PUBLIC CORPORATION RULING:

Professor: Atty. Ravelo

It is a general principle of the public law that on acquisition of territory the previous
CASE DIGESTS political relations of the ceded region are totally abrogated -- "political" being used to
(M3) denominate the laws regulating the relations sustained by the inhabitants to the
(AUGUST 21, 2019 2ND MEETING) sovereign.

On American occupation of the Philippines, by instructions of the President to the

1. The People of the Philippine Islands vs. Gregorio Perfecto, G.R. No. L-
18463, October 4, 1922
DOCTRINE:
It is a general principle of the public law that on acquisition of territory the previous
political relations of the ceded region are totally abrogated -- "political" being used to
denominate the laws regulating the relations sustained by the inhabitants to the
sovereign.
FACTS:
This is a case relating to the loss of some documents which constituted the records
of testimony given by witnesses in the Senate investigation of oil companies. The
newspaper La Nacion, edited by Mr. Gregorio Perfecto, published an article about it
to the effect that "the author or authors of the robbery of the records from the iron
safe of the Senate have, perhaps, but followed the example of certain Senators who
secured their election through fraud and robbery."
Consequently, the Attorney-General, through a resolution adopted by the Philippine
Senate, filed an information alleging that the editorial constituted a violation of article
256 of the Penal Code.
The defendant Gregorio Perfecto was found guilty in the municipal court and again in
the Court of First Instance of Manila.
ISSUE/S:
Military Commander, and by proclamation of the latter, the municipal laws of the
conquered territory affecting private rights of person and property and providing for
the punishment of crime (e.g. the Spanish Penal Code) were nominally continued in
force in so far as they were compatible with the new order of things.
Article 256 was enacted by the Government of Spain to protect Spanish officials who
were the representatives of the King. But with the change of sovereignty, a new
government, and a new theory of government, was set up in the Philippines. No
longer is there a Minister of the Crown or a person in authority of such exalted
position that the citizen must speak of him only with bated breath. Said article is
contrary to the genius and fundamental principles of the American character and
system of
government. It was crowded out by implication as soon as the United States
established its authority in the Philippine Islands.
"From an entirely different point of view, it must be noted that this article punishes
contempts against executive officials, although its terms are broad enough to cover
the entire official class. Punishment for contempt of non-judicial officers has no place
in a government based upon American principles. Our official class is not, as in
monarchies, an agent of some authority greater than the people but it is an agent and
servant of the people themselves. These officials are only entitled to respect and
obedience when they are acting within the scope of their authority and jurisdiction.
The American system of government is calculated to enforce respect and obedience
where such respect and obedience is due, but never does it place around the
individual who happens to occupy an official position by mandate of the people any
official halo, which calls for drastic punishment for contemptuous remarks."

Whether or not article 256 of the Spanish Penal Code was abrogated with the All the members of the court are of the opinion, although for different reasons, that
change from Spanish to American sovereignty the judgment should be reversed and the defendant and appellant acquitted, with
Whether or not Perfecto is guilty of libel costs de officio. So ordered.

Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE


MUNICIPALITY OF JIMENEZ VS EXECUTIVE SECRETARY, G.R. No. 105746,
December 2, 1996
DOCTRINE: Whatever doubt there might be as to the de jure character of the
municipality must be deemed to have been put to rest by the Local Government Code
of 1991 (R.A. No. 7160), §442(d) of which provides that "municipal districts organized
pursuant to presidential issuances or executive orders and which have their respective
sets of elective officials holding office at the time of the effectivity of this Code shall
henceforth be considered as regular municipalities."
FACTS: August 30, 1949, the Municipality of Sinacaban was created by Executive
Order No. 258 of then President Elpidio Quirino, pursuant to §68 of the Revised
Administrative Code of 1917.
EO No. 258
…….
The municipality of Sinacaban contains the barrios of Sinacaban,
which shall be the seat of the municipal government, Sinonoc,
Libertad, the southern portion of the barrio of Macabayao, and the
sitios of Tipan, Katipunan, Estrella, Flores, Senior, Adorable, San
Isidro, Cagayanon, Kamanse, Kulupan and Libertad Alto.
……..
February 18, 1950, Resolution No. 77 municipality of Jimenez and Sinacaban entered
into a boundary agreement.
November 22, 1988 , Sinacaban laid claim to a portion of Barrio Tabo-o and to Barrios
Macabayao, Adorable, Sinara Baja, and Sinara Alto,3 based on the technical
description in E.O. No. 258. The claim was filed with the Provincial Board of Misamis
Occidental against the Municipality of Jimenez. (By virtue of Municipal Council
Resolution No 171,)
In its answer, the Municipality of Jimenez, while conceding that under E.O. No. 258 the
disputed area is part of Sinacaban, nonetheless asserted jurisdiction on the basis of
an agreement it had with the Municipality of Sinacaban.
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
October 11, 1989, 5 the Provincial Board declared the disputed area to be part of
Sinacaban. It held that the previous resolution approving the agreement between the
municipalities was void because the Board had no power to alter the boundaries of
Sinacaban as fixed in E.O. No. 258, that power being vested in Congress pursuant
to the Constitution (1987) and the Local Government Code of 1983 (B.P. Blg.
337), §134. The Provincial Board denied in its Resolution No. 13-90 dated January 30,
1990 the motion of Jimenez seeking reconsideration.
March 20, 1990, Jimenez filed a petition for certiorari, prohibition, and mandamus in
the Regional Trial Court of Oroquieta City, Branch 14. Jimenez alleged that, in
accordance with the decision in Pelaez v. Auditor General, 8 the power to create
municipalities is essentially legislative and consequently Sinacaban, which was
created by an executive order, had no legal personality and no right to assert a
territorial claim vis-a-vis Jimenez, of which it remains part. (this time Jimenez
questioned the existence of the Municipality of Sinacaban and he also changed his
defence)
The RTC, inter alia, held that Sinacaban is a de facto corporation (1) since it had
completely organized itself even prior to the Pelaez(1965) case and exercised
corporate powers for forty years before its existence was questioned(1949-1990); (2)
that Jimenez did not have the legal standing to question the existence of Sinacaban,
the same being reserved to the State as represented by the Office of the Solicitor
General in a quo warranto proceeding; (3) that Jimenez was estopped from
questioning the legal existence of Sinacaban by entering into an agreement with it
concerning their common boundary; (4) and that any question as to the legal existence
of Sinacaban had been rendered moot by §442(d) of the Local Government Code of
1991 (R.A. No. 7160), which provides:
Municipalities existing as of the date of effectivity of this Code shall continue to exist
and operate as such. Existing municipal districts organized pursuant to presidential
issuances or executive orders and which have their respective set of elective municipal
officials holding office at the time of the effectivity of this Code shall henceforth be
considered as regular municipalities.
ISSUES:
(1) Whether Sinacaban has legal personality to file a claim; and
(2) If it has, whether it is the boundary provided for in E.O. No. 258 or in Resolution
No. 77 of the Provincial Board of Misamis Occidental which should be used as the
basis for adjudicating Sinacaban's territorial claim.
RULING:
1. YES, we have since held that where a municipality created as such by executive
order is later impliedly recognized and its acts are accorded legal validity, its
creation can no longer be questioned. In Municipality of San Narciso, Quezon
v. Mendez, Sr., 10 this Court considered the following factors as having validated
the creation of a municipal corporation, which, like the Municipality of Sinacaban,
was created by executive order of the President before the ruling in Pelaez
v. Auditor General: (1) the fact that for nearly 30 years the validity of the
creation of the municipality had never been challenged; (2) the fact that
following the ruling in Pelaez no quo warranto suit was filed to question the
validity of the executive order creating such municipality; and (3) the fact
that the municipality was later classified as a fifth class municipality,
organized as part of a municipal circuit court and considered part of a
legislative district in the Constitution apportioning the seats in the House of
Representatives. Above all, it was held that whatever doubt there might be as
to the de jure character of the municipality must be deemed to have been put
to rest by the Local Government Code of 1991 (R.A. No. 7160), §442(d) of
which provides that "municipal districts organized pursuant to presidential
issuances or executive orders and which have their respective sets of elective
officials holding office at the time of the effectivity of this Code shall henceforth be
considered as regular municipalities."
Here, the same factors are present so as to confer on Sinacaban the status of at least
a de facto municipal corporation in the sense that its legal existence has been
recognized and acquiesced publicly and officially. Sinacaban had been in existence for
sixteen years when Pelaez v. Auditor General was decided on December 24, 1965.
Yet the validity of E.O. No. 258 creating it had never been questioned. Created in 1949,
it was only 40 years later that its existence was questioned and only because it had
laid claim to an area that apparently is desired for its revenue. This fact must be
underscored because under Rule 66, §16 of the Rules of Court, a quo warranto suit
against a corporation for forfeiture of its charter must be commenced within five (5)
years from the time the act complained of was done or committed. On the contrary, the
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
State and even the Municipality of Jimenez itself have recognized Sinacaban's
corporate existence. Under Administrative Order No. 33 dated June 13, 1978 of this
Court, as reiterated by §31 of the Judiciary Reorganization Act of 1980 (B. P. Blg. 129),
Sinacaban is constituted part of a municipal circuit for purposes of the establishment
of Municipal Circuit Trial Courts in the country. For its part, Jimenez had earlier
recognized Sinacaban in 1950 by entering into an agreement with it regarding their
common boundary. The agreement was embodied in Resolution No. 77 of the
Provincial Board of Misamis Occidental.
Q: Jimenez claims, however, that R.A. No. 7160, §442(d) is invalid, since it does not
conform to the constitutional and statutory requirements for the holding of plebiscites
in the creation of new
municipalities. A:This contention will not bear analysis. Since, as previously explained,
Sinacaban had attained de facto status at the time the 1987 Constitution took effect
on February 2, 1987, it is not subject to the plebiscite requirement. This requirement
applies only to new municipalities created for the first time under the Constitution.
Actually, the requirement of plebiscite was originally contained in Art. XI, §3 of the
previous Constitution which took effect on January 17, 1973. It cannot, therefore, be
applied to municipal corporations created before, such as the Municipality of
Sinacaban in the case at bar. (remember it was created in 1949- under the 1935)
Q1: Jimenez argues that the RTC erred in ordering a relocation survey of the boundary
of Sinacaban because the barangays which Sinacaban are claiming are not
enumerated in E.O. No. 258 and Q2: that in any event in 1950 the parties entered into
an agreement whereby the barangays in question were considered part of the territory
of Jimenez. A1: E.O. No. 258 does not say that Sinacaban comprises only the barrios
(now called barangays) therein mentioned. What it says is that "Sinacaban contains"
those barrios, without saying they are the only ones comprising it. A2: This raises the
question whether the Provincial Board had authority to approve the agreement or, to
put it in another way, whether it had the power to declare certain barrios part of one or
the other municipality. We hold it did not if the effect would be to amend the area as
described in E.O. No. 258 creating the Municipality of Sinacaban. It is obvious
that any alteration of boundaries that is not in accordance with the law creating
a municipality is not the carrying into effect of that law but its amendment.
BOY SCOUT OF THE PHILIPPINES vs. COMMISSION ON AUDIT, G.R. No.
177131, June 7, 2011
DOCTRINES: The Constitution emphatically prohibits the creation of private
corporations except by a general law applicable to all citizens. The purpose of this
constitutional provision is to ban private corporations created by special charters,
which historically gave certain individuals, families or groups special privileges denied
to other citizens.
FACTS:
This case arose when the COA issued Resolution No. 99-011 on August 19, 1999 ("the
COA Resolution"), with the subject "Defining the Commission’s policy with respect to
the audit of the Boy Scouts of the Philippines." In its whereas clauses, the COA
Resolution stated that the BSP was created as a public corporation under
Commonwealth Act No. 111, as amended by Presidential Decree No. 460 and
Republic Act No. 7278; that in Boy Scouts of the Philippines v. National Labor Relations
Commission, the Supreme Court ruled that the BSP, as constituted under its charter,
was a "government-controlled corporation within the meaning of Article IX(B)(2)(1) of
the Constitution"; and that "the BSP is appropriately regarded as a government
instrumentality under the 1987 Administrative Code."
The BSP sought reconsideration of the COA Resolution in a letter dated November 26,
1999 signed by the BSP National President Jejomar C. Binay, who is now the Vice
President of the Republic, wherein he wrote:
It is the position of the BSP, with all due respect, that it is not subject to the
Commission’s jurisdiction on the following grounds:
1. We reckon that the ruling in the case of Boy Scouts of the Philippines vs. National
Labor Relations Commission, et al. (G.R. No. 80767) classifying the BSP as a
government-controlled corporation is anchored on the "substantial Government
participation" in the National Executive Board of the BSP. It is to be noted that the case
was decided when the BSP Charter is defined by Commonwealth Act No. 111 as
amended by Presidential Decree 460.
However, may we humbly refer you to Republic Act No. 7278 which amended the
BSP’s charter after the cited case was decided. The most salient of all amendments in
RA No. 7278 is the alteration of the composition of the National Executive Board of the
BSP.
The said RA virtually eliminated the "substantial government participation" in the
National Executive Board by removing: (i) the President of the Philippines and
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
executive secretaries, with the exception of the Secretary of Education, as members
thereof; and (ii) the appointment and confirmation power of the President of the
Philippines, as Chief Scout, over the members of the said Board.
The BSP believes that the cited case has been superseded by RA 7278. Thereby
weakening the case’s conclusion that the BSP is a government-controlled corporation
(sic). The 1987 Administrative Code itself, of which the BSP vs. NLRC relied on for
some terms, defines government-owned and controlled corporations as agencies
organized as stock or non-stock corporations which the BSP, under its present
charter, is not.
Also the BSP respectfully believes that the BSP is not "appropriately regarded as a
government instrumentality under the 1987 Administrative Code" as stated in the
COA resolution. As defined by Section 2(10) of the said code, 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."
The BSP is not an entity administering special funds. It is not even included in the
DECS National Budget. x x x
It may be argued also that the BSP is not an "agency" of the Government. The 1987
Administrative Code, merely referred the BSP as an "attached agency" of the DECS
as distinguished from an actual line agency of departments that are included in the
National Budget. The BSP believes that an "attached agency" is different from an
"agency." Agency, as defined in Section 2(4) of the Administrative Code, is defined as
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.
Under the above definition, the BSP is neither a unit of the Government; a
department which refers to an executive department as created by law (Section 2[7]
of the Administrative Code); nor a bureau which refers to any principal subdivision or
unit of any department (Section 2[8], Administrative Code).
the COA General Counsel opined that Republic Act No. 7278 did not supersede the
Court’s ruling in Boy Scouts of the Philippines v. National Labor Relations Commission,
even though said law eliminated the substantial government participation in the
selection of members of the National Executive Board of the BSP. The Memorandum
further provides:
Analysis of the said case disclosed that the substantial government participation is only
one (1) of the three (3) grounds relied upon by the Court in the resolution of the case.
Other considerations include the character of the BSP’s purposes and functions which
has a public aspect and the statutory designation of the BSP as a "public corporation".
These grounds have not been deleted by R.A. No. 7278. On the contrary, these were
strengthened as evidenced by the amendment made relative to BSP’s purposes
stated in Section 3 of R.A. No. 7278.
ISSUE:
Whether the BSP falls under the COA’s audit jurisdiction.
RULING:
YES. After looking at the legislative history of its amended charter and carefully
studying the applicable laws and the arguments of both parties, we find that the BSP
is a public corporation and its funds are subject to the COA’s audit jurisdiction.
The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936),
entitled "An Act to Create a Public Corporation to be Known as the Boy Scouts of the
Philippines, and to Define its Powers and Purposes" created the BSP as a "public
corporation" to serve the following public interest or purpose:
Sec. 3. The purpose of this corporation shall be to promote through organization and
cooperation with other agencies, the ability of boys to do useful things for themselves
and others, to train them in scoutcraft, and to inculcate in them patriotism, civic
consciousness and responsibility, courage, self-reliance, discipline and kindred virtues,
and moral values, using the method which are in common use by boy scouts.
There are three classes of juridical persons under Article 44 of the Civil Code and the
BSP, as presently constituted under Republic Act No. 7278, falls under the second
classification. Article 44 reads:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
(2) Other corporations, institutions and entities for public interest or purpose
created by law; their personality begins as soon as they have been constituted
according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which
the law grants a juridical personality, separate and distinct from that of each
shareholder, partner or member. (Emphases supplied.)
The BSP, which is a corporation created for a public interest or purpose, is subject to
the law creating it under Article 45 of the Civil Code, which provides:
Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are
governed by the laws creating or recognizing them.
The purpose of the BSP as stated in its amended charter shows that it was created in
order to implement a State policy declared in Article II, Section 13 of the Constitution,
which reads:
ARTICLE II - DECLARATION OF PRINCIPLES AND STATE POLICIES
Section 13. The State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual, and social well-being.
It shall inculcate in the youth patriotism and nationalism, and encourage their
involvement in public and civic affairs.
Evidently, the BSP, which was created by a special law to serve a public purpose in
pursuit of a constitutional mandate, comes within the class of "public corporations"
defined by paragraph 2, Article 44 of the Civil Code and governed by the law which
creates it, pursuant to Article 45 of the same Code.
As an attached agency, the BSP enjoys operational autonomy, as long as policy and
program coordination is achieved by having at least one representative of government
in its governing board, which in the case of the BSP is the DECS Secretary. In this
sense, the BSP is not under government control or "supervision and control." Still this
characteristic does not make the attached chartered agency a private corporation
covered by the constitutional proscription in question.
Art. XII, Sec. 16 of the Constitution refers to "private corporations" created by
government for proprietary or economic/business purposes.
Section 16, Article XII deals with "the formation, organization, or regulation of private
corporations," which should be done through a general law enacted by Congress,
provides for an exception, that is: if the corporation is government owned or controlled;
its creation is in the interest of the common good; and it meets the test of economic
viability. The rationale behind Article XII, Section 16 of the 1987 Constitution was
explained in Feliciano v. Commission on Audit, in the following manner:
The Constitution emphatically prohibits the creation of private corporations except by
a general law applicable to all citizens. The purpose of this constitutional provision is
to ban private corporations created by special charters, which historically gave certain
individuals, families or groups special privileges denied to other citizens.
The BSP is a public corporation or a government agency or instrumentality with juridical
personality, which does not fall within the constitutional prohibition in Article XII, Section
16, notwithstanding the amendments to its charter. Not all corporations, which are not
government owned or controlled, are ipso facto to be considered private corporations
as there exists another distinct class of corporations or chartered institutions which are
otherwise known as "public corporations."
Since the BSP, under its amended charter, continues to be a public corporation or a
government instrumentality, we come to the inevitable conclusion that it is subject to
the exercise by the COA of its audit jurisdiction in the manner consistent with the
provisions of the BSP Charter.
ENGR. RANULFO C. FELICIANO, in his capacity as General Manager of the
Leyte Metropolitan Water District (LMWD), Tacloban City vs. COMMISSION ON
AUDIT, Chairman CELSO D. GANGAN, Commissioners RAUL C. FLORES and
EMMANUEL M. DALMAN, and Regional Director of COA Region VIII, G.R. No.
147402, January 14, 2004
DOCTRINE:
The Constitution recognizes two classes of corporations. The first refers to private
corporations created under a general law. The second refers to government-owned or
controlled corporations created by special charters. Section 16, Article XII of the
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
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
corporations may be created or established by special charters in the interest of the
common good and subject to the test of economic viability.
The Constitution emphatically prohibits the creation of private corporations except by
a general law applicable to all citizens.The purpose of this constitutional provision is to
ban private corporations created by special charters, which historically gave certain
individuals, families or groups special privileges denied to other citizens.
FACTS:
A Special Audit Team from COA Regional Office No. VIII audited the accounts of
LMWD. Subsequently, LMWD received a letter from COA dated 19 July 1999
requesting payment of auditing fees. As General Manager of LMWD, petitioner sent a
reply dated 12 October 1999 informing COAs Regional Director that the water district
could not pay the auditing fees. Petitioner cited as basis for his action Sections 6 and
20 of Presidential Decree 198 ("PD 198") , as well as Section 18 of Republic Act No.
6758 ("RA 6758"). The Regional Director referred petitioners reply to the COA
Chairman on 18 October 1999.
The COA ruled that this Court has already settled COAs audit jurisdiction over local
water districts in Davao City Water District v. Civil Service Commission and
Commission on Audit, as follows:
The above-quoted provision [referring to Section 3(b) PD 198] definitely sets to
naught petitioners contention that they are private corporations. It is clear
therefrom that the power to appoint the members who will comprise the
members of the Board of Directors belong to the local executives of the local
subdivision unit where such districts are located. In contrast, the members of
the Board of Directors or the trustees of a private corporation are elected from
among members or stockholders thereof. It would not be amiss at this point to
emphasize that a private corporation is created for the private purpose, benefit,
aim and end of its members or stockholders. Necessarily, said members or
stockholders should be given a free hand to choose who will compose the
governing body of their corporation. But this is not the case here and this clearly
indicates that petitioners are not private corporations.
ISSUES:
Whether a Local Water District ("LWD") created under PD 198, as amended, is a
government-owned or controlled corporation subject to the audit jurisdiction of COA?
RULING:
The Constitution and existing laws mandate COA to audit all government agencies,
including government-owned and controlled corporations ("GOCCs") with original
charters. An LWD is a GOCC with an original charter. Section 2(1), Article IX-D of the
Constitution provides for COAs audit jurisdiction.
The COAs audit jurisdiction extends not only to government "agencies or
instrumentalities," but also to "government-owned and controlled corporations with
original charters" as well as "other government-owned or controlled corporations"
without original charters
Petitioner seeks to revive a well-settled issue. Petitioner asks for a re-examination of
a doctrine backed by a long line of cases culminating in Davao City Water District v.
Civil Service Commission and just recently reiterated in De Jesus v. Commission on
Audit. Petitioner maintains that LWDs are not government-owned and controlled
corporations with original charters. Petitioner even argues that LWDs are private
corporations. Petitioner asks the Court to consider certain interpretations of the
applicable laws, which would give a "new perspective to the issue of the true character
of water districts."
Petitioner theorizes that what PD 198 created was the Local Waters Utilities
Administration ("LWUA") and not the LWDs. Petitioner claims that LWDs are created
"pursuant to" and not created directly by PD 198. Thus, petitioner concludes that PD
198 is not an "original charter" that would place LWDs within the audit jurisdiction of
COA as defined in Section 2(1), Article IX-D of the Constitution. Petitioner elaborates
that PD 198 does not create LWDs since it does not expressly direct the creation of
such entities, but only provides for their formation on an optional or voluntary
basis. Petitioner adds that the operative act that creates an LWD is the approval of the
Sanggunian Resolution as specified in PD 198.
We begin by explaining the general framework under the fundamental law. The
Constitution recognizes two classes of corporations. The first refers to private
corporations created under a general law. The second refers to government-owned or
controlled corporations created by special charters. Section 16, Article XII of the
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
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
corporations may be created or established by special charters in the interest of the
common good and subject to the test of economic viability.
The Constitution emphatically prohibits the creation of private corporations except by
a general law applicable to all citizens.The purpose of this constitutional provision is to
ban private corporations created by special charters, which historically gave certain
individuals, families or groups special privileges denied to other citizens.
In short, Congress cannot enact a law creating a private corporation with a
special charter. Such legislation would be unconstitutional. Private corporations may
exist only under a general law. If the corporation is private, it must necessarily exist
under a general law. Stated differently, only corporations created under a general law
can qualify as private corporations. Under existing laws, that general law is the
Corporation Code, except that the Cooperative Code governs the incorporation of
cooperatives.
The Constitution authorizes Congress to create government-owned or controlled
corporations through special charters. Since private corporations cannot have special
charters, it follows that Congress can create corporations with special charters only if
such corporations are government-owned or controlled.
Obviously, LWDs are not private corporations because they are not created under the
Corporation Code. LWDs are not registered with the Securities and Exchange
Commission. Section 14 of the Corporation Code states that "[A]ll corporations
organized under this code shall file with the Securities and Exchange Commission
articles of incorporation x x x." LWDs have no articles of incorporation, no incorporators
and no stockholders or members. There are no stockholders or members to elect the
board directors of LWDs as in the case of all corporations registered with the Securities
and Exchange Commission.
From the foregoing pronouncement, it is clear that what has been excluded from the
coverage of the CSC are those corporations created pursuant to the Corporation
Code. Significantly, petitioners are not created under the said code, but on the
contrary, they were created pursuant to a special law and are governed primarily by its
provision.
LWDs exist by virtue of PD 198, which constitutes their special charter. Since under
the Constitution only government-owned or controlled corporations may have special
charters, LWDs can validly exist only if they are government-owned or controlled. To
claim that LWDs are private corporations with a special charter is to admit that their
existence is constitutionally infirm.
LWDs exist as corporations only by virtue of PD 198, which expressly confers on LWDs
corporate powers. Section 6 of PD 198 provides that LWDs "shall exercise the powers,
rights and privileges given to private corporations under existing laws." Without PD
198, LWDs would have no corporate powers. Thus, PD 198 constitutes the special
enabling charter of LWDs. The ineluctable conclusion is that LWDs are government-
owned and controlled corporations with a special charter.
The phrase "government-owned and controlled corporations with original charters"
means GOCCs created under special laws and not under the general incorporation
law. There is no difference between the term "original charters" and "special charters."
Petitioners contention that the Sangguniang Bayan resolution creates the LWDs
assumes that the Sangguniang Bayan has the power to create corporations. This is a
patently baseless assumption. The Local Government Code does not vest in the
Sangguniang Bayan the power to create corporations. What the Local Government
Code empowers the Sangguniang Bayan to do is to provide for the establishment of a
waterworks system "subject to existing laws.
QUESTION: petitioner argues that one special law cannot serve as enabling law for
several GOCCs but only for one GOCC. ANSWER: There is, however, no prohibition
on Congress to create several GOCCs of the same class under one special enabling
charter. Thus, Congress may create GOCCs either by special charters specific to each
GOCC, or by one special enabling charter applicable to a class of GOCCs, like PD 198
which applies only to LWDs. (DIRI NI ANA ANG SC NGA WALA MAY PROHIBITION)
QUESTION: petitioner rationalizes that a public corporation cannot be deemed "quasi-
public" because such corporation is already public. Petitioner concludes that the term
"quasi-public" can only apply to private corporations. Petitioners argument is
inconsequential. ANSWER: Petitioner forgets that the constitutional criterion on the
exercise of COAs audit jurisdiction depends on the governments ownership or control
of a corporation. The nature of the corporation, whether it is private, quasi-public, or
public is immaterial. ( NIANA ANG SC DIRI NGA BASIN NALIMOT KA)
The Constitution vests in the COA audit jurisdiction over "government-owned and
controlled corporations with original charters," as well as "government-owned or
controlled corporations" without original charters. GOCCs with original charters are
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
subject to COA pre-audit, while GOCCs without original charters are subject to COA
post-audit. GOCCs without original charters refer to corporations created under the
Corporation Code but are owned or controlled by the government.
QUESTION: Petitioner argues that upon the enactment of PD 198, LWDs became
private entities through the transfer of ownership of water facilities from local
government units to their respective water districts as mandated by PD 198. ANSWER:
Petitioner is grasping at straws. Privatization involves the transfer of government
assets to a private entity. Petitioner concedes that the owner of the assets transferred
under Section 6 (c) of PD 198 is no other than the LWD itself. The transfer of assets
mandated by PD 198 is a transfer of the water systems facilities "managed, operated
by or under the control of such city, municipality or province to such (water) district." In
short, the transfer is from one government entity to another government entity. PD 198
is bereft of any indication that the transfer is to privatize the operation and control of
water systems. (DIRI LAGOT NAJUD ANG SC KAY GAHIG ULO ANG PETITIONER
“GRASPING AT STRAWS”).
PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS
(PSPCA) vs. COMMISSION ON AUDIT, G.R. No. 169752, September 25, 2007
DOCTRINE:
Quasi- public corporation is a class of public corporation created as an agency of
the State for narrow and limited purposes without the powers and liabilities of self-
governing corporations. Municipal corporations, on the other hand, are body politic
and corporate constituted by the incorporation of inhabitants for purposes of local
government. It is established by law partly as an agency of the State to assist in the
civil government of the country, but chiefly to regulate and administer the local or
internal affairs of the city, town or district which is incorporated.
FACTS:
The Philippine Society for the Prevention of Cruelty to Animals (PSPCA, for brevity)
was incorporated as a juridical entity over one hundred years ago by virtue of Act No.
1285 as it was enacted last January 19, 1905 by the Philippine Commission. At the
time it was created, PSPCA was composed of animal aficionados and animal
propagandists whose main objective was to enforce laws relating to cruelty inflicted
upon animals or the protection of animals in the Philippine Islands, and generally, to
do and perform all things which may tend in any way to alleviate the suffering of animals
and promote their welfare.

At the time of the enactment of Act No. 1285, the original Corporation Law, Act No.
1459, was not yet in existence. Act No. 1285 antedated both the Corporation Law and
the constitution of the Securities and Exchange Commission. Important to note is that
the nature of the petitioner as a corporate entity is distinguished from the sociedad
anonimas under the Spanish Code of Commerce.
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.
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. Also, the cruel treatment of animals is now an
offense against the State, penalized under our statutes, which the government is duty
bound to enforce by virtue of Executive Order (E.O.) No. 63 dated November 12, 1936
issued by President Manuel L. Quezon.
When the audit team from COA visited the office of the PSPCA to conduct an audit
survey pursuant to COA Office Order No. 2003-051, PSPCA objected on the ground
that it was a private domestic corporation not under the jurisdiction of COA.
ISSUE:
Whether or not PSPCA qualifies as a government agency that may be subject to audit
by COA.
RULING:
No, PSPCA does not qualify as a government agency and as such, it is not
subject to audit by COA.
First, the Court agrees with the petitioner that the "charter test" cannot be
applied.
Essentially, the "charter test" provides that the test to determine whether a corporation
is government owned or controlled, or private in nature is simple. Is it created by its
own charter for the exercise of a public function, or by incorporation under the general
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
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.
And since the charter test had been introduced by the 1935 Constitution and not earlier,
it follows that the test cannot apply to the petitioner, which was incorporated by
virtue of Act No. 1285, enacted on January 19, 1905. Settled is the rule that laws in
general have no retroactive effect, unless the contrary is provided. All statutes are to
be construed as having only a prospective operation, unless the purpose and intention
of the legislature to give them a retrospective effect is expressly declared or is
necessarily implied from the language used.
Second, a 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. Like all private corporations, the successors of its members are
determined voluntarily and solely by the petitioner in accordance with its by-laws, and
may exercise those powers generally accorded to private corporations, such as the
powers to hold property, to sue and be sued, to use a common seal, and so forth. It
may adopt by-laws for its internal operations: the petitioner shall be managed or
operated by its officers "in accordance with its by-laws in force."
Third. The employees of the petitioner are registered and covered by the 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.
This argument is not tenable. The fact that a certain juridical entity is impressed with
public interest does not, by that circumstance alone, make the entity a public
corporation, inasmuch as a corporation may be private although its charter contains
provisions of a public character, incorporated solely for the public good. This class of
corporations may be considered quasi-public corporations, which are private
corporations that render public service, supply public wants, or pursue other
eleemosynary objectives. While purposely organized for the gain or benefit of its
members, they are required by law to discharge functions for the public benefit.
Examples of these corporations are utility,22 railroad, warehouse, telegraph, telephone,
water supply corporations and transportation companies. 23 It must be stressed that a
quasi-public corporation is a species of private corporations, but the qualifying factor
is the type of service the former renders to the public: if it performs a public service,
then it becomes a quasi-public corporation.241âwphi1
Authorities are of the view that the purpose alone of the corporation cannot be taken
as a safe guide, for the fact is that almost all corporations are nowadays created to
promote the interest, good, or convenience of the public. A bank, for example, is a
private corporation; yet, it is created for a public benefit. Private schools and
universities are likewise private corporations; and yet, they are rendering public
service. Private hospitals and wards are charged with heavy social responsibilities.
More so with all common carriers. On the other hand, there may exist a public
corporation even if it is endowed with gifts or donations from private individuals.
The true criterion, therefore, to determine whether a corporation is public or private is
found in the totality of the relation of the corporation to the State. If the corporation is
created by the State as the latter’s own agency or instrumentality to help it in carrying
out its governmental functions, then that corporation is considered public; otherwise, it
is private. Applying the above test, provinces, chartered cities, and barangays can best
exemplify public corporations. They are created by the State as its own device and
agency for the accomplishment of parts of its own public works.25
Fifth. The respondents argue that since the charter of the petitioner requires the
latter to render periodic reports to the Civil Governor, whose functions have
been inherited by the President, the petitioner is, therefore, a government
instrumentality.
This contention is inconclusive. By virtue of the fiction that all corporations owe their
very existence and powers to the State, the reportorial requirement is applicable to all
corporations of whatever nature, whether they are public, quasi-public, or private
corporations—as creatures of the State, there is a reserved right in the legislature to
investigate the activities of a corporation to determine whether it acted within its
powers. In other words, the reportorial requirement is the principal means by which the
State may see to it that its creature acted according to the powers and functions
conferred upon it.
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
Therefore, PSPCA does not qualify as a government agency but rather, a private
domestic corporation and as such, is not subject to audit by COA but by the Securities
and Exchange Commission.
BARA LIDASAN vs. COMELEC, G.R. No. L-28089, October 25, 1967
FACTS:
1. Lidasan, a resident and taxpayer of the detached portion of Parang, Cotabato,
and a qualified voter for the 1967 elections assails the constitutionality of RA
4790 and petitioned that Comelec's resolutions implementing the same for
electoral purposes be nullified. Under RA 4790, 12 barrios in two municipalities
in the province of Cotabato are transferred to the province of Lanao del Sur.
This brought about a change in the boundaries of the two provinces.
2. Barrios Togaig and Madalum are within the municipality of Buldon in the
Province of Cotabato, and that Bayanga, Langkong, Sarakan, Kat-bo,
Digakapan, Magabo, Tabangao, Tiongko, Colodan and Kabamakawan are
parts and parcel of another municipality, the municipality of Parang, also in
theProvince of Cotabato and not of Lanao del Sur.
3. Apprised of this development, the Office of the President, recommended to
Comelec that the operation of the statute be suspended until "clarified by
correcting legislation."
4. COMELEC, by resolution declared that the statute should be implemented
unless declared unconstitutional by the Supreme Court.
ISSUE:
Whether or not RA 4790, which is entitled "An Act Creating the Municipality of
Dianaton in the Province of Lanao del Sur", but which includes barrios located in
another province — Cotabato is unconstitutional for embracing more than one
subject in the title
RULING:
YES. RA 4790 is null and void.

1. The constitutional provision contains dual limitations upon legislative power.
First. Congress is to refrain from conglomeration, under one statute, of
heterogeneous subjects. Second. The title of the bill is to be couched in a
language sufficient to notify the legislators and the public and those concerned
of the import of the single subject thereof. Of relevance here is the second
directive. The subject of the statute must be "expressed in the title" of the bill.
This constitutional requirement "breathes the spirit of command." Compliance
is imperative, given the fact that the Constitution does not exact of Congress
the obligation to read during its deliberations the entire text of the bill. In fact,
in the case of House Bill 1247, which became RA 4790, only its title was read
from its introduction to its final approval in the House where the bill, being of
local application, originated.
2. The Constitution does not require Congress to employ in the title of an
enactment, language of such precision as to mirror, fully index or catalogue all
the contents and the minute details therein. It suffices if the title should serve
the purpose of the constitutional demand that it inform the legislators, the
persons interested in the subject of the bill, and the public, of the nature, scope
and consequences of the proposed law and its operation. And this, to lead
them to inquire into the body of the bill, study and discuss the same, take
appropriate action thereon, and, thus, prevent surprise or fraud upon the
legislators.
3. The test of the sufficiency of a title is whether or not it is misleading; and, which
technical accuracy is not essential, and the subject need not be stated in
express terms where it is clearly inferable from the details set forth, a title which
is so uncertain that the average person reading it would not be informed of the
purpose of the enactment or put on inquiry as to its contents, or which is
misleading, either in referring to or indicating one subject where another or
different one is really embraced in the act, or in omitting any expression or
indication of the real subject or scope of the act, is bad.
4. The title — "An Act Creating the Municipality of Dianaton, in the Province of
Lanao del Sur" — projects the impression that only the province of Lanao del
Sur is affected by the creation of Dianaton. Not the slightest intimation is there
that communities in the adjacent province of Cotabato are incorporated in this
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
new Lanao del Sur town. The phrase "in the Province of Lanao del Sur," read
without subtlety or contortion, makes the title misleading, deceptive. For, the
known fact is that the legislation has a two-pronged purpose combined in one
statute: (1) it creates the municipality of Dianaton purportedly from twenty-one
barrios in the towns of Butig and Balabagan, both in the province of Lanao del
Sur; and (2) it also dismembers two municipalities in Cotabato, a province
different from Lanao del Sur.
5. Finally, the title did not inform the members of Congress the full impact of the
law. One, it did not apprise the people in the towns of Buldon and Parang in
Cotabato and in the province of Cotabato itself that part of their territory is
being taken away from their towns and province and added to the adjacent
Province of Lanao del Sur. Two, it kept the public in the dark as to what towns
and provinces were actually affected by the bill.
SURIGAO ELECTRIC COMPANY, INC., ET AL. VS. MUNICIPALITY OF SURIGAO,
ET AL., G.R. No. L-22766, August 30, 1968
FACTS:

On June 18,1960, Congress amended the Public Service Act and introduced doing
away with the requirement of a certificate of public convenience and necessity from
the Public Service Commission for “public services owned or operated by government
entities or government-owned and controlled corporations (GOCC),” but at the same
time affecting its power of regulation which while exempting public services owned or
operated by any instrumentality of the government or any GOCC from its supervision,
jurisdiction and control stops short of including “the fixing of rates”.
 Surigao Electric Co.,
and Arturo Lumanlan filed a petition for review challenging the validity of the order of
respondent Public Service Commission, dated July 11, 1963, wherein it held that it had
“no alternative but to approve the tentative schedule of rates submitted by the
applicant”, the Municipality of Surigao.
ISSUE/S:

Whether or not a municipal government can directly maintain & operate an electric
plant without obtaining a specific franchise for the purpose and without a certificate of
public convenience and necessity duly issued by the PSC.
HELD:
 protect the morals and health of the community and so on is to administer government,
Yes.
 The Municipality of Surigao is not a GOCC. However, it cannot be said that it is
not a government entity.
 As early as 1916, in Mendoza v. de Leon (33 Phil. 508), the
dual character of a municipal corporation has long been recognized: (1) as
Governmental, being a branch of the general administration of the State, and (2) as
Quasi-Private and Corporate.
It is an undeniable fact that “legislative and government powers” are “conferred upon
a municipality…to enable it to aid a state in properly governing that portion of the
people residing within its municipality, such powers (being) in their nature public, xxx
(1 Dilon, Commentaries on the Law of Municipal Corporations, 5th ed., p.68 [1911]).
“Governmental affairs do not lose their governmental character by being delegated to
the municipal governments…to preserve the peace, protect the morals and health of
the community and so on is to administer government, whether it be done by the central
government itself or is shifted to a local organization.” (Mendoza v. de Leon).
A municipal corporation is a government entity and functions as an extension of
the national government, and, therefore, it is an instrumentality of the latter. By
express provisions of Sec.14(e) of RA 2677, an instrumentality of the national
government is exempted from the jurisdiction of the PSC except with respect to the
fixing of rates.
As early as 1916, in Mendoza v. de Leon,6 there has been a recognition by this Court
of the dual character of a municipal corporation, one as governmental, being a branch
of the general administration of the state, and the other as quasi-private and corporate.
A well-known authority, Dillon, was referred to by us to stress the undeniable fact that
"legislative and governmental powers" are "conferred upon a municipality, the better
to enable it to aid a state in properly governing that portion of its people residing within
its municipality, such powers [being] in their nature public, ..."7 As was emphasized by
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
us in the Mendoza decision: "Governmental affairs do not lose their governmental
character by being delegated to the municipal governments. Nor does the fact that
such duties are performed by officers of the municipality which, for convenience, the
state allows the municipality to select, change their character. To preserve the peace,
whether it be done by the central government itself or is shifted to a local organization."8
It would, therefore, be to erode the term "government entities" of its meaning if we are
to reverse the Public Service Commission and to hold that a municipality is to be
considered outside its scope. It may be admitted that there would be no ambiguity at
all had the term "municipal corporations" been employed. Our function, however, is to
put meaning to legislative words, not to denude them of their contents. They may be
at times, as Cohen pointed out, frail vessels in which to embark legislative hopes, but
we do not, just because of that, allow them to disappear perpetually from sight to find
eternal slumber in the deep. It would be far from manifesting fidelity to the judicial task
of construing statutes if we were to consider the order under review as a failure to abide
by what the law commands.
MUNICIPALITY OF SAN FERNANDO LA UNION VS FIRME 195 SCRA 692, G.R.
No. L-52179, April 8, 1991
FACTS:

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving
a passenger jeepney driven by Bernardo Balagot and owned by the Estate of Macario
Nieveras, a gravel and sand truck driven by Jose Manandeg and owned by Tanquilino
Velasquez and a dump truck of the Municipality of San Fernando, La Union and driven
by Alfredo Bislig. Due to the impact, several passengers of the jeepney including
Laureano Baniña Sr. died as a result of the injuries they sustained and 4 others
suffered varying degrees of physical injuries.
Consequently, the private respondents instituted a complaint for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of
the passenger jeepney. However, the aforesaid defendants filed a Third Party
Complaint against the petitioner and the driver of a dump truck of petitioner.
The case was transferred to branch presided by Judge Firme. The heirs of Baniña Sr.
amended the complaint wherein the petitioner and its regular employee Bislig were
impleaded as defendants. Judge Firme in its decision rendered the Municipality of San
Fernando and Bislig jointly and severally liable to pay funeral expenses, lot expected
earnings, moral damages and attorney’s fees.
ISSUE/S:
Whether or not the Municipality of San Fernando, La Union can enjoy the immunity
from suit
HELD:
 the absence of any evidence to the contrary, the regularity of the performance of official
Petitioner cannot be held liable by virtue of the non-suability of the State.
The doctrine of non-suability of the State is expressly provided for in Article XVI,
Section 3 of the Constitution, to wit: "the State may not be sued without its consent."
Stated in simple parlance, the general rule is that the State may not be sued except
when it gives consent to be sued. Consent takes the form of express or implied
consent.
Express consent may be embodied in a general law or special law. The standing
consent of the State to be sued in case of money claims involving liability arising from
contracts is found in Act No. 3083. A special law may be passed to enable a person to
sue the government for an alleged quasi-delict, as in Merritt v. Government of the
Philippine Islands.
Consent is implied when the government enters into business contracts, thereby
descending to the level of the other contracting party, and also when the State files a
complaint, thus opening itself to a counterclaim.
Municipal corporations are agencies of the State when they are engaged in
governmental functions and therefore should enjoy the sovereign immunity from suit.
Nevertheless, they are subject to suit even in the performance of such functions
because their charter provided that they can sue and be sued. However, the
circumstance that a state is suable does not necessarily mean that it is liable; on the
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
other hand, it can never be held liable if it does not first consent to be sued. Liability is
not conceded by the mere fact that the state has allowed itself to be sued. When the
state does waive its sovereign immunity, it is only giving the plaintiff the chance to
prove, if it can, that the defendant is liable.”
Municipal corporations are suable because their charters grant them the competence
to sue and be sued. Nevertheless, they are generally not liable for torts committed by
them in the discharge of governmental functions and can be held answerable only if it
can be shown that they were acting in a proprietary capacity Here, the driver of the
dump truck of the municipality insists that “he was on his way to the Naguilian river to
get a load of sand and gravel for the repair of San Fernando’s municipal streets.” In
duty is presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court.
Hence, the SC held that the driver of the dump truck was performing duties or tasks
pertaining to his office. Municipality cannot be held liable for the torts committed by its
regular employee, who was then engaged in the discharge of governmental functions.
THE MUNICIPALITY OF CATBALOGAN vs. THE DIRECTOR OF LANDS, G.R. No.
L-5631, October 17, 1910
FACTS:
1. The municipal president of the pueblo of Catbalogan, Province of Samar, filed, in
the name of the municipality, an application with the Court of Land Registration in which
he asked for the registration, in conformity with the Land Registration Act, of a parcel
of land of which the said municipality was the absolute owner.
2. That in the unlikely event of the denial of the said application, made in accordance
with the Land Registration Act, the applicant invokes the benefits of chapter 6 of Act
No. 926, since the said corporation has been in possession of the land mentioned,
which is entirely surrounded by a fence, and has been cultivating it for a great many
years.
3. The Attorney-General, in representation of the Director of Lands, filed a writing
opposing the registration solicited and alleged that the land in question belonged to the
United States and was under the control of the Government of the Philippines Islands.
4. The judge overruled the opposition of the Director of Lands, and decreed, after a
declaration of general default, that the property in question be awarded to the applicant,
the municipality of Catbalogan, and be registered in its name.
5. The respondent fled for a new trial but was denied.
ISSUE:
Whether the lot occupied by the court-house of the municipality of Catbalogan, of the
Islands and Province of Samar, belongs to the said municipality or is state land under
the control of the Insular Government.
HELD:
It is concluded that the land in question is the common property of the pueblo and is
comprised within the patrimonial property of the municipality of Catbalogan, to which it
was awarded for the construction thereon of the court-house, on the demarcation and
distribution being made of the lands which were to be occupied by the town in its
development, in accordance with the provisions of the Laws of the Indies, and other
complementary laws, at a time when there was an excess of land and a few inhabitants
to occupy them. It was for this reason that the royal cedula of October 15, 1754,
directed that neither the possessors of inappropriated crown lands, nor their
successors in interest, should be disturbed or denounced, although they had no titles,
it being sufficient for them to prove their prior possession to obtain a title by just
prescription.
The said municipality is today in possession of the land in litigation, as the owner
thereof, under the protection of the civil and administrative laws which guarantee the
right of ownership of the corporations that are capable of contracting, acquiring, and
possessing real and personal property.
Article 343 of the Civil Code reads:
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
The property of provinces and towns is divided into property for public use and
patrimonial property.
Article 344 of the same codes prescribes:
Property for public use in provinces and in towns comprises the provincial and town
roads, squares, streets, fountains, and public waters, promenades, and public works
of general services supported by the said towns or provinces.
All other property possessed by either is patrimonial, and shall be governed by the
provisions of this code, unless otherwise prescribed in special laws.
Section 2 of Act No. 82, entitled "The Municipal Code," is as follows:
( a) Pueblos incorporated under this Act shall be designated as municipalities (
municipios), and shall be known respectively by the names heretofore adopted. Under
such names they may sue and be sued, contract and be contracted with, acquire and
hold real and personal property for the general interest of the municipality, and exercise
all the powers hereinafter conferred upon them.
( b) All property and property rights vested in any pueblo under its former
organization shall continue to be vested in the same municipality after its incorporation
under this Act.
By this last-cited administrative Act the rights of the old municipalities to acquire real
and personal property, in accordance with their former organization, are recognized,
and it is declared that the said property and rights shall continue to pertain to the
municipalities created in harmony with the provisions of the Municipal Code, on
account of such property being the patrimonial property of the municipalities.
Under these principles, perfectly in accord with both the old and the mother legislation
of this country, the municipality of Catbalogan ought to be considered as the owner of
the land in question, on account of the same having been awarded to it as its own,
under its exclusive ownership, on the founding of the pueblo, for the erection of the
courthouse, the record of the case showing no proof nor data to the contrary. As the
plaintiff municipality, the applicant, has been occupying the property on which its court-
house is situated during such a long space of time, much longer than that required for
extraordinary prescription (art. 1959 of the Civil Code), it can not be denied that the
presumption exists, in its favor, that it has been holding the land in its character of
owner, since the trial record exhibits no proof that any other parcel of land, distinct from
that in controversy, was awarded to the said municipality for the erection thereon of its
court-house, a court-house and the land on which to build it being necessary and
indispensable for the existence of the pueblo.
The title under which the municipality of Catbalogan holds and enjoys the said lot is
the same as that under which it is recognized as a pueblo and under which the
municipality is justified in its present occupancy of the territory where the town is
established with its streets, squares, and common lands ( terreno comunal), a title
identical with that now held by the church, as a religious institution, to the land now
occupied by the temple that exists in the said pueblo.
BENJAMIN RABUCO, et al. vs. HON, ANTONIO J. VILLEGAS, et al., G.R. No. L-
24661, February 28, 1974, consolidated G.R. No. L-24915 and G.R. No. L-24916
FACTS:
1. Case L-24915 involves petitioners' independent petition for injunction filed directly
with the Court of Appeals January 29, 19655 to forestall the demolition overnight of
their houses pursuant to the order of demolition set for January 30, 1965 at 8 a.m.
issued by respondents city officials pending the elevation of their appeal. The appellate
court gave due course thereto and issued the writ of preliminary injunction as prayed
for.
2. Case L-24916 involves petitioners' appeal to the Court of Appeals from the decision
of the Manila court of first instance dismissing their petition for injunction and
mandamus to enjoin the demolition of their houses and the ejectment from the public
lots in question and to direct respondent administrator of the Land Authority (now
Secretary of Agrarian Reform) to implement the provisions of Republic Act 3120 for
the subdivision and sale on installment basis of the subdivided lots to them as tenants
and bona fide occupants thereof, and instead ordering their ejectment.
3. Case L-24661 for the continuation and maintenance of the writ of preliminary
injunction previously issued by the Court of Appeals for the preservation of the status
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
quo was filed by petitioners directly with this Court on June 21, 1965, pending
transmittal of the records of Cases L-24915 and L-24916 to this Court as certified by
the Court of Appeals which declared itself without jurisdiction over the principal and
decisive issue of constitutionality of Republic Act 3120.
4. On 1970, a large fire of undetermined origin gutted the Malate area including the lot
on which petitioners had built their homes and dwellings. Respondents city officials
then took over the lot and kept petitioners from reconstructing or repairing their burned
dwellings.
5. At petitioners' instance, the Court issued on June 17, 1970 a temporary restraining
order enjoining respondents city officials "from performing any act constituting an
interference in or disturbance of herein petitioners' possession of Lot No. 21-B, Block
No. 610, of the Cadastral Survey of the City of Manila" as safeguarded them under the
Court's subsisting preliminary injunction of August 17, 1965.
ISSUE:
1. Whether or not Republic Act 3120 is constitutional.
(whereby Congress converted the lot in question together with another lot in San
Andres, Malate "which are reserved as communal property" into "disposable or
alienable lands of the State to be placed under the administration and disposal of the
Land Tenure Administration" for subdivision into small lots not exceeding 120 square
meters per lot for sale on installment basis to the tenants or bona fide occupants
thereof6 and expressly prohibited ejectment and demolition of petitioners' homes under
section 2 of the Act as quoted in the appellate court's certification resolution,supra)
Corollary, whether or not petitioners' houses as they stood at the time of its judgment
in 1965 "were constructed in violation of city ordinances and constituted public
nuisances" whose removal could be ordered "even if petitioners were already the
owners of the land.
HELD:
The challenge of respondents city officials against the constitutionality of Republic Act
3120 must fail as the City was not deprived thereby of anything it owns by acquisition
with its private or corporate funds either under the due process clause or under the
eminent domain provisions of the Constitution, the provisions of said Act must be
enforced and petitioners are entitled to the injunction as prayed for implementing the
Act's prohibition against their ejectment and demolition of their houses.
The Court therein reaffirmed the established general rule that "regardless of the source
or classification of land in the possession of a municipality, excepting those acquired
with its own funds in its private or corporate capacity, such property is held in trust for
the State for the benefit of its inhabitants, whether it be for governmental or proprietary
purposes. It holds such lands subject to the paramount power of the legislature to
dispose of the same, for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being but a subdivision or
instrumentality thereof for purposes of local administration. Accordingly, the legal
situation is the same as if the State itself holds the property and puts it to a different
use" and stressed that "the property, as has been previously shown, was not acquired
by the City of Manila with its own funds in its private or proprietary capacity. That it has
in its name a registered title is not questioned, but this title should be deemed to be
held in trust for the State as the land covered thereby was part of the territory of the
City of Manila granted by the sovereign upon its creation."
There as here, the Court holds that the Acts in question (Republic Acts 4118 in Salas
and Republic Act 3120 in the case at bar) were intended to implement the social justice
policy of the Constitution and the government program of land for the landless and that
they were not "intended to expropriate the property involved but merely to confirm its
character as communal land of the State and to make it available for disposition by the
National Government: ... The subdivision of the land and conveyane of the resulting
subdivision lots to the occupants by Congressional authorization does not operate as
an exercise of the power of eminent domain without just compensation in violation of
Section 1, subsection (2), Article III of the Constitution, but simply as a manifestation
of its right and power to deal with state property.
MUNICIPALITY OF OAS vs. BARTOLOME ROA, G.R. No. L-2017,
November 24, 1906
FACTS:
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
1. BARTOLOME ROA is the owner of a building constructed on a piece of land in the
pueblo of Oas. the MUNICIPALITY OF OAS brought an action for the recovery of
a tract of land in the claiming that it was a part of the public square of said town.
BARTOLOME ROA in his answer alleged that he was the owner of the property.
2. Judgment was rendered in favor of the MUNICIPALITY OF OAS and
BARTOLOME ROA has brought the case here by bill of exceptions.
3. Evidence brought by the MUNICIPALITY OF OAS consisted of consisted of
statements made by witnesses to the effect that the land had always been a part
of the public square, and of certain resolutions adopted by the principalia of the
pueblo reciting the same fact, the most important of these being the minutes of the
meeting of the 27th of February, 1892. In that document it is expressly stated that
the land was bought in 1832 by the then parish priest for the benefit of the pueblo.
It recites various proceedings taken thereafter in connection with this ownership
including among them an order prohibiting the erection of houses upon the land
and that the occupant of the building then standing upon the property was ordered
not repair it. BARTOLOME ROA signed this resolution.
4. The said building was almost entirely destroyed by a baguio on May 13 and 14,
1893, and that the authorities of the pueblo ordered the complete demolition
thereof. The resolution on May 31, 1893, declared that the then owner of the
building, Jose Castillo, had no right to reconstruct it because it was situated upon
land which did not belong to him. This resolution was also signed by BARTOLOME
ROA.
5. The evidence on the part of BARTOLOME ROA shows that in 1876 Juana Ricarte
and Juana Riquiza sold the land in question to Juan Roco. Jose Castillo testified
that his Roco, his father-in-law sold the land to him by verbal contract. On
December 17, 1894 Castillo sold the land to ROA. After his purchase in 1894, ROA
procured a possessory of information which was allowed by an order of the justice
of the peace of Oas on the 19th day of January, 1895, and recorded in the Registry
of Property on the 28th of March of the same year.
ISSUE:

Was the property in question owned by the MUNICIPALITY OF OAS?
RULING:
YES, the MUNICIPALITY OF OAS is the owner of the land and it has the option of
buying the building thereon, which is the property of BARTOLOME ROA, or of selling
to him the land on which it stands. The MUNICIPALITY OF OAS is entitled to recover
the costs of both instances.
1. There is no evidence of any adverse occupation of this land for thirty years,
consequently the extraordinary period of prescription does not apply. ROA
cannot rely upon the ordinary period of prescription of ten years because he
was not a holder in good faith. He knew at that time of his purchase in 1894,
and had so stated in writing, that the pueblo was the owner of the property. So
that, even if the statute of limitations ran against a municipality in reference to
a public square, it could not avail ROA in this case.
2. As early as 1852 this land had been used by the municipality constructed
thereon buildings for the storage of property of the State, quarters for the
cuadrilleros, and others of a like character. It therefore had ceased to be
property used by the public and had become a part of the bienes patrimoniales
of the pueblo. (Civil Code, arts. 341, 344.)
3. To the case are applicable those provisions of the Civil Code which relate to
the construction by one person of a building upon land belonging to another.
Article 364 of the Civil Code is as follows:
Where there has been bad faith, not only on the part of the person who
built, sowed, or planted on another's land, but also on the part of the owner of
the latter, the rights of both shall be the same as if they had acted in good faith.
Bad faith on the part of the owner is understood whenever the act has
been executed in his presence with his knowledge and tolerance and without
objection.
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
4. BARTOLOME ROA constructed the building in bad faith for, as he had
knowledge of the fact that his grantor was not the owner thereof. There was a
bad faith also on the part of the MUNICIPALITY in accordance with the express
provisions of article 364 since it allowed Roa to construct the building without
any opposition on its part and to so occupy it for eight years.
5. The rights of the parties must, therefore, be determined as if they both had
acted in good faith. Their rights in such cases are governed by article 361 of
the Civil Code, which is as follows:
The owner of the land on which the building, sowing, or planting is done
in good faith shall have a right to appropriate as his own the work, sowing, or
planting after the indemnity mentioned in articles 453 and 454, or, to oblige the
person who has built or planted, to pay him the value of the land and to force the
person who sowed to pay the proper rent.
CITY OF MANILA vs. GERARDO GARCIA — CARMENCITA VILLANUEVA,
MODESTA PARAYNO — NARCISO PARAYNO, JUAN ASPERAS, MARIA TABIA
— SIMEON DILIMAN, AQUILINO BARRIOS — LEONORA RUIZ, LAUREANO
DIZO, BERNABE AYUDA — LEOGARDA DE LOS SANTOS, ISABELO OBAOB —
ANDREA RIPARIP, JOSE BARRIENTOS, URBANO RAMOS,1 ELENA RAMOS,
ESTEFANIA NEPACINA, MODESTA SANCHEZ, MARCIAL LAZARO, MARCIANA
ALANO, HONORIO BERIÑO — SEDORA ORAYLE, GLORIA VELASCO,
WILARICO RICAMATA, BENEDICTO DIAZ, ANA DEQUIZ — (MRS.) ALUNAN,
LORENZO CARANDANG, JUAN PECAYO, FELICIDAD MIRANDA — EMIGDIO
EGIPTO, G.R. No. L-26053 February 21, 1967
FACTS:
1. Plaintiff City of Manila is owner of parcels of land, forming one compact area
in Malate, Manila, and covered by Torrens Titles Nos. 49763, 37082 and
37558.
2. Shortly after liberation from 1945 to 1947, defendants entered upon these
premises without plaintiff's knowledge and consent. They built houses of
second-class materials, again without plaintiff's knowledge and consent, and
 without the necessary building permits from the city. There they lived thru the
years to the present.
3. In November, 1947, the presence of defendants having previously been
discovered, some of them were given by Mayor Valeriano E. Fugoso written
permits — each labeled "lease contract" — to occupy specific areas in the
property upon conditions therein set forth.
4. For their occupancy, defendants were charged nominal rentals.
5. Epifanio de los Santos Elementary School which is close to the property
needed the property for the school's expansion.
6. On September 14, 1961, plaintiff's City Engineer, pursuant to the Mayor's
directive to clear squatters' houses on city property, gave each of defendants
thirty (30) days to vacate and remove his construction or improvement on the
premises. This was followed by the City Treasurer's demand on each
defendant, made in February and March, 1962, for the payment of the amount
due by reason of the occupancy and to vacate in fifteen (15) days.
7. Defendants refused. Hence, this suit to recover possession.
8. The lower court directed defendants to vacate the premises; to pay their rental
due until they vacate the said premises, and the costs.
9. Defendants appealed.
ISSUE:
Whether or not the permits labeled as “lease contracts” issued to the defendants are
valid?
RULING:
NO, the Manila mayors did not have authority to give permits, written or oral, to
defendants, and that the permits herein granted are null and void.
1. The city charter enjoins the mayor to "safeguard all the lands" of the City of
Manila. Surely enough, the permits granted did not "safeguard" the city's land
in question. It is our considered view that the Mayor of the City of Manila cannot
legalize forcible entry into public property by the simple expedient of giving
permits, or, for that matter, executing leases.
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
2. The permits, erroneously labeled "lease" contracts, were issued by the mayors
in 1947 and 1948 when the effects of the war had simmered down and when
these defendants could have very well adjusted themselves. Two decades
have now elapsed since the unlawful entry. Defendants could have, if they
wanted to, located permanent premises for their abode. And yet, usurpers that
they are, they preferred to remain on city property.
3. Defendants' entry as aforesaid was illegal. Their constructions are as illegal,
without permits.
4. Squatting is unlawful and no amount of acquiescence on the part of the city
officials will elevate it into a lawful act. In principle, a compound of illegal entry
and official permit to stay is obnoxious to our concept of proper official norm of
conduct. Because, such permit does not serve social justice; it fosters moral
decadence. It does not promote public welfare; it abets disrespect for the law.
It has its roots in vice; so it is an infected bargain. Official approval of squatting
should not, therefore, be permitted to obtain in this country where there is an
orderly form of government.
VICTORIANA ESPIRITU, ET.AL. vs. MUNICIPAL COUNCIL OF POZZORUBIO,
G.R. No. L-11014, January 21, 1958
FACTS:
During the last world war, the market building of the town of Pozorrubio was
destroyed, and after Liberation, the market vendors began constructing temporary
and make-shift stalls, even small residences, on a portion of the town plaza. The
Municipal Treasurer collected from these stall owners fees at the rate of P.25 per
square meter a month. In time, the whole municipal market was rehabilitated, but the
owners of the structures on the plaza failed and refused to transfer to said
marketplace.
The Municipal Council of Pozorrubio received petitions from civic organizations like
the Woman's Club and the Puericulture Center, for the removal of the market stalls
on the plaza, which were being used not only as stalls, but also for residence
purposes, said organizations desiring to convert said portion of the plaza into a
children's park.
As a result, the Municipal Council of Pozorrubio passed Resolution No. 209, Series of
1951, stating that the public market had already been rehabilitated, and ordering the
occupants and owners of the structures on the plaza to remove their buildings within
sixty days from receipt of the resolution. In answer to this resolution, eight of the
market stall building owners filed a petition for prohibition in the Court of First
Instance of Pangasinan against the Municipal Council, the Municipal Mayor, and the
Chief of Police of Pozorrubio. Pending hearing, the trial court issued a writ of
preliminary injunction. Hence, the appellant’s appeal to the court praying the
dismissal of the preliminary injunction against them.
ISSUE:
Whether or not a town plaza can be a subject of a contract of lease to private
persons.
RULING:
NO. Town Plazas are properties of public dominion, to be devoted to public use and
to be made available to the public in general. They are outside the commerce of man
and cannot be disposed of or even leased by the municipality to private parties.
There is absolutely no question that the town plaza cannot be used for the
construction of market stalls, specially of residences, and that such structures
constitute a nuisance subject to abatement according to law.
In the case at hand, Appellants must have realized the absolute lack of merit in their
stand and the futility of their appeal because they voluntarily removed their buildings
on the plaza. Town plazas may be occupied temporarily by private individuals during
an emergency, as was done and as was tolerated by the Municipality of Pozorrubio,
when the emergency has ceased, said temporary occupation or use must also cease,
and the town officials should see to it that the town plazas should ever be kept open
to the public and free from encumbrances or illegal private constructions.
FELICIDAD VILLANUEVA ET. AL vs. HON. MARIANO CASTAÑEDA, JR., G.R.
No. 61311, September 21, 1987
FACTS:
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
November 7, 1961, the municipal council of San Fernando adopted Resolution No. 218
authorizing some 24 members of the Fernandino United Merchants and Traders
Association to construct permanent stalls and sell in the above-mentioned place.
On January 18, 1964, while this case was pending, the municipal council of San
Fernando adopted Resolution No. 29, which declared the subject area as "the parking
place and as the public plaza of the municipality. Four years later, on November 2,
1968, Judge Andres C. Aguilar decided the aforesaid case and held that the land
occupied by the petitioners, being public in nature, was beyond the commerce of man
and therefore could not be the subject of private occupancy. The decision was
apparently not enforced, for the petitioners were not evicted from the place; in fact,
according to them, they and the 128 other persons were in 1971 assigned specific
areas or space allotments therein for which they paid daily fees to the municipal
government. Thereafter, Macalino issued a resolution to demolish said stalls then the
petitioner’s filed a petition for prohibition which was denied. As a result, petitioners
come to this court on certiorari to challenge the decision. The basic contention of the
petitioners is that the disputed area is under lease to them by virtue of contracts they
had entered into with the municipal government, first in 1961 insofar as the original
occupants were concerned, and later with them and the other petitioners by virtue of
the space allocations made in their favor in 1971 for which they say they are paying
daily fees.
ISSUE:
Whether or not the respondent committed grave abuse of discretion in denying the
petition for prohibition.
RULING:
SC upheld the decision made by the respondent Judge. There is no question that the
place occupied by the petitioners and from which they are sought to be evicted is a
public plaza. A public plaza is beyond the commerce of man and so cannot be the
subject of lease or any other contractual undertaking. The petitioners had no right in
the first place to occupy the disputed premises and cannot insist in remaining there
now on the strength of their alleged lease contracts. Even assuming a valid lease of
the property in dispute, the resolution could have effectively terminated the agreement
for it is settled that the police power cannot be surrendered or bargained away through
the medium of a contract. The Supreme Court ruled that the respondent judge did not
commit grave abuse of discretion in denying the petition for prohibition.
 THE PROVINCE OF ZAMBOANGA DEL NORTE vs. CITY OF ZAMBOANGA,
SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, G.R.
No. L-24440, March 28, 1968
FACTS:
1. Prior to its incorporation as a chartered city, the Municipality of Zamboanga
used to be the provincial capital of the then Zamboanga Province.
2. On October 12, 1936, Commonwealth Act 39 was approved converting the
Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act also
provided that “Buildings ad properties which the province shall abandon upon
the transfer of the capital to another place will be acquired and paid for by
the City of Zamboanga at a price to be fixed by the Auditor General.” Such
properties were being utilized as lots for the capitol site, schools, hospitals,
leprosarium, high school playgrounds, burleighs, and hydro-electric sites.
3. On June 6, 1952, Republic Act 711 was approved dividing the province of
Zamboanga into two (2): Zamboanga del Norte and Zamboanga del Sur.
4. On March 17, 1959, the Executive Secretary, by order of the President,
declared that Zamboanga del Norte had a vested right as co-owner pro-
indiviso of said properties and is entitled to the price thereof, payable by
Zamboanga City. Partial payments were already made by the city.
5. However, on June 17, 1961, Republic Act 3039 was approved amending Sec.
50 of Commonwealth Act 39 by providing that —
“All buildings, properties and assets belonging to the former province of
Zamboanga and located within the City of Zamboanga are hereby transferred,
free of charge, in favor of the said City of Zamboanga.”
6. This constrained plaintiff Zamboanga del Norte to file a complaint for
Declaratory Relief with Preliminary Mandatory Injunction praying that RA 3039
be declared unconstitutional for depriving plaintiff province of its private
properties without due process and compensation.
7. Lower court ruled in favor of plaintiff Zamboanga del Norte declaring that
Republic Act No. 3039 was unconstitutional insofar as it deprived province
plaintiff of its private properties consisting of 50 parcels of land and the
improvements thereon. The defendant was thus ordered to pay for the said
properties.
8. Hence, this appeal by the defendant city.
ISSUE:
W/N the City of Zamboanga should pay for the said properties.
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
RULING:
YES but only for the properties which are considered patrimonial.
The validity of the RA 3039 ultimately depends on the nature of the 50 lots and
buildings thereon in question. For, the matter involved here is the extent of legislative
control over the properties of a municipal corporation, of which a province is one. The
principle itself is simple: If the property is owned by the municipality (meaning municipal
corporation) in its public and governmental capacity, the property is public and
Congress has absolute control over it. But if the property is owned in its private or
proprietary capacity, then it is patrimonial and Congress has no absolute control. The
municipality cannot be deprived of it without due process and payment of just
compensation.
What law to apply: Civil Code vs Municipal Corporation Law
The Civil Code classification is embodied in its Arts. 423 and 424 which
provide:1äwphï1.ñët
ART. 423. The property of provinces, cities, and municipalities is divided
into property for public use and patrimonial property.
ART. 424. Property for public use, in the provinces, cities, and
municipalities, consists of the provincial roads, city streets, municipal streets,
the squares, fountains, public waters, promenades, and public works for public
service paid for by said provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and shall be
governed by this Code, without prejudice to the provisions of special laws.
(Stressed for emphasis).
Applying the above cited norm, all the properties in question, except the two (2)
lots used as High School playgrounds, could be considered as patrimonial properties
of the former Zamboanga province. Even the capital site, the hospital and leprosarium
sites, and the school sites will be considered patrimonial for they are not for public use.
They would fall under the phrase "public works for public service" for it has been held
that under the ejusdem generis rule, such public works must be for free and
indiscriminate use by anyone, just like the preceding enumerated properties in the first
paragraph of Art 424. 7 The playgrounds, however, would fit into this category.
On the other hand, applying the norm obtaining under law on Municipal
Corporations, all those of the 50 properties in question which are devoted to
public service are deemed public; the rest remain patrimonial. Under this norm,
to be considered public, it is enough that the property be held and devoted for
governmental purposes like local administration, public education, public health,
etc. Following this classification, a total of 24 lots from the said properties are
considered public property since these were held by the former Zamboanga province
in its governmental capacity and therefore are subject to the absolute control of
Congress. But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte
of its share in the value of the rest of the 26 remaining lots which are patrimonial
properties since they are not being utilized for distinctly, governmental purposes.
As between the two, the Supreme Court was more inclined to uphold the latter
view. The controversy here is more along the domains of the Law of Municipal
Corporations — State vs. Province — than along that of Civil Law. The classification
of properties other than those for public use in the municipalities as patrimonial under
Art. 424 of the Civil Code — is "... without prejudice to the provisions of special laws."
For the purpose of this article, the principles, obtaining under the Law of Municipal
Corporations can be considered as "special laws". Hence, the classification of
municipal property devoted for distinctly governmental purposes as public should
prevail over the Civil Code classification in this particular case.
Therefore, Zamboanga del Norte is still entitled to collect from the City of
Zamboanga the former's share in the 26 properties which are patrimonial in nature,
said share to computed on the basis of the valuation of said 26 properties.
CITY OF MANILA, and EVANGELINE SUVA, vs. HON. INTERMEDIATE
APPELLATE COURT, IRENE STO. DOMINGO and for and in behalf of her minor
children, VIVENCIO, JR., IRIS, VERGEL and IMELDA, all surnamed STO.
DOMINGO, G.R. No. 71159 November 15, 1989
FACTS:
1. Vivencio Sto. Domingo, Sr. deceased husband of plaintiff Irene Sto. Domingo and
father of the litigating minors, died on June 4,1971 and buried on June 6,1971 in
Lot No. 159, Block No. 194 of the North Cemetery which lot was leased by the city
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
to Irene Sto. Domingo for the period from June 6, 1971 to June 6, 2021. Full
payment of the rental therefor of P50.00 is evidenced by the said receipt.
2. No other document was executed to embody such lease over the burial lot in
question. In fact, the burial record for Block No. 194 of Manila North Cemetery in
which subject Lot No. 159 is situated does not reflect the term of duration of the
lease.
3. In good faith, the City Mayor of Manila believed that subject lot in which the mortal
remains of the late Vivencio Sto. Domingo were laid to rest was leased to the
bereaved family for five (5) years only, subject lot was certified on January 25,
1978 as ready for exhumation.
4. On the basis of such certification, the authorities of the North Cemetery then
headed by defendant Joseph Helmuth authorized the exhumation and removal
from subject burial lot the remains of the late Vivencio Sto. Domingo, Sr.
5. Subsequently, the same lot in question was rented out to another lessee so that
when the plaintiffs herein went to said lot on All Souls Day in their shock and
dismay, that the resting place of their dear departed did not anymore bear the
stone marker which they lovingly placed on the tomb.
6. Irene Sto. Domingo inquired from the officer-in-charge of the cemetery, defendant
Sergio Mallari, and was told that the remains of her late husband had been taken
from the burial lot in question which was given to another lessee. She was also
informed that she can look for the bones of her deceased husband in the
warehouse of the cemetery where the exhumed remains from the different burial
lots of the North Cemetery are being kept until they are retrieved by interested
parties.
7. But to the bereaved widow, what she was advised to do was simply unacceptable.
So she brought an action for damages against the city and those personnel
involved.
8. Trial court and CA, upon appeal, ruled in Sto. Domingo’s favor. Hence this instant
petition by the City of Manila.
Petitioner’s arguments:
Petitioners alleged in their petition that the North Cemetery is exclusively devoted for
public use or purpose as stated in Sec. 316 of the Compilation of the Ordinances of
the City of Manila. They conclude that since the City is a political subdivision in the
performance of its governmental function, it is immune from tort liability which may be
caused by its public officers and subordinate employees.
Private respondent’s contention:
Private respondents on the other hand maintain that the City of Manila entered into a
contract of lease which involve the exercise of proprietary functions with private
respondent Irene Sto. Domingo. The city and its officers therefore can be sued for any-
violation of the contract of lease.
ISSUE:
Whether or not the operations and functions of a public cemetery are a
governmental, or a corporate or proprietary function of the City of Manila.
(PROPRIETARY)
Whether or not the petitioner city can be made liable for damages. (YES)
RULING:
The operations and functions of a public cemetery are proprietary
functions of the City of Manila.
Under Philippine laws, the City of Manila is a political body corporate and as
such endowed with the faculties of municipal corporations to be exercised by and
through its city government in conformity with law, and in its proper corporate name. It
may sue and be sued, and contract and be contracted with. Its powers are twofold in
character-public, governmental or political on the one hand, and corporate, private and
proprietary on the other.
In connection with the powers of a municipal corporation, it may acquire
property in its public or governmental capacity, and private or proprietary capacity. The
New Civil Code divides such properties into property for public use and patrimonial
properties (Article 423), and further enumerates the properties for public use as
provincial roads, city streets, municipal streets, the squares, fountains, public waters,
promenades, and public works for public service paid for by said provisions, cities or
municipalities, all other property is patrimonial without prejudice to the provisions of
special laws. Thus in Torio v. Fontanilla, supra, the Court declared that with respect
to proprietary functions the settled rule is that a municipal corporation can be
held liable to third persons ex contractu.
Under the foregoing considerations and in the absence of a special law, the
North Cemetery is a patrimonial property of the City of Manila which was created by
resolution of the Municipal Board. The administration and government of the cemetery
are under the City Health Officer the order and police of the cemetery, the opening of
Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE
graves, niches, or tombs, the exhuming of remains, and the purification of the same
are under the charge and responsibility of the superintendent of the cemetery.
The City of Manila furthermore prescribes the procedure and guidelines for the
use and dispositions of burial lots and plots within the North Cemetery through
Administrative Order No. 5. With the acts of dominion exercised by the City, there is,
therefore no doubt that the North Cemetery is within the class of property which the
City of Manila owns in its proprietary or private character. Furthermore, there is no
dispute that the burial lot was leased in favor of the private respondents. Hence,
obligations arising from contracts have the force of law between the contracting parties.
Thus a lease contract executed by the lessor and lessee remains as the law between
them.
Therefore, a breach of contractual provision entitles the other party to
damages even if no penalty for such breach is prescribed in the contract.
MUNICIPALITY [now city] OF LEGASPI vs. A.L. AMMEN TRANSPORTATION
CO., INC., G.R. No. L-22377, November 29, 1968
FACTS:
1. A complaint was filed by herein respondent A. L. Ammen Transportation Co.,
Inc. for the recovery of possession of a piece of land against the Province of
Albay, the Municipality of Legaspi, and twenty-four private individuals
occupying portions thereof.
2. The Court of First Instance of Albay issued an order authorizing such
reconstitution. The reconstitution notwithstanding, one of the defendants, and
now sole appellant, petitioner City of Legaspi, did not surrender possession.
Hence the filing of such complaint. Respondent A. L. Ammen Transportation
Co., Inc. as plaintiff, was unsuccessful, its complaint for the recovery having
been dismissed.
3. Court of Appeals reversed the judgment of the lower court, declaring that the
reconstituted certificate of title "is valid and that respondent A. L. Ammen
Transportation Co., Inc. is the registered owner of Lot No. 1114 of the Legaspi
Cadastre. Hence, City of Legaspi filed for certiorari.
ISSUE: and decide the petition for the reconstitution of the owner's title upon compliance with
the required posting of notices and publication in the Official Gazette."
1. Whether or not the reconstituted certificate of title has the same validity and
legal effect as the original (YES) Issue 3: NO
2. Whether or not there was a violation of due process in the proceedings (NO)
3. Whether or not the petitioners should vacate the property (NO)
The ably written brief of petitioner, represented by City Fiscal Aquilino P. Bonto,
"emphasized that the land in dispute is now a public road (Quezon Avenue) making up
RULING:
one of the vital arteries of commerce and trade in Legaspi City. It is the principal outlet
to and from the Pier Area where vessels both coastwise and unload their cargoes; from
Issue 1: YES
the Pier Area it leads to the market and the commercial sector of the City; and from
various points it is the most convenient road to the Post Office, the frontage of which
To show why the appeal of respondent A. L. Ammen Transportation Co., Inc. from the
abuts the land in litigation. Ordering the petitioner to vacate the property would in effect
decision of the lower court was meritorious, the Court of Appeals referred to the
cut off access to the areas of trade and commerce, thereby adversely affecting the
applicable statutory provision which leaves no doubt that the reconstituted certificate
economic potential of petitioner and its inhabitants. Generally the closing of the road
of title has the same validity and legal effect as the original thereof. The force to
would otherwise create serious inconvenience to vehicular pedestrian traffic to
which such statutory language is entitled was clearly set forth in the leading case of
which Quezon Avenue has been devoted since 1947, or a period of seventeen
Philippine National Bank v. De la Viña,4 where this Court, speaking through Justice J.
years."6chanrobles virtual law library
B. L. Reyes, stated:
“It appears that prior to the institution of these proceedings with the court below, there
Such a problem thus gives rise to a matter of public interest. Fortunately, it is not
had already been a judicial reconstitution of the original certificates of title upon petition
a new one in this jurisdiction. The appropriate solution was indicated in the leading
of the registered owner. Unlike in the extrajudicial reconstitution of titles, wherein there
case of Alfonso v. Pasay City where this Court, through Justice Montemayor, held: "In
is the statutory reservation that the new title 'shall be without prejudice to any party
the present case, Alfonso remains up to now the owner of the land in question, Lot No.
whose right or interest in the property was duly noted in the original, at the same time
4368 of the Cadastral Survey of Pasay, because being registered land, the City of
it was lost or destroyed' (Sec. 7, Republic Act; No. 26), a judicially reconstituted title,
Pasay or its predecessor, Municipality of Pasay, did not and could not acquire it thru
by express provisions of the statute (Sec. 10, ibid), 'shall not be subject to the
prescription. As registered owner, he could bring an action to recover possession at
encumbrance referred to in section 7' of the Act. Evidently, the statute would not
any time because possession is one of the attributes of ownership of land. However,
ordinarily allow the reconstitution of liens and other encumbrances not noted in the
said restoration of possession by the City of Pasay is neither convenient nor feasible
judicially reconstituted owner's certificate of title."
because it is now and has been used for road purposes. So, the only relief available is
for the City of Pasay to make due compensation, which it could and should have done
Issue 2: NO
years ago since 1925."
Even the objection based on procedure on due process grounds could not prosper for
as clearly set forth in the above decision: "While it may be true that no notice was sent RAFAEL S. SALAS, ET. AL. vs. HILARION U. JARENCIO, G.R. No. L-29788,
by registered mail to the petitioner bank when the judicial reconstitution of title was August 30, 1972
sought, such failure, however, did not amount to a jurisdictional defect. The
proceedings therein being in rem, the cadastral court acquired jurisdiction to hear FACTS:

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1. In 1920, the CFI in Manila declared the City of Manila as the owner in fee simple of
a parcel of land. Afterwards, the City sold portions of the land to Pura Villanueva.
As a result, the Original Certificate of Title was cancelled and Transfer Certificates
of Title were issued in favor of Villanueva.
2. The Municipal Board of Manila adopted a resolution requesting the President to
declare certain parcels of land, including the ones sold, as patrimonial property for
the purpose of reselling them to the actual occupants. Copies of the said resolution
were also sent to Congress.
3. Congress then enacted RA 4118 which converted the said communal property to
disposable or alienable land of the State to be put under the disposal of the Land
Tenure Administration. To implement the law, the TCT of the city was cancelled and
a new one was issued in favor of the Land Tenure Administration.
4. However, the city did a complete turn-about and assailed the constitutionality of the
said law. The CFI declared it unconstitutional for depriving the city of its properties
without due process of law. Executive Secretary Salas assailed the decision.
ISSUE:
1. Whether or not the property involved the patrimonial property of the city.
2. Whether RA 4118 is constitutional.
HELD:
1. NO. The City of Manila could validly acquire property in its corporate or private
capacity, following the accepted doctrine on the dual character — public and private
— of a municipal corporation. However,in the absence of a title deed to any land
claimed by the City of Manila as its own, showing that it was acquired with its private
or corporate funds, the presumption is that such land came from the State upon the
creation of the municipality.
Communal lands or "legua comunal" came into existence when a town or pueblo was
established in this country under the laws of Spain. The municipalities of the Philippines
were not entitled, as a matter of right, to any part of the public domain for use as
communal lands. It may be laid down as a general rule that regardless of the source
or classification of land in the possession of a municipality, excepting those acquired
with its own funds in its private or corporate capacity, such property is held in trust for
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the State for the benefit of its inhabitants, whether it be for governmental or proprietary
purposes. It holds such lands subject to the paramount power of the legislature to
dispose of the same, for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being but a subdivision or
instrumentality thereof for purposes of local administration. Accordingly, the legal
situation is the same as if the State itself holds the property and puts it to a different
use.
The property subject of the litigation in the case at bar was shown not to have been
acquired by the City of Manila with its own funds in its private or proprietary capacity.
That it has in its name a registered title is not questioned, but this title should be
deemed to be held in trust for the State as the land covered thereby was part of the
territory of the City of Manila granted by the sovereign upon its creation. Moreover, the
alleged patrimonial character of the land is bellied by the City’s acts. If it were its
patrimonial property why should the City of Manila be requesting the President to make
representation to the legislature to declare it as such so it can be disposed of in favor
of the actual occupants? There could be no more blatant recognition of the fact that
said land belongs to the State and was simply granted in usufruct to the City of Manila
for municipal purposes.
MUNICIPALITY OF MAKATI vs. HONORABLE COURT OF APPEALS, ET AL.,
G.R. Nos. 89898-99, October 1, 1990
FACTS:
1. The present petition for review is an off-shoot of expropriation proceedings initiated
by petitioner Municipality of Makati against private respondent Admiral Finance
Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli
P. Jo, involving a parcel of land and improvements thereon located at Mayapis St., San
Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-
5499.
2. An action for eminent domain was filed by petitioner Municipality of Makati, attached
was a certification that a bank account (Account No. S/A 265-537154-3) opened with
the PNB Buendia Branch. After due hearing, respondent Judge fixed the appraised
value of the property to P5,291,666.00 and ordering petitioner to pay this amount minus
the advanced payment of P338,160.00 which was earlier released to private
respondent. Private respondent moved for the issuance of a writ of execution, followed
by the garnishment of petitioners fund with PNB Buendia Branch. Petitioner alleges
that it has two accounts with PNB Buendia:
(1) Account No. S/A 265-537154-3 — exclusively for the expropriation of the subject
property, with an outstanding balance of P99,743.94.
(2) Account No. S/A 263-530850-7 — for statutory obligations and other purposes of
the municipal government, with a balance of P170,098,421.72, as of July 12, 1989.
3. Petitioner claims that only the first PNB account may be garnished, but not the
second.
4. The Court then issued the corresponding writ of execution accompanied with a writ
of garnishment of funds of the petitioner which was deposited in PNB. Petitioner filed
a motion for reconsideration, contending that its funds at the PNB could neither be
garnished nor levied upon execution, for to do so would result in the disbursement of
public funds without the proper appropriation required under the law. The RTC denied
the motion. CA affirmed; hence, petitioner filed a petition for review before the SC.
ISSUE:
Whether or not funds of the Municipality of Makati are exempt from garnishment and
levy upon execution.
RULING:
YES. In this jurisdiction, well-settled is the rule that public funds are not subject to levy
and execution, unless otherwise provided for by statute. More particularly, the
properties of a municipality, whether real or personal, which are necessary for public
use cannot be attached and sold at execution sale to satisfy a money judgment against
the municipality. Municipal revenues derived from taxes, licenses and market fees, and
which are intended primarily and exclusively for the purpose of financing the
governmental activities and functions of the municipality, are exempt from execution.
Absent a showing that the municipal council of Makati has passed an
ordinance appropriating from its public funds an amount corresponding to the balance
due under the RTC decision, no levy under execution may be validly effected on the
public funds of petitioner.
Nevertheless, this is not to say that private respondent and PSB are left with no legal
recourse. Where a municipality fails or refuses, without justifiable reason, to effect
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payment of a final money judgment rendered against it, the claimant may avail of the
remedy of mandamus in order to compel the enactment and approval of the necessary
appropriation ordinance, and the corresponding disbursement of municipal funds
therefor.
For three years now, petitioner has enjoyed possession and use of the subject property
notwithstanding its inexcusable failure to comply with its legal obligation to pay just
compensation. Petitioner has benefited from its possession of the property since the
same has been the site of Makati West High School since the school year 1986-1987.
The Court will not condone petitioner's blatant refusal to settle its legal obligation
arising from expropriation proceedings it had in fact initiated. The State's power of
eminent domain should be exercised within the bounds of fair play and justice.
1. Norberto Asuncion, et al. vs. Manuel De Yriarte, G.R. No. 9321,
September 24, 1914
DOCTRINE:
It is a general principle of the public law that on acquisition of territory, the previous
political relations of the ceded region are totally abrogated.
FACTS:
Mr. Gregorio Perfecto published an article in the newspaper La Nacion regarding the
disappearance of certain documents in the Office of Fernando M. Guerrero, the
Secretary of the Philippine Senate. The article of Mr. Perfecto suggested that the
difficulty in finding the perpetrators was due to an official concealment by the Senate
since the missing documents constituted the records of testimony given by witnesses
in the investigation of oil companies. This resulted to a case being filed against Mr.
Perfecto for violation of Article 256 of the Penal Code which states, "Any person who,
by word, deed, or writing, shall defame, abuse, or insult any Minister of the Crown or
other person in authority, while engaged in the performance of official duties, or by
reason of such performance, provided that the offensive minister or person, or the
offensive writing be not addressed to him, shall suffer the penalty of arresto mayor."
Defendant argued whether Article 256 is still in force with the new American
occupation. He was found guilty by the Municipal Trial Court and again in the Court of
First Instance of Manila. Mr. Perfecto filed an appeal in the Supreme Court to dismiss
the case on the ground that Article 256 was not in force anymore.
ISSUE/S:
Whether or not Mr. Gregorio Perfecto violated Article 256 of the Spanish Penal Code.
RULING:
NO. During the Spanish Government, Article 256 of the SPC was enacted to protect
Spanish officials as representatives of the King. However, the Court explains that in
the present case, we no longer have Kings nor its representatives for the provision to
protect. Also, with the change of sovereignty over the Philippines from Spanish to
American, it means that the invoked provision of the SPC had been automatically
abrogated. The Court determined Article 256 of the SPC to be ‘political’ in nature for it
is about the relation of the State to its inhabitants, thus, the Court emphasized that ‘it
is a general principle of the public law that on acquisition of territory, the previous
political relations of the ceded region are totally abrogated.’ Hence, Article 256 of the
SPC is considered no longer in force and cannot be applied to the present case.
“Political" here is used to denominate the laws regulating the relations sustained by the
inhabitants to the sovereign. Mr. Justice Field of the United States Supreme Court
stated the obvious when in the course of his opinion in the case of Chicago, Rock
Island and Pacific Railway Co. vs. McGlinn, supra, he said: "As a matter of course, all
laws, ordinances and regulations in conflict with the political character, institutions and
Constitution of the new government are at once displaced. Thus, upon a cession of
political jurisdiction and legislative power — and the latter is involved in the former —
to the United States, the laws of the country in support of an established religion or
abridging the freedom of the press, or authorizing cruel and unusual punishments, and
he like, would at once cease to be of obligatory force without any declaration to that
effect." To quote again from the United States Supreme Court: "It cannot be admitted
that the King of Spain could, by treaty or otherwise, impart to the United States any of
his royal prerogatives; and much less can it be admitted that they have capacity to
receive or power to exercise them. Every nation acquiring territory, by treaty or
otherwise, must hold it subject to the Constitution and laws of its own government, and
not according to those of the government ceding it." (Pollard vs. Hagan [1845], 3 Hos.,
210.)
On American occupation of the Philippines, by instructions of the President to the
Military Commander dated May 28, 1898, and by proclamation of the latter, the
municipal laws of the conquered territory affecting private rights of person and property
and providing for the punishment of crime were nominally continued in force in so far
as they were compatible with the new order of things. But President McKinley, in his
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instructions to General Merritt, was careful to say: "The first effect of the military
occupation of the enemy's territory is the severance of the former political relation of
the inhabitants and the establishment of a new political power." From that day to this,
the ordinarily it has been taken for granted that the provisions under consideration were
still effective. To paraphrase the language of the United States Supreme Court in
Weems vs. United States ([1910], 217 U. S., 349), there was not and could not be,
except as precise questions were presented, a careful consideration of the codal
provisions and a determination of the extent to which they accorded with or were
repugnant to the "'great principles of liberty and law' which had been 'made the basis
of our governmental system.' "But when the question has been squarely raised, the
appellate court has been forced on occasion to hold certain portions of the Spanish
codes repugnant democratic institutions and American constitutional principles. (U.S.
vs.Sweet [1901], 1 Phil., 18; U.S. vs. Balcorta [1913], 25 Phil., 273; U.S. vs. Balcorta
[1913], 25 Phil., 533; Weems vs. U.S., supra.)
2. Manuel M. Leyson, Jr. vs. Office of the Ombudsman, et al., G.R. No.
134990, April 27, 2000
DOCTRINE:
FACTS:
International Towage and Transport Corporation (ITTC), a domestic corporation
engaged in the lighterage or shipping business, entered into a one (1)-year contract
with Legaspi Oil Company, Inc. (LEGASPI OIL), Granexport Manufacturing
Corporation (GRANEXPORT) and United Coconut Chemicals, Inc. (UNITED
COCONUT), comprising the Coconut Industry Investment Fund (CIIF) companies, for
the transport of coconut oil in bulk through MT Transasia. The majority shareholdings
of these CIIF companies are owned by the United Coconut Planters Bank (UCPB) as
administrator of the CIIF. Under the terms of the contract, either party could terminate
the agreement provided a three (3)-month advance notice was given to the other party.
However, prior to the expiration of the contract, the CIIF companies with their new
President, respondent Oscar A. Torralba, terminated the contract without the requisite
advance notice. The CIIF companies engaged the services of another vessel, MT
Marilag, operated by Southwest Maritime Corporation.
Petitioner Manuel M. Leyson Jr., Executive Vice President of ITTC, filed with public
respondent Office of the Ombudsman a grievance case against respondent Oscar A.
Torralba. The following is a summary of the irregularities and corrupt practices
allegedly committed by respondent Torralba: (a) breach of contract - unilateral
cancellation of valid and existing contract; (b) bad faith - falsification of documents and
reports to stop the operation of MT Transasia; (c) manipulation - influenced their
insurance to disqualify MT Transasia; (d) unreasonable denial of requirement imposed;
(e) double standards and inconsistent in favor of MT Marilag; (f) engaged and entered
into a contract with Southwest Maritime Corp. which is not the owner of MT Marilag,
where liabilities were waived and whose paid-up capital is only P250,000.00; and, (g)
overpricing in the freight rate causing losses of millions of pesos to Cocochem.
Petitioner charged respondent Tirso Antiporda, Chairman of UCPB and CIIF Oil Mills,
and respondent Oscar A. Torralba with violation of The Anti-Graft and Corrupt
Practices Act also before the Ombudsman anchored on the aforementioned alleged
irregularities and corrupt practices.
Public respondent dismissed the complaint based on its finding that the case is a
simple case of breach of contract with damages which should have been filed in the
regular court. It has no jurisdiction to determine the legality or validity of the termination
of the contract entered into by CIIF and ITTC. Besides the entities involved are private
corporations (over) which this Office has no jurisdiction.
Petitioner now imputes grave abuse of discretion on public respondent in dismissing
his complaint. He submits that inasmuch as Philippine Coconut Producers Federation,
Inc. (COCOFED) v. PCGG4 and Republic v. Sandiganbayan have declared that the
coconut levy funds are public funds then, conformably with Quimpo v. Tanodbayan,
corporations formed and organized from those funds or whose controlling stocks are
from those funds should be regarded as government owned and/or controlled
corporations.
ISSUE/S:
Whether or not the Office of the Ombudsman committed grave abuse of discretion in
dismissing the petitioner's complaint.
RULING:
NO. The SC held that the Office of the Ombudsman did not commit grave abuse of
discretion.
COCOFED v. PCGG referred to in Republic v. Sandiganbayan reviewed the history of
the coconut levy funds. These funds actually have four (4) general classes: (a) the
Coconut Investment Fund created under R. A. No. 6260;8 (b) the Coconut Consumers
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Stabilization Fund created under P. D. No. 276;9 (c) the Coconut Industry Development
Fund created under P. D. No. 582; 10 and, (d) the Coconut Industry Stabilization Fund
created under P. D. No. 1841.
The various laws relating to the coconut industry were codified in 1976. On 21 October
of that year, P. D. No. 961 12 was promulgated. On 11 June 1978 it was amended by
P. D. No. 1468 13 by inserting a new provision authorizing the use of the balance of
the Coconut Industry Development Fund for the acquisition of "shares of stocks in
corporations organized for the purpose of engaging in the establishment and operation
of industries . . . commercial activities and other allied business undertakings relating
to coconut and other palm oil indust(ries)." 14 From this fund thus created, or the CIIF,
shares of stock in what have come to be known as the "CIIF companies" were
purchased.
The court stated in COCOFED that the coconut levy funds were raised by the State's
police and taxing powers such that the utilization and proper management thereof were
certainly the concern of the Government. These funds have a public character and are
clearly affected with public interest.
jurisprudential rules invoked by petitioner in support of his claim that the CIIF
companies are government owned and/or controlled corporations are incomplete
without resorting to the definition of "government owned or controlled corporation"
contained in par. (13), Sec. 2, Introductory Provisions of the Administrative Code of
1987, i. e., 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. The definition mentions three (3) requisites, namely,
first, any agency organized as a stock or non-stock corporation; second, vested with
functions relating to public needs whether governmental or proprietary in nature; and,
third, 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.
In the present case, all three (3) corporations comprising the CIIF companies were
organized as stock corporations.1âwphi1 The UCPB-CIIF owns 44.10% of the shares
of LEGASPI OIL, 91.24% of the shares of GRANEXPORT, and 92.85% of the shares
of UNITED COCONUT. 15 Obviously, the below 51% shares of stock in LEGASPI OIL
removes this firm from the definition of a government owned or controlled corporation.
Our concern has thus been limited to GRANEXPORT and UNITED COCONUT as we
go back to the second requisite. Unfortunately, it is in this regard that petitioner failed
to substantiate his contentions. There is no showing that GRANEXPORT and/or
UNITED COCONUT was vested with functions relating to public needs whether
governmental or proprietary in nature.

The Court thus concludes that the CIIF companies are, as found by public respondent,
private corporations not within the scope of its jurisdiction.

-END-

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Digested By: ANDRINO-BERTULFO-CAMINERO-DIONALDO-GALINATO-ISMAEL-MARGALLO-NILLAS-RUAYA-YASE