PHIL. SOCIETY v. COA POLI – Art. II, Sec.

1: Quasi public corps

Phil Society was incorporated as a juridical entity over one hundred years ago by virtue its special
charter, enacted on January 19, 1905, by the Philippine Commission. At the time of the enactment of
Act No. 1285, the original Corporation Law as well as the 1935 Constitution, was not yet in existence.
Phil Society was composed of animal aficionados and animal propagandists and its objects, 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, which include the power to make arrests as well as the
privilege to retain a portion of the fines collected for violation of animal-related laws.

Subsequently, however, the power to make arrests and to retain a portion of the fines were recalled by
virtue of Commonwealth Act 148 and President Quezon’s EO 48. When the COA was to perform an
audit on Phil Society, they refused to do so, arguing that they were a private entity and not under
COA’s jurisdiction. Phil Society contended that it was created through a special charter because there
was no general law then and that it exercises no governmental functions because these have been
revoked by CA 148 and EO 63. As compared to the Boy Scouts of the Philippines, its charter does not
indicate that it is a public corporation. Its employees are registered with the SSS and not the GSIS.
There is no government appointee or representative in their board of trustees.

On the other hand, the COA contended that Phil Society is a government entity based on the charter
test. COA further argued that Phil. Society’s charter requires it to render a report to the Civil Governor,
whose functions have been inherited by the Office of the President.

I: Is Phil Society a private corporation? YES. It is a quasi-public corporation.

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. Examples of these corporations are utility, railroad, warehouse, telegraph, telephone,
water supply corporations and transportation companies.

Here, CA 148’s amendments made it clear that Phil Society was a private corporation. As correctly
pointed out by Phil Society, its charter shows that it is not subject to control or supervision by any
agency of the State, there is no government representative on its board of trustees, and its employees
are registered with the SSS.

The charter test1, stemming from the 1935 Constitution, cannot be applied because the act which
created Phil Society antedated both the Corporation Code and the 1935 Constitution. 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. COA is also wrong in its
contention about rendering a report to the Civil Governor since corporations are creatures of the State,
the reportorial requirement is applicable to all corporations as there is a reserved right in the legislature
to investigate the activities of a corporation.

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Is it created by its own charter for the exercise of a public function, or by incorporation under the general corporation
law?

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Facts
1. Petitioner Philippine Society for the Prevention of Animal Cruelty (Phil. Society) was incorporated
as a juridical entity way back 100 years ago by virtue of Act. No. 1285. At that time, the original
Corporation Law was not yet in existence.
2. Phil. Society is composed of animal aficionados and propagandists. Under their charter, their duty
is to enforce laws related to animal cruelty for the protection of animals in the Philippine Islands.
Under the same charter, they were also given the power
 to appoint agents, who shall have the same authority as a police officer, to make arrests
for violation of prevention of animal cruelty laws; and
 to collect fines in relation to violations or offenses in animal cruelty, to which they will have
a share of 1⁄2 of the fines imposed and collected through its efforts.
3. Subsequently, the power to make arrests and to retain a portion of a fine collected were recalled
by virtue of Commonwealth Act 148 and thereafter, under President Quezon’s EO 63.
4. On Dec. 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 2003-051. Phil. Society
demurred on the ground that it was a private entity not under the jurisdiction of COA based on Art.
IX, Sec. 2(1) of the Constitution.
5. Phil. Society did not allow COA to audit and argued that:
 Although they were 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.
 EO 63, issued during the Commonwealth period, effectively deprived them of their power
to make arrests, and that they lost their operational funding, underscore the fact that it
exercises no governmental function. In fine, the government itself, by its overt acts, confirmed Phil.
Society’s status as a private juridical entity.
6. COA asserted its authority and contended that Phil. Society was a government entity. Phil. Society
now assails Office Order No. 2005-021 dated September 14, 2005 issued by COA which states
that they are subjected to an audit of their accounts, operations and financial transactions.

Point/s of Contention
Phil. Society
 It was created through a special charter because there was no general law then and that it
exercises no governmental functions because these have been revoked by CA 148 and
EO 63.
 As compared to the Boy Scouts of the Philippines, its charter does not indicate that it is a
public corporation.
 The grant of tax exemptions under RA 1178 strengthens its position as a private
institution.
 Its employees are registered with the SSS and not the GSIS.
 It does not receive any form of financial assistance from the government since CA 148
allocated the fines collected for violations of animal cruelty laws to the municipality where
the offense was committed
 CA 148 transferred Phil. Society’s power to arrest and serve processes to the police force
 There is no government appointee or representative in their board of trustees
 No decision by the Phil. Society is subject to the approval or control of the government
 The Committee on Animal Welfare, under the Animal Welfare Act of 1998, includes
members from both the private and the public sectors.
COA
 The test to determine whether an entity is a government corporation lies in the manner of
its creation. Since Phil. Society was created by special law, it is a government corporation.
 Phil Society exercises governmental powers as laws for the protection and welfare of
animals ultimately redound to the public good and welfare; therefore, it is a government
instrumentality, where the Office of the President exercise supervision or control, based
on the Administrative Code.
 Phil. Society’s charter requires it to render a report to the Civil Governor, whose functions

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 have been inherited by the Office of the President.
 Despite the passage of the Corporation Code, the special charter had not been abolished
nor was Phil Society re-incorporated under the Corporation Code.
 The Animal Welfare Act of 1998 designates Phil Society as a member of its Committee on
Animal Welfare which is attached to the Department of Agriculture.
Issue Ruling
1. WN Phil. Society qualifies as a government agency subject to audit by COA. 1. No
2. What is the classification of Phil. Society?
2. Quasi-public corp.
Rationale
1. The charter test cannot be applied retroactively.

The charter test cannot be applied to Phil. Society. The charter test to determine whether a
corporation is government owned or controlled, or private in nature is simple. Is it created by its
own charter for the exercise of a public function, or by incorporation under the general
corporation law? Those with special charters are government corporations subject to its
provisions, and its employees are under the jurisdiction of the CSC and are compulsory members
of the GSIS. This test is predicated from the 1935 Constitution and is carried in Art. XII, Sec. 16 2 of
the present Constitution.

In this case, this test cannot be applied because the act which created the petitioner antedated
both the Corporation Code and the 1935 Constitution. Phil. Society was incorporated through its
special charter on January 19, 1905. It is a settled rule that laws in general have no retroactive
effect, unless the contrary is provided such as (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. None of the exceptions is present in the instant case.

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. 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.

CA 148’s amendments also made it clear that Phil Society was a private corporation. As correctly
pointed out by Phil Society, its charter shows that it is not subject to control or supervision by any
agency of the State, there is no government representative on its board of trustees, and its
employees are registered with the SSS.

2. Phil Society is a quasi-public corporation.

As a curative statute, CA 148 has to be given retroactive effect, thereby freeing all doubt as to
which class of corporations belongs, that is, it is a quasi-public corporation, a kind of private
domestic corporation. COA’s argument that Phil Society is a “body politic” 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, or pursue other eleemosynary
objectives. While purposely organized for the gain or benefit of its members, they are required by
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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.

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 law to discharge functions for the public benefit. Examples of these corporations are utility,
railroad, warehouse, telegraph, telephone, water supply corporations and transportation
companies.

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. It is clear that
the amendments introduced by CA 148 revoked the powers of the Phil Society to arrest offenders
of animal welfare laws and the power to serve processes in connection therewith.

COA is also wrong in its contention about rendering a report to the Civil Governor. 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
Disposition
Petition granted. Phil Society is a private domestic corporation under SEC’s jurisdiction. COA enjoined
from investigating and auditing Phil Society.

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