Philippine Society v. Commission on Audit
NEW DOCTRINEFacts
The Antecedents: The Philippine Society for the Prevention of Cruelty to Animals (PSPCA), incorporated in 1905 by Act No. 1285, received an audit survey notice from the Commission on Audit (COA) in 2003. PSPCA demurred, asserting it was a private entity not under COA's jurisdiction. Procedural History: COA, through its General Counsel, maintained that PSPCA was subject to its audit authority. PSPCA's request for re-evaluation was denied, and COA issued an Office Order and Letter in 2005 constituting an audit team to conduct a detailed audit. PSPCA filed a special civil action for Certiorari and Prohibition. The Petition: PSPCA assailed the COA's ruling that it was subject to COA's audit authority, arguing it is a private domestic corporation and not a government agency or instrumentality.
Issue(s)
Whether the Commission on Audit (COA) committed grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that the Philippine Society for the Prevention of Cruelty to Animals (PSPCA) is subject to its audit authority, considering PSPCA's corporate nature. Whether PSPCA is a private domestic corporation or a government agency/instrumentality, based on its creation, powers, and relationship with the State.
Ruling
The petition is GRANTED. Petitioner PSPCA is DECLARED a private domestic corporation subject to the jurisdiction of the Securities and Exchange Commission. The respondents are ENJOINED from investigating, examining and auditing the petitioner's fiscal and financial affairs.
Ratio Decidendi
On the issue of COA's audit authority and PSPCA's corporate nature: The Court held that the "charter test," which presumes a corporation created by special charter to be a government corporation, cannot be applied to PSPCA because it was incorporated in 1905, predating the 1935 Constitution and the Corporation Law (Act No. 1459). Applying the charter test retroactively would be erroneous. Commonwealth Act No. 148 and Executive Order No. 63, which revoked PSPCA's powers to arrest and share in fines, indicated a legislative intent to treat PSPCA as a private entity. On PSPCA's status as a private or public entity: The Court clarified that the mere fact that an entity is impressed with public interest does not automatically make it a public corporation; such entities may be quasi-public corporations, which are a species of private corporations rendering public service. The ultimate criterion is the totality of the corporation's relation to the State; if created as the State's agency for governmental functions, it is public; otherwise, it is private. PSPCA's employees being covered by the Social Security System (SSS) and not the Government Service Insurance System (GSIS) further supported its private status. The reportorial requirement to the Civil Governor, inherited by the President, was deemed inconclusive as it applies to all corporations, public or private, as a means for the State to monitor adherence to granted powers.
Main Doctrine
The "charter test" for determining whether a corporation is government-owned or controlled cannot be applied to entities incorporated prior to the 1935 Constitution. The mere fact that a corporation is created by special law does not automatically make it a public corporation; its nature is determined by its relation to the State and the functions it exercises. Entities impressed with public interest but not created as the State's agency for governmental functions are considered private, potentially quasi-public corporations.