Stonehill v Diokno

(Entitlement of corporations to constitutional guarantees)

Facts:
1. Respondent (porsecution) made possible the issuance of 42 search warrants against the
petitioner and the corporation to search persons and premises of several personal
properties due to an alleged violation of Central Bank Laws, Tariff and Custom Laws,
Internal Revenue Code and the Revised Penal Code of the Philippines. As a results,
search and seizures were conducted in the both the residence of the petitioner and in the
corporation's premises.
2.The petitioner contended that the search warrants are null and void as their issuance
violated the Constitution and the Rules of Court for being general warrants. Thus, he
filed a petition with the Supreme Court for certiorari, prohibition, mandamus and
injunction to prevent the seized effects from being introduced as evidence in the
deportation cases against the petitioner. The court issued the writ only for those effects
found in the petitioner's residence.
Issue: Whether or not the petitioner can validly assail the legality of the search and
seizure in both premises?
RULING: No, he can only assail the search conducted in the residences but not those
done in the corporation's premises. The petitioner has no cause of action in the second
situation since a corporation has a personality separate and distinct from the personality
of its officers or herein petitioner regardless of the amount of shares of stock or interest of
each in the said corporation, and whatever office they hold therein. Only the party whose
rights has been impaired can validly object the legality of a seizure--a purely personal
right which cannot be exercised by a third party. The right to object belongs to the
corporation ( for the 1st group of documents, papers, and things seized from the offices
and the premises).

Bataan Shipyard Engineering Co., Inc. vs. PCGG (G.R. No. 75885 May 27, 1987)
(Entitlement of corporations to constitutional guarantees)
Facts:
Challenged in this special civil action of certiorari and prohibition by a private
corporation known as the Bataan Shipyard and Engineering Co., Inc. are: (1) Executive
Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino on February
28,1986 and March 12, 1986, respectively, and (2) the sequestration, takeover, and other
orders issued, and acts done, in accordance with said executive orders by the Presidential
Commission on Good Government and/or its Commissioners and agents, affecting said
corporation. The sequestration order issued on April 14, 1986 was addressed to three
of the agents of the Commission, ordering them to sequester several companies among
which is Bataan Shipyard and Engineering Co., Inc. On the strength of the above
sequestration order, several letters were sent to BASECO among which is that from
Mr.Jose M. Balde, acting for the PCGG, addressed a letter dated April 18, 1986 to the
President and other officers of petitioner firm, reiterating an earlier request for the
production of certain documents. The letter closed with the warning that if the documents
were not submitted within five days, the officers would be cited for "contempt in
pursuance with Presidential Executive Order Nos. 1 and 2." BASECO contends that its
right against self-incrimination and unreasonable searches and seizures had
been transgressed by the Order of April 18, 1986 which required it "to produce corporate
records from 1973 to 1986 under pain of contempt of the Commission if it fails to do so."
BASECO prays that the Court 1) declare unconstitutional and void Executive Orders
Numbered 1 and 2; 2) annul the sequestration order dated April- 14, 1986, and all other
orders subsequently issued and acts done on the basis thereof, inclusive of the takeover
order of July 14, 1986 and the termination of the services of the BASECO executives.
Issue:
Whether or not BASECOs right against self -incrimination and unreasonable searches
and seizures was violated.
Ruling:
No. The order to produce documents was issued upon the authority of Section 3 (e)of
Executive Order No. 1, treating of the PCGG's power to "issue subpoenas requiring *
*the production of such books, papers, contracts, records, statements of accounts and
other documents as may be material to the investigation conducted by the Commission. It
is elementary that the right against self-incrimination has no application to juridical
persons. While an individual may lawfully refuse to answer incriminating questions
unless protected by an immunity statute, it does not follow that a corporation, vested with
special privileges and franchises, may refuse to show its hand when charged with an
abuse of such privileges. Corporations are not entitled to all of the constitutional
protections, which private individuals have.
They are not at all within the privilege against self-incrimination; although this court
more than once has said that the privilege runs very closely with the 4th Amendment's
Search and Seizure provisions.

It is also settled that an officer of the company cannot refuse to produce its records in its
possession upon the plea that they will either incriminate him or may incriminate it."
The corporation is a creature of the state. It is presumed to be incorporated for the benefit
of the public. It received certain special privileges and franchises, and holds them subject
to the laws of the state and the limitations of its charter. Its powers are limited by law. It
can make no contract not authorized by its charter. Its rights to act as a corporation are
only preserved to it so long as it obeys the laws of its creation. There is a reserve right in
the legislature to investigate its contracts and find out whether it has exceeded its powers.
It would be a strange anomaly to hold that a state, having chartered a corporation to make
use of certain franchises, could not, in the exercise of sovereignty, inquire how these
franchises had been employed, and whether they had been abused, and demand the
production of the corporate books and papers for that purpose. The defense amounts to
this, that an officer of the corporation which is charged with a criminal violation of the
statute may plead the criminality of such corporation as a refusal to produce its books. To
state this proposition is to answer it.
While an individual may lawfully refuse to answer incriminating questions unless
protected by an immunity statute, it does not follow that a corporation, vested with
special privileges and franchises may refuse to show its hand when charged with an abuse
of such privileges.

PNB v CA G.R. No. L-27155 May 18, 1978

Lessons Applicable: Liability for Torts (Corporate Law)

FACTS:
Plaintiff, Philam gen as surety, issued a bond in favor of Tapnio, to secure the latters
obligation to PNB 2371.79 plus 12% interest. Philamgen paid the said amount to PNB
and seek indemnity from Tapnio. Tapnio refused to pay alleging that he was not liable to
the bank because due to the negligence of the latter the contract of lease w/Tuazon was
rescind which amounts to 2800. Tapnio mortgage his standing crops and sugar quota to
PNB. Tapnio agreed to leased the sugar quota, in excess of his need to Tuazon, which was
approved by the branch and vice president of the PNB in the amount of P2.80 per picul.
However, the banks board of directors disapproved the lease, stating that the
amount should be P3.00 per picul, its market value. Tuazon ask for reconsideration to the
board which was not acted by the board, so the lease was not consummated resulting to
the loss of P2,800, which could have been earned by Tapnio
ISSUE:
W/N PNB should be liable for tort?

HELD:
YES. affirmed.

While Tapnio had the ultimate authority of approving or disapproving the

proposed lease since the quota was mortgaged to the bank, it certainly CANNOT
escape its responsibility of observing, for the protection of the interest of Tapnio and
Tuazon, that the degree of care, precaution and vigilance which the circumstances
justly demand in approving or disapproving the lease of said sugar quota

Art. 21 of the Civil Code: any person who wilfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.

Whenever a tortuous act is committed by an officer or agent under the express

direction or authority of the stockholders or members acting as a body, or, generally,
from the directors as the governing body.

People v Tan Boon Kong

(Criminal liability of corporations)
Facts:
During 1924, in Iloilo, Tan Boon Kong as manager of the Visayan General Supply Co.
engaged in the purchase and sale of sugar, bayon, copra, and other native products and as
such must pay internal revenue taxes upon is sales. However, he only declared 2.3 million
in sales but in actuality the sales amounted to 2.5million, therefore failing to declare for
the purpose of taxation about 200,000, not having paid the government 2,000 in taxes.
Upon filing by the defendant of a demurrer, the lower court judge sustained said motion
on the ground that the offense charged must be regarded as committed by the corporation
and not its officials.
Issue:
The question to be decided is whether the information sets forth facts rendering the
defendant, as manager of the corporation liable criminally under section 2723 of Act No.
2711 for violation of section 1458 of the same act for the benefit of said corporation?
Held:
Apparently, the High Court noted that the lower court bbased the appealed ruling on the
ground that the offense charged must be regarded as committed by the corporation and
not by its officials or agents. This view is in direct conflict with the great weight of
authority. a corporation can act only through its officers and agent s, and where the
business itself involves a violation of the law, the correct rule is that all who participate in
it are liable (Grall and Ostrand's Case, 103 Va., 855, and authorities there cited.)
In case of State vs. Burnam (17 Wash., 199), the court went so far as to hold that the
manager of a diary corporation was criminally liable for the violation of a statute by the
corporation through he was not present when the offense was committed.
In the present case the information or complaint alleges that he defendant was the
manager of a corporation which was engaged in business as a merchant, and as such
manager, he made a false return, for purposes of taxation, of the total amount of sale
made by said false return constitutes a violation of law, the defendant, as the author of the
illegal act, must necessarily answer for its consequences, provided that the allegation are
proven.

MAMBULAO LUMBER COMPANY,

plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK and ANACLETOHERALDO
Deputy Provincial Sheriff of Camarines Norte, defendants-appellees.
G.R. No. L-22973,January 30, 1968 ANGELES,
(entitlement to moral damages)
FACTS:
On May 5, 1956 the plaintiff applied for an industrial loan of P155,000 (approved for a
loan of P100,000 only) with the Naga Branch of defendant PNB. To secure payment, the
plaintiff mortgaged parcel of land, together with the buildings and improvements existing
thereon, situated in the poblacion of Jose Panganiban (formerly Mambulao), province of
Camarines Norte. The PNB released from the approved loan the sum of P27,500, and
another release of P15,500.The plaintiff failed to pay the amortization on the amounts
released to and received by it. It was found that the plaintiff had already stopped
operation about the end of 1957 or early part of 1958.The unpaid obligation of the
plaintiff as of September 22, 1961, amounted to P57,646.59, excluding attorneys fees. A
foreclosure sale of the parcel of land, together with the buildings and improvements
thereon was, held on November 21, 1961, and the said property was sold to the PNB for
the sum of P56,908.00, subject to the right of the plaintiff to redeem the same within a
period of one year. The plaintiff sent a letter reiterating its request that the foreclosure
sale of the mortgaged chattels be discontinued on the grounds that the mortgaged
indebtedness had been fully paid and that it could not be legally effected at a place other
than the City of Manila. The trial court sentenced the Mambulao Lumber Company to
pay to the defendant PNB the sum of P3,582.52 with interest thereon at the rate of 6% per
annum. The plaintiff on appeal advanced that its total indebtedness to the PNB as of
November 21, 1961, was only P56,485.87 and not P58,213.51 as concluded by the court
a quo; hence, the proceeds of the foreclosure sale of its real property alone in the amount
of P56,908.00 on that date, added to the sum of P738.59 it remitted to the PNB thereafter
was more than sufficient to liquidate its obligation, thereby rendering the subsequent
foreclosure sale of its chattels unlawful; That for the acts of the PNB in proceeding with
the sale of the chattels, in utter disregard of plaintiffs vigorous opposition thereto, and in
taking possession thereof after the sale thru force, intimidation, coercion, and by
detaining its "man-in-charge" of said properties, the PNB is liable to plaintiff for damages
and attorney's fees.
ISSUE:
Whether or not PNB may be held liable to plaintiff Corporation for damages and
attorneys fees?

HELD:
Herein appellant's claim for moral damages, seems to have no legal or factual basis.
Obviously, an artificial person like herein appellant 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 aground 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 theplace agreed upon by the parties
in the mortgage contract.
But for the wrongful acts of herein appellee bank and the deputy 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. The circumstances of the case also warrant the award of
P3,000.00 as attorneys fees for herein appellant.

Asset Privatization Trust v CA

Facts:
In 1968, the government undertook to support the financing of Marinduque Mining and Industrial
Corporation (MMIC). The government then issued debenture bonds in favor of MMIC which
enable the latter to take out loans from the Development Bank of the Philippines (DBP) and the
Philippine National Bank (PNB). The loans were mortgaged by MMICs assets. In 1984 however,
MMICs indebtedness reached P13.7 billion and P8.7 billion to DPB and PNB respectively.
MMIC had trouble paying and this exposed the government, because of the debenture bonds, to a
P22 billion obligation.
In order to mitigate MMICs loan liability, a financial restructuring plan (FRP) was drafted in the
presence of MMICs representatives as well as representatives from DBP and PNB. The two
banks however never formally approved the said FRP. Eventually, the staggering loans became
overdue and PNB and DBP chose to foreclose MMICs assets, FRP no longer feasible at that
point. So the assets were foreclosed and were eventually assigned to the Asset Privatization Trust
(APT).
Later, Jesus Cabarrus, Sr., a stockholder of MMIC initiated a derivative suit against PNB and
DBP with APT being impleaded as the successor in interest of the two banks. The suit basically
questioned the foreclosure as Cabarrus asserted that the foreclosure was invalid because he
insisted that the FRP was adopted by PNB and DBP as a consequence of the presence of the
banks representatives when the said FRP was drafted. Cabarrus asserts that APT should restore
the assets to MMIC and that PNB and DBP should honor the FRP. The suit was filed in the RTC
of Makati but while the case was pending, the parties agreed to submit the case for arbitration.
Hence, Makati RTC dismissed the case upon motion of the parties.
The Arbitration Committee (AC) which heard the case ruled in favor of Cabarrus. The AC
granted Cabarrus prayer and at the same time awarded him P10 million in moral damages. Not
only that, the AC also awarded P2.5 billion in moral damages in favor of MMIC to be paid by the
government. APTs MFR was denied. Cabarrus then filed before the Makati RTC a motion to
confirm the arbitration award. APT opposed the same as it alleged that the motion is improper.
Makati RTC denied APTs opposition and confirmed the arbitration award. The Court of Appeals
affirmed the ruling of the RTC.

Issue:
Whether or not the award for damages for MMIC is warranted?

Held:
The award of damages in favor of MMIC is improper. First, it was not made a party to the
case. The derivative suit filed by Cabarrus failed to implead MMIC. So how can an award
for damages be awarded to a non-party? Second, even if MMIC, which is actually a real
party in interest, was impleaded, it is not entitled to moral damages. It is not yet a well
settled jurisprudence that corporations are entitled to moral damages. While the Supreme
Court in some cases did award certain corporations moral damages for besmirched
reputations, such is not applicable in this case because when the alleged wrongful
foreclosure was done, MMIC was already in bad standing hence it has no good
wholesome reputation to protect. So it could not be said that there was a reputation
besmirched by the act of foreclosure. Likewise, the award of moral damages in favor of
Cabarrus is invalid. He cannot have possibly suffered any moral damages because the
alleged wrongful act was committed against MMIC. It is a basic postulate that a
corporation has a personality separate and distinct from its stockholders. The properties
foreclosed belonged to MMIC, not to its stockholders. Hence, if wrong was committed in
the foreclosure, it was done against the corporation.

ABS CBN v CA
Lessons Applicable: Who may recover (Torts and Damages)
Laws Applicable: Articles 19, 20, and 21 of the Civil Code
FACTS:
In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby VIVA
gave ABS-CBN an exclusive right to exhibit some VIVA films. According to the
agreement, ABS-CBN shall have the right of first refusal to the next 24VIVA films for
TV telecast under such terms as may be agreed upon by the parties, however, such right
shall be exercised by ABS-CBN from the actual offer in writing. Sometime in December
1991, VIVA, through Vicente Del Rosario (Executive Producer), offered ABS-CBN
through VP Charo Santos-Concio, a list of 3 film packages from which ABS-CBN may
exercise its right of first refusal.ABS- CBN, however through Mrs. Concio, tick off only
10 titles they can purchase among which is the film Maging SinoKa Man which is one
of the subjects of the present case, therefore, it did not accept the said list as per the
rejection letter authored by Mrs. Concio sent to Del Rosario. Subsequently, Del Rosario
approached Mrs. Concio with another list consisting of 52 original movie titles and
104re-runs, proposing to sell to ABS-CBN airing rights for P60M (P30M in cash and
P30M worth of television spots). DelRosario and ABS- CBNs General Manager,
Eugenio Lopez III, to discuss the package proposal but to no avail. Four days later, Del
Rosario and Mr. Graciano Gozon, ) discussed the terms and conditions of VIVAs offer. A
day after that, Mrs. Concio sent the draft of the contract between ABS-CBN and VIVA
which contained a counter-proposal covering 53 films for P 35M. VIVAs Board of
Directors rejected the counter-proposal as it would not sell anything less than the package
of 104 films for P60M.After said rejection, ABS-CBN closed a deal with RBS including
the 14 films previously ticked off by ABS-CBN. Consequently, ABS-CBN filed a
complaint for specific performance with prayer for a writ of preliminary injunction and/or
TRO against RBS, VIVA and Del Rosario. RTC then enjoined the latter from airing the
subject films. RBS posted aP30M counter bond to dissolve the injunction. Later on, the
trial court as well as the CA dismissed the complaint holding that there was no meeting of
minds between ABS-CBN and VIVA, hence, there was no basis for ABS- CBNs
demand, furthermore, the right of first refusal had previously been exercised. Hence, the
present petition, ABS-CBN argued that an agreement was made during the meeting of
Mr. Lopez and Del Rosario jotted down on a napkin (this was never produced in court).
Moreover, it had yet to fully exercise its right of first refusal since only 10 titles were
chosen from the first list. As to actual, moral and exemplary damages, there was no clear
basis in awarding the same.
Issue:
WON a contract was perfected between ABS-CBN and VIVA and WON moral damages
may be awarded to corporation?
Held:

Both NO.
Contracts that are consensual in nature are perfected upon mere meeting of the minds.
Once there is concurrence between the offer and the acceptance upon the subject matter,
consideration, and terms of payment contract is produced. The offer must be certain. To
convert the offer into a contract, the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional, and without variance of
any sort from the proposal. A qualified acceptance, or one that involves a new proposal,
constitutes a counter-offer and is rejection of the original offer. Consequently, when
something is desired which is not exactly what is proposed in the offer, such acceptance
is not sufficient to generate consent because any modification or variation from the terms
of the offerannuls the offer.After Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN to
discuss the package of films, ABS-CBN, sent throughMs. Concio, counter-proposal in the
form a draft contract. This counter-proposal could be nothing less than the counter-offer
of Mr. Lopez during his conference with Del Rosario.
Clearly, there was no acceptance of VIVAs offer, for it was met by a counter-offer which
substantially varied the terms of the offer.
- The award of moral damages cannot be granted in favor of a corporation because, being
an artificial person and having existence only in legal contemplation, it has no feelings,
no emotions, no senses, It cannot, therefore, experience physical suffering and mental
anguish, which call be experienced only by one having a nervous system. A corporation
may recover moral damages if it "has a good reputation that is debased, resulting in social
humiliation" is an obiter dictum. On this score alone the award for damages must be set
aside, since RBS is a corporation.
- exemplary damages are imposed by way of example or correction for the public good,
in addition to moral, temperate, liquidated or compensatory damages. They are
recoverable in criminal cases as part of the civil liability when the crime was committed
with one or more aggravating circumstances in quasi-contracts, if the defendant acted
with gross negligence and in contracts and quasi-contracts, if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner
- It may be reiterated that the claim of RBS against ABS-CBN is not based on contract,
quasi-contract, delict, or quasi-delict, Hence, the claims for moral and exemplary
damages can only be based on Articles 19, 20, and 21 of the Civil Code.
There is no adequate proof that ABS-CBN was inspired by malice or bad faith. If
damages result from a person's exercise of a right, it is damnum absque injuria.

Jardine Davis vs CA
[GR No. 128066, June 19, 2000]
(Moral damages, besmirched reputation)
Facts:
During the height of the power crisis in 1992 which the country experiencing, PURE
FOODSCORPORATION (hereafter PUREFOODS) decided to install two (2) 1500 KW
generators in its food processing plant in San Roque, Marikina City to remedy and curtail
further losses due to the series of power failures. Sometime in November 1992, bidding
for the supply and installation of the generators was held. Several suppliers and dealers
were invited to attend a pre-bidding conference to discuss the conditions, propose scheme
and specifications that would best suit the needs of PUREFOODS. Out of the eight (8)
prospective bidders, FAR EAST MILLS SUPPLY CORPORATION (hereafter
FEMSCO)won the bid. Thereafter, in a letter dated 12 December 1992 addressed to
FEMSCO President Alfonso Po, PUREFOODS confirmed the award of the contract to
FEMSCO. Later, however, in a letter dated 22 December 1992, PUREFOODS
unilaterally canceled the award due to alleged "significant factors and re -bid of the
project." Consequently, FEMSCO protested the cancellation of the award. However, on
26 March 1993, before the matter could be resolved, PUREFOODS already awarded the
project and entered into a contract with JARDINE NELL, a division of Jardine Davies,
Inc.(hereafter JARDINE).Trial ensued and on 27 June 1994 the Regional Trial Court of
Pasig, Br. 68, granted among others the award for moral damages in the amount of
P2,000,000.00 each for JARDINE and PUREFOODS, respectively.
Issue:
Whether or not the award for moral damages is proper?
Ruling:
The award for moral damages to a corporation whose reputation has been besmirched is
proper. The controversy in this case lies in the consent - whether there was an acceptance
of the offer, and if so, if it was communicated, thereby there is a perfected contract.
Article 1326 of the Civil Code, provides that "advertisements for bidders are simply
invitations to make proposals," accordingly, the Terms and Conditions of the Bidding
disseminated by petitioner PUREFOODS constitutes the "advertisement" to bid on the
project. The bid proposals or quotations submitted by the prospective suppliers including
respondent FEMSCO, are the offer and, the reply of petitioner PUREFOODS, the
acceptance or rejection of the respective offers. The 12 December 1992 letter of
petitioner PUREFOODS to FEMSCO constituted acceptance of respondent
FEMSCOs offer as contemplated by law. Hence, by the unilateral cancellation of the
contract, the defendant (petitioner PURE FOODS) has acted with bad faith and this was
further aggravated by the subsequent inking of a contract between defendant Purefoods
and erstwhile co-defendant Jardine.

Manila Electric Co v TEAM Electronics

(Entitlement to Moral Damages)
Facts:
Respondent T.E.A.M. Electronics Corporation (TEC) was formerly known as NS
Electronics (Philippines), Inc. before 1982 and National Semi-Conductors (Phils.) before
1988. TEC is wholly owned by respondent Technology Electronics Assembly and
Management Pacific Corporation (TPC). On the other hand, petitioner Manila
Electric Company (Meralco) is a utility company supplying electricity in the Metro
Manila area. Petitioner and NS Electronics (Philippines), Inc., the predecessor-in-interest
of respondent TEC, were parties to two separate contracts denominated as Agreements
for the Sale of Electric Energy. Under the aforesaid agreements, petitioner undertook to
supply TECs building known as Dyna Craft International Manila (DCIM).
TEC, under its former name National Semi-Conductors (Phils.) entered into a Contract
of Lease with respondent Ultra Electronics Industries, Inc. (Ultra) for the use of the
formers DCIM building for a period of five years. Ultra was, however, ejected from the
premises by virtue of a court order, for repeated violation of the terms and conditions of
the lease contract.
A team of petitioners inspectors conducted a surprise inspection of the electric meters
installed at the DCIM building. The results of the inspection were reflected in the Service
Inspection Reportsprepared by the team. In a letter dated November 25, 1987, petitioner
informed TEC of the results of the inspection and demanded from the latter the payment
of P7,040,401.01 representing its unregistered consumption as a result of the alleged
tampering of the meters. TEC received the letters on January 7, 1988. Since Ultra was in
possession of the subject building during the covered period, TECs Managing Director,
Mr. Bobby Tan, referred the demand letter to Ultra which, in turn, informed TEC that its
Executive Vice-President had met with petitioners representative. Ultra further intimated
that assuming that there was tampering of the meters, petitioners assessment was
excessive.[10] For failure of TEC to pay the differential billing, petitioner disconnected
the electricity supply to the DCIM building on April 29, 1988.
Issue:
Whether or not herein TEAM Electronics (TEC) is entitled to moral damages?
Held:
The Court herein deems it proper to delete the award of moral damages. TECs claim was
premised allegedly on the damage to its goodwill and reputation.
As a rule, a corporation is not entitled to moral damages because, not being a natural
person, it cannot experience physical suffering or sentiments like wounded feelings,
serious anxiety, mental anguish and moral shock. The only exception to this rule is when
the corporation has a reputation that is debased, resulting in its humiliation in the
business realm. But in such a case, it is imperative for the claimant to present proof to
justify the award. It is essential to prove the existence of the factual basis of the damage
and its causal relation to petitioners acts. In the present case, the records are bereft of any
evidence that the name or reputation of TEC/TPC has been debased as a result of
petitioners acts. Besides, the trial court simply awarded moral damages in the dispositive
portion of its decision without stating the basis thereof.

Register of Deeds of Rizal vs Ung Sui Si Temple

(Nationality of Corporation)
Facts:
A Filipino citizen executed a deed of donation in favor of the Ung Siu Si Temple, an
unregistered religious organization that operated through three trustees all of Chinese
nationality. The Register of Deeds refused to record the deed of donation executed in due
form arguing that the Constitution provides that acquisition of land is limited to Filipino
citizens, or to corporations or associations at least 60% of which is owned by such
citizens.
ISSUE:
Whether a deed of donation of a parcel of land executed in favor of a religious
organization whose founder, trustees and administrator are Chinese citizens should be
registered or not.
RULING:
Sec. 5, Art. 13 of the Constitution provides that save in cases of hereditary succession, no
private agricultural land shall be transferred or assigned except to individuals,
corporations, or associations qualified to hold lands of the public domain in the
Philippines. The Constitution does not make any exception in favor of religious
associations
The fact that appellant has no capital stock does not exempt it from the Constitutional
inhibition, since its member are of foreign nationality. The purpose of the 60%
requirement is to ensure that corporations or associations allowed to acquire agricultural
lands or to exploit natural resources shall be controlled by Filipinos; and
the spirit of the Constitution demands that in the absence of capital stock, controlling
membership should be composed of Filipino citizens.
As to the complaint that the disqualification under Art. 13 of the Constitution violated the
freedom of religion, the Court was not convinced that land tenure is indispensable to the
free exercise and enjoyment of religious profession or worship.

Roman Catholic Admin of Davao vs Register of Deeds of Davao

(Nationality of a corporation)
Facts:
Mateo L. Rodis, a Filipino citizen executed a deed of sale of a parcel of land located in
Davao covered in favor of the Roman Catholic Apostolic Administrator of Davao Inc.,
which is a corporation sole organized and existing in accordance with Philippine Laws,
with Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent.
The Register of Deeds of Davao for registration, having in mind a previous resolution of
the CFI in Carmelite Nuns of Davao were made to prepare an affidavit to the effect that
60% of the members of their corp. were Filipino citizens when they sought to register in
favor of their congregation of deed of donation of a parcel of land, required it to submit a
similar affidavit declaring the same.
June 28, 1954: Roman in the letter expressed willingness to submit an affidavit but not in
the same tenor as the Carmelite Nuns because it had five incorporators while as a
corporation sole it has only one and it was ownership through donation and this was
purchased
LRC:
In view of the provisions of Section 1 and 5 of Article XIII of the Philippine Constitution,
the vendee was not qualified to acquire private lands in the Philippines in the absence of
proof that at least 60 per centum of the capital, property, or assets of the Roman Catholic
Apostolic Administrator of Davao, Inc., was actually owned or controlled by Filipino
citizens, there being no question that the present incumbent of the corporation sole was a
Canadian citizen ordered the Registered Deeds of Davao to deny registration of the deed
of sale in the absence of proof of compliance with such condition action for mandamus
was instituted by Roman alleging the land is held in true for the benefit of the Catholic
population of a place.
ISSUE:
W/N Roman is qualified to acquire private agricultural lands in the Philippines pursuant
to the provisions of Article XIII of the Constitution?
HELD:
YES. Register of Deeds of the City of Davao is ordered to register the deed of sale
A corporation sole consists of one person only, and his successors (who will always be
one at a time), in some particular station, who are incorporated by law in order to give
them some legal capacities and advantages, particularly that of perpetuity, which in their
natural persons they could not have had.
In this sense, the king is a sole corporation; so is a bishop, or dens, distinct from their
several chapters
corporation sole
- composed of only one persons, usually the head or bishop of the diocese, a unit which is
not subject to expansion for the purpose of determining any percentage whatsoever
- only the administrator and not the owner of the temporalities located in the territory
comprised by said corporation sole and such temporalities are administered for and on
behalf of the faithful residing in the diocese or territory of the corporation sole

- has no nationality and the citizenship of the incumbent and ordinary has nothing to do
with the operation, management or administration of the corporation sole, nor effects the
citizenship of the faithful connected with their respective dioceses or corporation sole.
Constitution demands that in the absence of capital stock, the controlling membership
should be composed of Filipino citizens. (Register of Deeds of Rizal vs. Ung Sui Si
Temple)
> undeniable proof that the members of the Roman Catholic Apostolic faith within the
territory of Davao are predominantly Filipino citizens
> presented evidence to establish that the clergy and lay members of this religion fully
covers the percentage of Filipino citizens required by the Constitution
> fact that the law thus expressly authorizes the corporations sole to receive bequests or
gifts of real properties (which were the main source that the friars had to acquire their big
haciendas during the Spanish regime), is a clear indication that the requisite that bequests
or gifts of real estate be for charitable, benevolent, or educational purposes, was, in the
opinion of the legislators, considered sufficient and adequate protection against the
revitalization of religious landholdings.
as in respect to the property which they hold for the corporation, they stand in position of
TRUSTEES and the courts may exercise the same supervision as in other cases of trust.

People vs Quasha
(nationality of a corporation)
Facts:
On November 4,1946, the Pacific Airways Corporation registered its articles of
incorporation with the Securities and Exchanged Commission. The article were prepared
and the registration was effected by the accused (William Quasha), who was in fact the
organizer of the corporation. The article stated that the primary purpose of the
corporation was to carry on the business of a common carrier by air, land or water.
Herein accused, a member of the Philippine bar, was charged in the Court of First
Instance of Manila with the crime of falsification of a public and commercial document
in that, having been entrusted with the preparation and registration of the article of
incorporation of the Pacific Airways Corporation, a domestic corporation organized for
the purpose of engaging in business as a common carrier, he caused it to appear in said
article of incorporation that one Arsenio Baylon, a Filipino citizen, had subscribed to and
was the owner of 60.005 per cent of the subscribed capital stock of the corporation when
in reality, as the accused well knew, such was not the case, the truth being that the owner
of the portion of the capital stock subscribed to by Baylon and the money paid thereon
were American citizen whose name did not appear in the article of incorporation, and that
the purpose for making this false statement was to circumvent the constitutional mandate
that no corporation shall be authorize to operate as a public utility in the Philippines
unless 60 per cent of its capital stock is owned by Filipinos.
Issue:
Whether or not herein Quasha is liable for falisification?
Held:
The Court rules in the negative and notes the falsification imputed in the accused in the
present case consists in not disclosing in the articles of incorporation that Baylon was a
mere trustee (or dummy as the prosecution chooses to call him) of his American coincorporators, thus giving the impression that Baylon was the owner of the shares
subscribed to by him which, as above stated, amount to 60.005 per cent of the sub-scribed
capital stock.
Contrary to the lower court's assumption, the Constitution does not prohibit the mere
formation of a public utility corporation without the required formation of Filipino
capital. What it does prohibit is the granting of a franchise or other form of authorization
for the operation of a public utility to a corporation already in existence but without the
requisite proportion of Filipino capital. This is obvious from the context, for the
constitutional provision in question qualifies the terms " franchise", "certificate", or "any
other form of authorization" with the phrase "for the operation of a public utility," thereby
making it clear that the franchise meant is not the "primary franchise" that invest a body
of men with corporate existence but the "secondary franchise" or the privilege to operate
as a public utility after the corporation has already come into being.

For the mere formation of the corporation such revelation was not essential, and the
Corporation Law does not require it. Defendant was, therefore, under no obligation to
make it. In the absence of such obligation and of the alleged wrongful intent, defendant
cannot be legally convicted of the crime with which he is charged.

Filipinas Compania de Seguros vs Christern

Facts:
Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania
de Seguros to cover merchandise contained in a building. During the Japanese military
occupation, this same merchandise and the building were burned, so Huenefeld filed a
claim under the policy.
However, Filipinas Compania de Seguros refused to pay alleging that the policy had
ceased to be in force when the United States declared war against Germany. Filipinas
Compania contended that although organized and created under Philippine laws,
Huenefeld is a German subject, and hence, a public enemy, since majority of its
stockholders are Germans. On the other hand, Filipinas Compania is under American
jurisdiction.
The Director of Bureau of Financing, Philippine Executive Commission ordered Filipinas
Compania to pay, so Filipinas Compania did pay. The case at bar is about the recovery of
that sum paid.
ISSUES:
1. Whether or not Christern Huenefeld is a German subject.
2. Whether the fire insurance policy is enforceable against an enemy state.
HELD:
1. There is no question that majority of the stockholders of the respondent corporation
were German subjects. This being so, we have to rule that said respondent became an
enemy corporation upon the outbreak of the war between the United States and Germany.
2. The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that
"anyone except a public enemy may be insured." It stands to reason that an insurance
policy ceases to be allowable as soon as an insured becomes a public enemy.
The respondent having become an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine
corporation) had ceased to be valid and enforcible, and since the insured goods were
burned after December 10, 1941, and during the war, the respondent was not entitled to
any indemnity under said policy from the petitioner. However, elementary rules of justice
(in the absence of specific provision in the Insurance Law) require that the petitioner
should return the premium paid by the respondent for the period covered by its policy
from December 11, 1941.

Palting vs San Jose Petroleum

Facts:
In 1956, San Jose Petroleum, Inc. (SJP), a mining corporation organized under the laws
of Panama, was allowed by the Securities and Exchange Commission (SEC) to sell its
shares of stocks in the Philippines. Apparently, the proceeds of such sale shall be invested
in San Jose Oil Company, Inc. (SJO), a domestic mining corporation. Pedro Palting
opposed the authorization granted to SJP because said tie up between SJP and SJO is
violative of the constitution; that SJO is 90% owned by SJP; that the other 10% is owned
by another foreign corporation; that a mining corporation cannot be interested in another
mining corporation. SJP on the other hand invoked that under the parity rights agreement
(Laurel-Langley Agreement), SJP, a foreign corporation, is allowed to invest in a
domestic corporation.
Issue:
Whether or not the "tie-up" between the respondent SAN JOSE PETROLEUM, a foreign
corporation, and SAN JOSE OIL COMPANY, INC., a domestic mining corporation, is
violative of the Constitution, the Laurel-Langley Agreement, the Petroleum Act of 1949,
and the Corporation Law?
Held:
The motion of respondent to dismiss this appeal, is denied and the orders of the Securities
and Exchange Commissioner, allowing the registration of Respondent's securities and
licensing their sale in the Philippines are hereby set aside.
The relationship of these corporations involved or affected in this case is admitted and
established through the papers and documents which are parts of the records: SAN JOSE
OIL, is a domestic mining corporation, 90% of the outstanding capital stock of which is
owned by respondent SAN JOSE PETROLEUM, a foreign (Panamanian) corporation,
the majority interest of which is owned by OIL INVESTMENTS, Inc., another foreign
(Panamanian) company. This latter corporation in turn is wholly (100%) owned by
PANTEPEC OIL COMPANY, C.A., and PANCOASTAL PETROLEUM COMPANY,
C.A., both organized and existing under the laws of Venezuela.
is herein respondent SAN JOSE PETROLEUM an American business enterprise entitled
to parity rights in the Philippines? The answer must be in the negative, for the following
reasons:
Firstly It is not owned or controlled directly by citizens of the United States, because it
is owned and controlled by a corporation, the OIL INVESTMENTS, another foreign
(Panamanian) corporation.
Secondly Neither can it be said that it is indirectly owned and controlled by American
citizens through the OIL INVESTMENTS, for this latter corporation is in turn owned and

controlled, not by citizens of the United States, but still by two foreign (Venezuelan)
corporations, the PANTEPEC OIL COMPANY and PANCOASTAL PETROLEUM.
Thirdly Although it is claimed that these two last corporations are owned and
controlled respectively by 12,373 and 9,979 stockholders residing in the different
American states, there is no showing in the certification furnished by respondent that the
stockholders of PANCOASTAL or those of them holding the controlling stock, are
citizens of the United States.
Fourthly Granting that these individual stockholders are American citizens, it is yet
necessary to establish that the different states of which they are citizens, allow Filipino
citizens or corporations or associations owned or controlled by Filipino citizens, to
engage in the exploitation, etc. of the natural resources of these states (see paragraph 3,
Article VI of the Laurel-Langley Agreement, supra). Respondent has presented no proof
to this effect.

Phil. Society for prevention of cruelty to Animals vs COA

(classification of corporation)
Facts:
The petitioner was incorporated as a juridical entity over one hundred years ago by
virtue of Act No. 1285, enacted on January 19, 1905, by the Philippine Commission. The
petitioner, at the time it was created, was composed of animal aficionados and animal
propagandists. The objects of the petitioner, as stated in Section 2 of its charter, shall be
to enforce laws relating to cruelty inflicted upon animals or the protection of animals in
the Philippine Islands, and generally, to do and perform all things which may tend in any
way to alleviate the suffering of animals and promote their welfare.
For the purpose of enhancing its powers in promoting animal welfare and enforcing laws
for the protection of animals, the petitioner was initially imbued under its charter with the
power to apprehend violators of animal welfare laws. In addition, the petitioner was to
share one-half (1/2) of the fines imposed and collected through its efforts for violations of
the laws related thereto. As originally worded, Sections 4and 5 of Act No. 1285 provide:
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.
Issue:
Whether or not PSPCA is a governmental entity which is subject to the audit of the COA?
Held:
The Supreme Court held that the Charter Test cannot be applied in case herein.
Essentially, the Charter Test as it stands today provides that the test to determine whether
a corporation is government owned or controlled or private in nature is simple: it is
created by its own charter for the exercise of a public function, or by incorporation under
the general corporation law? Those with special charters are government corporations
subject to its provisions, and its employees are under the jurisdiction of the Civil Service
Commission, and are compulsory members of the Government Service Insurance System.
Authorities are of the view that the purpose alone of the corporation cannot betaken 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 latters 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.

Funa vs MECO
Facts:
The aftermath of the Chinese civil war left the country of China with two (2)
governments in a stalemate espousing competing assertions of sovereignty.3 On one hand
is the communist Peoples Republic of China (PROC) which controls the mainland
territories, and on the other hand is the nationalist Republic of China (ROC) which
controls the island of Taiwan. For a better part of the past century, both the PROC and
ROC adhered to a policy of "One China" i.e., the view that there is only one legitimate
government in China, but differed in their respective interpretation as to which that
government is.
Under the Joint Communiqu, the Philippines categorically stated its adherence to the
One China policy of the PROC.
The MECO12 was organized on 16 December 1997 as a non-stock, non-profit
corporation under Batas Pambansa Blg. 68 or the Corporation Code.
From the moment it was incorporated, the MECO became the corporate entity "entrusted"
by the Philippine government with the responsibility of fostering "friendly" and
"unofficial" relations with the people of Taiwan, particularly in the areas of trade,
economic cooperation, investment, cultural, scientific and educational exchanges.
On 23 August 2010, petitioner sent a letter18 to the COA requesting for a "copy of the
latest financial and audit report" of the MECO invoking, for that purpose, his
"constitutional right to information on matters of public concern." The petitioner made
the request on the belief that the MECO, being under the "operational supervision" of the
Department of Trade and Industry (DTI), is a government owned and controlled
corporation (GOCC) and thus subject to the audit jurisdiction of the COA.
According to petitioner, the MECO possesses all the essential characteristics of a GOCC
and an instrumentality under the Executive Order No. (EO) 292, s. 1987 or the
Administrative Code: it is a non-stock corporation vested with governmental functions
relating to public needs; it is controlled by the government thru a board of directors
appointed by the President of the Philippines; and while not integrated within the
executive departmental framework, it is nonetheless under the operational and policy
supervision of the DTI.
Issue:
Whether or not MECO is a government owned and controlled corporation, that is subject
to the audit of the COA?

Held:
The Court grants the petition in part. Further it is declared that the MECO is a nongovernmental entity. However, under existing laws, the accounts of the MECO pertaining
to the "verification fees" it collects on behalf of the DOLE as well as the fees it was
authorized to collect under Section 2(6) of EO No. 15, s. 2001, are subject to the audit
jurisdiction of the COA. Such fees pertain to the government and should be audited by
the COA.
The Court further reviews how the Administration Code defines a GOCC: Governmentowned 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: x x x.
The above definition is, in turn, replicated in the more recent Republic Act No. 10149 or
the GOCC Governance Act of 2011, to wit:92
(o) Government-Owned or -Controlled Corporation (GOCC) refers to any agency
organized as a stock or non-stock corporation, vested with functions relating to public
needs whether governmental or proprietary in nature, and owned by the Government of
the Republic of the Philippines directly or through its instrumentalities either wholly or,
where applicable as in the case of stock corporations, to the extent of at least a majority
of its outstanding capital stock: x x x.
GOCCs, therefore, are "stock or non-stock" corporations "vested with functions relating
to public needs" that are "owned by the Government directly or through its
instrumentalities."93 By definition, three attributes thus make an entity a GOCC: first, its
organization as stock or non-stock corporation;94 second, the public character of its
function; and third, government ownership over the same.
Possession of all three attributes is necessary to deem an entity a GOCC.
The MECO Is Organized as a Non-Stock Corporation
The organization of the MECO as a non-stock corporation cannot at all be denied.
Records disclose that the MECO was incorporated as a non-stock corporation under the
Corporation Code on 16 December 1977.
The MECO Is Not a Government Instrumentality; It Is a Sui Generis Entity.
The categorical exclusion of the MECO from a GOCC makes it easier to exclude the
same from any other class of government instrumentality. The other government
instrumentalities i.e., the regulatory agencies, chartered institutions and GCE/GICP are
all, by explicit or implicit definition, creatures of the law.110 The MECO cannot be any
other instrumentality because it was, as mentioned earlier, merely incorporated under the
Corporation Code.

Hence, unless its legality is questioned, and in this case it was not, the fact that the
MECO is operating under the policy supervision of the DTI is no longer a relevant issue
to be reckoned with for purposes of this case.
For whatever it is worth, however, and without justifying anything, it is easy enough for
this Court to understand the rationale, or necessity even, of the executive branch placing
the MECO under the policy supervision of one of its agencies.
It is evident, from the peculiar circumstances surrounding its incorporation, that the
MECO was not intended to operate as any other ordinary corporation. And it is not.

CIR v Club Filipino

(Classification of Corporations)
Facts:
As found by the Court of Tax Appeals, the "Club Filipino, Inc. de Cebu," (Club, for
short), is a civic corporation organized under the laws of the Philippines with an original
authorized capital stock of P22,000.00, which was subsequently increased to
P200,000.00, among others, to it.
The Club owns and operates a club house, a bowling alley, a golf course (on a lot leased
from the government), and a bar-restaurant where it sells wines and liquors, soft drinks,
meals and short orders to its members and their guests. The bar-restaurant was a
necessary incident to the operation of the club and its golf-course. The club is operated
mainly with funds derived from membership fees and dues. Whatever profits it had, were
used to defray its overhead expenses and to improve its golf-course.
In 1952, a BIR agent discovered that the Club has never paid percentage tax on the gross
receipts of its bar and restaurant, although it secured B-4, B-9(a) and B-7 licenses.
Issue:
Whether or not herein Club Filipino is to be considered a stock corporation?
Held:
The claim that Club Filipino is a stock corporation is unmeritorious.
The facts that the capital stock of the respondent 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. It is a familiar rule
that the actual purpose is not controlled by the corporate form or by the commercial
aspect of the business prosecuted, but may be shown by extrinsic evidence, including the
by-laws and the method of operation. From the extrinsic evidence adduced, the Tax Court
concluded that the Club is not engaged in the business as a barkeeper and restaurateur.
Moreover, for a stock corporation to exist, two requisites must be complied with, to wit:
(1) a capital stock divided into shares and (2) an authority to distribute to the holders of
such shares, dividends or allotments of the surplus profits on the basis of the shares held
(sec. 3, Act No. 1459). In the case at bar, nowhere in its articles of incorporation or bylaws could be found an authority for the distribution of its dividends or surplus profits.
Strictly speaking, it cannot, therefore, be considered a stock corporation, within the
contemplation of the corporation law.
A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic,
non-profit, nonstock organizations, unless the intent to the contrary is manifest and
patent" (Collector v. BPOE Elks Club, et al., supra), which is not the case in the present
appeal.