G.R. No.

175352

DANTE V. LIBAN, REYNALDO M. BERNARDO, and SALVADOR M. VIARI,

Petitioners,
vs.
RICHARD J. GORDON, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition to declare Senator Richard J. Gordon (respondent) as having forfeited his seat
in the Senate.

The Facts

Petitioners Dante V. Liban, Reynaldo M. Bernardo, and Salvador M. Viari (petitioners) filed
with this Court a Petition to Declare Richard J. Gordon as Having Forfeited His Seat in the
Senate. Petitioners are officers of the Board of Directors of the Quezon City Red Cross Chapter
while respondent is Chairman of the Philippine National Red Cross (PNRC) Board of Governors.

During respondent’s incumbency as a member of the Senate of the Philippines,1 he was elected
Chairman of the PNRC during the 23 February 2006 meeting of the PNRC Board of Governors.
Petitioners allege that by accepting the chairmanship of the PNRC Board of Governors,
respondent has ceased to be a member of the Senate as provided in Section 13, Article VI of the
Constitution, which reads:

SEC. 13. No Senator or Member of the House of Representatives may hold any other office or
employment in the Government, or any subdivision, agency, or instrumentality thereof, including
government-owned or controlled corporations or their subsidiaries, during his term without
forfeiting his seat. Neither shall he be appointed to any office which may have been created or
the emoluments thereof increased during the term for which he was elected.

Petitioners cite Camporedondo v. NLRC,2 which held that the PNRC is a government-owned or
controlled corporation. Petitioners claim that in accepting and holding the position of Chairman
of the PNRC Board of Governors, respondent has automatically forfeited his seat in the Senate,
pursuant to Flores v. Drilon,3 which held that incumbent national legislators lose their elective
posts upon their appointment to another government office.

In his Comment, respondent asserts that petitioners have no standing to file this petition which
appears to be an action for quo warranto, since the petition alleges that respondent committed an
act which, by provision of law, constitutes a ground for forfeiture of his public office. Petitioners
do not claim to be entitled to the Senate office of respondent. Under Section 5, Rule 66 of the
Rules of Civil Procedure, only a person claiming to be entitled to a public office usurped or
unlawfully held by another may bring an action for quo warranto in his own name. If the petition
is one for quo warranto, it is already barred by prescription since under Section 11, Rule 66 of
the Rules of Civil Procedure, the action should be commenced within one year after the cause of
the public officer’s forfeiture of office. In this case, respondent has been working as a Red Cross
volunteer for the past 40 years. Respondent was already Chairman of the PNRC Board of
Governors when he was elected Senator in May 2004, having been elected Chairman in 2003 and
re-elected in 2005.

Respondent contends that even if the present petition is treated as a taxpayer’s suit, petitioners
cannot be allowed to raise a constitutional question in the absence of any claim that they suffered
some actual damage or threatened injury as a result of the allegedly illegal act of respondent.
Furthermore, taxpayers are allowed to sue only when there is a claim of illegal disbursement of
public funds, or that public money is being diverted to any improper purpose, or where
petitioners seek to restrain respondent from enforcing an invalid law that results in wastage of
public funds.

Respondent also maintains that if the petition is treated as one for declaratory relief, this Court
would have no jurisdiction since original jurisdiction for declaratory relief lies with the Regional
Trial Court.

Respondent further insists that the PNRC is not a government-owned or controlled corporation
and that the prohibition under Section 13, Article VI of the Constitution does not apply in the
present case since volunteer service to the PNRC is neither an office nor an employment.

In their Reply, petitioners claim that their petition is neither an action for quo warranto nor an
action for declaratory relief. Petitioners maintain that the present petition is a taxpayer’s suit
questioning the unlawful disbursement of funds, considering that respondent has been drawing
his salaries and other compensation as a Senator even if he is no longer entitled to his office.
Petitioners point out that this Court has jurisdiction over this petition since it involves a legal or
constitutional issue which is of transcendental importance.

The Issues

Petitioners raise the following issues:

1. Whether the Philippine National Red Cross (PNRC) is a government- owned or

controlled corporation;

2. Whether Section 13, Article VI of the Philippine Constitution applies to the case of
respondent who is Chairman of the PNRC and at the same time a Member of the Senate;

3. Whether respondent should be automatically removed as a Senator pursuant to Section

13, Article VI of the Philippine Constitution; and

4. Whether petitioners may legally institute this petition against respondent.4

The substantial issue boils down to whether the office of the PNRC Chairman is a government
office or an office in a government-owned or controlled corporation for purposes of the
prohibition in Section 13, Article VI of the Constitution.

The Court’s Ruling

We find the petition without merit.

Petitioners Have No Standing to File this Petition

A careful reading of the petition reveals that it is an action for quo warranto. Section 1, Rule 66
of the Rules of Court provides:

Section 1. Action by Government against individuals. – An action for the usurpation of a public
office, position or franchise may be commenced by a verified petition brought in the name of the
Republic of the Philippines against:

(a) A person who usurps, intrudes into, or unlawfully holds or exercises a public office,
position or franchise;

(b) A public officer who does or suffers an act which by provision of law, constitutes a
ground for the forfeiture of his office; or

(c) An association which acts as a corporation within the Philippines without being
legally incorporated or without lawful authority so to act. (Emphasis supplied)

Petitioners allege in their petition that:

4. Respondent became the Chairman of the PNRC when he was elected as such during
the First Regular Luncheon-Meeting of the Board of Governors of the PNRC held on
February 23, 2006, the minutes of which is hereto attached and made integral part hereof
as Annex "A."

5. Respondent was elected as Chairman of the PNRC Board of Governors, during his
incumbency as a Member of the House of Senate of the Congress of the Philippines,
having been elected as such during the national elections last May 2004.

6. Since his election as Chairman of the PNRC Board of Governors, which position he
duly accepted, respondent has been exercising the powers and discharging the functions
and duties of said office, despite the fact that he is still a senator.

7. It is the respectful submission of the petitioner[s] that by accepting the chairmanship of

the Board of Governors of the PNRC, respondent has ceased to be a Member of the
House of Senate as provided in Section 13, Article VI of the Philippine Constitution, x x
x
 xxxx

10. It is respectfully submitted that in accepting the position of Chairman of the Board of
Governors of the PNRC on February 23, 2006, respondent has automatically forfeited his
seat in the House of Senate and, therefore, has long ceased to be a Senator, pursuant to
the ruling of this Honorable Court in the case of FLORES, ET AL. VS. DRILON AND
GORDON, G.R. No. 104732, x x x

11. Despite the fact that he is no longer a senator, respondent continues to act as such and
still performs the powers, functions and duties of a senator, contrary to the constitution,
law and jurisprudence.

12. Unless restrained, therefore, respondent will continue to falsely act and represent
himself as a senator or member of the House of Senate, collecting the salaries,
emoluments and other compensations, benefits and privileges appertaining and due only
to the legitimate senators, to the damage, great and irreparable injury of the Government
and the Filipino people.5 (Emphasis supplied)

Thus, petitioners are alleging that by accepting the position of Chairman of the PNRC Board of
Governors, respondent has automatically forfeited his seat in the Senate. In short, petitioners
filed an action for usurpation of public office against respondent, a public officer who allegedly
committed an act which constitutes a ground for the forfeiture of his public office. Clearly, such
an action is for quo warranto, specifically under Section 1(b), Rule 66 of the Rules of Court.

Quo warranto is generally commenced by the Government as the proper party plaintiff.
However, under Section 5, Rule 66 of the Rules of Court, an individual may commence such an
action if he claims to be entitled to the public office allegedly usurped by another, in which case
he can bring the action in his own name. The person instituting quo warranto proceedings in his
own behalf must claim and be able to show that he is entitled to the office in dispute, otherwise
the action may be dismissed at any stage.6 In the present case, petitioners do not claim to be
entitled to the Senate office of respondent. Clearly, petitioners have no standing to file the
present petition.

Even if the Court disregards the infirmities of the petition and treats it as a taxpayer’s suit, the
petition would still fail on the merits.

PNRC is a Private Organization Performing Public Functions

On 22 March 1947, President Manuel A. Roxas signed Republic Act No. 95,7 otherwise known
as the PNRC Charter. The PNRC is a non-profit, donor-funded, voluntary, humanitarian
organization, whose mission is to bring timely, effective, and compassionate humanitarian
assistance for the most vulnerable without consideration of nationality, race, religion, gender,
social status, or political affiliation.8 The PNRC provides six major services: Blood Services,
Disaster Management, Safety Services, Community Health and Nursing, Social Services and
Voluntary Service.9
The Republic of the Philippines, adhering to the Geneva Conventions, established the PNRC as a
voluntary organization for the purpose contemplated in the Geneva Convention of 27 July
1929.10 The Whereas clauses of the PNRC Charter read:

WHEREAS, there was developed at Geneva, Switzerland, on August 22, 1864, a convention by
which the nations of the world were invited to join together in diminishing, so far lies within
their power, the evils inherent in war;

WHEREAS, more than sixty nations of the world have ratified or adhered to the subsequent
revision of said convention, namely the "Convention of Geneva of July 29 [sic], 1929 for the
Amelioration of the Condition of the Wounded and Sick of Armies in the Field" (referred to in
this Charter as the Geneva Red Cross Convention);

WHEREAS, the Geneva Red Cross Convention envisages the establishment in each country of a
voluntary organization to assist in caring for the wounded and sick of the armed forces and to
furnish supplies for that purpose;

WHEREAS, the Republic of the Philippines became an independent nation on July 4, 1946 and
proclaimed its adherence to the Geneva Red Cross Convention on February 14, 1947, and by that
action indicated its desire to participate with the nations of the world in mitigating the suffering
caused by war and to establish in the Philippines a voluntary organization for that purpose as
contemplated by the Geneva Red Cross Convention;

WHEREAS, there existed in the Philippines since 1917 a Charter of the American National Red
Cross which must be terminated in view of the independence of the Philippines; and

WHEREAS, the volunteer organizations established in the other countries which have ratified or
adhered to the Geneva Red Cross Convention assist in promoting the health and welfare of their
people in peace and in war, and through their mutual assistance and cooperation directly and
through their international organizations promote better understanding and sympathy among the
peoples of the world. (Emphasis supplied)

The PNRC is a member National Society of the International Red Cross and Red Crescent
Movement (Movement), which is composed of the International Committee of the Red Cross
(ICRC), the International Federation of Red Cross and Red Crescent Societies (International
Federation), and the National Red Cross and Red Crescent Societies (National Societies). The
Movement is united and guided by its seven Fundamental Principles:

1. HUMANITY – The International Red Cross and Red Crescent Movement, born of a
desire to bring assistance without discrimination to the wounded on the battlefield,
endeavors, in its international and national capacity, to prevent and alleviate human
suffering wherever it may be found. Its purpose is to protect life and health and to ensure
respect for the human being. It promotes mutual understanding, friendship, cooperation
and lasting peace amongst all peoples.
 2. IMPARTIALITY – It makes no discrimination as to nationality, race, religious beliefs,
class or political opinions. It endeavors to relieve the suffering of individuals, being
guided solely by their needs, and to give priority to the most urgent cases of distress.

3. NEUTRALITY – In order to continue to enjoy the confidence of all, the Movement

may not take sides in hostilities or engage at any time in controversies of a political,
racial, religious or ideological nature.

4. INDEPENDENCE – The Movement is independent. The National Societies, while

auxiliaries in the humanitarian services of their governments and subject to the laws of
their respective countries, must always maintain their autonomy so that they may be able
at all times to act in accordance with the principles of the Movement.

5. VOLUNTARY SERVICE – It is a voluntary relief movement not prompted in any

manner by desire for gain.

6. UNITY – There can be only one Red Cross or one Red Crescent Society in any one
country. It must be open to all. It must carry on its humanitarian work throughout its
territory.

7. UNIVERSALITY – The International Red Cross and Red Crescent Movement, in

which all Societies have equal status and share equal responsibilities and duties in
helping each other, is worldwide. (Emphasis supplied)

The Fundamental Principles provide a universal standard of reference for all members of the
Movement. The PNRC, as a member National Society of the Movement, has the duty to uphold
the Fundamental Principles and ideals of the Movement. In order to be recognized as a National
Society, the PNRC has to be autonomous and must operate in conformity with the Fundamental
Principles of the Movement.11

The reason for this autonomy is fundamental. To be accepted by warring belligerents as neutral
workers during international or internal armed conflicts, the PNRC volunteers must not be seen
as belonging to any side of the armed conflict. In the Philippines where there is a communist
insurgency and a Muslim separatist rebellion, the PNRC cannot be seen as government-owned or
controlled, and neither can the PNRC volunteers be identified as government personnel or as
instruments of government policy. Otherwise, the insurgents or separatists will treat PNRC
volunteers as enemies when the volunteers tend to the wounded in the battlefield or the displaced
civilians in conflict areas.

Thus, the PNRC must not only be, but must also be seen to be, autonomous, neutral and
independent in order to conduct its activities in accordance with the Fundamental Principles. The
PNRC must not appear to be an instrument or agency that implements government policy;
otherwise, it cannot merit the trust of all and cannot effectively carry out its mission as a
National Red Cross Society.12 It is imperative that the PNRC must be autonomous, neutral, and
independent in relation to the State.
To ensure and maintain its autonomy, neutrality, and independence, the PNRC cannot be owned
or controlled by the government. Indeed, the Philippine government does not own the PNRC.
The PNRC does not have government assets and does not receive any appropriation from the
Philippine Congress.13 The PNRC is financed primarily by contributions from private individuals
and private entities obtained through solicitation campaigns organized by its Board of
Governors, as provided under Section 11 of the PNRC Charter:

SECTION 11. As a national voluntary organization, the Philippine National Red Cross shall be
financed primarily by contributions obtained through solicitation campaigns throughout the year
which shall be organized by the Board of Governors and conducted by the Chapters in their
respective jurisdictions. These fund raising campaigns shall be conducted independently of other
fund drives by other organizations. (Emphasis supplied)

The government does not control the PNRC. Under the PNRC Charter, as amended, only six of
the thirty members of the PNRC Board of Governors are appointed by the President of the
Philippines. Thus, twenty-four members, or four-fifths (4/5), of the PNRC Board of Governors
are not appointed by the President. Section 6 of the PNRC Charter, as amended, provides:

SECTION 6. The governing powers and authority shall be vested in a Board of Governors
composed of thirty members, six of whom shall be appointed by the President of the Philippines,
eighteen shall be elected by chapter delegates in biennial conventions and the remaining six shall
be selected by the twenty-four members of the Board already chosen. x x x.

Thus, of the twenty-four members of the PNRC Board, eighteen are elected by the chapter
delegates of the PNRC, and six are elected by the twenty-four members already chosen — a
select group where the private sector members have three-fourths majority. Clearly, an
overwhelming majority of four-fifths of the PNRC Board are elected or chosen by the private
sector members of the PNRC.

The PNRC Board of Governors, which exercises all corporate powers of the PNRC, elects the
PNRC Chairman and all other officers of the PNRC. The incumbent Chairman of PNRC,
respondent Senator Gordon, was elected, as all PNRC Chairmen are elected, by a private sector-
controlled PNRC Board four-fifths of whom are private sector members of the PNRC. The
PNRC Chairman is not appointed by the President or by any subordinate government official.

Under Section 16, Article VII of the Constitution,14 the President appoints all officials and
employees in the Executive branch whose appointments are vested in the President by the
Constitution or by law. The President also appoints those whose appointments are not otherwise
provided by law. Under this Section 16, the law may also authorize the "heads of departments,
agencies, commissions, or boards" to appoint officers lower in rank than such heads of
departments, agencies, commissions or boards.15 In Rufino v. Endriga,16 the Court explained
appointments under Section 16 in this wise:

Under Section 16, Article VII of the 1987 Constitution, the President appoints three groups of
officers. The first group refers to the heads of the Executive departments, ambassadors, other
public ministers and consuls, officers of the armed forces from the rank of colonel or naval
captain, and other officers whose appointments are vested in the President by the Constitution.
The second group refers to those whom the President may be authorized by law to appoint. The
third group refers to all other officers of the Government whose appointments are not otherwise
provided by law.

Under the same Section 16, there is a fourth group of lower-ranked officers whose appointments
Congress may by law vest in the heads of departments, agencies, commissions, or boards. x x x

xxx

In a department in the Executive branch, the head is the Secretary. The law may not authorize the
Undersecretary, acting as such Undersecretary, to appoint lower-ranked officers in the Executive
department. In an agency, the power is vested in the head of the agency for it would be
preposterous to vest it in the agency itself. In a commission, the head is the chairperson of the
commission. In a board, the head is also the chairperson of the board. In the last three situations,
the law may not also authorize officers other than the heads of the agency, commission, or board
to appoint lower-ranked officers.

xxx

The Constitution authorizes Congress to vest the power to appoint lower-ranked officers
specifically in the "heads" of the specified offices, and in no other person. The word "heads"
refers to the chairpersons of the commissions or boards and not to their members, for several
reasons.

The President does not appoint the Chairman of the PNRC. Neither does the head of any
department, agency, commission or board appoint the PNRC Chairman. Thus, the PNRC
Chairman is not an official or employee of the Executive branch since his appointment does not
fall under Section 16, Article VII of the Constitution. Certainly, the PNRC Chairman is not an
official or employee of the Judiciary or Legislature. This leads us to the obvious conclusion that
the PNRC Chairman is not an official or employee of the Philippine Government. Not being a
government official or employee, the PNRC Chairman, as such, does not hold a government
office or employment.

Under Section 17, Article VII of the Constitution,17 the President exercises control over all
government offices in the Executive branch. If an office is legally not under the control of the
President, then such office is not part of the Executive branch. In Rufino v. Endriga,18 the
Court explained the President’s power of control over all government offices as follows:

Every government office, entity, or agency must fall under the Executive, Legislative, or Judicial
branches, or must belong to one of the independent constitutional bodies, or must be a quasi-
judicial body or local government unit. Otherwise, such government office, entity, or agency has
no legal and constitutional basis for its existence.

The CCP does not fall under the Legislative or Judicial branches of government. The CCP is also
not one of the independent constitutional bodies. Neither is the CCP a quasi-judicial body nor a
local government unit. Thus, the CCP must fall under the Executive branch. Under the Revised
Administrative Code of 1987, any agency "not placed by law or order creating them under any
specific department" falls "under the Office of the President."

Since the President exercises control over "all the executive departments, bureaus, and offices,"
the President necessarily exercises control over the CCP which is an office in the Executive
branch. In mandating that the President "shall have control of all executive . . . offices," Section
17, Article VII of the 1987 Constitution does not exempt any executive office — one performing
executive functions outside of the independent constitutional bodies — from the President’s
power of control. There is no dispute that the CCP performs executive, and not legislative,
judicial, or quasi-judicial functions.

The President’s power of control applies to the acts or decisions of all officers in the Executive
branch. This is true whether such officers are appointed by the President or by heads of
departments, agencies, commissions, or boards. The power of control means the power to revise
or reverse the acts or decisions of a subordinate officer involving the exercise of discretion.

In short, the President sits at the apex of the Executive branch, and exercises "control of all the
executive departments, bureaus, and offices." There can be no instance under the Constitution
where an officer of the Executive branch is outside the control of the President. The Executive
branch is unitary since there is only one President vested with executive power exercising control
over the entire Executive branch. Any office in the Executive branch that is not under the control
of the President is a lost command whose existence is without any legal or constitutional basis.
(Emphasis supplied)

An overwhelming four-fifths majority of the PNRC Board are private sector individuals elected
to the PNRC Board by the private sector members of the PNRC. The PNRC Board exercises all
corporate powers of the PNRC. The PNRC is controlled by private sector individuals. Decisions
or actions of the PNRC Board are not reviewable by the President. The President cannot reverse
or modify the decisions or actions of the PNRC Board. Neither can the President reverse or
modify the decisions or actions of the PNRC Chairman. It is the PNRC Board that can review,
reverse or modify the decisions or actions of the PNRC Chairman. This proves again that the
office of the PNRC Chairman is a private office, not a government office.1avvphi1

Although the State is often represented in the governing bodies of a National Society, this can be
justified by the need for proper coordination with the public authorities, and the government
representatives may take part in decision-making within a National Society. However, the freely-
elected representatives of a National Society’s active members must remain in a large majority in
a National Society’s governing bodies.19

The PNRC is not government-owned but privately owned. The vast majority of the thousands of
PNRC members are private individuals, including students. Under the PNRC Charter, those who
contribute to the annual fund campaign of the PNRC are entitled to membership in the PNRC for
one year. Thus, any one between 6 and 65 years of age can be a PNRC member for one year
upon contributing ₱35, ₱100, ₱300, ₱500 or ₱1,000 for the year.20 Even foreigners, whether
residents or not, can be members of the PNRC. Section 5 of the PNRC Charter, as amended by
Presidential Decree No. 1264,21 reads:

SEC. 5. Membership in the Philippine National Red Cross shall be open to the entire population
in the Philippines regardless of citizenship. Any contribution to the Philippine National Red
Cross Annual Fund Campaign shall entitle the contributor to membership for one year and said
contribution shall be deductible in full for taxation purposes.

Thus, the PNRC is a privately owned, privately funded, and privately run charitable
organization. The PNRC is not a government-owned or controlled corporation.

Petitioners anchor their petition on the 1999 case of Camporedondo v. NLRC,22 which ruled that
the PNRC is a government-owned or controlled corporation. In ruling that the PNRC is a
government-owned or controlled corporation, the simple test used was whether the corporation
was created by its own special charter for the exercise of a public function or by incorporation
under the general corporation law. Since the PNRC was created under a special charter, the
Court then ruled that it is a government corporation. However, the Camporedondo ruling failed
to consider the definition of a government-owned or controlled corporation as provided under
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987:

SEC. 2. General Terms Defined. – x x x

(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) percent of its capital stock: Provided, That government-owned or controlled
corporations may be further categorized by the Department of the Budget, the Civil Service
Commission, and the Commission on Audit for purposes of the exercise and discharge of their
respective powers, functions and responsibilities with respect to such corporations.(Boldfacing
and underscoring supplied)

A government-owned or controlled corporation must be owned by the government, and in the

case of a stock corporation, at least a majority of its capital stock must be owned by the
government. In the case of a non-stock corporation, by analogy at least a majority of the
members must be government officials holding such membership by appointment or designation
by the government. Under this criterion, and as discussed earlier, the government does not own
or control PNRC.

The PNRC Charter is Violative of the Constitutional Proscription against the Creation of Private
Corporations by Special Law

The 1935 Constitution, as amended, was in force when the PNRC was created by special charter
on 22 March 1947. Section 7, Article XIV of the 1935 Constitution, as amended, reads:
SEC. 7. The Congress shall not, except by general law, provide for the formation, organization,
or regulation of private corporations, unless such corporations are owned or controlled by the
Government or any subdivision or instrumentality thereof.

The subsequent 1973 and 1987 Constitutions contain similar provisions prohibiting Congress
from creating private corporations except by general law. Section 1 of the PNRC Charter, as
amended, creates the PNRC as a "body corporate and politic," thus:

SECTION 1. There is hereby created in the Republic of the Philippines a body corporate and
politic to be the voluntary organization officially designated to assist the Republic of the
Philippines in discharging the obligations set forth in the Geneva Conventions and to perform
such other duties as are inherent upon a National Red Cross Society. The national headquarters
of this Corporation shall be located in Metropolitan Manila. (Emphasis supplied)

In Feliciano v. Commission on Audit,23 the Court explained the constitutional provision

prohibiting Congress from creating private corporations in this wise:

We begin by explaining the general framework under the fundamental law. The Constitution
recognizes two classes of corporations. The first refers to private corporations created under a
general law. The second refers to government-owned or controlled corporations created by
special charters. Section 16, Article XII of the Constitution provides:

Sec. 16. The Congress shall not, except by general law, provide for the formation, organization,
or regulation of private corporations. Government-owned or controlled corporations may be
created or established by special charters in the interest of the common good and subject to the
test of economic viability.

The Constitution emphatically prohibits the creation of private corporations except by general
law applicable to all citizens. The purpose of this constitutional provision is to ban private
corporations created by special charters, which historically gave certain individuals, families or
groups special privileges denied to other citizens.

In short, Congress cannot enact a law creating a private corporation with a special charter. Such
legislation would be unconstitutional. Private corporations may exist only under a general law. If
the corporation is private, it must necessarily exist under a general law. Stated differently, only
corporations created under a general law can qualify as private corporations. Under existing
laws, the general law is the Corporation Code, except that the Cooperative Code governs the
incorporation of cooperatives.

The Constitution authorizes Congress to create government-owned or controlled corporations

through special charters. Since private corporations cannot have special charters, it follows that
Congress can create corporations with special charters only if such corporations are government-
owned or controlled.24 (Emphasis supplied)

In Feliciano, the Court held that the Local Water Districts are government-owned or controlled
corporations since they exist by virtue of Presidential Decree No. 198, which constitutes their
special charter. The seed capital assets of the Local Water Districts, such as waterworks and
sewerage facilities, were public property which were managed, operated by or under the control
of the city, municipality or province before the assets were transferred to the Local Water
Districts. The Local Water Districts also receive subsidies and loans from the Local Water
Utilities Administration (LWUA). In fact, under the 2009 General Appropriations Act,25 the
LWUA has a budget amounting to ₱400,000,000 for its subsidy requirements.26 There is no
private capital invested in the Local Water Districts. The capital assets and operating funds of
the Local Water Districts all come from the government, either through transfer of assets, loans,
subsidies or the income from such assets or funds.

The government also controls the Local Water Districts because the municipal or city mayor, or
the provincial governor, appoints all the board directors of the Local Water Districts.
Furthermore, the board directors and other personnel of the Local Water Districts are
government employees subject to civil service laws and anti-graft laws. Clearly, the Local Water
Districts are considered government-owned or controlled corporations not only because of their
creation by special charter but also because the government in fact owns and controls the Local
Water Districts.

Just like the Local Water Districts, the PNRC was created through a special charter. However,
unlike the Local Water Districts, the elements of government ownership and control are clearly
lacking in the PNRC. Thus, although the PNRC is created by a special charter, it cannot be
considered a government-owned or controlled corporation in the absence of the essential
elements of ownership and control by the government. In creating the PNRC as a corporate
entity, Congress was in fact creating a private corporation. However, the constitutional
prohibition against the creation of private corporations by special charters provides no exception
even for non-profit or charitable corporations. Consequently, the PNRC Charter, insofar as it
creates the PNRC as a private corporation and grants it corporate powers,27 is void for being
unconstitutional. Thus, Sections 1,28 2,29 3,30 4(a),31 5,32 6,33 7,34 8,35 9,36 10,37 11,38 12,39 and
1340 of the PNRC Charter, as amended, are void.

The other provisions41 of the PNRC Charter remain valid as they can be considered as a
recognition by the State that the unincorporated PNRC is the local National Society of the
International Red Cross and Red Crescent Movement, and thus entitled to the benefits,
exemptions and privileges set forth in the PNRC Charter. The other provisions of the PNRC
Charter implement the Philippine Government’s treaty obligations under Article 4(5) of the
Statutes of the International Red Cross and Red Crescent Movement, which provides that to be
recognized as a National Society, the Society must be "duly recognized by the legal government
of its country on the basis of the Geneva Conventions and of the national legislation as a
voluntary aid society, auxiliary to the public authorities in the humanitarian field."

In sum, we hold that the office of the PNRC Chairman is not a government office or an office in
a government-owned or controlled corporation for purposes of the prohibition in Section 13,
Article VI of the 1987 Constitution. However, since the PNRC Charter is void insofar as it
creates the PNRC as a private corporation, the PNRC should incorporate under the Corporation
Code and register with the Securities and Exchange Commission if it wants to be a private
corporation.
WHEREFORE, we declare that the office of the Chairman of the Philippine National Red Cross
is not a government office or an office in a government-owned or controlled corporation for
purposes of the prohibition in Section 13, Article VI of the 1987 Constitution. We also declare
that Sections 1, 2, 3, 4(a), 5, 6, 7, 8, 9, 10, 11, 12, and 13 of the Charter of the Philippine
National Red Cross, or Republic Act No. 95, as amended by Presidential Decree Nos. 1264 and
1643, are VOID because they create the PNRC as a private corporation or grant it corporate
powers.

SO ORDERED.