Case Summary (G.R. No. 110524)
Key Dates
Petitioner’s Incorporation: January 19, 1905 (Act No. 1285).
Commonwealth Amendments: November 8, 1936 (C.A. No. 148) and November 12, 1936 (E.O. No. 63).
COA Audit Survey: Initial visit December 1, 2003; Office Order September 14, 2005; survey letter September 23, 2005.
Supreme Court Decision: September 25, 2007.
Applicable Law
1987 Philippine Constitution, Article IX, Section 2 (COA jurisdiction).
Rules of Court, Rule 65 (Certiorari and Prohibition), Rule 64, Section 2 (injunction against threatened acts).
Act No. 1285 (1905) – Charter of PSPCA.
Commonwealth Act No. 148 (1936) – Revocation of arrest and fine-sharing powers.
Executive Order No. 63 (1936) – Assignment of law enforcement duties to government police.
Facts and Procedural History
PSPCA’s original charter granted agents police powers and half of fines collected. Commonwealth Act No. 148 and E.O. 63 revoked these powers and redirected fines to municipal treasuries. COA asserted authority to audit PSPCA as a government entity under Article IX. PSPCA maintained it is a private corporation and thus outside COA’s mandate. COA General Counsel issued memoranda (May 6 and July 13, 2004) upholding audit jurisdiction. PSPCA filed requests for re-evaluation and ultimately the present petition after COA issued Office Order No. 2005-021.
Issues Presented
- Whether PSPCA qualifies as a government agency or instrumentality subject to COA audit authority.
- Whether COA committed grave abuse of discretion in asserting jurisdiction over PSPCA.
Petitioner's Contentions
• PSPCA’s public-law powers were repealed by C.A. No. 148 and E.O. No. 63, leaving it without governmental functions.
• Its charter does not designate it a public corporation; it was organized prior to any general corporation law.
• Tax exemptions under R.A. 1178, Social Security System coverage (not GSIS), absence of government financial assistance, and no government representation on its Board of Trustees confirm its private nature.
• No government oversight or control over its decisions beyond what applies to all private corporations under general corporate law.
Respondents' Contentions
• Special-charter creation and public-welfare purpose render PSPCA a government corporation or instrumentality subject to COA.
• PSPCA exercises sovereign powers in enforcing animal-welfare laws and participates in the Committee on Animal Welfare under R.A. 8485.
• Supervision by the Office of the President and reportorial requirements to the Civil Governor establish governmental control.
• PSPCA’s charter remains in force and was not superseded by general laws or constitutional transitory provisions.
Court’s Analysis: Applicability of the Charter Test
The Court held that the so-called “charter test” derives from the 1935 Constitution’s prohibition against special-law creation of private corporations and cannot apply retroactively to an entity formed in 1905. In 1905 there was no general corporation law nor constitutional restriction. Act No. 1459 (Corporation Law, 1906) expressly permitted preexisting corporations to continue without being reorganized. The charter test’s constitutional underpinnings only emerged in 1935. Absent a clear retroactive intent, Act No. 1285 must be governed by the law as it stood at its creation.
Court’s Analysis: Nature of PSPCA as Private Entity
PSPCA’s charter grants powers typical of private corporations: capacity to choose members, adopt by-laws, sue and be sued, hold property, and manage officers without government appointees. Commonwealth Act No. 148 and E.O. 63 expressly removed public-law powers (arrest and fine-sharing), confirming PSPCA’s private st
...continue readingCase Syllabus (G.R. No. 110524)
Facts of the Case
- The Philippine Society for the Prevention of Cruelty to Animals (“PSPCA” or “petitioner”) was incorporated by Act No. 1285 on January 19, 1905, as a body corporate to enforce laws against cruelty to animals and promote their welfare.
- Its original charter endowed it with powers to appoint agents with police authority to arrest violators and to share one-half of fines collected through its efforts.
- Commonwealth Act No. 148 (approved November 8, 1936) amended Section 4 and abolished the petitioner’s arrest powers, limited its authority to denounce violations to peace officers, and directed all fines to municipal funds.
- Executive Order No. 63 (November 12, 1936) assigned government police forces to enforce animal-welfare laws, noting the correction of “a serious defect” in preexisting law.
- On December 1, 2003, a Commission on Audit (“COA”) team sought to conduct an audit survey of the petitioner’s finances, based on COA Office Order No. 2003-051.
- The petitioner refused, asserting private status under Section 2(1), Article IX of the 1987 Constitution, and filed requests for evaluation and re-evaluation; COA’s General Counsel repeatedly maintained the Society’s subjection to audit.
- By Office Order No. 2005-021 (September 14, 2005) and a subsequent letter (September 23, 2005), COA formally directed a detailed audit of petitioner’s accounts, operations, and transactions.
- The petitioner filed a Rule 65 petition for certiorari and prohibition, contesting COA’s jurisdiction and seeking to enjoin the audit.
Petitioner’s Contentions
- PSPCA was created in 1905 when no general corporation law or SEC existed; its private character followed from subsequent revocation of arrest powers and fines-sharing privileges.
- There is no language in its charter labeling it a public corporation; unlike the Boy Scouts of the Philippines charter, PSPCA’s charter lacks any declaration of public status.
- It enjoys tax exemptions under Republic Act No. 1178, reinforcing its private nature.
- Its employees participate in the Social Security System, not the Government Service Insurance System, demonstrating its private character.
- It receives no government subsidy or equity; C.A. 148 diverted all fines to municipal coffers.
- No government official sits on its board of trustees; it operates under its own by-laws without government control.
- Its charter contains no provision for