CORPO – CHAPTER 3

COLLECTOR OF INTERNAL REVENUE VS. CLUB FILIPINO, INC. DE CEBU (5 SCRA 312;
May 31, 1968) – Herein respondent Club operates a clubhouse, a bowling alley, a golf
course and a bar restaurant where it sells wines, liquors, soft-drinks, meals and short
orders to its members and their guests. The bar and restaurant was a necessary
incident to the operation of the Club and its golf course is operated mainly with funds
derived from membership fees and dues. Whatever profits it had were used to defray
its overhead expenses and to improve its golf course. In 1951, as a result of capital
surplus arising from the revaluation of its real properties, the Club declared stock
dividends. In 1952, the BIR assessed percentage taxes on the gross receipt of the
Club’s bar and restaurant pursuant to Sec. 182 of the Tax Code: ―unless otherwise
provided, every person engaging in a business on which the percentage tax is imposed
shall pay in full a fixed annual tax of P10 for each calendar year or a fraction thereof‖
and under Sec. 191: ―keepers of restaurant, refreshment parlors and other eating
places shall pay a tax of 3% of their gross receipts.

ISSUE: WON the Club is liable for the assessment?

HELD: No. It has been held that the liability for fixed and percentage taxes does not
ipso facto attach by mere reason of the operation of a bar and restaurant. For the
liability to attach, the operator thereof must be engaged in the business as a bar
keeper and restauranteur. Business, in the ordinary sense, is restricted to activities or
affairs where profit is the purpose or livelihood is the motive, and the term business
when used without qualification, should be construed in its plain and ordinary
meaning; restricted to activities for profit or livelihood.

The fact that the Club derived profits from the operation of its bar and restaurant
does not necessarily convert it into a profit making enterprise. The bar and restaurant
are necessary adjunct of the Club to foster its purpose and the profits derived
therefrom are necessarily incidental to the primary object of developing and
cultivating sports for the healthful recreation and entertainment of the stockholders
and members. That a club makes profit does not make it a profit-making club.

ISSUE2: Is the Club a stock corporation?


HELD: No. The fact that the capital of the Club is divided into shares does not detract
from the finding of the trial court that it is not engaged in the business of operator of
bar and restaurant. What is determinative of whether or not the Club is engaged in
such business is its object or purpose as stated in its articles and by-laws.
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Moreover, for a stock corporation to exists, two requisites must be complied with: (1)
a capital stock divided into shares; and (2) an authority to distribute to the holders of
such shares, dividends or allotments of surplus profits on the basis of the shares held.
In the case at bar, nowhere it its AOI or by-laws could be found an authority for the
distribution of its dividends or surplus profits. Strictly speaking, it cannot therefore,
be considered as stock corporation, within the contemplation of the Corporation
Code.

PNOC-EDC VS. NLRC (201 SCRA 487; Sept. 11, 1991) – Danilo Mercado, an employee
of herein petitioner was dismissed on the ground of dishonesty and violation of
company rules and regulations. He filed an illegal dismissal complaint before herein
respondent NLRC who ruled on his favour, despite the motion to dismiss of petitioner
that the Civil Service Commission has jurisdiction over the case.

ISSUE: WON NLRC has jurisdiction over the case?

HELD: Yes. Employees of GOCCs, whether created by special law or formed as

subsidiaries under the Corporation Law are governed by the Civil Service Law and not
the Labor Code, under the 1973 Constitution has been supplanted by the present
Constitution.

Thus, under the present state of the law, the test in determining whether a GOCC is
subject to the Civil Service Law is the manner of its creation, such that government
corporations created by special charter are subject to its provisions while those
incorporated under the General Corporaiton Law are not within its coverage.
PNOC has its special charter, but its subsidiary, PNOC-EDC, having been incorporated
under the General Corporation Law was held to be a GOCC whose employees are
subject to the provisions of the Labor Code.

NATIONAL COAL COMPANY VS. COLLECTOR OF INTERNAL REVENUE

(146 Phil. 583) – Herein plaintiff brought an action for the purpose of recovering a
sum of money allegedly paid by it under protest to the herein defendant, a specific
tax on some tons of coal. It claimed exemption from taxes under Sec. 1469 of the
Administrative Code which provides that ―on all coal and coke shall be collected per
metric ton, fifty centavos‖. Of the 30,000 shares issued by the corporation, the
Philippine government is the owner of 29,809 or substantially all of the shares of the
company.

ISSUE: WON the plaintiff corporation is a public corporation?

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HELD: No. The plaintiff is a private corporation. The mere fact that the government
happens to be a majority stockholder does not make it a public corporation. As a
private corporation, it has no greater rights, powers and privileges than any other
corporation which might be organized for the same purpose under the Corporation
Law, and certainly, it was not the intention of the Legislature to give it a preference
or right or privilege over other legitimate private corporation in the mining of coal.
PRIVATE CORPORATIONS: those formed for some private purpose, benefit, aim or end.
They are created for the immediate benefit and advantage of the individuals or
members composing it and their franchise may be considered as privileges conferred
by the State to be exercised and enjoyed by them in the form of the corporation.