G.R. No. 177131

G.R. No. 177131: BOY SCOUTS OF THE PHILIPPINES, petitioner, v. COMMISSION ON AUDIT, respondent.

Promulgated:

June 7, 2011

x-----------------------------------------------------------------------------------------x

DISSENTING OPINION

CARPIO, J.:

I dissent.

The Boy Scouts of the Philippines (BSP) is neither a government-owned or controlled corporation nor a government instrumentality subject to the Commission on Audits (COA) jurisdiction. The BSP is a private, non-stock, and non-profit corporation beyond the COAs audit jurisdiction.

COAs Audit Jurisdiction

Section 2(1), Article IX-D of the Constitution provides for COAs audit jurisdiction, as follows:

SECTION 2. (1) The Commission on Audit shall have the power, authority and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity. However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.

Based on this Constitutional provision, the COA exercises jurisdiction on a pre-audit basis over the (1) Government, (2) any of its subdivisions, (3) agencies, (4) instrumentalities, and (5) GOCCs with original charters.

The COA also has jurisdiction on a post-audit basis over (1) constitutional bodies, commissions and offices that have been granted fiscal autonomy under the Constitution; (2) autonomous state colleges and universities; (3) other GOCCs ¹ and their subsidiaries; and (4) non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity.

Hence, if an entity is properly identified and categorized as among those enumerated in Section 2(1), Article IX-D of the Constitution, then the COA can indisputably examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property of that particular entity.

II.

History of the BSP

The Boy Scouts of the Philippines began in 1923 with the establishment of the Philippine Council of the Boy Scouts of America, when the Philippines was an American possession at the time.²

On 31 October 1936, the Philippine National Assembly enacted Commonwealth Act No. 111, or An Act to Create a Public Corporation to be Known as the Boy Scouts of the Philippines, and to Define its Powers and Purposes, the pertinent provisions of which read:

Section 1. J. E. H. Stevenot, A. N. Luz, C. P. Romulo, Vicente Lim, Manuel Camus, Jorge B. Vargas, and G. A. Daza; all of Manila, Philippines, their associates and successors, are hereby created a body corporate and politic in deed and in law, by the name, style and title of Boy Scouts of the Philippines (hereinafter called the corporation). x x x

Section 3. The purpose of this corporation shall be to promote, through organization, and cooperation with other agencies, the ability of boys to do things for themselves and others, to train them in scoutcraft, and to teach them patriotism, courage, self-reliance, and kindred virtues, using the methods which are now in common use by boy scouts.

Section 4. Until such time as the corporation shall have acquired by purchase, gift or other equitable arrangement from and with the Boy Scouts of America all of the existing assets and properties of the aforesaid Boy Scouts of America in the Philippines, it shall carry on its operations in accordance with such arrangements as it may make with said Boy Scouts of America; and the corporation created by this Act shall defray and provide for any debts or liabilities to the discharge of which said assets of the Boy Scouts of America shall be applicable, but said corporation shall have no power to issue certificates of stock or to declare or pay dividends, its objects and purposes being solely of a benevolent character and not for pecuniary profit by its members.

Section 5. The governing body of the said corporation shall consist of an executive board composed of residents of the Philippines. The number, qualifications, and terms of office of members of the executive board shall be prescribed by the by-laws. x x x

On 17 May 1974, then President Ferdinand E. Marcos issued Presidential Decree No. 460, Amending Certain Provisions of Commonwealth Act No. 111, Otherwise Known as the National Charter of the Boy Scouts of the Philippines. One of its Whereas clauses reads:

WHEREAS, recent events have shown that it has become necessary to effect reforms in the organizations structure in order to revitalize and strengthen its operational capabilities, enhance its effectiveness as an instrument to promote the youth development program of the nation, and insure the full and active cooperation, involvement and support of all sectors of the community, public and private; x x x

One of the amendments introduced by PD 460 pertained to the composition of the BSPs governing body. PD 460 reorganized and restructured ³ the BSPs executive board, thus:

Section II. Section 5 of the said Act is also amended to read as follows:

The governing body of the said corporation shall consist of a National Executive Board composed of (a) the President of the Philippines or his representative; (b) the charter and life members of the Boy Scouts of the Philippines; (c) the Chairman of the Board of Trustees of the Philippine Scouting Foundation; (d) the Regional Chairman of the Scout Regions of the Philippines; (e) the Secretary of Education and Culture, the Secretary of Social Welfare, the Secretary of Labor, the Secretary of Finance, the Secretary of Youth and Sports, and the Secretary of Local Government and Community Development; (f) an equal number of individuals from the private sector; (g) the National President of the Girl Scouts of the Philippines; (h) one Scout of Senior age from each Scout Region to represent the boy membership; and (i) three representatives of the cultural minorities. Except for the Regional Chairman who shall be elected by the Regional Scout Councils during their annual meetings, and the Scouts of their respective regions, all members of the National Executive Board shall be either by appointment or cooption, subject to ratification and confirmation by the Chief Scout, who shall be the Head of the State. Vacancies in the Executive Board shall be filled by a majority vote of the remaining members, subject to ratification and confirmation by the Chief Scout. The by-laws may prescribe the number of members of the National Executive Board necessary to constitute a quorum of the board, which number may be less than a majority of the whole number of the board. The National Executive Board shall have power to make and to amend the by-laws, and, by a two-thirds vote of the whole board at a meeting called for this purpose, may authorize and cause to be executed mortgages and liens upon the property of the corporation.

x x x x (Emphasis supplied)

On 6 December 1991, then President Corazon C. Aquino, pursuant to her delegated legislative authority under Section 22 of Proclamation No. 50, issued Executive Order No. 495 converting the BSP, together with the Philippine Shippers Council and the Girl Scouts of the Philippines, into a private corporation. However, on 4 March 1992, President Aquino issued Executive Order No. 509 revoking the dissolution and conversion of the BSP into a private corporation, and restored Commonwealth Act No. 111 and PD 460 prior to their repeal under EO 495.

On 24 March 1992, Republic Act No. 7278, further amending Commonwealth Act No. 111, as amended by PD 460, was enacted. Aimed at strengthening the volunteer and democratic character of the BSP, RA 7278 amended the composition of BSPs governing body by drastically reducing the number of Cabinet secretaries in the National Executive Board, to wit:

SEC. 3. Sections 5, 6, 7 and 8 of Commonwealth Act No. 111, as amended, are hereby amended to read as follows:

SEC. 5. The governing body of the said corporation shall consist of a National Executive Board, the members of which shall be Filipino citizens of good moral character. The Board shall be composed of the following:

(a) One (1) charter member of the Boy Scouts of the Philippines who shall be elected by the members of the National Council at its meeting called for this purpose;

(b) The regional chairmen of the scouts regions who shall be elected by the representatives of all the local scouts councils of the region during its meeting called for this purpose: Provided, That a candidate for regional chairman need not be the chairman of a local scout council;

(d) The National President of the Girl Scouts of the Philippines;

(e) One (1) senior scout, each from Luzon, Visayas and Mindanao areas, to be elected by the senior scout delegates of the local scout councils to the scout youth forums in their respective areas, in its meeting called for this purpose, to represent the boy scout membership;

(f) Twelve (12) regular members to be elected by the members of the National Council in its meeting called for this purpose;

(g) At least ten (10) but not more than fifteen (15) additional members from the private sector who shall be elected by the members of the National Executive Board referred to in the immediately preceding paragraphs (a), (b), (c), (d), (e) and (f) at the organizational meeting of the newly reconstituted National Executive Board which shall be held immediately after the meeting of the National Council wherein the twelve (12) regular members and the one (1) charter member were elected.

x x x x

III.

The ruling in BSP v. NLRC

The COA relies on the Courts ruling in Boy Scouts of the Philippines v. National Labor Relations Commission,⁴ promulgated on 22 April 1991, declaring the BSP both a GOCC and a government instrumentality ⁵ within the meaning of Section 2(1) of Article IX-B of the Constitution ⁶ based on the following criteria:

Firstly, BSPs functions as set out in its statutory charter do have a public aspect. BSPs functions do relate to the fostering of the public virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of our youth.

x x x x

The second aspect that the Court must take into account relates to the governance of the BSP. The composition of the National Executive Board of the BSP includes x x x seven (7) Secretaries of Executive Departments. x x x We must note at the same time that the appointments of members of the National Executive Board, except only the appointments of the Regional Chairman and Scouts of Senior age from the various Scout Regions, are subject to ratification and confirmation by the Chief Scout, who is the President of the Philippines. x x x It does appear therefore that there is substantial governmental (i.e., Presidential) participation or intervention in the choice of the majority of the members of the National Executive Board of the BSP.

The third aspect relates to the character of the assets and funds of the BSP. The original assets of the BSP were acquired by purchase or gift or other equitable arrangement with the Boy Scouts of America, of which the BSP was part before the establishment of the Commonwealth of the Philippines. x x x In this respect, the BSP appears similar to private non-stock, non-profit corporations, although its charter expressly envisages donations and contributions to it from the Government and any of its agencies and instrumentalities.⁷ (Emphasis supplied)

IV.

Republic Act No. 7278 reduced the number of

Cabinet secretaries in the BSP governing body.

When PD 460, amending Commonwealth Act No. 111, was issued by then President Marcos, the President of the Philippines and six Cabinet Secretaries were among the members of the BSPs National Executive Board. The President even had the final say on the private sector representation in the BSPs governing body.⁸ The leadership of the BSP was virtually under the Office of the President.

With the enactment of RA 7278, only one Cabinet Secretary, that is, the Secretary of Education, remains a member of the BSPs National Executive Board. The BSP relies on this drastic change in the composition of its governing body for its claim that the BSP is not a GOCC subject to COAs audit jurisdiction. According to the BSP, RA 7278 took out the element of government control, which is akin to privatization. It follows then that the finding in BSP v. NLRC that the BSP is a GOCC with original charter no longer holds water. RA 7278 was enacted after BSP v. NLRC.

The BSP is not a GOCC.

1. Control test

In Feliciano v. Commission on Audit,⁹ the Court declared that the determining factor of COAs audit jurisdiction is government ownership or control of the corporation. Citing Philippine Veterans Bank Employees Union-NUBE v. Philippine Veterans Bank,¹⁰ the Court held in Feliciano that the criterion of ownership and control is more important than the issue of original charter, thus:

This point is important because the Constitution provides in its Article IX-B, Section 2(1) that the Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. As the Bank is not owned or controlled by the Government although it does have an original charter in the form of R.A. No. 3518, it clearly does not fall under the Civil Service and should be regarded as an ordinary commercial corporation. Section 28 of the said law so provides. The consequence is that the relations of the Bank with its employees should be governed by the labor laws, under which in fact they have already been paid some of their claims.¹¹ (Emphasis supplied)

Employing the test laid down in Feliciano in determining COAs jurisdiction, we find that the BSP is not a GOCC.

A. The government does not own the BSP.

Under Section 2(13) of the Revised Administrative Code,¹² a GOCC refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) per cent of its capital stock.

Under the above definition, a GOCC must be owned or controlled by the government, and in the case of a stock corporation, at least a majority of its capital stock must be owned by the government. In the case of a non-stock corporation, by analogy, at least a majority of the members must be government officials holding such membership by appointment or designation by the government.¹³

In this case, the BSP is a non-stock and non-profit organization composed almost entirely of members coming from the private sector, more particularly boys ranging from ages four (known as KID Scouts) to seventeen (known as SENIOR Scouts). The BSP is one of the largest Scout organizations in the world today (after Gerakan Pramuka of Indonesia and the Boy Scouts of America, first and second, respectively) and is one of the worlds National Scout Associations having the highest penetration rate (Scout density), with one Scout out of two boys of Scouting age enrolled in the Scouting program.¹⁴ Since the BSP is composed almost entirely of members and officers from the private sector, the BSP is clearly not owned by the government.

B. The government does not control the BSP.

Prior to RA 7278, the President of the Philippines and six Cabinet Secretaries were among the members of the National Executive Board. According to Senator Jose A. Lina during the Senate deliberations on RA 7278, the [voluntary] character and the nongovernmental character of the Boy Scouts of the Philippines was altered by the old law, thus necessitating its amendment. More importantly, prior to RA 7278, the appointment of all other members of the governing board, except the elected regional chairmen and senior scout representatives, were made subject to the ratification and confirmation of the President of the Philippines.¹⁵ There is therefore no doubt that prior to RA 7278, the government had effective control of the structure and membership of the National Executive Board. However, as clearly intended in RA 7278, the government lost control over the BSP to the private sector upon the effectivity of RA 7278.

In Feliciano,¹⁶ we found that local water districts (LWDs) were GOCCs considering that, among other factors, the government controls LWDs because under PD 198 the municipal or city mayor, or the provincial governor, appoints all the board directors of an LWD for a fixed term of six years. x x x LWDs have no private stockholders or members. The board of directors and other personnel of LWDs are government employees subject to civil service laws and anti-graft laws. In other words, where the government appoints at least a majority of the members of the board of directors of an entity, such entity is undoubtedly under the control of the government. Likewise, if the government has the power to fill up at least a majority of the vacancies in the governing body of an entity, then such an entity is definitely government controlled.¹⁷

The foregoing circumstances manifesting government control over an entity are wanting in BSPs case under RA 7278.

As pointed out by the BSP, under RA 7278 only one Cabinet Secretary remains a member of the National Executive Board, as opposed to the previous composition where the President of the Philippines and six cabinet secretaries were members of the same board. To repeat, the National Executive Board is presently composed of (1) a charter member of the BSP; (2) the regional chairmen of the scouts regions; (3) the Secretary of Education, Culture and Sports; (4) National President of the Girl Scouts of the Philippines; (5) a senior scout, one each from Luzon, Visayas and Mindanao; (6) twelve regular members to be elected by the members of the National Council; (7) at least ten but not more than fifteen additional members from the private sector. Significantly, the lone cabinet member, who is the Education Secretary, merely serves as an ex-officio member.¹⁸ Meanwhile, the President of the Philippines is no longer a member of the National Executive Board and simply acts as the Chief Scout of the BSP. Except for the Education Secretary, none of the other members of the National Executive Board is a government official or holds such position or membership through appointment or designation by the government. Moreover, the government lacks the power to fill up vacancies in the National Executive Board of the BSP or remove any of its members. In fact, vacancies in the National Executive Board shall be filled by a majority vote of the remaining members.¹⁹ This structural set-up and membership of BSPs governing body under RA 7278, where all except one come from the private sector, glaringly negate any form of government control over the BSP.

Moreover, if the BSP is a GOCC, as what the COA insists, then it must be under the Presidents power of control. In Rufino v. Endriga,²⁰ which involved the battle for Cultural Center of the Philippines (CCP) leadership between the Rufino and Endriga groups, the Court explained exhaustively the Presidents power of control, thus:

Under our system of government, all Executive departments, bureaus, and offices are under the control of the President of the Philippines. Section 17, Article VII of the 1987 Constitution provides:

The President shall have control of all the executive departments, bureaus, and offices. He shall ensure that the laws be faithfully executed. (Emphasis supplied)

The presidential power of control over the Executive branch of government extends to all executive employees from the Department Secretary to the lowliest clerk. This constitutional power of the President is self-executing and does not require any implementing law. Congress cannot limit or curtail the Presidents power of control over the Executive branch.

x x x

The Presidents power of control applies to the acts or decisions of all officers in the Executive branch. This is true whether such officers are appointed by the President or by heads of departments, agencies, commissions, or boards. The power of control means the power to revise or reverse the acts or decisions of a subordinate officer involving the exercise of discretion.

In short, the President sits at the apex of the Executive branch, and exercises control of all the executive departments, bureaus, and offices. There can be no instance under the Constitution where an officer of the Executive branch is outside the control of the President. The Executive branch is unitary since there is only one President vested with executive power exercising control over the entire Executive branch. Any office in the Executive branch that is not under the control of the President is a lost command whose existence is without any legal or constitutional basis.²¹

However, in this case, unlike in CCPs case,²² there is absolutely nothing which demonstrates that the President of the Philippines exercises control over the acts or decisions of the BSPs National Executive Board or any of its members.²³ The President does not have the power to alter or modify or nullify or set aside what the BSPs National Executive Board does in the performance of its duties and to substitute the judgment of the former for that of the latter.²⁴ The title Chief Scout does not confer on the President any power of control over the affairs and management of the BSP. This absence of any form of presidential control reinforces the fact that the government does not control the BSP. In short, the President, while holding the title of Chief Scout, does not control the BSP.

C. The funds of the BSP are private in nature.

The Court noted in BSP v. NLRC that the original assets of the BSP were acquired by purchase or gift or other equitable arrangement with the Boy Scouts of America, of which the BSP was part before the establishment of the Commonwealth of the Philippines. The BSP charter, however, does not indicate that such assets were public or statal in character or had originated from the government. No public capital was invested in the BSP.²⁵ According to the BSP, its operating funds used for carrying out its purposes and programs are derived principally from membership dues paid by the Boy Scouts themselves and from property rentals. The BSP does not have government assets and does not receive any appropriation from Congress. This was revealed during the deliberations in the House of Representatives on RA 7278, thus:

MR. ESCUDERO. Yes, Mr. Chairman. The question is the sources of funds of the organization. First, Mr. Chairman, the Boy Scouts of the Philippines do not receive annual allotment from the government. The organization has to raise its own funds through fund drives and fund campaigns or fund raising activities. Aside from this, we have some revenue producing projects in the organization that gives us funds to support the operation. x x x ²⁶

Further, BSPs properties are being managed and operated by the BSP itself, not by the government or any of its agencies. Therefore, it is crystal-clear that the funds of the BSP come from private sources. As such, the BSP funds are necessarily beyond the jurisdiction of the COA, which exclusively audits public funds and assets.

D. Public purpose of BSP is not determinative of status.

Indeed, the BSP performs functions which may be classified as public in character, in the sense that it promotes virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of our youth. However, this fact alone does not automatically make the BSP a GOCC. Significantly, the Court declared in Philippine Society for the Prevention of Cruelty to Animals v. Commission on Audit,²⁷ the fact that a certain juridical entity is impressed with public interest does not, by that circumstance alone, make the entity a public corporation, inasmuch as a corporation may be private although its charter contains provisions of a public character, incorporated solely for the public good.²⁸ The Court further held:

Authorities are of the view that the purpose alone of the corporation cannot be taken as a safe guide, for the fact is that almost all corporations are nowadays created to promote the interest, good, or convenience of the public. A bank, for example, is a private corporation; yet, it is created for a public benefit. Private schools and universities are likewise private corporations; and yet, they are rendering public service. Private hospitals and wards are charged with heavy social responsibilities. More so with all common carriers. On the other hand, there may exist a public corporation even if it is endowed with gifts or donations from private individuals.

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 latters own agency or instrumentality to help it in carrying out its governmental functions, then that corporation is considered public; otherwise, it is private. Applying the above test, provinces, chartered cities, and barangays can best exemplify public corporations. They are created by the State as its own device and agency for the accomplishment of parts of its own public works.²⁹ (Emphasis supplied)

2. Economic viability test

The Constitution recognizes only two classes of corporations.³⁰ The first refers to private corporations created under a general law.³¹ The second refers to government-owned or controlled corporations created by special charters.³² Section 16, Article XII of the 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)

Contrary to this constitutional provision, the majority introduces a totally different species of corporation, which is neither a private corporation nor a government owned or controlled corporation. The majority gravely misses the fact that the BSP, which was created as a non-stock, non-profit corporation, can only be either a private corporation or a government owned or controlled corporation. The Legislatures usage in Commonwealth Act No. 111 of the term public corporation ³³ to designate the BSP must never be construed as creating an entirely new type of corporation, neither private nor government owned or controlled. Otherwise, such an interpretation will unjustifiably and unlawfully expand the classes of corporations expressly recognized by the Constitution in Section 16, Article XII, putting the new class of corporation outside the coverage of Section 16. In short, such new class of public corporation created by special charter will not be subject to the test of economic viability, a blatant circumvention of the Constitution.

In Manila International Airport Authority (MIAA) v. Court of Appeals,³⁴ where the Court ruled that MIAA is a government instrumentality, the Court explained the importance of the test of economic viability, in this wise:

The Constitution expressly authorizes the legislature to create government-owned or controlled corporations through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good meaning for economic development purposes these government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations.

x x x The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers.

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows:

MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers money which could have been relocated to agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase ECONOMIC VIABILITY together with the common good, this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committees consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of ECONOMIC VIABILITY OR THE ECONOMIC TEST, together with the common good.

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:

The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase in the interest of the common good and subject to the test of economic viability. The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.³⁵ (Emphasis supplied)

Indisputably, a government owned or controlled corporation created by special charter must necessarily meet the test of economic viability. Otherwise, the creation by Congress of a government owned or controlled corporation not satisfying the test of economic viability clearly runs counter to the express mandate of Section 16, Article XII of the Constitution. Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. To repeat, government-owned or controlled corporations may be created or established by special charters x x x subject to the test of economic viability. Therefore, there can be no public corporation or government owned or controlled corporation that cannot be subject to the test of economic viability. In short, the majoritys view that BSP is a public corporation which does not fall under either of the classifications of corporation recognized under Section 16, Article XII of the Constitution, and consequently not subject to the test of economic viability, is patently erroneous and baseless.

The term public corporation refers to a government owned or controlled corporation as referred to in Section 16, Article XII of the Constitution. However, in this case, the usage of the term public corporation in Commonwealth Act No. 111 to designate BSP is no longer controlling in determining the real nature of the BSP. As amended by RA 7278, Commonwealth Act No. 111 now refers to a corporation owned, managed and controlled by the private sector although the purpose of the corporation remains public.

The majority theorizes that public corporations 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.

This theory finds no basis in law. As the Court emphatically stated in Philippine Society for the Prevention of Cruelty to Animals, the fact that a certain juridical entity is impressed with public interest does not, by that circumstance alone, make the entity a public corporation, inasmuch as a corporation may be private although its charter contains provisions of a public character, incorporated solely for the public good.³⁶ Neither does administrative relationship to the government indicate that an entity is an instrumentality within the purview of the COAs audit jurisdiction. Only corporations controlled and owned by the government, which are subject to the test of economic viability, and government instrumentalities, as defined by the Administrative Code, fall under COAs audit jurisdiction. The BSP is neither; hence, it is beyond the COAs audit jurisdiction.

VI.

Neither is the BSP a government instrumentality.

A government instrumentality is defined by the Revised Administrative Code as any agency of the National Government, not integrated within the department framework vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. In other words, to be considered a government instrumentality, an entity must be (1) an agency of the National Government; (2) outside the department framework of the National Government; (3) vested with special functions or jurisdiction by law; (4) endowed with some, if not all, corporate powers; (5) administering special funds; and (6) enjoying operational autonomy.

The BSP is not an agency of the National Government because the BSP is not a unit of the National Government, like a department, bureau, office, instrumentality or government owned or controlled corporation, or a local government or a distinct unit therein.³⁷ There is also no dispute that the BSP does not administer special funds of the government. While the BSP may receive donations or contributions from the government just like other non-government organizations, the same cannot be characterized as special funds. Moreover, the BSP is not vested with special functions or jurisdiction by law. Hence, the BSP is not a government instrumentality.

If the BSP is a government instrumentality, the following consequences are inevitable: (1) pursuant to Section 2(1), Article IX-D of the Constitution ³⁸ it will be subject to COAs pre-audit, and not post-audit; (2) it will be subject to the Government Procurement Reform Act or Republic Act No. 9184; and (3) the BSPs officers and employees will be considered government personnel who are (a) subject to Civil Service laws;³⁹ (b) covered by the Government Service Insurance System;⁴⁰ (c) subject to the Salary Standardization Law;⁴¹ (d) required to file Statements of Assets, Liabilities and Networth;⁴² (e) under the jurisdiction of the Ombudsman;⁴³ and (f) subject to the control of the President.

Under the Administrative Code of 1987, the BSP is an attached agency of the Department of Education for purposes of policy and program coordination. However, this was changed with the enactment of RA 7278 which removed government control over the BSP. To repeat, the determining factor of COAs audit jurisdiction is government ownership or control. Conversely, without such ownership or control, the BSP is beyond the COAs audit jurisdiction. Surprisingly, the majority states that the BSP is not under government control although it is an attached agency to the Department of Education. Needless to say, the Department of Education and any agency or unit attached to it is under the control of the President pursuant to Section 17, Article VII of the Constitution, which mandates that the President shall have control of all the executive departments, bureaus, and offices. If a government office, unit, or instrumentality is subject to the control of the President, then it is obviously under government control.

VII.

The BSP is a private, non-stock

and non-profit corporation performing public functions.

Scouting is a non-partisan, non-governmental worldwide youth movement geared towards the development of young people in achieving their full physical, mental, social, intellectual and spiritual potentials as individuals, as responsible citizens and as members of their local, national

and international communities.⁴⁴ Scouting complements the school and the family, filling the needs not met by either.⁴⁵ It belongs to the category of non-formal education since, while it takes place outside the formal educational system, it is an organized institution with an educational aim and is addressed to a specific clientele.⁴⁶

In Boy Scouts of America v. Dale,⁴⁷ which involved a suit for reinstatement and damages filed by an Assistant scoutmaster, who was expelled after he publicly declared he was homosexual, against Boy Scouts of America (BSA), the Supreme Court of the United States stated that the Boy Scouts is a private, not-for-profit organization engaged in instilling its system of values in young people.

The fact that the BSP, like the BSA, is a private, non-stock, non-profit corporation is consistent with the clear intent of the Legislature in enacting RA 7278. The following exchanges during the deliberations in the Senate on RA 7278 reveal the intent of the Legislature to restore the non-governmental and private character of the BSP, thus:

SPONSORSHIP SPEECH OF SENATOR LINA

Senator Lina. Thank you, Mr. President.

The measure before us this evening, Senate Bill No. 132, seeks to strengthen the nature of Scouting, restore the democratic and nongovernmental process to the movement, and provide a framework of leadership which shall give direction and purpose to the two million boys and young men, ages seven to 17. Representatives of the vital group of our youth were here this afternoon, waiting that this bill be sponsored today.⁴⁸

x x x x

Senator Lina. Before I answer that question, Mr. President, originally, the boy scouting movement in this country is intrinsically democratic and its strength derives from the efforts of the nongovernmental sector. The Constitution of the movement declares that it is independent, voluntary, nonpolitical, nonsectarian, and nongovernmental. The local and national leadership of the Boys Scout Movement, from its inception up to 1974, when it was amended by Presidential Decree No. 460, came from elected members of local councils, volunteers who have worked for many years of their lives for the development of young boys so that they will learn and heed the scout oath and law.

However, Mr. President, in May 1974, this character of the local boy scouting movement was altered because the old dispensation issued a Presidential Decree which included in the membership of the governing board the President of the Philippines and seven Members of the Cabinet. That was the major change in Commonwealth Act No. 111.

So, the President of the Philippines and seven Cabinet Members were included and institutionalized as members of the governing body of the Boy Scouts of the Philippines. So, the nonvoluntary [sic] character and the nongovernmental character of the Boy Scouts of the Philippines was altered. Not only that.

All other members of the governing board, except the elected regional chairmen and senior scout representatives were made subject to the ratification and confirmation of the President of the Philippines. So, iyon po ang naging major amendment na inistrodyus ng PD No. 460. And as a result of this, marami po ang na-discourage sa boy scouting movement, sapagkat dati-rati talagang democratic iyan, walang so much imposition from government and its officials. Also, as a result of PD No. 460, the voluntary character of the boy scouting movement was changed. Halos naging gobyerno, and imagine, the dictatorial character of that previous Government was transferred to the Boy Scouts of the Philippines, kasi the members of the governing board have to be subjected to confirmation by the President. So, napulitika rin po iyong boy scouting the movement.

Ngayon, ang ginagawa po natin, basically, is to remove this undemocratic feature of the law creating the Boy Scouts, and also to remove from the Constitution of the present Boy Scouts of the Philippines the other features that make the boy scouting movement now undemocractic.

Senator Guingona. The intent of this bill is to make more democratic the membership in the Boy Scouts of the Philippines.

Senator Lina. Well, to lessen government direct interference.⁴⁹

= = = = = = = = = = = =

Senator Lina. x x x

Noong araw ay mas aktibo ang boy scouting movement. Pero noong 1974, when Presidential Decree was issued by the then President amending Commonwealth Act No. 111, iyon pong National Executive Board, the governing body, ay napasukan ng halos pitong Cabinet Members. Dari-rati po, wala iyon. Iyon po lamang Department of Education, Culture and Sports and kasama sa Boy Scouts of the Philippines. Kung sino ang Secretary, iyon ang nagiging ex officio or institutionalized member. Pero, nang madagdagan ito ng miyembro mula sa Department of National Defense, from the other departments, pati DSWD, naging government halos ang character nito. Nawala na iyong spirit of voluntarism. Since the Cabinet Members are busy doing other things, hindi po ito nabigyan ng gaanong pansin kung kaya nag-deteriorate nang malaki ang scouting movement of the Philippines. Ngayon lamang po ito nare-revive, because Secretary Carino is the President. Right now he is very much involved. He as president before he became the Secretary of Education, Culture and Sports. Under his leadership, things are shaping up. There is greater recruitment and more activities.

Senator Romulo. Kaya po, mahalaga ang bill na ito, sapagkat ibinabalik natin ito sa private sector at nang sa ganoon, gaya noong nakaraan, this is more conducive to voluntarism and therefore, to the growth of the Boy Scout movement.

Senator Lina. Opo.⁵⁰ (Emphasis supplied)

There is no question that RA 7278 was enacted precisely to remove government control and return the BSP to the private sector and to its non-governmental status. In other words, the government lost control over the BSP to the private sector upon the effectivity of RA 7278. The absence of government control or ownership, coupled with the private nature of BSP funds, makes the BSP a private corporation beyond the audit jurisdiction of the COA. Clearly, the attributes of BSPs relationship with the State that point to its being a private non-stock corporation are overwhelming and irrefutable.⁵¹

VIII.

Constitutionality of BSP charter, as amended

Since the BSP is not a GOCC, can Congress create, organize and regulate the BSP by enacting its charter, or Commonwealth Act No. 111, as amended by PD 460 and further amended by RA 7278?

The answer is in the negative.

Section 7, Article XIV of the 1935 Constitution, as amended, was in force when the BSP was created by special charter on 31 October 1936. Section 7, Article XIV of the 1935 Constitution, as amended, reads:

SEC. 7. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof.

The subsequent 1973 and 1987 Constitutions contain similar provisions. Thus, Section 4, Article XIV of the 1973 Constitution provides:

SEC. 4. The National Assembly shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof.

The 1987 Constitution substantially reiterated the above provision in Section 16, Article XII, to wit:

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.

In Feliciano,⁵² the Court discussed the significance of the above Constitutional provision in this wise:

The Constitution emphatically prohibits the creation of private corporations except by a general law applicable to all citizens. The purpose of this constitutional provision is to ban private corporations created by special charters, which historically gave certain individuals, families or groups special privileges denied to other citizens.

In short, Congress cannot enact a law creating a private corporation with a special charter. Such legislation would be unconstitutional. Private corporations may exist only under a general law. If the corporation is private, it must necessarily exist under a general law. Stated differently, only corporations created under a general law can qualify as private corporations. Under existing laws, that general law is the Corporation Code, except that the Cooperative Code governs the incorporation of cooperatives.

The Constitution authorizes Congress to create government-owned or controlled corporations through special charters. Since private corporations cannot have special charters, it follows that Congress can create corporations with special charters only if such corporations are government-owned or controlled. (Emphasis supplied)

While both BSP and COA submit that Commonwealth Act No. 111 and its amendatory laws do not violate Section 16, Article XII of the Constitution, the Court should reject such contention. Considering that the BSP is not a GOCC, it follows that the law creating and regulating the BSP clearly violates Section 16, Article XII of the Constitution which specifically states that Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any of its subdivision or instrumentality.

In this case, the Court directed the parties to comment on the issue of the constitutionality of Commonwealth Act No. 111, as amended. This is precisely because the constitutionality of Commonwealth Act No. 111, as amended, is inextricably linked to the issue of whether the BSP is subject to COAs audit jurisdiction, which in turn depends on whether the BSP is a private or a government owned or controlled corporation. Hence, this issue was properly addressed and exhaustively argued upon by the parties.

That the parties did not specifically raise the issue on the constitutionality of Commonwealth Act No. 111, as amended, does not preclude this Court from resolving such issue since it is absolutely indispensable for the complete disposition of this case. In fact, in exceptional cases, such as this, it is within the Courts discretion when a constitutional issue may be ruled upon. It is likewise the duty of this Court to pass upon the constitutionality of Commonwealth Act No. 111, as amended, since it clearly appears that a determination of the constitutional question is necessary to decide this case. In People v. Vera,⁵³ the Court held:

It is true that, as a general rule, the question of constitutionality must be raised at the earliest opportunity, so that if not raised by the pleadings, ordinarily it may not be raised at the trial, and if not raised in the trial court, it will not considered on appeal. But we must state that the general rule admits of exceptions. Courts, in the exercise of sounds discretion, may determine the time when a question affecting the constitutionality of a statute should be presented. Thus, in criminal cases, although there is a very sharp conflict of authorities, it is said that the question may be raised for the first time at any stage of the proceedings, either in the trial court or on appeal. Even in civil cases, it has been held that it is the duty of a court to pass on the constitutional question, though raised for the first time on appeal, if it appears that a determination of the question is necessary to a decision of the case.

Unless, therefore, the constitutional question is thus timely raised and presented, it will be considered waived, except in extraordinary cases noted in People and Hongkong & Shanghai Banking Corporation vs. Vera and Cu Unjieng, supra, or in exceptional cases where, the opinion of this court, the question may be said to be fairly involved upon the face of the undisputed record. (Emphasis supplied; citations omitted)

In Robb v. People,⁵⁴ the Court reiterated:

Unless, therefore, the constitutional question is thus timely raised and presented, it will be considered waived, except in extraordinary cases noted in People and Hongkong & Shanghai Banking Corporation vs. Vera and Cu Unjieng, supra, or in exceptional cases where, the opinion of this court, the question may be said to be fairly involved upon the face of the undisputed record. (Emphasis supplied)

In Moldex Realty, Inc. v. Housing and Land Use Regulatory Board,⁵⁵ this Court held that constitutional challenge can be made anytime:

That the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly file a case to challenge the same. (Emphasis supplied)

The Constitution prohibits the creation of a private corporation through a special law. The Constitutional prohibition under Section 16, Article XII is clear, categorical, absolute, and admits of no exception. Since the BSP is a private corporation and not a government owned or controlled corporation, Sections 1,⁵⁶ 2,⁵⁷ 3,⁵⁸ 5,⁵⁹ 6,⁶⁰ 7,⁶¹ 9,⁶² and 11 ⁶³ of Commonwealth Act No. 111, as amended, are unconstitutional, and hence void, for contravening the Constitutional proscription against the creation, organization, and regulation of private corporations by Congress.

The rest of the provisions, namely, Sections 4,⁶⁴ 8,⁶⁵ and 10 ⁶⁶ of Commonwealth Act No. 111, as amended, remain valid as these do not refer to BSPs creation as a corporation and thus, do not violate the prohibition under Section 16, Article XII of the Constitution. Moreover, Section 5 of RA 7278, amending Commonwealth Act No. 111, provides for a separability clause.⁶⁷

In sum, the BSP is a private corporation beyond the audit jurisdiction of the COA. Accordingly, the specific provisions in the BSP charter creating the BSP as a private corporation are void. Considering the Constitutional infirmity of its creation, BSPs recourse is either to incorporate under the Corporation Code of the Philippines or to exist as an unincorporated association.

ACCORDINGLY, I vote to GRANT the petition. The Boy Scouts of the Philippines is a private corporation beyond the audit jurisdiction of the Commission on Audit. Sections 1, 2, 3, 5, 6, 7, 9, and 11 of Commonwealth Act No. 111, as amended by Presidential Decree No. 460 and Republic Act No. 7278, are void for being violative of the prohibition in Section 16, Article XII of the Constitution.

ANTONIO T. CARPIO

Associate Justice

1 These are GOCCs without original charters which refer to corporations created under the Corporation Code but are owned or controlled by the government. (Feliciano v. Commission on Audit, 464 Phil. 439 [2004])

2 See http://www.mbcenter.org/pub/pdf/notes_history101.pdf (accessed 7 June 2011). See also http://scouts.org.ph/about-scouting/birth-of-bsp / (accessed 7 June 2011).

3 Section V. The same Act is further amended by adding the following section immediately after Section 10:

Until such time as the reorganization and restructuring of the Executive Board, in accordance with Section 5 as amended is effected, the Honorable Carlos P. Romulo, Chairman of the Golden Jubilee Board and one of the founders of the Organization and a charter member thereof, is hereby appointed Interim Chairman of the Board and President of the Organization and authorized to organize an interim body to conduct the affairs of the Boy Scouts of the Philippines and to take the necessary steps to effect such reorganization within six (6) months from date of this decree.

4 G.R. No. 80767, 22 April 1991, 196 SCRA 176.

5Section 2(10) of the Administrative Code of 1987 defines an instrumentality as any agency of the National Government, not integrated within the department framework vested within special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.

6 Sec. 2(1). The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters.

7 Supra at 184-186.

8 http://www.mbcenter.org/history/p9_martiallaw.php (accessed 7 June 2011).

9 464 Phil. 439 (2004).

10 G.R. Nos. 67125 and 82337, 24 August 1990, 189 SCRA 14, 30.

11 Feliciano v. Commission on Audit, supra at 462.

12 Executive Order No. 292. Effective on 25 July 1987.

13 Liban v. Gordon, G.R. No. 175352, 15 July 2009, 593 SCRA 68, 88.

14 See http://scouts.org.ph/about-scouting/bsps-pride/?replytocom=31 (accessed 7 June 2011).

15 Id.

16 Supra note 9.

17 See City of Baltimore Development Corp. v. Carmel Realty Associates, 395 Md. 299, 910 A.2d 406 Md.,2006.

18As stated by Senator Jose Lina during the Senate deliberations before the passage of RA 7278, the ex-officio members are the Secretary of the Department of Education, Culture and Sports and the President of the Girl Scouts of the Philippines. (Record of the Senate, Vol. II, No. 44, p. 1532).

19 Section 5, RA 7278.

20 G.R. No. 139554, 21 July 2006, 496 SCRA 13.

21 Id. at 62-63, 64-65.

22 CCP is under the supervision of the National Commission for Culture and the Arts, and it is attached to the Office of the President. (http://en.wikipilipinas.org/index.php ? title=Cultural_Center_of_the_Philippines#Arts_Resident_Companies_of_CCP )

23 See Carpio v. Executive Secretary, G.R. No. 96409, 14 February 1992, 206 SCRA 290.

24Mondano v. Silvosa, 97 Phil. 143, 147-148 (1955), where the Court stated: In administrative law supervision means overseeing or the power or authority of an officer to see that subordinate officers perform their duties. If the latter fail or neglect to fulfill them the former may take such action or step as prescribed by law to make them perform their duties. Control, on the other hand, means the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter.

25In Feliciano, supra note 9, where the Court held that the Local Water Districts are government-owned or controlled corporations, the seed capital assets of the Local Water Districts, such as waterworks and sewerage facilities, were public property which were managed, operated by or under the control of the city, municipality or province before the assets were transferred to the Local Water Districts. The Local Water Districts also receive subsidies and loans from the Local Water Utilities Administration. There is no private capital invested in the Local Water Districts. The capital assets and operating funds of the Local Water Districts all come from the government, either through transfer of assets, loans, subsidies or the income from such assets or funds.

26 Quoted in Majority Opinion (Committee on Government Enterprises, 13 February 1991, p. 16).

27 G.R. No. 169752, 25 September 2007, 534 SCRA 112.

28 Id. at 131.

29 Id. at 132.

30 Feliciano v. Commission on Audit, supra note 9.

31 Id.

32 Id.

33 Must not be confused with public corporations such as barangay, municipality, city and province, which are also known as political subdivisions.

34 G.R. No. 155650, 20 July 2006, 495 SCRA 591.

35 Id. at 639-641.

36 Supra note 27 at 131.

37 Section 1(3) of the Administrative Code of 1987.

38 Section 2, Article X of the Constitution pertinently provides:

Section 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters, and on a post- audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the Government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity. x x x (Emphasis supplied)

39Republic Act No. 6713, otherwise known as the Code of Conduct and Ethical Standards for Public Officials and Employees. Section 3(a) thereof provides:

Section 3. Definition of Terms. - As used in this Act, the term:

(a) Government includes the National Government, the local governments, and all other instrumentalities, agencies or branches of the Republic of the Philippines including government-owned or controlled corporations, and their subsidiaries.

40Section 2 of this law provides:

SEC. 2. Definition of terms.- Unless the context otherwise indicates, the following terms shall mean:

x x x x

(c) Employer- The national government, its political subdivisions, branches, agencies or instrumentalities, including government-owned or controlled corporations, and financial institutions with original charters, the constitutional commissions and the judiciary;

41 Republic Act No. 6758 entitled An Act Prescribing A Revised Compensation and Position Classification System in the Govenment and for Other Puposes.

42 Section 34 of Executive Order No. 292 or the Administrative Code of 1987 provides:

Sec. 34. Declaration of Assets, Liabilities and Net Worth. - A public officer or employee shall upon assumption of office and as often thereafter as may be required by law, submit a declaration under oath of his assets, liabilities, and net worth.

43 Section 13 of RA 6770 provides:

Section 13. Mandate. The Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints filed in any form or manner against officers or employees of the Government, or of any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations, and enforce their administrative, civil and criminal liability in every case where the evidence warrants in order to promote efficient service by the Government to the people.

44 http://scout.org/en/about_scouting/educational_methods/an_educational_movement_for_young_pe ople (accessed 7 June 2011)

45 See http://scout.org/en/about_scouting/facts_figures/fact_sheets [Fact sheet - Scouting Is.pdf] (accessed 7 June 2011).

46 http://scout.org/en/about_scouting/educational_methods/an_educational_movement_for_young_pe ople (accessed 7 June 2011) See also Boy Scouts of the Phil. v. Araos, 102 Phil. 1080 (1958).

47 530 U.S. 640, 120 S.Ct. 2446, U.S.N.J., 2000.

48 Record of the Senate, Vol. II, No. 43, p. 1502.

49 Record of the Senate, Vol. II, No. 44, pp. 1529-1530.

50 Record of the Senate,Vol. II, No. 46, p. 1592.

51 See Napata v. University of Maryland Medical System Corp., 417 Md. 724, 12 A.3d 144 Md.,2011.

52 Supra note 9 at 454-455.

53 65 Phil. 56, 88 (1935).

54 68 Phil. 320, 326 (1939).

55 G.R. No. 149719, 21 June 2007, 525 SCRA 198, 204.

56Section 1. J. E. H. Stevenot, A. N. Luz, C. P. Romulo, Vicente Lim, Manuel Camus, Jorge B. Vargas, and G. A. Daza; all of Manila, Philippines, their associates and successors, are hereby created a body corporate and politic in deed and in law, by the name, style and title of Boy Scouts of the Philippines (hereinafter called the corporation). The principal office of the corporation shall be in Metropolitan Manila, Philippines.

57Section 2. The said corporation shall have the powers of perpetual succession, to sue and be sued; to enter into contracts; to acquire, own, lease, convey and dispose of such real and personal estate, land grants, rights and choses in action as shall be necessary for corporate purposes, and to accept and receive funds, real and personal property by gift, devise, bequest or other means, to conduct fund-raising activities; to adopt and use a seal, and the same to alter and destroy; to have offices and conduct its business and affairs in Metropolitan Manila and in the regions, provinces, cities, municipalities, and barangays of the Philippines, to make and adopt by-laws, rules and regulations not inconsistent with this Act and the laws of the Philippines, and generally to do all such acts and things, including the establishment of regulations for the election of associates and successors, as may be necessary to carry into effect the provisions of this Act and promote the purpose of said corporation: Provided, That said corporation shall have no power to issue certificates of stock or to declare or pay dividends, its objectives and purposes being solely of benevolent character and not for pecuniary profit of its members.

58 Section 3. The purpose of this corporation shall be to promote through organization and cooperation with other agencies, the ability of boys to do useful things for themselves and others, to train them in scoutcraft, and to inculcate in them patriotism, civic consciousness and responsibility, courage, self-reliance, discipline and kindred virtues, and moral values, using the method which are in common use by boy scouts.

59 Section 5. The governing body of the said corporation shall consist of a National Executive Board, the members of which shall be Filipino citizens of good moral character. The Board shall be composed of the following:

(a) One (1) charter member of the Boy Scouts of the Philippines who shall be elected by the members of the National Council at its meeting called for this purpose;

(b) The regional chairmen of the scouts regions who shall be elected by the representatives of all the local scout councils of the region during its meeting called for this purpose: Provided, That a candidate for regional chairman need not be the chairman of a local scout council;

(d) The National President of the Girl Scouts of the Philippines;

(f) Twelve (12) regular members to be elected by the members of the National Council in its meeting called for this purpose;

Thereafter, the National Executive Board as herein fully constituted shall elect from among themselves the following officers of the corporation:

(a) President;

(b) Senior Vice-President;

(d) Such other officers as the Board may deem necessary.

The numerical composition of the National Executive Board shall be provided for in the by-laws of the Boy Scouts of the Philippines: Provided, That said numerical composition shall be at least thirty (30) and not more than forty-five (45) for all elected, life and ex officio members.

The term of office of the members of the National Executive Board shall be one (1) year, except for the regular members to be elected by the National Council whose term of office shall be three (3) years: Provided, That for the first twelve (12) regular members to be elected by the National Council, the term of office shall be as follows: the members garnering the first four (4) highest number of votes shall serve for a term of three (3) years; the member garnering the second four (4) highest number of votes shall serve for a term of two (2) years; and the members garnering the last four (4) number of votes shall serve for a term of one (1) year.

Vacancies in the National Executive Board shall be filled by a majority vote of the remaining members and a member thus elected shall serve only for the unexpired term.

The by-laws may prescribe the number of members of the National Executive Board necessary to constitute a quorum of the Board, which number shall not be less than the majority of the entire membership of the Board.

The National Executive Board shall exercise the following powers and functions:

(a) To make and to amend the by-laws subject to the ratification by a majority vote of the members present at a meeting of the National Council or at a special meeting called for this purpose;

(b) To authorize and caused to be executed mortgages and liens upon the property of the corporation by a two-thirds (2/3) vote of the whole Board at a meeting called for this purpose;

(c) To designate five (5) or more their number to constitute an executive or governing committee, of which a majority shall constitute a quorum, through a resolution passed by majority of the whole Board. Such Committee, to the extent provided in said resolution or in the by-laws of the corporation, shall have and exercise the powers of the National Executive Board in the management of the business affairs of the corporation, and may have the power to authorize the seal of the corporation to be affixed to all papers which may require it;

(d) To create standing committees and appoint the chairman and members thereof from among themselves by the affirmative vote of a majority of the whole Board. Such standing committees shall exercise such powers as may be authorized by the by-laws;

(e) To dispose in any manner a part or the whole property of the corporation with the consent in writing and pursuant to an affirmative vote of two-thirds (2/3) of the members of the National Council; and

(f) To hold regular meetings at least once every two (2) months at a time and place to be designated in the by-laws. Special meetings of the Board may be called upon such notice as may be prescribed in the by-laws.

60Section 6. The National Council shall be composed of the following members:

(a) The members of the National Executive Board;

(b) The charter members;

(d) The chairmen and commissioners of all local scout councils; and

(e) Other duly accredited delegates of local scout councils as may be provided in the by-laws.

The qualifications, terms of office, and the manner of electing the abovementioned members of the National Council shall be prescribed in the by-laws of the corporation.

The numerical composition of the National Council shall be provided for in the by-laws of the Boy Scouts of the Philippines: Provided, That all regions and all local councils shall be duly represented therein by at least two (2) duly accredited delegates, in addition to those who are members of the National Executive Board as provided for under Section 5 of this Act.

The annual meeting of the National Council shall be held at such time and place as shall be prescribed in the by-laws, at which meeting the annual reports of the officers of the National Executive Board shall be presented and the election of members to the National Executive Board.

Special meetings of the National Council may be called upon such notice as may be prescribed in the by-laws. One-third (1/3) of the members of the National Council shall constitute a quorum to do business at any annual or special meeting. The National Council and the National Executive Board shall have the power to hold their meetings and keep the seal, books, documents, and papers of the corporation within or without the Metropolitan Manila.

The National President of the corporation shall preside over the meetings of the National Council.

Each local scout council represented in the annual or special meeting of the National Council shall be entitled to four (4) votes plus one (1) vote for every ten thousand (10,000) of their scout membership. The members of the National Executive Board and the life members shall each be entitled to one (1) vote.

61Section 7. The corporation created by this Act shall adopt and shall have the sole and exclusive right to use distinctive titles, emblems, descriptive or designing marks, words and phrases,badges, uniforms and insignia for the Boy Scouts of the Philippines in carrying out its program in accordance with the purposes of this Act, and which shall be published in the Official Gazette or in any newspaper of general circulation in the Philippines.

62Section 9. On or before the first of April of each year, the said corporation shall make and transmit to the President of the Philippines a report of its proceedings for the year ending December thirty-first preceding, including a full, complete, and itemized report of receipts and expenditures of whatever kind.

63Section 11. Until such time as the reorganization and restructuring of the Boy Scouts of the Philippines in accordance with this Act is effected, the incumbent officers and members of the National Executive Board and the present and past national presidents of the Boy Scouts of the Philippines shall continue to conduct the affairs of the Boy Scouts of the Philippines and to take the necessary steps to effect such reorganization until a new National Executive Board and a new set of national officers shall have been elected within six (6) months from the effectivity of this Act.

64 Section 4. The President of the Philippines shall be the Chief Scout of the Boy Scouts of the Philippines.

65Section 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the Philippines by the Government or any of its subdivisions, branches, offices, agencies or instrumentalities or by a foreign government or by private entities and individuals shall be expended by the National Executive Board in pursuance of this Act.

The corporation shall be entitled to the following tax and duty privileges:

(a) Exemption from income tax pursuant to Section 26(e), (g) and (h) of the National Internal Revenue Code, as amended;

(b) Exemption from donors tax pursuant to Section 94(a) (3) of the National Internal Revenue Code, as amended;

(d) Tax and/or duty exemption of donations from foreign countries as provided under the relevant laws such as, but not limited to, Section 105 of the Tariff and Customs Code of the Philippines, as amended, Section 103 of the National Internal Revenue Code, as amended.

Any other provisions of law to the contrary notwithstanding, there shall be no discrimination in tax treatment of the Boy and Girl Scouts of the Philippines.

66Section 10. From and after the passage of this Act, it shall be unlawful for any person within the jurisdiction of the Philippines to falsely and fraudulently call himself as, or represent himself to be, a member of, or an agent for, the Boy Scouts of the Philippines; and any person who violates any of the provisions of this Act shall be punished by prision correccional in its minimum period or a fine not exceeding Five thousand pesos (P5,000.00) or both, at the discretion of the court.

It shall be unlawful for any person to manufacture, sell or distribute or cause to be manufactured, sold or distributed fraudulently or without the official knowledge and written consent or permission of the National Executive Board of the Boy Scouts of the Philippines badges, uniforms, insignia, or any other boy scout paraphernalia; or to use, apply, feature or portray said badges, uniforms, insignia or scouting paraphernalia or the photos or visuals of a boy scout or boy scouts in uniform, or the logo, seal, or corporate name of the Boy Scouts of the Philippines, in any print ad, radio or television commercial, billboard, collateral material or any form of advertisement; or to use the name of the Boy Scouts of the Philippines for any illegal purpose or personal gain. Any violation of any of the provisions of Section 7 and of this section shall be punished by prision correccional in its medium period to prision mayor in its minimum period or a fine of not less than Ten thousand pesos (P10,000.00) nor more than One hundred thousand pesos (P100,000.00), or both, at the discretion of the court: Provided, That, in case of corporations, partnerships, associations, societies or companies, the manager, administrator or the person in charge of the management or administration of the business shall be criminally responsible for any such violation. These penalties shall be without prejudice to the proper civil action for recovery of civil damages, which may be instituted together with or independently of the criminal prosecution.

67 Section 5. If any section or provision of this Act is held invalid, all the other provisions not affected thereby shall remain valid.