Boys Scout vs. Coa

7/29/2019 Boys Scout vs. Coa

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ENBANC

BOYSCOUTSOFTHEPHILIPPINES, Petitioner,

-versus-

COMMISSIONONAUDIT ,Respondent.

G.R.No.177131

Present:

CORONA,C.J.,

CARPIO,

CARPIOMORALES,VELASCO,JR.,

NACHURA,

LEONARDO-DECASTRO,

BRION,

PERALTA,BERSAMIN,

DELCASTILLO,ABAD,

VILLARAMA,JR.,

PEREZ,

MENDOZA,and

SERENO,JJ.

Promulgated:

June7,2011

x--------------------------------------------------x

DECISION

LEONARDO-DECASTRO,J.:

The jurisdiction of the Commission on Audit (COA) over the Boy Scouts of the

Philippines(BSP)isthesubjectmatterofthiscontroversythatreachedusviapetitionfor

prohibition[1]filedbytheBSPunderRule65ofthe1997RulesofCourt.Inthispetition,theBSPseeksthattheCOAbeprohibitedfromimplementingitsJune18,2002Decision,[2]

itsFebruary21,2007Resolution,[3]aswellasallotherissuancesarisingtherefrom,andthatalloftheforegoingberenderednullandvoid.[4]

AntecedentFactsandBackgroundoftheCase


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ThiscasearosewhentheCOAissuedResolutionNo.99-011[5]onAugust19,

1999(theCOAResolution),withthesubjectDefiningtheCommissionspolicywithrespecttotheauditoftheBoyScoutsofthePhilippines.Initswhereasclauses,theCOAResolution

statedthattheBSPwascreatedasapubliccorporationunderCommonwealthActNo.111,

asamendedbyPresidentialDecreeNo.460andRepublicActNo.7278;thatinBoyScoutsof

thePhilippinesv.NationalLaborRelationsCommission,[6]theSupremeCourtruledthattheBSP,asconstitutedunderitscharter,wasagovernment-controlledcorporationwithinthe

meaning of Article IX(B)(2)(1) of the Constitution; and that the BSP is appropriately

regardedasagovernmentinstrumentalityunderthe1987AdministrativeCode. [7]The

COA Resolution also cited its constitutional mandate under Section 2(1), Article IX(D).Finally,theCOAResolutionreads:

NOWTHEREFORE,inconsiderationoftheforegoingpremises,

the COMMISSION PROPER HAS RESOLVED, AS IT DOES HEREBY

RESOLVE,toconductanannualfinancialauditoftheBoyScoutsofthe Philippines in accordance with generally accepted auditing

standards,andexpressanopiniononwhetherthefinancialstatementswhich include the Balance Sheet, the Income Statement and the

StatementofCashFlowspresentfairlyitsfinancialpositionandresults

ofoperations.

xxxx

BE IT RESOLVED FURTHERMORE, that for purposes of audit

supervision, the Boy Scouts of the Philippines shall be classifiedamongthegovernmentcorporationsbelongingtotheEducational,

Social, Scientific, Civic and Research Sector under the Corporate

AuditOffice I,to beaudited,similar tothe subsidiarycorporations,byemployingtheteamauditapproach.[8](Emphasessupplied.)

The BSP sought reconsideration of the COA Resolution in a letter[9] dated

November26,1999signedbytheBSPNationalPresidentJejomarC.Binay,whoisnowtheVicePresidentoftheRepublic,whereinhewrote:

ItisthepositionoftheBSP,withallduerespect,thatitisnotsubjecttotheCommissionsjurisdictiononthefollowinggrounds:

1.WereckonthattherulinginthecaseofBoyScoutsofthePhilippinesvs. National Labor Relations Commission, et al. (G.R. No. 80767)

classifying the BSP as a government-controlled corporation is

anchored on the substantial Government participation in the

NationalExecutiveBoardoftheBSP.Itistobenotedthatthecasewas

decidedwhen the BSP Charter isdefined byCommonwealth Act No.

111asamendedbyPresidentialDecree460.


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However,maywehumbly referyou toRepublicAct No. 7278which

amendedtheBSPscharterafterthecitedcasewasdecided.Themost

salient of all amendments in RA No. 7278 is the alteration of the

compositionoftheNationalExecutiveBoardoftheBSP.

The said RA virtually eliminated the substantial governmentparticipation in the National Executive Board by removing: (i) the

President of the Philippines and executive secretaries, with the

exceptionof theSecretaryofEducation,asmembersthereof; and(ii)

the appointment and confirmation power of the President of thePhilippines,asChiefScout,overthemembersofthesaidBoard.

TheBSPbelievesthatthecitedcasehasbeensupersededbyRA7278.

TherebyweakeningthecasesconclusionthattheBSPisagovernment-

controlled corporation (sic). The 1987 Administrative Code itself, ofwhichtheBSPvs.NLRCreliedonforsometerms,definesgovernment-

ownedandcontrolledcorporationsasagenciesorganizedasstockornon-stockcorporationswhichtheBSP,underitspresentcharter,isnot.

Also, the Government, like in other GOCCs, does not have funds

invested in the BSP. What RA 7278 only provides is that the

Governmentoranyofitssubdivisions,branches,offices,agenciesand

instrumentalitiescanfromtimetotimedonateandcontributefundsto

theBSP.

xxxx

Also the BSPrespectfully believes that the BSP isnot appropriatelyregarded as a government instrumentality under the 1987

AdministrativeCode as stated in the COA resolution. Asdefined by

Section2(10)ofthesaidcode,instrumentalityreferstoanyagencyofthe National Government, not integrated within the department

framework, vested with special functions or jurisdiction by law,endowedwithsomeifnotallcorporatepowers,administeringspecial

funds,andenjoyingoperationalautonomy,usuallythroughacharter.

The BSP is not an entity administering special funds. It is not even

includedintheDECSNationalBudget.xxx

It may be argued also that the BSP is not an agency of the

Government.The1987AdministrativeCode,merelyreferredtheBSP

asanattachedagency of the DECS asdistinguished fromanactual

line agency ofdepartmentsthatare includedintheNationalBudget.

The BSP believes that an attached agency is different from an

agency.Agency,asdefinedinSection2(4)oftheAdministrativeCode,

isdefined asany of the variousunitsof the Government including a


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department, bureau, office, instrumentality, government-owned or

controlledcorporationorlocalgovernmentordistinctunittherein.

Under the above definition, the BSP is neither a unit of the

Government;adepartmentwhichreferstoanexecutivedepartmentas

createdbylaw(Section2[7]oftheAdministrativeCode);norabureauwhich refers to any principal subdivision orunit of any department

(Section2[8],AdministrativeCode).[10]

Subsequently,requestsforreconsiderationoftheCOAResolutionwerealsomadeseparatelybyRobertP.Valdellon,RegionalScoutDirector,WesternVisayasRegion,Iloilo

CityandEugenioF.Capreso,CouncilScoutExecutiveofCalbayogCity.[11]

Inaletter[12]datedJuly3,2000,DirectorCrescencioS.Sunico,CorporateAudit

Officer(CAO)IoftheCOA,furnishedtheBSPwithacopyoftheMemorandum[13]datedJune 20, 2000 of Atty. Santos M. Alquizalas, the COA General Counsel. In said

Memorandum, the COA General Counsel opined that Republic Act No. 7278 did notsupersede the Courts ruling inBoy Scouts of the Philippinesv.NationalLaborRelationsCommission,eventhoughsaidlaweliminatedthesubstantialgovernmentparticipationin

theselectionofmembersof theNationalExecutiveBoardof theBSP.TheMemorandum

furtherprovides:

Analysis of the said case disclosed that the substantial government

participationisonlyone(1)ofthethree(3)groundsrelieduponbythe

Court in the resolution of the case. Other considerations include the

characteroftheBSPspurposesandfunctionswhichhasapublicaspect

andthestatutorydesignationoftheBSPasapubliccorporation.These

groundshavenotbeendeletedbyR.A.No.7278.Onthecontrary,thesewere strengthened as evidenced by the amendment made relative to

BSPspurposesstatedinSection3ofR.A.No.7278.

OntheargumentthatBSPisnotappropriatelyregardedasa

governmentinstrumentalityandagencyofthegovernment,suchhasalreadybeenansweredandclarified.TheSupremeCourthaselucidated

thismatter in theBSP casewhen it declared that BSP is regarded as,

both a government-controlled corporation with an original charterand as an instrumentality of the Government. Likewise, it is not

disputed that the AdministrativeCode of1987 designated the BSP as

one of the attached agencies of DECS. Being an attached agency,however, it does not change its nature as a government-controlled

corporationwithoriginalcharterand,necessarily,subjecttoCOAaudit

jurisdiction. Besides, Section 2(1), Article IX-D of the Constitution

providesthatCOAshallhavethepower,authority,anddutytoexamine,

auditandsettle all accountspertainingtotherevenueandreceipts of,

andexpendituresorusesoffundsandproperty,ownedorheldintrust

by,orpertainingto,theGovernment,oranyofitssubdivisions,agencies


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or instrumentalities, including government-owned or controlled

corporationswithoriginalcharters.[14]

BasedontheMemorandumoftheCOAGeneralCounsel,DirectorSunicowrote:

InviewofthepointsclarifiedbysaidMemorandumupholding

COAResolutionNo.99-011,wehave tocomplywith the provisionsof

thelatter,amongwhichistoconductanannualfinancialauditoftheBoy

ScoutsofthePhilippines.[15]

Ina letter datedNovember20, 2000signed byDirectorAmorsonia B.Escarda,

CAOI,theCOAinformedtheBSPthatapreliminarysurveyofitsorganizationalstructure,

operations and accounting system/records shall be conducted on November 21 to 22,2000.[16]

UpontheBSPsrequest,theauditwasdeferredforthirty(30)days.TheBSPthen

filed a Petition for Review with Prayer for Preliminary Injunction and/or Temporary

RestrainingOrderbeforetheCOA.Thiswas deniedbytheCOAinitsquestionedDecision,whichheldthattheBSPisunderitsauditjurisdiction.TheBSPmovedforreconsideration

butthiswaslikewisedeniedunderitsquestionedResolution.[17]

ThisledtothefilingbytheBSPofthispetitionforprohibitionwithpreliminary

injunctionandtemporaryrestrainingorderagainsttheCOA.

TheIssue

Asstatedearlier,thesoleissuetoberesolvedinthiscaseiswhethertheBSPfalls

undertheCOAsauditjurisdiction.

ThePartiesRespectiveArguments

The BSP contends thatBoyScoutsof thePhilippinesv.NationalLaborRelations

CommissionisinapplicableforpurposesofdeterminingtheauditjurisdictionoftheCOAas

theissuethereinwasthejurisdictionoftheNationalLaborRelationsCommissionoveracaseforillegaldismissalandunfairlaborpracticefiledbycertainBSPemployees.[18]

WhiletheBSPconcedesthatitsfunctionsdorelatetothosethatthegovernment

might otherwise completely assume on its own, it avers that this alone was not

determinativeoftheCOAsauditjurisdictionoverit.TheBSPfurtheraversthattheCourt

inBoyScoutsofthePhilippinesv.NationalLaborRelationsCommission simplystatedxxx

that in respect of functions, the BSP is akin to a public corporation but this was not


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synonymoustoholdingthattheBSPisagovernmentcorporationorentitysubjecttoaudit

bytheCOA.[19]

TheBSPcontendsthatRepublicActNo.7278introducedcrucialamendmentsto

itscharter;hence,thefindingsoftheCourtin BoyScoutsofthePhilippinesv.NationalLabor

Relations Commission are no longer valid as the government has ceased to play acontrollinginfluence init.TheBSPclaims thatthepronouncementsof theCourttherein

mustbetakenonlywithinthecontextofthatcase;thattheCourthadcategoricallyfound

thatitsassetswereacquiredfromtheBoyScoutsofAmericaandnotfromthePhilippine

government,andthatitsoperationsarefinancedchieflyfrommembershipduesoftheBoyScouts themselvesaswell as frompropertyrentals;and that theBSPmay correctly be

characterized as non-governmental, and hence, beyond the audit jurisdiction of the

COA. It further claims that the designation by the Court of the BSP as a government

agencyorinstrumentalityismereobiterdictum.[20]

The BSP maintains that the provisions of Republic Act No. 7278 suggest that

governance of BSP has come to be overwhelmingly a private affair or nature, withgovernmentparticipationrestrictedtotheseatoftheSecretaryofEducation,Cultureand

Sports.[21]Itcites PhilippineAirlinesInc.v.CommissiononAudit[22]whereintheCourt

declaredthat,PAL,havingceasedtobeagovernment-ownedorcontrolledcorporationis

no longer under the audit jurisdictionof the COA.[23] Claiming that the amendments

introduced byRepublic Act No. 7278 constituted a supervening event that changed the

BSPs corporate identity in the same way that the governments privatization program

changedPALs,theBSPmakesthecasethatthegovernmentnolongerhascontroloverit;

thus, the COA cannot use the Boy Scouts of the Philippines v. National Labor RelationsCommission as its basis for the exercise of its jurisdiction and the issuance of COA

ResolutionNo.99-011.[24]TheBSPfurtherclaimsasfollows:

Itisnotfar-fetched,infact,toconcedethatBSPsfundsandassets

are private in character. Unlike ordinary public corporations, such as

provinces, cities, andmunicipalities,or government-ownedand controlledcorporations, such as Land Bank of the Philippines and the Development

BankofthePhilippines,theassetsandfundsofBSParenotderivedfromanygovernmentgrant.Foritsoperations,BSPisnotdependentinanywayon

any government appropriation; as a matter of fact, it has not even been

includedinanyappropriationsforthegovernment.Tobesure,COAhasnotalleged,initsResolutionNo.99-011orintheMemorandumofitsGeneral

Counsel,thatBSPreceived,receivesorcontinuestoreceiveassetsandfunds

from any agency of the government. The foregoing simply point to theprivatenatureofthefundsandassetsofpetitionerBSP.

xxxx

As stated in petitioners third argument, BSPs assets and funds

wereneveracquiredfromthegovernment.Itsoperationsarenotinanyway

financed by the government, as BSP has never been included in any


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appropriationsactforthegovernment.Neitherhasthegovernmentinvested

funds with BSP. BSP, has not been, at any time, a user of government

propertyorfunds;norhavepropertiesofthegovernmentbeenheldintrust

by BSP. This is precisely the reasonwhy, until this time, theCOAhasnot

attemptedtosubjectBSPtoitsauditjurisdiction.xxx.[25]

Tosummarizeitsotherarguments,theBSPcontendsthatitisnotagovernment-

ownedorcontrolledcorporation;neitherisitaninstrumentality,agency,orsubdivisionof

thegovernment.

InitsComment,[26]theCOAarguesasfollows:

1.TheBSPisapubliccorporationcreatedunderCommonwealthAct

No. 111 datedOctober31, 1936,andwhosefunctions relateto thefostering of public virtues of citizenship and patriotism and the

generalimprovementofthemoralspiritandfiberoftheyouth.ThemannerofcreationandthepurposeforwhichtheBSPwascreated

indubitablyprovethatitisagovernmentagency.

2.Beingagovernmentagency,thefundsandpropertyownedorheld

intrustbytheBSParesubjecttotheauditauthorityofrespondent

CommissiononAuditpursuant toSection2 (1),Article IX-Dof the

1987Constitution.

3.RepublicActNo.7278didnotchangethecharacteroftheBSPasa

government-owned or controlled corporation and government

instrumentality.[27]

The COAmaintains that the functions of the BSP that include,amongothers, theteaching to the youth of patriotism, courage, self-reliance, and kindred virtues, are

undeniably sovereign functions enshrined under the Constitution and discussed by theCourt inBoy Scouts of the Philippinesv.NationalLaborRelations Commission.The COA

contends that any attempt to classify the BSP as a private corporation would be

incomprehensiblesincenolessthanthelawwhichcreatedithaddesignateditasapubliccorporationanditsstatutorymandateembracesperformanceofsovereignfunctions.[28]

TheCOAclaimsthattheonlyreasonwhytheBSPemployeesfellwithinthescopeoftheCivilServiceCommissionevenbeforethe1987Constitutionwasthefactthatitwasa

government-owned or controlled corporation; that as an attached agency of the

Department of Education, Culture and Sports (DECS), the BSP is an agency of the

government;andthattheBSPisacharteredinstitutionunderSection1(12)oftheRevised

AdministrativeCodeof1987,embracedunderthetermgovernmentinstrumentality.[29]

The COA concludes that being a government agency, the funds and property


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ownedorheldbytheBSParesubjecttotheauditauthorityoftheCOApursuanttoSection

2(1),ArticleIX(D)ofthe1987Constitution.

In support of its arguments, the COA cites The Veterans Federation of the

Philippines(VFP)v.Reyes,[30]whereintheCourtheldthatamongthereasonswhytheVFP

is a public corporation is that its charter, Republic Act No. 2640, designates it asone.Furthermore,theCOAquotestheCourtassayinginthatcase:

In several cases, we have dealt with the issue of whether certain

specificactivitiescanbeclassifiedassovereignfunctions.Thesecases,whichdeal with activities not immediately apparent to be sovereign functions,

upheldthepublicsovereignnatureofoperationsneededeithertopromote

socialjusticeortostimulatepatrioticsentimentsandloveofcountry.

xxxx

Petitioner claims that its funds are not public funds because nobudgetary appropriationsorgovernment fundshave been released to the

VFPdirectlyorindirectlyfromtheDBM,andbecauseVFPfundscomefrom

membershipduesandleaserentalsearnedfromadministeringgovernment

landsreservedfortheVFP.

Thefactthatnobudgetaryappropriationshavebeenreleasedtothe

VFPdoesnotprovethatitisaprivatecorporation.TheDBMindeeddidnot

see it fit to propose budgetary appropriations to the VFP, having itself

believed that the VFP is a private corporation. If the DBM, however, is

mistakenastoitsconclusionregardingthenatureofVFP'sincorporation,its

previousassertionswillnotpreventfuturebudgetaryappropriationstotheVFP.Theerroneousapplicationofthe lawbypublicofficersdoesnotbara

subsequentcorrectapplicationofthelaw.[31](Citationsomitted.)

TheCOApointsoutthatthegovernmentisnotprecludedbylawfromextendingfinancial support to the BSP and adding to its funds, and that as a government

instrumentalitywhichcontinues toperforma vital function imbuedwithpublic interest

and reflective of the governments policy to stimulate patriotic sentiments and love ofcountry,theBSPsfundsfromwhateversourcearepublicfunds,andcanbeusedsolelyfor

publicpurposeinpursuanceoftheprovisionsofRepublicActNo.[7278].[32]

TheCOAclaimsthatthefactthatithasnotyetauditedtheBSPsfundsmaynot

barthesubsequentexerciseofitsauditjurisdiction.

The BSP filed itsReply[33] on August 29, 2007 maintaining that its statutory

designationasapubliccorporationandthepubliccharacterofitspurposeandfunctions

arenotdeterminativeoftheCOAsauditjurisdiction;reiteratingitsstandthat BoyScoutsof

thePhilippinesv.NationalLaborRelationsCommissionisnotapplicableanymorebecause


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the aspectofgovernmentownership and control has been removedbyRepublicActNo.

7278;andconcludingthatthefundsandpropertythatiteitherownedorheldintrustare

notpublicfundsandarenotsubjecttotheCOAsauditjurisdiction.

Thereafter,consideringtheBSPsclaimthatitisaprivatecorporation,thisCourt,

inaResolution[34] dated July 20, 2010, required theparties to file,within aperiod oftwenty(20)daysfromreceiptofsaidResolution,theirrespectivecommentsontheissueof

whether Commonwealth Act No. 111, as amended by Republic Act No. 7278, is

constitutional.

In compliance with the Courts resolution, the parties filed their respective

Comments.

In its Comment[35] dated October 22, 2010, the COA argues that the

constitutionalityofCommonwealthActNo. 111,asamended,isnot determinativeoftheresolutionofthepresentcontroversyontheCOAsauditjurisdictionoverpetitioner,andin

fact, the controversy may be resolved on other grounds; thus, the requisites before ajudicialinquirymaybemade,assetforthinCommissionerofInternalRevenuev.CourtofTaxAppeals,[36]havenotbeenfullymet.[37]Moreover, the COAmaintains thatbehind

every law lies the presumption of constitutionality.[38] The COA likewise argues that

contrarytotheBSPsposition,repealofalawbyimplicationisnotfavored. [39]Lastly,the

COAclaimsthattherewasnoviolationofSection16,ArticleXIIofthe1987Constitution

withthecreationordeclarationoftheBSPasagovernmentcorporation.CitingPhilippineSocietyforthePreventionofCrueltytoAnimalsv.CommissiononAudit,[40]theCOAfurther

alleges:

Thetruecriterion,therefore,todeterminewhetheracorporationis

publicorprivateisfoundinthetotalityoftherelationofthecorporationtotheState.IfthecorporationiscreatedbytheStateasthelattersownagency

orinstrumentalitytohelpitincarryingoutitsgovernmentalfunctions,then

thatcorporationisconsideredpublic;otherwise,itisprivate.xxx.[41]

Foritspart,initsComment[42]filedonDecember3,2010,theBSPsubmitsthat

its charter, Commonwealth Act No. 111, as amended by Republic Act No. 7278, is

constitutional as itdoes not violate Section 16, Article XII of the Constitution. The BSPalleges that while [it] is not a public corporation within the purview of COAs audit

jurisdiction, neither is it a private corporation created by special law fallingwithin the

ambitoftheconstitutionalprohibitionxxx.[43]TheBSPfurtheralleges:

Petitioners purpose is embodied in Section 3 of C.A. No. 111, as

amendedbySection1ofR.A.No.7278,thus:

xxxx

A reading of the foregoing provision shows that petitioner was


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Philippines,andtoDefineitsPowersandPurposescreatedtheBSPasapubliccorporation

toservethefollowingpublicinterestorpurpose:

Sec. 3.The purpose of this corporation shall be to promote

throughorganizationandcooperationwithotheragencies,theabilityof

boys to do useful things for themselves and others, to train them inscoutcraft,andtoinculcateinthempatriotism,civicconsciousnessand

responsibility,courage,self-reliance,disciplineandkindredvirtues,and

moralvalues,usingthemethodwhichareincommonusebyboyscouts.

Presidential Decree No. 460, approved on May 17, 1974, amended

CommonwealthAct No. 111 andprovidedsubstantialchanges inthe BSP organizational

structure.Pertinentprovisionsarequotedbelow:

SectionII.Section5ofthesaidActisalsoamendedtoreadas

follows:

Thegoverningbodyofthesaidcorporationshallconsistofa

National Executive Board composed of (a) the President of the

Philippinesorhisrepresentative;(b)thecharterandlifemembersofthe

BoyScoutsofthePhilippines;(c)theChairmanoftheBoardofTrustees

ofthePhilippineScoutingFoundation;(d)theRegionalChairmanofthe

Scout Regions of the Philippines; (e) the Secretary of Education and

Culture, the Secretary of Social Welfare, the Secretary of National

Defense,theSecretaryofLabor,theSecretaryofFinance,theSecretary

of Youth and Sports, and the Secretary of Local Government and

CommunityDevelopment;(f)anequalnumberofindividualsfromtheprivate sector; (g) the National President of the Girl Scouts of the

Philippines; (h) one Scout of Senior age from each Scout Region to

represent the boy membership; and (i) three representatives of thecultural minorities. Except for the Regional Chairman who shall be

electedbytheRegionalScoutCouncilsduringtheirannualmeetings,andthe Scouts of their respective regions, all members of the National

ExecutiveBoardshallbeeitherbyappointmentorcooption,subjectto

ratificationandconfirmationbytheChiefScout,whoshallbetheHeadofState.VacanciesintheExecutiveBoardshallbefilledbyamajority

voteoftheremainingmembers,subjecttoratificationandconfirmation

bytheChiefScout.Theby-lawsmayprescribethenumberofmembersoftheNationalExecutiveBoardnecessarytoconstituteaquorumofthe

board,whichnumbermaybelessthanamajorityofthewholenumber

of the board.TheNationalExecutiveBoard shallhavepowertomake

andtoamendtheby-laws,and,byatwo-thirdsvoteofthewholeboard

at a meeting called for this purpose, may authorize and cause to be

executedmortgagesandliensuponthepropertyofthecorporation.


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Subsequently, on March 24, 1992, Republic Act No. 7278 further amended

CommonwealthActNo.111bystrengtheningthevolunteeranddemocraticcharacterof

theBSPandreducinggovernmentrepresentationinitsgoverningbody,asfollows:

Section1.Sections2and3ofCommonwealthAct.No.111,asamended,isherebyamendedtoreadasfollows:

"Sec. 2.The said corporation shall have the powers of

perpetual succession, to sue and be sued; to enter into contracts; toacquire,own,lease,conveyanddisposeofsuchrealandpersonalestate,

land grants, rights and choses in action as shall be necessary for

corporatepurposes,andtoacceptandreceivefunds,realandpersonal

propertybygift,devise,bequestorothermeans,toconductfund-raising

activities;toadoptanduseaseal,andthesametoalteranddestroy;tohaveofficesandconductitsbusinessandaffairsinMetropolitanManila

andintheregions,provinces,cities,municipalities,andbarangaysofthePhilippines, to make and adopt by-laws, rules and regulations not

inconsistentwiththisActandthelawsofthePhilippines,andgenerally

todoallsuchactsandthings,includingtheestablishmentofregulations

for the election of associates and successors, as may benecessary to

carryintoeffecttheprovisionsofthisActandpromotethepurposesof

saidcorporation:Provided,Thatsaidcorporationshallhavenopowerto

issuecertificatesofstockor todeclareorpaydividends, itsobjectives

andpurposesbeingsolelyofbenevolentcharacterandnotforpecuniary

profitofitsmembers.

"Sec.3.Thepurposeofthiscorporationshallbetopromotethrough organization and cooperation with other agencies, the

ability of boys to do useful things for themselves and others, to

traintheminscoutcraft,andtoinculcateinthempatriotism,civicconsciousnessandresponsibility,courage,self-reliance,discipline

andkindredvirtues,andmoralvalues,usingthemethodwhichareincommonusebyboyscouts ."

Sec.2.Section4ofCommonwealthActNo.111,asamended,isherebyrepealedandinlieuthereof,Section4shallreadasfollows:

"Sec.4.ThePresidentofthePhilippinesshallbetheChiefScoutoftheBoyScoutsofthePhilippines."

Sec.3.Sections5,6,7and8ofCommonwealthActNo.111,as

amended,areherebyamendedtoreadasfollows:

"Sec.5.The governing body of the said corporation shall

consistofaNationalExecutiveBoard,themembersofwhichshallbe


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Filipino citizens of good moral character. The Board shall be

composedofthefollowing:

"(a)One (1) charter member of the Boy Scouts of the

PhilippineswhoshallbeelectedbythemembersoftheNationalCouncil

atitsmeetingcalledforthispurpose;

"(b)Theregionalchairmenof the scoutregionswho shallbe

electedbytherepresentativesofallthelocalscoutcouncilsoftheregion

duringitsmeetingcalledforthispurpose:Provided,Thatacandidateforregionalchairmanneednotbethechairmanofalocalscoutcouncil;

"(c)TheSecretaryofEducation,CultureandSports;

"(d)The National President of the Girl Scouts of thePhilippines;

"(e)One (1) senior scout, each from Luzon, Visayas and

Mindanaoareas,tobeelectedbytheseniorscoutdelegatesofthelocal

scoutcouncilstothescoutyouthforumsintheirrespectiveareas,inits

meetingcalledforthispurpose,torepresenttheboyscoutmembership;

"(f)Twelve (12) regular members to be elected by the

membersoftheNationalCouncilinitsmeetingcalledforthispurpose;

"(g)Atleastten(10)butnotmorethanfifteen(15)additional

membersfromtheprivatesectorwhoshallbeelectedbythemembers

of the National Executive Board referred to in the immediatelyprecedingparagraphs(a),(b),(c), (d),(e)and(f)at theorganizational

meeting of the newly reconstituted National Executive Board which

shall be held immediately after the meeting of the National Councilwherein the twelve (12) regular members and the one (1) charter

memberwereelected.

xxxx

"Sec.8.Anydonationorcontributionwhichfromtimetotime

maybemadetotheBoyScoutsofthePhilippinesbytheGovernmentor

anyofitssubdivisions,branches,offices,agenciesorinstrumentalitiesorbyaforeigngovernmentorbyprivate,entitiesandindividualsshallbe

expendedbytheNationalExecutiveBoardinpursuanceofthisAct.

The BSP as a Public Corporation underPar.2,Art.2oftheCivilCode


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TherearethreeclassesofjuridicalpersonsunderArticle44oftheCivilCodeand

theBSP, aspresentlyconstitutedunderRepublicAct No. 7278, fallsunder the secondclassification.Article44reads:

Art.44.Thefollowingarejuridicalpersons:

(1)TheStateanditspoliticalsubdivisions;(2)Othercorporations,institutionsandentitiesforpublic

interestorpurposecreatedbylaw;theirpersonalitybeginsassoon

astheyhavebeenconstitutedaccordingtolaw;

(3) Corporations, partnerships and associations for privateinterest or purpose to which the law grants a juridical personality,

separateanddistinctfromthatofeachshareholder,partnerormember.

(Emphasessupplied.)

TheBSP,whichisacorporationcreatedforapublicinterestorpurpose,issubject

tothelawcreatingitunderArticle45oftheCivilCode,whichprovides:

Art.45.JuridicalpersonsmentionedinNos.1and2ofthe

precedingarticlearegovernedbythelawscreatingorrecognizingthem.

Private corporations are regulated by laws of general

applicationonthesubject.

Partnerships andassociations forprivate interestorpurpose

are governed by the provisions of this Code concerning partnerships.

(Emphasisandunderscoringsupplied.)

ThepurposeoftheBSPasstatedinitsamendedchartershowsthatitwascreated

inordertoimplementaStatepolicydeclaredinArticleII,Section13oftheConstitution,

whichreads:

ARTICLEII-DECLARATIONOFPRINCIPLESANDSTATEPOLICIESSection13.TheStaterecognizesthevitalroleoftheyouthin

nation-building and shall promote and protect their physical, moral,

spiritual,intellectual,andsocialwell-being.Itshallinculcateintheyouthpatriotismandnationalism,andencouragetheirinvolvementinpublic

andcivicaffairs.

Evidently,theBSP,whichwascreatedbyaspeciallawtoserveapublicpurpose

in pursuit of a constitutional mandate, comes within the class of public corporations

definedbyparagraph2,Article44oftheCivilCodeandgovernedbythelawwhichcreates

it,pursuanttoArticle45ofthesameCode.

TheBSPsClassificationUnderthe


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AdministrativeCodeof1987

Thepublic,ratherthanprivate,characteroftheBSPisrecognizedbythefactthat,

alongwiththeGirlScoutsofthePhilippines,itisclassifiedasan attachedagencyoftheDECSunderExecutiveOrderNo.292,ortheAdministrativeCodeof1987,whichstates:

TITLEVIEDUCATION,CULTUREANDSPORTS

Chapter8AttachedAgencies

SEC. 20. Attached Agencies. The following agencies are

herebyattachedtotheDepartment:

xxxx

(12)BoyScoutsofthePhilippines;

(13)GirlScoutsofthePhilippines.

The administrative relationship of an attached agency to the department is

definedintheAdministrativeCodeof1987asfollows:

BOOKIV

THEEXECUTIVEBRANCH

Chapter7ADMINISTRATIVERELATIONSHIP

SEC. 38. Definition of Administrative Relationship. Unless

otherwise expressly stated in the Code or in other laws defining thespecialrelationshipsofparticularagencies,administrativerelationships

shallbecategorizedanddefinedasfollows:

xxxx

(3)Attachment. (a) This refers to the lateral relationship

between the department or its equivalent and the attachedagency or

corporationforpurposesofpolicyandprogramcoordination.Thecoordination may be accomplished by having the department

represented in the governing board of the attached agency orcorporation, either aschairmanorasamember,withorwithout

votingrights,if thisispermittedbythecharter;havingtheattached

corporationoragencycomplywithasystemofperiodicreportingwhich

shall reflect the progress of programs and projects; and having the

department or its equivalent provide general policies through its


16/30

representativeintheboard,whichshallserveastheframeworkforthe

internalpoliciesoftheattachedcorporationoragency.(Emphasisours.)

Asanattachedagency,theBSPenjoysoperationalautonomy,aslongaspolicyand

programcoordinationisachievedbyhavingatleastonerepresentativeofgovernmentinitsgoverningboard,whichinthecaseoftheBSPistheDECSSecretary.Inthissense,the BSP is not under government control or supervision and control. Still this

characteristicdoesnotmaketheattachedcharteredagencyaprivatecorporationcovered

bytheconstitutionalproscriptioninquestion.

Art.XII,Sec.16oftheConstitutionrefersto private corporations created by

government for proprietary or

economic/businesspurposes

Attheoutset,itshouldbenotedthattheprovisionofSection16inissueisfound

inArticleXIIoftheConstitution,entitledNationalEconomyandPatrimony.Section1

ofArticleXIIisquotedasfollows:

SECTION 1. The goals of the national economy are a more

equitabledistributionofopportunities,income,andwealth;asustained

increaseintheamountofgoodsandservicesproducedbythenationfor

thebenefitofthepeople;andanexpandingproductivityasthekeyto

raisingthequalityoflifeforall,especiallytheunderprivileged.

TheStateshallpromoteindustrializationandfullemploymentbasedonsoundagriculturaldevelopmentandagrarianreform,through

industries that make full and efficient use of human and natural

resources, and which are competitive in both domestic and foreignmarkets. However, the State shall protect Filipino enterprises against

unfairforeigncompetitionandtradepractices.

Inthepursuitofthesegoals,allsectorsoftheeconomyandall

regionsofthecountryshallbegivenoptimumopportunitytodevelop.Private enterprises, including corporations, cooperatives, and similar

collective organizations, shall be encouraged to broaden the base of

theirownership.

ThescopeandcoverageofSection16,ArticleXIIoftheConstitutioncanbeseen

fromtheaforementioneddeclarationofstatepoliciesandgoalswhichpertainsto national

economyandpatrimonyandtheinterestsofthepeopleineconomicdevelopment.

Section16,ArticleXIIdealswiththeformation,organization,orregulationof


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private corporations,[52] which should be done through a general law enacted by

Congress, provides for anexception, that is: if the corporation isgovernment ownedor

controlled; its creation is in the interest of the common good; and it meets the test of

economicviability.The rationalebehindArticleXII, Section16ofthe 1987Constitution

wasexplainedinFelicianov.CommissiononAudit,[53]inthefollowingmanner:

TheConstitutionemphaticallyprohibitsthecreationofprivate

corporations except by a general law applicable to all citizens. The

purpose of this constitutional provision is to ban private

corporations created by special charters, which historically gavecertainindividuals,familiesorgroupsspecialprivilegesdeniedto

othercitizens.[54](Emphasisadded.)

ItmaybegleanedfromtheabovediscussionthatArticleXII,Section16bansthecreation of private corporations by special law. The said constitutional provision

should not be construed so as to prohibit the creation of public corporations or acorporateagencyorinstrumentalityofthegovernmentintendedtoserveapublicinterest

orpurpose,whichshouldnotbemeasuredonthebasisofeconomicviability,butaccording

tothepublicinterestorpurposeitservesasenvisionedbyparagraph(2),ofArticle44oftheCivilCodeandthepertinentprovisionsoftheAdministrativeCodeof1987.

The BSP is a Public Corporation NotSubject to the Test of Government

Ownership or Control and EconomicViability

TheBSPisapubliccorporationoragovernmentagencyorinstrumentalitywithjuridicalpersonality,whichdoesnotfallwithintheconstitutionalprohibitioninArticleXII,

Section16,notwithstandingtheamendmentstoitscharter.Notallcorporations,whichare

notgovernmentownedorcontrolled,areipsofactotobeconsideredprivatecorporationsasthereexists another distinctclassofcorporations orchartered institutionswhichare

otherwise known as public corporations. These corporations are treated by law asagencies or instrumentalities of the government which are not subject to the tests of

ownershiporcontrolandeconomicviabilitybuttodifferentcriteriarelatingtotheirpublic

purposes/interests or constitutional policies and objectives and their administrativerelationshiptothegovernmentoranyofitsDepartmentsorOffices.

Classification of Corporations UnderSection16,ArticleXIIoftheConstitution

onNationalEconomyandPatrimony

ThedissentingopinionofAssociateJusticeAntonioT.Carpio,citingalineofcases,

insists that the Constitution recognizes only two classes of corporations: private

corporations under a general law, and government-owned or controlled corporations


18/30

createdbyspecialcharters.

We strongly disagree. Section 16, ArticleXII should not be construed so as to

prohibit Congress from creating public corporations. In fact, Congress has enacted

numerouslawscreatingpubliccorporationsorgovernmentagenciesorinstrumentalities

vestedwithcorporatepowers.Moreover,Section16,ArticleXII,whichrelatestoNationalEconomy and Patrimony, could not have tied the hands of Congress in creating public

corporationstoserveanyoftheconstitutionalpoliciesorobjectives.

In his dissent, Justice Carpio contends that this ponente introduces a totallydifferentspeciesofcorporation,whichisneitheraprivatecorporationnoragovernment

ownedorcontrolledcorporationand,insodoing,ismissingthefactthattheBSP,which

wascreatedasanon-stock,non-profitcorporation,canonlybeeitheraprivatecorporation

oragovernmentownedorcontrolledcorporation.

NotethatinBoyScoutsofthePhilippinesv.NationalLaborRelationsCommission,

theBSP,underitsformercharter,wasregardedasbothagovernmentownedorcontrolledcorporationwith original charterand a public corporation. The said case pertinentlystated:

While theBSPmaybe seen to be amixed type of entity,

combining aspects of both public and private entities,webelieve

that considering the character of its purposes and its functions, the

statutory designation of the BSP as "a public corporation" and the

substantialparticipationoftheGovernmentintheselectionofmembers

of the National Executive Board of the BSP, the BSP, as presently

constitutedunderitscharter,isagovernment-controlledcorporation

withinthemeaningofArticleIX(B)(2)(1)oftheConstitution.

We are fortified in this conclusion when we note that the

AdministrativeCodeof1987designatestheBSPasoneoftheattachedagenciesoftheDepartmentofEducation,CultureandSports("DECS").

An "agency of the Government" is defined as referring to any of thevariousunitsoftheGovernmentincludingadepartment,bureau,office,

instrumentality,government-ownedor-controlledcorporation,orlocal

governmentordistinctunittherein."Governmentinstrumentality"isinturndefinedinthe1987AdministrativeCodeinthefollowingmanner:

Instrumentality-referstoanyagencyoftheNational Government, not integrated within the

departmentframework,vestedwithspecialfunctions

orjurisdictionbylaw,endowedwithsomeifnotall

corporatepowers,administeringspecialfunds,and

enjoying operational autonomy usually through a

charter. This term includes regulatory agencies,

chartered institutions and government-owned or


19/30

controlledcorporations.

The same Code describes a "chartered institution" in the

followingterms:

Charteredinstitution-referstoanyagencyorganized or operating under a special charter,andvestedbylawwithfunctions relatingto specific

constitutional policies or objectives. This term

includes the state universities andcolleges, and themonetaryauthorityoftheState.

We believe that the BSP is appropriately regarded as "a

governmentinstrumentality"underthe1987AdministrativeCode.

It thus appears that theBSPmaybe regarded as both a

"governmentcontrolledcorporationwithanoriginalcharter"andasan"instrumentality"of theGovernmentwithin themeaningofArticle IX (B) (2) (1) of the Constitution. x x x.[55] (Emphases

supplied.)

Theexistenceofpublicorgovernmentcorporateorjuridicalentitiesorchartered

institutionsbylegislativefiatdistinctfromprivatecorporationsandgovernmentowned

or controlled corporation is best exemplified by the 1987 Administrative Code cited

above,whichwequoteinpart:

Sec.2.GeneralTermsDefined.Unlessthespecificwordsofthetext,orthecontextasawhole,oraparticularstatute,shallrequirea

differentmeaning:

xxxx

(10) "Instrumentality" refers to any agency of the National

Government,not integratedwithin thedepartment framework, vested

withspecialfunctionsorjurisdictionbylaw,endowedwithsomeifnotall corporate powers, administering special funds, and enjoying

operationalautonomy,usuallythroughacharter.Thistermincludes

regulatory agencies, chartered institutions and government-owned orcontrolledcorporations.

xxxx

(12) "Chartered institution" refers toany agency organizedoroperatingundera specialcharter,andvestedbylawwithfunctions

relating to specific constitutionalpoliciesor objectives.This term


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includesthestateuniversitiesandcollegesandthemonetaryauthority

oftheState.

(13)"Government-ownedorcontrolledcorporation"referstoanyagencyorganizedasastockornon-stockcorporation,vestedwith

functions relating to public needs whether governmental orproprietary in nature, and owned by the Government directly orthrough its instrumentalitieseitherwholly, or, whereapplicable as in

thecaseofstockcorporations,totheextentofatleastfifty-one(51)per

cent of its capital stock: Provided, That government-owned orcontrolled corporations may be further categorized by the

Departmentof the Budget, the CivilServiceCommission,and theCommissiononAuditforpurposesoftheexerciseanddischargeof

theirrespectivepowers,functionsandresponsibilitieswithrespect

tosuchcorporations.

AssumingforthesakeofargumentthattheBSPceasestobeownedorcontrolled

by the government because of reduction of the number of representatives of the

government in theBSPBoard, it does not follow that it also ceases to beagovernment

instrumentalityasitstillretainsallthecharacteristicsofthelatterasanattachedagencyof

theDECSundertheAdministrativeCode.Vestingcorporatepowerstoanattachedagency

orinstrumentalityofthegovernmentisnotconstitutionallyprohibitedandisallowedby

theabove-mentionedprovisionsoftheCivilCodeandthe1987AdministrativeCode.

Economic Viability and Ownership and

Control Tests Inapplicable to Public

Corporations

Aspresentlyconstituted,theBSPstillremainsan instrumentalityofthenationalgovernment.Itisapubliccorporationcreatedbylawforapublicpurpose,attachedtothe

DECS pursuant to its Charter and the Administrative Code of 1987. It is not a privatecorporation which is required to be owned or controlled by the government and be

economicallyviabletojustifyitsexistenceunderaspeciallaw.

The dissent of Justice Carpio also submits that by recognizing a new class of

public corporation(s) created by special charter that will not be subject to the test ofeconomicviability,theconstitutionalprovisionwillbecircumvented.

However,a reviewoftheRecordofthe1986ConstitutionalConventionreveals

theintentoftheframersofthehighestlawofourlandtodistinguishbetween government

corporations performing governmental functions and corporations involved inbusinessorproprietaryfunctions:


21/30

THEPRESIDENT.CommissionerFozisrecognized.

MR. FOZ. Madam President, I support the proposal to insert

ECONOMIC VIABILITY as one of the grounds for organizing

governmentcorporations.xxx.

MR. OPLE. Madam President, the reason for this concern is

reallythatwhenthegovernmentcreatesacorporation,thereisasense

inwhich this corporationbecomes exempt from the test of economic

performance. We know what happened in the past. If a governmentcorporation loses, then itmakes its claimupon the taxpayersmoney

throughnewequityinfusionsfromthegovernmentandwhatisalways

invokedisthecommongood.xxx

Therefore,whenweinsertthephraseECONOMICVIABILITYtogetherwith the common good, this becomes a restraint on future

enthusiasts for state capitalism to excuse themselves from theresponsibilityofmeetingthemarkettestsothattheybecomeviable.xx

x.

xxxx

THEPRESIDENT.CommissionerQuesadaisrecognized.

MS. QUESADA.MadamPresident,maywebe clarified by the

committeeonwhatismeantbyeconomicviability?

THEPRESIDENT.Pleaseproceed.

MR. MONSOD. Economic viability normally is determined by

cost-benefit ratio that takes into consideration all benefits, includingeconomicexternalaswellasinternalbenefits.Thesearewhattheycall

externalitiesineconomics,sothatthesearenotstrictlyfinancialcriteria.Economicviabilityinvolveswhatwecalleconomicreturnsorbenefitsof

thecountrythatarenotquantifiableinfinancialterms.xxx.

xxxx

MS.QUESADA.So,wouldthisparticularformulationnowreallylimittheentryofgovernmentcorporationsintoactivitiesengagedinby

corporations?

MR. MONSOD.Yes, because it is also consistent with the

economic philosophy that this Commissionapproved that thereshouldbeminimumgovernmentparticipationandinterventionin

theeconomy.


22/30

MS.QUESDA.Sometimes thisCommissionwouldjust referto

Congresstoprovidetheparticularrequirementswhenthegovernment

would get into corporations. But this time around, we specifically

mentionedeconomicviability.xxx.

MR.VILLEGAS.CommissionerOplewillrestatethereasonfor

hisintroducingthatamendment.

MR.OPLE.IamobligedtorepeatwhatIsaidearlierinmovingfor this particular amendment jointly with Commissioner Foz. During

the past threedecades, therehad been a proliferation of government

corporations,veryfewofwhichhavesucceeded,andmanyofwhichare

now earmarked by the Presidential Reorganization Commission for

liquidationbecausetheyfailedtheeconomictest.xxx.

xxxx

MS. QUESADA.Butwouldnot the Commissioner say that the

reasonwhymanyofthegovernment-ownedorcontrolledcorporations

failedtocomeupwiththeeconomictestisduetothemanagementof

thesecorporations,andnottheideaitselfofgovernmentcorporations?

It isaproblemofefficiency and effectivenessofmanagementofthese

corporationswhichcouldberemedied,notbyeliminatinggovernment

corporations or the ideaofgetting into state-ownedcorporations, but

improving management which our technocrats should be able to do,

giventhetrainingandtheexperience.

MR. OPLE. That is part of the economic viability, Madam

President.

MS. QUESADA. So, is the Commissioner saying then that the

Filipinoswillbenefitmoreifthesegovernment-controlledcorporationswere given to private hands, and that there will bemore goods and

services that will be affordable and within the reach of the ordinary

citizens?

MR.OPLE. Yes. There isnothing here,Madam President,

that will prevent the formation of a government corporation inaccordancewithaspecialchartergivenbyCongress.However,we

are raising the standard a little bit so that, in the future,corporations establishedby thegovernmentwillmeet thetest of

thecommongoodbutwithinthatframeworkweshouldalsobuild

acertainstandardofeconomicviability.

xxxx


23/30

THEPRESIDENT.CommissionerPadillaisrecognized.

MR.PADILLA.Thisisaninquirytothecommittee.Withregard

tocorporations createdbyaspecialcharter for government-ownedor

controlledcorporations,will thesebe inthepioneerfieldsorinplaceswhere the private enterprise does not or cannot enter? Or is this so

general that thesegovernment corporationscan competewithprivate

corporationsorganizedunderagenerallaw?

MR.MONSOD.MadamPresident,xxx.Therearetwotypesof

government corporations those that are involved in performinggovernmental functions, like garbage disposal, Manila waterworks,

and so on; and those government corporations that are involved in

business functions. As we said earlier, there are two criteria thatshouldbe followedforcorporationsthatwanttogointobusiness.

First is for government corporations to first prove that they can beefficient in the areas of their proper functions. This is one of the

problems now because they go into all kinds of activities but are not

even efficient in theirproper functions.Secondly, they should not gointoactivitiesthattheprivatesectorcandobetter.

MR. PADILLA. There is no question about corporationsperforming governmental functions or functions that are

impressedwithpublicinterest.Butthequestioniswithregardtomatters that are covered, perhaps not exhaustively, by private

enterprise. Itseems thatunderthisprovision theonlyqualification is

economic viability and common good, but shall government, throughgovernment-controlledcorporations,competewithprivateenterprise?

MR. MONSOD. No, Madam President. As we said, thegovernment should not engage in activities that private enterprise is

engagedinandcandobetter.xxx.[56](Emphasessupplied.)

Thus, the test of economic viability clearly does not apply to public corporationsdealingwithgovernmentalfunctions,towhichcategorytheBSPbelongs.Thediscussion

aboveconveystheconstitutionalintentnottoapplythisconstitutionalbanonthecreation

ofpubliccorporationswheretheeconomicviabilitytestwouldbeirrelevant.Thesaidtestwould only apply if the corporation is engaged in some economic activity or business

functionforthegovernment.

It is undisputed that the BSP performs functions that are impressed with public

interest. In fact, during the consideration of the Senate Bill that eventually became

RepublicActNo.7278,whichamendedtheBSPCharter,oneofthebillssponsors,Senator

JoeyLina,describedtheBSPasfollows:


24/30

Senator Lina. Yes, I can only think of two organizationsinvolving themassesof our youth,Mr. President, thatshouldbegiven

thiskindofaprivilegetheBoyScoutsofthePhilippinesandtheGirl

Scouts of the Philippines.Outsideof these twogroups, I do not think

thereareothergroupssimilarlysituated.

The Boy Scouts of the Philippines has a long history of

providingvalueformationtoouryoung,andconsideringhowhuge

thepopulationoftheyoungpeopleis,atthispointintime,andalsoconsideringtheimportanceofhavinganorganizationsuchasthis

thatwillinculcatemoraluprightnessamongtheyoungpeople,andfurtherconsideringthatthedevelopmentoftheseyoungpeopleat

thattenderageofseventosixteenisvitalinthedevelopmentofthe

country producing good citizens, I believe that we can make anexception of the Boy Scoutingmovement of the Philippines from this

generalprohibitionagainstprovidingtaxexemptionandprivileges.[57]

Furthermore,thisCourtcannotagreewiththedissentingopinionwhichequatesthe

changesintroducedbyRepublicActNo.7278totheBSPCharterasclearmanifestationof

theintentofCongresstoreturntheBSPtotheprivatesector.Itwasnottheintentof

Congress in enacting Republic Act No. 7278 to give up all interests in this basic youth

organization,whichhasbeenitspartnerinformingresponsiblecitizensfordecades.

Infact,asmaybeseeninthedeliberationoftheHouseBillsthateventuallyresultedto

Republic Act No. 7278, Congress worked closely with the BSP to rejuvenate the

organization, to bring it back to its former glory reached under its original charter,Commonwealth Act No. 111, and to correct the perceived ills introduced by the

amendmentstoitsCharterunderPresidentialDecreeNo.460.TheBSPsufferedfromlow

moraleand decrease innumberbecause the Secretariesof the different departments ingovernmentwho were too busy to attend themeetings of the BSPsNationalExecutive

Board(theBoard)sentrepresentativeswho,asitturnedout,changedfrommeetingtomeeting. Thus,theScoutingCouncilsestablishedintheprovinces and citieswerenotin

touchwithwhatwashappeningonthenationallevel,buttheywerelefttoimplementwhat

wasdecidedbytheBoard.[58]

Aportionofthelegislatorsdiscussionisquotedbelowtoclearlyshowtheirintent:

HON.DELMAR.xxxIneednotmention to you the value

andthetremendousgood that theBoyScoutMovementhasdonenotonlyfortheyouthinparticularbutforthecountryingeneral.

Andthatiswhy, ifwe lookaround,ourpastandpresentnational

leaders,prominentmen in the various fields ofendeavor, publicservants in government offices, and civic leaders in the

communitiesallovertheland,andnotonlyinourcountrybutall


25/30

over the world many if not most of them have at one time or

anotherbeenbeneficiariesof theScoutingMovement.Andso,itisalong this line, Mr. Chairman, that we would like to have the early

approvalofthismeasureifonlytopaybackwhatweowemuchtothe

ScoutingMovement.Now,goingtothemeatofthematter,Mr.Chairman,

ifImayjust theScoutingMovementwasenactedintolawinOctober31, 1936 under Commonwealth Act No. 111. x x x [W]e were

acknowledgedasthethirdbiggestscoutingorganizationintheworldxx

x.Andtoourmind,Mr.Chairman,thiserraticgrowthandthisdecrease

in membership [number] is because of the bad policy measures thatwereenunciatedwiththeenactmentorpromulgationbythePresident

beforeofPresidentialDecreeNo.460whichwefeelistheculpritofthe

ills that is flagging the Boy Scout Movement today. And so, this is

specifically what we are attacking, Mr. Chairman, the

disenfranchisement of the National Council in the election of thenationalboard.xxx.Andso,thisiswhatwewouldliketobeappraised

ofbytheofficersoftheBoy[Scouts]ofthePhilippineswhomwearealsoconfident,havethebestinterestoftheBoyScoutMovementatheartand

it is in this spirit, Mr. Chairman, that we see no impediment towards

working together, the Boy Scout of the Philippines officers working

together with the House of Representatives in coming out with a

measurethatwillputbackthevigorandenthusiasmoftheBoyScout

Movement.xxx.[59](Emphasisours.)

ThefollowingisanotherexcerptfromthediscussionontheHouseversionofthe

bill,intheCommitteeonGovernmentEnterprises:

HON.AQUINO:xxxWell,obviously,thetwobillsaswellasthe

previouslawsthathavecreatedtheBoyScoutsofthePhilippinesdidnot

provide for any direct government support by way of appropriationfromthenationalbudget tosupport the activitiesofthisorganization.

Thepointhereis,andatthesametimetheyhavebeensubjectedtoagovernmentalintervention,whichtotheirmindhasbeeninimicaltothe

objectives and to the institution per se, that is why they are seeking

legislativefiattorestorebacktheoriginalmandatethattheyhadunderCommonwealth Act 111. Such having been the experience in the

hands of government, meaning, there has been negative

interferenceontheirpartandinasmuchastheirmandateiscomingfromalegislativefiat,thenshouldntitbe,thisrhetoricalquestion,

shouldntitbebetterforthisorganizationtoseekamandatefrom,lets say,the government theCorporationCodeof thePhilippines

and registerwith the SEC asnon-profitnon-stock corporation so

that government interventioncouldbeveryveryminimal.Maybethats a rhetorical question, theymayor theymay not answer, ano. I

dontknowwhatwouldbethebenefitofa charteroramandatebeing


26/30

provided for by way of legislation versus a registration with the SEC

underthe CorporationCodeof the Philippines inasmuchastheydont

getanythingfromthegovernmentanywayinsofarasdirectfunding.In

fact,theonly thingthattheygot fromgovernmentwas intervention in

theiraffairs.Maybewecansolicit some commentary comments from

the resourcepersons.Incidentally,dont take thatasanobjection, Imnotobjecting.Imallfortheobjectivesofthesetwobills.Itjustoccurred

to me that since you have had very bad experience in the hands of

governmentandyouwillalwaysbeopentosuchpossibleintervention

even in the future as long as you have a legislativemandate or yourmandateoryourchartercomingfromlegislativeaction.

xxxx

MR.ESCUDERO:Mr.Chairman,theremaybeadisadvantageiftheBoyScoutsofthePhilippineswillberequiredtoregisterwith

theSEC. IfweareregisteredwiththeSEC,therecouldbeadangerofproliferation of scout organization. Anybody can organize and then

register with the SEC. If therewill be aproliferation of this, then the

organization will lose control of the entire organization. Another

disadvantage,Mr. Chairman, anybody can file a complaint in the SEC

againsttheBoyScoutsofthePhilippinesandtheSECmaysuspendthe

operation or freeze the assets of the organization and hamper the

operationoftheorganization.Idontknow,Mr.Chairman,howyoulook

atitbuttherecouldbeadangerforanybodyfilingacomplaintagainst

theorganizationintheSECandtheSECmightsuspendtheregistration

permitoftheorganizationandwewillnotbeabletooperate.

HON.AQUINO:Well,thatIthinkwouldbeaproblemthatwill

notbeexclusivetocorporationsregisteredwiththeSECbecauseevenif

youaregovernmentcorporation,courtactionmaybetakenagainstyouinotherjudicialbodiesbecausetheSECissimplyanotherquasi-judicial

body.But,Ithink,thefirstpointwouldbeveryinteresting,thefirstpointthatyouraised.Ineffect,whatyouaresayingisthatwiththe

legislativemandatecreatingyourcharter,ineffect,youhavebeen

givensomesortofafranchisewiththismovement.

MR.ESCUDERO:Yes.

HON.AQUINO:Exclusivefranchiseofthatmovement?

MR.ESCUDERO:Yes.

HON.AQUINO:Well,thatsverywelltakensoIwillproceedwithotherissues,Mr.Chairman.xxx.[60](Emphasesadded.)


27/30


28/30

allows the BSP to receive contributions or donations from the government. Section 8

reads:

Section8.Anydonationorcontributionwhichfromtimetotime may be made to the Boy Scouts of the Philippines by the

Governmentoranyof itssubdivisions,branches,offices,agenciesor instrumentalitiesshallbeexpendedbythe ExecutiveBoardinpursuanceofthisAct.

The sources of funds to maintain the BSP were identified before the House

Committee on Government Enterprises while the bill was being deliberated, and the

pertinentportionofthediscussionisquotedbelow:

MR.ESCUDERO.Yes,Mr.Chairman.Thequestionisthesourcesoffundsoftheorganization.First,Mr.Chairman,theBoyScoutsofthe

Philippinesdonotreceiveannualallotmentfromthegovernment.Theorganizationhas to raise its own funds through fund drives and fund

campaigns or fund raising activities. Aside from this, we have some

revenue producing projects in the organization that givesus funds to

supporttheoperation.xxxFromtimetotime,Mr.Chairman,whenwe

havespecialactivitieswerequestforassistanceorfinancialassistance

fromgovernmentagencies,fromprivatebusinessandcorporations,but

this is only during special activities that the Boy Scouts of the

Philippineswouldconductduringtheyear.Otherwise,wehavetoraise

ourownfundstosupporttheorganization.[62]

ThenatureofthefundsoftheBSPandtheCOAsauditjurisdictionwerelikewise

broughtupinsaidcongressionaldeliberations,towit:

HON. AQUINO: x x x Insofar as this organization being a

government created organization, in fact, a government corporationclassifiedassuch,areyourfundsoryourfinancessubjectedtotheCOA

audit?

MR. ESCUDERO: Mr. Chairman, we are not. Our funds is not

subjected.WedontfallunderthejurisdictionoftheCOA.

HON.AQUINO:Allright,butbeforewereyou?

MR.ESCUDERO:No,Mr.Chairman.

MR.JESUS:MayI?Ashistoricalbackgrounder,CommonwealthAct

111waswrittenbythenSecretaryJorgeVargasandbeforeanduptothe

middleoftheMartialLawyears,theBSPwasreceivingasubsidyinthe


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formofanannualaonedrawfromtheSweepstakes.And,thiswasthe

casealsowiththeGirlScoutsattheAnti-TB,butthenthiswasandtheBoy Scouts then because of this funding partly fromgovernment

wasbeingsubjectedtoauditinthecontributionsbeingmadeinthepartoftheSweepstakes.ButthiswasremovedlaterduringtheMartial

LawyearswiththecreationoftheHumanSettlementsCommission.Sothe situation right now is that the Boy Scouts does not receive any

fundingfromgovernment,buttheninthecaseofthelocalcouncilsand

thislegislativecharter, sotospeak,enablesthe localcouncilseventhe

nationalheadquarters inviewof the provisions in the existing law toreceivedonationsfromthegovernmentoranyofitsinstrumentalities,

which would be difficult if the Boy Scouts is registered as a private

corporationwiththeSecuritiesandExchangeCommission.Government

bodies would be estopped from making donations to the Boy Scouts,

whichatpresentisnotthecasebecausethereistheBoyScoutscharter,thisCommonwealthAct111asamendedbyPD463.

xxxx

HON.AMATONG:Mr.Chairman,inconnectionwiththat.

THECHAIRMAN:Yeah,GentlemanfromZamboanga.

HON.AMATONG:Thereisnoauditingbeingmadebecausetheres

nomoneyputintheorganization,buthowaboutdonatedfundstothis

organization?What are the remedies of the donors of howwill they

knowhowtheirmoneyarebeingspent?

MR.ESCUDERO:MayIanswer,Mr.Chairman?

THECHAIRMAN:Yes,gentleman.

MR.ESCUDERO:TheBoyScoutsofthePhilippineshasanexternalauditorandbythecharterwearerequiredtosubmitafinancialreport

attheendofeachyeartotheNationalExecutiveBoard.Soallthefunds

donated or otherwise is accounted for at the end of the year by ourexternalauditor.InthiscasetheSGV.[63]

Historically,therefore,theBSPhadbeensubjectedtogovernmentauditinsofar

aspublicfundshadbeeninfusedthereto.However,thispracticeshouldnotprecludethe

exerciseof the audit jurisdiction ofCOA, clearly set forthunder the Constitution,which

pertinentlyprovides:

Section 2. (1) The Commission on Audit shall have the


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power, authority, and duty to examine, audit, and settle all

accounts pertaining to the revenue and receipts of, andexpendituresorusesoffundsandproperty,ownedorheldintrust

by, or pertaining to, theGovernment, or any of its subdivisions,agencies, or instrumentalities, including government-owned and

controlled corporationswith originalcharters, andonapost-auditbasis:(a)constitutionalbodies,commissionsandofficesthathavebeen

grantedfiscalautonomyunderthisConstitution;(b)autonomousstate

colleges and universities; (c) other government-owned or controlled

corporationswithoriginalchartersandtheirsubsidiaries;and(d)suchnon-governmental entities receiving subsidy or equity, directly or

indirectly,fromorthroughtheGovernment,whicharerequiredbylaw

of the granting institution to submit to such audit as a condition of

subsidyorequity.xxx.[64]

SincetheBSP,underitsamendedcharter,continuestobeapubliccorporationoragovernmentinstrumentality,wecometotheinevitableconclusionthatitissubjecttothe

exercisebytheCOAofitsauditjurisdictioninthemannerconsistentwiththeprovisionsof

theBSPCharter.

WHEREFORE, premises considered, the instant petition for prohibition is

DISMISSED.

SOORDERED.

Boys Scout vs. Coa

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