DOJ Opinion No. 060, s. 1997

DOJ OPINION NO. 060 , s. 1997 July 24, 1997 Hon Ralph G. Recto Congressman, 4th District, Batangas Room 403 North Wing, Batasang Pambansa Complex Constitution Hills, Quezon City Sir : This refers to your request for opinion on certain issues concerning the People's Credit and Finance Corporation (PCFC), which is proposed to be the conduit for providing micro-finance services for the poor under the proposed House Bill No. 9360, the substitute for House Bill No. 1, entitled "An Act Institutionalizing The Social Reform And Poverty Alleviation Program, Creating For The Purpose The National Anti-Poverty Commission, Defining Its Powers And Functions, And For Other Purposes." Specifically, you raise the following issues: "1. What is the nature of PCFC? Are there other existing entities like PCFC which are registered under the SEC but the funds are totally infused by the government? 2. Can Congress a. increase the capitalization of PCFC? b. mandate its powers and functions? 3. Can PCFC be a conduit of Small Savers Instruments (SSI)? 4. Are there legal infirmities of the bill as to the creation of the NAPC and the establishment of the People's Development Fund (PDF)?" We shall discuss the abovestated issues in seriatim . I Based on the attached copies of its Articles of Incorporation and By-Laws, the PCFC is a corporation organized in accordance with the Corporation Code of the Philippines, and duly registered with the Securities and Exchange Commission on September 14, 1995. Basically, it can be classified as a stock corporation on the ground that the two elements of stock corporation as expressed in Section 3 of the Corporation Code are present, namely, the capital stock divided into shares and the authority to distribute to its shareholders dividends out of its surplus profits (Jose C. Campos, Jr., The Corporation Code, Vol. 1). Furthermore, its Articles of Incorporation shows that its capital stock of P100 Million is available for subscription by the National Government out of the Capital Fund of the National Livelihood Support Fund (NLSF) in the name of the Land Bank of the Philippines (LBP) (7th par., Articles of Incorporation) and that the amount of P39,999,100 out of the said P100 Million capital of the PCFC has been actually subscribed and the amount of P9,999,100 has been paid by the LBP, as supervising agency of the NLSF (8th par., ibid ). The query as to the nature of the PCFC is being raised presumably because the PCFC, whose capital stock is owned by the government, as shown by its Articles of Incorporation, is a SEC-registered corporation and not a corporation which is directly chartered by law. If it were directly chartered by law, there would be no doubt that the PCFC is a government-owned or controlled corporation in view of Section 16, Article XII of the 1987 Constitution which 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 ". (Emphasis supplied) However, construing a similar provision in the 1935 Constitution (Sec. 7, Art. XIV), this Department had ruled that this Constitutional provision "is simply a prohibition, directed against Congress, against the creation of private corporations by special law, except those owned or controlled by the government or a subdivision or instrumentality thereof. But it does not in any manner preclude other methods of organizing a government-owned or controlled entity, such as for instance, by the acquisition of all or a majority of the shares of an existing private corporation or by organizing a new corporation to be owned or controlled by the government or its subdivision or instrumentality " (Opinion dated August 2, 1968). A similar provision in the 1973 Constitution (Sec. 4, Art. XIV) was interpreted by this Department in a similar fashion. We ruled: "The above Constitutional provision prohibits the creation of private corporations by special law, except those owned or controlled by the government or a subdivision or instrumentality thereof. xxx xxx xxx The same provision, however, does not preclude other modes of organizing a government-owned or controlled entity, such as for instance by acquisition of all or a majority of the shares of an existing private corporation or by organizing under the general corporation law a new corporation to be owned or controlled by the government or its subdivision or instrumentality (Op. dated August 2, 1968; Op. No. 94, s. 1981)." A subsequent law (P.D. No. 2048) defines "government-owned or controlled corporation" along the same concept expounded in the aforementioned rulings of this Department. Section 2 of P.D. No. 2048 provides thusly: "SEC. 2. Definition . A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by special law or if organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock ; . . ." (Emphasis supplied.) As previously stated, the PCFC is a SEC-registered corporation. It was organized by virtue of Administrative Order No. 148 and Memorandum Circular No. 261 with the LBP being directed to invest funds for its initial capitalization. The funds to be invested shall come from the Capital Fund of the NLSF which is a public fund. Likewise, the Articles of Incorporation of the PCFC states that its authorized capital stock of P100 Million divided into one million (1,000) common shares "are available for subscription by the National Government" (7th par. Articles of Incorporation). Based on the foregoing, it is clear that the PCFC is a government-owned or controlled corporation by reason of the government's ownership of its shares of stocks. There are government-owned or controlled corporations which, like the PCFC, have been organized under the Corporation Code and registered with the SEC. These are mostly subsidiaries of government-owned or controlled corporations directly created by special laws. We can mention a few: 1. National Gas Corporation, which is a subsidiary of the National Development Corporation; 2. PNOC Energy Development Corporation, which is a subsidiary of PNOC; 3. Integrated Feedmills Corporation, which is a subsidiary of the Southern Philippines Development Corporation; 4. Philippine Cotton Corporation which was organized and registered with the SEC by virtue of P.D. No. 350; and 5. NEDA-APO Production Unit which is a non-stock non-profit SEC-registered corporation organized in 1974 pursuant to LOI No. 197. II The second issue on whether the Congress may increase the capitalization of the PCFC and mandate its powers and functions is answered in the affirmative. Since the PCFC is a government-owned or controlled corporation, the government, if needed, may infuse capital in the PCFC. Such infusion of capital must, of course, be authorized by Congress because it will involve the appropriation of public funds. The Congress may, by law, also define or mandate the powers and functions of the PCFC. The PCFC, being a government-owned or controlled corporation, is an instrumentality of the government (Sec. 2[10], Introductory Provision, Administrative Code of 1987). Although it was organized under the Corporation Code, its creation was mandated by the Executive through Administrative Order No. 148 and Memorandum Order No. 261, both of President Fidel V. Ramos, purposely to provide affordable credit to the marginalized sectors of the population consistently with the objectives to promote people empowerment and self-reliance and as a measure to complement the developmental efforts to equitably distribute wealth in the countryside. The objective for the creation of the PCFC is public and governmental it is to alleviate poverty through the institutionalization of a credit program for the poor to make them self-reliant and economically productive. Consistent with this public and governmental purpose of the PCFC, the Congress may, by law, vest upon the PCFC powers and functions that will enable said body to better achieve the purposes of its creation as the extender of credit facilities to the poor. III The issue on whether the PCFC can be a conduit of Small Savers Instruments (SSI) should be referred to the Bangko Sentral ng Pilipinas and the Department of Finance since it deals with borrowings. As a matter of official courtesy, this Department refrains from expressing its views on matters which fall within the official competence of another agency. cdt IV Finally, on the fourth issue, the creation of the National Anti-Poverty Commission (NAPC) and the establishment of the People's Development Fund (PDF) are matters within the legislative prerogative. Accordingly, considerations affecting the wisdom, efficacy or practicability of a law should come under the exclusive jurisdiction of the Congress (J. Isagani A. Cruz, Philippine Political Law, 1989 Edition, p. 73). Such matter is in the nature of a political question. As held in Taada v. Cuenco (100 Phil. 1101), the term "political question" connotes what it means in ordinary parlance, namely, a question of policy. It refers to "those questions which, under the Constitution, are to be decided by the people in their sovereign capacity; or in regard to which full discretionary authority has been delegated to the legislative or executive branch of the government. It is concerned with issues dependent upon the wisdom, not the legality, of a particular measure." As to whether there are legal infirmities in the creation of the NAPC and the PDF, we note the following: 1. Section 10 establishing the PDF does not fix any specific amount to constitute the PDF and does not specify its fund source/s, except for the statement that the "Fund may be augmented by voluntary contributions, grants, gifts from both local and foreign sources." Likewise, the provision is not clear as to the role of the PDF vis-a-vis the PCFC. Apparently, both agencies are envisioned to extend financing to the marginalized sectors of the community. Their respective roles, however, should be clearly defined and delineated, and the amount of the PDF and its fund source/s should be specified. These ambiguities in the proposed law affect the legality of the proposal. 2. Section 18 appropriating funds for the NAPC, the PDF and the increase in the capitalization of the PCFC is likewise legally infirm for its failure to provide the specific amounts to be appropriated for each of the aforementioned agencies. The 1987 Constitution provides in Section 29 (1), Article VI thereof that "[N]o money shall be paid out of the Treasury except in pursuance of an appropriation made by law". To be valid, the appropriation must be for a public purpose (Pascual vs. Secretary of Public Works and Communications, 110 Phil. 331; Gaston vs. Republic Planters Bank, 158 SCRA 626), and the amount authorized to be released must be a sum certain so that the executive officers are authorized to expend that sum, and no more, for that purpose, and no other (State of Nebraska v. Eugene Moore, 50 Neb. 88; Stratton v. Green, 45 Cal. 149; State v. Wallichs, 12 Neb. 407). It is essential to the validity of an appropriation measure that it should state the exact amount appropriated or the maximum sum from which the authorized expenses shall be paid, otherwise it would be void for uncertainty, since the legislative power over appropriation would in effect have been delegated in such case to the recipient of the funds appropriated (Political Law of the Philippines, Taada and Carreon, 1961 First Edition, Vol. 1, p. 253). Wherefore, your queries are hereby answered accordingly. Very truly yours, (SGD.) TEOFISTO T. GUINGONA, JR. Secretary