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FUNA v.

MECO

G.R. No. 193462/February 4, 2014/ PEREZ, J./ JBMORETO

NATURE
Petition for MANDAMUS
PETITIONERS
DENNIS A.B. FUNA
RESPONDENTS MANILA ECONOMIC AND CULTURAL OFFICE and the
COMMISSION ON AUDIT
SUMMARY. Because the Philippines subscribes to the One China Policy of
the Peoples Republic of China, it ended its diplomatic relations with
Taiwan. However it continued to maintain an unofficial relationship with
Taiwan through the MECO. Funa asked COA to furnish him with financial
and audit reports of COAs audit of MECO. COA initially said that MECO was
not under its audit jurisdiction. This prompted Funa to file this petition for
mandamus. COA subsequently sent auditors to Taiwan. Funa argues that
MECO is a GOCC or at least a governmental entity subject to the audit
jurisdiction of COA. MECO argues that it is not a GOCC nor is it a
governmental instrumentality and to categorize it as such would violate
the one china policy of PROC. COA concedes that MECO is under its audit
jurisdiction because of certain fees that MECO handles which are
receivables of DOLE but insists that the case is moot because it already
sent a team to audit MECO. SC ruled that the case was not moot since it
falls under the exceptions. That MECO is not a GOCC nor is it a
governmental entity. MECO is in fact a sui generis entity. However certain
transactions of MECO are subject to the audit jurisdiction of COA
particularly its collection of Verification fees and Consular fees.
DOCTRINE. The MECO is not a GOCC or government instrumentality. It is a
sui generis private entity especially entrusted by the government with the
facilitation of unofficial relations with the people in Taiwan without
jeopardizing the countrys faithful commitment to the One China policy of
the PROC. However, despite its non-governmental character, the MECO
handles government funds in the form of the "verification fees" it collects
on behalf of the DOLE and the "consular fees" it collects under Section 2(6)
of EO No. 15, s. 2001. Hence, under existing laws, the accounts of the
MECO pertaining to its collection of such "verification fees" and "consular
fees" should be audited by the COA
FACTS.
The Philippines subscribes to the One China Policy of the
Communist Peoples Republic of China (PROC) under the Joint
Communique between RP and PROC.
The Philippines ended its diplomatic relations with the government
of Taiwan (nationalist Republic of China ) on June 9 1975.
Despite this the Philippines and Taiwan maintained an unofficial
relationship facilitated by the Taipei Economic and Cultural Office
for Taiwan and the MANILA ECONOMIC AND CULTURAL
OFFICE(MECO) for the Philippines
MECO was organized on Dec 16 1997 as a non-stock non-profit
corporation. from then on MECO became the corporate entity
entrusted by the Philipine Government with maintaining the
friendly and unofficial relations with the People of Taiwan.

In order to carry out its functions, MECO was authorized by the


Government to perform certain consular and other functions that
relate to the promotion, protection and facilitation of Philippine
interests in Taiwan
o At present, MEco oversees the rights and interests of OFWs
in Taiwan, promotes the Philippines as a tourist and
investment destination for the Taiwanese and facilitates
travel of Filipinos and Taiwanese from Taiwan to the
Philippines and vice versa.
Dennis AB Funa wrote to COA requesting for the latest financial and
audit report of MECO. HE invoked his constitutional right to
information on matters of public concern. He believed that MECO
was under the supervision of DTI and is a GOCC thus subject to the
audit jurisdiction of COA.
COA asst. Commissioner Naranjo issued a memorandum which
stated that MECO is not among the agencies audited by any of the
three clusters of the Corporate Government Sector.
This prompted Funa to file this mandamus petition in his capacity
as "taxpayer, concerned citizen, a member of the Philippine Bar
and law book author he alleged that COA neglected its duty under
Sec. 2(1) Art IX-D of the Constitution. He claimed that MECO was a
GOCC or at least a government instrumentality whose funds
partake the nature of public funds.
To support his argument he presented the following points
o It is a non-stock corporation vested with governmental
functions relating to public needs
o It is controlled by the government thru a board of directors
appointed by the Philippine President
o It is under the operational and policy supervision of DTI
He also compared MECO with the American Institute in Taiwan. AIT
is supposedly audited by the US Comptroller General.
MECO: prayed for the dismissal of the mandamus petition on
procedural and substantial grounds.
o Procedural: prematurely filed. Funa never demanded for
COA to make an audit. The only action he took was to
request for a copy of the financial and audit report of
MECO. This request was not finally disposed of by the time
the petition was filed
o Substantial: MECO is not a GOCC. The desire letter of the
President sends to MECO is merely recommendatory and
not binding on the corporation (in relation to the election of
the Board of MECO). In the end the members are the ones
who elect the directors and these directors are private
individuals and not government officials. MECO also argued
that the government merely has a policy supervision over
it. The government merely sees to it that the activities of
MECO are in tune with the One China Policy under the
PROC. The day-to-day operations of MECO are still under
the control of the Board.
o It also argued that for MECO to be considered a GOCC
would be a violation of the One China Policy of the PROC

COA: wanted the petition to be dismissed on procedural grounds


and that the issue is already moot
o Procedural: lacks locus standi Funa wasnt shown to have
been aggrieved or prejudiced by COAs failure to Audit
MECO. Also, that the case violated the doctrine of hierarchy
of Courts. Funa failed to justify a direct petition to SC
o Moot: COA Chair already sent a team to Taiwan to audit
MECO and other government agencies based there.
o Although the COA concedes that MECO is within its
jurisdiction, it maintains that MECO is not a GOCC nor is it a
Government instrumentality, instead MECO is a nongovernmental entity.

MECO may still be audited with respect to


Verification Fees. These fees are what MECO
collects from Taiwanese employers. A portion of
these fees are remitted to DOLE. Under Sec 26 of
PD 1445 or the STATE AUDIT CODE OF THE
PHILIPPINES, MECO is a non-governmental entity
required to pay government share and is subject to
partial audit

ISSUES & RATIO.


Whether MECO is a Governmental entity and is subject to the audit
jurisdiction of COA.
MECO is not a GOCC nor is it a Governmental entity, however,
certain transactions of MECO are subject to the audit jurisdiction
of COA (verification fees and consular fees)
Procedural issues:
Mootness: the issue is not moot. Despite the existence of supervening
events( the eventual auditing done by COA in Taiwan), the issue is within
the exceptions of rule on dismissal of moot cases.
-The issue deals with a supposed grave violation of the constitution
( Funa alleged that COA neglected to audit MECO),
-that the issue is of paramount public interest (the failure of COA to
audit MECO if it was supposed to audit MECO shows that COA failed
to fulfill its duties as guardian of the public treasury AND the status
of MECO has a direct bearing on the countrys commitment to the
One China Policy)
-and that it is susceptible to repetition (COA suddenly decided to
audit MECO, unless the issue is decided, the successor of the
current COA chair might decide to not auditing MECO)
Standing: the instant petition raises issues of transcendental importance
Principle of Hierarchy of Courts: transcendental importance of the issues
raised in the mandamus petition, hence the court waives this procedural
issue
MAIN ISSUE

Jurisdiction of COA
Under SEC 2(1) ART IX-D of the constitution, COA was vested with the
power, authority and duty to examine, audit and settle the
accounts(revenue," "receipts," "expenditures" and "uses of funds and
property") of the following entitites:
Government , or any of its subdivisions, agencies and
instrumentalities
GOCCs with original charters
GOCCs without original charters
Constitutional bodies, commissions and offices that have been
granted fiscal autonomy under the Constitution and
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.
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)80 of the Audit Code, which grants the
COA visitorial authority over the following non-governmental entities:
1. Non-governmental entities "subsidized by the government";
2. Non-governmental entities "required to pay levy or government share";
3. Non-governmental entities that have "received counterpart funds from
the government"; and
4. Non-governmental entities "partly funded by donations through the
government."
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."
SC: MECO is not a GOCC or Governmental Instrumentality
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. They include:
1.regulatory agencies; 2.chartered institutions; 3.government corporate
entities or government instrumentalities with corporate powers
(GCE/GICP); and 4. GOCCs
GOCCs: "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: first, its
organization as stock or non-stock corporation; second, the public
character of its function; and third, government ownership over
the same. Possession of all three attributes is necessary to deem an entity
a GOCC

MECO is a non-stock corporation based on the records and


based on the fact that its earnings are not distributed as dividends
to its members
MECO performs functions with a Public Aspect. 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. The functions of
the MECO 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.
The MECO Is Not Owned or Controlled by the Government.
The "desire letters" that the President transmits are merely
recommendatory and not binding on it. Under its by-laws, the
election of its directors are done by the members themselves, its
officers are elected by the directors and members are admitted
through a unanimous board resolution. None of the incorporators of
MECO were government officials and up to this day, none of the
members, directors or officers are government appointees or public
officers designated by reason of their office.
SC: it is a sui generis entity
Since MECO is not a GOCC, it cannot also be either of the other
government instrumentalities primarily because these instrumentalities are
creatures of law (meaning an actual law was passed for their creation)
while MECO was incorporated under the Corporation code.
The reason behind it being under the supervision of the DTI is because its
functions may result in it engaged in dealings or activities that can directly
contradict the Philippines commitment to the One China Policy. This
scenario can be avoided if theExecutive exercises some sort of supervision
over it. But this aspect was not questioned by the petitioner, so this was
deemed irrelevant to the issue by the SC.
Certain accounts may be audited by the COA
MECO should be subjected to the auditing of COA as regards its collection
of verification and consular fees.
Pertinent is the provision of the Administrative Code, Section 14(1), Book V
thereof, which authorizes the COA to audit accounts of nongovernmental
entities required to pay xxx or have government share but only with
respect to funds xxx coming from or through the government. The said
fees collected by MECO are receivables of DOLE.
As to the verification fees("service fee for the verification of overseas
employment contracts, recruitment agreement or special powers of
attorney"): Under Section 7 of EO No. 1022, DOLE has the authority to
collect verification fees. But it entered into a series of MoA with MECO

authorizing the latter to collect such fees since the PH does not have an
official post in Taiwan.
As to the consular fees: The authority behind consular fees is Section
2(6) of EO No. 15, s. 2001. The said section authorizes the MECO to collect
reasonable fees for its performance of consular functions. Evidently, and
just like the peculiarity that attends the DOLE verification fees, there is
no consular office for the collection of the consular fees. Thus, the
authority for the MECO to collect the reasonable fees, vested unto it by
the executive order (EO No. 15, s. 2001)
NOTES.
Just in case sIr asks who Dennis AB FUNA is, Funa is the chair of the Civil
Service Commission appointed by then president GMA. But this fact wasnt
mentioned in this case. His request with COA was not done in his capacity
as the CSC chair. He just appeared out of nowhere asking for the records.