G.R. No. 169752 – 560 Phil. 385 – 534 SCRA 112 – Political Law – Constitutional Law – State Immunity from Suit – Suit against Quasi-Public Corporations
The Philippine Society for Prevention of Cruelty to Animals is a corporation created by law in 1905 (Act No. 1285). It was empowered to make arrests in relation to acts of cruelty against animals.
In 1936, a law was passed removing from the PSPCA the power to make arrests. The law also directed the PSPCA to remit to LGUs collected fines in relation to animal cruelty.
In 2003, the Commission on Audit sought to audit the accounts of PSPCA. PSPCA opposed the planned audit on the ground that it is not subject to COA audit. COA maintained that PSPCA is a government corporation created by law for a governmental purpose; that the fact that PSPCA is a government owned and controlled corporation is obvious applying the charter test: that PSPCA was created by Act No. 1285.
ISSUE: Whether or not COA is correct.
HELD: No. The charter test is not applicable to PSPCA. The charter test is based on the Constitution.
In 1935, the 1935 Constitution was enacted. One of the provisions of the 1935 Constitution was the prohibition on Congress from enacting laws creating private corporations. This provision was carried over to subsequent Constitutions. Sec. 16, Art. VII of the 1987 Constitution provides: The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations.
Based on the cited provision, Congress may create a corporation by law but such corporation must be a GOCC. By COA’s logic, since PSPCA was created by law, then it is a GOCC. However, such does not apply to PSPCA simply because its creation pre-dated the 1935 Constitution.
Subsequent laws were passed stripping the PSPCA of its powers and privileges. As of now, it can only coordinate with law enforcement agencies in investigating cases of animal cruelty.
So what then is the corporate nature of PSPCA?
It is a quasi-public corporation. Quasi-public corporations are private corporations that render public service, supply public wants, or pursue other eleemosynary objectives. While purposely organized for the gain or benefit of its members, they are required by law to discharge functions for the public benefit. Examples of these corporations are utility, railroad, warehouse, telegraph, telephone, water supply corporations and transportation companies. It must be stressed that a quasi-public corporation is a species of private corporations, but the qualifying factor is the type of service the former renders to the public: if it performs a public service, then it becomes a quasi-public corporation.
Nevertheless, the SC further clarified: to determine whether a corporation is public or private is found in the totality of the relation of the corporation to the State. If the corporation is created by the State as the latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that corporation is considered public; otherwise, it is private.
The PSPCA is not subject to COA audit but is subject to SEC regulations.
May quasi-public corporations invoke immunity?
No. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation vested with special privileges and franchises may refuse to show its hand when charged with an abuse of such privileges.
