Liban vs Gordon

- Prerequisites of action for Quo Warranto

- Constitutional Prohibition for Congress:
o To enact laws to create, organize and regulate private corporate, except by general law (Sec. 16, Art. XII, 1987 Constitution)
o To keep members of the Senate and House of Representatives from holding any other office or employment in the
Government…, including GOCCs, during their term without forfeiting their seat.

Facts:

This is a Quo warranto petition to declare Sean. Gordon (respondent) as having forfeited his seat in the Senate.

During respondent’s incumbency as Senator, he was elected Chairman of PNRC. Petitioners allege that by accepting the chairmanship of the
PNRC Board of Governors, respondent has ceased to be a member of the Senate as provided in Section 13, Article VI of the Constitution, which
reads:

SEC. 13. No Senator or Member of the House of Representatives may hold any other office or employment in the Government, or
any subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their
subsidiaries, during his term without forfeiting his seat. Neither shall he be appointed to any office which may have been created or
the emoluments thereof increased during the term for which he was elected.

Issues:

1. Whether petitioners may legally institute this petition against respondent

2. Whether the Philippine National Red Cross (PNRC) is a government- owned or controlled corporation;
3. Whether Section 13, Article VI of the Philippine Constitution applies to the case of respondent who is Chairman of the PNRC and at the
same time a Member of the Senate
4. Whether respondent should be automatically removed as a Senator pursuant to Section 13, Article VI of the Philippine Constitution;
5. Whether PNRC Charter is violative of the Constitutional proscription against the creation of private corporations by special law.

Ruling

Petitioners do not have legal standing to commence quo warranto action. PNRC is a private organization and not a government owned and
controlled corporation, hence the respondent is not prohibited to be Chairman of PNRC and at the same time a member of the Senate. Secs.1-3,
4(a), 5-14 of the PNRC Charter are void in violating Constitutional prohibition for Congress a private corporate under a special charter. The
unincorporated PNRC may incorporate itself under the Corporation Code as private corporation

Ratio

1. Whether petitioners may legally institute this petition against respondent

The Court ruled that petitioners have NO standing to file an action for quo warranto.

Action for quo warranto is either commenced by the Government as the proper party plaintiff through the Solicitor General or a public prosecutor
(Sec. 1, Rule 66 of the Rules of Court), or by an individual who claims to be entitled to the public office allegedly usurped by another, in which
case he can bring the action in his own name (Sec. 5, supra).

Section 1. Action by Government against individuals. – An action for the usurpation of a public office, position or franchise may be
commenced by a verified petition brought in the name of the Republic of the Philippines against:

(a) A person who usurps, intrudes into, or unlawfully holds or exercises a public office, position or franchise;

(b) A public officer who does or suffers an act which by provision of law, constitutes a ground for the forfeiture of his
office; or

(c) An association which acts as a corporation within the Philippines without being legally incorporated or without lawful authority
so to act.

Section 5. When an individual may commence such an action. — A person claiming to be entitled to a public office or position usurped or
unlawfully held or exercised by another may bring an action therefor in his own name.

Petitioners filed an action for usurpation of public office against respondent, a public officer who allegedly committed an act which constitutes a
ground for the forfeiture of his public office under Section 1(b), Rule 66 of the Rules of Court.
Liban vs Gordon
- Prerequisites of action for Quo Warranto
- Constitutional Prohibition for Congress:
o To enact laws to create, organize and regulate private corporate, except by general law (Sec. 16, Art. XII, 1987 Constitution)
o To keep members of the Senate and House of Representatives from holding any other office or employment in the
Government…, including GOCCs, during their term without forfeiting their seat.

The person instituting quo warranto proceedings in his own behalf must claim and be able to show that he is entitled to the office in dispute,
otherwise the action may be dismissed at any stage.6 In the present case, petitioners do not claim to be entitled to the Senate office of respondent.
Clearly, petitioners have no standing to file the present petition.

Even if the Court disregards the infirmities of the petition and treats it as a taxpayer’s suit, the petition would still fail on the merits.

2. Whether the Philippine National Red Cross (PNRC) is a government- owned or controlled corporation;
3. Whether Section 13, Article VI of the Philippine Constitution applies to the case of respondent who is Chairman of the PNRC
and at the same time a Member of the Senate
4. Whether respondent should be automatically removed as a Senator pursuant to Section 13, Article VI of the Philippine
Constitution;

Petitioners cite Camporedondo v. NLRC,2 which held that the PNRC is a government-owned or controlled corporation. Petitioners claim that in
accepting and holding the position of Chairman of the PNRC Board of Governors, respondent has automatically forfeited his seat in the Senate,
pursuant to Flores v. Drilon,3 which held that incumbent national legislators lose their elective posts upon their appointment to another government
office.

The Court ruled that PNRC is a private organization performing public functions. It follows that Sec. 13, Art. VI, supra does not prohibit
the respondent to be Chairman of PNRC and at the same time a Member of the Senate.

On 22 March 1947, President Manuel A. Roxas signed Republic Act No. 95, 7 otherwise known as the PNRC Charter. The PNRC is a non-profit,
donor-funded, voluntary, humanitarian organization.

The PNRC must not only be, but must also be seen to be, autonomous, neutral and independent in order to conduct its activities in accordance
with the Fundamental Principles. The PNRC must not appear to be an instrument or agency that implements government policy; otherwise, it
cannot merit the trust of all and cannot effectively carry out its mission as a National Red Cross Society.12 It is imperative that the PNRC must
be autonomous, neutral, and independent in relation to the State.

The PNRC does not have government assets and does not receive any appropriation from the Philippine Congress. 13 The PNRC is financed
primarily by contributions from private individuals and private entities obtained through solicitation campaigns organized by its Board of Governors.

The government does not control the PNRC. Under the PNRC Charter, as amended, only six of the thirty members of the PNRC Board of
Governors are appointed by the President of the Philippines. Thus, twenty-four members, or four-fifths (4/5), of the PNRC Board of Governors are
not appointed by the President. The PNRC Chairman is not appointed by the President or by any subordinate government official. Therefore, the
office of the Chairman is not a government office or an office in a GOCC for purposes of the prohibition in Sec. 13, Art. VI of the
Constitution. The vast majority of the thousands of PNRC members are private individuals, including students.

Camporedondo ruling that PNRC is a GOCC is abandoned.

In Camporedondo ruling, the simple test used was whether the corporation was created by its own special charter for the exercise of a
public function or by incorporation under the general corporation law. Since the PNRC was created under a special charter, the Court then
ruled that it is a government corporation. However, the it failed to consider the definition of a government-owned or controlled corporation as
provided under Section 2(13) of the Introductory Provisions of the Administrative Code of 1987:

SEC. 2. General Terms Defined. – x x x

(13) Government-owned 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) percent of
its capital stock: Provided, That government-owned or controlled corporations may be further categorized by the Department of the
Budget, the Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective
powers, functions and responsibilities with respect to such corporations.(Boldfacing and underscoring supplied)

A government-owned or controlled corporation must be owned by the government, and in the case of a stock corporation, at least a majority
of its capital stock must be owned by the government. In the case of a non-stock corporation, by analogy at least a majority of the members must
be government officials holding such membership by appointment or designation by the government.
Liban vs Gordon
- Prerequisites of action for Quo Warranto
- Constitutional Prohibition for Congress:
o To enact laws to create, organize and regulate private corporate, except by general law (Sec. 16, Art. XII, 1987 Constitution)
o To keep members of the Senate and House of Representatives from holding any other office or employment in the
Government…, including GOCCs, during their term without forfeiting their seat.

5. Whether PNRC Charter is violative of the Constitutional proscription against the creation of private corporations by special law.

The Court ruled that Sections 1-3, 4(a), 5-13 of the PNRC Special Charter are VOID in violation of the Sec. 16, Art. XII of the 1987
Constitution, to wit:

Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and
subject to the test of economic viability.

Section 1 of the PNRC Charter, as amended, creates the PNRC as a “body corporate and politic.”

In Felciano v. COA, the Court says that 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.

The purpose of this constitutional provision is to ban private corporations created by special charters, which historically gave certain individuals,
families or groups special privileges denied to other citizens

In short, Congress cannot enact a law creating a private corporation with a special charter. Such legislation would be unconstitutional. Private
corporations may exist only under a general law. Under existing laws, the general law is the Corporation Code, except that the Cooperative Code
governs the incorporation of cooperatives.

In Feliciano ruling, the Court held that the Local Water Districts are GOCCs for the following reasons:

1) They exist by virtue of PD No. 198, which created their special charters.
2) Prior to transfer to LWDs, the seed capital assets such as waterworks and sewerage facilities were public properties managed and
operated by or under the control of the city, municipality or province.
3) LWD receives subsidies and loans from Local Water Utilities Administration. LWUA has a budget approriation in GAA for its subsidy
requirements.
4) There is no private capital invested in the LWD.
5) The capital assets and operating funds of the LWD all come from the government.

Just like the LWD, the PNRC was created through a special charter. However, unlike the Local Water Districts, the elements of government
ownership and control are clearly lacking in the PNRC. Thus, although the PNRC is created by a special charter, it cannot be considered a
government-owned or controlled corporation in the absence of the essential elements of ownership and control by the government. In
creating the PNRC as a corporate entity, Congress was in fact creating a private corporation. However, the constitutional prohibition against the
creation of private corporations by special charters provides no exception even for non-profit or charitable corporations. Consequently, the PNRC
Charter, insofar as it creates the PNRC as a private corporation and grants it corporate powers, 27 is void for being unconstitutional.