MACTAN INTERNATIONAL AIRPORT AUTHORITY VS.

CITY OF LAPU-LAPU

G.R. NO. 181756, JUNE 15, 2015

FACTS:

Petitioner, Mactan-Cebu International Airport Authority (MCIAA) was created by the

Congress under Republic Act No. 6958 to undertake the economical, efficient and effective control,

management and supervision of the Mactan International Airport. Upon its creation, petitioner

enjoyed exemption from realty taxes imposed by the National Government or any of its political

subdivision. However, upon the effectivity of the Local Government Code, the Supreme Court

rendered a decision that the petitioner is no longer exempt from realty estate taxes.

Respondent City issued to petitioner a Statement of Real Estate Tax assessing the lots

comprising the Mactan International Airport which included the airfield, runway, taxi way and the lots

on which these are built. Petitioner contends that these lots, and the lots to which they are built, are

utilized solely and exclusively for public purposes and are exempt from real property

tax. Respondent issued notices of levy on 18 sets of real properties of petitioners.

Petitioner filed a petition for Prohibition, TRO, and a writ of preliminary injunction with RTC

Lapu-Lapu which sought to enjoin respondent City from issuing the warrant of levy against

petitioners properties from selling them at public auction for delinquency in realty tax obligations.

Petitioner claimed before the RTC that it had discovered that respondent City did not pass any

ordinance authorizing the collection of real property tax, a tax for the special education fund, and a

penalty interest for its non payment. Petitioner argued that without the corresponding tax ordinances,

respondent City could not impose and collect real property tax, an additional tax for the SEF, and

penalty interest from petitioner.

RTC granted the writ of preliminary which was later on lifted upon motion by the

respondents. The Court of Appeals held that petitioners airport terminal building, airfield, runway,

taxiway, and the lots on which they are situated are not exempt from real estate tax since under the

Local Government Code, enacted pursuant to the constitutional mandate of local autonomy, all

natural and juridical persons, including government-owned or controlled corporations,

instrumentalities and agencies, are no longer exempt from local taxes even if previously granted an

exemption. The only exemptions from local taxes are those specifically provided under the Code

itself, or those enacted through subsequent legislation.

ISSUE: Whether or not MIAA is a government-owned or controlled corporation.

HELD: NO.

MIAA is not a government-owned or controlled corporation under Section 2(13) of the

Introductory Provisions of the Administrative Code because it is not organized as a stock or non-
stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16,

Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic

viability. MIAA is a government instrumentality vested with corporate powers and performing

essential public services pursuant to Section 2(10) of the Introductory Provisions of the

Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local

governments under Section 133(o) of the Local Government Code. The exception to the exemption

in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local

Government Code. Such exception applies only if the beneficial use of real property owned by the

Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus

are properties of public dominion. Properties of public dominion are owned by the State or the

Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that

the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of

the Local Government Code. This Court has also repeatedly ruled that properties of public dominion

are not subject to execution or foreclosure sale.

Therefore, Petitioners properties that are actually, solely and exclusively used for public

purpose, consisting of the airport terminal building, airfield, runway, taxiway and the lots on which

they are situated, are exemp from real property tax imposed by the City of Lapu-Lapu, all the real

property tax assessments, including the additional tax for the special education fund and the penalty

interest are void and the sale in public auction of 27 of petitioners properties and the eventual

forfeiture and purchase of the said properties by respondent City of Lapu-Lapu are likewise null and

void.
 BOY SCOUTS OF THE PHILIPPINES VS. COMMISSION ON AUDIT

G.R. NO. 177131, JUNE 7, 2011

FACTS:

The Commission on Audit issued COA Resolution No. 99-011 in which the said resolution

state that the BSP was created as a public corporation created under Commonwealth Act No. 111

dated October 31, 1936, and whose functions relate to the fostering of public virtues of citizenship

and patriotism and the general improvement of the moral spirit and fiber of the youth. On August 19,

1999, COA issued Resolution No. 99-011 "Defining the Commission's policy with respect to the audit

of the Boy Scouts of the Philippines" which provides for the conduction of an annual financial audit of

the Boy Scouts of the Philippines and the expression of an opinion on the fairness of their financial

statements. The BSP shall also be classified among the government corporations belonging to the

Educational, Social, Scientific, Civic and Research Sector.

The BSP sought reconsideration of the COA Resolution in a letter signed by the BSP

National President Jejomar Binay stating that the BSP is not subject to the Commission's jurisdiction

because it is not a unit of the government. Moreover, RA 7278 virtually eliminated the "substantial

government participation" in the National Executive Board and that the BSP is not as a government

instrumentality under the 1987 Administrative Code which provides that instrumentality refers to "any

agency of the National Government, not integrated within the department framework, vested with

special functions or jurisdiction by law. The BSP further claimed that the 1987 Administrative Code

itself, of which the BSP s. NLRC relied on for some terms, defines government-owned and controlled

corporations as agencies organized as stock or non-stock corporations which the BSP, under its

present charter, is not. And finally, they claim that the Government, like in other GOCCs, does not

have funds invested in the BSP. The BSP is not an entity administering special funds. The BSP is

not a unit of the Government, a department which refers to an executive department as created by

law or a bureau which refers to any principal subdivision or unit of any department.

ISSUE: Whether or not the Boy Scouts of the Philippines is a public corporation and is subject to

COAs audit jurisdiction.

HELD: Yes.

The Court found that the BSP is a public corporation and its funds are subject to the COAs

audit jurisdiction. The BSP is a public corporation whose functions relate to the fostering of public

virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of the

youth. Any attempt to classify the BSP as a private corporation would be incomprehensible since no

less than the law which created it had designated it as a public corporation and its statutory mandate
embraces performance of sovereign functions. The manner of creation and the purpose for which

the BSP was created indubitably prove that it is a government agency.

Moreover, there are three classes of juridical persons under Article 44 of the Civil Code

which are (1)The State and its political subdivisions; (2)Other corporations, institutions and entities

for public interest or purpose created by law; their personality begins as soon as they have been

constituted according to law and (3)Corporations, partnerships and associations for private interest

or purpose to which the law grants a juridical personality, separate and distinct from that of each

shareholder, partner or member. The BSP, as presently constituted under Republic Act No. 7278,

falls under the second classification. The purpose of the BSP as stated in its amended charter

shows that it was created in order to implement a State policy declared in Article II, Section 13 of the

Constitution.

Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit

of a constitutional mandate, comes within the class of "public corporations". Since BSP, under its

amended charter, continues to be a public corporation or a government instrumentality, the Court

concludes that it is subject to the exercise by the COA of its audit jurisdiction in the manner

Dissenting Opinion relevant to the issue: (Carpio)

According to Carpio, the public purpose of the BSP is not determinative of status. The BSP

performs functions which may be classified as public in character, in the sense that it promotes

"virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of our

youth." However, this fact alone does not automatically make the BSP a GOCC. The fact that a

certain juridical entity is impressed with public interest does not, by that circumstance alone, make

the entity a public corporation, incorporated solely for the public good. Authorities are of the view that

the purpose alone of the corporation cannot be taken 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. The

true criterion 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 latter's own

agency or instrumentality to help it in carrying out its governmental functions, then that corporation is

considered public, otherwise, it is private.

 PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS vs. COA

G.R. No. 169752, September 25, 2007

FACTS:

The petitioner was incorporated as a juridical entity by virtue of Act No. 1285, enacted on

January 19, 1905, by the Philippine Commission. 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. At the time of the enactment of

Act No. 1285, the original Corporation Law, Act No. 1459, was not yet in existence. Act No. 1285

antedated both the Corporation Law and the constitution of the SEC.

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 1/2 of the fines

imposed and collected through its efforts for violations of the laws related thereto. Subsequently, 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 C.A. No. 148. The cruel treatment of animals is now

an offense against the State, penalized under our statutes, which the Government is duty bound to

enforce.

An audit team from respondent COA visited the office of the petitioner to conduct an audit

survey but the petitioner objected on the ground that it was a private entity which is not under the

jurisdiction of COA.

ISSUE: Whether or not the petitioner is a private corporation.

HELD: Yes.

The Court agrees with the petitioner that the charter test cannot be applied. The charter

test had been introduced by the 1935 Constitution and not earlier, it follows that the test cannot

apply to the petitioner, which was incorporated by virtue of Act No. 1285, enacted on January 19,

1905. Settled is the rule that laws in general have no retroactive effect, unless the contrary is

provided. Moreover, Petitioners charter shows that it is not subject to control or supervision by any

agency of the State, unlike government-owned and -controlled corporations. No government

representative sits on the board of trustees of the petitioner. Like all private corporations, the

successors of its members are determined voluntarily and solely by the petitioner in accordance with

its by-laws, and may exercise those powers generally accorded to private corporations, and it may
adopt by-laws for its internal operations and the petitioner shall be managed or operated by its

officers in accordance with its by-laws in force.

Furthermore, the employees of the petitioner are registered and covered by the SSS at the

latters initiative, and not through the GSIS, which should be the case if the employees are

considered government employees. This is another indication of petitioners nature as a private

entity. In addition, the respondents contend that the petitioner is a body politic because its primary

purpose is to secure the protection and welfare of animals which, in turn, redounds to the public

good. This argument is not tenable. The fact that a certain juridical entity is impressed with public

interest does not, by that circumstance alone, make the entity a public corporation, inasmuch as a

corporation may be private although its charter contains provisions of a public character,

incorporated solely for the public good. Authorities are of the view that the purpose alone of the

corporation cannot be taken 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.

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.

Therefore, the Court declared petitioner as a private domestic corporation subject to the

jurisdiction of the Securities and Exchange Commission. The respondents are enjoined from

investigating, examining and auditing the petitioner's fiscal and financial affairs.
 NATIONAL POWER CORPORATION VS. CITY OF CABANATUAN

GR. No. 149110, April 9, 2003

FACTS:

NAPOCOR, the petitioner, is a government-owned and controlled corporation created under

Commonwealth Act 120. It is tasked to undertake the development of hydroelectric generations of

power and the production of electricity from nuclear, geothermal, and other sources, as well as, the

transmission of electric power on a nationwide basis.For many years now, NAPOCOR sells electric

power to the resident Cabanatuan City. The respondent assessed the petitioner a franchise tax.

Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government,

refused to pay the tax assessment. It argued that the respondent has no authority to impose tax on

government entities that are engaged in trade or occupation for profit, and that the NAPOCOR

Charter, being a valid exercise of police power, should prevail over the LGC.

Petitioner also contend that as a non-profit organization, it is exempted from the payment of all forms

of taxes, charges, duties or fees in accordance with Sec. 13 of RA 6395, as amended.

The respondent filed a collection suit in the RTC of Cabanatuan City, demanding that

petitioner pay the assessed tax, plus surcharge. Respondent alleged that petitioners exemption

from local taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code). The trial

court issued an order dismissing the case and ruled that the tax exemption privileges granted to

petitioner subsist despite the passage of Rep. Act No. 7160.On appeal, the Court of Appeals

reversed the decision of the RTC on the ground that section 193, in relation to sections 137 and 151

of the LGC, expressly withdrew the exemptions granted to the petitioner and ordered the petitioner

to pay the city government the tax assessment.

ISSUES:

(1) Whether or not the NAPOCOR is excluded from the coverage of the franchise tax because its

stocks are wholly owned by the National Government and its charter is characterized as a non-profit

organization.

HELD:

NO. To determine whether the petitioner is covered by the franchise tax in question, the

following requisites should concur: (1) that petitioner has a "franchise" in the sense of a secondary or

special franchise; and (2) that it is exercising its rights or privileges under this franchise within the

territory of the respondent city government. Petitioner fulfills the first requisite. Commonwealth Act
No. 120, as amended by Rep. Act No. 7395, constitutes petitioner's primary and secondary

franchises. It serves as the petitioner's charter, defining its composition, capitalization, the

appointment and the specific duties of its corporate officers, and its corporate life span. Petitioner

also fulfills the second requisite. It is operating within the respondent city government's territorial

jurisdiction pursuant to the powers granted to it by Commonwealth Act No. 120, as amended.

Fulfilling both requisites, petitioner is, and ought to be, subject of the franchise tax in question.

To stress, a franchise tax is imposed based not on the ownership but on the exercise by the

corporation of a privilege to do business. The taxable entity is the corporation which exercises the

franchise, and not the individual stockholders. By virtue of its charter, petitioner was created as a

separate and distinct entity from the National Government. It can sue and be sued under its own

name, and can exercise all the powers of a corporation under the Corporation Code. To be sure, the

ownership by the National Government of its entire capital stock does not necessarily imply that

petitioner is not engaged in business. Moreover, a franchise is a privilege conferred by government

authority, which does not belong to citizens of the country generally as a matter of common right. It

may be construed in two senses namely, the right vested in the individuals composing the

corporation and the right and privileges conferred upon the corporation. A franchise tax is

understood in the second sense. It is not levied on the corporation simply for existing as a

corporation but on its exercise of the rights or privileges granted to it by the government. NAPOCOR

is covered by the franchise tax because it exercises a franchise in the second sense and it is

exercising its rights or privileges under this franchise within the territory of the City.

Furthermore, petitioner was created to undertake the development of hydroelectric

generation of power and the production of electricity from nuclear, geothermal and other sources, as

well as the transmission of electric power on a nationwide basis. Pursuant to this mandate, petitioner

generates power and sells electricity in bulk. Certainly, these activities do not partake of the

sovereign functions of the government. They are purely private and commercial undertakings, albeit

imbued with public interest. The public interest involved in its activities, however, does not distract

from the true nature of the petitioner as a commercial enterprise which is declared by this Court as

ministrant or proprietary functions of government aimed at advancing the general interest of society.

It is worth mentioning that section 192 of the LGC empowers the LGUs, through ordinances

duly approved, to grant tax exemptions, initiatives or reliefs. But in enacting section 37 of Ordinance

No. 165-92 which imposes an annual franchise tax notwithstanding any exemption granted by law or

other special law, the respondent city government clearly did not intend to exempt the petitioner from

the coverage thereof.

 SOCIAL SECURITY SYSTEM vs. COMMISSION ON AUDIT

G.R. No. 149240, July 11, 2002

FACTS:

The Social Security Commission (SSC) in behalf of SSS and the Concerned Employees for

Better SSS (ACCESS) executed a collective negotiation agreement (CAN) that provides P5,000.00

as contract signing bonus. Department of Budget and Management (DBM) declared the CAN as

illegal. The SSS Corporate Auditor disallowed fund releases for the signing bonus since it was an

allowance in the form of additional compensation prohibited by the Constitution. Two years later,

ACCESS appealed the disallowance but COA affirmed the disallowance and ruled that the grant of

the signing bonus was improper because it has no legal basis since Sec. 16 of RA 7658 (1989) had

repealed the authority of the SSC to fix the compensation of its personnel.

Hence, the instant petition was filed in the name of the Social Security System and not by

ACCESS through its legal staff. Petitioner SSS argues that a signing bonus may be granted upon

the conclusion of negotiations leading to the execution of a CNA under Sec. 3, par. (c), of RA 1161

as, which allows the SSC to fix the compensation of its personnel. On the other hand, respondent

COA asserts that the authority of the SSC to fix the compensation of its personnel has been

repealed by Sections 12 and 16 of RA 6758 and is therefore no longer effective.

ISSUES:

1. Whether or not ACESS has a power to file a case in the name of SSS?

2. Whether or not PITC is covered by laws prescribing a compensation and position classification

system in the government.

3. Whether or not the charter of SSS authorizes SSC to fix the compensation of its employees and

officers.

HELD:

No. There is no directive from the SSC that authorized the suit and only the officer-in-charge

in behalf of petitioner executed the purported directive. Clearly, this is irregular since under Sec. 4,

par. 10, in relation to par. 7 RA 1161 as amended by RA 8282, it is the SSC as a collegiate body

which has the power to approve, confirm, pass upon or review the action of the SSS to sue in court.

Moreover, the appearance of the internal legal staff of the SSS as counsel in the present

proceedings is similarly questionable because only DOJ can act as counsel of SSS under both RA

1161 and RA 8282. It is well settled that the legality of the representation of an unauthorized counsel

may be raised at any stage of the proceedings and that such illicit representation produces no legal

effect.
 In the case at bar, there is no approval or ratification of the SSC has been undertaken in the

manner prescribed by law and DOJ has not delegated the authority to act as counsel, then this case

must fail. These procedural deficiencies are serious matters that cannot be ignored since the SSS is

in reality confessing judgment to charge expenditure against the trust fund under its custodianship.

As to the second issue, according to the COA in its Decision No. 98-048 dated January 27,

1998, the exemption granted to the PITC has been repealed and revoked by the repealing

provisions of RA 6758. The repeal by Section 16 of RA 6758 of all corporate charters that exempt

agencies from the coverage of the System was clear and expressed necessarily to achieve the

purposes for which the law was enacted, that is, the standardization of salaries of all employees in

government owned and / or controlled corporations to achieve equal pay for substantially equal

work. Henceforth, PITC should now be considered as covered by laws prescribing a compensation

and position classification system in the government including RA 6758

And lastly, RA 6758 modified, if not repealed, Sec. 3, par. (c), of RA 1161 as amended, at

least insofar as it concerned the authority of SSC to fix the compensation of SSS employees and

officers. RA 6758 intended to do away with multiple allowances and other incentive packages and

the resulting differences in compensation among government personnel, the statute clearly did not

revoke existing benefits being enjoyed by incumbents of government positions at the time of the

passage of RA 6758 by virtue of Sections 12 and 17 thereof. This means that whatever salaries and

other financial and non-financial inducements that the SSC was minded to fix for them, the

compensation must comply with the terms of RA 6758. Unfortunately, the signing bonus in question

did not qualify under Sections 12 and 17 of RA 6758. It was non-existent as of 1 July 1989 as it

accrued only in 1996 when the CNA was entered into by and between SSC and ACCESS. The

signing bonus therefore could not have been included in the salutary provisions of the statute nor

would it be legal to disburse to the intended recipients. The signing bonus is not truly reasonable

compensation. A propaganda which is so commonly practiced in private sector labor-management

relations have no place in the bureaucracy and that only a peaceful collective negotiation which is

concluded within a reasonable time must be the standard for interaction in the public sector. This

desired conduct among civil servants should not come, we must stress, with a price tag which is

what the signing bonus appears to be.

MARILAO WATER CONSUMERS ASSOCIATION, INC vs. INTERMEDIATE APPELLATE COURT

G.R. No. 72807, September 9, 1991

Facts:

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. Marilao Water District was formed by Resolution of the Sangguniang

Bayan of the Municipality of Marilao pursuant to PD 198 which resolution was thereafter forwarded

to the LWUA duly filed by it after ascertaining that it conformed to the requirements of the law. Under

PD 198, water districts may be created by the different local legislative bodies by the passage of a

resolution to this effect, subject to the terms of the decree.

The primary function of these water districts is to sell water to residents within their territory,

under such schedules of rates and charges as may be determined by their boards.The juridical

entities thus created and organized under PD 198 are considered quasi-public corporations,

performing public services and supplying public wants.

A claim was thereafter made that the creation of the Marilao Water District in the manner

stated was defective and illegal. The claim was made by a non-stock, non-profit corporation known

as the Marilao Water Consumers Association. The petition prayed for the dissolution of the water

district on the basis on the reason that there had been no real, but only a "farcical" public hearing

prior to the creation of the Water District, that not only was the waterworks system turned over to the

Water District without compensation but a subsidy was illegally authorized for it, that the Water

District was being run with "negligence, apathy, indifference and mismanagement," and was not

providing adequate and efficient service to the community, but this notwithstanding, the consumers

were being billed in full and threatened with disconnection for failure to pay bills on time, in fact, one

of the consumers who complained had his water service cut off, and lastly, that the consumers were

consequently "forced to organize themselves into a corporation for the purpose of demanding

adequate and sufficient supply of water and efficient management of the waterworks in Marilao,

Bulacan.

The Marilao Water District filed its Answer denying the material allegations of the petition and

asserting as affirmative defenses (a) the Court's lack of jurisdiction of the subject matter, and (b) the

failure of the petition to state a cause of action. The answer alleged that the matter of the water

district's dissolution fell under the original and exclusive jurisdiction of the Securities & Exchange
Commission (SEC), and the matter of the propriety of water rates, within the primary administrative

jurisdiction of the LWUA and the quasi-judicial jurisdiction of the National Water Resources Council.

The petitioner, the Marilao Consumers Association filed a reply, and an answer to the counterclaim.

It averred that since 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, and neither the LWUA nor the National

Water Resources Council is competent to take cognizance of the matter of dissolution of the water

district and recovery of its waterworks system, or the exorbitant rates imposed by it.

The Trial Court found for the respondents. It dismissed the Consumers Association's suit.

The Appellate Court, in its Decision ruled that its cause could not prosper.

Issue: Whether or not the matter of the water district's dissolution fell under the original and

exclusive jurisdiction of the Securities & Exchange Commission (SEC)?

HELD: No.

The court held that 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. The Corporation Code has nothing 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 and 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, and

their powers. 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 function of supervision or control

over water districts is entrusted to the Local Water Utilities Administration.

Moreover, the Provincial Water Utilities Act of 1973 has a specific provision governing

dissolution of water districts. 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 set out in Sections 117 to 121, inclusive, of said Code, under which dissolution
may be voluntary, 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.

All these argue against conceding jurisdiction in the Securities and Exchange Commission

over proceedings for the dissolution of water districts. For 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.

The decision of the Intermediate Appellate Court affirming that of the Regional Trial Court is

reversed and set aside, and the case was remanded to the Regional Trial Court for further

proceedings and adjudication.