Charelle Mei V.

Sy 11-0073

1) What is a public corporation? Contrast with private corporation, non-governmental

organization, line agency and local government.

Public corporations are corporations that are treated by law as agencies or instrumentalities
of the government which are not subject to the tests of ownership or control and economic viability
but to different criteria relating to their public purposes/interests or constitutional policies and
objectives and their administrative relationship to the government or any of its Departments or
Offices. [Boy Scout of the Philippines v. Commission on Audit, G.R. No. 177131, June 7, 2011]

Whereas, private corporations are corporations formed for some private purpose, benefit,
aim or end, and is governed by the Corporation Code of the Philippines and is regulated by the
Securities and Exchange Commission.

Whereas, non-governmental organizations refers to a non-stock, non-profit domestic

corporation organized and operated exclusively for scientific, research, educational, character-
building and youth and sports development, health, social welfare, cultural or charitable purposes,
or a combination thereof, and no part of the net income of which inures to the benefit of any
private individual.

Whereas, a line agency is similar to an attached agency wherein it is an agency of the

government which has a lateral relationship to an executive department of the Government but
only for purposes of policy and program coordination. [Beja, Sr. v. Court of Appeals, G.R. No.
97149, 31 March 1992]

Whereas, a local government is a political subdivision of the State which is constituted by

law and possessed of substantial control over its own affairs. Remaining to be an intra- sovereign
subdivision of one sovereign nation, but not intended, however, to be an imperium in imperio
(empire within empire), the local government unit is autonomous in the sense that it is given more
powers, authority, responsibility and resources. [Alvarez v. Guingona, G.R. No. 118303, January
31, 1996]

2) Is the MMDA a public corporation? Is the ARMM a public corporation?

No, the MMDA is not a public corporation. Even if the MMDA was established as a “public
corporation” pursuant to Sec. 1 of PD 824, it is not a political unit of government. The power
delegated to the MMDA is that given to the Metro Manila Council (MMC) to promulgate
administrative rules and regulations in the implementation of the MMDA's functions. There is no
grant of authority to enact ordinances and regulations for the general welfare of the inhabitants of
the metropolis. Unlike the MMC, the MMDA has no power to enact ordinances for the welfare of the
community. It is the local government units, acting through their respective legislative councils, that
possess legislative power and police power. [Metropolitan Manila Development Authority vs. Bel-Air
Village Association, G.R. No. 135962, March 27, 2000]

No, the ARMM is also not a public corporation, but is a mere local government unit. The
ARMM was created through RA. 6734 with the purpose of providing for an autonomous area in
Muslim Mindanao. It does not serve as an agency to help carry out the functions of the government,
but is an independent region with its own government composed of Executive and Legislative
assemblies headed by a Regional Governor and a speaker. Thus, the ARMM works towards a
purpose independent to that of the State’s.

Phil. Society for Prevention of Cruelty to Animals vs. Commission on Audit

GR No. 169752. 25 September 2007
Facts
Petitioner was incorporated as a juridical entity around one hundred years ago by virtue of
Act No. 1285, enacted in 1905 by the Philippine Commission. The objects of petitioner shall be to
enforce laws relating to cruelty inflicted upon animals or for their protection in the Philippines. To
promote animal welfare, petitioner’s charter allowed it to apprehend violators of animal welfare laws.
Also, petitioner was to share one-half (1/2) of the fines imposed and collected through its efforts for
violations of the laws related thereto. However, then President Manuel Quezon subsequently issued
E.O. No. 63, specifically depriving the agents of petitioner the power to arrest violators.

In 2003, an audit team from Commission on Audit (COA) visited petitioner to conduct an audit
survey pursuant to COA Office Order No. 2003-051. Petitioner then demurred on the ground that it
was a private entity not under the jurisdiction of COA, citing Section 2(1) of Article IX of the
Constitution. The COA General Counsel however asserted that petitioner was subject to its audit
authority since it was a government entity.

Issue
Whether or not Philippine Society for the Prevention of Cruelty to Animals is a private entity
and therefore not subject to COA’s audit authority.

Held
Yes. Petition granted.

Ratio:
The test used to determine whether a corporation is government owned or controlled, or
private in nature is called the “charter test”, which asks, “Is it 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 government corporations subject to its provisions, xxx”. This Charter Test
cannot be used in this case since the underpinnings of the charter test had been introduced by the
1935 Constitution and not earlier, thus it follows that the test cannot apply to the petitioner, which
was incorporated by virtue of Act No. 1285, enacted on January 19, 1905. Settled is the rule that
laws in general have no retroactive effect, unless the contrary is provided. In a legal regime where
the charter test doctrine 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.

The true criterion, therefore, 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. Here, petitioner’s powers to arrest
violators was revoked and thus cannot be considered as an agency of the State.

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 - as creatures of the State, there is a reserved right in
the legislature to investigate the activities of a corporation to determine whether it acted within its
powers. Thus, being subject to the reportorial requirement does not necessarily indicate that
petitioner is a government instrumentality.