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7/29/2019 Boys Scout vs. Coa
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ENBANC
BOYSCOUTSOFTHEPHILIPPINES, Petitioner,
-versus-
COMMISSIONONAUDIT ,Respondent.
G.R.No.177131
Present:
CORONA,C.J.,
CARPIO,
CARPIOMORALES,VELASCO,JR.,
NACHURA,
LEONARDO-DECASTRO,
BRION,
PERALTA,BERSAMIN,
DELCASTILLO,ABAD,
VILLARAMA,JR.,
PEREZ,
MENDOZA,and
SERENO,JJ.
Promulgated:
June7,2011
x--------------------------------------------------x
DECISION
LEONARDO-DECASTRO,J.:
The jurisdiction of the Commission on Audit (COA) over the Boy Scouts of the
Philippines(BSP)isthesubjectmatterofthiscontroversythatreachedusviapetitionfor
prohibition[1]filedbytheBSPunderRule65ofthe1997RulesofCourt.Inthispetition,theBSPseeksthattheCOAbeprohibitedfromimplementingitsJune18,2002Decision,[2]
itsFebruary21,2007Resolution,[3]aswellasallotherissuancesarisingtherefrom,andthatalloftheforegoingberenderednullandvoid.[4]
AntecedentFactsandBackgroundoftheCase
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ThiscasearosewhentheCOAissuedResolutionNo.99-011[5]onAugust19,
1999(theCOAResolution),withthesubjectDefiningtheCommissionspolicywithrespecttotheauditoftheBoyScoutsofthePhilippines.Initswhereasclauses,theCOAResolution
statedthattheBSPwascreatedasapubliccorporationunderCommonwealthActNo.111,
asamendedbyPresidentialDecreeNo.460andRepublicActNo.7278;thatinBoyScoutsof
thePhilippinesv.NationalLaborRelationsCommission,[6]theSupremeCourtruledthattheBSP,asconstitutedunderitscharter,wasagovernment-controlledcorporationwithinthe
meaning of Article IX(B)(2)(1) of the Constitution; and that the BSP is appropriately
regardedasagovernmentinstrumentalityunderthe1987AdministrativeCode. [7]The
COA Resolution also cited its constitutional mandate under Section 2(1), Article IX(D).Finally,theCOAResolutionreads:
NOWTHEREFORE,inconsiderationoftheforegoingpremises,
the COMMISSION PROPER HAS RESOLVED, AS IT DOES HEREBY
RESOLVE,toconductanannualfinancialauditoftheBoyScoutsofthe Philippines in accordance with generally accepted auditing
standards,andexpressanopiniononwhetherthefinancialstatementswhich include the Balance Sheet, the Income Statement and the
StatementofCashFlowspresentfairlyitsfinancialpositionandresults
ofoperations.
xxxx
BE IT RESOLVED FURTHERMORE, that for purposes of audit
supervision, the Boy Scouts of the Philippines shall be classifiedamongthegovernmentcorporationsbelongingtotheEducational,
Social, Scientific, Civic and Research Sector under the Corporate
AuditOffice I,to beaudited,similar tothe subsidiarycorporations,byemployingtheteamauditapproach.[8](Emphasessupplied.)
The BSP sought reconsideration of the COA Resolution in a letter[9] dated
November26,1999signedbytheBSPNationalPresidentJejomarC.Binay,whoisnowtheVicePresidentoftheRepublic,whereinhewrote:
ItisthepositionoftheBSP,withallduerespect,thatitisnotsubjecttotheCommissionsjurisdictiononthefollowinggrounds:
1.WereckonthattherulinginthecaseofBoyScoutsofthePhilippinesvs. National Labor Relations Commission, et al. (G.R. No. 80767)
classifying the BSP as a government-controlled corporation is
anchored on the substantial Government participation in the
NationalExecutiveBoardoftheBSP.Itistobenotedthatthecasewas
decidedwhen the BSP Charter isdefined byCommonwealth Act No.
111asamendedbyPresidentialDecree460.
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However,maywehumbly referyou toRepublicAct No. 7278which
amendedtheBSPscharterafterthecitedcasewasdecided.Themost
salient of all amendments in RA No. 7278 is the alteration of the
compositionoftheNationalExecutiveBoardoftheBSP.
The said RA virtually eliminated the substantial governmentparticipation in the National Executive Board by removing: (i) the
President of the Philippines and executive secretaries, with the
exceptionof theSecretaryofEducation,asmembersthereof; and(ii)
the appointment and confirmation power of the President of thePhilippines,asChiefScout,overthemembersofthesaidBoard.
TheBSPbelievesthatthecitedcasehasbeensupersededbyRA7278.
TherebyweakeningthecasesconclusionthattheBSPisagovernment-
controlled corporation (sic). The 1987 Administrative Code itself, ofwhichtheBSPvs.NLRCreliedonforsometerms,definesgovernment-
ownedandcontrolledcorporationsasagenciesorganizedasstockornon-stockcorporationswhichtheBSP,underitspresentcharter,isnot.
Also, the Government, like in other GOCCs, does not have funds
invested in the BSP. What RA 7278 only provides is that the
Governmentoranyofitssubdivisions,branches,offices,agenciesand
instrumentalitiescanfromtimetotimedonateandcontributefundsto
theBSP.
xxxx
Also the BSPrespectfully believes that the BSP isnot appropriatelyregarded as a government instrumentality under the 1987
AdministrativeCode as stated in the COA resolution. Asdefined by
Section2(10)ofthesaidcode,instrumentalityreferstoanyagencyofthe National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law,endowedwithsomeifnotallcorporatepowers,administeringspecial
funds,andenjoyingoperationalautonomy,usuallythroughacharter.
The BSP is not an entity administering special funds. It is not even
includedintheDECSNationalBudget.xxx
It may be argued also that the BSP is not an agency of the
Government.The1987AdministrativeCode,merelyreferredtheBSP
asanattachedagency of the DECS asdistinguished fromanactual
line agency ofdepartmentsthatare includedintheNationalBudget.
The BSP believes that an attached agency is different from an
agency.Agency,asdefinedinSection2(4)oftheAdministrativeCode,
isdefined asany of the variousunitsof the Government including a
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department, bureau, office, instrumentality, government-owned or
controlledcorporationorlocalgovernmentordistinctunittherein.
Under the above definition, the BSP is neither a unit of the
Government;adepartmentwhichreferstoanexecutivedepartmentas
createdbylaw(Section2[7]oftheAdministrativeCode);norabureauwhich refers to any principal subdivision orunit of any department
(Section2[8],AdministrativeCode).[10]
Subsequently,requestsforreconsiderationoftheCOAResolutionwerealsomadeseparatelybyRobertP.Valdellon,RegionalScoutDirector,WesternVisayasRegion,Iloilo
CityandEugenioF.Capreso,CouncilScoutExecutiveofCalbayogCity.[11]
Inaletter[12]datedJuly3,2000,DirectorCrescencioS.Sunico,CorporateAudit
Officer(CAO)IoftheCOA,furnishedtheBSPwithacopyoftheMemorandum[13]datedJune 20, 2000 of Atty. Santos M. Alquizalas, the COA General Counsel. In said
Memorandum, the COA General Counsel opined that Republic Act No. 7278 did notsupersede the Courts ruling inBoy Scouts of the Philippinesv.NationalLaborRelationsCommission,eventhoughsaidlaweliminatedthesubstantialgovernmentparticipationin
theselectionofmembersof theNationalExecutiveBoardof theBSP.TheMemorandum
furtherprovides:
Analysis of the said case disclosed that the substantial government
participationisonlyone(1)ofthethree(3)groundsrelieduponbythe
Court in the resolution of the case. Other considerations include the
characteroftheBSPspurposesandfunctionswhichhasapublicaspect
andthestatutorydesignationoftheBSPasapubliccorporation.These
groundshavenotbeendeletedbyR.A.No.7278.Onthecontrary,thesewere strengthened as evidenced by the amendment made relative to
BSPspurposesstatedinSection3ofR.A.No.7278.
OntheargumentthatBSPisnotappropriatelyregardedasa
governmentinstrumentalityandagencyofthegovernment,suchhasalreadybeenansweredandclarified.TheSupremeCourthaselucidated
thismatter in theBSP casewhen it declared that BSP is regarded as,
both a government-controlled corporation with an original charterand as an instrumentality of the Government. Likewise, it is not
disputed that the AdministrativeCode of1987 designated the BSP as
one of the attached agencies of DECS. Being an attached agency,however, it does not change its nature as a government-controlled
corporationwithoriginalcharterand,necessarily,subjecttoCOAaudit
jurisdiction. Besides, Section 2(1), Article IX-D of the Constitution
providesthatCOAshallhavethepower,authority,anddutytoexamine,
auditandsettle all accountspertainingtotherevenueandreceipts of,
andexpendituresorusesoffundsandproperty,ownedorheldintrust
by,orpertainingto,theGovernment,oranyofitssubdivisions,agencies
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or instrumentalities, including government-owned or controlled
corporationswithoriginalcharters.[14]
BasedontheMemorandumoftheCOAGeneralCounsel,DirectorSunicowrote:
InviewofthepointsclarifiedbysaidMemorandumupholding
COAResolutionNo.99-011,wehave tocomplywith the provisionsof
thelatter,amongwhichistoconductanannualfinancialauditoftheBoy
ScoutsofthePhilippines.[15]
Ina letter datedNovember20, 2000signed byDirectorAmorsonia B.Escarda,
CAOI,theCOAinformedtheBSPthatapreliminarysurveyofitsorganizationalstructure,
operations and accounting system/records shall be conducted on November 21 to 22,2000.[16]
UpontheBSPsrequest,theauditwasdeferredforthirty(30)days.TheBSPthen
filed a Petition for Review with Prayer for Preliminary Injunction and/or Temporary
RestrainingOrderbeforetheCOA.Thiswas deniedbytheCOAinitsquestionedDecision,whichheldthattheBSPisunderitsauditjurisdiction.TheBSPmovedforreconsideration
butthiswaslikewisedeniedunderitsquestionedResolution.[17]
ThisledtothefilingbytheBSPofthispetitionforprohibitionwithpreliminary
injunctionandtemporaryrestrainingorderagainsttheCOA.
TheIssue
Asstatedearlier,thesoleissuetoberesolvedinthiscaseiswhethertheBSPfalls
undertheCOAsauditjurisdiction.
ThePartiesRespectiveArguments
The BSP contends thatBoyScoutsof thePhilippinesv.NationalLaborRelations
CommissionisinapplicableforpurposesofdeterminingtheauditjurisdictionoftheCOAas
theissuethereinwasthejurisdictionoftheNationalLaborRelationsCommissionoveracaseforillegaldismissalandunfairlaborpracticefiledbycertainBSPemployees.[18]
WhiletheBSPconcedesthatitsfunctionsdorelatetothosethatthegovernment
might otherwise completely assume on its own, it avers that this alone was not
determinativeoftheCOAsauditjurisdictionoverit.TheBSPfurtheraversthattheCourt
inBoyScoutsofthePhilippinesv.NationalLaborRelationsCommission simplystatedxxx
that in respect of functions, the BSP is akin to a public corporation but this was not
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synonymoustoholdingthattheBSPisagovernmentcorporationorentitysubjecttoaudit
bytheCOA.[19]
TheBSPcontendsthatRepublicActNo.7278introducedcrucialamendmentsto
itscharter;hence,thefindingsoftheCourtin BoyScoutsofthePhilippinesv.NationalLabor
Relations Commission are no longer valid as the government has ceased to play acontrollinginfluence init.TheBSPclaims thatthepronouncementsof theCourttherein
mustbetakenonlywithinthecontextofthatcase;thattheCourthadcategoricallyfound
thatitsassetswereacquiredfromtheBoyScoutsofAmericaandnotfromthePhilippine
government,andthatitsoperationsarefinancedchieflyfrommembershipduesoftheBoyScouts themselvesaswell as frompropertyrentals;and that theBSPmay correctly be
characterized as non-governmental, and hence, beyond the audit jurisdiction of the
COA. It further claims that the designation by the Court of the BSP as a government
agencyorinstrumentalityismereobiterdictum.[20]
The BSP maintains that the provisions of Republic Act No. 7278 suggest that
governance of BSP has come to be overwhelmingly a private affair or nature, withgovernmentparticipationrestrictedtotheseatoftheSecretaryofEducation,Cultureand
Sports.[21]Itcites PhilippineAirlinesInc.v.CommissiononAudit[22]whereintheCourt
declaredthat,PAL,havingceasedtobeagovernment-ownedorcontrolledcorporationis
no longer under the audit jurisdictionof the COA.[23] Claiming that the amendments
introduced byRepublic Act No. 7278 constituted a supervening event that changed the
BSPs corporate identity in the same way that the governments privatization program
changedPALs,theBSPmakesthecasethatthegovernmentnolongerhascontroloverit;
thus, the COA cannot use the Boy Scouts of the Philippines v. National Labor RelationsCommission as its basis for the exercise of its jurisdiction and the issuance of COA
ResolutionNo.99-011.[24]TheBSPfurtherclaimsasfollows:
Itisnotfar-fetched,infact,toconcedethatBSPsfundsandassets
are private in character. Unlike ordinary public corporations, such as
provinces, cities, andmunicipalities,or government-ownedand controlledcorporations, such as Land Bank of the Philippines and the Development
BankofthePhilippines,theassetsandfundsofBSParenotderivedfromanygovernmentgrant.Foritsoperations,BSPisnotdependentinanywayon
any government appropriation; as a matter of fact, it has not even been
includedinanyappropriationsforthegovernment.Tobesure,COAhasnotalleged,initsResolutionNo.99-011orintheMemorandumofitsGeneral
Counsel,thatBSPreceived,receivesorcontinuestoreceiveassetsandfunds
from any agency of the government. The foregoing simply point to theprivatenatureofthefundsandassetsofpetitionerBSP.
xxxx
As stated in petitioners third argument, BSPs assets and funds
wereneveracquiredfromthegovernment.Itsoperationsarenotinanyway
financed by the government, as BSP has never been included in any
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appropriationsactforthegovernment.Neitherhasthegovernmentinvested
funds with BSP. BSP, has not been, at any time, a user of government
propertyorfunds;norhavepropertiesofthegovernmentbeenheldintrust
by BSP. This is precisely the reasonwhy, until this time, theCOAhasnot
attemptedtosubjectBSPtoitsauditjurisdiction.xxx.[25]
Tosummarizeitsotherarguments,theBSPcontendsthatitisnotagovernment-
ownedorcontrolledcorporation;neitherisitaninstrumentality,agency,orsubdivisionof
thegovernment.
InitsComment,[26]theCOAarguesasfollows:
1.TheBSPisapubliccorporationcreatedunderCommonwealthAct
No. 111 datedOctober31, 1936,andwhosefunctions relateto thefostering of public virtues of citizenship and patriotism and the
generalimprovementofthemoralspiritandfiberoftheyouth.ThemannerofcreationandthepurposeforwhichtheBSPwascreated
indubitablyprovethatitisagovernmentagency.
2.Beingagovernmentagency,thefundsandpropertyownedorheld
intrustbytheBSParesubjecttotheauditauthorityofrespondent
CommissiononAuditpursuant toSection2 (1),Article IX-Dof the
1987Constitution.
3.RepublicActNo.7278didnotchangethecharacteroftheBSPasa
government-owned or controlled corporation and government
instrumentality.[27]
The COAmaintains that the functions of the BSP that include,amongothers, theteaching to the youth of patriotism, courage, self-reliance, and kindred virtues, are
undeniably sovereign functions enshrined under the Constitution and discussed by theCourt inBoy Scouts of the Philippinesv.NationalLaborRelations Commission.The COA
contends that any attempt to classify the BSP as a private corporation would be
incomprehensiblesincenolessthanthelawwhichcreatedithaddesignateditasapubliccorporationanditsstatutorymandateembracesperformanceofsovereignfunctions.[28]
TheCOAclaimsthattheonlyreasonwhytheBSPemployeesfellwithinthescopeoftheCivilServiceCommissionevenbeforethe1987Constitutionwasthefactthatitwasa
government-owned or controlled corporation; that as an attached agency of the
Department of Education, Culture and Sports (DECS), the BSP is an agency of the
government;andthattheBSPisacharteredinstitutionunderSection1(12)oftheRevised
AdministrativeCodeof1987,embracedunderthetermgovernmentinstrumentality.[29]
The COA concludes that being a government agency, the funds and property
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ownedorheldbytheBSParesubjecttotheauditauthorityoftheCOApursuanttoSection
2(1),ArticleIX(D)ofthe1987Constitution.
In support of its arguments, the COA cites The Veterans Federation of the
Philippines(VFP)v.Reyes,[30]whereintheCourtheldthatamongthereasonswhytheVFP
is a public corporation is that its charter, Republic Act No. 2640, designates it asone.Furthermore,theCOAquotestheCourtassayinginthatcase:
In several cases, we have dealt with the issue of whether certain
specificactivitiescanbeclassifiedassovereignfunctions.Thesecases,whichdeal with activities not immediately apparent to be sovereign functions,
upheldthepublicsovereignnatureofoperationsneededeithertopromote
socialjusticeortostimulatepatrioticsentimentsandloveofcountry.
xxxx
Petitioner claims that its funds are not public funds because nobudgetary appropriationsorgovernment fundshave been released to the
VFPdirectlyorindirectlyfromtheDBM,andbecauseVFPfundscomefrom
membershipduesandleaserentalsearnedfromadministeringgovernment
landsreservedfortheVFP.
Thefactthatnobudgetaryappropriationshavebeenreleasedtothe
VFPdoesnotprovethatitisaprivatecorporation.TheDBMindeeddidnot
see it fit to propose budgetary appropriations to the VFP, having itself
believed that the VFP is a private corporation. If the DBM, however, is
mistakenastoitsconclusionregardingthenatureofVFP'sincorporation,its
previousassertionswillnotpreventfuturebudgetaryappropriationstotheVFP.Theerroneousapplicationofthe lawbypublicofficersdoesnotbara
subsequentcorrectapplicationofthelaw.[31](Citationsomitted.)
TheCOApointsoutthatthegovernmentisnotprecludedbylawfromextendingfinancial support to the BSP and adding to its funds, and that as a government
instrumentalitywhichcontinues toperforma vital function imbuedwithpublic interest
and reflective of the governments policy to stimulate patriotic sentiments and love ofcountry,theBSPsfundsfromwhateversourcearepublicfunds,andcanbeusedsolelyfor
publicpurposeinpursuanceoftheprovisionsofRepublicActNo.[7278].[32]
TheCOAclaimsthatthefactthatithasnotyetauditedtheBSPsfundsmaynot
barthesubsequentexerciseofitsauditjurisdiction.
The BSP filed itsReply[33] on August 29, 2007 maintaining that its statutory
designationasapubliccorporationandthepubliccharacterofitspurposeandfunctions
arenotdeterminativeoftheCOAsauditjurisdiction;reiteratingitsstandthat BoyScoutsof
thePhilippinesv.NationalLaborRelationsCommissionisnotapplicableanymorebecause
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the aspectofgovernmentownership and control has been removedbyRepublicActNo.
7278;andconcludingthatthefundsandpropertythatiteitherownedorheldintrustare
notpublicfundsandarenotsubjecttotheCOAsauditjurisdiction.
Thereafter,consideringtheBSPsclaimthatitisaprivatecorporation,thisCourt,
inaResolution[34] dated July 20, 2010, required theparties to file,within aperiod oftwenty(20)daysfromreceiptofsaidResolution,theirrespectivecommentsontheissueof
whether Commonwealth Act No. 111, as amended by Republic Act No. 7278, is
constitutional.
In compliance with the Courts resolution, the parties filed their respective
Comments.
In its Comment[35] dated October 22, 2010, the COA argues that the
constitutionalityofCommonwealthActNo. 111,asamended,isnot determinativeoftheresolutionofthepresentcontroversyontheCOAsauditjurisdictionoverpetitioner,andin
fact, the controversy may be resolved on other grounds; thus, the requisites before ajudicialinquirymaybemade,assetforthinCommissionerofInternalRevenuev.CourtofTaxAppeals,[36]havenotbeenfullymet.[37]Moreover, the COAmaintains thatbehind
every law lies the presumption of constitutionality.[38] The COA likewise argues that
contrarytotheBSPsposition,repealofalawbyimplicationisnotfavored. [39]Lastly,the
COAclaimsthattherewasnoviolationofSection16,ArticleXIIofthe1987Constitution
withthecreationordeclarationoftheBSPasagovernmentcorporation.CitingPhilippineSocietyforthePreventionofCrueltytoAnimalsv.CommissiononAudit,[40]theCOAfurther
alleges:
Thetruecriterion,therefore,todeterminewhetheracorporationis
publicorprivateisfoundinthetotalityoftherelationofthecorporationtotheState.IfthecorporationiscreatedbytheStateasthelattersownagency
orinstrumentalitytohelpitincarryingoutitsgovernmentalfunctions,then
thatcorporationisconsideredpublic;otherwise,itisprivate.xxx.[41]
Foritspart,initsComment[42]filedonDecember3,2010,theBSPsubmitsthat
its charter, Commonwealth Act No. 111, as amended by Republic Act No. 7278, is
constitutional as itdoes not violate Section 16, Article XII of the Constitution. The BSPalleges that while [it] is not a public corporation within the purview of COAs audit
jurisdiction, neither is it a private corporation created by special law fallingwithin the
ambitoftheconstitutionalprohibitionxxx.[43]TheBSPfurtheralleges:
Petitioners purpose is embodied in Section 3 of C.A. No. 111, as
amendedbySection1ofR.A.No.7278,thus:
xxxx
A reading of the foregoing provision shows that petitioner was
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Philippines,andtoDefineitsPowersandPurposescreatedtheBSPasapubliccorporation
toservethefollowingpublicinterestorpurpose:
Sec. 3.The purpose of this corporation shall be to promote
throughorganizationandcooperationwithotheragencies,theabilityof
boys to do useful things for themselves and others, to train them inscoutcraft,andtoinculcateinthempatriotism,civicconsciousnessand
responsibility,courage,self-reliance,disciplineandkindredvirtues,and
moralvalues,usingthemethodwhichareincommonusebyboyscouts.
Presidential Decree No. 460, approved on May 17, 1974, amended
CommonwealthAct No. 111 andprovidedsubstantialchanges inthe BSP organizational
structure.Pertinentprovisionsarequotedbelow:
SectionII.Section5ofthesaidActisalsoamendedtoreadas
follows:
Thegoverningbodyofthesaidcorporationshallconsistofa
National Executive Board composed of (a) the President of the
Philippinesorhisrepresentative;(b)thecharterandlifemembersofthe
BoyScoutsofthePhilippines;(c)theChairmanoftheBoardofTrustees
ofthePhilippineScoutingFoundation;(d)theRegionalChairmanofthe
Scout Regions of the Philippines; (e) the Secretary of Education and
Culture, the Secretary of Social Welfare, the Secretary of National
Defense,theSecretaryofLabor,theSecretaryofFinance,theSecretary
of Youth and Sports, and the Secretary of Local Government and
CommunityDevelopment;(f)anequalnumberofindividualsfromtheprivate sector; (g) the National President of the Girl Scouts of the
Philippines; (h) one Scout of Senior age from each Scout Region to
represent the boy membership; and (i) three representatives of thecultural minorities. Except for the Regional Chairman who shall be
electedbytheRegionalScoutCouncilsduringtheirannualmeetings,andthe Scouts of their respective regions, all members of the National
ExecutiveBoardshallbeeitherbyappointmentorcooption,subjectto
ratificationandconfirmationbytheChiefScout,whoshallbetheHeadofState.VacanciesintheExecutiveBoardshallbefilledbyamajority
voteoftheremainingmembers,subjecttoratificationandconfirmation
bytheChiefScout.Theby-lawsmayprescribethenumberofmembersoftheNationalExecutiveBoardnecessarytoconstituteaquorumofthe
board,whichnumbermaybelessthanamajorityofthewholenumber
of the board.TheNationalExecutiveBoard shallhavepowertomake
andtoamendtheby-laws,and,byatwo-thirdsvoteofthewholeboard
at a meeting called for this purpose, may authorize and cause to be
executedmortgagesandliensuponthepropertyofthecorporation.
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Subsequently, on March 24, 1992, Republic Act No. 7278 further amended
CommonwealthActNo.111bystrengtheningthevolunteeranddemocraticcharacterof
theBSPandreducinggovernmentrepresentationinitsgoverningbody,asfollows:
Section1.Sections2and3ofCommonwealthAct.No.111,asamended,isherebyamendedtoreadasfollows:
"Sec. 2.The said corporation shall have the powers of
perpetual succession, to sue and be sued; to enter into contracts; toacquire,own,lease,conveyanddisposeofsuchrealandpersonalestate,
land grants, rights and choses in action as shall be necessary for
corporatepurposes,andtoacceptandreceivefunds,realandpersonal
propertybygift,devise,bequestorothermeans,toconductfund-raising
activities;toadoptanduseaseal,andthesametoalteranddestroy;tohaveofficesandconductitsbusinessandaffairsinMetropolitanManila
andintheregions,provinces,cities,municipalities,andbarangaysofthePhilippines, to make and adopt by-laws, rules and regulations not
inconsistentwiththisActandthelawsofthePhilippines,andgenerally
todoallsuchactsandthings,includingtheestablishmentofregulations
for the election of associates and successors, as may benecessary to
carryintoeffecttheprovisionsofthisActandpromotethepurposesof
saidcorporation:Provided,Thatsaidcorporationshallhavenopowerto
issuecertificatesofstockor todeclareorpaydividends, itsobjectives
andpurposesbeingsolelyofbenevolentcharacterandnotforpecuniary
profitofitsmembers.
"Sec.3.Thepurposeofthiscorporationshallbetopromotethrough organization and cooperation with other agencies, the
ability of boys to do useful things for themselves and others, to
traintheminscoutcraft,andtoinculcateinthempatriotism,civicconsciousnessandresponsibility,courage,self-reliance,discipline
andkindredvirtues,andmoralvalues,usingthemethodwhichareincommonusebyboyscouts ."
Sec.2.Section4ofCommonwealthActNo.111,asamended,isherebyrepealedandinlieuthereof,Section4shallreadasfollows:
"Sec.4.ThePresidentofthePhilippinesshallbetheChiefScoutoftheBoyScoutsofthePhilippines."
Sec.3.Sections5,6,7and8ofCommonwealthActNo.111,as
amended,areherebyamendedtoreadasfollows:
"Sec.5.The governing body of the said corporation shall
consistofaNationalExecutiveBoard,themembersofwhichshallbe
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Filipino citizens of good moral character. The Board shall be
composedofthefollowing:
"(a)One (1) charter member of the Boy Scouts of the
PhilippineswhoshallbeelectedbythemembersoftheNationalCouncil
atitsmeetingcalledforthispurpose;
"(b)Theregionalchairmenof the scoutregionswho shallbe
electedbytherepresentativesofallthelocalscoutcouncilsoftheregion
duringitsmeetingcalledforthispurpose:Provided,Thatacandidateforregionalchairmanneednotbethechairmanofalocalscoutcouncil;
"(c)TheSecretaryofEducation,CultureandSports;
"(d)The National President of the Girl Scouts of thePhilippines;
"(e)One (1) senior scout, each from Luzon, Visayas and
Mindanaoareas,tobeelectedbytheseniorscoutdelegatesofthelocal
scoutcouncilstothescoutyouthforumsintheirrespectiveareas,inits
meetingcalledforthispurpose,torepresenttheboyscoutmembership;
"(f)Twelve (12) regular members to be elected by the
membersoftheNationalCouncilinitsmeetingcalledforthispurpose;
"(g)Atleastten(10)butnotmorethanfifteen(15)additional
membersfromtheprivatesectorwhoshallbeelectedbythemembers
of the National Executive Board referred to in the immediatelyprecedingparagraphs(a),(b),(c), (d),(e)and(f)at theorganizational
meeting of the newly reconstituted National Executive Board which
shall be held immediately after the meeting of the National Councilwherein the twelve (12) regular members and the one (1) charter
memberwereelected.
xxxx
"Sec.8.Anydonationorcontributionwhichfromtimetotime
maybemadetotheBoyScoutsofthePhilippinesbytheGovernmentor
anyofitssubdivisions,branches,offices,agenciesorinstrumentalitiesorbyaforeigngovernmentorbyprivate,entitiesandindividualsshallbe
expendedbytheNationalExecutiveBoardinpursuanceofthisAct.
The BSP as a Public Corporation underPar.2,Art.2oftheCivilCode
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TherearethreeclassesofjuridicalpersonsunderArticle44oftheCivilCodeand
theBSP, aspresentlyconstitutedunderRepublicAct No. 7278, fallsunder the secondclassification.Article44reads:
Art.44.Thefollowingarejuridicalpersons:
(1)TheStateanditspoliticalsubdivisions;(2)Othercorporations,institutionsandentitiesforpublic
interestorpurposecreatedbylaw;theirpersonalitybeginsassoon
astheyhavebeenconstitutedaccordingtolaw;
(3) Corporations, partnerships and associations for privateinterest or purpose to which the law grants a juridical personality,
separateanddistinctfromthatofeachshareholder,partnerormember.
(Emphasessupplied.)
TheBSP,whichisacorporationcreatedforapublicinterestorpurpose,issubject
tothelawcreatingitunderArticle45oftheCivilCode,whichprovides:
Art.45.JuridicalpersonsmentionedinNos.1and2ofthe
precedingarticlearegovernedbythelawscreatingorrecognizingthem.
Private corporations are regulated by laws of general
applicationonthesubject.
Partnerships andassociations forprivate interestorpurpose
are governed by the provisions of this Code concerning partnerships.
(Emphasisandunderscoringsupplied.)
ThepurposeoftheBSPasstatedinitsamendedchartershowsthatitwascreated
inordertoimplementaStatepolicydeclaredinArticleII,Section13oftheConstitution,
whichreads:
ARTICLEII-DECLARATIONOFPRINCIPLESANDSTATEPOLICIESSection13.TheStaterecognizesthevitalroleoftheyouthin
nation-building and shall promote and protect their physical, moral,
spiritual,intellectual,andsocialwell-being.Itshallinculcateintheyouthpatriotismandnationalism,andencouragetheirinvolvementinpublic
andcivicaffairs.
Evidently,theBSP,whichwascreatedbyaspeciallawtoserveapublicpurpose
in pursuit of a constitutional mandate, comes within the class of public corporations
definedbyparagraph2,Article44oftheCivilCodeandgovernedbythelawwhichcreates
it,pursuanttoArticle45ofthesameCode.
TheBSPsClassificationUnderthe
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AdministrativeCodeof1987
Thepublic,ratherthanprivate,characteroftheBSPisrecognizedbythefactthat,
alongwiththeGirlScoutsofthePhilippines,itisclassifiedasan attachedagencyoftheDECSunderExecutiveOrderNo.292,ortheAdministrativeCodeof1987,whichstates:
TITLEVIEDUCATION,CULTUREANDSPORTS
Chapter8AttachedAgencies
SEC. 20. Attached Agencies. The following agencies are
herebyattachedtotheDepartment:
xxxx
(12)BoyScoutsofthePhilippines;
(13)GirlScoutsofthePhilippines.
The administrative relationship of an attached agency to the department is
definedintheAdministrativeCodeof1987asfollows:
BOOKIV
THEEXECUTIVEBRANCH
Chapter7ADMINISTRATIVERELATIONSHIP
SEC. 38. Definition of Administrative Relationship. Unless
otherwise expressly stated in the Code or in other laws defining thespecialrelationshipsofparticularagencies,administrativerelationships
shallbecategorizedanddefinedasfollows:
xxxx
(3)Attachment. (a) This refers to the lateral relationship
between the department or its equivalent and the attachedagency or
corporationforpurposesofpolicyandprogramcoordination.Thecoordination may be accomplished by having the department
represented in the governing board of the attached agency orcorporation, either aschairmanorasamember,withorwithout
votingrights,if thisispermittedbythecharter;havingtheattached
corporationoragencycomplywithasystemofperiodicreportingwhich
shall reflect the progress of programs and projects; and having the
department or its equivalent provide general policies through its
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representativeintheboard,whichshallserveastheframeworkforthe
internalpoliciesoftheattachedcorporationoragency.(Emphasisours.)
Asanattachedagency,theBSPenjoysoperationalautonomy,aslongaspolicyand
programcoordinationisachievedbyhavingatleastonerepresentativeofgovernmentinitsgoverningboard,whichinthecaseoftheBSPistheDECSSecretary.Inthissense,the BSP is not under government control or supervision and control. Still this
characteristicdoesnotmaketheattachedcharteredagencyaprivatecorporationcovered
bytheconstitutionalproscriptioninquestion.
Art.XII,Sec.16oftheConstitutionrefersto private corporations created by
government for proprietary or
economic/businesspurposes
Attheoutset,itshouldbenotedthattheprovisionofSection16inissueisfound
inArticleXIIoftheConstitution,entitledNationalEconomyandPatrimony.Section1
ofArticleXIIisquotedasfollows:
SECTION 1. The goals of the national economy are a more
equitabledistributionofopportunities,income,andwealth;asustained
increaseintheamountofgoodsandservicesproducedbythenationfor
thebenefitofthepeople;andanexpandingproductivityasthekeyto
raisingthequalityoflifeforall,especiallytheunderprivileged.
TheStateshallpromoteindustrializationandfullemploymentbasedonsoundagriculturaldevelopmentandagrarianreform,through
industries that make full and efficient use of human and natural
resources, and which are competitive in both domestic and foreignmarkets. However, the State shall protect Filipino enterprises against
unfairforeigncompetitionandtradepractices.
Inthepursuitofthesegoals,allsectorsoftheeconomyandall
regionsofthecountryshallbegivenoptimumopportunitytodevelop.Private enterprises, including corporations, cooperatives, and similar
collective organizations, shall be encouraged to broaden the base of
theirownership.
ThescopeandcoverageofSection16,ArticleXIIoftheConstitutioncanbeseen
fromtheaforementioneddeclarationofstatepoliciesandgoalswhichpertainsto national
economyandpatrimonyandtheinterestsofthepeopleineconomicdevelopment.
Section16,ArticleXIIdealswiththeformation,organization,orregulationof
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private corporations,[52] which should be done through a general law enacted by
Congress, provides for anexception, that is: if the corporation isgovernment ownedor
controlled; its creation is in the interest of the common good; and it meets the test of
economicviability.The rationalebehindArticleXII, Section16ofthe 1987Constitution
wasexplainedinFelicianov.CommissiononAudit,[53]inthefollowingmanner:
TheConstitutionemphaticallyprohibitsthecreationofprivate
corporations except by a general law applicable to all citizens. The
purpose of this constitutional provision is to ban private
corporations created by special charters, which historically gavecertainindividuals,familiesorgroupsspecialprivilegesdeniedto
othercitizens.[54](Emphasisadded.)
ItmaybegleanedfromtheabovediscussionthatArticleXII,Section16bansthecreation of private corporations by special law. The said constitutional provision
should not be construed so as to prohibit the creation of public corporations or acorporateagencyorinstrumentalityofthegovernmentintendedtoserveapublicinterest
orpurpose,whichshouldnotbemeasuredonthebasisofeconomicviability,butaccording
tothepublicinterestorpurposeitservesasenvisionedbyparagraph(2),ofArticle44oftheCivilCodeandthepertinentprovisionsoftheAdministrativeCodeof1987.
The BSP is a Public Corporation NotSubject to the Test of Government
Ownership or Control and EconomicViability
TheBSPisapubliccorporationoragovernmentagencyorinstrumentalitywithjuridicalpersonality,whichdoesnotfallwithintheconstitutionalprohibitioninArticleXII,
Section16,notwithstandingtheamendmentstoitscharter.Notallcorporations,whichare
notgovernmentownedorcontrolled,areipsofactotobeconsideredprivatecorporationsasthereexists another distinctclassofcorporations orchartered institutionswhichare
otherwise known as public corporations. These corporations are treated by law asagencies or instrumentalities of the government which are not subject to the tests of
ownershiporcontrolandeconomicviabilitybuttodifferentcriteriarelatingtotheirpublic
purposes/interests or constitutional policies and objectives and their administrativerelationshiptothegovernmentoranyofitsDepartmentsorOffices.
Classification of Corporations UnderSection16,ArticleXIIoftheConstitution
onNationalEconomyandPatrimony
ThedissentingopinionofAssociateJusticeAntonioT.Carpio,citingalineofcases,
insists that the Constitution recognizes only two classes of corporations: private
corporations under a general law, and government-owned or controlled corporations
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createdbyspecialcharters.
We strongly disagree. Section 16, ArticleXII should not be construed so as to
prohibit Congress from creating public corporations. In fact, Congress has enacted
numerouslawscreatingpubliccorporationsorgovernmentagenciesorinstrumentalities
vestedwithcorporatepowers.Moreover,Section16,ArticleXII,whichrelatestoNationalEconomy and Patrimony, could not have tied the hands of Congress in creating public
corporationstoserveanyoftheconstitutionalpoliciesorobjectives.
In his dissent, Justice Carpio contends that this ponente introduces a totallydifferentspeciesofcorporation,whichisneitheraprivatecorporationnoragovernment
ownedorcontrolledcorporationand,insodoing,ismissingthefactthattheBSP,which
wascreatedasanon-stock,non-profitcorporation,canonlybeeitheraprivatecorporation
oragovernmentownedorcontrolledcorporation.
NotethatinBoyScoutsofthePhilippinesv.NationalLaborRelationsCommission,
theBSP,underitsformercharter,wasregardedasbothagovernmentownedorcontrolledcorporationwith original charterand a public corporation. The said case pertinentlystated:
While theBSPmaybe seen to be amixed type of entity,
combining aspects of both public and private entities,webelieve
that considering the character of its purposes and its functions, the
statutory designation of the BSP as "a public corporation" and the
substantialparticipationoftheGovernmentintheselectionofmembers
of the National Executive Board of the BSP, the BSP, as presently
constitutedunderitscharter,isagovernment-controlledcorporation
withinthemeaningofArticleIX(B)(2)(1)oftheConstitution.
We are fortified in this conclusion when we note that the
AdministrativeCodeof1987designatestheBSPasoneoftheattachedagenciesoftheDepartmentofEducation,CultureandSports("DECS").
An "agency of the Government" is defined as referring to any of thevariousunitsoftheGovernmentincludingadepartment,bureau,office,
instrumentality,government-ownedor-controlledcorporation,orlocal
governmentordistinctunittherein."Governmentinstrumentality"isinturndefinedinthe1987AdministrativeCodeinthefollowingmanner:
Instrumentality-referstoanyagencyoftheNational Government, not integrated within the
departmentframework,vestedwithspecialfunctions
orjurisdictionbylaw,endowedwithsomeifnotall
corporatepowers,administeringspecialfunds,and
enjoying operational autonomy usually through a
charter. This term includes regulatory agencies,
chartered institutions and government-owned or
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controlledcorporations.
The same Code describes a "chartered institution" in the
followingterms:
Charteredinstitution-referstoanyagencyorganized or operating under a special charter,andvestedbylawwithfunctions relatingto specific
constitutional policies or objectives. This term
includes the state universities andcolleges, and themonetaryauthorityoftheState.
We believe that the BSP is appropriately regarded as "a
governmentinstrumentality"underthe1987AdministrativeCode.
It thus appears that theBSPmaybe regarded as both a
"governmentcontrolledcorporationwithanoriginalcharter"andasan"instrumentality"of theGovernmentwithin themeaningofArticle IX (B) (2) (1) of the Constitution. x x x.[55] (Emphases
supplied.)
Theexistenceofpublicorgovernmentcorporateorjuridicalentitiesorchartered
institutionsbylegislativefiatdistinctfromprivatecorporationsandgovernmentowned
or controlled corporation is best exemplified by the 1987 Administrative Code cited
above,whichwequoteinpart:
Sec.2.GeneralTermsDefined.Unlessthespecificwordsofthetext,orthecontextasawhole,oraparticularstatute,shallrequirea
differentmeaning:
xxxx
(10) "Instrumentality" refers to any agency of the National
Government,not integratedwithin thedepartment framework, vested
withspecialfunctionsorjurisdictionbylaw,endowedwithsomeifnotall corporate powers, administering special funds, and enjoying
operationalautonomy,usuallythroughacharter.Thistermincludes
regulatory agencies, chartered institutions and government-owned orcontrolledcorporations.
xxxx
(12) "Chartered institution" refers toany agency organizedoroperatingundera specialcharter,andvestedbylawwithfunctions
relating to specific constitutionalpoliciesor objectives.This term
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includesthestateuniversitiesandcollegesandthemonetaryauthority
oftheState.
(13)"Government-ownedorcontrolledcorporation"referstoanyagencyorganizedasastockornon-stockcorporation,vestedwith
functions relating to public needs whether governmental orproprietary in nature, and owned by the Government directly orthrough its instrumentalitieseitherwholly, or, whereapplicable as in
thecaseofstockcorporations,totheextentofatleastfifty-one(51)per
cent of its capital stock: Provided, That government-owned orcontrolled corporations may be further categorized by the
Departmentof the Budget, the CivilServiceCommission,and theCommissiononAuditforpurposesoftheexerciseanddischargeof
theirrespectivepowers,functionsandresponsibilitieswithrespect
tosuchcorporations.
AssumingforthesakeofargumentthattheBSPceasestobeownedorcontrolled
by the government because of reduction of the number of representatives of the
government in theBSPBoard, it does not follow that it also ceases to beagovernment
instrumentalityasitstillretainsallthecharacteristicsofthelatterasanattachedagencyof
theDECSundertheAdministrativeCode.Vestingcorporatepowerstoanattachedagency
orinstrumentalityofthegovernmentisnotconstitutionallyprohibitedandisallowedby
theabove-mentionedprovisionsoftheCivilCodeandthe1987AdministrativeCode.
Economic Viability and Ownership and
Control Tests Inapplicable to Public
Corporations
Aspresentlyconstituted,theBSPstillremainsan instrumentalityofthenationalgovernment.Itisapubliccorporationcreatedbylawforapublicpurpose,attachedtothe
DECS pursuant to its Charter and the Administrative Code of 1987. It is not a privatecorporation which is required to be owned or controlled by the government and be
economicallyviabletojustifyitsexistenceunderaspeciallaw.
The dissent of Justice Carpio also submits that by recognizing a new class of
public corporation(s) created by special charter that will not be subject to the test ofeconomicviability,theconstitutionalprovisionwillbecircumvented.
However,a reviewoftheRecordofthe1986ConstitutionalConventionreveals
theintentoftheframersofthehighestlawofourlandtodistinguishbetween government
corporations performing governmental functions and corporations involved inbusinessorproprietaryfunctions:
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THEPRESIDENT.CommissionerFozisrecognized.
MR. FOZ. Madam President, I support the proposal to insert
ECONOMIC VIABILITY as one of the grounds for organizing
governmentcorporations.xxx.
MR. OPLE. Madam President, the reason for this concern is
reallythatwhenthegovernmentcreatesacorporation,thereisasense
inwhich this corporationbecomes exempt from the test of economic
performance. We know what happened in the past. If a governmentcorporation loses, then itmakes its claimupon the taxpayersmoney
throughnewequityinfusionsfromthegovernmentandwhatisalways
invokedisthecommongood.xxx
Therefore,whenweinsertthephraseECONOMICVIABILITYtogetherwith the common good, this becomes a restraint on future
enthusiasts for state capitalism to excuse themselves from theresponsibilityofmeetingthemarkettestsothattheybecomeviable.xx
x.
xxxx
THEPRESIDENT.CommissionerQuesadaisrecognized.
MS. QUESADA.MadamPresident,maywebe clarified by the
committeeonwhatismeantbyeconomicviability?
THEPRESIDENT.Pleaseproceed.
MR. MONSOD. Economic viability normally is determined by
cost-benefit ratio that takes into consideration all benefits, includingeconomicexternalaswellasinternalbenefits.Thesearewhattheycall
externalitiesineconomics,sothatthesearenotstrictlyfinancialcriteria.Economicviabilityinvolveswhatwecalleconomicreturnsorbenefitsof
thecountrythatarenotquantifiableinfinancialterms.xxx.
xxxx
MS.QUESADA.So,wouldthisparticularformulationnowreallylimittheentryofgovernmentcorporationsintoactivitiesengagedinby
corporations?
MR. MONSOD.Yes, because it is also consistent with the
economic philosophy that this Commissionapproved that thereshouldbeminimumgovernmentparticipationandinterventionin
theeconomy.
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MS.QUESDA.Sometimes thisCommissionwouldjust referto
Congresstoprovidetheparticularrequirementswhenthegovernment
would get into corporations. But this time around, we specifically
mentionedeconomicviability.xxx.
MR.VILLEGAS.CommissionerOplewillrestatethereasonfor
hisintroducingthatamendment.
MR.OPLE.IamobligedtorepeatwhatIsaidearlierinmovingfor this particular amendment jointly with Commissioner Foz. During
the past threedecades, therehad been a proliferation of government
corporations,veryfewofwhichhavesucceeded,andmanyofwhichare
now earmarked by the Presidential Reorganization Commission for
liquidationbecausetheyfailedtheeconomictest.xxx.
xxxx
MS. QUESADA.Butwouldnot the Commissioner say that the
reasonwhymanyofthegovernment-ownedorcontrolledcorporations
failedtocomeupwiththeeconomictestisduetothemanagementof
thesecorporations,andnottheideaitselfofgovernmentcorporations?
It isaproblemofefficiency and effectivenessofmanagementofthese
corporationswhichcouldberemedied,notbyeliminatinggovernment
corporations or the ideaofgetting into state-ownedcorporations, but
improving management which our technocrats should be able to do,
giventhetrainingandtheexperience.
MR. OPLE. That is part of the economic viability, Madam
President.
MS. QUESADA. So, is the Commissioner saying then that the
Filipinoswillbenefitmoreifthesegovernment-controlledcorporationswere given to private hands, and that there will bemore goods and
services that will be affordable and within the reach of the ordinary
citizens?
MR.OPLE. Yes. There isnothing here,Madam President,
that will prevent the formation of a government corporation inaccordancewithaspecialchartergivenbyCongress.However,we
are raising the standard a little bit so that, in the future,corporations establishedby thegovernmentwillmeet thetest of
thecommongoodbutwithinthatframeworkweshouldalsobuild
acertainstandardofeconomicviability.
xxxx
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THEPRESIDENT.CommissionerPadillaisrecognized.
MR.PADILLA.Thisisaninquirytothecommittee.Withregard
tocorporations createdbyaspecialcharter for government-ownedor
controlledcorporations,will thesebe inthepioneerfieldsorinplaceswhere the private enterprise does not or cannot enter? Or is this so
general that thesegovernment corporationscan competewithprivate
corporationsorganizedunderagenerallaw?
MR.MONSOD.MadamPresident,xxx.Therearetwotypesof
government corporations those that are involved in performinggovernmental functions, like garbage disposal, Manila waterworks,
and so on; and those government corporations that are involved in
business functions. As we said earlier, there are two criteria thatshouldbe followedforcorporationsthatwanttogointobusiness.
First is for government corporations to first prove that they can beefficient in the areas of their proper functions. This is one of the
problems now because they go into all kinds of activities but are not
even efficient in theirproper functions.Secondly, they should not gointoactivitiesthattheprivatesectorcandobetter.
MR. PADILLA. There is no question about corporationsperforming governmental functions or functions that are
impressedwithpublicinterest.Butthequestioniswithregardtomatters that are covered, perhaps not exhaustively, by private
enterprise. Itseems thatunderthisprovision theonlyqualification is
economic viability and common good, but shall government, throughgovernment-controlledcorporations,competewithprivateenterprise?
MR. MONSOD. No, Madam President. As we said, thegovernment should not engage in activities that private enterprise is
engagedinandcandobetter.xxx.[56](Emphasessupplied.)
Thus, the test of economic viability clearly does not apply to public corporationsdealingwithgovernmentalfunctions,towhichcategorytheBSPbelongs.Thediscussion
aboveconveystheconstitutionalintentnottoapplythisconstitutionalbanonthecreation
ofpubliccorporationswheretheeconomicviabilitytestwouldbeirrelevant.Thesaidtestwould only apply if the corporation is engaged in some economic activity or business
functionforthegovernment.
It is undisputed that the BSP performs functions that are impressed with public
interest. In fact, during the consideration of the Senate Bill that eventually became
RepublicActNo.7278,whichamendedtheBSPCharter,oneofthebillssponsors,Senator
JoeyLina,describedtheBSPasfollows:
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Senator Lina. Yes, I can only think of two organizationsinvolving themassesof our youth,Mr. President, thatshouldbegiven
thiskindofaprivilegetheBoyScoutsofthePhilippinesandtheGirl
Scouts of the Philippines.Outsideof these twogroups, I do not think
thereareothergroupssimilarlysituated.
The Boy Scouts of the Philippines has a long history of
providingvalueformationtoouryoung,andconsideringhowhuge
thepopulationoftheyoungpeopleis,atthispointintime,andalsoconsideringtheimportanceofhavinganorganizationsuchasthis
thatwillinculcatemoraluprightnessamongtheyoungpeople,andfurtherconsideringthatthedevelopmentoftheseyoungpeopleat
thattenderageofseventosixteenisvitalinthedevelopmentofthe
country producing good citizens, I believe that we can make anexception of the Boy Scoutingmovement of the Philippines from this
generalprohibitionagainstprovidingtaxexemptionandprivileges.[57]
Furthermore,thisCourtcannotagreewiththedissentingopinionwhichequatesthe
changesintroducedbyRepublicActNo.7278totheBSPCharterasclearmanifestationof
theintentofCongresstoreturntheBSPtotheprivatesector.Itwasnottheintentof
Congress in enacting Republic Act No. 7278 to give up all interests in this basic youth
organization,whichhasbeenitspartnerinformingresponsiblecitizensfordecades.
Infact,asmaybeseeninthedeliberationoftheHouseBillsthateventuallyresultedto
Republic Act No. 7278, Congress worked closely with the BSP to rejuvenate the
organization, to bring it back to its former glory reached under its original charter,Commonwealth Act No. 111, and to correct the perceived ills introduced by the
amendmentstoitsCharterunderPresidentialDecreeNo.460.TheBSPsufferedfromlow
moraleand decrease innumberbecause the Secretariesof the different departments ingovernmentwho were too busy to attend themeetings of the BSPsNationalExecutive
Board(theBoard)sentrepresentativeswho,asitturnedout,changedfrommeetingtomeeting. Thus,theScoutingCouncilsestablishedintheprovinces and citieswerenotin
touchwithwhatwashappeningonthenationallevel,buttheywerelefttoimplementwhat
wasdecidedbytheBoard.[58]
Aportionofthelegislatorsdiscussionisquotedbelowtoclearlyshowtheirintent:
HON.DELMAR.xxxIneednotmention to you the value
andthetremendousgood that theBoyScoutMovementhasdonenotonlyfortheyouthinparticularbutforthecountryingeneral.
Andthatiswhy, ifwe lookaround,ourpastandpresentnational
leaders,prominentmen in the various fields ofendeavor, publicservants in government offices, and civic leaders in the
communitiesallovertheland,andnotonlyinourcountrybutall
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over the world many if not most of them have at one time or
anotherbeenbeneficiariesof theScoutingMovement.Andso,itisalong this line, Mr. Chairman, that we would like to have the early
approvalofthismeasureifonlytopaybackwhatweowemuchtothe
ScoutingMovement.Now,goingtothemeatofthematter,Mr.Chairman,
ifImayjust theScoutingMovementwasenactedintolawinOctober31, 1936 under Commonwealth Act No. 111. x x x [W]e were
acknowledgedasthethirdbiggestscoutingorganizationintheworldxx
x.Andtoourmind,Mr.Chairman,thiserraticgrowthandthisdecrease
in membership [number] is because of the bad policy measures thatwereenunciatedwiththeenactmentorpromulgationbythePresident
beforeofPresidentialDecreeNo.460whichwefeelistheculpritofthe
ills that is flagging the Boy Scout Movement today. And so, this is
specifically what we are attacking, Mr. Chairman, the
disenfranchisement of the National Council in the election of thenationalboard.xxx.Andso,thisiswhatwewouldliketobeappraised
ofbytheofficersoftheBoy[Scouts]ofthePhilippineswhomwearealsoconfident,havethebestinterestoftheBoyScoutMovementatheartand
it is in this spirit, Mr. Chairman, that we see no impediment towards
working together, the Boy Scout of the Philippines officers working
together with the House of Representatives in coming out with a
measurethatwillputbackthevigorandenthusiasmoftheBoyScout
Movement.xxx.[59](Emphasisours.)
ThefollowingisanotherexcerptfromthediscussionontheHouseversionofthe
bill,intheCommitteeonGovernmentEnterprises:
HON.AQUINO:xxxWell,obviously,thetwobillsaswellasthe
previouslawsthathavecreatedtheBoyScoutsofthePhilippinesdidnot
provide for any direct government support by way of appropriationfromthenationalbudget tosupport the activitiesofthisorganization.
Thepointhereis,andatthesametimetheyhavebeensubjectedtoagovernmentalintervention,whichtotheirmindhasbeeninimicaltothe
objectives and to the institution per se, that is why they are seeking
legislativefiattorestorebacktheoriginalmandatethattheyhadunderCommonwealth Act 111. Such having been the experience in the
hands of government, meaning, there has been negative
interferenceontheirpartandinasmuchastheirmandateiscomingfromalegislativefiat,thenshouldntitbe,thisrhetoricalquestion,
shouldntitbebetterforthisorganizationtoseekamandatefrom,lets say,the government theCorporationCodeof thePhilippines
and registerwith the SEC asnon-profitnon-stock corporation so
that government interventioncouldbeveryveryminimal.Maybethats a rhetorical question, theymayor theymay not answer, ano. I
dontknowwhatwouldbethebenefitofa charteroramandatebeing
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provided for by way of legislation versus a registration with the SEC
underthe CorporationCodeof the Philippines inasmuchastheydont
getanythingfromthegovernmentanywayinsofarasdirectfunding.In
fact,theonly thingthattheygot fromgovernmentwas intervention in
theiraffairs.Maybewecansolicit some commentary comments from
the resourcepersons.Incidentally,dont take thatasanobjection, Imnotobjecting.Imallfortheobjectivesofthesetwobills.Itjustoccurred
to me that since you have had very bad experience in the hands of
governmentandyouwillalwaysbeopentosuchpossibleintervention
even in the future as long as you have a legislativemandate or yourmandateoryourchartercomingfromlegislativeaction.
xxxx
MR.ESCUDERO:Mr.Chairman,theremaybeadisadvantageiftheBoyScoutsofthePhilippineswillberequiredtoregisterwith
theSEC. IfweareregisteredwiththeSEC,therecouldbeadangerofproliferation of scout organization. Anybody can organize and then
register with the SEC. If therewill be aproliferation of this, then the
organization will lose control of the entire organization. Another
disadvantage,Mr. Chairman, anybody can file a complaint in the SEC
againsttheBoyScoutsofthePhilippinesandtheSECmaysuspendthe
operation or freeze the assets of the organization and hamper the
operationoftheorganization.Idontknow,Mr.Chairman,howyoulook
atitbuttherecouldbeadangerforanybodyfilingacomplaintagainst
theorganizationintheSECandtheSECmightsuspendtheregistration
permitoftheorganizationandwewillnotbeabletooperate.
HON.AQUINO:Well,thatIthinkwouldbeaproblemthatwill
notbeexclusivetocorporationsregisteredwiththeSECbecauseevenif
youaregovernmentcorporation,courtactionmaybetakenagainstyouinotherjudicialbodiesbecausetheSECissimplyanotherquasi-judicial
body.But,Ithink,thefirstpointwouldbeveryinteresting,thefirstpointthatyouraised.Ineffect,whatyouaresayingisthatwiththe
legislativemandatecreatingyourcharter,ineffect,youhavebeen
givensomesortofafranchisewiththismovement.
MR.ESCUDERO:Yes.
HON.AQUINO:Exclusivefranchiseofthatmovement?
MR.ESCUDERO:Yes.
HON.AQUINO:Well,thatsverywelltakensoIwillproceedwithotherissues,Mr.Chairman.xxx.[60](Emphasesadded.)
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allows the BSP to receive contributions or donations from the government. Section 8
reads:
Section8.Anydonationorcontributionwhichfromtimetotime may be made to the Boy Scouts of the Philippines by the
Governmentoranyof itssubdivisions,branches,offices,agenciesor instrumentalitiesshallbeexpendedbythe ExecutiveBoardinpursuanceofthisAct.
The sources of funds to maintain the BSP were identified before the House
Committee on Government Enterprises while the bill was being deliberated, and the
pertinentportionofthediscussionisquotedbelow:
MR.ESCUDERO.Yes,Mr.Chairman.Thequestionisthesourcesoffundsoftheorganization.First,Mr.Chairman,theBoyScoutsofthe
Philippinesdonotreceiveannualallotmentfromthegovernment.Theorganizationhas to raise its own funds through fund drives and fund
campaigns or fund raising activities. Aside from this, we have some
revenue producing projects in the organization that givesus funds to
supporttheoperation.xxxFromtimetotime,Mr.Chairman,whenwe
havespecialactivitieswerequestforassistanceorfinancialassistance
fromgovernmentagencies,fromprivatebusinessandcorporations,but
this is only during special activities that the Boy Scouts of the
Philippineswouldconductduringtheyear.Otherwise,wehavetoraise
ourownfundstosupporttheorganization.[62]
ThenatureofthefundsoftheBSPandtheCOAsauditjurisdictionwerelikewise
broughtupinsaidcongressionaldeliberations,towit:
HON. AQUINO: x x x Insofar as this organization being a
government created organization, in fact, a government corporationclassifiedassuch,areyourfundsoryourfinancessubjectedtotheCOA
audit?
MR. ESCUDERO: Mr. Chairman, we are not. Our funds is not
subjected.WedontfallunderthejurisdictionoftheCOA.
HON.AQUINO:Allright,butbeforewereyou?
MR.ESCUDERO:No,Mr.Chairman.
MR.JESUS:MayI?Ashistoricalbackgrounder,CommonwealthAct
111waswrittenbythenSecretaryJorgeVargasandbeforeanduptothe
middleoftheMartialLawyears,theBSPwasreceivingasubsidyinthe
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formofanannualaonedrawfromtheSweepstakes.And,thiswasthe
casealsowiththeGirlScoutsattheAnti-TB,butthenthiswasandtheBoy Scouts then because of this funding partly fromgovernment
wasbeingsubjectedtoauditinthecontributionsbeingmadeinthepartoftheSweepstakes.ButthiswasremovedlaterduringtheMartial
LawyearswiththecreationoftheHumanSettlementsCommission.Sothe situation right now is that the Boy Scouts does not receive any
fundingfromgovernment,buttheninthecaseofthelocalcouncilsand
thislegislativecharter, sotospeak,enablesthe localcouncilseventhe
nationalheadquarters inviewof the provisions in the existing law toreceivedonationsfromthegovernmentoranyofitsinstrumentalities,
which would be difficult if the Boy Scouts is registered as a private
corporationwiththeSecuritiesandExchangeCommission.Government
bodies would be estopped from making donations to the Boy Scouts,
whichatpresentisnotthecasebecausethereistheBoyScoutscharter,thisCommonwealthAct111asamendedbyPD463.
xxxx
HON.AMATONG:Mr.Chairman,inconnectionwiththat.
THECHAIRMAN:Yeah,GentlemanfromZamboanga.
HON.AMATONG:Thereisnoauditingbeingmadebecausetheres
nomoneyputintheorganization,buthowaboutdonatedfundstothis
organization?What are the remedies of the donors of howwill they
knowhowtheirmoneyarebeingspent?
MR.ESCUDERO:MayIanswer,Mr.Chairman?
THECHAIRMAN:Yes,gentleman.
MR.ESCUDERO:TheBoyScoutsofthePhilippineshasanexternalauditorandbythecharterwearerequiredtosubmitafinancialreport
attheendofeachyeartotheNationalExecutiveBoard.Soallthefunds
donated or otherwise is accounted for at the end of the year by ourexternalauditor.InthiscasetheSGV.[63]
Historically,therefore,theBSPhadbeensubjectedtogovernmentauditinsofar
aspublicfundshadbeeninfusedthereto.However,thispracticeshouldnotprecludethe
exerciseof the audit jurisdiction ofCOA, clearly set forthunder the Constitution,which
pertinentlyprovides:
Section 2. (1) The Commission on Audit shall have the
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power, authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, andexpendituresorusesoffundsandproperty,ownedorheldintrust
by, or pertaining to, theGovernment, or any of its subdivisions,agencies, or instrumentalities, including government-owned and
controlled corporationswith originalcharters, andonapost-auditbasis:(a)constitutionalbodies,commissionsandofficesthathavebeen
grantedfiscalautonomyunderthisConstitution;(b)autonomousstate
colleges and universities; (c) other government-owned or controlled
corporationswithoriginalchartersandtheirsubsidiaries;and(d)suchnon-governmental entities receiving subsidy or equity, directly or
indirectly,fromorthroughtheGovernment,whicharerequiredbylaw
of the granting institution to submit to such audit as a condition of
subsidyorequity.xxx.[64]
SincetheBSP,underitsamendedcharter,continuestobeapubliccorporationoragovernmentinstrumentality,wecometotheinevitableconclusionthatitissubjecttothe
exercisebytheCOAofitsauditjurisdictioninthemannerconsistentwiththeprovisionsof
theBSPCharter.
WHEREFORE, premises considered, the instant petition for prohibition is
DISMISSED.
SOORDERED.