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Engr. Ranulfo C. Feliciano, Et. Al. Versus Honorable Cornelio C. Gison, Undersecretary, Department of Finance - G.R. No. 165641. August 25, 2010

This document summarizes a Supreme Court case regarding whether local water districts are considered government-owned and controlled corporations (GOCCs) with special charters or private corporations. The Supreme Court ruled that based on previous jurisprudence, local water districts like the Leyte Metropolitan Water District are indeed GOCCs with special charters as they were created by presidential decree, not through general corporation law, and are subject to government control. As such, they do not enjoy tax exemptions that were withdrawn for GOCCs by executive order. The petition and petition for intervention claiming local water districts are private corporations were denied for lack of merit.

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134 views3 pages

Engr. Ranulfo C. Feliciano, Et. Al. Versus Honorable Cornelio C. Gison, Undersecretary, Department of Finance - G.R. No. 165641. August 25, 2010

This document summarizes a Supreme Court case regarding whether local water districts are considered government-owned and controlled corporations (GOCCs) with special charters or private corporations. The Supreme Court ruled that based on previous jurisprudence, local water districts like the Leyte Metropolitan Water District are indeed GOCCs with special charters as they were created by presidential decree, not through general corporation law, and are subject to government control. As such, they do not enjoy tax exemptions that were withdrawn for GOCCs by executive order. The petition and petition for intervention claiming local water districts are private corporations were denied for lack of merit.

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UNC70
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G.R. No.

165641               August 25, 2010

ENGR. RANULFO C. FELICIANO, in his capacity as General Manager of the Leyte


Metropolitan Water District (LMWD), Tacloban City, Petitioner,
NAPOLEON G. ARANEZ, in his capacity as President and Chairman of "No Tax, No
Impairment of Contracts Coalition, Inc.," Petitioner-in-intervention,
vs.
HON. CORNELIO C. GISON, Undersecretary, Department of Finance, Respondent.

Facts:

Present petition arose from the tax case by LMWD after it field with the Department of
Finance (DOF) a petition to request that a water supply equipment and a motor vehicle
which is a Toyota Hi-Lux pick-up truck be exempted of tax.

These were given to LMWD through the Japanese Government for the rehabilitated
their typhoon-damaged water supply system.

July 5, 1995, the DOF granted the said tax exemption on the water supply equipment
but further assessed the tax of the Toyota Hi-Lux pick-up truck.

On June 9, 2020, LMWD moved to reconsider the disallowance of the tax exemption on
the pick-up truck. The DOF through then Undersecretary Cornelio C. Gision denied said
request for reconsideration because of the tax exemptions privileges of government
agencies and government owned and controlled corporations (GOCCS) had been
withdrawn by E.O No. 93.

This prompted LMWD through its General Manager Engr. Ranulfo C. Feliciano to
appeal to the CTA.

CTA found LMWD to be a GOCC with an original charter through the evidence
presented during the hearing. The findings of the CTA resolved the dismissal of
LMWD’s appeal for lack of jurisdiction to take cognizance of the said case; the
resolution was without prejudice for LMWD’s right to refile the case if they so desire, in
the right forum. CTA also denied LMWD’s motion to reconsider the dismissal of said
appeal.

Issues:

1. Whether or not water districts are, by law, GOCCs with original charter.
Ruling:

Yes, the findings have no merit in the petition and the petition in intervention specifically
in the core issue that water districts are private corporations, not GOCCS.

LMWD has the same question in Feliciano v. Commission on Audit (COA) in ruling that
local water districts, such as the LMWD, are GOCCs with a special charter which the
Court pointed to settled jurisprudence in Davao City Water District v. Civil Service
Commission and recently reiterated in De Jesus v. COA. 

In Feliciano, LMWD claimed that it is a private corporation and same claim that it should
not be a subject to the audit jurisdiction of the COA. LMWD argued that P.D No. 198 is
not an original charter that places water districts within the audit jurisdiction of COA
defined in Section 2 (1), Article IX-D of the 1987 Constitution and P.D. No. 198 did not
expressly direct the creation of the water districts.

LMWD posted that said decree merely provided the formation of an optional or
voluntary basis and what created the water districts is through the approval of the
Sanggunian Resolution.

As the Constitution recognizes two classes of corporations, one refers to the private
corporations created under general law and the second refers to government-owned or
controlled corporations created by special charters.

Section 16, Article XII of the Constitution provides:

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.

According to the Corporation Code, it is obviously that LWDS (of local water districts)
are not private corporations because they were not created under this Codce. LWDs are
not registered with the Securities and Exchange Commission.

Section 14 of the Corporation Code states that:

…[A]ll corporations organized under this code shall file with the Securities and
Exchange Commission articles of incorporation x x x."…

LWDs have no articles of incorporation, no incorporators and no stockholders or


members. In the same, there are no stockholders or members to elect for the board
directors such as those corporations registered with the Securities and Exchange
Commission. It is the local mayor or the provincial governor who appoints the directors
of LWDs for a fixed term of office. This Court has ruled that LWDs are not created under
the Corporation Code, thus:
The respondents of these cases were different government bodies, the Commission on
Audit and the Department of Finance. However, they represented for the same
government. Their identity is substantial in obtaining resolution of the same contentious
issue of whether local water districts should be treated as private corporations and not
as GOCCs with special charter.

IN VIEW OF THE FOREGOING, we hereby DENY the petition and the petition for
intervention for lack of merit and accordingly AFFIRM the decision of the Court of
Appeals dated July 14, 2004 affirming the ruling of the Court of Tax Appeals in CTA
Case No. 6165. Costs against the petitioners.

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