EN BANC

[G.R. No. L-9657. November 29, 1956.]

LEOPOLDO T. BACANI and MATEO A. MATOTO , plaintiffs-appellees,

vs . NATIONAL COCONUT CORPORATION, ET AL., defendants,
NATIONAL COCONUT CORPORATION and BOARD OF LIQUIDATORS,
LIQUIDATORS
defendants-appellants.

Valentin C. Gutierrez for appellees.

First Corporate Counsel Simeon M. Gopengco and Lorenzo Mosqueda for
appellants National Coconut Corporation and Board of Liquidators.
Solicitor General Ambrosio Padilla and Solicitor Jorge R. Coquia for appellants.

SYLLABUS

1. POLITICAL LAW; TERM "GOVERNMENT OF THE REPUBLIC OF THE

PHILIPPINES" CONSTRUED. — The term "Government of the Republic of the Philippines"
used in section 2 of the Revised Administrative Code refers to that government entity
through which functions of the government are exercised as an attribute of sovereignty,
and in this are included those arms through which political authority is made effective
whether they be provincial, municipal or other form of local government. These are what
we call municipal corporations. They do not include government entities which are
given a corporate personality separate and distinct from the government and which are
governed by the Corporation Law, such as the National Coconut Corporation. Their
powers, duties and liabilities have to determined in the light of that law and of their
corporate charters. They do not therefore come within the exemption clause prescribed
in section 16, Rule 130 of our Rules of Court.
2. STENOGRAPHERS; TRANSCRIPT FEES; PAYMENT OF FEES BEYOND THE
LIMIT PRESCRIBED BY THE RULES OF COURT, VALID. — It is true that in section 8, Rule
130, stenographers may only charge as fees P0.30 for each page of transcript of not
less than 200 words before the appeal is taken and P0.15 for each page after filing of
the appeal, but where, as in the case at bar, the party has agreed and in fact has paid P1
per page for the services rendered by the stenographers and has not raised any
objection to the amount paid until its propriety was disputed by the Auditor General, the
payment of the fees became contractual and as such is valid even if it goes beyond the
limit prescribed by the Rules of Court.

DECISION

BAUTISTA ANGELO , J : p

Plaintiffs herein are court stenographers assigned in Branch VI of the Court of

First Instance of Manila. During the pendency of Civil Case No. 2293 of said court,
entitled Francisco Sycip vs. National Coconut Corporation, Assistant Corporate Counsel
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 Federico Alikpala, counsel for defendant, requested said stenographers for copies of
the transcript of the stenographic notes taken by them during the hearing. Plaintiffs
complied with the request by delivering to Counsel Alikpala the needed transcript
containing 714 pages and thereafter submitted to him their bills for the payment of
their fees. The National Coconut Corporation paid the amount of P564 to Leopoldo T.
Bacani and P150 to Mateo A. Matoto for said transcript at the rate of P1 per page.
Upon inspecting the books of this corporation, the Auditor General disallowed
the payment of these fees and sought the recovery of the amounts paid. On January 19,
1953, the Auditor General required the plaintiffs to reimburse said amounts on the
strength of a circular of the Department of Justice wherein the opinion was expressed
that the National Coconut Corporation, being a government entity, was exempt from the
payment of the fees in question. On February 6, 1954, the Auditor General issued an
order directing the Cashier of the Department of Justice to deduct from the salary of
Leopoldo T. Bacani the amount of P25 every payday and from the salary of Mateo A.
Matoto the amount of P10 every payday beginning March 30, 1954. To prevent
deduction of these fees from their salaries and secure a judicial ruling that the National
Coconut Corporation is not a government entity within the purview of section 16, Rule
130 of the Rules of Court, this action was instituted in the Court of First Instance of
Manila.
Defendants set up as a defense that the National Coconut Corporation is a
government entity within the purview of section 2 of the Revised Administrative Code of
1917 and, hence, it is exempt from paying the stenographers' fees under Rule 130 of
the Rules of Court. After trial, the court found for the plaintiffs declaring (1) "that
defendant National Coconut Corporation is not a government entity within the purview
of section 16, Rule 130 of the Rules of Court; (2) that the payments already made by
said defendant to plaintiffs herein and received by the latter from the former in the total
amount of P714, for copies of the stenographic transcripts in question, are valid, just
and legal; and (3) that plaintiffs are under no obligation whatsoever to make a refund of
these payments already received by them." This is an appeal from said decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the
Philippines is exempt from paying the legal fees provided for therein, and among these
fees are those which stenographers may charge for the transcript of notes taken by
them that may be requested by any interested person (section 8). The fees in question
are for the transcript of notes taken during the hearing of a case in which the National
Coconut Corporation is interested, and the transcript was requested by its assistant
corporate counsel for the use of said corporation.
On the other hand, section 2 of the Revised Administrative Code de nes the
scope of the term "Government of the Republic of the Philippines" as follows:
"'The Government of the Philippine Islands' is a term which refers to the
corporate governmental entity through which the functions of government are
exercised throughout the Philippine Islands, including, save as the contrary
appears from the context, the various arms through which political authority is
made effective in said Islands, whether pertaining to the central Government or to
the provincial or municipal branches or other form of local government."
The question now to be determined is whether the National Coconut Corporation
may be considered as included in the term "Government of the Republic of the
Philippines" for the purposes of the exemption of the legal fees provided for in Rule 130
of the Rules of Court.
As may be noted, the term "Government of the Republic of the Philippines" refers
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 to a government entity through which the functions of government are exercised,
including the various arms through which political authority is made effective in the
Philippines, whether pertaining to the central government or to the provincial or
municipal branches or other form of local government. This requires a little digression
on the nature and functions of our government as instituted in our Constitution.
To begin with, we state that the term "Government" may be de ned as "that
institution or aggregate of institutions by which an independent society makes and
carries out those rules of action which are necessary to enable men to live in a social
state, or which are imposed upon the people forming that society by those who
possess the power or authority of prescribing them" (U.S. vs. Dorr, 2 Phil., 332). This
institution, when referring to the national government, has reference to what our
Constitution has established composed of three great departments, the legislative,
executive, and the judicial, through which the powers and functions of government are
exercised. These functions are twofold: constitute and ministrant. The former are those
which constitute the very bonds of society and are compulsory in nature; the latter are
those that are undertaken only by way of advancing the general interests of society, and
are merely optional. President Wilson enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons
and property from violence and robbery.
'(2) The fixing of the legal relations between man and wife and
between parents and children.
'(3) The regulation of the holding, transmission, and interchange of
property, and the determination of its liabilities for debt or for crime.
'(4) The determination of contract rights between individuals.
'(5) The definition and punishment of crime.
'(6) The administration of justice in civil cases.
'(7) The determination of the political duties, privileges, and relations
of citizens.
'(8) Dealings of the state with foreign powers: the preservation of the
state from external danger or encroachment and the advancement of its
international interests.'" (Malcolm, The Government of the Philippine Islands, p.
19.)
The most important of the ministrant functions are: public works, public
education, public charity, health and safety regulations, and regulations of trade and
industry. The principles deter mining whether or not a government shall exercise certain
of these optional functions are: (1) that a government should do for the public welfare
those things which private capital would not naturally undertake and (2) that a
government should do these things which by its very nature it is better equipped to
administer for the public welfare than is any private individual or group of individuals.
(Malcolm, The Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our
government is required to exercise to promote its objectives as expressed in our
Constitution and which are exercised by it as an attribute of sovereignty, and those
which it may exercise to promote merely the welfare, progress and prosperity of the
people. To this latter class belongs the organization of those corporations owned or
controlled by the government to promote certain aspects of the economic life of our
people such as the National Coconut Corporation. These are what we call government-
owned or controlled corporations which may take on the form of a private enterprise or
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 one organized with powers and formal characteristics of a private corporations under
the Corporation Law.
The question that now arises is: Does the fact that these corporation perform
certain functions of government make them a part of the Government of the
Philippines?
The answer is simple: they do not acquire that status for the simple reason that
they do not come under the classi cation of municipal or public corporation. Take for
instance the National Coconut Corporation. While it was organized with the purpose of
"adjusting the coconut industry to a position independent of trade preferences in the
United States" and of providing "Facilities for the better curing of copra products and
the proper utilization of coconut by-products", a function which our government has
chosen to exercise to promote the coconut industry, however, it was given a corporate
power separate and distinct from our government, for it was made subject to the
provisions of our Corporation Law in so far as its corporate existence and the powers
that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It
may sue and be sued in the same manner as any other private corporations, and in this
sense it is an entity different from our government. As this Court has aptly said, "The
mere fact that the Government happens to be a majority stockholder does not make it
a public corporation" (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-
587). "By becoming a stockholder in the National Coal Company, the Government
divested itself of its sovereign character so far as respects the transactions of the
corporation. . . . Unlike the Government, the corporation may be sued without its
consent, and is subject to taxation. Yet the National Coal Company remains an agency
or instrumentality of government." (Government of the Philippine Islands vs. Springer,
50 Phil., 288.)
To recapitulate, we may mention that the term "Government of the Republic of
the Philippines" used in section 2 of the Revised Administrative Code refers only to that
government entity through which the functions of the government are exercised as an
attribute of sovereignty, and in this are included those arms through which political
authority is made effective whether they be provincial, municipal or other form of local
government. These are what we call municipal corporations. They do not include
government entities which are given a corporate personality separate and distinct from
the government and which are governed by the Corporation Law. Their powers, duties
and liabilities have to be determined in the light of that law and of their corporate
charters. They do not therefore come within the exemption clause prescribed in section
16, Rule 130 of our Rules of Court.
"Public corporations are those formed or organized for the government of a
portion of the State." (Section 3, Act No. 1459 n, Corporation Law).
"'The generally accepted definition of a municipal corporation would only
include organized cities and towns, and like organizations, with political and
legislative powers for the local, civil government and police regulations of the
inhabitants of the particular district included in the boundaries of the corporation.'
Heller vs. Stremmel, 52 Mo. 309, 312."
"In its more general sense the phrase 'municipal corporation' may include
both towns and counties, and other public corporations created by government
for political purposes. In its more common and limited signification, it embraces
only incorporated villages, towns and cities. Dunn vs. Court of County Revenues,
85 Ala. 144, 146, 4 So. 661." (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p.
385.)
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 "We may, therefore, define a municipal corporation in its historical and
strict sense to be the incorporation, by the authority of the government, of the
inhabitants of a particular place or district, and authorizing them in their corporate
capacity to exercise subordinate specified powers of legislation and regulation
with respect to their local and internal concerns. This power of local government
is the distinctive purpose and the distinguishing feature of a municipal
corporation proper." (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.)
It is true that under section 8, Rule 130, stenographers may only charge as fees
P0.30 for each page of transcript of not less than 200 words before the appeal is taken
and P0.15 for each page after the ling of the appeal, but in this case the National
Coconut Corporation has agreed and in fact has paid P1.00 per page for the services
rendered by the plaintiffs and has not raised any objection to the amount paid until its
propriety was disputed by the Auditor General. The payment of the fees in question
became therefore contractual and as such is valid even if it goes beyond the limit
prescribed in section 8, Rule 130 of the Rules of Court.
As regards the question of procedure raised by appellants, su ce it to say that
the same is insubstantial, considering that this case refers not to a money claim
disapproved by the Auditor General but to an action of prohibition the purpose of which
is to restrain the o cials concerned from deducting from plaintiffs' salaries the
amount paid to them as stenographers' fees. This case does not come under section 1,
Rule 45 of the Rules of Court relative to appeals from a decision of the Auditor General.
Wherefore, the decision appealed from is a rmed, without pronouncement as to
costs.
Paras, C.J., Bengzon, Padilla, Montemayor, Labrador, Concepcion, Reyes, J. B. L.,
Endencia and Felix, JJ., concur.
Footnotes

n Note from the Publisher: Written as "Republic Act No. 1459" in the original document.

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