacfor Phils. because the latter is merely representative office
and not an entity separate and distinct from Pacfor-USA. "It's simply a 'theoretical company' with the
purpose of dividing the income 50-50." Arsenio claimed that he was all along made to believe that he
was in a joint venture with them. With this, Pacfor ordered Arsenio to turn over to it all records and
other materials in his or Arsenio Marketing Corporation's possession that belong to Pacfor or Pacfor
Phils. Arsenio construed these directives as a severance of the "unregistered partnership" between him
and Pacfor, and the termination of his employment as resident manager of Pacfor Phils. On the basis of
the "Side Agreement," Arsenio insisted that he and Pacfor equally own Pacfor Phils. Thus, it follows that
he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office furniture and equipment and the
service car.
Pacfor placed Arsenio on preventive suspension and ordered him to show cause why no
disciplinary action should be taken against him. Pacfor charged Arsenio with willful disobedience and
serious misconduct for his refusal to turn over the service car and the Christmas giveaway fund which he
applied to his alleged unpaid commissions. Labor Arbiter Felipe Pati ruled in favor of Arsenio, finding
there was constructive dismissal. NLRC however ruled in Pacfor’s favor. It held there was no employer-
employee relationship between the parties. Based on the two agreements between the parties, it
concluded that Arsenio is not an employee of private respondent Pacfor, but a full co-owner (50/50
equity).

ISSUE: Whether or not partnership exist between Pacfor, a corporation, and Arsenio

RULING: No. Arsenio is an employee of Pacfor and that no partnership or co-ownership exists between
the parties.
In a partnership, the members become co-owners of what is contributed to the firm capital and
of all property that may be acquired thereby and through the efforts of the members. The property or
stock of the partnership forms a community of goods, a common fund, in which each party has a
proprietary interest. This essential element, the community of interest, or co-ownership of, or joint
interest in partnership property is absent in the relations between Arsenio and Pacfor.
A corporation cannot become a member of a partnership in the absence of express
authorization by statute or charter.41 This doctrine is based on the following considerations: (1) that the
mutual agency between the partners, whereby the corporation would be bound by the acts of persons
who are not its duly appointed and authorized agents and officers, would be inconsistent with the policy
of the law that the corporation shall manage its own affairs separately and exclusively; and, (2) that such
an arrangement would improperly allow corporate property to become subject to risks not
contemplated by the stockholders when they originally invested in the corporation. 42 No such
authorization has been proved in the case at bar.
J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA ARANETA, INC., plaintiff-
appellee,
vs.
QUIRINO BOLAÑOS, defendant-appellant.
G.R. No. L-4935, May 28, 1954

FACTS:
Bolanos sought to recover possession of a registered land in dispute) under claim of ownership,
adverse to the entire world by defendant and his predecessor in interest" from "time in-memorial" and
further alleges that registration of the land in dispute was obtained by JM TUASON through "fraud or
error and without knowledge (of) or interest either personal or thru publication to defendant and/or
predecessors in interest." After trial, the lower court rendered judgment for JM Tuason, declaring
Bolanost to be without any right to the land in question and ordering him to restore possession thereof
to JM TUASON and to pay the latter a monthly rent until he vacates the land.

ISSUE:
Whether or not the representation made by Gregorio Araneta, which is another corporation, is
proper?

RULING:
Yes. Th complaint states that JM Tuason is being "represented by its Managing Partner Gregorio
Araneta, Inc.", another corporation, but there is nothing against one corporation being represented by
another person, natural or juridical, in a suit in court. The contention that Gregorio Araneta, Inc. can not
act as managing partner for plaintiff on the theory that it is illegal for two corporations to enter into a
partnership is without merit, for the true rule is that "though a corporation has no power to enter into a
partnership, it may nevertheless enter into a joint venture with another where the nature of that
venture is in line with the business authorized by its charter." There is nothing in the record to indicate
that the venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is
not in line with the corporate business of either of them.
 Aurbach vs. Sanitary Wares Manufacturing Corporation (189 SCRA 130)

Facts: Saniwares, a domestic corporation entered into an agreement with American Standard Inc., a
foreign group and some Filipino investors, in order to expand their business internationally. The parties
agreed that the business operations in the Philippines shall be carried on by an incorporated enterprise
and will be named “Sanitary Wares Manufacturing Corporation.” Unfortunately, there came a
deterioration of relations between the Filipino group of investors led by Lagdameo and American group
of investors regarding the export operations of the company. Thereafter, the annual stockholder’s
meeting was held with its primary agenda is to elect the members of the board of directors. In the
election of their board members, they agreed that 3 of the 9 directors shall be designated by ASI while
the other 6 shall be designated by the Filipino stockholders. Dispute ensued when ASI invoked their right
to cumulative voting and nominated another candidate. This incident led the 2 groups to file before the
SEC in determining who the duly elected directors of Saniwares were. ASI group claimed they have the
right to vote their additional equity under the Sec. 24 of the Corporation Code and further contend that
the actual intention of the parties was to form a corporation and not a joint venture. The Lagdameo
group argued otherwise and contends that they intended to enter into a joint venture.

Issue: Whether or not the parties entered into joint Venture agreement

Held: Yes. Joint venture, under Philippine law, is a form of partnership and should thus be governed by
the law of partnerships. The Supreme Court has however recognized a distinction between these two
business forms, and has held that although a corporation cannot enter into a partnership contract, it
may however engage in a joint venture with others.

a one-time grouping of two or more persons, natural or juridical, in a specified undertaking.

DEFINITION AND ATTRIBUTES

LBC EXPRESS, INC., petitioner,

vs.
THE COURT OF APPEALS, ADOLFO M. CARLOTO, and RURAL BANK OF LABASON, INC., respondents.
G.R. No. 108670 September 21, 1994

FACTS:
Adolfo Carloto, President-Manager of Rural Bank of Labason was in Cebu City transacting
business with the Central Bank Regional Office. He was instructed to proceed to Manila to follow-up the
Rural Bank's plan of payment of rediscounting obligations with Central Bank's main office in Manila. He
2

purchased a round trip plane ticket to Manila and likewise phoned his sister Elsie Carloto-Concha to
send him P1,000.00 for his pocket money. Mrs. Concha consigned thru LBC Dipolog Branch the pertinent
documents and the P1,000.00 to Carloto. However, the documents arrived without the cashpack.
Carloto made several follow-ups but LBC failed to deliver to him the cashpack. Carloto claimed that
because of the delay in the transmittal of the cashpack, he failed to submit the rediscounting documents
to Central Bank on time. As a consequence, his rural bank was made to pay the Central Bank penalty
interest. LBC, on the other hand, alleged that the cashpack was forwarded to LBC Cebu City branch on
the same day, however, he was not around to receive it. Instead a claim notice was served to insure he
would personally receive the money. Notwithstanding the said notice, Carloto did not claim the
cashpack hence, it was returned to Elsie Carloto-Concha. Carloto instituted an action where rural bank
joined as one of the plaintiffs and prayed for the reimbursement.

ISSUE:
Whether or not respondent Rural Bank of Labason Inc., being an artificial person should be
awarded moral damages.

RULING:
No, Moral damages are granted in recompense for physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. A corporation, being an artificial person and having existence only in legal contemplation, has no
7

feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental
anguish. We can neither sustain the award of moral damages in favor of the private respondents. The
right to recover moral damages is based on equity. Moral damages are recoverable only if the case falls
under Article 2219 of the Civil Code in relation to Article 21. Part of conventional wisdom is that he
10

who comes to court to demand equity, must come with clean hands.
 FILIPINAS BROADCASTING NETWORK, INC., petitioner,
vs.
AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM)
and ANGELITA F. AGO, respondents.
G.R. No. 141994, January 17, 2005
FACTS:
"Exposé" is a radio documentary 4 program hosted by Carmelo ‘Mel’ Rima and Hermogenes ‘Jun’
Alegre. Exposé is aired over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. ("FBNI").
Rima and Alegre exposed various alleged complaints from students, teachers and parents against Ago
Medical and Educational Center-Bicol Christian College of Medicine ("AMEC") and its administrators.
Claiming that the broadcasts were defamatory, AMEC and Angelita Ago ("Ago"), as Dean of AMEC’s
College of Medicine, filed a complaint for damages 7 against FBNI, Rima and Alegre. The complaint
further alleged that AMEC is a reputable learning institution. With the supposed exposés, FBNI, Rima
and Alegre "transmitted malicious imputations, and as such, destroyed plaintiffs’ (AMEC and Ago)
reputation." AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in
the selection and supervision of its employees, particularly Rima and Alegre. The trial court rendered a
Decision12 finding FBNI and Alegre liable for libel except Rima. The trial court held that the broadcasts
are libelous per se thus awarding moral damages to AMEC. The Court of Appeals affirmed the trial
court’s judgment with modification.

ISSUE:
Whether or not AMEC is entitled to moral damages?

RULING:
Yes, A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock. Nevertheless, AMEC’s claim for moral damages falls under item 7 of
Article 221943 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.
STOCK VS NON-STOCK

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
THE CLUB FILIPINO, INC. DE CEBU, respondent.
G.R. No. L-12719, May 31, 1962

FACTS:
"Club Filipino, Inc. de Cebu," is a civic corporation organized under the laws of the Philippines
with an authorized capital stock of P200,000.00. Neither in the articles or by-laws is there a provision
relative to dividends and their distribution, although it is covenanted that upon its dissolution, the Club's
remaining assets, after paying debts, shall be donated to a charitable Philippine Institution in Cebu.The
Club owns and operates a club house, a bowling alley, a golf course, and a bar-restaurant where it sells
wines and liquors, soft drinks, meals and short orders to its members and their guests. The bar-
restaurant was a necessary incident to the operation of the club and its golf-course. The club is operated
mainly with funds derived from membership fees and dues. Whatever profits it had, were used to pay its
overhead expenses and to improve its golf-course. However, as a result of a capital surplus, arising from
the re-valuation of its real properties, the value or price of which increased, the Club declared stock
dividends; but no actual cash dividends were distributed to the stockholders. Hence, the Collector of
Internal Revenue assessed against and demanded from the Club percentage taxes and penalties. The
Club wrote the Collector, requesting for the cancellation of the assessment. The request having been
denied, the Club filed the instant petition for review.

ISSUE:
Whether or not Club Filipino, Inc. de Cebu is a stock corporation?
RULING:
No, Club Filipino, Inc. de Cebu is not a stock corporation.

The Club derived profit from the operation of its bar and restaurant, but such fact does not
necessarily convert it into a profit-making enterprise. The bar and restaurant are necessary adjuncts of
the Club to foster its purposes and the profits derived therefrom are necessarily incidental to the
primary object of developing and cultivating sports for the healthful recreation and entertainment of the
stockholders and members. What is determinative of whether or not the Club is engaged in such
business is its object or purpose, as stated in its articles and by-laws. Moreover, for a stock corporation
to exist, two requisites must be complied with, to wit: (1) a capital stock divided into shares and (2) an
authority to distribute to the holders of such shares, dividends or allotments of the surplus profits on
the basis of the shares held (sec. 3, Act No. 1459). In the case at bar, nowhere in its articles of
incorporation or by-laws could be found an authority for the distribution of its dividends or surplus
profits. Strictly speaking, it cannot, therefore, be considered a stock corporation, within the
contemplation of the corporation law.
CREATED BY SPECIAL LAW

PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and DANILO MERCADO, respondents.
G.R. No. 79182 September 11, 1991

FACTS:
Danilo Mercado is employed with Philippine National Oil Company-Energy Development
Corporation (PNOC-EDC) and held various positions ranging from clerk, general clerk to shipping clerk
during his employment until his transfer to its establishment at Dumaguete. Later, Mercado was
dismissed on the basis of serious acts of dishonesty. Mercado filed a complaint for illegal dismissal. The
Labor Arbiter ruled in favor of Mercado. The appeal to the NLRC was dismissed for lack of merit and the
assailed decision was affirmed. Hence, the matter was elevated to the Supreme Court.

ISSUE:
Whether or not matters of employment affecting the PNOC-EDC, a government-owned and
controlled corporation, are within the jurisdiction of the Labor Arbiter and the NLRC.

RULING:
Yes, The previous ruling that employees of government-owned and/or con controlled
corporations, whether created by special law or formed as subsidiaries under the General Corporation
law are governed by the Civil Service Law and not by the Labor Code, has been supplanted by the
present Constitution. "Thus, under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service Law are the manner of its
creation, such that government corporations created by special charter are subject to its provisions
while those incorporated under the General Corporation Law are not within its coverage."
Specifically, the PNOC-EDC having been incorporated under the General Corporation Law was
held to be a government owned or controlled corporation whose employees are subject to the
provisions of the Labor Code (Ibid.).
The fact that the case arose at the time when the 1973 Constitution was still in effect, does not
deprive the NLRC of jurisdiction on the premise that it is the 1987 Constitution that governs because it is
the Constitution in place at the time of the decision.
Hacienda Luisita, Incorporated vs PARC (GR No. 171101, July 5, 2011)

Facts: Tarlac Development Corporation or TADECO owned by Jose Cojuangco Sr., bought the 6,000
hectares land of Haciend Luisita in Tarlac and the sugar mill within the hacienda from the original owner
TABACALERA. The Philippine government, thru GSIS, extended loans to TADECO for the payment of
the land. One of the conditions on the loan agreement was that the lots comprising the hacienda shall be
distributed and sold to its tenants ten years after. Marcos administration filed an expropriation suit against
TADECO to surrender the Hacienda to the then Ministry of Agrarian Reform so that the land can be
distributed to the farmers at cost. Tadeco, on the other hand alleged that Hacienda Luisita does not have
tenants, and the subject lands are of sugar land hence not covered by existing agrarian reform
legislations. The RTC rendered judgment ordering TADECO to surrender Hacienda Luisita to the MAR.
In 1988, RA 6657 or the CARP law was passed. One of the lands covered by this law is the Hacienda
Luisita. The CA dismissed the case against TADECO, subject to the condition that TADECO shall obtain
the approval of farm worker beneficiaries to the Stock Distribution Plan and to ensure implementation of
Sec 31 of the CARP Law which allows either land transfer or stock transfer as two alternative modes in
distributing land ownership to the FWBs. Since the stock distribution scheme is the preferred option of
TADECO, it organized a spin-off corporation, the Hacienda Luisita Inc. (HLI), as vehicle to facilitate stock
acquisition by the farmers. From 1989 to 2005, the HLI claimed to have extended those benefits to the
farm workers, but this was contested by two groups representing the interests of the farmers – the HLI
Supervisory Group and the AMBALA and claimed that they haven’t actually received those benefits in full.
On its resolution PARC revoked HLI Stock Distribution Plan (SDP) and placed the subject land under
compulsory coverage of the CARP of the government. HLI assails the jurisdiction of the PARC to recall
the SDOA. It argues that the parties to the SDOA should now look to the Corporation Code, instead of to
RA 6657, in determining their rights, obligations and remedies.

Issue: WHETHER OR NOT PARC HAVE JURISDICTION, POWER AND/OR AUTHORITY TO NULLIFY,
RECALL, REVOKE OR RESCIND THE SDOA

Ruling: Yes. It should abundantly be made clear that HLI was precisely created in order to comply with
RA 6657, which the OSG aptly described as the "mother law" of the SDOA and the SDP. It is, thus,
paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive applicability of the
Corporation Code under the guise of being a corporate entity.

Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also
stockholders, its applicability is limited as the rights of the parties arising from the SDP should not be
made to supplant or circumvent the agrarian reform program.

Without doubt, the Corporation Code is the general law providing for the formation, organization and
regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As
between a general and special law, the latter shall prevail—generalia specialibus non derogant. Besides,
the present impasse between HLI and the private respondents is not an intra-corporate dispute which
necessitates the application of the Corporation Code. What private respondents questioned before the
DAR is the proper implementation of the SDP and HLI’s compliance with RA 6657. Evidently, RA 6657
should be the applicable law to the instant case.
 TUNA PROCESSING, INC., Petitioner,
vs.
PHILIPPINE KINGFORD, INC., Respondent.
G.R. No. 185582, February 29, 2012
FACTS:

Kanemitsu Yamaoka, co-patentee of U.S., Philippine, and Indonesian Patents, and five (5)
Philippine tuna processors, one of which is Kingford, entered into a Memorandum of Agreement where
the parties agreed to the establishment of Tuna Processors, Inc. ("TPI"), a corporation established in the
State of California. The parties likewise executed a Supplemental Memorandum of Agreements.
However, due to a series of events, the licensees, including respondent Kingford, withdrew from
petitioner TPI and correspondingly reneged on their obligations. TPI submitted the dispute for
arbitration before the International Centre for Dispute Resolution in the State of California, United
States and won the case against Kingford, ordering the latter the payment of award for breach of MOA.
To enforce the award, TPI filed a Petition for Confirmation, Recognition, and Enforcement of Foreign
Arbitral Award before the RTC of Makati City. The trial court granted Kingford’s Motion for
Reconsideration and dismissed the petition on the ground that TPI lacked legal capacity to sue in the
Philippines.

ISSUE:
Whether or not a foreign corporation not licensed to do business in the Philippines have legal
capacity to sue under the provisions of the Alternative Dispute Resolution Act of 2004?

RULING:
Yes. In the recent case of Hacienda Luisita, Incorporated v. Presidential Agrarian Reform
Council, this Court held, “the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is the special law on
agrarian reform. As between a general and special law, the latter shall prevail—generalia specialibus non
derogant.
Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply in this
case as the Act, as its title - An Act to Institutionalize the Use of an Alternative Dispute Resolution System
in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes
- would suggest, is a law especially enacted "to actively promote party autonomy in the resolution of
disputes or the freedom of the party to make their own arrangements to resolve their disputes." It 29

specifically provides exclusive grounds available to the party opposing an application for recognition and
enforcement of the arbitral award.
 EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,
vs. ETERNIT CORPORATION et. al., Respondents.
G.R. No. 144805 June 8, 2006

FACTS:
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine
laws whose manufacturing operations were conducted on eight parcels of land located in Mandaluyong
City, under the name of Far East Bank & Trust Company, as trustee. Ninety (90%) percent of the shares
of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized and
registered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was the General Manager
and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia of ESAC. Both had
their offices in Belgium. The management of ESAC grew concerned about the political situation in the
Philippines and wanted to stop its operations in the country hence instructed Michael Adams, a member
of EC’s Board of Directors, to dispose of the eight parcels of land thereby engaging the services of
realtor/broker Lauro G. Marquez. Glanville later showed the properties to Marquez. Marquez thereafter
offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua &
Company, Inc. Eduardo Litonjua, Jr. responded to the offer and intended to buy the said lands.
Negotations ensued, however, with the assumption of Corazon C. Aquino as President of the Republic of
the Philippines, the political situation in the Philippines had improved to which ESAC no longer
interested in selling the lands. The Litonjuas then filed a complaint for specific performance and
damages against EC and the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City. The trial
court dismissed the complaint, to which the Court of Appeals affirmed such decision, hence the matter
was elevated to the Supreme Court.

ISSUE:

Whether or not Marquez needed a written authority from the board of directors of Eternit
before the sale can be perfected?

RULING:
Yes. Indeed, a corporation is a juridical person separate and distinct from its members or
stockholders and is not affected by the personal rights, obligations and transactions of the latter. It may
act only through its board of directors or, when authorized either by its by-laws or by its board
resolution, through its officers or agents in the normal course of business. The general principles of
agency govern the relation between the corporation and its officers or agents, subject to the articles of
incorporation, by-laws, or relevant provisions of law. The property of a corporation, however, is not the
property of the stockholders or members, and as such, may not be sold without express authority from
the board of directors. Physical acts, like the offering of the properties of the corporation for sale, or the
acceptance of a counter-offer of prospective buyers of such properties and the execution of the deed of
sale covering such property, can be performed by the corporation only by officers or agents duly
authorized for the purpose by corporate by-laws or by specific acts of the board of directors. Absent
such valid delegation/authorization, the rule is that the declaration of an individual director relating to
the affairs of the corporation, but not in the course of, or connected with, the performance of
authorized duties of such director, are not binding on the corporation.
 REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY
(PRA), Petitioner,
vs.
CITY OF PARANAQUE, Respondent.
G.R. No. 191109, July 18, 2012

FACTS:
The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential
Decree (P.D.) No. 1084, and was designated as the agency primarily responsible for integrating, directing
and coordinating all reclamation projects for and on behalf of the National Government. By virtue of its
mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay, including
those located in Parañaque City. Later, the then Parañaque City Treasurer Liberato M. Carabeo
(Carabeo) issued Warrants of Levy on PRA’s reclaimed properties based on the assessment for
delinquent real property taxes made by then Parañaque City Assessor Soledad Medina Cue for tax years
2001 and 2002. PRA filed a Petition which sought to declare as null and void the assessment for real
property taxes, the levy based on the said assessment, the public auction sale conducted on April 7,
2003, and the Certificates of Sale issued pursuant to the auction sale. RTC however dismissed PRA’s
petition, that PRA was not exempt from payment of real property taxes because it was a GOCC and
organized as a stock corporation because it had an authorized capital stock divided into no par value
shares. With this, the matter was then elevated to the Supreme Court.

ISSUE:
Whether or not PEA is an incorporated instrumentality of the national government and is,
therefore, exempt from payment of real property tax?

RULING:
Yes, Section 2(13) of the Administrative Code of 1987 defines a GOCC, “Government-owned or
controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or, where applicable as in the case of
stock corporations, to the extent of at least fifty-one(51) percent of its capital stock”. Also,
“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.” It is clear that a GOCC must be "organized as a stock or non-stock corporation" while an
instrumentality is vested by law with corporate powers. Likewise, when the law makes a government
instrumentality operationally autonomous, the instrumentality remains part of the National
Government machinery although not integrated with the department framework.
When the law vests in a government instrumentality corporate powers, the instrumentality does
not necessarily become a corporation. Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality exercising not only governmental but
also corporate powers.
Two requisites must concur before one may be classified as a stock corporation, namely: (1) that
it has capital stock divided into shares; and (2) that it is authorized to distribute dividends and
allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot be
properly classified as a stock corporation. As for non-stock corporations, they must have members and
must not distribute any part of their income to said members.
 In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock
corporation. It cannot be considered as a stock corporation because although it has a capital stock
divided into no par value shares as provided in Section 74 of P.D. No. 1084, it is not authorized to
distribute dividends, surplus allotments or profits to stockholders. There is no provision whatsoever in
P.D. No. 1084 or in any of the subsequent executive issuances pertaining to PRA, particularly, E.O. No.
525,5 E.O. No. 6546 and EO No. 7987 that authorizes PRA to distribute dividends, surplus allotments
or profits to its stockholders.
PRA cannot be considered a non-stock corporation either because it does not have members. A
non-stock corporation must have members.8 Moreover, it was not organized for any of the purposes
mentioned in Section 88 of the Corporation Code. Specifically, it was created to manage all government
reclamation projects.
Furthermore, there is another reason why the PRA cannot be classified as a GOCC. The fundamental
provision above authorizes Congress to create GOCCs through special charters on two conditions: 1) the
GOCC must be established for the common good; and 2) the GOCC must meet the test of economic
viability. In this case, PRA may have passed the first condition of common good but failed the second
one - economic viability. Undoubtedly, the purpose behind the creation of PRA was not for economic or
commercial activities. Neither was it created to compete in the market place considering that there
were no other competing reclamation companies being operated by the private sector. PRA was created
essentially to perform a public service considering that it was primarily responsible for a coordinated,
economical and efficient reclamation, administration and operation of lands belonging to the
government with the object of maximizing their utilization and hastening their development consistent
with the public interest.
Government instrumentalities vested with corporate powers and performing governmental or
public functions need not meet the test of economic viability. These instrumentalities perform essential
public services for the common good, services that every modern State must provide its citizens. These
instrumentalities need not be economically viable since the government may even subsidize their entire
operations.
 MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF
PARAÑAQUE, respondents.
G.R. No. 155650, July 20, 2006

FACTS:
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Parañaque City. As operator of the international airport, MIAA
administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter
transferred to MIAA approximately 600 hectares of land, including the runways and buildings ("Airport
Lands and Buildings") then under the Bureau of Air Transportation. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section
21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate
tax imposed by the City. MIAA then paid some of the real estate tax already due. Later, MIAA received
Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to
2001. Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport
Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport
Lands and Buildings should MIAA fail to pay the real estate tax delinquency. The City of Parañaque then
proceeded with the public auction of Airports Lands and buildings. Supreme Court issued a temporary
restraining order (TRO) effective immediately. MIAA points out that Section 21 of the MIAA Charter
specifically exempts MIAA from the payment of real estate tax. Respondents invoke Section 193 of the
Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned
and-controlled corporations" upon the effectivity of the Local Government Code.

ISSUE:
Whether or not MIAA is an incorporated instrumentality of the national government and is,
therefore, exempt from payment of real property tax?

RULING:
Yes. MIAA is not a government-owned or controlled corporation but an instrumentality of the
National Government and thus exempt from local taxation. Second, the real properties of MIAA
are owned by the Republic of the Philippines and thus exempt from real estate tax. A government-
owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not
organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital
stock divided into shares. MIAA has no stockholders or voting shares. Clearly, under its Charter, MIAA
does not have capital stock that is divided into shares. MIAA is also not a non-stock corporation because
it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where
no part of its income is distributable as dividends to its members, trustees or officers." A non-stock
corporation must have members. Non-stock corporations cannot distribute any part of their income to
their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross
operating income to the National Treasury.11 This prevents MIAA from qualifying as a non-stock
corporation.
MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference is that
MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative
Code defines a government "instrumentality" as, “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.” When the law vests in a government instrumentality
corporate powers, the instrumentality does not become a corporation.
PUBLIC VS. PRIVATE

NATIONAL COAL COMPANY, plaintiff-appellee,

vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellant.
G.R. No. L-22619, December 2, 1924

FACTS:
NATIONAL COAL COMPANY is a corporation created by Act No. 2705 of the Philippine
Legislature for the purpose of developing the coal industry in the Philippine Islands and is actually
engaged in coal mining on reserved lands belonging to the Government. It claimed exemption from
taxes under the provision of sections 14 and 15 of Act No. 2719, and prayed for refund for the taxes it
paid.
The CIR alleged that said sum was due and owing from the plaintiff to the Government of the Philippine
Islands under the provisions of section 1496 of the Administrative Code and prayed that the complaint
be dismissed, with costs against the plaintiff.
RTC held that the CIR to refund to the plaintiff the difference between the amount collected under
section 1496 of the Administrative Code and the amount which should have been collected under the
provisions of said section 15 of Act No. 2719.

ISSUES:
Whether or not National Coal Company is a Private Corporation?

RULING:
Yes, The plaintiff is a private corporation. The mere fact that the Government happens to the
majority stockholder does not make it a public corporation. As a private corporation, it has no greater
rights, powers or privileges than any other corporation which might be organized for the same
purpose under the Corporation Law, and certainly it was not the intention of the Legislature to give it
a preference or right or privilege over other legitimate private corporations in the mining of coal.
While it is true that said proclamation No. 39 withdrew "from settlement, entry, sale, or other
disposition of coal-bearing public lands within the Province of Zamboanga . . . and the Island of Polillo,"
it made no provision for the occupation and operation by the plaintiff, to the exclusion of other persons
or corporations who might, under proper permission, enter upon the operate coal mines.
Section 1 of Act 2719 provides: "Coal-bearing lands of the public domain in the Philippine Island
shall not be disposed of in any manner except as provided in this Act," thereby giving a clear indication
that no "coal-bearing lands of the public domain" had been disposed of by virtue of said proclamation.
The said Act likewise discloses that National Coal Company is neither a lessee nor an owner of coal-
bearing lands, and is, therefore, not subject to any other provisions of Act No. 2719. It having been
demonstrated that the plaintiff has produced coal in the Philippine Islands and is not a lessee or
owner of the land from which the coal was produced, we are clearly of the opinion, and so hold, that
it is subject to pay the internal revenue tax under the provisions of section 1496 of the Administrative
Code, and is not subject to the payment of the internal revenue tax under section 15 of Act No. 2719,
nor to any other provisions of said Act.
 REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY
(PRA), Petitioner,
vs.
CITY OF PARANAQUE, Respondent.
G.R. No. 191109, July 18, 2012

FACTS:
The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential
Decree (P.D.) No. 1084, and was designated as the agency primarily responsible for integrating, directing
and coordinating all reclamation projects for and on behalf of the National Government. By virtue of its
mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay, including
those located in Parañaque City. Later, the then Parañaque City Treasurer Liberato M. Carabeo
(Carabeo) issued Warrants of Levy on PRA’s reclaimed properties based on the assessment for
delinquent real property taxes made by then Parañaque City Assessor Soledad Medina Cue for tax years
2001 and 2002. PRA filed a Petition which sought to declare as null and void the assessment for real
property taxes, the levy based on the said assessment, the public auction sale conducted on April 7,
2003, and the Certificates of Sale issued pursuant to the auction sale. RTC however dismissed PRA’s
petition, that PRA was not exempt from payment of real property taxes because it was a GOCC and
organized as a stock corporation because it had an authorized capital stock divided into no par value
shares. With this, the matter was then elevated to the Supreme Court.

ISSUE:
Whether or not PEA is a GOCC created by a special charter?

RULING:
NO. Government-owned or controlled corporations created through special charters are those
that meet the two conditions prescribed in Section 16, Article XII of the Constitution, (1) must be
established for the common good, and (2) must meet the test of economic viability. The test of
economic viability applies only to government-owned or controlled corporations that perform economic
or commercial activities and need to compete in the market place. Being essentially economic vehicles
of the State for the common good, these government-owned or controlled corporations with special
charters are usually organized as stock corporations just like ordinary private corporations. In contrast,
PEA being a government instrumentality vested with corporate powers and performing governmental or
public functions need not meet the test of economic viability. These instrumentalities perform essential
public services for the common good, services that every modern State must provide its citizens. These
instrumentalities need not be economically viable since the government may even subsidize their entire
operations. These instrumentalities are not the "government-owned or controlled corporations"
referred to in Section 16, Article XII of the 1987 Constitution.
 MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF
PARAÑAQUE, respondents.
G.R. No. 155650, July 20, 2006

FACTS:
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Parañaque City. As operator of the international airport, MIAA
administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter
transferred to MIAA approximately 600 hectares of land, including the runways and buildings ("Airport
Lands and Buildings") then under the Bureau of Air Transportation. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section
21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate
tax imposed by the City. MIAA then paid some of the real estate tax already due. Later, MIAA received
Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to
2001. Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport
Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport
Lands and Buildings should MIAA fail to pay the real estate tax delinquency. The City of Parañaque then
proceeded with the public auction of Airports Lands and buildings. Supreme Court issued a temporary
restraining order (TRO) effective immediately. MIAA points out that Section 21 of the MIAA Charter
specifically exempts MIAA from the payment of real estate tax. Respondents invoke Section 193 of the
Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned
and-controlled corporations" upon the effectivity of the Local Government Code.

ISSUE:
Whether or not MIAA is a GOCC created by special law/ charter?

RULING:
No, government-owned or controlled corporations with special charters, organized essentially
for economic or commercial objectives, must meet the test of economic viability, these are the GOCC
that are usually organized under their special charters as stock corporations. However such test does not
apply to government entities vested with corporate powers and performing essential public services.
The State is obligated to render essential public services regardless of the economic viability of providing
such service. The non-economic viability of rendering such essential public service does not excuse the
State from withholding such essential services from the public. The MIAA need not meet the test of
economic viability because the legislature did not create MIAA to compete in the market place. MIAA
does not compete in the market place because there is no competing international airport operated by
the private sector. MIAA performs an essential public service as the primary domestic and international
airport of the Philippines.