Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=50152:gr-169752-2007&amp;catid=1496&amp;Itemid=566
Timestamp: 2019-04-19 08:57:01+00:00

Document:
G.R. No. 169752 - Phil. Society for the Prevention of Cruelty to Animals v. Commission On Audit, et al.
PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS, Petitioners, v. COMMISSION ON AUDIT, DIR. RODULFO J. ARIESGA (in his official capacity as Director of the Commission on Audit), MS. MERLE M. VALENTIN and MS. SUSAN GUARDIAN (in their official capacities as Team Leader and Team Member, respectively, of the audit Team of the Commission on Audit), Respondents.
Before the Court is a special civil action for Certiorari and Prohibition under Rule 65 of the Rules of Court, in relation to Section 2 of Rule 64, filed by the petitioner assailing Office Order No. 2005-0211 dated September 14, 2005 issued by the respondents which constituted the audit team, as well as its September 23, 2005 Letter2 informing the petitioner that respondents' audit team shall conduct an audit survey on the petitioner for a detailed audit of its accounts, operations, and financial transactions. No temporary restraining order was issued.
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 Securities and Exchange Commission. Important to note is that the nature of the petitioner as a corporate entity is distinguished from the sociedad anonimas under the Spanish Code of Commerce.
SEC. 4. The said society is authorized to appoint not to exceed five agents in the City of Manila, and not to exceed two in each of the provinces of the Philippine Islands who shall have all the power and authority of a police officer to make arrests for violation of the laws enacted for the prevention of cruelty to animals and the protection of animals, and to serve any process in connection with the execution of such laws; and in addition thereto, all the police force of the Philippine Islands, wherever organized, shall, as occasion requires, assist said society, its members or agents, in the enforcement of all such laws.
SEC. 5. One-half of all the fines imposed and collected through the efforts of said society, its members or its agents, for violations of the laws enacted for the prevention of cruelty to animals and for their protection, shall belong to said society and shall be used to promote its objects.
Sec. 4. The said society is authorized to appoint not to exceed ten agents in the City of Manila, and not to exceed one in each municipality of the Philippines who shall have the authority to denounce to regular peace officers any violation of the laws enacted for the prevention of cruelty to animals and the protection of animals and to cooperate with said peace officers in the prosecution of transgressors of such laws.
Sec. 2. The full amount of the fines collected for violation of the laws against cruelty to animals and for the protection of animals, shall accrue to the general fund of the Municipality where the offense was committed.
Whereas, during the first regular session of the National Assembly, Commonwealth Act Numbered One Hundred Forty Eight was enacted depriving the agents of the Society for the Prevention of Cruelty to Animals of their power to arrest persons who have violated the laws prohibiting cruelty to animals thereby correcting a serious defect in one of the laws existing in our statute books.
A. Although the petitioner was created by special legislation, this necessarily came about because in January 1905 there was as yet neither a Corporation Law or any other general law under which it may be organized and incorporated, nor a Securities and Exchange Commission which would have passed upon its organization and incorporation.
b. That Executive Order No. 63, issued during the Commonwealth period, effectively deprived the petitioner of its power to make arrests, and that the petitioner lost its operational funding, underscore the fact that it exercises no governmental function. In fine, the government itself, by its overt acts, confirmed petitioner's status as a private juridical entity.
The COA General Counsel issued a Memorandum6 dated May 6, 2004, asserting that the petitioner was subject to its audit authority. In a letter dated May 17, 2004,7 respondent COA informed the petitioner of the result of the evaluation, furnishing it with a copy of said Memorandum dated May 6, 2004 of the General Counsel.
Petitioner thereafter filed with the respondent COA a Request for Re-evaluation dated May 19, 2004,8 insisting that it was a private domestic corporation.
Acting on the said request, the General Counsel of respondent COA, in a Memorandum dated July 13, 2004,9 affirmed her earlier opinion that the petitioner was a government entity that was subject to the audit jurisdiction of respondent COA. In a letter dated September 14, 2004, the respondent COA informed the petitioner of the result of the re-evaluation, maintaining its position that the petitioner was subject to its audit jurisdiction, and requested an initial conference with the respondents.
In a Memorandum dated September 16, 2004, Director Delfin Aguilar reported to COA Assistant Commissioner Juanito Espino, Corporate Government Sector, that the audit survey was not conducted due to the refusal of the petitioner because the latter maintained that it was a private corporation.
Petitioner received on September 27, 2005 the subject COA Office Order 2005-021 dated September 14, 2005 and the COA Letter dated September 23, 2005.
RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT RULED THAT PETITIONER IS SUBJECT TO ITS AUDIT AUTHORITY.
The essential question before this Court is whether the petitioner qualifies as a government agency that may be subject to audit by respondent COA.
Petitioner argues: first, even though it was created by special legislation in 1905 as there was no general law then existing under which it may be organized or incorporated, it exercises no governmental functions because these have been revoked by C.A. No. 148 and E.O. No. 63; second, nowhere in its charter is it indicated that it is a public corporation, unlike, for instance, C.A. No. 111 which created the Boy Scouts of the Philippines, defined its powers and purposes, and specifically stated that it was "An Act to Create a Public Corporation" in which, even as amended by Presidential Decree No. 460, the law still adverted to the Boy Scouts of the Philippines as a "public corporation," all of which are not obtaining in the charter of the petitioner; third, if it were a government body, there would have been no need for the State to grant it tax exemptions under Republic Act No. 1178, and the fact that it was so exempted strengthens its position that it is a private institution; fourth, the employees of the petitioner are registered and covered by the Social Security System at the latter's initiative and not through the Government Service Insurance System, which should have been the case had the employees been considered government employees; fifth, the petitioner does not receive any form of financial assistance from the government, since C.A. No. 148, amending Section 5 of Act No. 1285, states that the "full amount of the fines, collected for violation of the laws against cruelty to animals and for the protection of animals, shall accrue to the general fund of the Municipality where the offense was committed"; sixth, C.A. No. 148 effectively deprived the petitioner of its powers to make arrests and serve processes as these functions were placed in the hands of the police force; seventh, no government appointee or representative sits on the board of trustees of the petitioner; eighth, a reading of the provisions of its charter (Act No. 1285) fails to show that any act or decision of the petitioner is subject to the approval of or control by any government agency, except to the extent that it is governed by the law on private corporations in general; and finally, ninth, the Committee on Animal Welfare, under the Animal Welfare Act of 1998, includes members from both the private and the public sectors.
The respondents contend that since the petitioner is a "body politic" created by virtue of a special legislation and endowed with a governmental purpose, then, indubitably, the COA may audit the financial activities of the latter. Respondents in effect divide their contentions into six strains: first, the test to determine whether an entity is a government corporation lies in the manner of its creation, and, since the petitioner was created by virtue of a special charter, it is thus a government corporation subject to respondents' auditing power; second, the petitioner exercises "sovereign powers," that is, it is tasked to enforce the laws for the protection and welfare of animals which "ultimately redound to the public good and welfare," and, therefore, it is deemed to be a government "instrumentality" as defined under the Administrative Code of 1987, the purpose of which is connected with the administration of government, as purportedly affirmed by American jurisprudence; third, by virtue of Section 23,11 Title II, Book III of the same Code, the Office of the President exercises supervision or control over the petitioner; fourth, under the same Code, the requirement under its special charter for the petitioner to render a report to the Civil Governor, whose functions have been inherited by the Office of the President, clearly reflects the nature of the petitioner as a government instrumentality; fifth, despite the passage of the Corporation Code, the law creating the petitioner had not been abolished, nor had it been re-incorporated under any general corporation law; and finally, sixth, Republic Act No. 8485, otherwise known as the "Animal Welfare Act of 1998," designates the petitioner as a member of its Committee on Animal Welfare which is attached to the Department of Agriculture.
In view of the phrase "One-half of all the fines imposed and collected through the efforts of said society," the Court, in a Resolution dated January 30, 2007, required the Office of the Solicitor General (OSG) and the parties to comment on: a) petitioner's authority to impose fines and the validity of the provisions of Act No. 1285 and Commonwealth Act No. 148 considering that there are no standard measures provided for in the aforecited laws as to the manner of implementation, the specific violations of the law, the person/s authorized to impose fine and in what amount; and, b) the effect of the 1935 and 1987 Constitutions on whether petitioner continues to exist or should organize as a private corporation under the Corporation Code, B.P. Blg. 68 as amended.
Petitioner and the OSG filed their respective Comments. Respondents filed a Manifestation stating that since they were being represented by the OSG which filed its Comment, they opted to dispense with the filing of a separate one and adopt for the purpose that of the OSG.
The petitioner avers that it does not have the authority to impose fines for violation of animal welfare laws; it only enjoyed the privilege of sharing in the fines imposed and collected from its efforts in the enforcement of animal welfare laws; such privilege, however, was subsequently abolished by C.A. No. 148; that it continues to exist as a private corporation since it was created by the Philippine Commission before the effectivity of the Corporation law, Act No. 1459; and the 1935 and 1987 Constitutions.
The OSG submits that Act No. 1285 and its amendatory laws did not give petitioner the authority to impose fines for violation of laws12 relating to the prevention of cruelty to animals and the protection of animals; that even prior to the amendment of Act No. 1285, petitioner was only entitled to share in the fines imposed; C.A. No. 148 abolished that privilege to share in the fines collected; that petitioner is a public corporation and has continued to exist since Act No. 1285; petitioner was not repealed by the 1935 and 1987 Constitutions which contain transitory provisions maintaining all laws issued not inconsistent therewith until amended, modified or repealed.
The arguments of the parties, interlaced as they are, can be disposed of in five points.
First, the Court agrees with the petitioner that the "charter test" cannot be applied.
Sec. 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 16 is essentially a re-enactment of Section 7 of Article XVI of the 1935 Constitution and Section 4 of Article XIV of the 1973 Constitution.
There are a few exceptions. Statutes can be given retroactive effect in the following cases: (1) when the law itself so expressly provides; (2) in case of remedial statutes; (3) in case of curative statutes; (4) in case of laws interpreting others; and (5) in case of laws creating new rights.18 None of the exceptions is present in the instant case.
SEC. 75. Any corporation or sociedad anonima formed, organized, and existing under the laws of the Philippine Islands and lawfully transacting business in the Philippine Islands on the date of the passage of this Act, shall be subject to the provisions hereof so far as such provisions may be applicable and shall be entitled at its option either to continue business as such corporation or to reform and organize under and by virtue of the provisions of this Act, transferring all corporate interests to the new corporation which, if a stock corporation, is authorized to issue its shares of stock at par to the stockholders or members of the old corporation according to their interests. (Emphasis supplied).
In a legal regime where the charter test doctrine cannot be applied, the mere fact that a corporation has been created by virtue of a special law does not necessarily qualify it as a public corporation.
As stated, at the time the petitioner was formed, the applicable law was the Philippine Bill of 1902, and, emphatically, as also stated above, no proscription similar to the charter test can be found therein.
The amendments introduced by C.A. No. 148 made it clear that the petitioner was a private corporation and not an agency of the government. This was evident in Executive Order No. 63, issued by then President of the Philippines Manuel L. Quezon, declaring that the revocation of the powers of the petitioner to appoint agents with powers of arrest "corrected a serious defect" in one of the laws existing in the statute books.
As a curative statute, and based on the doctrines so far discussed, C.A. No. 148 has to be given retroactive effect, thereby freeing all doubt as to which class of corporations the petitioner belongs, that is, it is a quasi-public corporation, a kind of private domestic corporation, which the Court will further elaborate on under the fourth point.
Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain, William F. Tucker, Mary S. Fergusson, Amasa S. Crossfield, Spencer Cosby, Sealy B. Rossiter, Richard P. Strong, Jose Robles Lahesa, Josefina R. de Luzuriaga, and such other persons as may be associated with them in conformity with this act, and their successors, are hereby constituted and created a body politic and corporate at law, under the name and style of "The Philippines Society for the Prevention of Cruelty to Animals."
As incorporated by this Act, said society shall have the power to add to its organization such and as many members as it desires, to provide for and choose such officers as it may deem advisable, and in such manner as it may wish, and to remove members as it shall provide.
It shall have the right to sue and be sued, to use a common seal, to receive legacies and donations, to conduct social enterprises for the purpose of obtaining funds, to levy dues upon its members and provide for their collection to hold real and personal estate such as may be necessary for the accomplishment of the purposes of the society, and to adopt such by-laws for its government as may not be inconsistent with law or this charter.
Sec. 3. The said society shall be operated under the direction of its officers, in accordance with its by-laws in force, and this charter.
Sec. 6. The principal office of the society shall be kept in the city of Manila, and the society shall have full power to locate and establish branch offices of the society wherever it may deem advisable in the Philippine Islands, such branch offices to be under the supervision and control of the principal office.
Fourth. 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.
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. A bank, for example, is a private corporation; yet, it is created for a public benefit. Private schools and universities are likewise private corporations; and yet, they are rendering public service. Private hospitals and wards are charged with heavy social responsibilities. More so with all common carriers. On the other hand, there may exist a public corporation even if it is endowed with gifts or donations from private individuals.
It is clear that the amendments introduced by C.A. No. 148 revoked the powers of the petitioner to arrest offenders of animal welfare laws and the power to serve processes in connection therewith.
Fifth. The respondents argue that since the charter of the petitioner requires the latter to render periodic reports to the Civil Governor, whose functions have been inherited by the President, the petitioner is, therefore, a government instrumentality.
WHEREFORE, the petition is GRANTED. Petitioner is DECLARED 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.
3 Act No. 1285, '2 (1905).
4 Entitled "AN ACT TO AMEND SECTION FOUR OF ACT NUMBERED TWELVE HUNDRED AND EIGHTY-FIVE SO AS TO WITHDRAW FROM AGENTS OF THE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS OF THE PHILIPPINES THE POWER AND AUTHORITY TO MAKE ARRESTS FOR VIOLATION OF THE LAW AGAINST CRUELTY TO ANIMALS AND TO ABOLISH THE PRIVILEGE GRANTED TO SAID SOCIETY TO SHARE IN THE AMOUNT OF THE FINES COLLECTED FOR SAID VIOLATIONS."
12 Act No. 3547 (1928) and R.A. No. 8485 (1988).
13 Baluyot v. Holganza, 382 Phil. 131, 136-137 (2000); Camporedondo v. National Labor Relations Commission, 370 Phil. 901, 906 (1999).
Section 1. There shall be a General Auditing Office under the direction and control of an Auditor General, who shall hold office for a term of ten years and may not be reappointed. The Auditor General shall be appointed by the President with the consent of the Commission on Appointments, and shall receive an annual compensation to be fixed by law which shall not be diminished during his continuance in office. Until the Congress shall provide otherwise, the Auditor General shall receive an annual compensation of twelve thousand pesos.
Sec. 2. The Auditor General shall examine, audit, and settle all accounts pertaining to the revenues and receipts from whatever source, including trust funds derived from bond issues; and audit, in accordance with law and administrative regulations, all expenditures of funds or property pertaining or held in trust by the Government or the provinces or municipalities thereof. He shall keep the general accounts of the Government and preserve the vouchers pertaining thereto. It shall be the duty of the Auditor General to bring the attention of the proper administrative officer expenditures of funds or property which, in his opinion, are irregular, unnecessary, excessive, or extravagant. He shall also perform such other functions as may be prescribed by law.
16 See Civil Code of the Philippines, R.A. No. 386, as amended, Art. 4 (1950) & Spanish Civil Code of 1889, Art. 3.
17 1 Arturo M. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 24 (1983), citing Montilla v. Agustinian Corporation, 24 Phil. 220 (1913).
Section 7. All existing laws not inconsistent with this Constitution shall remain operative until amended, modified, or repealed by the National Assembly.
Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed, or revoked.
20 See Helen Cam, Introduction: Selected Historical Essays of F.W. Maitland, xix (1957).
25 See id. at 1-3.
26 No. L-75885, May 27, 1987, 150 SCRA 181.
27 Id. at 234-23 (emphasis supplied and also in the original).

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