IV.

CLASSIFICATIONS OF CORPORATIONS

1. In Relation to the State:

(a) Public Corporation
(b) Quasi-public Corporation
(c) Private Corporation

Section 3, Act No. 1459 - The Corporation Law

Corporations may be public or private. - Public corporations are those formed or organized for the government of a portion of the
state. Private corporations are those formed for some private purpose, benefit, aim, or end, as distinguished from public
corporations, which have for their purpose the general good and welfare. Private corporations are divided into stock corporations
and nonstock corporations. Corporations which have a capital stock divided into shares and are authorized to distribute to the
holders of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock corporations. All other
private corporations are nonstock corporations.

Marilao Water Consumers Association v. IAC, 201 SCRA 437, 1991

Facts: Pursuant to the provisions of P.D. 168 (Provincial Water Utilities Act of 1973), Marilao Water District (MWD) was formed by
Resolution of the Sangguniang Bayan of the Municipality of Marilao dated September 18, 1982, which resolution was thereafter
forwarded to the LWUA and "duly filed" by it on October 4, 1982 after ascertaining that it conformed to the requirements of the law.

Marilao Waters Consumers Association, Inc. (MWCA), a non-stock, non-profit corporation, filed a petition before the RTC of Malolos,
Bulacan claiming that the creation of the water district is defective and illegal. Impleaded as respondents were the Marilao Water
District, as well as the Municipality of Marilao, Bulacan; its Sangguniang Bayan; and Mayor Nicanor V. GUILLERMO. The petition prayed
for the dissolution of the water district.

MWD filed its Answer with an affirmative defences that the RTC lacked jurisdiction over the subject matter since the water district’s
dissolution fell under the original and exclusive jurisdiction of the SEC.

MWCA countered thatsince the Marilao Water District had not been organized under the Corporation Code, the SEC had no
jurisdiction over a proceeding for its dissolution and that under Section 45 of PD 198, the proceeding to determine if the dissolution of
the water district is for the best interest of the people, is within the competence of a regular court of justice.

RTC dismissed the MWCA’s suit ruling that it is the SEC which has exclusive and original jurisdiction over the case.

Issue: Which triburial has jurisdiction over the dissolution of a water district organized and operating as a quasi-public corporation
under the provisions of Presidential Decree No. 198, as amended: the Regional Trial Court, or the Securities & Exchange Commission.

Held: The present case does not fall within the limited jurisdiction of the SEC, but within the general jurisdiction of RTCs.

PD 198 authorizes the formation, lays down the powers and functions, and governs the operation of water districts throughout the
country; it is "the source of authorization and power to form and maintain a (water) district." Once formed, it says, a district is subject
to its provisions and is not under the jurisdiction of any political subdivision.

The juridical entities thus created and organized under PD 198 are considered quasi-public corporations, performing public services
and supplying public wants.

The juridical entities known as water districts created by PD 198, although considered as quasi-public corporations and authorized to
exercise the powers, rights and privileges given to private corporations under existing laws are entirely distinct from corporations
organized under the Corporation Code, PD 902-A, as amended.

The Corporation Code has nothing whatever to do with their formation and organization, all the terms and conditions for their
organization and operation being particularly spelled out in PD 198.

The resolutions creating them, their charters, in other words, are filed not with the Securities and Exchange Commission but with the
LWUA. It is these resolutions qua charters, and not articles of incorporation drawn up under the Corporation Code, which set forth the
name of the water districts, the number of their directors, the manner of their selection and replacement, their powers, etc.

The SEC which is charged with enforcement of the Corporation Code as regards corporations, partnerships and associations formed or
operating under its provisions, has no power of supervision or control over the activities of water districts.
The "Provincial Water Utilities Act of 1973" has a specific provision governing dissolution of water districts created thereunder This is
Section 45 of PD 198. Under this provision, it is the LWUA which is the administrative body involved in the voluntary dissolution of a
water district; it is with it that the resolution of dissolution is filed, not the Securities and Exchange Commission. And this provision is
evidently quite distinct and different from those on dissolution of corporations "formed or organized under the provisions of the
Corporation Code under which dissolution may be voluntary (by vote of the stockholders or members), generally effected by the filing
of the corresponding resolution with the Securities and Exchange Commission, or involuntary, commenced by the filing of a verified
complaint also with the SEC.
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Although described as quasi-public corporations, and granted the same powers as private corporations, water districts are not really
corporations. They have no incorporators, stockholders or members, who have the right to vote for directors, or amend the articles of
incorporation or by-laws, or pass resolutions, or otherwise perform such other acts as are authorized to stockholders or members of
corporations by the Corporation Code. In a word, there can be no such thing as a relation of corporation and stockholders or members
in a water district for the simple reason that in the latter there are no stockholders or members. Between the water district and those
who are recipients of its water services there exists not the relationship of corporation-and-stockholder, but that of a service agency
and users or customers.

There can therefore be no such thing in a water district as "intra-corporate or partnership relations, between and among stockholders,
members or associates (or) between any or all of them and the corporation, partnership or association of which they are stockholders,
members or associates, respectively," within the contemplation of Section 5 of the Corporation Code so as to bring controversies
involving them within the competence and cognizance of the SEC.

National Coal Co. v.Collector of Internal Revenue, 46 Phil. 583, 1924

Doctrine: The plaintiff is a private corporation. The mere fact that the Government happens to the majority stockholder does not
make it a public corporation. Act No. 2705, as amended by Act No. 2822, makes it subject to all of the provisions of the Corporation
Law, in so far as they are not inconsistent with said Act (No. 2705). As a private corporation, it has no greater rights, powers or
privileges than any other corporation which might be organized for the same purpose under the Corporation Law, and certainly it was
not the intention of the Legislature to give it a preference or right or privilege over other legitimate private corporations in the mining
of coal.

Facts: The National Coal Company was created by Act No. 2705 and was granted the general powers of a corporation “and such other
powers as may be necessary to enable it to prosecute the business of developing coal deposits in the Philippine Island and of mining,
extracting, transporting and selling the coal contained in said deposits.” Two months later, the Philippine Legislature passed Act No.
2719 to provide for the leasing and development of coal lands in the Philippine Islands. Seven months after the company’s creation,
the National Coal Company took possession of coal lands within a reservation in the Zambaonaga Peninsula. Plaintiff harvested coal on
public lands between 1920 and 1922 collecting a total of 24,089.3 tons of coal.

Appellant CIR then subjected the mined coal to a specific tax of P0.50 per metric ton under Act 1496 which subjected coal collected by
non-owners of land for P12,044.68. Plaintiff claimed a refund from the CIR arguing exemption from taxes under the provision of
sections 14 and 15 of Act No. 2719, and prayed for a judgment ordering the defendant to refund to the plaintiff said sum of P12,
044.68, with legal interest from the date of the presentation of the complaint, and costs against the defendant.

The trial court decided in favor of Plaintiff extending the definition of ownership and should be understood to mean “lands held in
lease or usufruct” and should be taxed only P0.04 per ton of coal under Section 15 of Act No. 2719.

Issue: Whether the plaintiff is subject to the taxes under section 15 of Act No. 2719, or to the specific taxes under section 1496 of the
Administrative Code?

Held: Plaintiff is liable for the taxes imposed under Section 1496 of the Administrative Code.
Plaintiff is neither a lessee nor an owner of coal-bearing lands, and is, therefore, not subject to any other provisions of Act No. 2719. It
having been demonstrated that the plaintiff has produced coal in the Philippine Islands and is not a lessee or owner of the land from
which the coal was produced, we are clearly of the opinion, and so hold, that it is subject to pay the internal revenue tax under the
provisions of section 1496 of the Administrative Code, and is not subject to the payment of the internal revenue tax under section 15
of Act No. 2719, nor to any other provisions of said Act.

Cervantes v. Auditor General, 91 Phil. 359, 1952

Facts: This is a petition for review of a decision of Auditor General denying petitioner’s claim for quarters allowance as manager of the
National Abaca and other Fibers Corp. (NAFCO). Petitioner was the manager of NAFCO in 1949 with an annual salary of P15,000.00. By
a resolution of the Board of Directors, he was granted quarter allowance of not exceeding P400 a month effective the first of
that month. This allowance was disapproved by the Central Committee of the government enterprise council on the strength
of the recommendation of the NAFCO auditor, concurred in by the Auditor General,
(1) that quarters allowance constituted additional compensation prohibited by the charter of the NAFCO, which fixes the
salary of the general manager thereof at the sum not to exceed P15,000 a year, and
(2) that the precarious financial condition of the corporation did not warrant the granting of such allowance.

Petitioner asked the Control Committee to reconsider its action and approve his claim for allowance which was again referred by the
Control Committee to the auditor General for comment. The Committee in turn referred it to the NAFCO auditor, who reaffirmed his
previous recommendation and emphasized that the fact that the corporation's finances had not improved.

Hence, this petition for review.

Issue: Whether or not RA No. 51 is null and void.

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Held:
NEGATIVE. The rule is that so long as the Legislature "lays down a policy and a standard is established by the statute" there is no
undue delegation. Republic Act No. 51 in authorizing the President of the Philippines, among others, to make reforms and
changes in government- controlled corporations, lays down a standard and policy that the purpose shall be to meet the exigencies
attendant upon the establishment of the free and independent government of the Philippines and to promote simplicity, economy
and efficiency in their operations. The standard was set and the policy fixed. The President had to carry the mandate.
This he did by promulgating the executive order in question which, tested by the rule above cited, does not constitute an undue
delegation of legislative power.

NOTE: RA No. 51 authorizes the President of the Philippines, among other things, to effect such reforms and changes in government
owned and controlled corporations for the purpose of promoting simplicity, economy and efficiency in their operation.

Benguet Electrical Cooperative, Inc. v. NLRC, 209 SCRA 55, 1992

Subject: The date of actual receipt by the court, and not the date of delivery to the private carrier, is deemed the date of filing of the
pleading; 10-day reglementary period to perfect an appeal is mandatory and jurisdictional in nature; Suspension and termination of
services imposed by the Board members upon Cosalan was illegal; Corporate officers and directors are not personally liable for
consequences of their corporate acts unless they act with malice and bad faith; Section 31 of the Corporation Code is applicable to
cooperatives; Board members solidarily liable with Beneco for the monetary award; Beneco has right to be reimbursed by the Board
members for any amount it is compelled to pay

Facts:
Peter Cosalan was the General Manager of Benguet Electric Cooperative, Inc. (Beneco), having been elected as such by the Board of
Directors of Beneco, effective October 16, 1982.

Cosalan received two Audit Memorandums (No. 1 and 2) issued by the Commission on Audit (COA). These Memorandums noted that
the audit and treatment of cash advances, per diems and allowances received by officers and employees of Beneco were not in
compliance with the guidelines of the National Electrification Administration (NEA). The Audit Memorandums directed the taking of
immediate remedial action in conformity with existing NEA regulations.

Cosalan initiated implementation of the remedial measures recommended by the COA. The members of the Board of Beneco reacted
by adopting a series of resolutions during the period from 23 June to 24 July 1984. These Board Resolutions abolished the housing and
other allowances of Cosalan, reduced his salary and struck his name out as a principal signatory to transactions of Beneco.

The Beneco Board adopted another series of resolutions which resulted in the ouster of Cosalan as General Manager as well as the
withholding of his salary and allowances.

Cosalan nevertheless continued to work as General Manager of Beneco, in the belief that he could be suspended or removed only by
duly authorized officials of NEA, in accordance with provisions of P.D. No. 269, as amended by P.D. No. 1645 (NEA Charter).
Accordingly, on 5 October and 10 November 1984, Cosalan requested Beneco to release the compensation due him. Beneco, acting
through its Board members, denied the written request of Cosalan.

Cosalan then filed a complaint with the National Labor Relations Commissions (NLRC) against member of the Beneco Board,
challenging the legality of the Board resolutions which ordered his suspension and termination from the service and demanding
payment of his salaries and allowances.

In the course of the proceedings before the Labor Arbiter, Cosalan filed a motion for reinstatement which was granted. Beneco
complied with the Labor Arbiter's order through Resolution No. 10-90.

The Labor Arbiter rendered a decision (a) confirming Cosalan's reinstatement; (b) ordering payment to Cosalan of his backwages and
allowances by Beneco and the Board members, jointly and severally, for a period of three (3) years without deduction, and (3)
ordering the individual Board members to pay, jointly and severally, to Cosalan moral damages of P50,000 plus attorney's fees of ten
percent (10%) of the award.

The Board members appealed to the NLRC. However, petitioner Beneco did not appeal, but moved to dismiss the appeal filed by the
Board members and for execution of judgment. By this time, petitioner Beneco had a new set of directors.

The NLRC modified the award rendered by the Labor Arbiter by declaring that petitioner Beneco alone, and not the Board members,
was liable for Cosalan's backwages and allowances, and by ruling that there was no legal basis for the award of moral damages and
attorney's fees made by the Labor Arbiter.

In the present Petition for Certiorari, Beneco (through its new set of directors), allege that the NLRC had acted with grave abuse of
discretion amounting to lack of jurisdiction when (a) it gave due course to the Board members' appeal although such appeal had been
filed out of time, and (b) it held Beneco alone liable for payment of the backwages and allowances due to Cosalan and releasing the
Board members from liability therefor.

Held:
The date of actual receipt by the court, and not the date of delivery to the private carrier, is deemed the date of filing of the pleading

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 1. Beneco Board members received the decision of the Labor Arbiter on 21 April 1988. Accordingly, and because 1 May 1988
was a legal holiday, they had only up to 2 May 1988 within which to perfect their appeal by filing their memorandum on
appeal. The Board members' memorandum on appeal was posted by registered mail on 3 May 1988 and received by the
NLRC the following day. Clearly, the memorandum on appeal was filed out of time.

2. The Board members insist that their Memorandum on Appeal was filed on time because it was delivered for mailing on May
1, 1988 to the Garcia Communications Company, a licensed private letter carrier. The Board members in effect contend that
the date of delivery to Garcia Communications was the date of filing of their appeal memorandum.

3. The established rule is that transmission through a private carrier or letter-forwarded - instead of the Philippine Post Office -
is not a recognized mode of filing pleadings. The established rule is that the date of delivery of pleadings to a private letter-
forwarding agency is not to be considered as the date of filing thereof in court, and that in such cases, the date of actual
receipt by the court, and not the date of delivery to the private carrier, is deemed the date of filing of the pleading.

10-day reglementary period to perfect an appeal is mandatory and jurisdictional in nature

4. There was no reason grounded upon substantial justice and the prevention of serious miscarriage of justice that might have
justified the NLRC in disregarding the ten-day reglementary period for perfection of an appeal by the Board members.
Accordingly, the applicable rule was that the ten-day reglementary period to perfect an appeal is mandatory and
jurisdictional in nature, that failure to file an appeal within the reglementary period renders the assailed decision final and
executory and no longer subject to review. The Board members had thus lost their right to appeal from the decision of the
Labor Arbiter and the NLRC should have forthwith dismissed their appeal memorandum.

Suspension and termination of services imposed by the Board members upon Cosalan was illegal
5. The appeal was likewise quite bereft of merit. Both the Labor Arbiter and the NLRC had found that the indefinite suspension
and termination of services imposed by the Board members upon Cosalan was illegal.

6. First, the suspension of Cosalan was continued long after expiration of the period of thirty (30) days, which is the maximum
period of preventive suspension that could be lawfully imposed under Section 4, Rule XIV of the Omnibus Rules Implementing
the Labor Code.

7. Second, Cosalan had been deprived of procedural due process by the Board members. He was never informed of the charges
raised against him and was given no opportunity to meet those charges and present his side of whatever dispute existed; he
was kept totally in the dark as to the reason or reasons why he had been suspended and effectively dismissed from the
service of Beneco.

8. Third, the Board members failed to adduce any cause which could reasonably be regarded as lawful cause for the suspension
and dismissal of Cosalan from his position as General Manager of Beneco. Cosalan was, in other words, denied due process
both procedural and substantive.

9. Fourth, the Board members failed to obtain the prior approval of the NEA of their suspension and dismissal of Cosalan, which
prior approval was required under the subsisting loan agreement between the NEA and Beneco. The requisite NEA approval
was subsequently sought by the Board members but no NEA approval was granted.

Corporate officers and directors are not personally liable for consequences of their corporate acts unless they act with malice and bad
faith
10. The Board members and officers of a corporation who purport to act for and in behalf of the corporation, who keep within
the lawful scope of their authority in so acting, and act in good faith, do not become liable, whether civilly or otherwise, for
the consequences of their acts. Those acts, when they are such a nature and are done under such circumstances, are
properly attributed to the corporation alone and no personal liability is incurred by such officers and Board members.

11. The NLRC clearly overlooked or disregarded the circumstances under which the Board members had in fact acted in the
instant case. The record showed strong indications that the Board members had illegally suspended and dismissed Cosalan
precisely because he was trying to remedy the financial irregularities and violations of NEA regulations which the COA had
brought to the attention of Beneco. The conclusion reached by the NLRC that "the records do not disclose that the individual
Board members were motivated by malice or bad faith" flew in the face of the evidence of record. At the very least, a strong
presumption had arisen, which it was incumbent upon the Board members to disprove, that they had acted in reprisal
against respondent Cosalan and in an effort to suppress knowledge about and remedial measures against the financial
irregularities the COA Audits had unearthed. That burden the Board members did not discharge.

Section 31 of the Corporation Code is applicable to cooperatives

12. Section 31 of the Corporation Code is applicable in respect of Beneco and other electric cooperatives similarly situated:

Sec. 31. Liability of directors, trustees or officers. Directors or trustees who willfully and knowingly vote for or assent
to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs
of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or
trustees shall be jointly liable and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons . . ..

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 13. Section 4 of the Corporation Code renders the provisions of that Code applicable in a supplementary manner to all
corporations, including those with special or individual charters so long as those provisions are not inconsistent with such
charters. We find no provision in P.D. No. 269, as amended, that would exclude expressly or by necessary implication the
applicability of Section 31 of the Corporation Code in respect of members of the boards of directors of electric cooperatives.
Indeed, P.D. No. 269 expressly describes these cooperatives as "corporations"

Board members solidarily liable with Beneco for the monetary award
14. The Board members were guilty of "gross negligence or bad faith in directing the affairs of the corporation" in enacting the
series of resolutions noted earlier indefinitely suspending and dismissing Cosalan from the position of General Manager of
Beneco. The Board members, in doing so, acted beyond the scope of their authority as such Board members. The dismissal of
an officer or employee in bad faith, without lawful cause and without procedural due process, is an act that is contra legem.
It cannot be supposed that members of boards of directors derive any authority to violate the express mandates of law or
the clear legal rights of their officers and employees by simply purporting to act for the corporation they control.

Beneco has right to be reimbursed by the Board members for any amount it is compelled to pay
15. Not only are Beneco and the Board members properly held solidarily liable for the awards made by the Labor Arbiter, but
also that Beneco which was controlled by and which could act only through the Board members, has a right to be reimbursed
for any amounts that Beneco may be compelled to pay to respondent Cosalan. Such right of reimbursement is essential of
the innocent members of Beneco are not to be penalized for the acts of respondent Board members which were both done
in bad faith and ultra vires. The liability -generating acts here are the personal and individual acts of respondent Board
members, and are not properly attributed to Beneco itself.

Camporedondo v. NLRC, 312 SCRA 47, 1999

Facts: Petitioner Baltazar Camporedondo was employed by the Philippine National Red Cross since 1980 until his early retirement on
15 Dec 1995. On 21 Nov 1995, PNRC Secretary General Celso Samson required petitioner to restitute the total sum of ₱135,927.78
representing cash shortages, technical shortage and unremitted collection. On 28 May 1996, petitioner filed with the NLRC a
complaint for illegal dismissal, damages and underpayment of wages against the PNRC and its key officials.

Issue: WON the PNRC is a GOCC.

Held: YES. The PNRC is a GOCC with an original charter under RA No. 95, as amended. 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. The PNRC was not impliedly converted to a private sector corporation simply
because its character was amended to vest in it the authority to secure loans, be exempted from payment of all its duties, taxes, fees,
and other charges of all kinds on all importations and purchases for its exclusive use, on donations for its disaster relief work and
other services and in its benefits and fund raising drives, among others.

Feliciano v. COA, 419 SCRA 363, 2004

Facts: COA assessed Leyte Metropolitan Water District (LMWD) auditing fees. Petitioner Feliciano, as General Manager of LMWD,
contended that the water district could not pay the said fees on the basis of Sections 6 and 20 of P.D. No. 198 as well as Section 18 of
R.A. No. 6758. He primarily claimed that LMWD is a private corporation not covered by COA's jurisdiction. Petitioner also asked for
refund of all auditing fees LMWD previously paid to COA. COA Chairman denied petitioner’s requests. Petitioner filed a motion for
reconsideration which COA denied. Hence, this petition.

Issue: Whether a Local Water District (“LWD”) created under PD 198, as amended, is a government-owned or controlled corporation
subject to the audit jurisdiction of COA or a private corporation which is outside of COA’s audit jurisdiction.

Held: Petition lacks merit. The Constitution under Sec. 2(1), Article IX-D and existing laws mandate COA to audit all government
agencies, including government-owned and controlled corporations with original charters. An LWD is a GOCC with an original charter.

The Constitution recognizes two classes of corporations. The first refers to private corporations created under a general law. The
second refers to government-owned or controlled corporations created by special charters. Under existing laws, that general law is
the Corporation Code.

Obviously, LWD’s are not private corporations because they are not created under the Corporation Code. LWD’s are not registered
with the Securities and Exchange Commission. Section 14 of the Corporation Code states that “all corporations organized under this
code shall file with the SEC articles of incorporation x x x.” LWDs have no articles of incorporation, no incorporators and no
stockholders or members. There are no stockholders or members to elect the board directors of LWDs as in the case of all
corporations registered with the SEC. The local mayor or the provincial governor appoints the directors of LWDs for a fixed term of
office. The board directors of LWDs are not co-owners of the LWDs. The board directors and other personnel of LWDs are government
employees subject to civil service laws and anti-graft laws. Clearly, an LWD is a public and not a private entity, hence, subject to COA’s
audit jurisdiction.