KILOSBAYAN v GUINGONA

In 1993, the Philippine Charity Sweepstakes Office decided to put up an on-line lottery system which
will establish a national network system that will in turn expand PCSOs source of income.
A bidding was made. Philippine Gaming Management Corporation (PGMC) won it. A contract of
lease was awarded in favor of PGMC.
Kilosbayan opposed the said agreement between PCSO and PGMC as it alleged that:
1. PGMC does not meet the nationality requirement because it is 75% foreign owned (owned by a
Malaysian firm Berjaya Group Berhad);
2. PCSO, under Section 1 of its charter (RA 1169), is prohibited from holding and conducting lotteries in
collaboration, association or joint venture with any person, association, company or entity;
3. The network system sought to be built by PGMC for PCSO is a telecommunications network. Under the
law (Act No. 3846), a franchise is needed to be granted by the Congress before any person may be
allowed to set up such;
4. PGMCs articles of incorporation, as well as the Foreign Investments Act (R.A. No. 7042) does not allow
it to install, establish and operate the on-line lotto and telecommunications systems.
PGMC and PCSO, through Teofisto Guingona, Jr. and Renato Corona, Executive Secretary and
Asst. Executive Secretary respectively, alleged that PGMC is not a collaborator but merely a
contractor for a piece of work, i.e., the building of the network; that PGMC is a mere lessor of the
network it will build as evidenced by the nature of the contract agreed upon, i.e., Contract of Lease.
ISSUE: Whether or not Kilosbayan is correct.
HELD: Yes, but only on issues 2, 3, and 4.
1. On the issue of nationality, it seems that PGMCs foreign ownership was reduced to 40% though.
2. On issues 2, 3, and 4, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, prohibits the PCSO from
holding and conducting lotteries in collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign. There is undoubtedly a collaboration
between PCSO and PGMC and not merely a contract of lease. The relations between PCSO and PGMC
cannot be defined simply by the designation they used, i.e., a contract of lease. Pursuant to the wordings
of their agreement, PGMC at its own expense shall build, operate, and manage the network
system including its facilities needed to operate a nationwide online lottery system. PCSO bears no risk
and all it does is to provide its franchise in violation of its charter. Necessarily, the use of such franchise
by PGMC is a violation of Act No. 3846

Entitlement to Constitutional Guarantees
Philex Mining v CIR 2008 case
Stonehill v Diokno 1967
Bache and Co. v Ruiz 1971
Bataan Shipyard and Engineering v PCGG 1987
Liability for Torts
PNB v CA 1978
Naguiat v NLRC 1997
Aratea v Suico 2007
PHILEX MINING v CIR
Facts: Petitioner Philex entered into an agreement with Baguio Gold Mining Corporation for the
PHILEX to manage the latters mining claim known as the Sto. Nino Mine. The parties
agreement was denominated as Power of Attorney.

Par.5 of the agreement stipulates: Whenever the MANAGERS (PHILEX) shall deem it necessary and
convenient in connection with the MANAGEMENT of the STO. NINO MINE, they may transfer their own
funds or property to the Sto. Nino PROJECT,

Since LOSSES accrued, PHILEX withdrew as manager of the mine. The parties executed a
Compromise Dation in Payment, where Baguios debt amounted to Php. 112M. Petitioner
deducted said amount from its gross income in its annual tax income return as loss on
the settlement of receivables from Baguio Gold against reserves and allowances. BIR
disallowed the amount as deduction for bad debt. Petitioner claims that it entered a contract
of agency evidenced by the power of attorney executed by them and the advances made by
petitioners is in the nature of a loan and thus can be deducted from its gross income.
Court of Tax Appeals (CTA) rejected the claim and held that it is a partnership rather than an
agency. CA affirmed CTA

Petitioner insists that in determining the nature of its business relationship with Baguio Gold,
dont rely on Power of Attorney, but also on the subsequent Compromise with Dation in Payment
and Amended Compromise with Dation in Payment that the parties executed in 1982. These
documents, allegedly evinced the parties of loan and establish creditor-debtor relationship between them.

Issue: Whether or not it is an agency.

Held: No. The lower courts correctly held that the Power of Attorney (PA) is
the instrument material that is material in determining the true nature of the business
relationship between petitioner and Baguio. An examination of the said PA reveals that a
partnership or joint venture was indeed intended by the parties. While a corporation like the
petitioner cannot generally enter into a contract of partnership unless authorized by law or its
charter, it has been held that it may enter into a joint venture, which is akin to a particular
partnership. The PA indicates that they intended to create a PAT and establish a common fund
for the purpose. They also had a joint interest in the profits of the business as shown by the 50-
50 sharing of income of the mine.
Moreover, in an agency coupled with interest, it is the agency that cannot be revoked or
withdrawn by the principal due to an interest of a third party that depends upon it or the mutual
interest of both principal and agent. In this case the non-revocation or non-withdrawal under the
PA applies to the advances made by the petitioner who is the agent and not the principal under
the contract. Thus, it cannot be inferred from the stipulation that it is an agency.
AN ACT CREATING THE COOPERATIVE DEVELOPMENT AUTHORITY TO PROMOTE THE VIABILITY AND GROWTH OF
COOPERATIVES AS INSTRUMENTS OF EQUITY, SOCIAL JUSTICE AND ECONOMIC DEVELOPMENT, DEFINING ITS
POWERS, FUNCTIONS AND RESPONSIBILITIES, RATIONALIZING GOVERNMENT POLICIES AND AGENCIES WITH
COOPERATIVE FUNCTIONS, SUPPORTING COOPERATIVE DEVELOPMENT, TRANSFERRING THE REGISTRATION AND
REGULATION FUNCTIONS OF EXISTING GOVERNMENT AGENCIES ON COOPERATIVES AS SUCH AND
CONSOLIDATING THE SAME WITH THE AUTHORITY, APPROPRIATING FUNDS THEREFOR, AND FOR OTHER
PURPOSES
Section 3. Powers, Functions and Responsibilities. - The Authority shall have the following powers,
functions and responsibilities:
(a) Formulate, adopt and implement integrated and comprehensive plans and programs on cooperative
development consistent with the national policy on cooperatives and the overall socioeconomic
development plans of the Government;
(b) Develop and conduct management and training programs upon request of cooperatives that will
provide members of cooperatives with the entrepreneurial capabilities, managerial expertise, and
technical skills required for the efficient operation of their cooperatives and inculcate in them the true spirit
of cooperativism and provide, when necessary, technical and professional assistance to ensure the
viability and growth of cooperatives with special concern for agrarian reform, fishery and economically
depressed sectors;
(c) Support the voluntary organization and consensual development of activities that promote cooperative
movements and provide assistance towards upgrading managerial and technical expertise upon request
of the cooperatives concerned;
(d) Coordinate the efforts of the local government units and the private sector in promotion, organization,
and development of cooperatives;
(e) Register all cooperatives and their federations and unions, including their division, merger,
consolidation, dissolution or liquidation. It shall also register the transfer of all or substantially all of their
assets and liabilities and such other matters as may be required by the Authority;
(f) Require all cooperatives, their federations and unions to submit their annual financial statements, duly
audited by certified public accountants, and general information sheets;
(g) Order the cancellation after due notice and hearing of the cooperative's certificate of registration for
non-compliance with administrative requirements and in cases of voluntary dissolution;
(h) Assist cooperatives in arranging for financial and other forms of assistance under such terms and
conditions as are calculated to strengthen their viability and autonomy;
(i) Establish extension offices as may be necessary and financially viable to implement this Act. Initially,
there shall be extension offices in the Cities of Dagupan, Manila, Naga, Iloilo, Cebu, Cagayan de Oro and
Davao;
(j) Impose and collect reasonable fees and charges in connection with the registration of cooperatives;
(k) Administer all grants and donations coursed through the Government for cooperative development,
without prejudice to the right of cooperatives to directly receive and administer such grants and donations
upon agreement with the grantors and donors thereof;
Smith, Bell & Company (Ltd.) vs. Natividad, Collector of Customs of the port of Cebu, resp.

This is a petition for a writ of mandamus filed by the petitioner to compel Natividad to issue a
certificate of Philippine registry in favor of the former for its motor vessel Bato.

Facts:
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the Philippine
Islands. A majority of its stockholders are British subjects. It is the owner of a motor vessel
known as the Bato built for it in the Philippine Islands in 1916, of more than fifteen tons gross
The Bato was brought to Cebu in the present year for the purpose of transporting plaintiff's
merchandise between ports in the Islands. Application was made at Cebu, the home port of the
vessel, to the Collector of Customs for a certificate of Philippine registry. The Collector refused
to issue the certificate, giving as his reason that all the stockholders of Smith, Bell & Co., Ltd.,
were not citizens either of the United States or of the Philippine Islands. The instant action is
the result.
Counsel argues that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection of the
laws because it, in effect, prohibits the corporation from owning vessels, and because
classification of corporations based on the citizenship of one or more of their stockholders is
capricious, and that Act No. 2761 deprives the corporation of its property without due process
of law because by the passage of the law company was automatically deprived of every
beneficial attribute of ownership in the Bato and left with the naked title to a boat it could not
use .

Issue:
Whether the Government of the Philippine Islands, through its Legislature, can deny the
registry of vessel in its coastwise trade to corporations having alien stockholders

Ruling:
Yes. Act No. 2761 provides:
Investigation into character of vessel. No application for a certificate of Philippine register
shall be approved until the collector of customs is satisfied from an inspection of the vessel that
it is engaged or destined to be engaged in legitimate trade and that it is of domestic ownership
as such ownership is defined in section eleven hundred and seventy-two of this Code.
Certificate of Philippine register. Upon registration of a vessel of domestic ownership, and of
more than fifteen tons gross, a certificate of Philippine register shall be issued for it. If the
vessel is of domestic ownership and of fifteen tons gross or less, the taking of the certificate of
Philippine register shall be optional with the owner.
While Smith, Bell & Co. Ltd., a corporation having alien stockholders, is entitled to the
protection afforded by the due-process of law and equal protection of the laws clause of the
Philippine Bill of Rights, nevertheless, Act No. 2761 of the Philippine Legislature, in denying to
corporations such as Smith, Bell &. Co. Ltd., the right to register vessels in the Philippines
coastwise trade, does not belong to that vicious species of class legislation which must always
be condemned, but does fall within authorized exceptions, notably, within the purview of the
police power, and so does not offend against the constitutional provision.
Harry Stonehill,Robert Brooks, John Brooks and Karl Beck, petitioner
vs.
Hon. Jose Diokno as Sec of Justice, Prosecutors and Judges, respondents

This is a petition for certiorari, prohibition, mandamus and injunction to restrain the
respondent-Prosecutors, their agents and/or representatives from using the effects seized by
the police officers from the petitioners offices and residences by virtue of search warrants.

Facts:
Upon application of the Respondent-Prosecutors and Respondent-Judges, a total of 42 search
warrants were issued on different dates against petitioners and/or the corporations of which
they were officers, directing any peace officer to search the petitioners and/or the premises of
their offices, warehouses and/or residences and to seize and take possession of records to all
business transactions.
Petitioners questioned the validity of the search warrants and alleged that they are null and
void, mainly, because they do not describe with particularity the books and things to be seized.
Respondents alleged that the said search warrants are valid and issued in accordance with law,
that the defects, if any, were cured by petitioners consent

Issue:
Whether the petitioners can assail the legality of the search warrants and of the seizures made
in pursuance thereof

Ruling:
No. The petitioners herein and the corporations of which they are officers have personalities
separate and distinct from each other.
It is well settled that the legality of a seizure can be contested only by the party whose rights
have been impaired thereby, and that the objection to an unlawful search and seizure is purely
personal and cannot be availed of by third parties. Consequently, petitioners herein may not
validly object to the use in evidence against them of the documents, papers and things seized
from the offices and premises of the corporations adverted to above, since the right to object
to the admission of said papers in evidence belongs exclusively to the corporations, to whom
the seized effects belong, and may not be invoked by the corporate officers in proceedings
against them in their individual capacity.
Moreover, the Government's action in gaining possession of papers belonging to the
corporation did not relate to nor did it affect the personal defendants. If these papers were
unlawfully seized and thereby the constitutional rights of or any one were invaded, they were
the rights of the corporation and not the rights of the other defendants.






BACHE v RUIZ 1971

On 24 Feb 1970, Commissioner Vera of Internal Revenue, wrote a letter addressed to J Ruiz
requesting the issuance of a search warrant against petitioners for violation of Sec 46(a) of the
NIRC, in relation to all other pertinent provisions thereof, particularly Sects 53, 72, 73, 208 and 209,
and authorizing Revenue Examiner de Leon make and file the application for search warrant which
was attached to the letter. The next day, de Leon and his witnesses went to CFI Rizal to obtain the
search warrant. At that time J Ruiz was hearing a certain case; so, by means of a note, he instructed
his Deputy Clerk of Court to take the depositions of De Leon and Logronio. After the session had
adjourned, J Ruiz was informed that the depositions had already been taken. The stenographer read
to him her stenographic notes; and thereafter, J Ruiz asked respondent Logronio to take the oath
and warned him that if his deposition was found to be false and without legal basis, he could be
charged for perjury. J Ruiz signed de Leons application for search warrant and Logronios
deposition. The search was subsequently conducted.

ISSUE: Whether or not there had been a valid search warrant.

HELD: The SC ruled in favor of Bache on three grounds.
1. J Ruiz failed to personally examine the complainant and his witness.
Personal examination by the judge of the complainant and his witnesses is necessary to enable him
to determine the existence or non-existence of a probable cause.
2. The search warrant was issued for more than one specific offense.
The search warrant in question was issued for at least four distinct offenses under the Tax Code. As
ruled in StonehillSuch is the seriousness of the irregularities committed in connection with the
disputed search warrants, that this Court deemed it fit to amend Section 3 of Rule 122 of the former
Rules of Court that a search warrant shall not issue but upon probable cause in connection with one
specific offense. Not satisfied with this qualification, the Court added thereto a paragraph, directing
that no search warrant shall issue for more than one specific offense.
3. The search warrant does not particularly describe the things to be seized.

The documents, papers and effects sought to be seized are described in the Search Warrant
Unregistered and private books of accounts (ledgers, journals, columnars, receipts and
disbursements books, customers ledgers); receipts for payments received; certificates of stocks and
securities; contracts, promissory notes and deeds of sale; telex and coded messages; business
communications, accounting and business records; checks and check stubs; records of bank
deposits and withdrawals; and records of foreign remittances, covering the years 1966 to 1970.
The description does not meet the requirement in Art III, Sec. 1, of the Constitution, and of Sec. 3,
Rule 126 of the Revised Rules of Court, that the warrant should particularly describe the things to be
seized.

A search warrant may be said to particularly describe the things to be seized when the description
therein is as specific as the circumstances will ordinarily allow or when the description expresses a
conclusion of fact not of law by which the warrant officer may be guided in making the search and
seizure or when the things described are limited to those which bear direct relation to the offense for
which the warrant is being issued.


BASECO v PCGG

When President Corazon Aquino took power, the Presidential Commission on Good Government
(PCGG) was formed in order to recover ill gotten wealth allegedly acquired by former President
Marcos and his cronies. Aquino then issued two executive orders in 1986 and pursuant thereto, a
sequestration and a takeover order were issued against Bataan Shipyard & engineering Co., Inc.
(BASECO). BASECO was alleged to be in actuality owned and controlled by the Marcoses through
the Romualdez family, and in turn, through dummy stockholders.
The sequestration order issued in 1986 required, among others, that BASECO produce corporate
records from 1973 to 1986 under pain of contempt of the PCGG if it fails to do so. BASECO assails
this order as it avers, among others, that it is against BASECOs right against self incrimination and
unreasonable searches and seizures.
ISSUE: Whether or not BASECO is correct.
HELD: No. First of all, PCGG has the right to require the production of such documents pursuant to
the power granted to it. Second, and more importantly, right against self-incrimination has no
application to juridical persons. There is a reserve right in the legislature to investigate the contracts
of a corporation and find out whether it has exceeded its powers. It would be a strange anomaly to
hold that a state, having chartered a corporation like BASECO 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.
Neither is the right against unreasonable searches and seizures applicable here. There were no
searches made and no seizure pursuant to any search was ever made. BASECO was merely
ordered to produce the corporate records.

Liability for Torts 1) PNB v CA 1978
PNB executed its bond w/ Rita Gueco Tapnio as principal, in favor of the PNB to guarantee the payment
of Tapnio's account with PNB.
Indemnity Agreement w/ 12% int. and 15% atty. fees
Sept 18 1957: PNB sent a letter of demand for Tapnio to pay the reduced amount of 2,379.91
PNB demanded both oral and written but to no avail
Tapnio mortgaged to the bank her lease agreement w/ Jacobo Tuazon for her unused export sugar quota at
P2.80 per picular or a total of P2,800 which was more than the value of the bond
PNB insisted on raising it to P3.00 per picular so Tuazon rejected the offer
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.
NAGUIAT v NLRC
Sergio Naguiat was the president of Clark Field Taxi, Inc. (CFTI) which supplied taxi services to
Clark Air Base. At the same time, Naguiat was a director of the Sergio F. Naguiat Enterprises, Inc.
(SFNEI), their family owned corporation along with CFTI.
In 1991, CFTI had to close due to great financial losses and lost business opportunity resulting
from the phase-out of Clark Air Base brought about by the Mt. Pinatubo eruption and the expiration
of the RP-US military bases agreement.
CFTI then came up with an agreement with the drivers that the latter be entitled to a separation pay
in the amount of P500.00 per every year of service. Most of the drivers accepted this but some
drivers did not. The drivers who refused to accept the separation pay offered by CFTI instead sued
the latter before the labor arbiter.
The labor arbiter ruled in favor of the taxi drivers. The National Labor Relations Commission affirmed
the labor arbiter. It was established that when CFTI closed, it was in profitable standing and was not
incurring losses. It ruled that the drivers are entitled to $120.00 per every year of service subject to
exchange rates prevailing that time.
The NLRC likewise ruled that SFNEI as well as CFTIs president and vice president Sergio Naguiat
and Antolin Naguiat should be held jointly and severally liable to pay the drivers. The NLRC ruled
that SFNEI actively managed CFTI and its business affairs hence it acted as the employer of the
drivers.

ISSUE: Whether or not the ruling of the NLRC is correct.

HELD: It is only partially correct.
1. It is correct when it ruled that the Sergio Naguiat is jointly and severally liable to pay the drivers the award
of separation pay in the amount so determined. As president of CFTI, Sergio Naguiat is considered an
employer of the dismissed employees who is therefore liable for the obligations of the corporation to its
dismissed employees. Moreover, CFTI, being a close family corporation, is liable for corporate torts and
stockholders thereof shall be personally liable for corporate torts unless the corporation has obtained
reasonably adequate liability insurance (par. 5, Section 100, Close Corporations, Corporation Code).
Antolin Naguiat is absolved because there was insufficient evidence as against him.
2. SFNEI is not liable jointly or severally with CFTI. SFNEI has nothing to do with CFTI. There is no
sufficient evidence to prove that it actively managed CFTI especially so when even the drivers testified
that their employer is CFTI and that their payroll comes from CFTI. Further, SFNEI was into trading
business while CFTI was into taxi services.


Aratea v Suico 2007




CRIMINAL LIABILITY
PP v TAN BOON KONG

FACTS:

Tan Boon Kong, manager of the Visayan Gen. Supply Co. Inc, enegaed in the purchase and sale of sugar
"bayon:, copra and other native projects voluntarily made a false return stating gross sales of only
2,352,761.94 when the true amount is 2,543,303. 44 with a difference of 190,541.50 (1 1/2 sales) resulting
to a tax difference of 2,960.12.
Secs. 1458 to 2723 seem to mention only about corporations
ISSUE: W/N Tan Boon Kong is criminally liable.
HELD: YES.
A corporation can act only through its officers and agents and where the business itself involves a
violation of the law, the correct rule is that all who participate in it = liable

SIA v PP (1983)
Sia was the President and General Manager of the Metal Manufacturing of the Philippines Inc.
(MEMAP)
He obtained 150 M/T Cold Rolled Sheets consigned to Continental Bank and converted it into
personal used instead of selling it and turning over the proceeds
It resulted to a damage of 46,819 php, interest of 28,736.47 php and forfeited deposit of
71,023.60 php
ISSUE: W/N Sia can be criminally charged.

HELD: NO. Acquit.
Sia did not act for and on behalf of MEMAP
For crimes committed by corp. officers criminally charged, existence of criminal liability for which
the petition is being prosecuted must be clear and certain, here it may not be said to be beyond
reasonable doubt
Allegation v. evidence = strictly in harmony
The merchandise was manufactured before sold but although the bank was aware of this, it was
not in the trust agreement




COMETA v CA (1999)
1979: State Investment Trust, Inc (SITI), formerly State Investment
House, Inc. (SIHI) extended loans in various amounts to Guevent Industrial
Development Corp. (GIDC) which failed to pay when due.
A rehabilitation plan where GIDC mortgaged its property but it still defaulted
resulting in a foreclosure sale where SITI is the highest bidder.
GIDC filed in the RTC alleging irregularities in the foreclosure of
themortgages and the sale of properties to petitioner SITI which ended
with a compromise agreement wherein HBI offered to purchasea and SITI
agreed
RTC AND CA: compelled SITI to accept HBI's offer to purchase
HBI applied to the Housing and Land Use Regulatory Board for a permit
to develop the property submitting an affidavit by
SITTI president Cometa releasing the mortgage.
Cometa denied executing an affidavit as supported by the NBI's finding
that it is forged. Cometa filed a complaint for falsification of public
document against HBI president Guevara
RTC: dismissed
HBI filed a complaint for malicious prosecution against petitioners Cometa and SITI alleging
that it was filed with the sole intent of harassing and pressuring Guevara, in
his capacity as chairman of GIDC, to give in to their illicit and malicious
desire to appropriate the remaining unsold properties of GIDC
Cometa and SITI answered that the action seeks to impose a penalty on the right
to litigate and for that reason is unconstitutional and against settled
public policy
RTC and CA: denied since without malice
ISSUE: W/N Cometa and SITI should be penalized for malicious prosecution

HELD: NO. CA affirmed
It is hardly necessary to say that to allow the present action to proceed is not to impose a
penalty on the right to litigate. For trial is still to be conducted and liability is not automatic.
Just as it is bad to encourage the indiscriminate filing of actions for damages by accused
persons after they have been acquitted, whether correctly or incorrectly, a
blanket clearance of all who may be minded to charge others with offenses, fancied or
otherwise, without any chance of the aggrieved parties in the appropriate cases of false
accusation to obtain relief, is in Our Opinion short of being good law