Case Digest: Funa v. Manila Economic Cultural Office et al., G.R. No. 193462, February 4, 2014

 Corporation Law | Sui Generis

• The Philippines ended official relations with Taiwan in 1975, recognizing the PROC as the sole legal government of China. The Joint Communiqué between the Philippines and the PROC explicitly recognized Taiwan as part of Chinese territory.
• Despite diplomatic termination, unofficial relations between Taiwan and the Philippines were facilitated by designated offices like the Manila Economic Cultural Office (MECO) and the Taipei Economic and Cultural Office.
• MECO was formed as a non-stock, non-profit corporation under the Corporation Code to foster friendly and unofficial relations with Taiwan. It handles Filipino workers' interests in Taiwan, promoting trade, investment, cultural, and educational exchanges.
• Dennis A.B. Funa sought financial and audit reports of MECO from the COA, on the belief that it is a government-owned corporation (GOCC).

WoN MECO is a GOCC. NO

The MECO Is Not a GOCC or Government Instrumentality

Petitioner claims that the accounts of the MECO ought to be audited by the COA because the former is a GOCC or government instrumentality. Petitioner points out that the MECO is a non-stock corporation "vested with governmental functions relating to public needs"; it is "controlled by the government thru a board of directors appointed by the President of the Philippines"; and it operates "outside of the departmental framework," subject only to the "operational and policy supervision of the DTI." The MECO thus possesses, petitioner argues, the essential characteristics of a bona fide GOCC and government instrumentality.

We take exception to petitioner’s characterization of the MECO as a GOCC or government instrumentality. The MECO is not a GOCC or government instrumentality.

Government instrumentalities are agencies of the national government that, by reason of some "special function or jurisdiction" they perform or exercise, are allotted "operational autonomy" and are "not integrated within the department framework." Subsumed under the rubric "government instrumentality" are the following entities:

1. regulatory agencies,

2. chartered institutions,

3. government corporate entities or government instrumentalities with corporate powers (GCE/GICP), and

4. GOCCs

The Administrative Code defines a GOCC:

(13) Government-owned or controlled corporation 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: x x x.

The above definition is, in turn, replicated in the more recent Republic Act No. 10149 or the GOCC Governance Act of 2011, to wit:

(o) Government-Owned or -Controlled Corporation (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 of the Republic of the Philippines directly or through its instrumentalities either wholly or, where applicable as in the case of stock corporations, to the extent of at least a majority of its outstanding capital stock: x x x.

GOCCs, therefore, are "stock or non-stock" corporations "vested with functions relating to public needs" that are "owned by the Government directly or through its instrumentalities." By definition, three attributes thus make an entity a GOCC: first, its organization as stock or non-stock corporation; second, the public character of its function; and third, government ownership over the same. Possession of all three attributes is necessary to deem an entity a GOCC.

In this case, there is not much dispute that the MECO possesses the first and second attributes. It is the third attribute, which the MECO lacks.

The MECO Is Not a Government Instrumentality; It Is a Sui Generis Entity.

The categorical exclusion of the MECO from a GOCC makes it easier to exclude the same from any other class of government instrumentality. The other government instrumentalities i.e., the regulatory agencies, chartered institutions and GCE/GICP are all, by explicit or implicit definition, creatures of the law. The MECO cannot be any other instrumentality because it was, as mentioned earlier, merely incorporated under the Corporation Code.

Hence, unless its legality is questioned, and in this case it was not, the fact that the MECO is operating under the policy supervision of the DTI is no longer a relevant issue to be reckoned with for purposes of this case.

For whatever it is worth, however, and without justifying anything, it is easy enough for this Court to understand the rationale, or necessity even, of the executive branch placing the MECO under the policy supervision of one of its agencies.

It is evident, from the peculiar circumstances surrounding its incorporation, that the MECO was not intended to operate as any other ordinary corporation. And it is not. Despite its private origins, and perhaps deliberately so, the MECO was "entrusted" by the government with the "delicate and precarious" responsibility of pursuing "unofficial" relations with the people of a foreign land whose government the Philippines is bound not to recognize. The intricacy involved in such undertaking is the possibility that, at any given time in fulfilling the purposes for which it was incorporated, the MECO may find itself engaged in dealings or activities that can directly contradict the Philippines’ commitment to the One China policy of the PROC. Such a scenario can only truly be avoided if the executive department exercises some form of oversight, no matter how limited, over the operations of this otherwise private entity.

Indeed, from hindsight, it is clear that the MECO is uniquely situated as compared with other private corporations. From its over-reaching corporate objectives, its special duty and authority to exercise certain consular functions, up to the oversight by the executive department over its operations—all the while maintaining its legal status as a non-governmental entity—the MECO is, for all intents and purposes, sui generis.