EN BANC G.R. No. 177131 June 7, 2011 BOY SCOUTS OF THE PHILIPPINES, Petitioner, vs. COMMISSION ON AUDIT, Respondent.

As stated earlier, the sole issue to be resolved in this case is whether the BSP falls under the COA’s audit jurisdiction.

ruling:

After looking at the legislative history of its amended charter and carefully studying the applicable laws and the arguments of both parties, we find that the BSP is a public corporation and its funds are subject to the COA’s audit jurisdiction.

The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936), entitled "An Act to Create a Public Corporation to be Known as the Boy Scouts of the Philippines, and to Define its Powers and Purposes" created the BSP as a "public corporation" to serve the following public interest or purpose:

Sec. 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.

Presidential Decree No. 460, approved on May 17, 1974, amended Commonwealth Act No. 111 and provided substantial changes in the BSP organizational structure. Pertinent provisions are quoted below:

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 National Defense, 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 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.

Subsequently, on March 24, 1992, Republic Act No. 7278 further amended Commonwealth Act No. 111 "by strengthening the volunteer and democratic character" of the BSP and reducing government representation in its governing body, as follows:

Section 1. Sections 2 and 3 of Commonwealth Act. No. 111, as amended, is hereby amended to read as follows:

"Sec. 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 purposes 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.

"Sec. 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."

Sec. 2. Section 4 of Commonwealth Act No. 111, as amended, is hereby repealed and in lieu thereof, Section 4 shall read as follows:

"Sec. 4. The President of the Philippines shall be the Chief Scout of the Boy Scouts of the Philippines."

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 scout 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;

"(c) The Secretary of Education, Culture and Sports;

"(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

"Sec. 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 BSP as a Public Corporation under Par. 2, Art. 2 of the Civil Code

There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently constituted under Republic Act No. 7278, falls under the second classification. Article 44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose created by law; their personality begins as soon as they have been constituted according to law;

(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member. (Emphases supplied.)

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it under Article 45 of the Civil Code, which provides:

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating or recognizing them.

Private corporations are regulated by laws of general application on the subject.

Partnerships and associations for private interest or purpose are governed by the provisions of this Code concerning partnerships. (Emphasis and underscoring supplied.)

The purpose of the BSP as stated in its amended charter shows that it was created in order to implement a State policy declared in Article II, Section 13 of the Constitution, which reads: