G.R. No. 210314

G.R. No. 210314, October 12, 2021,
♦ Decision, Hernando, [J]
♦ Concurring Opinion, Perlas-Bernabe, [J]
♦ Separate Opinion, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurring Opinion, Lazaro-Javier, [J]
♦ Separate Concurring Opinion, Zalameda, [J]

BANGKO SENTRAL NG PILIPINAS, PETITIONER, VS. THE COMMISSION ON AUDIT, RESPONDENT.

This Petition for Certiorari1 assails the Decision No. 2012-1542 dated September 27, 2012 and the Resolution No. 2013-2143 dated December 3, 2013 rendered by the respondent Commission on Audit (COA).

Here, we resolve the question of whether the petitioner Bangko Sentral ng Pilipinas (BSP) is allowed to deduct any reserve from its net profits to be remitted to the government.

The BSP theorizes that it may, pursuant to Section 43 of Republic Act No. (RA) 7653,4 otherwise known as the New Central Bank Act, to wit:

SECTION 43. Computation of Profits and Losses. - Within the first thirty (30) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. In the calculation of net profits, the Bangko Sentral shall make adequate allowance or establish adequate reserves for bad and doubtful accounts. (Emphasis supplied)

The COA, on the other hand, disagrees, citing Section 2(d) in relation to Section 3 of RA 7656, entitled An Act Requiring Government-Owned Or -Controlled Corporations To Declare Dividends Under Certain Conditions To The National Government, And For Other Purposes:5

(d) "Net earnings" shall mean income derived from whatever source, whether exempt or subject to tax, net of deductions allowed under Section 29 of the National Internal Revenue Code, as amended, and income tax and other taxes paid thereon, but in no case shall any reserve for whatever purpose be allowed as a deduction from net earnings.

SECTION. 3. Dividends. - All government-owned or -controlled corporations shall declare and remit at least fifty percent (50%) of their annual net earnings as cash, stock or property dividends to the National Government. This section shall also apply to those government-owned or -controlled corporations whose profit distribution is provided by their respective charters or by special law, but shall exclude those enumerated in Section 4 hereof: Provided, That such dividends accruing to the National Government shall be received by the National Treasury and recorded as income of the General Fund. (Emphasis supplied)

While the case was pending before this Court, the Congress amended Section 43 of RA 76536 on February 14, 2019, viz.:

SEC. 43. Computation of Profits and Losses. - Within the first sixty (60) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. Notwithstanding any provision of law to the contrary, the net profit of the Bangko Sentral shall be determined after allowing for expenses of operation, adequate allowances and provisions for bad and doubtful debts, depreciation in assets, and such allowances and provisions for contingencies or other purposes as the Monetary Board may determine in accordance with prudent financial management and effective central banking operations (Emphasis supplied)

On July 27, 2006, the COA's Office of the General Counsel - Legal and Adjudication Sector issued Opinion No. 2006-031,7 stating that the proper basis for the BSP's dividend declaration is its net earnings undiminished by any reserves for whatever purpose, pursuant to Section 2(d) of RA 7656, and not Section 43 of RA 7653, which allows the BSP to deduct reserves from its net earnings.8 According to the Office, Section 2(d) of RA 7656 repealed Section 43 of RA 7653.9 Notably, Opinion No. 2006-031 was issued after the post-audit of the BSP's dividend payment for the year 2003 showed that the BSP incurred an understatement in dividends resulting from its deduction of reserves from its net earnings.10

Pursuant to Opinion No. 2006-031, the COA issued Audit Observation Memorandum (AOM) No. RMS-2006-0211 stating that the BSP incurred an understatement of P2.101 billion in dividends paid to the government for the period of 2003 to 200512 due to the deduction from its net income of reserves for property insurance and rehabilitation of the Security Plant Complex.13

In its January 3, 2007 Letter,14 the BSP disputed this AOM on the ground that RA 7656, a general law, cannot repeal RA 7653, a special law.15

In its July 3, 2007 Memorandum,16 the COA maintained that Section 2(d) of RA 7656 impliedly repealed Section 43 of RA 7653.17 It reasoned that although RA 7653 is the special law applicable to the BSP, the applicable law for the computation of net earnings to be remitted to the government is Section 2(d) of RA 7656 under the principle that a specific provision of a general statute prevails and repeals a general provision of a special law,18 Pursuant to this memorandum, the COA issued another AOM, FSAT-DP-AO-2007-02,19 which revised the total underpayment of dividends to the government to P7.147 billion.20 This AOM extended the coverage of the prior AOM from 2003 to 2005, to 2006.21

The BSP sent two more letters22 disagreeing with the COA, which were treated as an appeal.

On March 23, 2010 the COA rendered Decision No. 2010-04223 holding that Section 2(d) of RA 7656 impliedly repealed Section 43 of RA 7653.24 Citing Bagatsing v. Ramirez,25 the COA ruled that while a special law generally prevails over a general law, in case of conflict between a general provision of a special law and a particular provision of a general law, the latter prevails.26 On the basis of such legal finding, the COA directed the issuance of a Notice of Charge to enforce the collection of the understated dividends covered by the previous AOMs, i.e. for 2003 to 2006.27

WHEREFOHE, foregoing premises considered, COA-OGC-LAS Opinion No. 2006-031 and OGC Memorandum dated July 27, 2006 and July 3, 2007, respectively, are hereby AFFIRMED. Accordingly, the Supervising Auditor - BSP is hereby directed to issue the necessary Notice of Charge to enforce the collection of the understated dividend from the BSP.28 (Emphasis supplied)

Aggrieved, the BSP filed a motion for reconsideration, which was denied by the COA on January 25, 2011 through Resolution No. 2011-007.29 In the said resolution, the COA recognized the settlement between the respective heads of the COA, the Department of Finance (DOF), and the BSP for the dividends covered by the period of 2003 to 2006, which pegged the amount of payable dividends at P9.312 billion.30 However, aside from recognizing the settlement for 2003 to 2006, the COA also declared that for 2007 onwards, the BSP may not deduct reserves from its net earnings for 2007 onwards, in line with its ruling that there was an implied repeal of Section 43 of RA 7653:

This Commission agrees only insofar as the unremitted amount stated in AOM Nos. RMS 2006-02 and FSAT-DP-AO-2007-02 are concerned, but not as to the bases of the findings stated therein. It is maintained that said AOMs and the assailed COA Decision No. 2010-042 shall stand.

Thus, for subsequent years, that is, for the years 2007 onwards, the BSP must compute the net earnings for purposes of dividends to be remitted to the NG undiminished by any reserve for whatever purpose. Additionally, only those allowed in Section 34, NIRC, shall be deducted from its gross income consistent with the view that R.A. No. 7653 was partly repealed by R.A. No. 7656.

WHEREFORE, in view of the foregoing considerations, this Commission hereby AFFIRMS Decision No. 2010-042 dated March 23, 2010. Accordingly, no reserve for whatever purpose shall be allowed to be deducted from BSP's net earnings/income in the computation of dividends to be remitted to the NG. However, for the years 2003 to 2006, this Commission interposes no objection to the agreement between the BSP and the DOF, in the presence of the DBM Secretary and the Senate Chairman of the Committee on Finance, that the BSP shall remit the NG dividends in the amount of only P9.312 billion, subject to the submission of the duly signed Agreement of the parties concerned to form part of the record of the herein case.31 (Emphasis supplied)

On January 27, 2011, the BSP, the COA and the DOF formally executed a Memorandum of Agreement32 (MOA) reflecting their prior agreement to settle the amount of payable dividends for the period of 2003 to 2006.33 Accordingly, the BSP remitted the amount of P9.312 billion to the government on January 31, 2011.34 In the MOA, the parties also agreed to "diligently work towards a mutually acceptable and legal arrangement for the subsequent dividend payments and the account settlement[s] consistent with the above agreements between BSP and DOF and with due regard to the BSP's unique functions and responsibilities as central monetary authority of the country[.]"35

In its July 15, 2011 Letter,36 the COA informed the BSP that Resolution No. 2011-007 already attained finality since the BSP no longer filed an appeal.37 Hence, from 2007 onwards "no reserve for whatever purpose shall be allowed to be deducted from BSP's net earnings/income in the computation of dividends to be remitted to the [National Government]."38

On September 27, 2012, the COA rendered the assailed Decision, upholding its previous rulings and disallowing any reserve to be deducted from the BSP's net earnings.39 It held that since the ruling in Resolution No. 2011-007 that the BSP may not deduct reserves from its net earnings from 2007 onwards has already attained finality, it will be the "concrete precedent" for all future cases. The dispositive portion reads:

WHEREFORE, the foregoing premises considered, this Commission reiterates its ruling in COA [Resolution] No. 2011-007 dated January 25, 2011. Accordingly, this Commission rules with FINALITY that no reserve for whatever purpose shall be deducted from the BSP's net earnings/income in the computation of dividends to be remitted to the NG. The Supervising Auditor, BSP, is hereby directed to ensure that the herein ruling is implemented by the BSP.40

The BSP moved for reconsideration, but the COA denied the motion on December 3, 2013 through the assailed Resolution, the dispositive portion of which reads:

WHEREFORE, the foregoing premises considered, this Commission finds no cogent reason to reverse or modify the assailed decision; hence the instant Motion for Reconsideration is hereby DENIED, and COA Decision No. 2012-154 dated September 27, 2012 is hereby AFFIRMED WITH FINALITY.41

Thus, this petition where the BSP raises the following arguments: (1) that the MOA, which supposedly adopted the BSP's own computation of dividend declaration from 2007 onwards, superseded Decision No. 2010-042 and Resolution No. 2011-007;42 (2) that the COA has no power to interpret provisions of law with finality;43 (3) that the COA, with grave abuse of discretion, failed to consider the BSP's independence as the central monetary authority, and its nature as an administrative agency entrusted to enforce RA 7653, with primary authority to interpret its own charter, and with implied power to provide for allowances, reserves and restricted retained earnings;44 ( 4) that Section 2(d) of RA 7656 did not impliedly repeal Sections 43 and 44 of RA 7653, and that RA 7653, being the special law, governs in the computation of dividends, and not RA 7653, a general law;45 (5) that the COA's manner of computing dividends is inconsistent and vague since its ruling that the BSP may deduct reserves for bad or doubtful accounts after remittance of dividends to the government contradicts its implied repeal ruling;46 and (6) that RA 7656 does not apply during the 25 year transitory period under Section 132 (b) of RA 7653.47

In its Comment,48 the COA raises the following counter arguments: (1) that Decision No. 2010-042 and Resolution No. 2011-007 have attained finality and thus could no longer be assailed through a petition for certiorari;49 (2) that the MOA did not supersede Decision No. 2010-042 and Resolution No. 2011-007 with respect to 2007 onwards since it only settled the computation of dividends for the period of 2003 to 2006;50 (3) that in case of conflict between a general provision of a special law and a particular provision of a general law, the latter should prevail;51 (4) that the BSP does not have the implied power to maintain as much reserve as may be necessary since it is prohibited by Section 2(d) of RA 7656;52 and (5) that the COA 's manner of computing dividends is not inconsistent and vague.53

In its Reply,54 the BSP maintains that the COA's computation of dividends for the period of 2003 to 2006, not having been subject to judicial review, remains a mere advisory opinion and cannot be applied as controlling doctrine for succeeding years.55

Further, the BSP points out that the COA may not insist on making Decision No. 2010-042 a concrete precedent for future dividends without violating the undertaking of the parties in the MOA to "diligently work towards a mutually acceptable and legal arrangement for the subsequent dividend payments and the account settlement x x x[.]"56

Did the COA commit grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the assailed Decision and Resolution?

The COA committed grave abuse of discretion when it held in the assailed Decision and Resolution that Resolution No. 2011-007 in its entirety, had already attained finality and is thus the concrete precedent for future dividend payments of the BSP.

I. The COA is empowered to rule on a question of law as part of its duty to audit and examine government entities. Nevertheless, the issue on implied repeal of Section 43 of RA 7653 is moot and academic.

A. The COA has the power to resolve questions of law in the exercise of its audit jurisdiction. However, its rulings do not create legal precedent nor preclude judicial review.

The COA argues that its ruling in Resolution No. 2011-007 was properly within its jurisdiction to make as it may resolve questions of law under its rules of procedure.57 Since its ruling had already attained finality, it insists that such decision may no longer be modified.58

It is true that the COA is empowered to resolve questions of law. Its 2009 Revised Rules of Procedure states that the COA may resolve "novel, controversial, complicated or difficult questions of law relating to government accounting and auditing."59 This is in line with its constitutional powers under Section 2, Article IX-D of the Constitution:

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. 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.

(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties.

In Oriondo v. Commission on Audit60 (Oriondo), the Court recognized the COA's competence to rule on a question of law as part of its duty to audit and examine government entities under the Constitution, the Administrative Code,61 and the Government Auditing Code.62 In that case, the Court held that the COA generally has audit jurisdiction over public entities,63 and that the determination of whether an entity is the proper subject of its audit jurisdiction is a necessary part of the Commission's constitutional mandate to examine and audit the government as well as non-government entities that receive subsidies from it.64 To insist otherwise, according to the Court would impede the COA's exercise of its powers and functions.65

Here, the COA's determination of whether the BSP had an underdeclaration of dividends for the years 2003 to 2006 necessitated the resolution of a question of law i.e. whether Section 2(d) of RA 7656 impliedly repealed Section 43 of RA. 7653 (and is thus the proper basis for computation of the BSP's dividend declarations). Hence, as we ruled in Oriondo, the COA has the power and duty to rule on a question of law as a necessary part of its constitutional mandate to examine and audit government entities.

However, the COA's power to resolve questions of law relating to government auditing and accounting is not without limitations. First, the COA's rulings on questions of law may be the subject of judicial review by the courts. Section 1, Article VIII of the Constitution states that "judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law." Such power belongs exclusively to courts as part of the separation of powers among the three branches of government.66 Judicial power includes the duty of the courts to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government,67 of which the COA is undoubtedly a part.

To be sure, and as succinctly noted by my esteemed colleague, Senior Associate Justice Marvic Leonen, this Court's power to review judgments, orders and decisions of the COA may be invoked only if petitioner avails of the remedy provided by law-here, by filing a petition for certiorari within the 30-day reglementary period and in the manner provided under the relevant laws, regulations and Rules of Court.68 If the proper remedy is not availed of and the ruling becomes final,69 execution will issue as a matter of right.70

Further, findings of administrative agencies, especially one which is constitutionally-created, are generally accorded respect and finality, not only on the basis of the separation of powers but also for their presumed expertise in the laws they are entrusted to enforce. Thus, even assuming the proper remedy was timely availed of, the COA must have first acted with grave abuse of discretion amounting to lack or excess of jurisdiction before this Court may overturn its ruling.71

Nevertheless, it bears emphasis that COA decisions are generally subject to judicial review.

The second limitation on the COA's power to resolve questions of law is that its ruling thereon, even if already final, does not create binding legal precedent that will apply to future cases. The reason is that administrative decisions do not enjoy the same level of recognition as judicial decisions applying or interpreting the laws or the Constitution.72 These decisions do not have a binding effect similar to stare decisis-the doctrine that enjoins adherence to judicial precedents. As we have said in a prior case:

Article 8 of the Civil Code 26 recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country. But administrative decisions do not enjoy that level of recognition. A memorandum-circular of a bureau head could not operate to vest a taxpayer with a shield against judicial action. For there are no vested rights to speak of respecting a wrong construction of the law by the administrative officials and such wrong interpretation could not place the Government in estoppel to correct or overrule the same.73 (Emphasis supplied, citations omitted)

In that case, we held that the interpretation of a law by the Commissioner of Internal Revenue through an administrative issuance is not conclusive and cannot preclude judicial review, especially when such interpretation is erroneous.74 Indeed, in our jurisdiction, only the decisions of the Supreme Court establish jurisprudence or doctrines that form a part of our legal system.75

To recapitulate, while the COA has the power to resolve questions of law, its rulings generally do not preclude judicial review nor create legal precedent.

B. The ruling in Resolution No. 2011-007 as regards the understated dividends for the years 2003 to 2006 has attained finality. However, the ruling as regards the dividends for 2007 onwards failed to attain the same finality because the ruling thereon is void.

The doctrine of finality or immutability of judgment provides that when a decision has attained finality, it may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact and law.76 This applies not only to decisions of courts, but also to those of administrative bodies exercising quasi-judicial functions.77 The doctrine is grounded on the public policy that at the risk of occasional errors, litigation should end at some definite date fixed by law.78 However, it admits of exceptions: (1) the correction of clerical errors; (2) nunc pro tunc entries that cause no prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision that render its execution unjust and inequitable.79

Here, it is undisputed that the BSP failed to avail the proper remedy to prevent Resolution No. 2011-007 from becoming final and executory. Thus, the ruling, in its entirety, would normally have attained finality. Indeed, Resolution No. 2011-007 did attain finality insofar as it concerned the ruling on the underdeclaration of the dividends for the years 2003 to 2006. If not for the MOA entered into by the DOF and the BSP which compromised on the amount that must be paid by the BSP for those years, the BSP would have been bound to follow Resolution No. 2011-007 insofar as it ruled on the dividends for the years 2003 to 2006.

However, the COA's ruling as to 2007 onwards did not attain finality because it is covered by the exception of "void judgments" under the doctrine of finality. The ruling as to 2007 onwards is void since the COA exceeded its jurisdiction in rendering judgment as to transactions which have not yet occurred.

To recall, prior to the issuance of Resolution No. 2011-007, the only actual dispute between the parties was the dividend payments for 2003 to 2006 as covered by the two AOMs. To resolve the dispute, the COA had to determine whether Section 2(d) of RA 7656 had repealed Section 43 of RA 7653. In Decision No. 2010-042, the COA held in the affirmative80 and accordingly directed the issuance of a Notice of Charge to enforce the collection of the understated dividends covered by the two AOMs.81

Aggrieved, the BSP filed a motion for reconsideration. In resolving such motion, however, the COA not only settled the issue of the dividend payments for the period of 2003 to 2006, but also ruled that for 2007 onwards, the BSP may not deduct reserves from its net earnings consistent with its ruling that there was an implied repeal.82 It is thus in Resolution No. 2011-007 that the COA first made a determination as to the future dividend payments of the BSP-payments which have not yet been discussed nor disputed prior to the issuance of such resolution.

By ruling on future dividend payments or transactions which have yet to occur or which have not yet been submitted for review, the COA clearly acted in excess of its jurisdiction, making the ruling in such respect void.83 A void judgment does not attain finality.84 As noted by Justice Benjamin S. Caguioa, there can be no immutability of judgment as regards rulings on disputed audit observations on transactions which have not even occurred yet and were not part of the dispute between the COA Auditor/s and the BSP when Resolution No. 2011-07 was issued.

In fine, the COA not only committed grave abuse of discretion but acted in excess of its jurisdiction when it held that Resolution No. 2011-007, in its entirety, had become final and is thus the "concrete precedent" for all future dividend payments of the BSP. To stress, Resolution No. 2011-007 is null and void insofar the pronouncement as to 2007 onwards is concerned. Accordingly, the assailed Decision and Resolution are likewise void insofar as they reiterated the COA's sweeping pronouncement over future dividend payments.

C. The Court will resolve the case on the merits under the exceptions to the doctrine of mootness.

As astutely observed by my esteemed colleague, Justice Estela M. Perlas Bernabe, the determination of whether Section 2(d) of RA 7656 repealed Section 43 of RA 7653 is already moot and academic considering that there is no longer an issue as to the dividend payments for 2003 to 2006, and considering further that there is no actual controversy as to the dividend payments for 2007 onwards. Nevertheless, because the issue is capable of repetition yet evading review, and for the guidance of the bench, the bar, and the public, we will proceed to make such determination.85

II. Section 2(d) in relation to Section 3 of RA 7656 did not repeal Section 43 of RA 7653.

When confronted with apparently conflicting statutes, the courts should endeavor to harmonize and reconcile them instead of declaring the outright invalidity of one against the other because they are equally the handiwork of the same legislature.86 The legislature is presumed to know the existing laws on the subject and would express a repeal if one is intended.87 Indeed, all doubts must be resolved against the implied repeal of a statute and every statute must be interpreted and harmonized with other laws to form a uniform system of jurisprudence:

Well-settled is the rule that repeals of laws by implication are not favored, and that courts must generally assume their congruent application. The two laws must be absolutely incompatible, and a dear finding thereof must surface, before the inference of implied repeal may be drawn. The rule is expressed in the maxim, interpretare et concordare leqibus est optimus interpretendi, i.e., every statute must be so interpreted and brought into accord with other laws as to form a uniform system of jurisprudence. The fundament is that the legislature should be presumed to have known the existing laws on the subject and not have enacted conflicting statutes. Hence, an doubts must he resolved against any implied repeal, and all efforts should be exerted in order to harmonize and give effect to all laws on the subject.88

Thus, repeals by implication are not favored unless manifestly intended by Congress, or unless it is convincingly and unambiguously demonstrated that the laws or orders are clearly repugnant and patently inconsistent with one another so that they cannot co-exist.89

Repeal by implication takes place when (a) the provisions in the two acts on the same subject matter are irreconcilably contradictory, in which case, the later act, to the extent of the conflict, constitutes an implied repeal of the earlier one, or (b) when the later act covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate to repeal the earlier law.90 As regards the first instance, no irreconcilable conflict could reasonably exist between two statutes if the statutes concerned do not cover the same subject matter in the first place.

As applied, to determine whether Section 2(d) of RA 7656 repealed Section 43 of RA 7653 or the BSP Charter, it is necessary to ascertain whether the BSP is within the coverage of RA 7656. In the event that the BSP is indeed outside the coverage of RA 7656, then there could be no irreconcilable conflict between the two provisions resulting in an implied repeal.

After a judicious examination of the applicable laws and jurisprudence, we find and so hold that the BSP is outside the coverage of RA 7656. Thus, Section 2(d) of RA 7656 did not repeal Section 43 of RA 7653.

A. The BSP is not covered by RA 7656 because it is not a government-owned or -controlled corporation as defined under Section 2(b) of RA 7656.

To recall, RA 7656 requires all government-owned or -controlled corporations (GOCCs) to remit at least 50% of their earnings to the national government, viz:

SECTION 3. Dividends. - All government-owned or -controlled corporations shall declare and remit at least fifty percent (50%) of their annual net earnings as cash, stock or property dividends to the National Government. This section shall also apply to those government-owned or -controlled corporations whose profit distribution is provided by their respective charters or by special law, but shall exclude those enumerated in Section 4 hereof: Provided, That such dividends accruing to the National Government shall be received by the National Treasury and recorded as income of the General Fund. (Emphasis supplied)

(b) "Government-owned or controlled corporations" refers to corporations 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 percent (51%) of its capital stock. This term shall also include financial institutions, owned or controlled by the National Government, but shall exclude acquired asset corporations, as defined in the next paragraphs, state universities, and colleges.

As observed from the wording of Section 2(b), and as confirmed by legislative records,91 the definition of a GOCC in RA 7656 is a substantial reproduction of the definition found in the Administrative Code:

(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: Provided, That government-owned or controlled corporations may be further categorized by the Department of the Budget, the Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.92

In the 2006 case of Manila International Airport Authority v. Court of Appeals,93 the Court had the occasion to interpret and apply the foregoing definition in the Administrative Code when it was confronted with the question of whether Manila International Airport Authority (MIAA) is a GOCC and is thus not exempt from real estate tax.94 In resolving the issue, the Court explained that a GOCC must be organized as a stock or non-stock corporation, as expressly stated in the definition.95 It further explained that under the Corporation Code, to be classified as a stock corporation, an entity must have capital stock divided into shares and must be authorized to distribute dividends and allotments of surplus and profits to its stockholders.96 On the other hand, to be classified as a non-stock corporation, it must have members and must not distribute any part of its income to said members.97 Since MIAA is not organized as a stock or non-stock corporation, the Court held that it is not a GOCC:

There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:

(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) percent of its capital stock: ....(Emphasis supplied)

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter provides:

SECTION 10. Capital. - The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:

(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties;

(b) That the amount of P605 million as of December 31, 1986 representing about seventy [percent] (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of E.O. No. 903 as amended, shall be converted into the equity of the National Government in the Authority. Thereafter, the Government contribution to the capital of the Authority shall be provided in the General Appropriations Act.

Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.

Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and ...authorized to distribute to the holders of such shares dividends ...." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation.98 x x x (Citations omitted)

Applying the parameters in Manila International Airport Authority v. Court of Appeals, the Court has since disqualified many entities from being classified as GOCCs, including the Philippine Fisheries Development Authority,99 the Philippine Ports Authoriry,100 the Government Service Insurance System,101 the Philippine Reclamation Authority,102 the Manila Economic & Cultural Office,103 the Mactan-Cebu International Airport Authority,104 the Bases Conversion and Development Authority,105 the Executive Committee of the Metro Manila Film Festival,106 and the Light Rail Transit Authority.107

After applying the same parameters, we find that the BSP does not qualify as a GOCC as defined under the Administrative Code and RA 7656.

First, the BSP is not organized as a stock corporation. The capitalization of the BSP is provided under Section 2 of RA 7653, as amended by RA 11211:

SEC. 2. Creation of the Bangko Sentral. - There is hereby established an independent central monetary authority, which shall be a body corporate known as the Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral.

"The capital of the Bangko Sentral shall be Two hundred billion pesos (P200,000,000,000), to be fully , subscribed by the Government of the Republic of the Philippines, hereafter referred to as the Government: Provided, That the increase in capitalization shall be funded solely from the declared dividends of the Bangko Sentral in favor of the National Government. For this purpose, any and all declared dividends of the Bangko Sentral in favor of the National Government shall be deposited in a special account in the General Fund, and earmarked for the payment of Bangko Sentral's increase in capitalization. Such payment shall be released and disbursed immediately and shall continue until the increase in capitalization has been fully paid."108

Thus, while the BSP has capital under Section 2 of the BSP Charter, it does not have capital stock or share capital. Further, its capital is not divided into shares of stocks. There are no stockholders or voting shares. Hence, the BSP cannot be classified as a stock corporation.

Second, the BSP is not a non-stock corporation. It does not have members. Even assuming that the government may be considered as the sole member of the BSP, this will not make the BSP a non-stock corporation because the BSP Charter mandates it to remit 50% of its net profits to the National Treasury,109 in conflict with the provision that non-stock corporations do not distribute any part of their income to their members.110

Further, unlike non-stock corporations which are "organized for charitable, religious, educational, professional, cultural fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultural and like chambers, or any combination thereof,"111 the BSP was created to provide policy directions in the areas of money, banking, and credit.112

Neither can the BSP be considered a "financial institution owned or controlled by the National Government," which is expressly included in the definition of a GOCC in Section 2(b) of RA 7656.113 In the Revised Implementing Rules and Regulations of RA 7656, said entity is defined as follows:

f. "Financial Institutions Owned or Controlled by the National Government" refer to financial institutions or corporations in which the National Government directly or indirectly owns majority of the capital stock, and which are either: (1) registered with or directly supervised by the BSP; or are (2) collecting or transacting funds or contributions from the public and thereafter, placing them in financial instruments or assets such as deposits, loans, bonds and equity including, but not limited to, the Government Service Insurance System and the Social Security System.

First, while the BSP has capital that is fully subscribed by the government under Section 2 of its charter, it does not have capital stock. Second, it cannot be classified in either of the two categories mentioned above because (1) it supervises the institutions under the first category;114 and (2) it does not collect funds or contributions from the public like the Government Service Insurance System and the Social Security System under the second category.115

In fine, following the definition of a GOCC under the law and in line with settled jurisprudence, the BSP does not qualify as a GOCC as defined under RA 7656. Incidentally, this was also the impression of the Court in Manila International Airport Authority v. Court of Appeals.116

B. The records of the Constitutional Commission and the legislative deliberations on RA 7653 reveal the intent to exclude the BSP from the general category of GOCCs.

The creation of a central monetary authority is mandated by the Constitution.117 Under Section 20, Article XII thereof, the Congress shall establish an independent central monetary authority that shall provide policy direction in the areas of money, banking, and credit:

SECTION 20. The Congress shall establish an independent central monetary authority, the members of whose governing board must be natural-born Filipino citizens, of known probity, integrity, and patriotism, the majority of whom shall come from the private sector. They shall also be subject to such other qualifications and disabilities as may be prescribed by law. The authority shall provide policy direction in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory powers as may be provided by law over the operations of finance companies and other institutions performing similar functions.

Until the Congress otherwise provides, the Central Bank of the Philippines, operating under existing laws, shall function as the central monetary authority. (Emphasis supplied)

Pursuant to this provision, the BSP was created under RA 7653. Section 1 of the BSP Charter reiterates the independence of the BSP, as well as its accountability,118 in the discharge of its responsibilities concerning money, banking, and credit:

SECTION 1. Declaration of Policy. - The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy. (Emphasis supplied)

Notably, the predecessor of the BSP, the Central Bank, did not enjoy the same independence. Unlike Section 20, Article XII of the 1987 Constitution, the text of Section 14, Article XV of the 1973 Constitution does not contain the word "independent."119 Similarly, RA 265120 or the Central Bank Charter does not contain the same qualification. A reading of the records of the Constitutional Commission and the congressional deliberations reveals that the grant of further independence to the BSP, and the express inclusion of "independence" in the Constitution and its charter, was in response to the political pressure and influence previously exerted by the government on the Central Bank, which led to disastrous economic consequences.121 Thus, the framers intended the word "independent" to mean independence from the government, especially from the Executive department, in providing policy direction in the areas of money, banking, and credit,122 viz:

MR. MAAMBONG: Mr. Vice-President, I ask that Commissioner Natividad be recognized.

The Congress shall establish an independent central monetary authority, the majority of whose governing board shall come from the private sector, which shall provide policy direction in the areas of money, banking, and credit.

If this is an independent major governmental activity, why do we want that it should have a majority coming from the private sector. If we do this, shall we not lose control of monetary and fiscal policies? The government may lose control of monetary and fiscal policies because we use the word "independent" and then say "majority of the members of the governing board shall come from the private sector." Is this not a formula for losing control of monetary and fiscal policies of the government?

MR. VILLEGAS: No, this is a formula intended to prevent what happened in the last regime when the fiscal authorities sided with the executive branch and were systematically in control of monetary policy. This can lead to disastrous consequences. When the fiscal and the monetary authorities of a specific economy are combined, then there can be a lot of irresponsibility. So, this word "independent" refers to the executive branch.123 (Emphasis supplied)

Senator Maceda. Would it be correct to say at this point in time, as a general statement, the reason we are discussing this bill here today is that the Central Bank has allowed itself to be interfered with politically, has allowed itself to be run by the political leadership and that, certainly, its monetary policies were adopted not on the basis of long-term financial stability, but on the basis of political expediency or political considerations?

Senator Roco. There may have been instances, as being mentioned by the Gentleman, Mr. President. So that is historically an accurate statement.124 (Emphasis supplied)

Mr. President... The Monetary Authority is expected to be independent of the President and the Congress in providing "policy directions in the areas of money, banking and credit." Until otherwise provided, the present Central Bank shall perform these functions.

Thus, Mr. President, when we read the full constitutional mandate, Congress is mandated to leave the monetary policy to the new Central Monetary Authority or the Bangko Sentral, as we call it in this bill, or to the old Central bank as it exists today.125 (Emphasis supplied)

To ensure the independence of the BSP, Section 20, Article XII expressly requires the majority of the BSP's governing board to come from the private sector, and not from the government126-a requirement not found in the 1973 Constitution,127 and which digresses from the composition of the past Central Bank.128

Significantly, the independence of the BSP necessarily entailed its exclusion from the "general category of government-owned and controlled corporations"129 which are under the control of the Executive department,130 viz:

Let me start by saying first of all, in terms of the format, the new Central Bank draft bill basically reproduces the old C.B. Charter and incorporates the amendments that were already done earlier in House Bill... I forgot the number, and that we would like to add. So, let me just go over these changes. And there are actually about twelve of them, but let me just highlight the more important ones.

First of all, there is a new section entitled, Declaration of Policy. This is intended to emphasize the independence of the Central Bank, and at the same time remove the Central Monetary Authority from the general category of government-owned and controlled corporations.131 (Emphasis supplied)

MR. FUA. I was asking this question - if the central monetary authority is to be independent, you will, of course, refer to the exclusiveness of its operations as far as money matters are concerned, banking system is concerned and credit system is concerned for the government. And all the other government agencies including the rules and regulations promulgated for the operations of some of its instrumentalities or corporations, if there are corporations under that department, would not apply to the central monetary authority? And that as a matter of fact, any other law passed by Congress relative to regulations and rules governing government corporations or governing agencies shall not apply to the central monetary authority simply because under this bill you want to create an independent and exclusive central monetary authority?

MR. JAVIER (E.) Well, Your Honor, here in the Declaration of Policy, it does not mean that the central monetary authority shall be above the law or it should no longer be accountable to any other agency. It can be accountable to Congress. It can be accountable to courts. But, Your Honor, since the Constitution provides that we should establish an independent Central Monetary Authority, then we have to treat this as separate from other government-owned or controlled corporations which are now under the control of the Executive Department. That's the meaning of this provision, Your Honor. Now, most of these government-owned or controlled corporations are under the Office of the President or they are attached to departments and these departments are also under the Office of the President. That's the meaning of this provision, that the Central Monetary Authority or the Bangko Sentral ng Pilipinas will not be in the same manner or treated in the same manners as a government-owned or controlled corporation. Meaning, that it should not be under the Executive Department and it should not be interfered with by other government agencies. But it does not mean that the Central Monetary Authority should be above the law. There is nothing in this bill which exempts the Central Monetary from the coverage of the law.132 (Emphasis supplied)

Senator Roco. The term "government-owned or controlled corporations," Mr. President, is defined under several laws. Therefore, they apply depending on which law the Gentleman is referring to.

In the view of the Committee - and this is my own preference, Mr. President - the Central Bank is not a normal government-owned or -controlled corporation, in the sense it is used in the Investments law, in the sense it is used in the MDC Charter. It is different, although, evidently speaking it is a public corporation in the Administrative Law, since it is a mandated Charter by the Constitution. We might say, it is a semi-constitutional body, because we are required to create it. It is a corporation we are creating by special law. So, it is not quite the same as GOCCs or government-owned corporations.

The studies indicate definitions. But if our intention is to be followed, Mr. President, we leave it to the courts later on to define the in-between. As far as this Committee's intention was concerned, it was the intention to create sui generis in the Central Bank. It is owned by the government, but not quite government-owned or -controlled corporation as defined now by various law.133 (Emphasis supplied)

Thus, the legislative intent has always been to set apart the BSP from the GOCCs under the control of the executive department.

Concededly, the reference in Section 1 of RA 7653134 to the BSP as a "government-owned corporation" may be taken as basis for the BSP's inclusion in the GOCCs covered by RA 7656. This was alluded to by Justice Dante O. Tinga in his Dissenting Opinion in Manila International Airport Authority v. Court of Appeals, where he drew attention to the inconsistency between the wording of the provision ("government-owned corporation") and the majority's view that the BSP is not a GOCC.135

However, when Section 1 is read in its entirety, it is clear that the phrase "while being a government-owned corporation" merely recognizes the fact that the BSP is owned by the government, that its capital is fully subscribed by the latter. Indeed, the central point of Section 1 is to express the State policy to maintain an independent and accountable central monetary authority-not to provide for the BSP's legal status-hence the title "Declaration of Policy." As stated in the legislative records the BSP "is owned by the government, but not quite government-owned or -controlled corporation as defined now by various law."136

C. The subsequent legislations support the conclusion that the BSP is not a GOCC within the purview of RA 7656.

After RA 7656 was promulgated in 1993, two relevant laws have since been passed.

First, RA 10149 or the GOCC Governance Act of 2011.137 This law created the Governance Commission for GOCCs-the central advisory, monitoring, and oversight body with authority to regulate GOCCs.138 The law was enacted in recognition of the potential of GOCCs to serve as significant tools for economic development, and pursuant to the State policy to actively exercise its ownership rights in GOCCs and to promote growth:

SECTION 2. Declaration of Policy. - The State recognizes the potential of government-owned or -controlled corporations (GOCCs) as significant tools for economic development. It is thus the policy of the State to actively exercise its ownership rights in GOCCs and to promote growth by ensuring that operations are consistent with national development policies and programs.

Significantly, the GOCC Governance Act expressly excludes the BSP in its coverage.139 This exclusion strengthens the view that the BSP was meant to be set apart and not classified together with GOCCs.

Second, RA 11211 was enacted in 2019 and amended several provisions of RA 7653. Notably, among those amended was Section 43, which reiterated the BSP's power to maintain reserves:

SEC. 43. Computation of Profits and Losses. - Within the first sixty (60) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. Notwithstanding any provision of law to the contrary, the net profit of the Bangko Sentral shall be determined after allowing for expenses of operation, adequate allowances and provisions for bad and doubtful debts, depreciation in assets, and such allowances and provisions for contingencies or other purposes as the Monetary Board may determine in accordance with prudent financial management and effective central banking operations. (Emphasis supplied)

To us, this amendment to RA 7653 confirms the intent of Congress to allow the BSP to maintain reserves in its operations.

In fine, there is no implied repeal in this case because in the first place, the BSP is not covered by the application of RA 7656. The BSP is not a GOCC as defined under RA 7656 and the Administrative Code, and as gathered from the legislative intent of the Constitutional Commission and Congress. Thus, it is the BSP Charter, and not RA 7656 (which applies only to GOCCs), that governs the computation of the BSP's net earnings.

WHEREFORE, the Petition is PARTLY GRANTED. The Decision No. 2012-154 dated September 27, 2012 and Resolution No. 2013-214 dated December 3, 2013 are hereby SET ASIDE for being rendered by the Commission on Audit with grave abuse of discretion amounting to lack or excess of jurisdiction. Further, the ruling in Resolution No. 2011-007 that "no reserve for whatever purpose shall be allowed to be deducted from BSP's net earnings/income in the computation of dividends to be remitted to the National Government" is declared VOID. No pronouncement as to costs.

Gesmundo, C. J., Inting, Gaerlan, Rosario, J. Lopez, and Dimaampao, JJ., concur.