Phil. Society For Prevention For Cruelty vs. Commision On Audit 195 Scra 444
Phil. Society For Prevention For Cruelty vs. Commision On Audit 195 Scra 444
SUPREME COURT
Manila
EN BANC
DECISION
AUSTRIA-MARTINEZ, J.:
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.
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of
Act No. 1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at
the time it was created, was composed of animal aficionados and animal propagandists. 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.3
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.
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 one-
half (1/2) of the fines imposed and collected through its efforts for violations of the laws
related thereto. As originally worded, Sections 4 and 5 of Act No. 1285 provide:
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.
(emphasis supplied)
Today is Thursday, September 05, 2024home
EN BANC
DECISION
AUSTRIA-MARTINEZ, J.:
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.
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of
Act No. 1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at
the time it was created, was composed of animal aficionados and animal propagandists. 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.3
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.
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 one-
half (1/2) of the fines imposed and collected through its efforts for violations of the laws
related thereto. As originally worded, Sections 4 and 5 of Act No. 1285 provide:
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.
(emphasis supplied)
Subsequently, however, 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
Commonwealth Act (C.A.) No. 148,4 which reads, in its entirety, thus:
Section 1. Section four of Act Numbered Twelve hundred and eighty-five as amended by Act
Numbered Thirty five hundred and forty-eight, is hereby further amended so as to read as
follows:
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.
Immediately thereafter, then President Manuel L. Quezon issued Executive Order (E.O.) No.
63 dated November 12, 1936, portions of which provide:
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.
xxxx
Whereas, the cruel treatment of animals is an offense against the State, penalized under our
statutes, which the Government is duty bound to enforce;
Now, therefore, I, Manuel L. Quezon, President of the Philippines, pursuant to the authority
conferred upon me by the Constitution, hereby decree, order, and direct the Commissioner
of Public Safety, the Provost Marshal General as head of the Constabulary Division of the
Philippine Army, every Mayor of a chartered city, and every municipal president to detail and
organize special members of the police force, local, national, and the Constabulary to watch,
capture, and prosecute offenders against the laws enacted to prevent cruelty to animals.
(Emphasis supplied)
On December 1, 2003, an audit team from respondent Commission on Audit (COA) visited
the office of the petitioner to conduct an audit survey pursuant to COA Office Order No.
2003-051 dated November 18, 20035 addressed to the petitioner. The petitioner demurred
on the ground that it was a private entity not under the jurisdiction of COA, citing Section
2(1) of Article IX of the Constitution which specifies the general jurisdiction of the COA, viz:
Section 1. General Jurisdiction. The Commission on Audit shall have the power, authority,
and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of,
and expenditures or uses of funds and property, owned or held in trust by, or pertaining to
the Government, or any of its subdivisions, agencies, or instrumentalities, including
government-owned and controlled corporations with original charters, and on a post-audit
basis: (a) constitutional bodies, commissions and officers that have been granted fiscal
autonomy under the Constitution; (b) autonomous state colleges and universities; (c) other
government-owned or controlled corporations and their subsidiaries; and (d) such non-
governmental entities receiving subsidy or equity, directly or indirectly, from or through the
government, which are required by law or the granting institution to submit to such audit as
a condition of subsidy or equity. However, where the internal control system of the audited
agencies is inadequate, the Commission may adopt such measures, including temporary or
special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep
the general accounts of the Government, and for such period as may be provided by law,
preserve the vouchers and other supporting papers pertaining thereto. (Emphasis supplied)
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.
A.
B.
PETITIONER IS ENTITLED TO THE RELIEF SOUGHT, THERE BEING NO APPEAL, NOR ANY
PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW AVAILABLE
TO IT.10
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.
First, the Court agrees with the petitioner that the "charter test" cannot be applied.
The petitioner is correct in stating that the charter test is predicated, at best, on the legal
regime established by the 1935 Constitution, Section 7, Article XIII, which states:
Sec. 7. The National Assembly shall not, except by general law, provide for the formation,
organization, or regulation of private corporations, unless such corporations are owned or
controlled by the Government or any subdivision or instrumentality thereof.14
The foregoing proscription has been carried over to the 1973 and the 1987 Constitutions.
Section 16 of Article XII of the present Constitution provides:
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.
And since the underpinnings of 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.16 All statutes are
to be construed as having only a prospective operation, unless the purpose and intention of
the legislature to give them a retrospective effect is expressly declared or is necessarily
implied from the language used. In case of doubt, the doubt must be resolved against the
retrospective effect.17
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.
The general principle of prospectivity of the law likewise applies to Act No. 1459, otherwise
known as the Corporation Law, which had been enacted by virtue of the plenary powers of
the Philippine Commission on March 1, 1906, a little over a year after January 19, 1905, the
time the petitioner emerged as a juridical entity. Even the Corporation Law respects the
rights and powers of juridical entities organized beforehand, viz:
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).
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
DECISION
AUSTRIA-MARTINEZ, J.:
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.
The petitioner was incorporated as a juridical entity over one hundred years ago by virtue of
Act No. 1285, enacted on January 19, 1905, by the Philippine Commission. The petitioner, at
the time it was created, was composed of animal aficionados and animal propagandists. 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.3
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.
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 one-
half (1/2) of the fines imposed and collected through its efforts for violations of the laws
related thereto. As originally worded, Sections 4 and 5 of Act No. 1285 provide:
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.
(emphasis supplied)
Subsequently, however, 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
Commonwealth Act (C.A.) No. 148,4 which reads, in its entirety, thus:
Section 1. Section four of Act Numbered Twelve hundred and eighty-five as amended by Act
Numbered Thirty five hundred and forty-eight, is hereby further amended so as to read as
follows:
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.
Immediately thereafter, then President Manuel L. Quezon issued Executive Order (E.O.) No.
63 dated November 12, 1936, portions of which provide:
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.
xxxx
Whereas, the cruel treatment of animals is an offense against the State, penalized under our
statutes, which the Government is duty bound to enforce;
Now, therefore, I, Manuel L. Quezon, President of the Philippines, pursuant to the authority
conferred upon me by the Constitution, hereby decree, order, and direct the Commissioner
of Public Safety, the Provost Marshal General as head of the Constabulary Division of the
Philippine Army, every Mayor of a chartered city, and every municipal president to detail and
organize special members of the police force, local, national, and the Constabulary to watch,
capture, and prosecute offenders against the laws enacted to prevent cruelty to animals.
(Emphasis supplied)
On December 1, 2003, an audit team from respondent Commission on Audit (COA) visited
the office of the petitioner to conduct an audit survey pursuant to COA Office Order No.
2003-051 dated November 18, 20035 addressed to the petitioner. The petitioner demurred
on the ground that it was a private entity not under the jurisdiction of COA, citing Section
2(1) of Article IX of the Constitution which specifies the general jurisdiction of the COA, viz:
Section 1. General Jurisdiction. The Commission on Audit shall have the power, authority,
and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of,
and expenditures or uses of funds and property, owned or held in trust by, or pertaining to
the Government, or any of its subdivisions, agencies, or instrumentalities, including
government-owned and controlled corporations with original charters, and on a post-audit
basis: (a) constitutional bodies, commissions and officers that have been granted fiscal
autonomy under the Constitution; (b) autonomous state colleges and universities; (c) other
government-owned or controlled corporations and their subsidiaries; and (d) such non-
governmental entities receiving subsidy or equity, directly or indirectly, from or through the
government, which are required by law or the granting institution to submit to such audit as
a condition of subsidy or equity. However, where the internal control system of the audited
agencies is inadequate, the Commission may adopt such measures, including temporary or
special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep
the general accounts of the Government, and for such period as may be provided by law,
preserve the vouchers and other supporting papers pertaining thereto. (Emphasis supplied)
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.
A.
B.
PETITIONER IS ENTITLED TO THE RELIEF SOUGHT, THERE BEING NO APPEAL, NOR ANY
PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW AVAILABLE
TO IT.10
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.
The petitioner is correct in stating that the charter test is predicated, at best, on the legal
regime established by the 1935 Constitution, Section 7, Article XIII, which states:
Sec. 7. The National Assembly shall not, except by general law, provide for the formation,
organization, or regulation of private corporations, unless such corporations are owned or
controlled by the Government or any subdivision or instrumentality thereof.14
The foregoing proscription has been carried over to the 1973 and the 1987 Constitutions.
Section 16 of Article XII of the present Constitution provides:
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.
During the formulation of the 1935 Constitution, the Committee on Franchises recommended
the foregoing proscription to prevent the pressure of special interests upon the lawmaking
body in the creation of corporations or in the regulation of the same. To permit the
lawmaking body by special law to provide for the organization, formation, or regulation of
private corporations would be in effect to offer to it the temptation in many cases to favor
certain groups, to the prejudice of others or to the prejudice of the interests of the
country.15
And since the underpinnings of 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.16 All statutes are
to be construed as having only a prospective operation, unless the purpose and intention of
the legislature to give them a retrospective effect is expressly declared or is necessarily
implied from the language used. In case of doubt, the doubt must be resolved against the
retrospective effect.17
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.
The general principle of prospectivity of the law likewise applies to Act No. 1459, otherwise
known as the Corporation Law, which had been enacted by virtue of the plenary powers of
the Philippine Commission on March 1, 1906, a little over a year after January 19, 1905, the
time the petitioner emerged as a juridical entity. Even the Corporation Law respects the
rights and powers of juridical entities organized beforehand, viz:
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).
As pointed out by the OSG, both the 1935 and 1987 Constitutions contain transitory
provisions maintaining all laws issued not inconsistent therewith until amended, modified or
repealed.19
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.
What then is the nature of the petitioner as a corporate entity? What legal regime governs
its rights, powers, and duties?
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 textual foundation of the charter test, which placed a limitation on the power of the
legislature, first appeared in the 1935 Constitution. However, the petitioner was
incorporated in 1905 by virtue of Act No. 1258, a law antedating the Corporation Law (Act
No. 1459) by a year, and the 1935 Constitution, by thirty years. There being neither a general
law on the formation and organization of private corporations nor a restriction on the
legislature to create private corporations by direct legislation, the Philippine Commission at
that moment in history was well within its powers in 1905 to constitute the petitioner as a
private juridical entity.1âwphi1
Time and again the Court must caution even the most brilliant scholars of the law and all
constitutional historians on the danger of imposing legal concepts of a later date on facts of
an earlier date.20
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.
Second, a reading of petitioner’s 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, such as the powers to hold property, to sue and be sued, to use a
common seal, and so forth. It may adopt by-laws for its internal operations: the petitioner
shall be managed or operated by its officers "in accordance with its by-laws in force." The
pertinent provisions of the charter provide:
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.
xxxx
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.
xxxx
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.
Third. 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 be the case if the employees are considered government employees. This is
another indication of petitioner’s nature as a private entity. Section 1 of Republic Act No.
1161, as amended by Republic Act No. 8282, otherwise known as the Social Security Act of
1997, defines the employer:
Employer – Any person, natural or juridical, domestic or foreign, who carries on in the
Philippines any trade, business, industry, undertaking or activity of any kind and uses the
services of another person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government: Provided, That a self-employed
person shall be both employee and employer at the same time. (Emphasis supplied)
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.
This argument, is, at best, specious. 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. This class of corporations may be
considered quasi-public corporations, which are private corporations that render public
service, supply public wants,21 or pursue other eleemosynary objectives. While purposely
organized for the gain or benefit of its members, they are required by law to discharge
functions for the public benefit. Examples of these corporations are utility,22 railroad,
warehouse, telegraph, telephone, water supply corporations and transportation
companies.23 It must be stressed that a quasi-public corporation is a species of private
corporations, but the qualifying factor is the type of service the former renders to the public:
if it performs a public service, then it becomes a quasi-public corporation.241âwphi1
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.
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 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.
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.25
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.
This contention is inconclusive. By virtue of the fiction that all corporations owe their very
existence and powers to the State, the reportorial requirement is applicable to all
corporations of whatever nature, whether they are public, quasi-public, or private
corporations—as creatures of the State, there is a reserved right in the legislature to
investigate the activities of a corporation to determine whether it acted within its powers. In
other words, the reportorial requirement is the principal means by which the State may see
to it that its creature acted according to the powers and functions conferred upon it. These
principles were extensively discussed in Bataan Shipyard & Engineering Co., Inc. v.
Presidential Commission on Good Government.26 Here, the Court, in holding that the subject
corporation could not invoke the right against self-incrimination whenever the State
demanded the production of its corporate books and papers, extensively discussed the
purpose of reportorial requirements, viz:
SO ORDERED.