7/1/2015

G.R.No.177131

G.R.No.177131:BOYSCOUTSOFTHEPHILIPPINES,petitioner,v.COMMISSION
ONAUDIT,respondent.

Promulgated:
June7,2011
xx

DISSENTINGOPINION

CARPIO,J.:

Idissent.

TheBoyScoutsofthePhilippines(BSP)isneitheragovernmentownedorcontrolled
corporationnoragovernmentinstrumentalitysubjecttotheCommissiononAudits(COA)
jurisdiction.TheBSPisaprivate,nonstock,andnonprofitcorporationbeyondtheCOAs
auditjurisdiction.

I.
COAsAuditJurisdiction

Section2(1),ArticleIXDoftheConstitutionprovidesforCOAsauditjurisdiction,as
follows:
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SECTION2.(1)TheCommissiononAuditshallhavethepower,authorityanddutyto
examine,audit,andsettleallaccountspertainingtotherevenueandreceiptsof,and
expendituresorusesoffundsandproperty,ownedorheldintrustby,orpertainingto,the
Government,oranyofitssubdivisions,agencies,orinstrumentalities,including
governmentownedandcontrolledcorporationswithoriginalcharters,andonapostaudit
basis:(a)constitutionalbodies,commissionsandofficesthathavebeengrantedfiscal
autonomyunderthisConstitution(b)autonomousstatecollegesanduniversities(c)other
governmentownedorcontrolledcorporationsandtheirsubsidiariesand(d)suchnon
governmentalentitiesreceivingsubsidyorequity,directlyorindirectly,fromorthroughthe
government,whicharerequiredbylaworthegrantinginstitutiontosubmittosuchauditasa
conditionofsubsidyorequity.However,wheretheinternalcontrolsystemoftheaudited
agenciesisinadequate,theCommissionmayadoptsuchmeasures,includingtemporaryor
specialpreaudit,asarenecessaryandappropriatetocorrectthedeficiencies.Itshallkeep
thegeneralaccountsoftheGovernmentand,forsuchperiodasmaybeprovidedbylaw,
preservethevouchersandothersupportingpaperspertainingthereto.

BasedonthisConstitutionalprovision,theCOAexercisesjurisdictiononapreaudit
basisoverthe(1)Government,(2)anyofitssubdivisions,(3)agencies,(4)
instrumentalities,and(5)GOCCswithoriginalcharters.

TheCOAalsohasjurisdictiononapostauditbasisover(1)constitutionalbodies,
commissionsandofficesthathavebeengrantedfiscalautonomyundertheConstitution
(2)autonomousstatecollegesanduniversities(3)otherGOCCs1andtheirsubsidiaries
and(4)nongovernmentalentitiesreceivingsubsidyorequity,directlyorindirectly,
fromorthroughthegovernment,whicharerequiredbylaworthegrantinginstitution
tosubmittosuchauditasaconditionofsubsidyorequity.

Hence,ifanentityisproperlyidentifiedandcategorizedasamongthoseenumeratedin
Section2(1),ArticleIXDoftheConstitution,thentheCOAcanindisputablyexamine,
audit,andsettleallaccountspertainingtotherevenueandreceiptsof,andexpenditures
orusesoffundsandpropertyofthatparticularentity.

II.
HistoryoftheBSP

TheBoyScoutsofthePhilippinesbeganin1923withtheestablishmentofthe
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PhilippineCounciloftheBoyScoutsofAmerica,whenthePhilippineswasan
Americanpossessionatthetime.2
On31October1936,thePhilippineNationalAssemblyenactedCommonwealthActNo.
111,orAnActtoCreateaPublicCorporationtobeKnownastheBoyScoutsofthe
Philippines,andtoDefineitsPowersandPurposes,thepertinentprovisionsofwhich
read:

Section1.J.E.H.Stevenot,A.N.Luz,C.P.Romulo,VicenteLim,ManuelCamus,JorgeB.
Vargas,andG.A.DazaallofManila,Philippines,theirassociatesandsuccessors,are
herebycreatedabodycorporateandpoliticindeedandinlaw,bythename,styleandtitle
ofBoyScoutsofthePhilippines(hereinaftercalledthecorporation).xxx

Section3.Thepurposeofthiscorporationshallbetopromote,throughorganization,and
cooperationwithotheragencies,theabilityofboystodothingsforthemselvesandothers,
totraintheminscoutcraft,andtoteachthempatriotism,courage,selfreliance,and
kindredvirtues,usingthemethodswhicharenowincommonusebyboyscouts.

Section4.Untilsuchtimeasthecorporationshallhaveacquiredbypurchase,giftorother
equitablearrangementfromandwiththeBoyScoutsofAmericaalloftheexistingassets
andpropertiesoftheaforesaidBoyScoutsofAmericainthePhilippines,itshallcarryonits
operationsinaccordancewithsucharrangementsasitmaymakewithsaidBoyScoutsof
AmericaandthecorporationcreatedbythisActshalldefrayandprovideforanydebtsor
liabilitiestothedischargeofwhichsaidassetsoftheBoyScoutsofAmericashallbe
applicable,butsaidcorporationshallhavenopowertoissuecertificatesofstockorto
declareorpaydividends,itsobjectsandpurposesbeingsolelyofabenevolentcharacterand
notforpecuniaryprofitbyitsmembers.

Section5.Thegoverningbodyofthesaidcorporationshallconsistofanexecutiveboard
composedofresidentsofthePhilippines.Thenumber,qualifications,andtermsofofficeof
membersoftheexecutiveboardshallbeprescribedbythebylaws.xxx

On17May1974,thenPresidentFerdinandE.MarcosissuedPresidentialDecreeNo.
460,AmendingCertainProvisionsofCommonwealthActNo.111,OtherwiseKnownas
theNationalCharteroftheBoyScoutsofthePhilippines.OneofitsWhereasclauses
reads:

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WHEREAS,recenteventshaveshownthatithasbecomenecessarytoeffectreformsinthe
organizationsstructureinordertorevitalizeandstrengthenitsoperationalcapabilities,
enhanceitseffectivenessasaninstrumenttopromotetheyouthdevelopmentprogramof
thenation,andinsurethefullandactivecooperation,involvementandsupportofallsectors
ofthecommunity,publicandprivatexxx

OneoftheamendmentsintroducedbyPD460pertainedtothecompositionoftheBSPs
governingbody.PD460reorganizedandrestructured3theBSPsexecutiveboard,thus:

SectionII.Section5ofthesaidActisalsoamendedtoreadasfollows:

ThegoverningbodyofthesaidcorporationshallconsistofaNationalExecutiveBoardcomposed
of(a)thePresidentofthePhilippinesorhisrepresentative(b)thecharterandlifemembersofthe
BoyScoutsofthePhilippines(c)theChairmanoftheBoardofTrusteesofthePhilippine
ScoutingFoundation(d)theRegionalChairmanoftheScoutRegionsofthePhilippines(e)the
SecretaryofEducationandCulture,theSecretaryofSocialWelfare,theSecretaryofLabor,the
SecretaryofFinance,theSecretaryofYouthandSports,andtheSecretaryofLocalGovernment
andCommunityDevelopment(f)anequalnumberofindividualsfromtheprivatesector(g)the
NationalPresidentoftheGirlScoutsofthePhilippines(h)oneScoutofSenioragefromeach
ScoutRegiontorepresenttheboymembershipand(i)threerepresentativesofthecultural
minorities.ExceptfortheRegionalChairmanwhoshallbeelectedbytheRegionalScout
Councilsduringtheirannualmeetings,andtheScoutsoftheirrespectiveregions,all
membersoftheNationalExecutiveBoardshallbeeitherbyappointmentorcooption,
subjecttoratificationandconfirmationbytheChiefScout,whoshallbetheHeadofthe
State.VacanciesintheExecutiveBoardshallbefilledbyamajorityvoteoftheremaining
members,subjecttoratificationandconfirmationbytheChiefScout.Thebylawsmay
prescribethenumberofmembersoftheNationalExecutiveBoardnecessarytoconstitutea
quorumoftheboard,whichnumbermaybelessthanamajorityofthewholenumberofthe
board.TheNationalExecutiveBoardshallhavepowertomakeandtoamendthebylaws,and,
byatwothirdsvoteofthewholeboardatameetingcalledforthispurpose,mayauthorizeand
causetobeexecutedmortgagesandliensuponthepropertyofthecorporation.
xxxx(Emphasissupplied)

On6December1991,thenPresidentCorazonC.Aquino,pursuanttoherdelegated
legislativeauthorityunderSection22ofProclamationNo.50,issuedExecutiveOrder
No.495convertingtheBSP,togetherwiththePhilippineShippersCouncilandtheGirl
ScoutsofthePhilippines,intoaprivatecorporation.However,on4March1992,
PresidentAquinoissuedExecutiveOrderNo.509revokingthedissolutionand
conversionoftheBSPintoaprivatecorporation,andrestoredCommonwealthActNo.
111andPD460priortotheirrepealunderEO495.
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On24March1992,RepublicActNo.7278,furtheramendingCommonwealthActNo.
111,asamendedbyPD460,wasenacted.Aimedatstrengtheningthevolunteerand
democraticcharacteroftheBSP,RA7278amendedthecompositionofBSPsgoverning
bodybydrasticallyreducingthenumberofCabinetsecretariesintheNational
ExecutiveBoard,towit:

SEC.3.Sections5,6,7and8ofCommonwealthActNo.111,asamended,areherebyamended
toreadasfollows:

SEC.5.ThegoverningbodyofthesaidcorporationshallconsistofaNationalExecutiveBoard,
themembersofwhichshallbeFilipinocitizensofgoodmoralcharacter.TheBoardshallbe
composedofthefollowing:

(a)One(1)chartermemberoftheBoyScoutsofthePhilippineswhoshallbeelectedbythe
membersoftheNationalCouncilatitsmeetingcalledforthispurpose
(b)Theregionalchairmenofthescoutsregionswhoshallbeelectedbytherepresentatives
ofallthelocalscoutscouncilsoftheregionduringitsmeetingcalledforthispurpose:
Provided,Thatacandidateforregionalchairmanneednotbethechairmanofalocalscout
council
(c)TheSecretaryofEducation,CultureandSports
(d)TheNationalPresidentoftheGirlScoutsofthePhilippines
(e)One(1)seniorscout,eachfromLuzon,VisayasandMindanaoareas,tobeelectedbythe
seniorscoutdelegatesofthelocalscoutcouncilstothescoutyouthforumsintheirrespective
areas,initsmeetingcalledforthispurpose,torepresenttheboyscoutmembership
(f)Twelve(12)regularmemberstobeelectedbythemembersoftheNationalCouncilinits
meetingcalledforthispurpose
(g)Atleastten(10)butnotmorethanfifteen(15)additionalmembersfromtheprivate
sectorwhoshallbeelectedbythemembersoftheNationalExecutiveBoardreferredtoin
theimmediatelyprecedingparagraphs(a),(b),(c),(d),(e)and(f)attheorganizational
meetingofthenewlyreconstitutedNationalExecutiveBoardwhichshallbeheld
immediatelyafterthemeetingoftheNationalCouncilwhereinthetwelve(12)regular
membersandtheone(1)chartermemberwereelected.

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xxxx

III.
TherulinginBSPv.NLRC

TheCOAreliesontheCourtsrulinginBoyScoutsofthePhilippinesv.NationalLabor
RelationsCommission,4promulgatedon22April1991,declaringtheBSPbothaGOCC
andagovernmentinstrumentality5withinthemeaningofSection2(1)ofArticleIXBof
theConstitution6basedonthefollowingcriteria:

Firstly,BSPsfunctionsassetoutinitsstatutorycharterdohaveapublicaspect.BSPsfunctions
dorelatetothefosteringofthepublicvirtuesofcitizenshipandpatriotismandthegeneral
improvementofthemoralspiritandfiberofouryouth.

xxxx

ThesecondaspectthattheCourtmusttakeintoaccountrelatestothegovernanceoftheBSP.The
compositionoftheNationalExecutiveBoardoftheBSPincludesxxxseven(7)Secretariesof
ExecutiveDepartments.xxxWemustnoteatthesametimethattheappointmentsofmembers
oftheNationalExecutiveBoard,exceptonlytheappointmentsoftheRegionalChairmanand
ScoutsofSenioragefromthevariousScoutRegions,aresubjecttoratificationandconfirmation
bytheChiefScout,whoisthePresidentofthePhilippines.xxxItdoesappeartherefore
thatthereissubstantialgovernmental(i.e.,Presidential)participationorinterventioninthe
choiceofthemajorityofthemembersoftheNationalExecutiveBoardoftheBSP.

ThethirdaspectrelatestothecharacteroftheassetsandfundsoftheBSP.Theoriginalassetsof
theBSPwereacquiredbypurchaseorgiftorotherequitablearrangementwiththeBoyScoutsof
America,ofwhichtheBSPwaspartbeforetheestablishmentoftheCommonwealthofthe
Philippines.xxxInthisrespect,theBSPappearssimilartoprivatenonstock,nonprofit
corporations,althoughitscharterexpresslyenvisagesdonationsandcontributionstoit
fromtheGovernmentandanyofitsagenciesandinstrumentalities.7(Emphasissupplied)

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IV.
RepublicActNo.7278reducedthenumberof
CabinetsecretariesintheBSPgoverningbody.

WhenPD460,amendingCommonwealthActNo.111,wasissuedbythenPresident
Marcos,thePresidentofthePhilippinesandsixCabinetSecretarieswereamongthe
membersoftheBSPsNationalExecutiveBoard.ThePresidentevenhadthefinalsayon
theprivatesectorrepresentationintheBSPsgoverningbody.8Theleadershipofthe
BSPwasvirtuallyundertheOfficeofthePresident.

WiththeenactmentofRA7278,onlyoneCabinetSecretary,thatis,theSecretaryof
Education,remainsamemberoftheBSPsNationalExecutiveBoard.TheBSPrelieson
thisdrasticchangeinthecompositionofitsgoverningbodyforitsclaimthattheBSPis
notaGOCCsubjecttoCOAsauditjurisdiction.AccordingtotheBSP,RA7278took
outtheelementofgovernmentcontrol,whichisakintoprivatization.Itfollowsthen
thatthefindinginBSPv.NLRCthattheBSPisaGOCCwithoriginalcharternolonger
holdswater.RA7278wasenactedafterBSPv.NLRC.

V.
TheBSPisnotaGOCC.

1.Controltest

InFelicianov.CommissiononAudit,9theCourtdeclaredthatthedeterminingfactorof
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COAsauditjurisdictionisgovernmentownershiporcontrolofthecorporation.
CitingPhilippineVeteransBankEmployeesUnionNUBEv.PhilippineVeterans
Bank,10theCourtheldinFelicianothatthecriterionofownershipandcontrolismore
importantthantheissueoforiginalcharter,thus:

ThispointisimportantbecausetheConstitutionprovidesinitsArticleIXB,Section
2(1)thattheCivilServiceembracesallbranches,subdivisions,instrumentalities,and
agenciesoftheGovernment,includinggovernmentownedorcontrolledcorporations
withoriginalcharters.AstheBankisnotownedorcontrolledbytheGovernment
althoughitdoeshaveanoriginalcharterintheformofR.A.No.3518,itclearlydoes
notfallundertheCivilServiceandshouldberegardedasanordinarycommercial
corporation.Section28ofthesaidlawsoprovides.Theconsequenceisthatthe
relationsoftheBankwithitsemployeesshouldbegovernedbythelaborlaws,under
whichinfacttheyhavealreadybeenpaidsomeoftheirclaims.11(Emphasissupplied)

EmployingthetestlaiddowninFelicianoindeterminingCOAsjurisdiction,wefind
thattheBSPisnotaGOCC.

A.ThegovernmentdoesnotowntheBSP.

UnderSection2(13)oftheRevisedAdministrativeCode,12aGOCCreferstoany
agencyorganizedasastockornonstockcorporation,vestedwithfunctionsrelatingto
publicneedswhethergovernmentalorproprietaryinnature,andownedbythe
Governmentdirectlyorthroughitsinstrumentalitieseitherwholly,or,whereapplicable
asinthecaseofstockcorporations,totheextentofatleastfiftyone(51)percentofits
capitalstock.

Undertheabovedefinition,aGOCCmustbeownedorcontrolledbythegovernment,
andinthecaseofastockcorporation,atleastamajorityofitscapitalstockmustbe
ownedbythegovernment.Inthecaseofanonstockcorporation,byanalogy,atleasta
majorityofthemembersmustbegovernmentofficialsholdingsuchmembershipby
appointmentordesignationbythegovernment.13
Inthiscase,theBSPisanonstockandnonprofitorganizationcomposedalmost
entirelyofmemberscomingfromtheprivatesector,moreparticularlyboysranging
fromagesfour(knownasKIDScouts)toseventeen(knownasSENIORScouts).The
BSPisoneofthelargestScoutorganizationsintheworldtoday(afterGerakan
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PramukaofIndonesiaandtheBoyScoutsofAmerica,firstandsecond,respectively)
andisoneoftheworldsNationalScoutAssociationshavingthehighestpenetrationrate
(Scoutdensity),withoneScoutoutoftwoboysofScoutingageenrolledintheScouting
program.14SincetheBSPiscomposedalmostentirelyofmembersandofficersfromthe
privatesector,theBSPisclearlynotownedbythegovernment.

B.ThegovernmentdoesnotcontroltheBSP.

PriortoRA7278,thePresidentofthePhilippinesandsixCabinetSecretarieswere
amongthemembersoftheNationalExecutiveBoard.AccordingtoSenatorJoseA.
LinaduringtheSenatedeliberationsonRA7278,the[voluntary]characterandthe
nongovernmentalcharacteroftheBoyScoutsofthePhilippineswasalteredbytheold
law,thusnecessitatingitsamendment.Moreimportantly,priortoRA7278,the
appointmentofallothermembersofthegoverningboard,excepttheelectedregional
chairmenandseniorscoutrepresentatives,weremadesubjecttotheratificationand
confirmationofthePresidentofthePhilippines.15Thereisthereforenodoubtthat
priortoRA7278,thegovernmenthadeffectivecontrolofthestructureand
membershipoftheNationalExecutiveBoard.However,asclearlyintendedinRA7278,
thegovernmentlostcontrolovertheBSPtotheprivatesectorupontheeffectivityofRA
7278.

InFeliciano,16wefoundthatlocalwaterdistricts(LWDs)wereGOCCsconsidering
that,amongotherfactors,thegovernmentcontrolsLWDsbecauseunderPD198the
municipalorcitymayor,ortheprovincialgovernor,appointsalltheboarddirectorsof
anLWDforafixedtermofsixyears.xxxLWDshavenoprivatestockholdersor
members.TheboardofdirectorsandotherpersonnelofLWDsaregovernment
employeessubjecttocivilservicelawsandantigraftlaws.Inotherwords,wherethe
governmentappointsatleastamajorityofthemembersoftheboardofdirectorsofan
entity,suchentityisundoubtedlyunderthecontrolofthegovernment.Likewise,ifthe
governmenthasthepowertofillupatleastamajorityofthevacanciesinthegoverning
bodyofanentity,thensuchanentityisdefinitelygovernmentcontrolled.17

Theforegoingcircumstancesmanifestinggovernmentcontroloveranentityare
wantinginBSPscaseunderRA7278.

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AspointedoutbytheBSP,underRA7278onlyoneCabinetSecretaryremainsa
memberoftheNationalExecutiveBoard,asopposedtothepreviouscompositionwhere
thePresidentofthePhilippinesandsixcabinetsecretariesweremembersofthesame
board.Torepeat,theNationalExecutiveBoardispresentlycomposedof(1)acharter
memberoftheBSP(2)theregionalchairmenofthescoutsregions(3)theSecretaryof
Education,CultureandSports(4)NationalPresidentoftheGirlScoutsofthe
Philippines(5)aseniorscout,oneeachfromLuzon,VisayasandMindanao(6)twelve
regularmemberstobeelectedbythemembersoftheNationalCouncil(7)atleastten
butnotmorethanfifteenadditionalmembersfromtheprivatesector.Significantly,the
lonecabinetmember,whoistheEducationSecretary,merelyservesasanex
officiomember.18Meanwhile,thePresidentofthePhilippinesisnolongeramemberof
theNationalExecutiveBoardandsimplyactsastheChiefScoutoftheBSP.Exceptfor
theEducationSecretary,noneoftheothermembersoftheNationalExecutiveBoardis
agovernmentofficialorholdssuchpositionormembershipthroughappointmentor
designationbythegovernment.Moreover,thegovernmentlacksthepowertofillup
vacanciesintheNationalExecutiveBoardoftheBSPorremoveanyofitsmembers.In
fact,vacanciesintheNationalExecutiveBoardshallbefilledbyamajorityvoteofthe
remainingmembers.19ThisstructuralsetupandmembershipofBSPsgoverningbody
underRA7278,whereallexceptonecomefromtheprivatesector,glaringlynegateany
formofgovernmentcontrolovertheBSP.

Moreover,iftheBSPisaGOCC,aswhattheCOAinsists,thenitmustbeunderthe
Presidentspowerofcontrol.InRufinov.Endriga,20whichinvolvedthebattlefor
CulturalCenterofthePhilippines(CCP)leadershipbetweentheRufinoandEndriga
groups,theCourtexplainedexhaustivelythePresidentspowerofcontrol,thus:

Underoursystemofgovernment,allExecutivedepartments,bureaus,andofficesareunder
thecontrolofthePresidentofthePhilippines.Section17,ArticleVIIofthe1987
Constitutionprovides:

ThePresidentshallhavecontrolofalltheexecutivedepartments,bureaus,and
offices.Heshallensurethatthelawsbefaithfullyexecuted.(Emphasissupplied)
ThepresidentialpowerofcontrolovertheExecutivebranchofgovernmentextendstoall
executiveemployeesfromtheDepartmentSecretarytothelowliestclerk.This
constitutionalpowerofthePresidentisselfexecutinganddoesnotrequireany
implementinglaw.CongresscannotlimitorcurtailthePresidentspowerofcontroloverthe
Executivebranch.

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xxx

ThePresidentspowerofcontrolappliestotheactsordecisionsofallofficersinthe
Executivebranch.ThisistruewhethersuchofficersareappointedbythePresidentorby
headsofdepartments,agencies,commissions,orboards.Thepowerofcontrolmeansthe
powertoreviseorreversetheactsordecisionsofasubordinateofficerinvolvingthe
exerciseofdiscretion.

Inshort,thePresidentsitsattheapexoftheExecutivebranch,andexercisescontrolofall
theexecutivedepartments,bureaus,andoffices.Therecanbenoinstanceunderthe
ConstitutionwhereanofficeroftheExecutivebranchisoutsidethecontrolofthePresident.
TheExecutivebranchisunitarysincethereisonlyonePresidentvestedwithexecutive
powerexercisingcontrolovertheentireExecutivebranch.AnyofficeintheExecutive
branchthatisnotunderthecontrolofthePresidentisalostcommandwhoseexistenceis
withoutanylegalorconstitutionalbasis.21

However,inthiscase,unlikeinCCPscase,22thereisabsolutelynothingwhich
demonstratesthatthePresidentofthePhilippinesexercisescontrolovertheactsor
decisionsoftheBSPsNationalExecutiveBoardoranyofitsmembers.23ThePresident
doesnothavethepowertoalterormodifyornullifyorsetasidewhattheBSPs
NationalExecutiveBoarddoesintheperformanceofitsdutiesandtosubstitutethe
judgmentoftheformerforthatofthelatter.24ThetitleChiefScoutdoesnotconferon
thePresidentanypowerofcontrolovertheaffairsandmanagementoftheBSP.This
absenceofanyformofpresidentialcontrolreinforcesthefactthatthegovernmentdoes
notcontroltheBSP.Inshort,thePresident,whileholdingthetitleofChiefScout,does
notcontroltheBSP.

C.ThefundsoftheBSPareprivateinnature.

TheCourtnotedinBSPv.NLRCthattheoriginalassetsoftheBSPwereacquiredby
purchaseorgiftorotherequitablearrangementwiththeBoyScoutsofAmerica,of
whichtheBSPwaspartbeforetheestablishmentoftheCommonwealthofthe
Philippines.TheBSPcharter,however,doesnotindicatethatsuchassetswerepublicor
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statalincharacterorhadoriginatedfromthegovernment.Nopubliccapitalwas
investedintheBSP.25AccordingtotheBSP,itsoperatingfundsusedforcarryingout
itspurposesandprogramsarederivedprincipallyfrommembershipduespaidbythe
BoyScoutsthemselvesandfrompropertyrentals.TheBSPdoesnothavegovernment
assetsanddoesnotreceiveanyappropriationfromCongress.Thiswasrevealedduring
thedeliberationsintheHouseofRepresentativesonRA7278,thus:

MR.ESCUDERO.Yes,Mr.Chairman.Thequestionisthesourcesoffundsofthe
organization.First,Mr.Chairman,theBoyScoutsofthePhilippinesdonotreceiveannual
allotmentfromthegovernment.Theorganizationhastoraiseitsownfundsthroughfund
drivesandfundcampaignsorfundraisingactivities.Asidefromthis,wehavesomerevenue
producingprojectsintheorganizationthatgivesusfundstosupporttheoperation.xxx26

Further,BSPspropertiesarebeingmanagedandoperatedbytheBSPitself,notbythe
governmentoranyofitsagencies.Therefore,itiscrystalclearthatthefundsoftheBSP
comefromprivatesources.Assuch,theBSPfundsarenecessarilybeyondthe
jurisdictionoftheCOA,whichexclusivelyauditspublicfundsandassets.

D.PublicpurposeofBSPisnotdeterminativeofstatus.

Indeed,theBSPperformsfunctionswhichmaybeclassifiedaspublicincharacter,in
thesensethatitpromotesvirtuesofcitizenshipandpatriotismandthegeneral
improvementofthemoralspiritandfiberofouryouth.However,thisfactalonedoes
notautomaticallymaketheBSPaGOCC.Significantly,theCourtdeclared
inPhilippineSocietyforthePreventionofCrueltytoAnimalsv.Commissionon
Audit,27thefactthatacertainjuridicalentityisimpressedwithpublicinterestdoesnot,
bythatcircumstancealone,maketheentityapubliccorporation,inasmuchasa
corporationmaybeprivatealthoughitschartercontainsprovisionsofapublic
character,incorporatedsolelyforthepublicgood.28TheCourtfurtherheld:

Authoritiesareoftheviewthatthepurposealoneofthecorporationcannotbetakenasa
safeguide,forthefactisthatalmostallcorporationsarenowadayscreatedtopromotethe
interest,good,orconvenienceofthepublic.Abank,forexample,isaprivatecorporation
yet,itiscreatedforapublicbenefit.Privateschoolsanduniversitiesarelikewiseprivate
corporationsandyet,theyarerenderingpublicservice.Privatehospitalsandwardsare
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chargedwithheavysocialresponsibilities.Moresowithallcommoncarriers.Ontheother
hand,theremayexistapubliccorporationevenifitisendowedwithgiftsordonationsfrom
privateindividuals.

Thetruecriterion,therefore,todeterminewhetheracorporationispublicorprivateis
foundinthetotalityoftherelationofthecorporationtotheState.Ifthecorporationis
createdbytheStateasthelattersownagencyorinstrumentalitytohelpitincarryingout
itsgovernmentalfunctions,thenthatcorporationisconsideredpublicotherwise,itis
private.Applyingtheabovetest,provinces,charteredcities,andbarangayscanbest
exemplifypubliccorporations.TheyarecreatedbytheStateasitsowndeviceandagency
fortheaccomplishmentofpartsofitsownpublicworks.29(Emphasissupplied)

2.Economicviabilitytest

TheConstitutionrecognizesonlytwoclassesofcorporations.30Thefirstrefersto
privatecorporationscreatedunderagenerallaw.31Thesecondreferstogovernment
ownedorcontrolledcorporationscreatedbyspecialcharters.32Section16,ArticleXII
oftheConstitutionprovides:

Sec.16.TheCongressshallnot,exceptbygenerallaw,providefortheformation,
organization,orregulationofprivatecorporations.Governmentownedorcontrolled
corporationsmaybecreatedorestablishedbyspecialchartersintheinterestofthe
commongoodandsubjecttothetestofeconomicviability.(Emphasissupplied)

Contrarytothisconstitutionalprovision,themajorityintroducesatotallydifferent
speciesofcorporation,whichisneitheraprivatecorporationnoragovernmentowned
orcontrolledcorporation.ThemajoritygravelymissesthefactthattheBSP,whichwas
createdasanonstock,nonprofitcorporation,canonlybeeitheraprivatecorporation
oragovernmentownedorcontrolledcorporation.TheLegislaturesusagein
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CommonwealthActNo.111ofthetermpubliccorporation33todesignatetheBSPmust
neverbeconstruedascreatinganentirelynewtypeofcorporation,neitherprivatenor
governmentownedorcontrolled.Otherwise,suchaninterpretationwillunjustifiably
andunlawfullyexpandtheclassesofcorporationsexpresslyrecognizedbythe
ConstitutioninSection16,ArticleXII,puttingthenewclassofcorporationoutsidethe
coverageofSection16.Inshort,suchnewclassofpubliccorporationcreatedbyspecial
charterwillnotbesubjecttothetestofeconomicviability,ablatantcircumventionof
theConstitution.

InManilaInternationalAirportAuthority(MIAA)v.CourtofAppeals,34wheretheCourt
ruledthatMIAAisagovernmentinstrumentality,theCourtexplainedtheimportance
ofthetestofeconomicviability,inthiswise:

TheConstitutionexpresslyauthorizesthelegislaturetocreategovernmentownedor
controlledcorporationsthroughspecialchartersonlyiftheseentitiesarerequiredtomeet
thetwinconditionsofcommongoodandeconomicviability.Inotherwords,Congresshasno
powertocreategovernmentownedorcontrolledcorporationswithspecialchartersunless
theyaremadetocomplywiththetwoconditionsofcommongoodandeconomic
viability.Thetestofeconomicviabilityappliesonlytogovernmentownedorcontrolled
corporationsthatperformeconomicorcommercialactivitiesandneedtocompeteinthemarket
place.BeingessentiallyeconomicvehiclesoftheStateforthecommongoodmeaningfor
economicdevelopmentpurposesthesegovernmentownedorcontrolledcorporationswithspecial
chartersareusuallyorganizedasstockcorporationsjustlikeordinaryprivatecorporations.

xxxTheintentoftheConstitutionistopreventthecreationofgovernmentownedor
controlledcorporationsthatcannotsurviveontheirowninthemarketplaceandthus
merelydrainthepubliccoffers.
CommissionerBlasF.Ople,proponentofthetestofeconomicviability,explainedtothe
ConstitutionalCommissionthepurposeofthistest,asfollows:

MR.OPLE:MadamPresident,thereasonforthisconcernisreallythatwhenthegovernment
createsacorporation,thereisasenseinwhichthiscorporationbecomesexemptfromthetestof
economicperformance.Weknowwhathappenedinthepast.Ifagovernmentcorporationloses,
thenitmakesitsclaimuponthetaxpayersmoneythroughnewequityinfusionsfromthe
governmentandwhatisalwaysinvokedisthecommongood.Thatisthereasonwhythisyear,
outofabudgetofP115billionfortheentiregovernment,aboutP28billionofthiswillgointo
equityinfusionstosupportafewgovernmentfinancialinstitutions.Andthisisalltaxpayers
moneywhichcouldhavebeenrelocatedtoagrarianreform,tosocialserviceslikehealthand
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education,toaugmentthesalariesofgrosslyunderpaidpublicemployees.Andyetthisisall
goingdownthedrain.
Therefore,whenweinsertthephraseECONOMICVIABILITYtogetherwiththecommongood,
thisbecomesarestraintonfutureenthusiastsforstatecapitalismtoexcusethemselvesfromthe
responsibilityofmeetingthemarkettestsothattheybecomeviable.Andso,MadamPresident,I
reiterate,forthecommitteesconsiderationandIamgladthatIamjoinedinthisproposalby
CommissionerFoz,theinsertionofthestandardofECONOMICVIABILITYORTHE
ECONOMICTEST,togetherwiththecommongood.
FatherJoaquinG.Bernas,aleadingmemberoftheConstitutionalCommission,explainsinhis
textbookThe1987ConstitutionoftheRepublicofthePhilippines:ACommentary:

Thesecondsentencewasaddedbythe1986ConstitutionalCommission.Thesignificantaddition,
however,isthephraseintheinterestofthecommongoodandsubjecttothetestofeconomic
viability.Theadditionincludestheideasthattheymustshowcapacitytofunctionefficientlyin
businessandthattheyshouldnotgointoactivitieswhichtheprivatesectorcandobetter.
Moreover,economicviabilityismorethanfinancialviabilitybutalsoincludescapabilitytomake
profitandgeneratebenefitsnotquantifiableinfinancialterms.35(Emphasissupplied)

Indisputably,agovernmentownedorcontrolledcorporationcreatedbyspecialcharter
mustnecessarilymeetthetestofeconomicviability.Otherwise,thecreationby
Congressofagovernmentownedorcontrolledcorporationnotsatisfyingthetestof
economicviabilityclearlyrunscountertotheexpressmandateofSection16,ArticleXII
oftheConstitution.Congresshasnopowertocreategovernmentownedorcontrolled
corporationswithspecialchartersunlesstheyaremadetocomplywiththetwo
conditionsofcommongoodandeconomicviability.Torepeat,governmentownedor
controlledcorporationsmaybecreatedorestablishedbyspecialchartersxxxsubject
tothetestofeconomicviability.Therefore,therecanbenopubliccorporationor
governmentownedorcontrolledcorporationthatcannotbesubjecttothetestof
economicviability.Inshort,themajoritysviewthatBSPisapubliccorporationwhich
doesnotfallundereitheroftheclassificationsofcorporationrecognizedunderSection
16,ArticleXIIoftheConstitution,andconsequentlynotsubjecttothetestofeconomic
viability,ispatentlyerroneousandbaseless.

Thetermpubliccorporationreferstoagovernmentownedorcontrolledcorporationas
referredtoinSection16,ArticleXIIoftheConstitution.However,inthiscase,the
usageofthetermpubliccorporationinCommonwealthActNo.111todesignateBSPis
nolongercontrollingindeterminingtherealnatureoftheBSP.AsamendedbyRA
7278,CommonwealthActNo.111nowreferstoacorporationowned,managedand
controlledbytheprivatesectoralthoughthepurposeofthecorporationremainspublic.

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Themajoritytheorizesthatpubliccorporationsaretreatedbylawasagenciesor
instrumentalitiesofthegovernmentwhicharenotsubjecttothetestsofownershipor
controlandeconomicviabilitybuttodifferentcriteriarelatingtotheirpublic
purposes/interestsorconstitutionalpoliciesandobjectivesandtheiradministrative
relationshiptothegovernmentoranyofitsDepartmentsorOffices.

Thistheoryfindsnobasisinlaw.AstheCourtemphaticallystatedinPhilippineSociety
forthePreventionofCrueltytoAnimals,thefactthatacertainjuridicalentityis
impressedwithpublicinterestdoesnot,bythatcircumstancealone,maketheentitya
publiccorporation,inasmuchasacorporationmaybeprivatealthoughitscharter
containsprovisionsofapubliccharacter,incorporatedsolelyforthepublic
good.36Neitherdoesadministrativerelationshiptothegovernmentindicatethatan
entityisaninstrumentalitywithinthepurviewoftheCOAsauditjurisdiction.Only
corporationscontrolledandownedbythegovernment,whicharesubjecttothetestof
economicviability,andgovernmentinstrumentalities,asdefinedbytheAdministrative
Code,fallunderCOAsauditjurisdiction.TheBSPisneitherhence,itisbeyondthe
COAsauditjurisdiction.

VI.
NeitheristheBSPagovernmentinstrumentality.

AgovernmentinstrumentalityisdefinedbytheRevisedAdministrativeCodeasany
agencyoftheNationalGovernment,notintegratedwithinthedepartmentframework
vestedwithspecialfunctionsorjurisdictionbylaw,endowedwithsomeifnotall
corporatepowers,administeringspecialfunds,andenjoyingoperationalautonomy,
usuallythroughacharter.Inotherwords,tobeconsideredagovernment
instrumentality,anentitymustbe(1)anagencyoftheNationalGovernment(2)
outsidethedepartmentframeworkoftheNationalGovernment(3)vestedwithspecial
functionsorjurisdictionbylaw(4)endowedwithsome,ifnotall,corporatepowers(5)
administeringspecialfundsand(6)enjoyingoperationalautonomy.

TheBSPisnotanagencyoftheNationalGovernmentbecausetheBSPisnotaunitof
theNationalGovernment,likeadepartment,bureau,office,instrumentalityor
governmentownedorcontrolledcorporation,oralocalgovernmentoradistinctunit
therein.37ThereisalsonodisputethattheBSPdoesnotadministerspecialfundsofthe
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government.WhiletheBSPmayreceivedonationsorcontributionsfromthe
governmentjustlikeothernongovernmentorganizations,thesamecannotbe
characterizedasspecialfunds.Moreover,theBSPisnotvestedwithspecialfunctionsor
jurisdictionbylaw.Hence,theBSPisnotagovernmentinstrumentality.

IftheBSPisagovernmentinstrumentality,thefollowingconsequencesareinevitable:
(1)pursuanttoSection2(1),ArticleIXDoftheConstitution38itwillbesubjectto
COAspreaudit,andnotpostaudit(2)itwillbesubjecttotheGovernment
ProcurementReformActorRepublicActNo.9184and(3)theBSPsofficersand
employeeswillbeconsideredgovernmentpersonnelwhoare(a)subjecttoCivilService
laws39(b)coveredbytheGovernmentServiceInsuranceSystem40(c)subjecttothe
SalaryStandardizationLaw41(d)requiredtofileStatementsofAssets,Liabilitiesand
Networth42(e)underthejurisdictionoftheOmbudsman43and(f)subjecttothe
controlofthePresident.

UndertheAdministrativeCodeof1987,theBSPisanattachedagencyofthe
DepartmentofEducationforpurposesofpolicyandprogramcoordination.However,
thiswaschangedwiththeenactmentofRA7278whichremovedgovernmentcontrol
overtheBSP.Torepeat,thedeterminingfactorofCOAsauditjurisdictionis
governmentownershiporcontrol.Conversely,withoutsuchownershiporcontrol,the
BSPisbeyondtheCOAsauditjurisdiction.Surprisingly,themajoritystatesthatthe
BSPisnotundergovernmentcontrolalthoughitisanattachedagencytothe
DepartmentofEducation.Needlesstosay,theDepartmentofEducationandanyagency
orunitattachedtoitisunderthecontrolofthePresidentpursuanttoSection17,
ArticleVIIoftheConstitution,whichmandatesthatthePresidentshallhavecontrolof
alltheexecutivedepartments,bureaus,andoffices.Ifagovernmentoffice,unit,or
instrumentalityissubjecttothecontrolofthePresident,thenitisobviouslyunder
governmentcontrol.

VII.
TheBSPisaprivate,nonstock
andnonprofitcorporationperformingpublicfunctions.

Scoutingisanonpartisan,nongovernmentalworldwideyouthmovementgeared
towardsthedevelopmentofyoungpeopleinachievingtheirfullphysical,mental,social,
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intellectualandspiritualpotentialsasindividuals,asresponsiblecitizensandas
membersoftheirlocal,national
andinternationalcommunities.44Scoutingcomplementstheschoolandthefamily,
fillingtheneedsnotmetbyeither.45Itbelongstothecategoryofnonformaleducation
since,whileittakesplaceoutsidetheformaleducationalsystem,itisanorganized
institutionwithaneducationalaimandisaddressedtoaspecificclientele.46

InBoyScoutsofAmericav.Dale,47whichinvolvedasuitforreinstatementanddamages
filedbyanAssistantscoutmaster,whowasexpelledafterhepubliclydeclaredhewas
homosexual,againstBoyScoutsofAmerica(BSA),theSupremeCourtoftheUnited
StatesstatedthattheBoyScoutsisaprivate,notforprofitorganizationengagedin
instillingitssystemofvaluesinyoungpeople.

ThefactthattheBSP,liketheBSA,isaprivate,nonstock,nonprofitcorporationis
consistentwiththeclearintentoftheLegislatureinenactingRA7278.Thefollowing
exchangesduringthedeliberationsintheSenateonRA7278revealtheintentofthe
LegislaturetorestorethenongovernmentalandprivatecharacteroftheBSP,thus:

SPONSORSHIPSPEECHOFSENATORLINA

SenatorLina.Thankyou,Mr.President.

Themeasurebeforeusthisevening,SenateBillNo.132,seekstostrengthenthenatureof
Scouting,restorethedemocraticandnongovernmentalprocesstothemovement,and
provideaframeworkofleadershipwhichshallgivedirectionandpurposetothetwomillion
boysandyoungmen,agessevento17.Representativesofthevitalgroupofouryouthwere
herethisafternoon,waitingthatthisbillbesponsoredtoday.48

xxxx
SenatorLina.BeforeIanswerthatquestion,Mr.President,originally,theboyscouting
movementinthiscountryisintrinsicallydemocraticanditsstrengthderivesfromthe
effortsofthenongovernmentalsector.TheConstitutionofthemovementdeclaresthatitis
independent,voluntary,nonpolitical,nonsectarian,andnongovernmental.Thelocaland
nationalleadershipoftheBoysScoutMovement,fromitsinceptionupto1974,whenitwas
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amendedbyPresidentialDecreeNo.460,camefromelectedmembersoflocalcouncils,
volunteerswhohaveworkedformanyyearsoftheirlivesforthedevelopmentofyoungboysso
thattheywilllearnandheedthescoutoathandlaw.

However,Mr.President,inMay1974,thischaracterofthelocalboyscoutingmovementwas
alteredbecausetheolddispensationissuedaPresidentialDecreewhichincludedinthe
membershipofthegoverningboardthePresidentofthePhilippinesandsevenMembersofthe
Cabinet.ThatwasthemajorchangeinCommonwealthActNo.111.

So,thePresidentofthePhilippinesandsevenCabinetMemberswereincludedand
institutionalizedasmembersofthegoverningbodyoftheBoyScoutsofthePhilippines.So,the
nonvoluntary[sic]characterandthenongovernmentalcharacteroftheBoyScoutsofthe
Philippineswasaltered.Notonlythat.

Allothermembersofthegoverningboard,excepttheelectedregionalchairmenandseniorscout
representativesweremadesubjecttotheratificationandconfirmationofthePresidentofthe
Philippines.So,iyonpoangnagingmajoramendmentnainistrodyusngPDNo.460.Andasa
resultofthis,maramipoangnadiscouragesaboyscoutingmovement,sapagkatdatirati
talagangdemocraticiyan,walangsomuchimpositionfromgovernmentanditsofficials.Also,as
aresultofPDNo.460,thevoluntarycharacteroftheboyscoutingmovementwaschanged.
Halosnaginggobyerno,andimagine,thedictatorialcharacterofthatpreviousGovernmentwas
transferredtotheBoyScoutsofthePhilippines,kasithemembersofthegoverningboardhaveto
besubjectedtoconfirmationbythePresident.So,napulitikarinpoiyongboyscoutingthe
movement.

Ngayon,angginagawaponatin,basically,istoremovethisundemocraticfeatureofthelaw
creatingtheBoyScouts,andalsotoremovefromtheConstitutionofthepresentBoyScoutsof
thePhilippinestheotherfeaturesthatmaketheboyscoutingmovementnowundemocractic.

SenatorGuingona.Theintentofthisbillistomakemoredemocraticthemembershipinthe
BoyScoutsofthePhilippines.

SenatorLina.Well,tolessengovernmentdirectinterference.49

============

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SenatorLina.xxx

Noongarawaymasaktiboangboyscoutingmovement.Peronoong1974,whenPresidential
DecreewasissuedbythethenPresidentamendingCommonwealthActNo.111,iyonpong
NationalExecutiveBoard,thegoverningbody,aynapasukannghalospitongCabinetMembers.
Dariratipo,walaiyon.IyonpolamangDepartmentofEducation,CultureandSportsandkasama
saBoyScoutsofthePhilippines.KungsinoangSecretary,iyonangnagigingexofficioor
institutionalizedmember.Pero,nangmadagdaganitongmiyembromulasaDepartmentof
NationalDefense,fromtheotherdepartments,patiDSWD,naginggovernmenthalosang
characternito.Nawalanaiyongspiritofvoluntarism.SincetheCabinetMembersarebusydoing
otherthings,hindipoitonabigyannggaanongpansinkungkayanagdeterioratenangmalakiang
scoutingmovementofthePhilippines.Ngayonlamangpoitonarerevive,becauseSecretary
CarinoisthePresident.Rightnowheisverymuchinvolved.Heaspresidentbeforehebecame
theSecretaryofEducation,CultureandSports.Underhisleadership,thingsareshapingup.There
isgreaterrecruitmentandmoreactivities.

SenatorRomulo.Kayapo,mahalagaangbillnaito,sapagkatibinabaliknatinitosaprivate
sectoratnangsaganoon,gayanoongnakaraan,thisismoreconducivetovoluntarismand
therefore,tothegrowthoftheBoyScoutmovement.

SenatorLina.Opo.50(Emphasissupplied)

ThereisnoquestionthatRA7278wasenactedpreciselytoremovegovernmentcontrol
andreturntheBSPtotheprivatesectorandtoitsnongovernmentalstatus.Inother
words,thegovernmentlostcontrolovertheBSPtotheprivatesectoruponthe
effectivityofRA7278.Theabsenceofgovernmentcontrolorownership,coupledwith
theprivatenatureofBSPfunds,makestheBSPaprivatecorporationbeyondtheaudit
jurisdictionoftheCOA.Clearly,theattributesofBSPsrelationshipwiththeStatethat
pointtoitsbeingaprivatenonstockcorporationareoverwhelmingandirrefutable.51

VIII.
ConstitutionalityofBSPcharter,asamended

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SincetheBSPisnotaGOCC,canCongresscreate,organizeandregulatetheBSPby
enactingitscharter,orCommonwealthActNo.111,asamendedbyPD460andfurther
amendedbyRA7278?

Theanswerisinthenegative.
Section7,ArticleXIVofthe1935Constitution,asamended,wasinforcewhentheBSP
wascreatedbyspecialcharteron31October1936.Section7,ArticleXIVofthe1935
Constitution,asamended,reads:

SEC.7.TheCongressshallnot,exceptbygenerallaw,providefortheformation,organization,or
regulationofprivatecorporations,unlesssuchcorporationsareownedorcontrolledbythe
Governmentoranysubdivisionorinstrumentalitythereof.

Thesubsequent1973and1987Constitutionscontainsimilarprovisions.Thus,Section4,
ArticleXIVofthe1973Constitutionprovides:

SEC.4.TheNationalAssemblyshallnot,exceptbygenerallaw,providefortheformation,
organization,orregulationofprivatecorporations,unlesssuchcorporationsareownedor
controlledbytheGovernmentoranysubdivisionorinstrumentalitythereof.

The1987ConstitutionsubstantiallyreiteratedtheaboveprovisioninSection16,ArticleXII,
towit:

SEC.16.TheCongressshallnot,exceptbygenerallaw,providefortheformation,
organization,orregulationofprivatecorporations.Governmentownedorcontrolled
corporationsmaybecreatedorestablishedbyspecialchartersintheinterestofthe
commongoodandsubjecttothetestofeconomicviability.

InFeliciano,52theCourtdiscussedthesignificanceoftheaboveConstitutional
provisioninthiswise:

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TheConstitutionemphaticallyprohibitsthecreationofprivatecorporationsexceptbya
generallawapplicabletoallcitizens.Thepurposeofthisconstitutionalprovisionistoban
privatecorporationscreatedbyspecialcharters,whichhistoricallygavecertainindividuals,
familiesorgroupsspecialprivilegesdeniedtoothercitizens.
Inshort,Congresscannotenactalawcreatingaprivatecorporationwithaspecialcharter.
Suchlegislationwouldbeunconstitutional.Privatecorporationsmayexistonlyundera
generallaw.Ifthecorporationisprivate,itmustnecessarilyexistunderagenerallaw.Stated
differently,onlycorporationscreatedunderagenerallawcanqualifyasprivatecorporations.
Underexistinglaws,thatgenerallawistheCorporationCode,exceptthattheCooperativeCode
governstheincorporationofcooperatives.

TheConstitutionauthorizesCongresstocreategovernmentownedorcontrolledcorporations
throughspecialcharters.Sinceprivatecorporationscannothavespecialcharters,itfollowsthat
Congresscancreatecorporationswithspecialchartersonlyifsuchcorporationsaregovernment
ownedorcontrolled.(Emphasissupplied)

WhilebothBSPandCOAsubmitthatCommonwealthActNo.111anditsamendatory
lawsdonotviolateSection16,ArticleXIIoftheConstitution,theCourtshouldreject
suchcontention.ConsideringthattheBSPisnotaGOCC,itfollowsthatthelaw
creatingandregulatingtheBSPclearlyviolatesSection16,ArticleXIIofthe
ConstitutionwhichspecificallystatesthatCongressshallnot,exceptbygenerallaw,
providefortheformation,organization,orregulationofprivatecorporations,unless
suchcorporationsareownedorcontrolledbytheGovernmentoranyofitssubdivision
orinstrumentality.

Inthiscase,theCourtdirectedthepartiestocommentontheissueofthe
constitutionalityofCommonwealthActNo.111,asamended.Thisispreciselybecause
theconstitutionalityofCommonwealthActNo.111,asamended,isinextricablylinked
totheissueofwhethertheBSPissubjecttoCOAsauditjurisdiction,whichinturn
dependsonwhethertheBSPisaprivateoragovernmentownedorcontrolled
corporation.Hence,thisissuewasproperlyaddressedandexhaustivelyargueduponby
theparties.

Thatthepartiesdidnotspecificallyraisetheissueontheconstitutionalityof
CommonwealthActNo.111,asamended,doesnotprecludethisCourtfromresolving
suchissuesinceitisabsolutelyindispensableforthecompletedispositionofthiscase.In
fact,inexceptionalcases,suchasthis,itiswithintheCourtsdiscretionwhena
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constitutionalissuemayberuledupon.ItislikewisethedutyofthisCourttopassupon
theconstitutionalityofCommonwealthActNo.111,asamended,sinceitclearly
appearsthatadeterminationoftheconstitutionalquestionisnecessarytodecidethis
case.InPeoplev.Vera,53theCourtheld:

Itistruethat,asageneralrule,thequestionofconstitutionalitymustberaisedattheearliest
opportunity,sothatifnotraisedbythepleadings,ordinarilyitmaynotberaisedatthetrial,and
ifnotraisedinthetrialcourt,itwillnotconsideredonappeal.Butwemuststatethatthegeneral
ruleadmitsofexceptions.Courts,intheexerciseofsoundsdiscretion,maydeterminethe
timewhenaquestionaffectingtheconstitutionalityofastatuteshouldbepresented.Thus,in
criminalcases,althoughthereisaverysharpconflictofauthorities,itissaidthatthequestion
mayberaisedforthefirsttimeatanystageoftheproceedings,eitherinthetrialcourtoron
appeal.Evenincivilcases,ithasbeenheldthatitisthedutyofacourttopassonthe
constitutionalquestion,thoughraisedforthefirsttimeonappeal,ifitappearsthata
determinationofthequestionisnecessarytoadecisionofthecase.

Unless,therefore,theconstitutionalquestionisthustimelyraisedandpresented,itwillbe
consideredwaived,exceptinextraordinarycasesnotedinPeopleandHongkong&Shanghai
BankingCorporationvs.VeraandCuUnjieng,supra,orinexceptionalcaseswhere,the
opinionofthiscourt,thequestionmaybesaidtobefairlyinvolveduponthefaceofthe
undisputedrecord.(Emphasissuppliedcitationsomitted)

InRobbv.People,54theCourtreiterated:
Unless,therefore,theconstitutionalquestionisthustimelyraisedandpresented,itwillbe
consideredwaived,exceptinextraordinarycasesnotedinPeopleandHongkong&Shanghai
BankingCorporationvs.VeraandCuUnjieng,supra,orinexceptionalcaseswhere,the
opinionofthiscourt,thequestionmaybesaidtobefairlyinvolveduponthefaceofthe
undisputedrecord.(Emphasissupplied)

InMoldexRealty,Inc.v.HousingandLandUseRegulatoryBoard,55thisCourtheldthat
constitutionalchallengecanbemadeanytime:
Thatthequestionofconstitutionalityhasnotbeenraisedbeforeisnotavalidreason
forrefusingtoallowittoberaisedlater.Acontraryrulewouldmeanthatalaw,otherwise
unconstitutional,wouldlapseintoconstitutionalitybythemerefailureoftheproperpartyto
promptlyfileacasetochallengethesame.(Emphasissupplied)

TheConstitutionprohibitsthecreationofaprivatecorporationthroughaspeciallaw.
TheConstitutionalprohibitionunderSection16,ArticleXIIisclear,categorical,
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absolute,andadmitsofnoexception.SincetheBSPisaprivatecorporationandnota
governmentownedorcontrolledcorporation,Sections
1,562,573,585,596,607,619,62and1163ofCommonwealthActNo.111,asamended,are
unconstitutional,andhencevoid,forcontraveningtheConstitutionalproscription
againstthecreation,organization,andregulationofprivatecorporationsbyCongress.

Therestoftheprovisions,namely,Sections4,648,65and1066ofCommonwealthAct
No.111,asamended,remainvalidasthesedonotrefertoBSPscreationasa
corporationandthus,donotviolatetheprohibitionunderSection16,ArticleXIIofthe
Constitution.Moreover,Section5ofRA7278,amendingCommonwealthActNo.111,
providesforaseparabilityclause.67

Insum,theBSPisaprivatecorporationbeyondtheauditjurisdictionoftheCOA.
Accordingly,thespecificprovisionsintheBSPchartercreatingtheBSPasaprivate
corporationarevoid.ConsideringtheConstitutionalinfirmityofitscreation,BSPs
recourseiseithertoincorporateundertheCorporationCodeofthePhilippinesorto
existasanunincorporatedassociation.
ACCORDINGLY,IvotetoGRANTthepetition.TheBoyScoutsofthePhilippinesisa
privatecorporationbeyondtheauditjurisdictionoftheCommissiononAudit.Sections
1,2,3,5,6,7,9,and11ofCommonwealthActNo.111,asamendedbyPresidential
DecreeNo.460andRepublicActNo.7278,arevoidforbeingviolativeofthe
prohibitioninSection16,ArticleXIIoftheConstitution.

ANTONIOT.CARPIO
AssociateJustice

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