EN BANC
Section 13, Article VI of the Constitution,
[G.R. NO. 175352 : July 15, 2009]
DANTE V. LIBAN, REYNALDO M.
BERNARDO, and SALVADOR M. VIARI,
Petitioners, v. 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
usurped or unlawfully held by another may
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
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; andcralawlibrary
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)cralawlibrary
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
x x x
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. v. 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)cralawlibrary
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; andcralawlibrary
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)cralawlibrary
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)cralawlibrary
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)cralawlibrary
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 "headsof 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)cralawlibrary
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.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
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 P35, P100, P300, P500 or
P1,000 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)cralawlibrary
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)cralawlibrary
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
P400,000,000 for its subsidy
requirements.26There 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 1340of 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.