PHILIPPINL SOCIL1Y IOR 1HL PRLVLN1ION OI CRULL1Y 1O

ANIMALS v. COMMISSION ON AUDI1, et al.

G.R. No. J69752, 25 September 2007, Austria-Martinez, J. (Ln Banc)

)be trve criteriov to aetervive rbetber a corporatiov i. pvbtic or prirate i. tovva iv tbe totatity ot
tbe retatiov ot tbe corporatiov to tbe tate. t tbe corporatiov i. createa by tbe tate a. tbe tatter`. orv agevcy
or iv.trvvevtatity to betp it iv carryivg ovt it. gorervvevtat tvvctiov.. tbev tbat corporatiov i. cov.iaerea
pvbtic: otberri.e. it i. prirate.

1he Philippine Societv or the Preention o (rueltv to Animals PSP(A,. composed
o animal aicionados and animal propagandists. was incorporated as a juridical entitv on
Januarv 19. 1905 bv irtue o Act 1285. Its object is to enorce laws relating to crueltv
inlicted upon animals and to do all things which in anv wav promote the welare o the
animals.

At the time o its incorporation. both the (orporation Law and the Securities and
Lxchange (ommission were not vet in existence.

Bv irtue o (ommonwealth Act 148 (.A.148,. the powers o PSP(A granted to it
bv Act 1285. which included the power to apprehend iolators o animal welare laws and
the right to share one-hal o the ines imposed and collected through its eorts or
iolations o the laws related thereto. were reoked. (.A. 148 has limited the power o
PSP(A bv giing it the authoritv to denounce to regular peace oicers iolators o animal
laws. It also depried PSP(A its share in the ines collected or iolation said laws. 1hen
President Manuel L. Ouezon in his Lxecutie Order L.O.63, declared that (.A.148 had
corrected a serious deect in Act 1285.

In 2003. the audit team rom (ommission on Audit (OA, inormed PSP(A that it
would be conducting an audit surev pursuant to a (OA Oice Order. PSP(A reused the
audit surev on the ground that being a priate entitv it is not coered bv the authoritv o
(OA to audit. In support o its contention. PSP(A adanced the ollowing arguments: 1,
een though it was created bv special legislation in 1905 as there was no general law then
existing under which it mav be organized or incorporated. it exercises no goernmental
unctions because these hae been reoked bv (.A. 148 and L.O. 63: 2, nowhere in its
charter is it indicated that it is a public corporation: 3, i it were a goernment bodv. there
would hae been no need or the State to grant it tax exemptions under Republic Act No.
118: 4, the emplovees o the petitioner are registered and coered bv the Social Securitv
Svstem at the latter`s initiatie and not through the Goernment Serice Insurance Svstem:
5, it does not receie anv orm o inancial assistance rom the goernment as that was
reoked bv (.A. 148: 6, (.A. 148 eectielv depried the it o its powers to make arrests
and sere processes as these unctions were placed in the hands o the police orce: , no
goernment appointee or representatie sits on the board o trustees o the petitioner: 8, a
reading o the proisions o its charter Act No. 1285, ails to show that anv act or decision
o it is subject to the approal o or control bv anv goernment agencv. except to the extent
that it is goerned bv the law on priate corporations in general: and inallv. 9, the
(ommittee on Animal \elare. under the Animal \elare Act o 1998. includes members
rom both the priate and the public sectors.

1he (OA maintained that PSP(A is a bodv politic` created bv irtue o a special
legislation and endowed with a goernmental purpose. which is to enorce laws or the
protection and welare o animals. 1hus. the (OA mav audit the inancial actiities o the
latter.

ISSUL:

\hether or not PSP(A qualiies as a goernmental agencv that mav be subject to
audit bv (OA

HLLD:

Petition PAR1L\ GRAN1LD.

1he Supreme (ourt held that the charter test` cannot be applied in PSP(A case.
Lssentiallv. the charter test` as it stands todav proides that the test to determine whether a
corporation is goernment owned or controlled or priate in nature is simple: . it createa by
it. orv cbarter tor tbe eerci.e ot a pvbtic tvvctiov. or by ivcorporatiov vvaer tbe geverat corporatiov tar.
)bo.e ritb .peciat cbarter. are gorervvevt corporatiov. .vbiect to it. prori.iov.. and its emplovees are
under the jurisdiction o the (iil Serice (ommission. and are compulsorv members o the
Goernment Serice Insurance Svstem.

PSP(A is correct in stating that the charter test is predicated on the legal regime
established bv the 1935 (onstitution. Section . Article XIII. which states: 1he National
Assemblv shall not. except bv general law. proide or the ormation. organization. or
regulation o priate corporations. unless such corporations are owned or controlled bv the
Goernment or anv subdiision or instrumentalitv thereo.` 1he oregoing proscription has
been carried oer to the 193 and the 198 (onstitutions.

And since the underpinnings o the charter test had been introduced bv the 1935
(onstitution and not earlier. it ollows that the test cannot applv to the petitioner. which was
incorporated bv irtue o Act 1285. enacted on Januarv 19. 1905. Settled is the rule that laws
in general hae no retroactie eect. unless the contrarv is proided. All statutes are to be
construed as haing onlv a prospectie operation. unless the purpose and intention o the
legislature to gie them a retrospectie eect is expresslv declared or is necessarilv implied
rom the language used. In case o doubt. the doubt must be resoled against the
retrospectie eect.

1he general principle o prospectiitv o the law likewise applies to Act 1459.
otherwise known as the (orporation Law. which had been enacted bv irtue o the plenarv
powers o the Philippine (ommission on March 1. 1906. a little oer a vear ater Januarv 19.
1905. the time the petitioner emerged as a juridical entitv.

In a legal regime where the charter test doctrine cannot be applied. the mere act that
a corporation has been created bv irtue o a special law does not necessarilv qualiv it as a
public corporation.

Nature of PSPCA as a Corporate Lntity

As stated. at the time the PSP(A was ormed. the applicable law was the Philippine
Bill o 1902. and. emphaticallv. no proscription similar to the charter test can be ound
therein.

1he textual oundation o the charter test. which placed a limitation on the power o
the legislature. irst appeared in the 1935 (onstitution. loweer. the petitioner was
incorporated in 1905. 1here being neither a general law on the ormation and organization
o priate corporations nor a restriction on the legislature to create priate corporations bv
direct legislation. the Philippine (ommission at that moment in historv was well within its
powers in 1905 to constitute the petitioner as a priate juridical entitv.

1he amendments introduced bv (.A. 148 made it clear that the PSP(A was a priate
corporation and not an agencv o the goernment. 1his was eident in Lxecutie Order 63.
issued bv then President o the Philippines Manuel L. Ouezon. declaring that the reocation
o the powers o the PSP(A to appoint agents with powers o arrest corrected a serious
deect` in one o the laws existing in the statute books.

As a curatie statute. (.A. 148 has to be gien retroactie eect. therebv reeing all
doubt as to which class o corporations the PSP(A belongs. that is. it is a quasi-public
corporation. a kind o priate domestic corporation. 1hus. the act that a certain juridical
entitv is impressed with public interest does not. bv that circumstance alone. make it a public
corporation. inasmuch as a corporation mav be priate although its charter contains
proisions o a public character. Ouasi-public corporations are priate corporations. which.
while purposelv organized or gain or beneit o their members. are required bv law to
discharge unctions or public beneit.

Moreoer. a reading o PSP(A`s charter shows that it is not subject to control or
superision bv anv agencv o the State. unlike goernment-owned and -controlled
corporations. No goernment representatie sits on the board o trustees o the petitioner.
Like all priate corporations. the successors o its members are determined oluntarilv and
solelv bv the petitioner in accordance with its bv-laws. and mav exercise those powers
generallv accorded to priate corporations. such as the powers to hold propertv. to sue and
be sued. to use a common seal. and so orth. It mav adopt bv-laws or its internal
operations: the petitioner shall be managed or operated bv its oicers in accordance with its
bv-laws in orce.`

Also. the emplovees o the petitioner are registered and coered bv the Social
Securitv Svstem at the latter`s initiatie. and not through the Goernment Serice Insurance
Svstem. which should be the case i the emplovees are considered goernment emplovees.
1his is another indication o petitioner`s nature as a priate entitv.

1he true criterion. thereore. to determine whether a corporation is public or priate
is ound in the totalitv o the relation o the corporation to the State. I the corporation is
created bv the State as the latter`s own agencv or instrumentalitv to help it in carrving out its
goernmental unctions. then that corporation is considered public: otherwise. it is priate.