CASE DIGEST: BOY SCOUTS OF THE PHILIPPINES v. COMMISSION ON AUDIT. G.R. No.

177131;
June 7, 2011.

FACTS:

This case arose when the COA issued COA Resolution, with the subject "Defining the Commissions
policy with respect to the audit of the Boy Scouts of the Philippines." The COA Resolution stated that the
BSP was created as a public corporation under Commonwealth Act No. 111.

In the case Boy Scouts of the Philippines v. National Labor Relations Commission, the Supreme Court
ruled that the BSP, as constituted under its charter, was a "government-controlled corporation within
the meaning of Article IX(B)(2)(1) of the Constitution"; and that "the BSP is appropriately regarded as
a government instrumentality under the 1987 Administrative Code." The COA Resolution also cited its
constitutional mandate under Section 2(1), Article IX (D).Finally, the COA Resolution reads:

NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS
RESOLVED, AS IT DOES HEREBY RESOLVE,to conduct an annual financial audit of the Boy Scouts of
the Philippines in accordance with generally accepted auditing standards, and express an opinion on
whether the financial statements which include the Balance Sheet, the Income Statement and the
Statement of Cash Flows present fairly its financial position and results of operations.

BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision,the Boy Scouts of the
Philippines shall be classified among the government corporations belonging to the Educational, Social,
Scientific, Civic and Research Sector under the Corporate Audit Office I, to be audited, similar to the
subsidiary corporations, by employing the team audit approach

ISSUE:

Whether or not Boy Scout of the Philippines is a government owned and controlled corporation subject for
COA’s audit jurisdiction.

RULING:

YES. After looking at the legislative history of its amended charter and carefully studying the applicable
laws and the arguments of both parties, we find that the BSP is a public corporation and its funds are
subject to the COA’s audit jurisdiction.

The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936), entitled “An Act to
Create a Public Corporation to be Known as the Boy Scouts of the Philippines, and to Define its Powers
and Purposes” created the BSP as a “public corporation” to serve the following public interest or purpose:

Sec. 3. The purpose of this corporation shall be to promote through organization and cooperation with
other agencies, the ability of boys to do useful things for themselves and others, to train them in
scoutcraft, and to inculcate in them patriotism, civic consciousness and responsibility, courage, self-
reliance, discipline and kindred virtues, and moral values, using the method which are in common use by
boy scouts.

The BSP as a Public Corporation under Par. 2, Art. 2 of the Civil Code

There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently
constituted under Republic Act No. 7278, falls under the second classification. Article 44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose created by law; their
personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a
juridical personality, separate and distinct from that of each shareholder, partner or member. (Emphases
supplied.)

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it
under Article 45 of the Civil Code, which provides:

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the
laws creating or recognizing them.

Since the BSP, under its amended charter, continues to be a public corporation or a government
instrumentality, we come to the inevitable conclusion that it is subject to the exercise by the COA of its
audit jurisdiction in the manner consistent with the provisions of the BSP Charter.
PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS vs. COA. G.R. No.
169752 September 25, 2007

FACTS:

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 was composed of animal
aficionados and animal propagandists.  The objects of the petitioner 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.  

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 SEC.

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 1/2 of the fines imposed and collected
through its efforts for violations of the laws related thereto.           

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 C.A. No. 148. Whereas, the cruel
treatment of animals is now an offense against the State, penalized under our statutes, which the
Government is duty bound to enforce;

When the COA was to perform an audit on them they refuse to do so, by the reason that they are a
private entity and not under the said commission. It argued that COA covers only government entities. On
the other hand the COA decided that it is a government entity.

ISSUE: WON the said petitioner is a private entity.

RULING:

YES. The Court agrees with the petitioner that the “charter test” cannot be applied.   Essentially, the
“charter test” provides that the test to determine whether a corporation is government owned or
controlled, or private in nature is simple.

And since 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. Settled is the
rule that laws in general have no retroactive effect, unless the contrary is provided.  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.  

        Second, a reading of petitioner’s charter shows that it is not subject to control or supervision by any
agency of the State, unlike GOCCs.  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.”  

        Third.  The employees of the petitioner are registered and covered by the SSS at the latter’s
initiative, and not through the GSIS, which should be the case if the employees are considered
government employees.  This is another indication of petitioner’s nature as a private entity.  
        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 not tenable.  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, or pursue other beneficent 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, railroad, warehouse, telegraph,
telephone, water supply corporations and transportation companies.  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.

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.

        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.  
 MARILAO WATER CONSUMERS ASSOC.
vs. IAC
G.R. No. 72807 September 9, 1991

FACTS:
Pursuant to the provisions of P.D. 168 (Provincial Water Utilities Act of 1973), Marilao Water District (MWD) was formed by
Resolution of the Sangguniang Bayan of the Municipality of Marilao dated September 18, 1982, which resolution was thereafter
forwarded to the LWUA and "duly filed" by it on October 4, 1982 after ascertaining that it conformed to the requirements of the
law.

Marilao Waters Consumers Association, Inc. (MWCA), a non-stock, non-profit corporation, filed a petition before the RTC of
Malolos, Bulacan claiming that the creation of the water district is defective and illegal. Impleaded as respondents were the Marilao
Water District, as well as the Municipality of Marilao, Bulacan; its Sangguniang Bayan; and Mayor Nicanor V. GUILLERMO. The
petition prayed for the dissolution of the water district.

MWD filed its Answer with an affirmative defences that the RTC lacked jurisdiction over the subject matter since the water district’s
dissolution fell under the original and exclusive jurisdiction of the SEC.

MWCA countered that since the Marilao Water District had not been organized under the Corporation Code, the SEC had no
jurisdiction over a proceeding for its dissolution and that under Section 45 of PD 198, the proceeding to determine if the dissolution
of the water district is for the best interest of the people, is within the competence of a regular court of justice.

RTC dismissed the MWCA’s suit ruling that it is the SEC which has exclusive and original jurisdiction over the case.

ISSUE:
Which triburial has jurisdiction over the dissolution of a water district organized and operating as a quasi-public corporation under
the provisions of Presidential Decree No. 198, as amended: the Regional Trial Court, or the Securities & Exchange Commission.

RULING:
The present case does not fall within the limited jurisdiction of the SEC, but within the general jurisdiction of RTCs.

PD 198 authorizes the formation, lays down the powers and functions, and governs the operation of water districts throughout the
country; it is "the source of authorization and power to form and maintain a (water) district." Once formed, it says, a district is
subject to its provisions and is not under the jurisdiction of any political subdivision.

The juridical entities thus created and organized under PD 198 are considered quasi-public corporations, performing public services
and supplying public wants.

The juridical entities known as water districts created by PD 198, although considered as quasi-public corporations and authorized
to exercise the powers, rights and privileges given to private corporations under existing laws are entirely distinct from corporations
organized under the Corporation Code, PD 902-A, as amended.

The Corporation Code has nothing whatever to do with their formation and organization, all the terms and conditions for their
organization and operation being particularly spelled out in PD 198.

The resolutions creating them, their charters, in other words, are filed not with the Securities and Exchange Commission but with
the LWUA. It is these resolutions qua charters, and not articles of incorporation drawn up under the Corporation Code, which set
forth the name of the water districts, the number of their directors, the manner of their selection and replacement, their powers,
etc.

The SEC which is charged with enforcement of the Corporation Code as regards corporations, partnerships and associations formed
or operating under its provisions, has no power of supervision or control over the activities of water districts.

The "Provincial Water Utilities Act of 1973" has a specific provision governing dissolution of water districts created thereunder This
is Section 45 of PD 198. Under this provision, it is the LWUA which is the administrative body involved in the voluntary dissolution of
a water district; it is with it that the resolution of dissolution is filed, not the Securities and Exchange Commission. And this provision
is evidently quite distinct and different from those on dissolution of corporations "formed or organized under the provisions of the
Corporation Code under which dissolution may be voluntary (by vote of the stockholders or members), generally effected by the
filing of the corresponding resolution with the Securities and Exchange Commission, or involuntary, commenced by the filing of a
verified complaint also with the SEC.

Although described as quasi-public corporations, and granted the same powers as private corporations, water districts are not
really corporations. They have no incorporators, stockholders or members, who have the right to vote for directors, or
amend the articles of incorporation or by-laws, or pass resolutions, or otherwise perform such other acts as are authorized to
stockholders or members of corporations by the Corporation Code. In a word, there can be no such thing as a relation of
corporation and stockholders or members in a water district for the simple reason that in the latter there are no stockholders or
members. Between the water district and those who are recipients of its water services there exists not the relationship of
corporation-and-stockholder, but that of a service agency and users or customers.

There can therefore be no such thing in a water district as "intra-corporate or partnership relations, between and among
stockholders, members or associates (or) between any or all of them and the corporation, partnership or association of which they
are stockholders, members or associates, respectively," within the contemplation of Section 5 of the Corporation Code so as to bring
controversies involving them within the competence and cognizance of the SEC.