POLITICAL LAW REVIEW

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PHILIPPINE SOCIETY FOR THE PREVENTION OF Doctrine

CRUELTY TO ANIMALS V. COMMISSION ON AUDIT (2007)
G.R. No. 169752 | September 25, 2007 | Austria-Martinez, J.
Petitioners: Philippine Society for the Prevention of Cruelty to Animals
Respondents: Commission on Audit, Director Rudolfo H. Ariesga, Ms.
Merle M. Valentin and Ms. Susan Guardian (Team Leader and Team
Member, respectively, of the Audit Team)
The Philippine Society for the Prevention of
Cruelty to Animals (PSPCA) is a private
domestic corporation subject to the
jurisdiction of the Securities and Exchange
Commission. Thus, the Commission on Audit
is enjoined from investigating, examining and
auditing its fiscal and financial affairs.

Facts: Petitioner PSPCA was incorporated in 1905 prior to the Corporation Law to enforce laws relating to
prevention of animal cruelty and to promote the welfare of animals. Initially, it was empowered to arrest
violators of animal welfare laws and to share in the fines imposed and collected from violations of the laws;
however, these were later revoked by CA 148 and EO 63. PSPCA was notified by respondent COA that an
audit team will conduct a detailed audit of PSPCA’s accounts, operations, and financial transactions, to which
the latter opposed, arguing that it is a private domestic corporation and thus, not subject to COA’s audit
jurisdiction. Nonetheless. COA issued an order constituting an audit team to conduct the audit survey in
PSPCA.

Main Issue: Whether PSPCA is subject to the audit jurisdiction of COA – NO

Ruling: PSPCA is a private domestic corporation and hence, not subject to the audit jurisdiction of COA. First,
the “charter test” cannot be applied to determine the nature of PSPCA. Since the underpinnings of the charter
test had been introduced by the 1935 Constitution and not earlier, the test cannot apply to PSPCA, which was
incorporated in 1905, in consonance with the principle of non-retroactivity of laws. Second, PSPCA’s charter
shows that it is not subject to control or supervision by any agency of the State, unlike GOCCs. No government
representative sits on its board of trustees and it exercises the general powers of a private corporation. Third,
the employees of PSPCA are registered and covered by the SSS at the latter's initiative, and not through the
GSIS, which would have been the case if PSPCA is a public corporation. Fourth, the fact that PSPCA is
impressed with public interest does not by itself make it a public corporation—instead, it may be classified as a
quasi-public corporation, a corporation that is private although its charter contains provisions of a public
character, incorporated solely for the public good. And fifth, all corporations are subject to reportorial
requirements, regardless of their nature, since all corporations owe their very existence and powers to the
State.

Pertinent Provision: 1987 Const., Article IX-D, Sec. 2 (1). The Commission on Audit shall have the power,
authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any
of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with
original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other
government-owned or controlled corporations and their subsidiaries; and (d) such 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 such audit as a condition of subsidy or equity. However, where the internal
control system of the audited agencies is inadequate, the Commission may adopt such measures, including
temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep the
general accounts of the Government and, for such period as may be provided by law, preserve the vouchers
and other supporting papers pertaining thereto.

FACTS
● Petitioner PSPCA was incorporated in 1905 by virtue of Act No. 1285 by the Philippine Commission. It
was established to enforce laws relating to cruelty inflicted upon animals or the protection of animals in
the Philippines and to perform acts which may alleviate the suffering of animals and promote their
welfare.

DELA CRUZ, Cedric

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o At the time of the enactment of the PSPCA Charter, the original Corporation Law (Act No. 1459)
was not yet in effect and the SEC was not yet in existence.
o To enhance its powers, PSPCA was initially empowered to apprehend violators of animal welfare
laws and to collect one-half of the fines imposed and collected from violations of the laws.
o However, its powers to make arrests and to collect a portion of the fines were recalled by
Commonwealth Act No. 148. Further, EO 63 was issued by President Quezon in 1936 depriving
the PSPCA of their power to arrest violators, placing such power instead with the local chief
executive of the local governments.
● In 2003, an audit team from respondent COA visited PSPCA to conduct an audit. Petitioner
opposed, arguing that it was a private domestic corporation not under the jurisdiction of the COA,
citing Art. IX-D, Sec. 2(1) of the Constitution which specifies the general jurisdiction of the COA.
o Although PSPCA was created by special legislation, this was necessarily because in 1905 there
was neither a Corporation Law or any other general law under which it may be organized and
incorporated, nor the SEC which would have passed upon its organization and incorporation.
o EO 63 effectively deprived PSPCA of its power to make arrests, and its loss of operational
funding underscore the fact that it exercises no governmental function. Thus, the government
itself, by its overt acts, confirmed petitioner's status as a private juridical entity.
● Nonetheless, the COA asserted that PSPCA was subject to its audit authority. It issued the subject order
constituting the audit team and a letter informing the petitioner that said audit team shall conduct an audit
survey on the petitioner for a detailed audit of its accounts, operations, and financial transactions.
● PSPCA thus filed the present petition for certiorari and prohibition, seeking to enjoin COA from conducting
the audit.

PETITIONER RESPONDENT

PSCPA is a private domestic corporation and thus
not subject to the audit jurisdiction of COA.
1. Even though it was created by special legislation,
it exercises no governmental functions because
these have been revoked by CA 148 and EO 63.
2. Nowhere in its charter is it indicated that it is a
public corporation, unlike the Boy Scouts of the
Philippines, for example.
3. The fact that there was a need for the State to
grant it tax exemptions indicates that it is a private
entity.
4. Its employees are covered by SSS, not GSIS.
5. It does not receive any financial assistance from
the government, since CA 148 made it that all
fines collected from violators shall accrue to local
governments.
6. It no longer has the power to make arrests and
serve processes.
7. No government appointee or representative sits
on its board of trustees.
8. Its charter does not show that any of its act or
decision is subject to the approval or control by
any government agency.
9. The Committee on Animal Welfare, under the
Animal Welfare Act, included members from both
private and public sectors.
PSPCA is a "body politic" created by special
legislation and endowed with a governmental
purpose; thus, subject to the jurisdiction of COA.
1. The test to determine whether an entity is a
government corporation lies in the manner of its
creation, and, since PSPCA was created by virtue
of a special charter, it is thus a government
corporation subject to COA’s auditing power.
2. PSPCA exercises sovereign powers since it is
tasked to enforce the laws for the protection and
welfare of animals which "ultimately redound to
the public good and welfare," and, therefore, it is
deemed to be a government "instrumentality" as
defined under the Administrative Code of 1987.
3. Under the Admin Code, the Office of the President
exercises supervision or control over PSPCA.
4. Under the Admin Code also, the requirement for
PSPCA to render a report to the Office of the
President reflects its nature as a government
instrumentality.
5. Despite the passage of the Corporation Code, the
PSPCA Charter had not been abolished, nor had
it been re-incorporated under any general
corporation law.
6. RA 8485 or the Animal Welfare Act designates
petitioner as a member of its Committee on
Animal Welfare.

It does not have the authority to impose fines for OSG agrees that PSPCA was only entitled to share

DELA CRUZ, Cedric

POLITICAL LAW REVIEW
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violation of animal welfare laws, but only shared
in the fines collected; however, the same was
abolished by CA 148.
 Accordingly, it continues to exist as a private
corporation since it was created by the Philippine
Commission before the effectivity of the
Corporation Law and the 1935 and 1987
Constitutions.
in the fines but had no power to impose fines;
nonetheless, it is still a public corporation.
 Act No. 1285 and its amendatory laws did not
give petitioner the authority to impose fines; even
prior to the amendment of Act No. 1285, PSPCA
was only entitled to share in the fines imposed.
CA 148 abolished that privilege to share in the
fines collected. However, PSPCA is a public
corporation and has continued to exist since Act
No. 1285; it was not repealed by the 1935 and
1987 Constitutions which contain transitory
provisions maintaining all laws issued not
inconsistent therewith until amended, modified or
repealed.

ISSUES + HELD
Whether PSPCA is subject to the audit jurisdiction of COA – NO, petitioner is a private domestic
corporation and thus not subject to the audit jurisdiction of COA.

1. The “charter test” cannot be applied to determine the nature of PSPCA.

 According to the charter test, the test to determine whether a corporation is public or private in nature
is whether it is created by its own charter for the exercise of a public function or by incorporation
under the general corporation law. Those with special charters are public corporations.
 The charter test is predicated on the legal regime established by the 1935 Constitution which has
been carried over to the 1973 and 1987 Constitutions. Art. XII, Sec. 16 of the 1987 Constitution
provides that “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.”
o Under the 1935 Constitution, the proscription against the creation of private corporations by
special charter is to prevent the pressure of special interests upon Congress in the creation
and regulation of corporations. To allow Congress to organize or regulate private corporations
by special law may favor certain groups to the prejudice of others or the interests of the
country.
 Since the underpinnings of the charter test had been introduced by the 1935 Constitution and not
earlier, the test cannot apply to PSPCA, which was incorporated in 1905.
o GR: Laws have no retroactive effect and are to be construed as having only a prospective
operation.
o XPN: Laws can be given retroactive effect in the following cases: (1) when the law itself so
expressly provides; (2) in case of remedial statutes; (3) in case of curative statutes; (4) in
case of laws interpreting others; and (5) in case of laws creating new rights.
 None of these is present in the case at bar.
 The general principle of prospectivity of laws also applies to the Corporation Law, which was enacted
in 1906. Even the Corporation Law respects the rights and powers of juridical entities organized prior
to its enactment either to continue business as such corporation or to reform and organize under and
by virtue of the provisions of the Corporation Law.
 Thus, in a legal regime where the charter test cannot be applied, the mere fact that a corporation has
been created by virtue of a special law does not necessarily qualify it as a public corporation.
 Consequently, the applicable law at the time of formation of PSPCA was the Philippine Bill of 1902,
where no proscription similar to the charter test is found.

DELA CRUZ, Cedric

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 In sum, there being neither a general law on the formation and organization of private corporations
nor a restriction on the legislature to create private corporations by direct legislation, the Philippine
Commission in 1905 was well within its powers to constitute PSPCA as a private juridical entity.

2. PSPCA’s charter shows that it is not subject to control or supervision by any agency of the State,
unlike GOCCs.
 No government representative sits on the board of trustees of PSPCA. Like all private corporations,
the successors of its members are determined voluntarily and solely by the petitioner in accordance
with its by-laws, and may exercise those powers generally accorded to private corporations, such as
the powers to hold property, to sue and be sued, to use a common seal, and so forth.
 It may also adopt by-laws for its internal operations.

3. The employees of PSPCA are registered and covered by the SSS at the latter's initiative, and not
through the GSIS.
 If the employees are considered government employees, they should have been registered to the
GSIS.
 Sec. 1 of RA 1161, as amended by RA 8282 or the Social Security Act, excludes the Government
and any of its political subdivisions, branches or instrumentalities, including corporations owned or
controlled by the Government, from the definition of employer.

4. PSPCA can be considered a quasi-public corporation.

 The fact that a certain juridical entity is impressed with public interest does not, by that circumstance
alone, make the entity a public corporation, inasmuch as a corporation may be private although its
charter contains provisions of a public character, incorporated solely for the public good. This class of
corporations may be considered quasi-public corporations, which are private corporations that render
public service.
o 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.
 The purpose alone of the corporation cannot be taken as a safe guide, since almost all corporations
are nowadays created to promote the interest, good, or convenience of the public.
 Thus, the true criterion 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.

5. All corporations are subject to reportorial requirements, regardless of their nature.

 By virtue of the fiction that all corporations owe their very existence and powers to the State, the
reportorial requirement is applicable to all corporations of whatever nature, whether they are public,
quasi-public, or private corporations.
 The reportorial requirement is the principal means by which the State may see to it that its creature
acted according to the powers and functions conferred upon it.
o On the same note, corporations could not invoke the right against self-incrimination whenever
the State demanded the production of their corporate books and papers. (Bataan Shipyard &
Engineering Co., Inc. v. PCGG)

RULING

DELA CRUZ, Cedric

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WHEREFORE, the petition is GRANTED. Petitioner is DECLARED a private domestic corporation subject to the
jurisdiction of the Securities and Exchange Commission. The respondents are ENJOINED from investigating,
examining and auditing the petitioner's fiscal and financial affairs. 1

1
Puno, C.J., Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, Azcuna, Tinga, Chico-
Nazario, Garcia, Velasco, Jr., Nachura and Reyes, JJ., concur
DELA CRUZ, Cedric