G.R. No.

155683 February 16, 2007

PETRON CORPORATION, Petitioner,

vs.
NATIONAL COLLEGE OF BUSINESS AND ARTS, Respondent.

DECISION

CORONA, J.:

The sole question raised in this petition for review on certiorari1 is whether petitioner Petron
Corporation (Petron) should be held liable to pay attorney’s fees and exemplary damages to
respondent National College of Business and Arts (NCBA).

This case, however, is but part of a larger controversy over the lawful ownership of seven parcels
of land2 in the V. Mapa area of Sta. Mesa, Manila (the V. Mapa properties) that arose out of a
series of events that began in 1969.3

Sometime in 1969, the V. Mapa properties, then owned by Felipe and Enrique Monserrat, Jr.,
were mortgaged to the Development Bank of the Philippines (DBP) as part of the security for the
₱5.2 million loan of Manila Yellow Taxicab Co., Inc. (MYTC) and Monserrat Enterprises Co.
MYTC, for its part, mortgaged four parcels of land located in Quiapo, Manila.

On March 31, 1975, however, Felipe’s ½ undivided interest in the V. Mapa properties was levied
upon in execution of a money judgment rendered by the Regional Trial Court (RTC) of Manila
in Filoil Marketing Corporation v. MYTC, Felipe Monserrat, and Rosario Vda. De Monserrat (the
Manila case).4 DBP challenged the levy through a third-party claim asserting that the V. Mapa
properties were mortgaged to it and were, for that reason, exempt from levy or attachment. The
RTC quashed it.

On June 18, 1981, MYTC and the Monserrats got DBP to accept a dacion en pago arrangement
whereby MYTC conveyed to the bank the four mortgaged Quiapo properties as full settlement of
their loan obligation. But despite this agreement, DBP did not release the V. Mapa properties
from the mortgage.

On May 21, 1982, Felipe, acting for himself and as Enrique’s attorney-in-fact, sold the V. Mapa
properties to respondent NCBA. Part of the agreement was that Felipe and Enrique would secure
the release of the titles to the properties free of all liens and encumbrances including DBP’s
mortgage lien and Filoil’s levy on or before July 31, 1982. But the Monserrats failed to comply
with this undertaking. Thus, on February 3, 1983, NCBA caused the annotation of an affidavit of
adverse claim on the TCTs covering the V. Mapa properties.

Shortly thereafter, NCBA filed a complaint against Felipe and Enrique for specific performance
with an alternative prayer for rescission and damages in the RTC of Manila. The case was raffled
to Branch 30 and docketed as Civil Case No. 83-16617. On March 30, 1983, NCBA had a notice
of lis pendens inscribed on the TCTs of the V. Mapa properties. A little over two years later,
NCBA impleaded DBP as an additional defendant in order to compel it to release the V. Mapa
properties from mortgage.

On February 28, 1985, during the pendency of Civil Case No. 83-16617, Enrique’s ½ undivided
interest in the V. Mapa properties was levied on in execution of a judgment of the RTC of Makati
(the Makati case)5 holding him liable to Petron (then known as Petrophil Corporation) on a 1972
promissory note. On April 29, 1985, the V. Mapa properties were sold at public auction to satisfy
the judgments in the Manila and Makati cases. Petron, the highest bidder, acquired both Felipe’s
and Enrique’s undivided interests in the property. The final deeds of sale of Enrique’s and
Felipe’s shares in the V. Mapa properties were awarded to Petron in 1986. Sometime later, the
Monserrats’ TCTs were cancelled and new ones were issued to Petron. Thus it was that, towards
the end of 1987, Petron intervened in NCBA’s suit against Felipe, Enrique and DBP (Civil Case
No. 83-16617) to assert its right to the V. Mapa properties.

The RTC rendered judgment on March 11, 1996.6 It ruled, among other things, that Petron never
acquired valid title to the V. Mapa properties as the levy and sale thereof were void and that
NCBA was now the lawful owner of the properties. Moreover, the RTC held Petron, DBP, Felipe
and Enrique jointly and severally liable to NCBA for exemplary damages and attorney’s fees for
the following reasons:

FELIPE and ENRIQUE had no reason to renege on their undertaking in the Deed of Absolute
Sale "to secure the release of the titles to the properties xxx free from all the liens and
encumbrances, and to cause the lifting of the levy on execution of Commercial Credit
Corporation, Industrial Finance Corporation[,] and Filoil over the V. Mapa [p]roperty. Moreover,
ENRIQUE had no reason to repudiate FELIPE and disavow authority he had [given] the latter to
sell his share in the V. Mapa property.

On the other hand, the mortgage in favor of DBP had been fully extinguished thru dacion en
pago as early as 18 June 1981 but it unjustifiably and whimsically refused to release the
mortgage and to surrender to the buyer (NCBA) the owner’s duplicate copies of Transfer
Certificates of Title No[s]. 83621 to 83627, thereby preventing NCBA from registering the sale in
its favor.

Similarly, [Petron] has absolutely no reason to claim the V. Mapa property. For, as shown above,
the levy in execution and sale of the shares of FELIPE and ENRIQUE in the V. Mapa property
were null and void.

Finally, in their Memorandum of Agreement dated 25 September 1992 with Technical Institute of
the Philippines, [Petron] and DBP attempted to pre-empt this Court’s power to adjudicate on the
claim of ownership stipulating that "to facilitate their defenses and cause of action in Civil Case
No. 83-16617," they agreed on the disposition of the V. Mapa property among themselves. For
obvious reasons, this Court refused to give its imprimatur and denied their prayer for dismissal of
the complaint against DBP.

These acts of defendants and intervenor demonstrate their wanton, fraudulent, reckless,
oppressive and malevolent conduct in their dealings with NCBA. Furthermore, they acted with
gross and evident bad faith in refusing to satisfy NCBA’s plainly valid and demandable claims.
Assessment of exemplary damages and attorney’s fees in the amounts of ₱100,000.00 and
₱150,000.00, respectively, is therefore in order (Arts. 2208 and 2232, Civil Code).7

Enrique, DBP and Petron appealed to the Court of Appeals (CA). The appeal was docketed as
CA–G.R. CV No. 53466. In a decision dated June 21, 2002,8 the CA affirmed the RTC decision in
toto. On motion for reconsideration, Petron and DBP tried to have the award of exemplary
damages and attorney’s fees deleted for lack of legal and factual basis. The Philippine National
Oil Company (PNOC), which had been allowed to intervene in the appeal as transferee pendente
lite of Petron’s right to the V. Mapa properties, moved for reconsideration of the ruling on
ownership. In a resolution dated October 16, 2002,9 the CA denied these motions for lack of
merit. Thereupon, Petron and PNOC took separate appeals to this Court.

In this appeal, the only issue is Petron’s liability for exemplary damages and attorney’s fees. And
on this matter, we reverse the rulings of the trial and appellate courts.

Article 2208 lays down the rule that in the absence of stipulation, attorney’s fees cannot be
recovered except in the following instances:

(1) When exemplary damages are awarded;

 (2) When the defendant’s act or omission has compelled the plaintiff to litigate with third
persons or to incur expense to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;

(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s fees
and expenses of litigation should be recovered.10

Here, the RTC held Petron liable to NCBA for attorney’s fees under Article 2208(5), which allows
such an award "where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff’s plainly valid, just, and demandable claim." However, the only justification given for
this verdict was that Petron had no reason to claim the V. Mapa properties because, in the RTC’s
opinion, the levy and sale thereof were void.11 This was sorely inadequate and it was erroneous
for the CA to have upheld that ruling built on such a flimsy foundation.

Article 2208(5) contemplates a situation where one refuses unjustifiably and in evident bad faith
to satisfy another’s plainly valid, just and demandable claim, compelling the latter needlessly to
seek redress from the courts.12 In such a case, the law allows recovery of money the plaintiff had
to spend for a lawyer’s assistance in suing the defendant – expenses the plaintiff would not have
incurred if not for the defendant’s refusal to comply with the most basic rules of fair dealing. It
does not mean, however, that the losing party should be made to pay attorney’s fees merely
because the court finds his legal position to be erroneous and upholds that of the other party, for
that would be an intolerable transgression of the policy that no one should be penalized for
exercising the right to have contending claims settled by a court of law.13 In fact, even a clearly
untenable defense does not justify an award of attorney’s fees unless it amounts to gross and
evident bad faith.14

Petron’s claim to the V. Mapa properties, founded as it was on final deeds of sale on execution,
was far from untenable. No gross and evident bad faith could be imputed to Petron merely for
intervening in NCBA’s suit against DBP and the Monserrats in order to assert what it believed
(and had good reason to believe) were its rights and to have the disputed ownership of the V.
Mapa properties settled decisively in a single lawsuit.

With respect to the award of exemplary damages, the rule in this jurisdiction is that the plaintiff
must show that he is entitled to moral, temperate or compensatory damages before the court
may even consider the question of whether exemplary damages should be awarded.15 In other
words, no exemplary damages may be awarded without the plaintiff’s right to moral, temperate,
liquidated or compensatory damages having first been established. Therefore, in view of our
ruling that Petron cannot be made liable to NCBA for compensatory damages (i.e., attorney’s
fees), Petron cannot be held liable for exemplary damages either.

WHEREFORE, the petition is hereby GRANTED. The imposition of liability on Petron

Corporation for exemplary damages and attorney’s fees is REVOKED. The June 21, 2002
decision and October 16, 2002 resolution of the Court of Appeals in CA–G.R. CV No. 53466 and
the March 11, 1996 decision of the Regional Trial Court of Manila in Civil Case No. 83-16617 are
hereby MODIFIED accordingly.

ASSET PRIVATIZATION TRUST vs. COURT OF APPEALS, ET.

AL.,
G.R. No. 121171 / December 29, 1998
FACTS:
Pursuant to a Mortgage Trust Agreement, the Development Bank of the
Philippines and the Philippine National Bank foreclosed the assets of the
Marinduque Mining and Industrial Corporation. The assets were sold to Philippine
National Bank and later transferred to the Asset Privatization Trust (APT).
In February 1985, Jesus Cabarrus, Sr., together with other stockholders of
Marinduque Mining and Industrial Corporation, filed a derivative suit against
Development Bank of the Philippines and Philippine National Bank before the
Regional Trial Court of Makati for Annulment of Foreclosures, Specific
Performance and Damages. In the course of the trial, Marinduque Mining and
Industrial Corporation and Asset Privatization Trust as successor in interest of
Development Bank of the Philippines and Philippine National Bank, agreed to
submit the case to arbitration by entering into a Compromise and Arbitration
Agreement. This agreement was approved by the trial court and the complaint was
corollarily dismissed.
Thereafter, the Arbitration Committee rendered a decision ordering Asset
Privatization Trust to pay Marinduque Mining and Industrial Corporation damages
and arbitration costs in the amount of P2.5 Billion, P13,000,000.00 of which is for
moral and exemplary damages.
On motion of Cabarrus and the other stockholders of Marinduque Mining and
Industrial Corporation, the trial court confirmed the Arbitration Committee’s
award. Its motion for reconsideration having been denied, Asset Privatization Trust
filed a special civil action for certiorari with the Court of Appeals. It was likewise
denied.
Hence, this petition for review on certiorari.
ISSUE:

Whether or not the Marinduque Mining and Industrial Corporation is entitled to

moral damages?
HELD:
No. How could the MMIC be entitled to a big amount of moral damages when its
credit reputation was not exactly something to be considered sound and
wholesome. Under Article 2217 of the Civil Code, moral damages include
besmirched reputation which a corporation may possibly suffer. A corporation
whose overdue and unpaid debts to the Government alone reached a tremendous
amount of P22 Billion Pesos cannot certainly have a solid business reputation to
brag about.
Besides, it is not yet a well settled jurisprudence that corporations are entitled to
moral damages. While the Supreme Court may have awarded moral damages to a
corporation for besmirched reputation in Mambulao vs. PNB, 22 SCRA 359, such
ruling cannot find application in this case. It must be pointed out that when the
supposed wrongful act of foreclosure was done, MMIC’s credit reputation was no
longer a desirable one. The company then was already suffering from serious
financial crisis which definitely projects an image not compatible with good and
wholesome reputation. So it could not be said that there was a “reputation”
besmirched by the act of foreclosure.
As a rule, a corporation exercises its powers, including the power to enter into
contracts, through its board of directors. While a corporation may appoint agents to
enter into a contract in its behalf, the agent should not exceed his authority. 54 In
the case at bar, there was no showing that the representatives of PNB and DBP in
MMIC even had the requisite authority to enter into a debt-for-equity swap. And if
they had such authority, there was no showing that the banks, through their board
of directors, had ratified the FRP.
WHEREFORE, the petition is GRANTED.

Mambulao Lumber Co. vs PNB DIGEST

DECEMBER 21, 2016 ~ VBDIAZ

TOPIC: (Entitlement to moral damages)

Mambulao Lumber Co. vs PNB

GR L-22973
30 January 1968
FACTS: Petitioner (P) applied for industrial loan and granted by Respondent bank
(R). To secure payment of loan, P mortgaged a parcel of land together with various
sawmill equipment, rolling units and other fixed assets situated therein.
P failed to pay the amortization and the amounts released to and received by it.
Repeated demands were made but upon inspection it was found that P stopped
operation. R sent a letter to R sheriff of Camarines Norte requesting him to take
possession of the parcel of land and the chattels and to sell them at public auction.
R sheriff issued corresponding notice of extrajudicial sale and sent copy to P.
P sent a bank draft for to PNB allegedly full settlement of the obligation after the
application of the sum representing the proceeds of the foreclosure sale of the
parcel of land. P averred that the foreclosure of chattel mortgage is no longer
needed for being fully paid and that it could not be legally effected at a place other
than City of Manila, the place agreed and stipulated in their contract.
R’s counsel wrote to P that the remitted amount was not enough for its liability to
which should be added the expenses for guarding the mortgaged of chattels,
attorney’s fees and expenses of the sale. Notwithstanding, the foreclosure of both
land and the chattels were held.
ISSUE: Whether P is entitled to moral damages.
DECISION: No. Even if the R bank and R sheriff committed several
infractions/errors, to wit:
1. R sheriff’s actual work performed should be compensated pursuant to Sec 4 of
Act 3135, which is the governing law for extrajudicial foreclosure and not Sec
7 of Rule 130, which is applicable for judicial foreclosure;
2. Atty’s fees was found to be excessive and unconscionable;
3. Foreclosure should be conducted in the City of Manila, as agreed in the
contract. Ergo, R is guilty of conversion when he sells under the mortgage but
not in accordance with its terms; and
4. The amount of sale of the chattels is spurious/ grossly unfair to P.
However, P’s claim for moral damages seems to have no legal or factual basis.
Obviously, an artificial person like herein P corporation cannot experience physical
sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock
or social humiliation which are basis of moral damages. A corporation may have a
good reputation which, if besmirched, may also be a ground for the award of moral
damages. The same cannot be considered under the facts of this case, however, not
only because it is admitted that herein appellant had already ceased in its business
operation at the time of the foreclosure sale of the chattels, but also for the reason
that whatever adverse effects of the foreclosure sale of the chattels could have
upon its reputation or business standing would undoubtedly be the same whether
the sale was conducted at Jose Panganiban, Camarines Norte, or in Manila which is
the place agreed upon by the parties in the mortgage contract.
But for the wrongful acts of herein R bank and the R sheriff of Camarines
Norte in proceeding with the sale in utter disregard of the agreement to have the
chattels sold in Manila as provided for in the mortgage contract, to which their
attentions were timely called by herein appellant, and in disposing of the chattels in
gross for the miserable amount of P4,200.00, herein appellant should be awarded
exemplary damages in the sum of P10,000.00.

BACHE v. JUDGE VIVENCIO M. RUIZ +

Facts: Commissioner of Internal Revenue, wrote a letter addressed to respondent Judge
Vivencio M. Ruiz requesting the issuance of a search warrant against petitioners for
violation of Section 46(a) of the National Internal Revenue Code. Revenue Examiner
Rodolfo de Leon and Arturo Logronio went to CFI with proper documents. Judge Vivencio
Ruiz asked his secretary to take the deposition and when done stenographer read it to
the judge. Logronio took the oath ans was warned by judge that he may be charged with
perjury if found lying. Search warrant was issued and served. Petitioners’ lawyers
protested the search on the ground that no formal complaint or transcript of testimony
was attached to the warrant. The agents nevertheless proceeded with their search which
yielded six boxes of documents. BIR based on the documents seized. Petitioner contend
that judged failed to personally examine the complainant and witnesses.
Issue: Whether or not search warrant is null and void on the ground of no personal
examination of the jusge?
Decision: This cannot be consider a personal examination. If there was an examination
at all of the complainant and his witness, it was the one conducted by the Deputy Clerk
of Court. But, as stated, the Constitution and the rules require a personal examination
by the judge. It was precisely on account of the intention of the delegates to the
Constitutional Convention to make it a duty of the issuing judge to personally examine
the complainant and his witnesses that the question of how much time would be
consumed by the judge in examining them came up before the Convention, as can be
seen from the record of the proceedings quoted above. The reading of the stenographic
notes to respondent Judge did not constitute sufficient compliance with the constitutional
mandate and the rule; for by that manner respondent Judge did not have the
opportunity to observe the demeanor of the complainant and his witness, and to
propound initial and follow-up questions which the judicial mind, on account of its
training, was in the best position to conceive. These were important in arriving at a
sound inference on the all-important question of whether or not there was probable
cause.

Sulo ng Bayan vs. Araneta Case Digest

Sulo ng Bayan vs. Araneta

[GR L-31061, 17 August 1976]

Facts: On 26 April 1966, Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of
First Instance of Bulacan, Fifth Judicial District, Valenzuela, Bulacan, against Gregorio Araneta
Inc. (GAI), Paradise Farms Inc., National Waterworks & Sewerage Authority (NAWASA),
Hacienda Caretas Inc., and the Register of Deeds of Bulacan to recover the ownership and
possession of a large tract of land in San Jose del Monte, Bulacan, containing an area of
27,982,250 sq. ms., more or less, registered under the Torrens System in the name of GAI, et.
al.'s predecessors-in-interest (who are members of the corporation). On 2 September 1966, GAI
filed a motion to dismiss the amended complaint on the grounds that (1) the complaint states no
cause of action; and (2) the cause of action, if any, is barred by prescription and laches. Paradise
Farms, Inc. and Hacienda Caretas, Inc. filed motions to dismiss based on the same grounds.
NAWASA did not file any motion to dismiss. However, it pleaded in its answer as special and
affirmative defenses lack of cause of action by Sulo ng Bayan Inc. and the barring of such action
by prescription and laches. On 24 January 1967, the trial court issued an Order dismissing the
(amended) complaint. On 14 February 1967, Sulo ng Bayan filed a motion to reconsider the
Order of dismissal, arguing among others that the complaint states a sufficient cause of action
because the subject matter of the controversy in one of common interest to the members of the
corporation who are so numerous that the present complaint should be treated as a class suit.
The motion was denied by the trial court in its Order dated 22 February 1967.

Sulo ng Bayan appealed to the Court of Appeals. On 3 September 1969, the Court of Appeals,
upon finding that no question of fact was involved in the appeal but only questions of law and
jurisdiction, certified the case to the Supreme Court for resolution of the legal issues involved in
the controversy.

Issue:

1. Whether the corporation (non-stock) may institute an action in behalf of its

individual members for the recovery of certain parcels of land allegedly owned by said
members, among others.
2. Whether the complaint filed by the corporation in behalf of its members may be
treated as a class suit
Held:

1. It is a doctrine well-established and obtains both at law and in equity that a corporation is a
distinct legal entity to be considered as separate and apart from the individual stockholders or
members who compose it, and is not affected by the personal rights, obligations and transactions
of its stockholders or members. The property of the corporation is its property and not that of the
stockholders, as owners, although they have equities in it. Properties registered in the name of
the corporation are owned by it as an entity separate and distinct from its members. Conversely,
a corporation ordinarily has no interest in the individual property of its stockholders unless
transferred to the corporation, "even in the case of a one-man corporation." The mere fact that
one is president of a corporation does not render the property which he owns or possesses the
property of the corporation, since the president, as individual, and the corporation are separate
similarities. Similarly, stockholders in a corporation engaged in buying and dealing in real estate
whose certificates of stock entitled the holder thereof to an allotment in the distribution of the land
of the corporation upon surrender of their stock certificates were considered not to have such
legal or equitable title or interest in the land, as would support a suit for title, especially against
parties other than the corporation. It must be noted, however, that the juridical personality of the
corporation, as separate and distinct from the persons composing it, is but a legal fiction
introduced for the purpose of convenience and to subserve the ends of justice. This separate
personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in
cases where it is used as a cloak or cover for fraud or illegality, or to work -an injustice, or where
necessary to achieve equity. It has not been claimed that the members have assigned or
transferred whatever rights they may have on the land in question to the corporation. Absent any
showing of interest, therefore, a corporation, has no personality to bring an action for and in
behalf of its stockholders or members for the purpose of recovering property which belongs to
said stockholders or members in their personal capacities.

2. In order that a class suit may prosper, the following requisites must be present: (1) that the
subject matter of the controversy is one of common or general interest to many persons; and (2)
that the parties are so numerous that it is impracticable to bring them all before the court. Here,
there is only one party plaintiff, and the corporation does not even have an interest in the subject
matter of the controversy, and cannot, therefore, represent its members or stockholders who
claim to own in their individual capacities ownership of the said property. Moreover, a class suit
does not lie in actions for the recovery of property where several persons claim partnership of
their respective portions of the property, as each one could alleged and prove his respective right
in a different way for each portion of the land, so that they cannot all be held to have identical title
through acquisition/prescription.

BOY SCOUTS OF THE PHILIPPINES, Petitioner, v. COMMISSION ON AUDIT, Respondent.

LEONARDO-DE CASTRO, J.:

FACTS:

COA issued Resolution No. 99-0115 on August 19, 1999 with the subject "Defining the Commissions
policy with respect to the audit of the Boy Scouts of the Philippines." In its whereas clauses, the COA
Resolution stated that the BSP was created as a public corporation under CA No. 111, as amended by
PD No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines v. NLRC, the Supreme
Court ruled that the BSP, as constituted under its charter, was a "government-controlled corporation
within the meaning of Article IX(B)(2)(1) of the Constitution"; and that "the BSP is appropriately
regarded as a government instrumentality under the 1987 Administrative Code." The COA
Resolution also cited its constitutional mandate under Section 2(1), Article IX (D).

COA General Counsel, Director Sunico wrote BSP that latter have to comply with COA Resolution No.
99-011, among which is to conduct an annual financial audit therein.

Upon the BSPs request, the audit was deferred for thirty (30) days. The BSP then filed a Petition for
Review with Prayer for Preliminary Injunction and/or Temporary Restraining Order before the COA.
This was denied by the COA in its questioned Decision, which held that the BSP is under its audit
jurisdiction. The BSP moved for reconsideration but this was likewise denied under its questioned
Resolution.

This led to the filing by the BSP of this petition for prohibition with preliminary injunction and
temporary restraining order against the COA.

ISSUE: Whether the BSP falls under the COAs audit jurisdiction.

HELD: The BSP is under the COAs audit jurisdiction.

POLITICAL LAW personality of BSP

We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987
Administrative Code.

It thus appears that the BSP may be regarded as both a "government controlled corporation with an
original charter" and as an "instrumentality" of the Government within the meaning of Article IX (B)
(2) (1) of the Constitution.
The existence of public or government corporate or juridical entities or chartered institutions by
legislative fiat distinct from private corporations and government owned or controlled corporation is
best exemplified by the 1987 Administrative Code cited above, which we quote in part:

Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:

(10) "Instrumentality" refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered institutions and government-
owned or controlled corporations. 


(12) "Chartered institution" refers to any agency organized or operating under a special charter, and
vested by law with functions relating to specific constitutional policies or objectives. This term
includes the state universities and colleges and the monetary authority of the State.

(13) "Government-owned or controlled corporation" refers to any agency organized as a stock or

non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one
(51) per cent of its capital stock: Provided, That government-owned or controlled corporations may
be further categorized by the Department of the Budget, the Civil Service Commission, and the
Commission on Audit for purposes of the exercise and discharge of their respective powers,
functions and responsibilities with respect to such corporations.

Assuming for the sake of argument that the BSP ceases to be owned or controlled by the
government because of reduction of the number of representatives of the government in the BSP
Board, it does not follow that it also ceases to be a government instrumentality as it still retains all
the characteristics of the latter as an attached agency of the DECS under the Administrative Code.
Vesting corporate powers to an attached agency or instrumentality of the government is not
constitutionally prohibited and is allowed by the above-mentioned provisions of the Civil Code and
the 1987 Administrative Code.

Historically, therefore, the BSP had been subjected to government audit in so far as public funds had
been infused thereto. However, this practice should not preclude the exercise of the audit
jurisdiction of COA, clearly set forth under the Constitution, which pertinently provides:
Section 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit,
and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds
and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned and controlled corporations with
original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that
have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and
universities; (c) other government-owned or controlled corporations with original charters and their
subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or
indirectly, from or through the Government, which are required by law of the granting institution to
submit to such audit as a condition of subsidy or equity.

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.

The Petition for prohibition is dismissed.

DANTE V. LIBAN v. RICHARD J. GORDON, GR No. 175352, 2009-07-15

Facts:
Issues:
whether the respondent holds the chairmanship of PNRC in an ex officio capacity.
may hold any other office or employment in the Government
Ruling:
the office of the Chairman of the Philippine National Red Cross is not a government
office or an office in a government-owned or controlled corporation for purposes of the
prohibition in Section 13, Article VI of the 1987 Constitution.
Principles:
a position held in an ex officio capacity does not violate the constitutional proscription on
the holding of multiple offices.
The prohibition against holding dual or multiple offices or employment under Section 13,
Article VII of the Constitution must not, however, be construed as applying to posts
occupied by the Executive officials specified therein without additional compensation... in
an ex officio capacity as provided by law and as required by the primary functions of said
officials' office. The reason is that these posts do not comprise "any other office" within
the contemplation of the constitutional prohibition but are properly an... imposition of
additional duties and functions on said officials.
The ex officio position being actually and in legal contemplation part of the principal
office, it follows that the official concerned has no right to receive additional
compensation for his services in the said position. The reason is that these services are
already... paid for and covered by the compensation attached to his principal office.
The term ex officio means "from office; by virtue of office." It refers to an "authority
derived from official character merely, not expressly conferred upon the individual
character, but rather annexed to the official position." Ex officio likewise... denotes an
"act done in an official character, or as a consequence of office, and without any other
appointment or authority other than that conferred by the office." An ex officio member of
a board is one who is a member by virtue of his title to a certain office, and... without
further warrant or appointment.
the office of the PNRC Chairman is not a government office or an office in a
government-owned or controlled corporation for purposes of the prohibition in Section
13, Article VI of the 1987 Constitution. However, since the PNRC Charter is void insofar
as it... creates the PNRC as a private corporation, the PNRC should incorporate under
the Corporation Code and register with the Securities and Exchange Commission if it
wants to be a private corporation.

Baluyot vs CA

Facts:

On March 13, 1992 petitioners as resident of Barangay Cruz represented by petitioner Timoteo
Baluyot et.al filed for specific performance and damages against UP respondent contending that
they have been in open, peaceful, adverse and continuous possession in the concept of an owner of
that parcel of land in Quezon City

In 1979, UP approved the donation directly to the said residents for about 9.2 hectares and that UP
backed out to proceed with the donation and the execution of the legal instrument was not
formalized.

Afterwards, the negotiation of donation was resumed thru the defendant Quezon City government
under the terms contrary to the right of the bonafide residents of the said barrio.
Petitioners apply for writ of injunction that was issued to restrain defendant UP from ejecting
plaintiffs and demolishing their improvements on the Riceland. Also, petitioners seek enforcement
of the Deed of donation made by UP defendant to the Quezon City government.

Under the said Deed of Donation the donee shall after lapse of 3 years transfer to the qualified
residents by way of donation the individual lots occupied by them.

However, UP President had failed to deliver the CTC to enable Quezon City government to register
the Deed of Donation.

The defendant UP had continuously, unlawfully refused to comply the obligation to deliver the title
despite several requests and conferences.

Revocation and reversion of a Deed of Donation without Judicial declaration is illegal and prejudicial
to the rights of the bonafide residents in Barangay Cruz na Ligas Quezon City.

By reason of deception, the residents reiterate the claim of ownership of 42 hectares which are
included in the tax declaration under the name of UP.

The plaintiff prayed for the declaration of the Deed of Donation as valid and subsisting.

The trial court rendered its decision that petitioners did not have a cause of action for specific
performance on the ground that the Deed of donation had already been revoked denying the
injunction.

However CA ruled in favor of UP

Issue: Whether petitioners has the right to seek enforcement of the Deed of Donation.

Ruling:

The Supreme Court ruled in the affirmative, because there is a stipulation pour autrui
Under the Civil Code Art 1311

(READ ART. 1311 ON REQUISITES OF STIPULATION POUR AUTRUI)

That if a contract should contain, some stipulation in favour of a 3rd person. He may demand its
fulfilment provided that he communicated his acceptance to the obligor before its revocation.

The contracting parties must have clearly and deliberately conferred a favor upon a 3rd person.

Allegations are sufficient to bring the petitioners action within 2nd paragraph of Art. 1311 on
stipulation pour autrui

1. That the Deed of donation contains some stipulation that Quezon city government is required
to transfer donation to the barrio residents.

2. Its stipulation is part of conditions and obligations imposed by UP as donor upon Quezon City
government donee.

3. The intent of the parties to the deed of donation was to confer a favour upon petitioners by
transferring lots occupied by them.

4. Conference were held between the parties to convince UP to surrender CTC to the city
government which donation had been accepted by petitioners by demanding fulfilment and that
private respondents were aware of such acceptance.

5. All allegations can be fairly inferred that neither of private respondents acted in
representation of the other, each private respondents had its own obligation in view of
conferring a favor upon petitioners.

Veterans Federation of the Philippines (VFP) v. Reyes

Petition for CertiorariPrayer to declare as VOID Department Circular no. 04 of theDEPARTMENT OF
NATIONAL DEFENSE (DND), datedJune 10, 2002VFP (petitioner)
-
A corporate body organized under RA 2640 (June 18,1960)Angelo T. Reyes (respondent)
-

Secretary of National Defense, who issues theASSAILED CN. 04Edgardo Batenga

-

Undersecretary, who was tasked by the respondent toconduct an EXTENSIVE MANAGEMENT

AUDITof the records of VFP.Emmanuel De Ocampo
-

Petitioner’s incumbent presidenta.

REYES wrote to DE OCAMPO informing thecorporation that they (DND) came across some legalbases
which tended to show that there is anorganizational and management RELATIONSHIPbetween VFP
and PH Veterans Bank.a.

(letter) VFP is under the control andsupervision of the Secretary of ND. [Sec 1,RA 2640]b.

(letter) VFP shall make and transmit to thePresident of PH or to the SEC of ND aREPORT of its
proceedings, including aFULL & COMPLETE report of receipts andexpenditures of whatever kind.
[Sec 12, RA2640]b.

DND Secretary (petitioner) issues the ASSAILEDDepartment CIRCULAR no. 4 entitled

“FurtherImplementing the Provisions of Sections 1 & 12 of RA 2640”a.

CIRCULAR NO. 4: Rules shall apply to themanagement and operations of VFP.b.

CIRCULAR NO. 4: Definition of terms,relationship between DND and VFP, thepreservation of the
records of all businesstransactions, VFP should submit ANNUAL& PERIODIC reports, and there are
attachedpenal provisions of the law uponnoncompliance.c.

Supervision and control

- authority to actdirectly whenever a specific function isentrusted by law or regulation to
asubordinate (approve, reverse or modify actsand decisionsd.

Power of control
– power to alter, modifyor nullify or set aside what a subordinateofficer had done in the
performance of hisdutiese.

Supervision
– power to see to it that theirsubordinate officers perform their dutiesf.

Veteran
– any person who rendered militaryservice in the land, see or air forces of thePH during wars or
military campaigns ORwho rendered military service in the AFPAND has been honorably discharged
orseparated after AT LEAST 6 years totalcumulative active service or soonerseparated due to death
or disability arisingfrom a wound or injury received or diseaseincurred in line of duty while in the
activeservice.c.
Secretary general of VFP sent a latter to respondentDND Secretary COMPLAINING about the
allegedBROADNESS of the scope of the MANAGEMENTAUDIT and requesting the SUSPENSION
thereof until such time that specific areas of the audit shallhave been agreed upon.d.

Undersecretary DENIED the letter (reason: there is atimeframe)e.

Petitioner filed this petition for Certiorari withProhibitiona.

TRO: implementing DND DEP CN. 4 andthe ongoing management audit of petitioner’s books of
account.b.

DC No. 4 be declared null and void forbeing ultra viresc.

Convert TRO into a permanent one

VFP’s CLAIM THAT IT IS A PRIVATE NON-GOVERNMENT CORPORATION.
-

VFP claims that DND Circular no. 4 is an INVALIDexercise of respondent Secretary’s control
andsupervision.
-

BECAUSE: It is not a public nor a governmentalentity but a PRIVATE ORGANIZATION.

Central ISSUE
: WON VFP is a private corporation.Supreme Court:
We are constrained to rule that VFP is infact a PUBLIC CORPORATION.
BECAUSE:a.

RA 2640 – “An act to create a PUBLICCORPORATION”b.

Any act or decisions of the FEDERATION shall besubject to the approval of Sec. of Defensec.

VFP required to SUBMIT annual reportsd.

VFP was listed as among the GOCC that will NOTbe privatizede.

“VFP is an adjunct of the government” (

Ang bagongbayani-OFW labor party v. COMELEC
)
VFP Supreme Court
- ConstitutionEXPLICITYLY prohibitthe regulation by speciallaws of privatecorporations
(exceptGOCC)- There is no challenge in thecreation of VFP in the petition asto permit this Court
fromconsidering tis nullity.1. VFP does not possessthe elements which wouldqualify it as a public
office1. Public office – an individual isinvested with some portion of theSOVEREIGN FUCNTIONS of

2
the govt, to be exercised by himfor the benefit of the public.SOVEREIGN FUNCTION – theprotection
of the interest of warveterans is not only meant topromote social justice, but is alsointended to
REWARD patriotism.Functions of VFP are executivefunctions. (Provide immediateand adequate care,
benefits andother forms of assistance to warveterans and their survivingspouses and orphans.)2.
VFP funds are notpublic fundsa.

No budgetaryappropriationsfrom DBMb.

VFP fundscome frommembershipdiesc.

Lease rentalsraised areprivate incharacter2. No budgetary appropriationsdoes not prove that it is a

privatecorporation.DBM’s mistake will not preventfuture budgetary appropriations tothe
VFP.Erroneous application of the lawby public officers does not bar asubsequent coorect application
of the law.VFP funds are used for publicpurposes.3. Juridical personality of the VFP emanates from
astatutory character. It is aprivate, civilian federationof VETERANSvoluntarily formed byveterans
themselves3. Membership of the VFP is notindividual membership of theaffiliate organizations,
butMERELY the aggregation of theheads of such affiliateorganizations.4. ADMIN Code of 1987does
not provide VFP asan attached agency4. ADMIN Code is not exclusive5. DBM declared that VFPis a
non-governmentorganization and issues acertificate5. DBM opinion suffers from lackof explanation
and justification inthe certification of non-receiptwhere said opinion was given.DBM did not furnish
explanationfor its opinion.

Petitioner is a public corporation

Assailed circular did not supplant nor modify theprovision of RA 2640

Secretary of National Defense – REQUIREsubmission of reports, documents and other

papersregarding any or all of the federation’s businessfunctions
Even assuming that the assailed circular was notpublished – VALIDITY is not affected

Falls under two of the exceptions

Circular is an INTERNAL REGULATION

MIA v. CA
So what happened here was.. the Officers of Paranaque City sent notices to MIAA due to real estate
tax delinquency. MIAA then settled some of the amount.

Now when MIAA failed to settle the entire amount, the officers of Paranaque city threatened to levy
and subject to auction the land and buildings of MIAA, which they did.

MIAA then sought for a Temporary Restraining Order (TRO) from the CA but failed to do so within
the 60 days reglementary period, so the petition was dismissed.

MIAA then sought for the TRO with the Supreme Court a day before the public auction, MIAA was
granted with the TRO but unfortunately the TRO was received by the Paranaque City officers 3 hours
after the public auction. See what I told you? See how original this case was? I mean what on earth
was MIAA doing?? Talk about all the right moves.

MIAA claims that although the charter provides that the title of the land and building are with MIAA
still the ownership is with the Republic of the Philippines. MIAA also contends that it is an
instrumentality of the government and as such exempted from real estate tax. So in other words,
MIAA's bone of contention and defense lie solely on the principle that the land and buildings of
MIAA are of public dominion and therefore cannot be subjected to levy and auction sale.
Let's see if it will hold.

On the other hand, the officers of Paranaque City claim that MIAA is a GOCC (government owned
and controlled corporation) therefore not exempted to real estate tax.

ISSUE:

Whether or not:

1. MIAA is an instrumentality of the government and not a government owned and controlled
corporation and as such exempted from tax.

2. The land and buildings of MIAA are part of the public dominion and thus cannot be the subject of
levy and auction sale.

RULING:

1. Under the Local government code, (GOCCs) government owned and controlled corporation are
NOT exempted from real estate tax.

MIAA is not a government owned and controlled corporation, for to become one MIAA should either
be a stock or non stock corporation. MIAA is not a stock corporation for its capital is not divided into
shares. It is not a non stock corporation since it has no members.

MIAA is an instrumentality of the government vested with corporate powers and government
functions. Under the civil code, property may either be under public dominion or private ownership.
Those under public dominion are owned by the State and are utilized for public use, public service
and for the development of national wealth. When properties under public dominion cease to be for
public use and service, they form part of the patrimonial property of the State.

2. The court held that the land and buildings of MIAA are part of the public dominion. Since the
airport is devoted for public use, for the domestic and international travel and transportation. Even
if MIAA charge fees, this is for support of its operation and for regulation and does not change the
character of the land and buildings of MIAA as part of the public dominion.

As part of the public dominion the land and buildings of MIAA are outside the commerce of man. To
subject them to levy and public auction is contrary to public policy. Unless the President issues a
proclamation withdrawing the airport land and buildings from public use, these properties remain to
be of public dominion and are inalienable. As long as the land and buildings are for public use the
ownership is with the Republic of the Philippines

MIAA wins this case. Well I guess it has after all the luxury to take lightly such period prescriptions in
this case. It knew very well from the start its contentions will be very strong.