Funa vs MECO and COA (2014)

G.R. No. 193462 | 2014-02-04

Subject: Petition, even if rendered moot and academic by supervening events, may still
be decided upon under exceptional circumstances; Legal standing of petitioner as a
citizen; Audit jurisdiction of the COA; MECO is Not a GOCC or a Government
Instrumentality; MECO is organized as a Non-Stock Corporation; MECO performs
functions with a public aspect; MECO is Not owned or controlled by the Government;
MECO is a Sui Generis entity; Certain accounts of MECO (Verification Fees and Consular
Fees) are subject to audit by the COA;

Facts:

After the Chinese civil war, China was faced with two (2) governments: (i) the communist
Peoples Republic of China (PROC) which controls the mainland territories, and (ii) the
nationalist Republic of China (ROC) which controls the island of Taiwan. Both the PROC
and ROC adhered to a policy of One China i.e., the view that there is only one legitimate
government in China, but differed in their respective interpretation as to which that
government is.

The Philippines formally ended its official diplomatic relations with the government in
Taiwan on 9 June 1975, when the Philippines and the PROC expressed mutual recognition
thru the Joint Communiqu between the two countries.

However, this did not preclude the Philippines from keeping unofficial relations with
Taiwan on a people-to-people basis. Maintaining ties with Taiwan that is permissible by
the terms of the Joint Communiqu required the Philippines and Taiwan to course any
such relations thru offices outside of the official or governmental organs.

Hence, on the part of the Philippines, the Manila Economic and Cultural Office (MECO)
was established as a nonstock, non-profit corporation. The MECO became the corporate
entity entrusted by the Philippine government with the responsibility of fostering
friendly and unofficial relations with the people of Taiwan. It is the MECO that
oversees the rights and interests of Overseas Filipino Workers (OFWs) in Taiwan;
promotes the Philippines as a tourist and investment destination for the Taiwanese; and
facilitates the travel of Filipinos and Taiwanese from Taiwan to the Philippines, and vice
versa.

In August 2010, petitioner Dennis Funa sent a letter to the COA requesting for a copy
of the latest financial and audit report of the MECO invoking, for that purpose, his
constitutional right to information on matters of public concern. The petitioner made
the request on the belief that the MECO, being under the operational supervision of the
Department of Trade and Industry (DTI), is a government owned and controlled
corporation (GOCC) and thus subject to the audit jurisdiction of the COA.

Assistant COA Commissioner Naranjo revealed in a memorandum that the MECO was
not among the agencies audited by any of the three Clusters of the Corporate
Government Sector. Taking the memorandum as an admission that the COA had never
audited and examined the accounts of the MECO, petitioner Funa filed the instant petition
for mandamus in his capacities as taxpayer, concerned citizen, a member of the
Philippine Bar and law book author.

This petition for mandamus seeks to compel the Commission on Audit (COA) to audit and
examine the funds of MECO, and the MECO to submit to such audit and examination.

Petitioner posits that all accounts of the MECO are auditable as the latter is a bona fide
GOCC or government instrumentality. On the other hand, the COA argues that only the
accounts of the MECO that pertain to the verification fees it collects on behalf of the
DOLE are auditable because the former is merely a non-governmental entity required to
pay xxx government share per the Audit Code.

Held:

Petition, even if rendered moot and academic by supervening events, may still
be decided upon under exceptional circumstances

1. The COA claims that by issuing Office Order No. 2011-698, it had already conceded
its jurisdiction over the accounts of the MECO and so fulfilled the objective of the instant
petition. The COA thus urges that the instant petition be dismissed for being moot and
academic.

2. A case is deemed moot and academic when, by reason of the occurrence of a

supervening event, it ceases to present any justiciable controversy. Since they lack an
actual controversy otherwise cognizable by courts, moot cases are, as a rule, dismissible.

3. The rule that requires dismissal of moot cases, however, is not absolute. It is subject
to exceptions. Courts will decide cases, otherwise moot and academic, if:

(i) there is a grave violation of the Constitution;

(ii) the exceptional character of the situation and the paramount public interest is
involved;
(iii) when constitutional issue raised requires formulation of controlling principles to guide
the bench, the bar, and the public;
(iv) the case is capable of repetition yet evading review. (see David v. Macapagal-Arroyo)

4. The issuance by the COA of Office Order No. 2011-698 indeed qualifies as a
supervening event that effectively renders moot and academic the main prayer of the
instant mandamus petition. A writ of mandamus to compel the COA to audit the accounts
of the MECO would certainly be a mere superfluity, when the former had already obliged
itself to do the same.

5. Be that as it may, this Court refrains from dismissing outright the petition. We believe
that the mandamus petition was able to craft substantial issues presupposing the
commission of a grave violation of the Constitution and involving paramount public
interest. An allegation as serious as a violation of a constitutional or legal duty, coupled
with the pressing public interest in the resolution of all related issues, prompts this Court
to pursue a definitive ruling thereon, if not for the proper guidance of the government or
agency concerned, then for the formulation of controlling principles for the education of
the bench, bar and the public in general. For this purpose, the Court invokes its symbolic
function. Moreover, the inclusion of the MECO in Office Order No. 2011-698 appears to
be entirely dependent upon the judgment of the incumbent chairperson of the COA,
susceptible of being undone, with or without reason, by her or even her successor. Hence,
the case now before this Court is dangerously capable of being repeated yet evading
review.

Legal standing of petitioner as a citizen

6. Petitioner has standing, as a concerned citizen, to file the instant petition for
mandamus.

7. The rules regarding legal standing in bringing public suits, or locus standi, are already
well-defined in our case law. Standing to sue is accorded provided that the following
requirements are met:

(1) the cases involve constitutional issues;

(2) for taxpayers, there must be a claim of illegal disbursement of public funds or that
the tax measure is unconstitutional;

(3) for voters, there must be a showing of obvious interest in the validity of the election
law in question;
(4) for concerned citizens, there must be a showing that the issues raised are of
transcendental importance which must be settled early; and

(5) for legislators, there must be a claim that the official action complained of infringes
upon their prerogatives as legislators.

8. The instant petition raises issues of transcendental importance, involved as they are
with the performance of a constitutional duty, allegedly neglected, by the COA.
Hence, petitioner, as a concerned citizen, has the requisite legal standing to file the
instant mandamus petition.

9. Petitioner does not need to make any prior demand on the MECO or the COA in order
to maintain the instant petition. The duty of the COA sought to be compelled by
mandamus, emanates from the Constitution and law, which explicitly require, or
demand, that it perform the said duty. To the mind of this Court, petitioner already
established his cause of action against the COA when he alleged that the COA had
neglected its duty in violation of the Constitution and the law.

Audit jurisdiction of the COA

10. Under Section 2(1) of Article IX-D of the 1987 Constitution, the COA was
vested with the power, authority and duty to examine, audit and settle the accounts
of the following entities:

(a) The government, or any of its subdivisions, agencies and instrumentalities;

(b) GOCCs with original charters;
(c) GOCCs without original charters;
(d) Constitutional bodies, commissions and offices that have been granted fiscal
autonomy under the Constitution; and
(e) Non-governmental entities receiving subsidy or equity, directly or indirectly, from or
through the government, which are required by law or the granting institution to submit
to the COA for audit as a condition of subsidy or equity.

11. The term accounts mentioned in the subject constitutional provision pertains to
the revenue, receipts, expenditures and uses of funds and property of the
foregoing entities.

12. Complementing the constitutional power of the COA to audit accounts of non-
governmental entities receiving subsidy or equity xxx from or through the government
is Section 29(1) of the Audit Code, which grants theCOA visitorial authority over the
following nongovernmental entities:

(a) Non-governmental entities subsidized by the government

(b) Non-governmental entities required to pay levy or government share
(c) Non-governmental entities that have received counterpart funds from the
government, and
(d) Non-governmental entities partly funded by donations through the government.

13. Section 29(1) of the Audit Code, however, limits the audit of the foregoing non-
governmental entities only to funds xxx coming from or through the government. This
section of the Audit Code is,in turn, substantially reproduced in Section 14(1), Book V of
the Administrative Code.

14. In addition, the Administrative Code also empowers the COA to examine and audit
the books, records and accounts of public utilities in connection with the fixing of rates
of every nature, or in relation to the proceedings of the proper regulatory agencies, for
purposes of determining franchise tax.

MECO is Not a GOCC or a Government Instrumentality

15. Government instrumentalities are agencies of the national government that, by

reason of some special function or jurisdiction they perform or exercise, are allotted
operational autonomy and are not integrated within the department framework.
Subsumed under the rubric government instrumentality are the following entities:

1. regulatory agencies,
2. chartered institutions,
3. government corporate entities (GCE) or government instrumentalities with corporate
powers (GICP), and
4. GOCCs

16. The Administrative Code defines a GOCC (as reiterated in Republic Act No. 10149 or
the GOCC Governance Act of 2011):
(13) Government-owned or controlled corporation refers to any agency organized
as a stock or non-stock corporation, vested with functions relating to public needs
whether governmental or proprietary in nature, and owned by the Government directly
or through its instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) per cent of its capital stock: x x x.

17. GOCCs, therefore, are stock or non-stock corporations vested with functions
relating to public needs that are owned by the Government directly or through its
instrumentalities. By definition, three attributes thus make an entity a GOCC:

(i) its organization as stock or non-stock corporation

(ii) the public character of its function;
(iii) government ownership over the same.

18. Possession of all three attributes is necessary to deem an entity a GOCC.

19. In this case, MECO possesses the first and second attributes. It is the third attribute,
which the MECO lacks.

MECO is organized as a Non-Stock Corporation (1st GOCC attribute present)

20. MECO was incorporated as a non-stock corporation under the Corporation Code. The
purposes for which the MECO was organized are somewhat analogous to those of a trade,
business or industry chamber, but only on a much larger scale i.e., instead of furthering
the interests of a particular line of business or industry within a local sphere, the MECO
seeks to promote the general interests of the Filipino people in a foreign land. Finally,
none of the income derived by the MECO is distributable as dividends to any of its
members, directors or officers.

MECO performs functions with a public aspect (2nd GOCC attribute present)

21. Consistent with its corporate purposes, the MECO was authorized by the Philippine
government to perform certain consular and other functions relating to the promotion,
protection and facilitation of Philippine interests in Taiwan. (see Sections 1 and 2 of EO
No. 15, s. 2001)

22. The functions of the MECO bears an uncanny similarity to some of the functions
typically performed by the DFA itself, through the latters diplomatic and consular
missions.The functions of the MECO, in other words, are of the kind that would otherwise
be performed by the Philippines own diplomatic and consular organs, if not only for the
governments acquiescence that they instead be exercised by the MECO. Evidently, the
functions vested in the MECO are impressed with a public aspect.

MECO is Not owned or controlled by the Government (3rd GOCC attribute

ABSENT)

23. The government owns a stock or non-stock corporation if it has controlling interest
in the corporation. In astock corporation, the controlling interest of the government is
assured by its ownership of at least fifty-one percent (51%) of the corporate capital
stock. In a non-stock corporation, like the MECO, jurisprudence teaches that the
controlling interest of the government is affirmed when at least majority of the members
are government officials holding such membership by appointment or designation or
there is otherwise substantial participation of the government in the selection of the
corporations governing board.

24. Petitioner argues that the government has controlling interest in the MECO because
it is the President of the Philippines that indirectly appoints the directors of the
corporation thru desire letters addressed to the corporations board.

25. The desire letters that the President transmits are merely recommendatory and
not binding on MECO. The MECO maintains that, as a corporation organized under the
Corporation Code, matters relating to the election of its directors and officers, as well as
its membership, are ultimately governed by the appropriate provisions of the said code,
its articles of incorporation and its by-laws.

26. It is significant to note that none of the original incorporators of the MECO were
shown to be government officials at the time of the corporations organization. Indeed,
none of the members, officers or board of directors of the MECO, from its incorporation
up to the present day, were established as government appointees or public officers
designated by reason of their office. There is, in fact, no law or executive order that
authorizes such an appointment or designation. Hence, from a strictly legal perspective,
it appears that the presidential desire letters are, no matter how strong its persuasive
effect may be, merely recommendatory.

MECO is a Sui Generis entity

27. The exclusion of the MECO from a GOCC makes it easier to exclude the same from
any other class of government instrumentality. The other government instrumentalities
i.e., the regulatory agencies, chartered institutions and GCE/GICP are all, by explicit or
implicit definition, creatures of the law. The MECO cannot be any other instrumentality
because it was merely incorporated under the Corporation Code.
28. Nonetheless, MECO is uniquely situated as compared with other private corporations.
From its overreaching corporate objectives, its special duty and authority to exercise
certain consular functions, up to the oversight by the executive department over its
operationsall the while maintaining its legal status as a non-governmental entitythe
MECO is, for all intents and purposes, sui generis.

Certain accounts of MECO (Verification Fees and Consular Fees) are subject to
audit by the COA

29. Despite being a non-governmental entity, the MECO may still be audited with respect
to the verification feesfor overseas employment documents that the MECO collects from
Taiwanese employers on behalf of the DOLE. The verification fees refers to the service
fee for the verification of overseas employment contracts, recruitment agreement or
special powers of attorney that the DOLE was authorized to collect under Section 7 of
EO No. 1022. Since the Philippines does not maintain an official post in Taiwan, the DOLE
entered into a series of Memorandum of Agreements with the MECO, which made MECO
the DOLEs collecting agent with respect to the verification fees that may be due from
Taiwanese employers of OFW.

30. Aside from the DOLE verification fees, however, the MECO also collects consular
fees, or fees it collects from the exercise of its delegated consular functions (Issuance
of temporary visitors visa, etc.) . The consular fees, although held and expended by
the MECO by virtue of EO No. 15, s. 2001, are, without question, derived from the
exercise by the MECO of consular functionsfunctions it performs by and only through
special authority from the government. The visas, passports and other documents that
the MECO issues pursuant to its authorized functions still emanate from the Philippine
government itself. It is the government that has ultimate control over the disposition of
the consular fees, which control the government did exercise when it provided in
Section 2(6) of EO No. 15, s. 2001 that such funds may be kept by the MECO to defray
the cost of its operations.

31. Section 14(1), Book V of the Administrative Code authorizes the COA to audit
accounts of non-governmental entities required to pay ...or have government share but
only with respect to funds xxx coming from or through the government. This provision
of law perfectly fits the MECO.

32. The Memorandum of Agreement between the DOLE and the MECO and Section 2(6)
of EO No. 15, s. 2001, vis--vis, respectively, the verification fees and the consular
fees, grant and at the same time limit the authority of the MECO to collect such fees.
That grant and limit require the audit by the COA of the collections thereby generated.
Co Kim Chan v. Valdez Tan Keh
G.R. No. L-5 | 1945-09-17

Subject: De Facto Government; Postliminy in International Law; Belligerent Occupation

Facts:

This involves a petition for mandamus praying that the respondent judge of the lower court be ordered
to continue the proceedings in a civil case before said court. The proceedings were initiated under the
regime of the government (called Republic of the Philippines) established during the Japanese military
occupation.

The respondent judge refused to take cognizance of and continue the proceedings in the said case
on the ground that the proclamation issued by General Douglas MacArthur, upon American re-
occupation, had the effect of invalidating all judicial proceedings and judgements of the court of the
Philippines under the Japanese military occupation, and that, the lower courts have no jurisdiction to
take cognizance of and continue judicial proceedings pending in the courts of the defunct Republic of
the Philippines in the absence of an enabling law granting such authority.

The respondent judge likewise contends that the government established in the Philippines during the
Japanese occupation were not de facto governments.
Held:

De Facto Government

1. All acts and proceedings of the legislative, executive, and judicial departments of a de
facto government are good and valid.

2. There are three kinds of de facto governments.

(a) Government de facto in the proper legal sense-- that government that gets possession
and control of, or usurps, by force or by the voice of the majority, the rightful legal
governments and maintains itself against the will of the latter.

(b) Government of paramount force-- that which is established and maintained by military
forces who invade and occupy a territory of the enemy in the course of war.

(c) That established as an independent government by the inhabitants of a country who

rise in insurrection against the parent state
3. The Philippine Executive Commission and the Republic of the Philippines, both governments
established during the Japanese military occupation, are de facto governments of the second
kind. The fact that they were a civil and not a military government and was run by Filipinos and
not by Japanese nationals, is of no consequence. The ultimate source of its authority was the
same ? the Japanese military authority and government.

4. Being de facto governments, it necessarily follows that the judicial acts and proceedings of the
courts of justice of those governments, which are not of a political complexion, were good and
valid, and, by virtue of the well-known principle of postliminy (postliminium) in international law,
remained good and valid after the liberation or reoccupation of the Philippines under the
leadership of General Douglas MacArthur.

5. Courts are creatures of statutes and such laws, not being a political nature, are not abrogated by
a change of sovereignty, and continue in force "ex proprio vigore" unless and until repealed by
legislative acts. A proclamation that said laws and courts are expressly continued is not
necessary.

Principle of Postliminy

6. According to that principle in international law, the fact that a territory which has been occupied
by an enemy comes again into the power of its legitimate government of sovereignty, does not,
 except in a very few cases, wipe out the effects of acts done by an invader, which for one reason
or another it is within his competence to do. Thus judicial acts done under his control, when they
are not of a political complexion, administrative acts so done, to the extent that they take effect
during the continuance of his control, and the various acts done during the same time by private
persons under the sanction of municipal law, remain good.

Effects of a belligerent occupation

7. According to the precepts of the Hague Conventions, the belligerent occupant:

(i) possesses all the powers of a de facto government;

(ii) can suspend the old laws and promulgate new ones and make such changes in the
old as he may see fit;

(iii) the municipal laws in force in the country must be respected, unless absolutely
prevented by the circumstances prevailing in the occupied territory.

(i.e. affect private rights of person and property and provide for the punishment of crime);

(iv) laws of a political nature or affecting political relations are considered as suspended
during the military occupation
 (i.e. right of assembly, the right to bear arms, the freedom of the press, and the right to
travel freely in the territory occupied);

(v) local ordinary tribunals are authorized to continue administering justice; judges and
other judicial officers are kept in their posts if they accept the authority of the belligerent
occupant or are required to continue in their positions under the supervision of the military
or civil authorities appointed.

(vi) There is no transfer of sovereignty during a belligerent occupation. The occupation,

being essentially provisional, does not serve to transfer sovereignty over the territory
controlled. The de jure government, during the period of occupancy, is deprived of the
power to exercise its rights as such. (Note: There is no suspension of sovereignty during
a belligerent occupation, but merely the suspension of the exercise of sovereignty by the
de jure government)

Republic v. Sandiganbayan, Ramas and Dimaano

G.R. No. 104768 | 2003-07-21

Subject: PCGGJurisdiction, Revolutionary Government, International Law

Facts:

Upon herassumption to office following the EDSA Revolution, then President Aquinoissued Executive
Order No. 1 creating the PresidentialCommission on Good Government (PCGG). Pursuant to its
mandate to recover allill-gotten wealth of former President Marcos, his immediate family,
relatives,subordinates and close associates, PCGG created an AFP Anti-Graft Board toinvestigate
corrupt practices by AFP personnel, whether in the active serviceor retired.
The AFPBoard investigated reports of unexplained wealth of Major General Ramas, the Commanding
General of the Philippine Army until 1986 (with the rank ofMajor General) and filed a petitionfor
forfeiture against him and his office clerk and alleged mistress, ElizabethDimaano.

Duringthe trial, respondents filed a motion to dismiss on the ground that the PCGGdoes not have
jurisdiction to investigate and prosecute military officers byreason of mere position held without a
showing that they are"subordinates" of former President Marcos.

Moreover,during the raid conducted onDimaanos residence, there were items seized that
were not includedin the search warrant. Respondents therefore seek these items to beexcluded from
evidence for being illegally seized.

Notably, the search and seizure was conducted onMarch 3, 1986 or five days after the EDSA
revolution. According to the Republic, the items seizedare admissible since at the time of their seizure,
private respondents did notenjoy any constitutional right. What was in place at the time of the
seizurewas a revolutionary governmentand it effectively withheld the operation of the 1973
Constitution which wasthe basis of respondents exclusionary right.

Held:
PCGG Jurisdiction

1. PCGG has no jurisdiction to investigate and cause the filing of a forfeiture petition against Ramas
and Dimaano for unexplained wealth under RA No. 1379.

a. Ramas is not asubordinate as the term is contemplated under EO No. 1.

b. Mere position heldby a military officer does not automatically make him a
"subordinate"as this term is used in EO No.1 absent a showing that he enjoyed
closeassociation with former President Marcos.

c. There must be a prima facie showing that Ramas unlawfully accumulated wealth by
virtue of his close association orrelation with former Pres. Marcos and/or his wife.

d. Such closeassociation is manifested either by Ramas' complicity with former

PresidentMarcos in the accumulation of ill-gotten wealth by the deposed President or
byformer President Marcos' acquiescence in Ramas' own accumulation of ill-gottenwealth
if any.

2. The proper government agencies, and not the PCGG, should investigate and prosecute forfeiture
petitions not falling under EO No. 1 and its amendments. The preliminary investigation of
unexplained wealth amassed on or before 25 February 1986 falls under the jurisdiction of the
Ombudsman, while the authority to file the corresponding forfeiture petition rests with the Solicitor
General.
3. The right of the State to forfeit unexplained wealth under RA No. 1379 is not subject to prescription,
laches or estoppel

Rights under theRevolutionary Government (Legality of the seizure)

4. The Bill of Rights under the 1973 Constitution was not operative during the interregnum

a. The EDSA Revolution took place on February 23-25, 1986. The INTERREGNUM refers
toperiod after the actualand effective take-over of power by the revolutionary government
following thecessation of resistance by loyalist forces up to March 24, 1986 -- immediately
before the adoption ofthe Provisional Constitution).

b. During the interregnum, a person could not invokeany exclusionary right under a Bill of
Rights because there was neither aconstitution nor a Bill of Rights during the interregnum
During theinterregnum, the directives and orders of the revolutionary government were
thesupreme law because no constitution limited the extent and scope of suchdirectives and
orders.
5. Nevertheless, even during the interregnum the Filipino people continued to enjoy, under
the International Covenant on Civil and Political Rights (Covenant) and the Universal Declaration
of Human Rights (Declaration), almost the same rights found in the Bill of Rights of the 1973
Constitution.

a. The Declaration, to which the Philippines is asignatory, provides in its Article 17(2) that no one
shall be arbitrarilydeprived of his property.

b. Although the signatories to the Declaration did notintend it as a legally binding document, being
only a declaration, the Courthas interpreted the Declaration as part of the generally accepted
principlesof international law(customaryinternational law) and binding on the State. Thus, the
revolutionarygovernment was also obligated under international law to observe therights of individuals
under the Declaration.

6. After the EDSA Revolution, theresulting government was a revolutionary government bound by no
constitution orlegal limitations except treaty obligations that the revolutionary government,as the de
jure government in the Philippines, assumed underinternational law.

7. The search warrant, issued duringthe interregnum, was valid. However, the seizure of the items
not included inthe warrant was void, unless these items are contraband per se, which they arenot.