DOJ Opinion No. 079, s. 1985

DOJ OPINION NO. 079 , s. 1985 July 23, 1985 Chairman Armand V. Fabella Presidential Commission on Reorganization State Financing Center Bldg. Ortigas Avenue, Mandaluyong Metro Manila Sir : This refers to your request for opinion on certain issues concerning government-owned or controlled corporations in the light of the ruling of the Supreme Court in the case of National Housing Corporation vs. Juco, et al. (G.R. No. 64313, January 17, 1985). Your queries are restated and discussed hereunder in seriatim . A. Query No. 1 Under the so-called "charter test", if an entity (a) is created by special law, (b) acquires a juridical personality exclusively on the basis of that special law, and (c) is endowed under that special law with the corporate form of organization, then such an entity is a government corporation. Is it legally correct to presume that any entity which meets the above-mentioned three requirements of the charter test is automatically a government corporation? Can RISSI [Revenue Information Systems Services, Inc.] which was established through the SEC by the government but subsequently mentioned in Executive Order No. 873 as a government corporation, be legally considered a government corporation under the charter test? Our answer is "yes" to the first question and "no" to the second question. Article XIV, Section 4 of the 1973 Constitution provides: "SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the formation, organization, or regulation of private corporation, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof." 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. In view of this prohibition, an entity which is created by special law, acquires a juridical personality exclusively on the basis of that special law, and is endowed with the corporate form of organization under that special law may automatically be considered a government corporation. The same provision, however, does not 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 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). In the case of RISSI, since it was organized by the government under the Corporation Law, it cannot be considered a government corporation under the "charter test". Its subsequent mention in E.O. No. 873 as a "wholly government-owned foundation" only confirms its status as a corporation owned or controlled by the government but does not thereby convert it to a government corporation created by special law. Its registration with the SEC is still the source of its corporate existence. prcd B. Query No. 2. Assuming that the answer to the first query is in the affirmative, confirmation is requested as to whether the 93 corporations in the enclosed tentative list of "parent" government corporations are properly classified as government-owned or controlled corporations created by special law. Assessment is also requested as to whether the following entities may be considered government corporations for purposes of inclusion in the list: (1) Philippine Pilgrimate Authority, (2) NEDA Apo Production Unit, (3) Asian Exchange Center, Inc. and (4) Phil. Islamic Center in Jeddah. After a close examination of the individual charters of all the entities listed, our findings are summarized as follows: 1. Only 89 corporations are properly classified as government-owned or controlled corporations created by special law and are therefore properly included in the PCR list. 2. The following do not meet the "charter test" and should not be included in the PCR list: a. Philippine Cotton Corporation b. Revenue Information Systems Services, Inc. c. NEDA Apo Production Unit d. Asian Exchange Center, Inc. e. Philippine Sugar Commission f. Sacobia Development Authority g. Philippine Pilgrimage Authority h. Philippine Islamic Center in Jeddah The first four mentioned entities are not directly chartered by special law but are incorporated under the Corporation Law, and they acquired corporate personality only upon registration with the SEC. The last four are not corporate bodies but regular government agencies. Briefly, our specific findings on the eight mentioned corporations are as follows: 1. Philippine Cotton Corporation (PHILCOTTON) PHILCOTTON is a SEC-registered government corporation. P.D. No. 350 which created PHILCOTTON did not constitute it as a corporate body but expressly provided instead that it should be organized and registered with the Securities and Exchange Commission in accordance with the Corporation Law. 2. Revenue Information Systems Services, Inc. (RISSI) RISSI is also a SEC-registered government corporation (Op. No. 140, s. 1983). It was subsequently mentioned in E.O. No. 873 as a "wholly government-owned foundation" but this is no more than a reaffirmation of its status as a government-owned or controlled corporation. The source of its corporate existence is still its registration with the SEC. 3. NEDA-APO Production Unit (NEDA-APO) NEDA-APO is also a SEC-registered government corporation. It was incorporated in 1974 as a non-stock, non-profit corporation pursuant to LOI No. 197 directing NEDA to make APO "a self-sustaining operation" and in line with the commitment of the Philippine Government under its Agreement with the Asian Productivity Organization on June 24, 1971 to maintain APO "on a self-sustaining basis" (Op. No. 52, s. 1975). 4. Asian Exchange Center, Inc. (AECI) AECI was incorporated as a non-stock, non-profit corporation under the Corporation Law by the government to serve as its unofficial arm for continuing and promoting friendly relations and cooperation with Taiwan with which we have no diplomatic ties. It was placed under the Office of the President by virtue of E.O. No. 931 but is recognized under said E.O. as a "private corporation organized under the laws of the Philippines." prcd 5. Philippine Sugar Commission (PHILSUCOM) PHILSUCOM is not a corporate body. There is no indication in its charter(P.D. No. 388 and its various amendments) that it has been given a corporate status. If the intention is to constitute a corporate body, P.D. No. 388 would have so stated in explicit terms. Several government entities were originally established as regular government agencies, but were subsequently conferred corporate personality in amendatory legislations, such as the Employees Compensation Commission (Art. 176, Labor Code, as amended by P.D. No. 1368); Cultural Center of the Philippines (E.O. No. 30, as amended by P.D. No. 15); Land Bank of the Philippines (R.A. No. 3844, as amended by P.D. No. 251); National Cottage Industries Authority (R.A. No. 3470, as amended by P.D. No. 1788); National Social Action Council (E.O. No. 182-A as amended by P.D. No. 294). This was not done in the case of PHILSUCOM. Significantly, in Opinion No. 114, s. 1977, former Secretary of Justice Vicente Abad Santos ruled that PHILSUCOM "was not constituted into a corporate entity separate and distinct from that of the Government. It is a government agency or instrumentality and accordingly is a part of the Philippine Government" and its obligations legitimately contracted pursuant to its charter "represent the direct obligations of the Philippine Government and carry the full faith and credit of the Philippine Government". (See also Op. No. 48, s. 1978.) 6. Sacobia Development Authority (SACOBIA) The case of SACOBIA is similar to PHILSUCOM. E.O. No. 586 creating SACOBIA does not in express terms constitute a corporate body. It does not possess standard corporate powers which are ordinarily granted to, inherent in corporate entities, such as the power to sue and be sued, to have continuous succession, to adopt and use a corporate seal, to prescribe, amend and repeal its by-laws. While it has been given the powers to contract, to borrow money, to acquire, purchase, own, dispose of or otherwise deal in real and personal property, this is not indicative of corporate existence in the absence of an express provision giving it corporate personality. Moreover, SACOBIA has no corporate funds. It receives a regular appropriation from the government. prcd 7. Philippine Pilgrimage Authority (PHILPA) Also quite similar to SACOBIA is PHILPA. P.D. No. 1305 creating PHILPA does not give PHILPA corporate personality. It has no standard corporate powers and it has no corporate funds but a yearly appropriation from the government. 8. Philippine Islamic Center in Jeddah, Saudi Arabia (Philippine Islamic Center) The Philippine Islamic Center is not a corporate body. It has no separate juridical personality as may be gleaned from Sec. 2 of P.D. 1782 which provides that the Board shall "in behalf of the Republic of the Philippines, acquire by lease . . ." It is created to achieve a governmental purpose which is to strengthen our political and economic ties with Islamic countries. It has a regular appropriation from the national treasury. Incidentally, in a recent opinion (Op. 57 dated May 8, 1985), we had occasion to state that the usual practice by which the legislative authority invests an entity with a juridical personality is (a) to expressly declare that it is a "body corporate" or a "government corporation" or a "public corporation"; (b) to specifically confer it with general corporate powers, such as to enter into contracts, to sue and be sued or to acquire and own property; and (c) to explicitly state that it possesses all the rights, powers and privileges incident to corporations. We had these tests in mind when we examined the charters of all the government entities mentioned in your query. C. Queries Nos. 3 and 4 Your third and fourth queries relate to the implications of the Supreme Court decision in NHA vs. Juco with respect to reclassification of government corporations and to certain aspects of labor relations. We are constrained to forbear rendition of opinion on said queries since they are presently under Cabinet consideration. D. Query No. 5 In converting certain corporations created by special law, such as the Boy Scouts of the Philippines, Girl Scouts of the Philippines, Philippine National Red Cross, and Integrated Bar of the Philippines, which are essentially socio-civic in character and requiring no direct funding from the government, into private entities, what necessary steps would have to be taken? Would a mere general amendment of their existing charters requiring registration with the SEC as a prerequisite to acquiring juridical personality be sufficient for the purpose? An omnibus law may be enacted converting certain corporations directly chartered by law to private entities. Such law ought to provide for the reincorporation of the corporation under the general corporation law by private corporators and the consequent abrogation or repeal of the special charters upon registration of the new private corporations with the SEC. A mere general amendment of existing charters requiring juridical personality may give rise to the issue as to the status of the original charter. The special charter must lapse upon the emergence of the private entity to accomplish the conversion. Please be guided accordingly. Very truly yours, (SGD.) ESTELITO P. MENDOZA Minister of Justice