National Electrification Administration V. Maguindanao Electric Cooperative, Inc. Gr No. 192595-96 Date: April 11, 2018 Facts

National Electrification Administration v. Maguindanao Electric Cooperative, Inc. GR No. 192595-96 Date: April 11, 2018 FACTS: Maguindanao Electric Cooperative, Inc. (MAGELCO) is a duly organized cooperative with a franchise to distribute electric light, and power to the municipalities in the province of Maguindanao. Its franchise also includes the authority to distribute electricity in six municipalities in Cotabato, namely Pigcawayan, Alamada, Libungan, Midsayap, Aleosan, and Pikit (PPALMA Area). Cotabato Electric Cooperative, Inc. (COTELCO) is also a duly organized cooperative with a franchise to distribute electric light, and power to the province of Cotabato except for the PPALMA Area. COTELCO filed before National Electrification Administration (NEA) an application for the amendment of its franchise to include the PPALMA Area. MAGELCO opposed the application. After conducting hearings, NEA granted COTELCO’s application and ordered the transfer of MAGELCO’s assets in the PPALMA area to COTELCO upon payment of just compensation. MAGELCO then passed GA Resolution No. 4 which amended the MAGELCO by-laws. The resolution states that the general assembly has approved the division and separation of MAGELCO into two separate and independent branch units, the Maguindanao Electric Cooperative, Inc. (MAGELCO Main) and Maguindanao Electric Coorperative, Inc. Palma Area (MAGELCO-PALMA). NEA then approved GA Resolution No. 4 and its transition plan. However, MAGELCO Main thereafter issued Board Resolution No. 40, declaring the cancellation of the transition plan executed by and between MAGELCO Main and MAGELCOPALMA. NEA then issued two letter-directives. In the first letter-directive, NEA approved MAGELCO Main Board Resolution No. 40 and revoked its approval of MAGELCO Board Resolution No. 4 which divided MAGELCO between MAGELCO Main and MAGELCO-PALMA. In the second letter-directive, NEA declared that the PPALMA Area is under the coverage of COTELCO and not MAGELCO Main or MAGELCO-PALMA. MAGELCO-PALMA then filed a petition challenging the two letter-directives of NEA. The CA nullified the two letter-directives and ruled that the NEA, in dissolving MAGELCO-PALMA, acted without jurisdiction. ISSUE: 1. Does MAGELCO-PALMA has the right to file a petition challenging the two-letter directives of NEA? 2. Does NEA acted with grave abuse of discretion is dissolving MAGELCO-PALMA? HELD: 1. No, MAGELCO-PALMA does not have a right to file a petition challenging the letterdirectives of NEA. According to jurisprudence, by-laws governs the internal affairs of the corporation and the relationships between and among its members. The by-laws is intended as a guide in the

management of the activities of the cooperative and the relationships of its members. Amendments to the by-laws, as such, affect only the management of the cooperative and its members. It is not a mechanism by which new cooperatives are created. Moreover, PD 269 provides for the process by which cooperatives are formed. PD 269 does not allow for the creation of a cooperative from an existing one by mere amendment of its by-laws. In the case at bar, MAGELCO Main, in amending its by-laws creating MAGELCO-PALMA, merely rearranged its structure by creating two branches. It only formed a separate branch to handle the distribution of electricity in the PPALMA Area to regulate the affairs of MAGELCO Main. Thus, no new cooperative arose from MAGELCO Main's act of amending its own bylaws. It affected only the internal operations of MAGELCO Main itself. Consequently, MAGELCO-PALMA never existed as a separate juridical entity, and hence, do not have a capacity to file an action challenging the directives of NEA. 2. No, NEA did not act with grave abuse of discretion. According to jurisprudence, the board of directors shall have the right to formulate and adopt policies and plans, promulgate rules and regulations for the management, operation and conduct of the Cooperative. In the case at bar, NEA did not dissolve MAGELCO-PALMA as a separate cooperative. It merely approved the resolution issued by MAGELCO Main’s board of directors declaring the cancellation of the transition plan executed by and between MAGELCO Main and MAGELCOPALMA. Such resolution is a management decision that MAGELCO Main's board of directors can validly do in the pursuit of the affairs of the cooperative. Therefore, NEA committed no grave abuse of discretion as it merely approves a valid resolution of MAGELCO Main.