DOJ Opinion No. 160, s. 1993

DOJ OPINION NO. 160 , s. 1993 November 23, 1993 Ms. Leonora Vasquez-De Jesus Chairman, GCMCC Technical Board and Head, GCMCC Secretariat Government Corporate Monitoring & Coordinating Committee Office of the President Manila M a d a m : This refers to your request for opinion on "whether the Philippine National Red Cross (PNRC) and the Veterans Federation of the Philippines (VFP) are government corporations". prcd Corollarily, comment is requested on "whether the conversion of the PNRC to a purely private organization will, in a way, alter the Philippines' commitment to the 1947 Geneva Convention", considering that the PNRC was created to show our adherence to the said Convention, to which the Philippines is a signatory. You state that the Government Corporate Monitoring and Coordinating Committee (GCMCC) has been tasked to review/study the eighty-six (86) retained government-owned and controlled corporations (GOCCs) to determine the need for their further retention as GOCCs; and that in the course of the study being undertaken by the GCMCC Secretariat, underlying questions/issues cropped up which need to be resolved. In this connection, you raise the abovementioned queries. Records show that the PNRC was created pursuant to Republic Act No. 95 on March 22, 1947 as a "body corporate and politic to be the voluntary organization officially designated to assist the Republic of the Philippines in discharging the obligations set forth in the Geneva Conventions and to perform such other functions and duties as are inherent upon a national Red Cross Society" (Sec. 1, R.A. No. 95, as amended). It is vested with corporate powers, such as the power to sue and be sued, to own and hold such real and personal estate as shall be deemed advisable, to accept bequests, donations and contributions of property of all classes, and to adopt a seal and emblem (Sec. 2, id. ). The members of the Board of Governors are elected by its members, except six who shall be appointed by the President of the Philippines (Sec. 7, id. ). The PNRC derives its income primarily from the contributions obtained from solicitation campaigns (Sec. 11, id. ). Similarly, the VFP was crated on June 18, 1960 pursuant to R.A. No. 2640, as a "body corporate under the control and supervision of the Secretary of National Defense" (Sec. 1, R.A. No. 2640). Under the said law, VFP is vested with corporate powers, such as perpetual succession, power to sue and be sued, to hold real and personal property necessary for its purposes, and to adopt a seal, or to alter or destroy the same at pleasure. The VFP has its own governing body composed of officers directly elected by its members in the manner prescribed by its constitution and by-laws (Sec. 2. id. ). Section 16, Article XII of the 1987 Constitution 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) Interpreting a similar provision found in the 1973 Constitution (Sec. 4, Art. XIV), this Department ruled that "an entity which is created by a 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 under the so-called charter test" (Op. No. 79, s. 1985). The rationale is that under the Constitution, only government corporations may be created by special law; private corporations may only be created formed or organized pursuant to the general incorporation law. Since both the PNRC and the VFP are created by special laws and acquired corporate existence by virtue thereof, there is no doubt that these two bodies are government corporations. This answers your first query. Regarding the second query, it is our view that the conversion of the PNRC to a purely private organization will not alter the country's commitment to the 1947 Geneva Convention. We note that under Section 3 of P.D. No. 1264 (amending the PNRC Charter), the PNRC has, among its purposes, the giving of volunteer aid to the sick and wounded of armed forces in time of war and to perform all duties devolving upon the Corporation as a result of the adherence of the Republic of the Philippines to the said Convention (Sec. 3 [a] & [b], supra ). Likewise, as indicated in the Whereas clauses of P.D. No. 1264, the commitment of the Philippines is to establish a voluntary organization to carry out the purposes contemplated by the Geneva Convention. Accordingly, for as long as the organization is voluntary in character and continues to function in accordance with the objectives of the Geneva Convention, the Government's commitment under the Geneva Convention will have been sustained. It bears emphasis that it is the purpose clause which sets forth the nature or character of a corporation. Thus, it has been held that "the actual character of a corporation is determined by the object of its formation and the nature of its business as stated in the articles of incorporation themselves (Agbayani, Commercial Laws of the Philippines 1989 Ed., p. 142). Stated differently, it is the purpose clause which determines the nature or character of a corporation, and not its ownership. Hence, the conversion of the PNRC to an entirely private organization does not, and will not, affect as long as it keeps to the original purposes of its incorporation. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary