Case Summary (G.R. No. 155027)
Petitioner
Veterans Federation of the Philippines, a perpetual body corporate charged with promoting veterans’ welfare, operating under a statutory charter and governed by a Supreme Council and national officers elected from member associations.
Respondents
- Angelo T. Reyes, Secretary of National Defense—issuer of Department Circular No. 04.
- Edgardo E. Batenga, Undersecretary for Civil Relations and Administration—tasked with conducting a management audit of VFP.
Key Dates
– 18 June 1960: Approval of Republic Act No. 2640 creating VFP under the control and supervision of the Secretary of National Defense.
– 13 April 2002: Letter from DND Secretary Reyes requesting management clarification from VFP.
– 10 June 2002: Issuance of DND Department Circular No. 04.
– 23 August 2002: Order directing a management audit of VFP.
– 28 August–4 September 2002: Exchange of letters concerning scope and suspension of the audit.
– 28 February 2006: Decision of the Supreme Court (En Banc).
Applicable Law
– 1987 Constitution (no special-law regulation of private corporations; creation of GOCCs by special charter)
– Republic Act No. 2640 (charter of VFP)
– Executive Order No. 292 (1987 Administrative Code, defining “control” and “supervision”)
– 1997 Rules of Civil Procedure, Rule 65 (certiorari and prohibition)
Central Legal Issue
Whether VFP is a private corporation exempt from broad control and supervision by the Secretary of National Defense, and if Department Circular No. 04 exceeds the supervisory powers granted under RA 2640.
Classification of VFP
– Constitutional Prohibition: Special-law regulation of private corporations is barred unless they are government-owned or controlled.
– Statutory Charter: RA 2640 titles VFP as a “public corporation,” mandates the Secretary’s supervisory approval over its decisions, and requires annual reporting to the President or Secretary of National Defense.
– Judicial and Executive Recognition: Listed as a non-privatizable GOCC and treated as an adjunct of government in political-party registration cases.
Conclusion: VFP is a public corporation subject to constitutional and statutory control.
Public Character of VFP Funds
– Funds derive from membership dues, use of reserved government lands, and potentially government donations, all subject to RA 2640’s restrictions and the Government Auditing Code (PD 1445).
– Public funds must be spent only for statutory purposes—benefit of veterans—and are open to government auditing and supervision.
Validity of Department Circular No. 04
– Content: Defines “control” and “supervision” in line with the Administrative Code; prescribes reporting, recordkeeping, audit, and penal sanctions for noncompliance.
– Consistency with RA 2640: Circ
Case Syllabus (G.R. No. 155027)
Facts
- The Veterans Federation of the Philippines (VFP) is a corporate body created under Republic Act No. 2640 (18 June 1960), amended and registered with the SEC, representing various veterans’ associations.
- Angelo T. Reyes, then Secretary of National Defense, issued Department Circular No. 04 on 10 June 2002 to further implement Sections 1 and 2 of RA 2640, defining “control,” “supervision,” and related administrative processes.
- Undersecretary Edgardo E. Batenga was designated to conduct an extensive management audit of VFP records, supported by Department Order No. 129 dated 23 August 2002.
- Prior to the circular, Secretary Reyes sent a letter (13 April 2002) highlighting legal bases for DND supervision of VFP and Philippine Veterans Bank, requesting information and possible conference.
- VFP’s leadership protested the breadth of the audit scope and sought its suspension; the Undersecretary denied suspension (letter of 4 September 2002), citing fixed timeframes.
Procedural History
- VFP filed a Petition for Certiorari with Prohibition under Rule 65 of the 1997 Rules of Civil Procedure, praying for:
- Temporary restraining order and writs of preliminary prohibitory/mandatory injunction against implementation of DND Circular No. 04 and continuation of the management audit.
- Declaration that Circular No. 04 is null and void for being ultra vires.
- Conversion of preliminary writs into permanent injunctions.
- The petition was brought directly to the Supreme Court; respondents questioned forum and jurisdictional propriety.
- Supreme Court resolved to give due course, citing special and important reasons—namely, the vulnerable veteran constituency and need for expeditious resolution.
Issues
- Whether Department Circular No. 04 was issued in the valid exercise of the Secretary’s “control and supervision” under RA 2640.
- Whether the circular improperly subjects a civilian organization to standards applicable to government entities.
- Whether the circular unduly encroaches on the autonomy and prerogatives of VFP’s governing body.
- Central question: Is the VFP a private corporation or a public/governmental entity that may be placed under DND control and supervision?