Opinion of the Court
The Philippine Government, acting as the respondent, argued that selecting the directors and managers for a government-owned corporation by voting its government-owned shares is an executive power. This power, they contend, was granted to the Governor-General by the foundational Organic Act of the Philippine Islands.
The Organic Act of the Philippine Islands, enacted by the U.S. Congress in 1916, served as the foundational constitution for the Philippines. The Act established the structure of the Philippine government by separating powers among three distinct branches: legislative, executive and judicial. The Organic Act grants legislative power, but nothing in it suggests that when the legislature deals with the government's property rights, it can bypass the fundamental constitutional rule: it must perform legislative functions, not executive ones.
A core principle embedded in the Act was the separation of powers, particularly between the legislative and executive branches. A key provision stated that "all executive functions of the government must be directly under the Governor General or within one of the executive departments under the supervision and control of the Governor General." This clause was central to the legal dispute, as it was used to argue that the legislature could not constitutionally transfer executive functions—like voting government-owned stock—to a board controlled by legislative members. Specifically, the legislature must govern such property by establishing rules and policies (legislating), not by administering or executing those rules.
Therefore, the Philippine Government maintained that the subsequent acts of the Philippine Legislature—which removed this power from the Governor-General and transferred it to a "board" in one case and a "committee" in the other, both composed primarily of legislative officials—were invalid. The lower court agreed with the Government's position and ruled in its favor, issuing judgments to remove the petitioners from their positions in both cases.
Petitioners point to rare exceptions where Congress delegated governance of non-stock institutions (like the Smithsonian Institute) to boards containing legislators. The Court dismisses these as insufficient precedent. These cases are few in number and stand in stark contrast to the consistent practice Congress has followed with stock corporations owned or controlled by the government. In those standard cases, Congress has uniformly vested the power to vote government shares in an executive officer, never in its own members.
Section 4 of Act No. 2705, amended by Section 2 of Act No. 2822 was held to be invalid. The Philippine Legislature unlawfully determined who of its members sit on the committee, while still legally providing a National Coal Company. [3] Appointments to positions lie in the Executive powers, not the Legislative.
