I.

Civil Service Commission

 Scope of CSC

CASE 1 : Camporedondo v. NLRC, G.R. No. 129049

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 129049 August 6, 1999

BALTAZAR G. CAMPOREDONDO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), Fifth Division, Cagayan de Oro
City, THE PHILIPPINE NATIONAL RED CROSS (PNRC), represented by GOVERNOR ROMEO C.
ESPINO and DR. CELSO SAMSON, respondent.

DECISION

PARDO, J.:

At issue in this case is whether the Philippine National Red Cross (PNRC for short) is a government
owned and controlled corporation or it has been “impliedly converted to a private organization”
subject to the jurisdiction of labor tribunals in a complaint filed by petitioner, a former PNRC chapter
administrator in Surigao del Norte, for illegal dismissal and damages, as he was forced to “retire” after
he was required to restitute shortages and unremitted collections in the total sum of P135,927.78.

Having obviously no merit, we dismiss the petition.

All suitors must come to court with clean hands. This is especially true of paid staff of the Philippine
National Red Cross. Like its unpaid volunteers, they must be men of unquestioned honesty and
integrity serving in selfless manner to aid the sick and wounded of armed forces in time of war, acting
in voluntary relief in time of peace and war, maintaining a system of national and international relief in
meeting emergency relief needs caused by typhoons, floods, fires, earthquakes, and other natural
disasters, and promoting such service in time of peace and war to
improve the health, safety and welfare of the Filipino people. 1 Paid staff of the PNRC are government
employees who are members of the Government Service Insurance System and covered by the Civil
Service Law. Unlike government service in other agencies, Red Cross service demands of its paid
staff uberrima fides, the utmost good faith and dedication to work.

Since 1980, petitioner was employed with the PNRC, and until his early “retirement” on December 15,
1995, he was administrator of the Surigao del Norte Chapter, Philippine National Red Cross. 2

In July, 1995, a field auditor of the PNRC conducted an audit of the books of account of the Surigao
del Norte Chapter headed by petitioner and found him short in the total sum of P109,000.00. 3

On November 21, 1995, Dr. Celso Samson, Secretary General of the PNRC wrote petitioner requiring
him to restitute within seventy two (72) hours from notice, the total sum of P135,927.78 representing
cash shortage, technical shortage and unremitted collections.4

On December 15, 1995, petitioner applied for early retirement from the service, and later wrote Dr.
Samson requesting for a re-audit by an independent auditor of his accounts. However, Dr. Samson
denied the request.5

On May 28, 1996, petitioner filed with the National Labor Relations Commission, Sub-Regional
Arbitration Branch X, Butuan City, a complaint for illegal dismissal, damages and underpayment of
wages against the Philippine National Red Cross and its key officials.6

On June 14, 1996, respondent Philippine National Red Cross filed with the Surigao del Norte
provincial office, Department of Labor and Employment, a motion to dismiss the complaint for lack of
jurisdiction over the subject matter of the case because the PNRC is a government corporation
whose employees are members of the Government Service Insurance System (GSIS), and embraced
within the Civil Service Law and regulations.7

On July 25, 1996, petitioner filed an opposition to motion to dismiss arguing that there was between
the PNRC and its duly appointed paid staff, an employer-employee relationship, governed by the
Labor Code of the Philippines.8

On October 11, 1996, the Labor Arbiter issued an order dismissing the complaint for lack of
jurisdiction, finding that the Philippine National Red Cross is a government corporation with an
original charter, having been created by Republic Act No. 95.9

On November 12, 1996, the Labor Arbiter denied petitioner’s motion for reconsideration filed on
October 14, 1996.10

On November 20, 1996, petitioner filed a notice of appeal and appeal memorandum with the National
Labor Relations Commission.11
On March 21, 1997, the National Labor Relations Commission, Fifth Division, issued a resolution
dismissing the appeal and confirming the decision of the Labor Arbiter that dismissed petitioner’s
complaint for lack of jurisdiction.12

Hence, this recourse.

On July 7, 1997, we resolved to require respondents to comment on the petition within ten (10) days
from notice.13

On August 7, 1997, respondent Philippine National Red Cross filed its comment. 14 On November 7,
1997, the Solicitor General filed its comments.15

Resolving the issue set out in the opening paragraph of this opinion, we rule that the Philippine
National Red Cross (PNRC) is a government owned and controlled corporation, with an original
charter under Republic Act No. 95, as amended. The test to determine whether a corporation is
government owned or controlled, or private in nature is simple. Is it created by its own charter for the
exercise of a public function, or by incorporation under the general corporation law? Those with
special charters are government corporations subject to its provisions, and its employees are under
the jurisdiction of the Civil Service Commission, and are compulsory members of the Government
Service Insurance System. The PNRC was not “impliedly converted to a private corporation” simply
because its charter was amended to vest in it the authority to secure loans, be exempted from
payment of all duties, taxes, fees and other charges of all kinds on all importations and purchases for
its exclusive use, on donations for its disaster relief work and other services and in its benefits and
fund raising drives, and be allotted one lottery draw a year by the Philippine Charity Sweepstakes
Office for the support of its disaster relief operation in addition to its existing lottery draws for blood
program.

Having served in the Philippine National Red Cross for a number of years since his initial employment,
he must know that it is a government corporation with its own charter and that he was covered by
compulsory membership in the Government Service Insurance System, which is why he could apply,
as he did, for “early” retirement from the service under Presidential Decree No. 1146 or Republic Act
No. 1616.16

WHEREFORE, the Court hereby DISMISSES the petition, and AFFIRMS the ruling of the National
Labor Relations Commission.

Double costs taxed against petitioner.

SO ORDERED.

Davide, Jr., C.J., Puno, Kapunan and Ynares-Santiago, JJ., concur.

Case Digest: Camporedondo v. NLRC, G.R. No. 129049

Baltazar Camporedondo was the administrator of the Surigao del Norte chapter of the Philippine
National Red Cross (PNRC). In 1995, a PNRC auditor found out that Baltazar had unremitted
collections amounting to P109,000.00. Baltazar, unable to restitute said missing amount, then filed for
early retirement. He later filed a complaint for illegal dismissal against PNRC. He filed the case with
the National Labor Relations Commission (NLRC). He averred that he was forced to retire because of
the erroneous audit. The Labor Arbiter, affirmed by the NLRC, ruled that it has no jurisdiction over the
case because PNRC is a government owned and controlled corporation (GOCC). Baltazar however
argues that PNRC impliedly became a private corporation when its charter was amended to give it
authority to secure loans, etc.

ISSUE: Whether or not the Philippine National Red Cross is a private corporation.

HELD: No. The simple test is to find out whether or not a corporation is public or private is to
determine if it has its own charter for the exercise of a public function or was it incorporated under the
general corporation law. PNRC has its own charter (R.A. 95). Its subsequent amendment did not
convert it into a private corporation. As a GOCC, it is subject to its own charter and its employees are
under the jurisdiction of the Civil Service Commission, and are compulsory members of the
Government Service Insurance System.
CASE 2: SSS Employee Asso. v CA 175 SCRA 686 (July 28, 1989)

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 85279 July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T. BAYLON,

RAMON MODESTO, JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE ALDAY, SERGIO
ARANETA, PLACIDO AGUSTIN, VIRGILIO MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C. PERALEJO,
RTC, BRANCH 98, QUEZON CITY, respondents.

Vicente T. Ocampo & Associates for petitioners.

CORTES, J:

Primarily, the issue raised in this petition is whether or not the Regional Trial Court can enjoin the
Social Security System Employees Association (SSSEA) from striking and order the striking
employees to return to work. Collaterally, it is whether or not employees of the Social Security System
(SSS) have the right to strike.

The antecedents are as follows:

On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a complaint for
damages with a prayer for a writ of preliminary injunction against petitioners, alleging that on June 9,
1987, the officers and members of SSSEA staged an illegal strike and baricaded the entrances to the
SSS Building, preventing non-striking employees from reporting for work and SSS members from
transacting business with the SSS; that the strike was reported to the Public Sector Labor -
Management Council, which ordered the strikers to return to work; that the strikers refused to return
to work; and that the SSS suffered damages as a result of the strike. The complaint prayed that a writ
of preliminary injunction be issued to enjoin the strike and that the strikers be ordered to return to
work; that the defendants (petitioners herein) be ordered to pay damages; and that the strike be
declared illegal.

It appears that the SSSEA went on strike after the SSS failed to act on the union's demands, which
included: implementation of the provisions of the old SSS-SSSEA collective bargaining agreement
(CBA) on check-off of union dues; payment of accrued overtime pay, night differential pay and holiday
pay; conversion of temporary or contractual employees with six (6) months or more of service into
regular and permanent employees and their entitlement to the same salaries, allowances and
benefits given to other regular employees of the SSS; and payment of the children's allowance of
P30.00, and after the SSS deducted certain amounts from the salaries of the employees and
allegedly committed acts of discrimination and unfair labor practices [Rollo, pp. 21-241].

The court a quo, on June 11, 1987, issued a temporary restraining order pending resolution of the
application for a writ of preliminary injunction [Rollo, p. 71.] In the meantime, petitioners filed a motion
to dismiss alleging the trial court's lack of jurisdiction over the subject matter [Rollo, pp. 72-82.] To this
motion, the SSS filed an opposition, reiterating its prayer for the issuance of a writ of injunction [Rollo,
pp. 209-222]. On July 22,1987, in a four-page order, the court a quo denied the motion to dismiss and
converted the restraining order into an injunction upon posting of a bond, after finding that the strike
was illegal [Rollo, pp. 83- 86]. As petitioners' motion for the reconsideration of the aforesaid order was
also denied on August 14, 1988 [Rollo, p. 94], petitioners filed a petition for certiorari and prohibition
with preliminary injunction before this Court. Their petition was docketed as G.R. No. 79577. In a
resolution dated October 21, 1987, the Court, through the Third Division, resolved to refer the case to
the Court of Appeals. Petitioners filed a motion for reconsideration thereof, but during its pendency
the Court of Appeals on March 9,1988 promulgated its decision on the referred case [Rollo, pp. 130-
137]. Petitioners moved to recall the Court of Appeals' decision. In the meantime, the Court on June
29,1988 denied the motion for reconsideration in G.R. No. 97577 for being moot and academic.
Petitioners' motion to recall the decision of the Court of Appeals was also denied in view of this
Court's denial of the motion for reconsideration [Rollo, pp. 141- 143]. Hence, the instant petition to
review the decision of the Court of Appeals [Rollo, pp. 12-37].

Upon motion of the SSS on February 6,1989, the Court issued a temporary restraining order
enjoining the petitioners from staging another strike or from pursuing the notice of strike they filed with
the Department of Labor and Employment on January 25, 1989 and to maintain the status quo [Rollo,
pp. 151-152].

The Court, taking the comment as answer, and noting the reply and supplemental reply filed by
petitioners, considered the issues joined and the case submitted for decision.

The position of the petitioners is that the Regional Trial Court had no jurisdiction to hear the case
initiated by the SSS and to issue the restraining order and the writ of preliminary injunction, as
jurisdiction lay with the Department of Labor and Employment or the National Labor Relations
Commission, since the case involves a labor dispute.

On the other hand, the SSS advances the contrary view, on the ground that the employees of the
SSS are covered by civil service laws and rules and regulations, not the Labor Code, therefore they
do not have the right to strike. Since neither the DOLE nor the NLRC has jurisdiction over the dispute,
the Regional Trial Court may enjoin the employees from striking.

In dismissing the petition for certiorari and prohibition with preliminary injunction filed by petitioners,
the Court of Appeals held that since the employees of the SSS, are government employees, they are
not allowed to strike, and may be enjoined by the Regional Trial Court, which had jurisdiction over the
SSS' complaint for damages, from continuing with their strike.

Thus, the sequential questions to be resolved by the Court in deciding whether or not the Court of
Appeals erred in finding that the Regional Trial Court did not act without or in excess of jurisdiction
when it took cognizance of the case and enjoined the strike are as follows:

1. Do the employees of the SSS have the right to strike?

2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the SSS and to enjoin
the strikers from continuing with the strike and to order them to return to work?

These shall be discussed and resolved seriatim

The 1987 Constitution, in the Article on Social Justice and Human Rights, provides that the State
"shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law" [Art. XIII, Sec.
31].

By itself, this provision would seem to recognize the right of all workers and employees, including
those in the public sector, to strike. But the Constitution itself fails to expressly confirm this impression,
for in the Sub-Article on the Civil Service Commission, it provides, after defining the scope of the civil
service as "all branches, subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters," that "[t]he right to self-
organization shall not be denied to government employees" [Art. IX(B), Sec. 2(l) and (50)].
Parenthetically, the Bill of Rights also provides that "[tlhe right of the people, including those
employed in the public and private sectors, to form unions, associations, or societies for purposes not
contrary to law shall not abridged" [Art. III, Sec. 8]. Thus, while there is no question that the
Constitution recognizes the right of government employees to organize, it is silent as to whether such
recognition also includes the right to strike.

Resort to the intent of the framers of the organic law becomes helpful in understanding the meaning
of these provisions. A reading of the proceedings of the Constitutional Commission that drafted the
1987 Constitution would show that in recognizing the right of government employees to organize, the
commissioners intended to limit the right to the formation of unions or associations only, without
including the right to strike.

Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that "[tlhe right to self-
organization shall not be denied to government employees" [Art. IX(B), Sec. 2(5)], in answer to the
apprehensions expressed by Commissioner Ambrosio B. Padilla, Vice-President of the Commission,
explained:

MR. LERUM. I think what I will try to say will not take that long. When we proposed this
amendment providing for self-organization of government employees, it does not mean
that because they have the right to organize, they also have the right to strike. That is a
different matter. We are only talking about organizing, uniting as a union. With regard to
the right to strike, everyone will remember that in the Bill of Rights, there is a provision
that the right to form associations or societies whose purpose is not contrary to law shall
not be abridged. Now then, if the purpose of the state is to prohibit the strikes coming
from employees exercising government functions, that could be done because the
moment that is prohibited, then the union which will go on strike will be an illegal union.
And that provision is carried in Republic Act 875. In Republic Act 875, workers,
including those from the government-owned and controlled, are allowed to organize but
they are prohibited from striking. So, the fear of our honorable Vice- President is
unfounded. It does not mean that because we approve this resolution, it carries with it
the right to strike. That is a different matter. As a matter of fact, that subject is now being
discussed in the Committee on Social Justice because we are trying to find a solution to
this problem. We know that this problem exist; that the moment we allow anybody in the
government to strike, then what will happen if the members of the Armed Forces will go
on strike? What will happen to those people trying to protect us? So that is a matter of
discussion in the Committee on Social Justice. But, I repeat, the right to form an
organization does not carry with it the right to strike. [Record of the Constitutional
Commission, vol. 1, p. 569].

It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by the Labor Code
(P.D. 442) in 1974, expressly banned strikes by employees in the Government, including
instrumentalities exercising governmental functions, but excluding entities entrusted with proprietary
functions:

.Sec. 11. Prohibition Against Strikes in the Government. — The terms and conditions of
employment in the Government, including any political subdivision or instrumentality
thereof, are governed by law and it is declared to be the policy of this Act that
employees therein shall not strike for the purpose of securing changes or modification in
their terms and conditions of employment. Such employees may belong to any labor
organization which does not impose the obligation to strike or to join in strike:Provided,
however, That this section shall apply only to employees employed in governmental
functions and not those employed in proprietary functions of the Government including
but not limited to governmental corporations.
No similar provision is found in the Labor Code, although at one time it recognized the right of
employees of government corporations established under the Corporation Code to organize and
bargain collectively and those in the civil service to "form organizations for purposes not contrary to
law" [Art. 244, before its amendment by B.P. Blg. 70 in 1980], in the same breath it provided that
"[t]he terms and conditions of employment of all government employees, including employees of
government owned and controlled corporations, shall be governed by the Civil Service Law, rules and
regulations" [now Art. 276]. Understandably, the Labor Code is silent as to whether or not government
employees may strike, for such are excluded from its coverage [Ibid]. But then the Civil Service
Decree [P.D. No. 807], is equally silent on the matter.

On June 1, 1987, to implement the constitutional guarantee of the right of government employees to
organize, the President issued E.O. No. 180 which provides guidelines for the exercise of the right to
organize of government employees. In Section 14 thereof, it is provided that "[t]he Civil Service law
and rules governing concerted activities and strikes in the government service shall be observed,
subject to any legislation that may be enacted by Congress." The President was apparently referring
to Memorandum Circular No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987
which, "prior to the enactment by Congress of applicable laws concerning strike by government
employees ... enjoins under pain of administrative sanctions, all government officers and employees
from staging strikes, demonstrations, mass leaves, walk-outs and other forms of mass action which
will result in temporary stoppage or disruption of public service." The air was thus cleared of the
confusion. At present, in the absence of any legislation allowing government employees to strike,
recognizing their right to do so, or regulating the exercise of the right, they are prohibited from striking,
by express provision of Memorandum Circular No. 6 and as implied in E.O. No. 180. [At this juncture,
it must be stated that the validity of Memorandum Circular No. 6 is not at issue].

But are employees of the SSS covered by the prohibition against strikes?

The Court is of the considered view that they are. Considering that under the 1987 Constitution "[t]he
civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government,
including government-owned or controlled corporations with original charters" [Art. IX(B), Sec. .2(l)
see also Sec. 1 of E.O. No. 180 where the employees in the civil service are denominated as
"government employees"] and that the SSS is one such government-controlled corporation with an
original charter, having been created under R.A. No. 1161, its employees are part of the civil service
[NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and are covered by the Civil
Service Commission's memorandum prohibiting strikes. This being the case, the strike staged by the
employees of the SSS was illegal.

The statement of the Court in Alliance of Government Workers v. Minister of Labor and
Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is relevant as it furnishes the rationale
for distinguishing between workers in the private sector and government employees with regard to the
right to strike:

The general rule in the past and up to the present is that 'the terms and conditions of
employment in the Government, including any political subdivision or instrumentality
thereof are governed by law" (Section 11, the Industrial Peace Act, R.A. No. 875, as
amended and Article 277, the Labor Code, P.D. No. 442, as amended). Since the terms
and conditions of government employment are fixed by law, government workers cannot
use the same weapons employed by workers in the private sector to secure
concessions from their employers. The principle behind labor unionism in private
 industry is that industrial peace cannot be secured through compulsion by law.
Relations between private employers and their employees rest on an essentially
voluntary basis. Subject to the minimum requirements of wage laws and other labor and
welfare legislation, the terms and conditions of employment in the unionized private
sector are settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given delegated power,
the administrative heads of government which fix the terms and conditions of
employment. And this is effected through statutes or administrative circulars, rules, and
regulations, not through collective bargaining agreements. [At p. 13; Emphasis supplied].

Apropos is the observation of the Acting Commissioner of Civil Service, in his position paper
submitted to the 1971 Constitutional Convention, and quoted with approval by the Court in Alliance, to
wit:

It is the stand, therefore, of this Commission that by reason of the nature of the public
employer and the peculiar character of the public service, it must necessarily regard the
right to strike given to unions in private industry as not applying to public employees and
civil service employees. It has been stated that the Government, in contrast to the
private employer, protects the interest of all people in the public service, and that
accordingly, such conflicting interests as are present in private labor relations could not
exist in the relations between government and those whom they employ. [At pp. 16-17;
also quoted in National Housing Corporation v. Juco, G.R. No. 64313, January
17,1985,134 SCRA 172,178-179].

E.O. No. 180, which provides guidelines for the exercise of the right to organize of government
employees, while clinging to the same philosophy, has, however, relaxed the rule to allow negotiation
where the terms and conditions of employment involved are not among those fixed by law. Thus:

.SECTION 13. Terms and conditions of employment or improvements thereof, except

those that are fixed by law, may be the subject of negotiations between duly recognized
employees' organizations and appropriate government authorities.

The same executive order has also provided for the general mechanism for the settlement of labor
disputes in the public sector to wit:

.SECTION 16. The Civil Service and labor laws and procedures, whenever applicable,
shall be followed in the resolution of complaints, grievances and cases involving
government employees. In case any dispute remains unresolved after exhausting all the
available remedies under existing laws and procedures, the parties may jointly refer the
dispute to the [Public Sector Labor- Management] Council for appropriate action.

Government employees may, therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of employment which are within the ambit of
legislation or negotiate with the appropriate government agencies for the improvement of those which
are not fixed by law. If there be any unresolved grievances, the dispute may be referred to the Public
Sector Labor - Management Council for appropriate action. But employees in the civil service may not
resort to strikes, walk-outs and other temporary work stoppages, like workers in the private sector, to
pressure the Govemment to accede to their demands. As now provided under Sec. 4, Rule III of the
Rules and Regulations to Govern the Exercise of the Right of Government- Employees to Self-
Organization, which took effect after the instant dispute arose, "[t]he terms and conditions of
employment in the government, including any political subdivision or instrumentality thereof and
government- owned and controlled corporations with original charters are governed by law and
employees therein shall not strike for the purpose of securing changes thereof."

II

The strike staged by the employees of the SSS belonging to petitioner union being prohibited by law,
an injunction may be issued to restrain it.

It is futile for the petitioners to assert that the subject labor dispute falls within the exclusive
jurisdiction of the NLRC and, hence, the Regional Trial Court had no jurisdiction to issue a writ of
injunction enjoining the continuance of the strike. The Labor Code itself provides that terms and
conditions of employment of government employees shall be governed by the Civil Service Law, rules
and regulations [Art. 276]. More importantly, E.O. No. 180 vests the Public Sector Labor -
Management Council with jurisdiction over unresolved labor disputes involving government
employees [Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.

This being the case, the Regional Trial Court was not precluded, in the exercise of its general
jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction over the SSS's complaint for
damages and issuing the injunctive writ prayed for therein. Unlike the NLRC, the Public Sector Labor
- Management Council has not been granted by law authority to issue writs of injunction in labor
disputes within its jurisdiction. Thus, since it is the Council, and not the NLRC, that has jurisdiction
over the instant labor dispute, resort to the general courts of law for the issuance of a writ of injunction
to enjoin the strike is appropriate.

Neither could the court a quo be accused of imprudence or overzealousness, for in fact it had
proceeded with caution. Thus, after issuing a writ of injunction enjoining the continuance of the strike
to prevent any further disruption of public service, the respondent judge, in the same order,
admonished the parties to refer the unresolved controversies emanating from their employer-
employee relationship to the Public Sector Labor - Management Council for appropriate action [Rollo,
p. 86].

III

In their "Petition/Application for Preliminary and Mandatory Injunction," and reiterated in their reply
and supplemental reply, petitioners allege that the SSS unlawfully withheld bonuses and benefits due
the individual petitioners and they pray that the Court issue a writ of preliminary prohibitive and
mandatory injunction to restrain the SSS and its agents from withholding payment thereof and to
compel the SSS to pay them. In their supplemental reply, petitioners annexed an order of the Civil
Service Commission, dated May 5, 1989, which ruled that the officers of the SSSEA who are not
preventively suspended and who are reporting for work pending the resolution of the administrative
cases against them are entitled to their salaries, year-end bonuses and other fringe benefits and
affirmed the previous order of the Merit Systems Promotion Board.

The matter being extraneous to the issues elevated to this Court, it is Our view that petitioners'
remedy is not to petition this Court to issue an injunction, but to cause the execution of the aforesaid
order, if it has already become final.
WHEREFORE, no reversible error having been committed by the Court of Appeals, the instant
petition for review is hereby DENIED and the decision of the appellate court dated March 9, 1988 in
CA-G.R. SP No. 13192 is AFFIRMED. Petitioners' "Petition/Application for Preliminary and Mandatory
Injunction" dated December 13,1988 is DENIED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

CASE 3: Leyson v. Ombudsman, G.R. No. 134990, April 27, 2000

SECOND DIVISION

[G.R. No. 134990. April 27, 2000]

MANUEL M. LEYSON JR., petitioner, vs. OFFICE OF THE OMBUDSMAN, TIRSO ANTIPORDA,
Chairman, UCPB and CIIF Oil Mills, and OSCAR A. TORRALBA, President, CIIF Oil Mills,
respondents. ALEX

DECISION

BELLOSILLO, J.:

On 7 February 1996 International Towage and Transport Corporation (ITTC), a domestic corporation
engaged in the lighterage or shipping business, entered into a one (1)-year contract with Legaspi Oil
Company, Inc. (LEGASPI OIL), Granexport Manufacturing Corporation (GRANEXPORT) and United
Coconut Chemicals, Inc. (UNITED COCONUT), comprising the Coconut Industry Investment Fund
(CIIF) companies, for the transport of coconut oil in bulk through MT Transasia. The majority
shareholdings of these CIIF companies are owned by the United Coconut Planters Bank (UCPB) as
administrator of the CIIF. Under the terms of the contract, either party could terminate the agreement
provided a three (3)-month advance notice was given to the other party. However, in August 1996, or
prior to the expiration of the contract, the CIIF companies with their new President, respondent Oscar
A. Torralba, terminated the contract without the requisite advance notice. The CIIF companies
engaged the services of another vessel, MT Marilag, operated by Southwest Maritime
Corporation. miso

On 11 March 1997 petitioner Manuel M. Leyson Jr., Executive Vice President of ITTC, filed with
public respondent Office of the Ombudsman a grievance case against respondent Oscar A. Torralba.
The following is a summary of the irregularities and corrupt practices allegedly committed by
respondent Torralba: (a) breach of contract - unilateral cancellation of valid and existing contract; (b)
bad faith - falsification of documents and reports to stop the operation of MT Transasia; (c)
manipulation - influenced their insurance to disqualify MT Transasia; (d) unreasonable denial of
requirement imposed; (e) double standards and inconsistent in favor of MT Marilag; (f) engaged and
entered into a contract with Southwest Maritime Corp. which is not the owner of MT Marilag, where
liabilities were waived and whose paid-up capital is only P250,000.00; and, (g) overpricing in the
freight rate causing losses of millions of pesos to Cocochem.[1]

On 2 January 1998 petitioner charged respondent Tirso Antiporda, Chairman of UCPB and CIIF Oil
Mills, and respondent Oscar A. Torralba with violation of The Anti-Graft and Corrupt Practices
Act also before the Ombudsman anchored on the aforementioned alleged irregularities and corrupt
practices. spped

On 30 January 1998 public respondent dismissed the complaint based on its finding that

The case is a simple case of breach of contract with damages which should have been
filed in the regular court. This Office has no jurisdiction to determine the legality or
validity of the termination of the contract entered into by CIIF and ITTC. Besides the
entities involved are private corporations (over) which this Office has no jurisdiction. [2]

On 4 June 1998 reconsideration of the dismissal of the complaint was denied. The Ombudsman was
unswayed in his finding that the present controversy involved breach of contract as he also took into
account the circumstance that petitioner had already filed a collection case before the Regional Trial
Court of Manila-Br. 15, docketed as Civil Case No. 97-83354. Moreover, the Ombudsman found that
the filing of the motion for reconsideration on 31 March 1998 was beyond the inextendible period of
five (5) days from notice of the assailed resolution on 19 March 1998. [3] miso

Petitioner now imputes grave abuse of discretion on public respondent in dismissing his complaint.
He submits that inasmuch as Philippine Coconut Producers Federation, Inc. (COCOFED) v.
PCGG[4] and Republic v. Sandiganbayan[5] have declared that the coconut levy funds are public funds
then, conformably with Quimpo v. Tanodbayan,[6] corporations formed and organized from those
funds or whose controlling stocks are from those funds should be regarded as government owned
and/or controlled corporations. As in the present case, since the funding or controlling interest of the
companies being headed by private respondents was given or owned by the CIIF as shown in the
certification of their Corporate Secretary,[7] it follows that they are government owned and/or
controlled corporations. Corollarily, petitioner asserts that respondents Antiporda and Torralba are
public officers subject to the jurisdiction of the Ombudsman. Sdaadsc

Petitioner alleges next that public respondent's conclusion that his complaint refers to a breach of
contract is whimsical, capricious and irresponsible amounting to a total disregard of its main point, i.
e., whether private respondents violated The Anti-Graft and Corrupt Practices Act when they entered
into a contract with Southwest Maritime Corporation which was grossly disadvantageous to the
government in general and to the CIIF in particular. Petitioner admits that his motion for
reconsideration was filed out of time. Nonetheless, he advances that public respondent should have
relaxed its rules in the paramount interest of justice; after all, the delay was just a matter of days and
he, a layman not aware of technicalities, personally filed the complaint. Rtcspped

Private respondents counter that the CIIF companies were duly organized and are existing by virtue
of the Corporation Code. Their stockholders are private individuals and entities. In addition, private
respondents contend that they are not public officers as defined under The Anti-Graft and Corrupt
Practices Act but are private executives appointed by the Boards of Directors of the CIIF companies.
They asseverate that petitioner's motion for reconsideration was filed through the expert assistance of
a learned counsel. They then charge petitioner with forum shopping since he had similarly filed a
case for collection of a sum of money plus damages before the trial court.

The Office of the Solicitor General maintains that the Ombudsman approved the recommendation of
the investigating officer to dismiss the complaint because he sincerely believed there was no
sufficient basis for the criminal indictment of private respondents. spped
We find no grave abuse of discretion committed by the Ombudsman. COCOFED v. PCGG referred to
in Republic v. Sandiganbayan reviewed the history of the coconut levy funds. I These funds actually
have four (4) general classes: (a) the Coconut Investment Fund created under R. A. No. 6260;[8] (b)
the Coconut Consumers Stabilization Fund created under P. D. No. 276; [9](c) the Coconut Industry
Development Fund created under P. D. No. 582;[10] and, (d) the Coconut Industry Stabilization Fund
created under P. D. No. 1841.[11]

The various laws relating to the coconut industry were codified in 1976. On 21 October of that year, P.
D. No. 961[12] was promulgated. On 11 June 1978 it was amended by P. D. No. 1468 [13] by inserting a
new provision authorizing the use of the balance of the Coconut Industry Development Fund for the
acquisition of "shares of stocks in corporations organized for the purpose of engaging in the
establishment and operation of industries x x x commercial activities and other allied business
undertakings relating to coconut and other palm oil indust(ries)."[14]From this fund thus created, or the
CIIF, shares of stock in what have come to be known as the "CIIF companies" were purchased. miso

We then stated in COCOFED that the coconut levy funds were raised by the State's police and taxing
powers such that the utilization and proper management thereof were certainly the concern of the
Government. These funds have a public character and are clearly affected with public interest.

Quimpo v. Tanodbayan involved the issue as to whether PETROPHIL was a government owned or
controlled corporation the employees of which fell within the jurisdictional purview of the Tanodbayan
for purposes of The Anti-Graft and Corrupt Practices Act. We upheld the jurisdiction of the
Tanodbayan on the ratiocination that -

While it may be that PETROPHIL was not originally "created" as a government-owned

or controlled corporation, after it was acquired by PNOC, which is a government-owned
or controlled corporation, PETROPHIL became a subsidiary of PNOC and thus shed-off
its private status. It is now funded and owned by the government as, in fact, it was
acquired to perform functions related to government programs and policies on oil, a vital
commodity in the economic life of the nation. It was acquired not temporarily but as a
permanent adjunct to perform essential government or government-related functions, as
the marketing arm of the PNOC to assist the latter in selling and distributing oil and
petroleum products to assure and maintain an adequate and stable domestic
supply. Korte

But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies
are government owned and/or controlled corporations are incomplete without resorting to the
definition of "government owned or controlled corporation" contained in par. (13), Sec. 2, Introductory
Provisions of the Administrative Code of 1987, i. e., 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. The definition mentions three (3) requisites, namely, first, any agency organized as a
stock or non-stock corporation; second, vested with functions relating to public needs whether
governmental or proprietary in nature; and, third, 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. Sclaw
In the present case, all three (3) corporations comprising the CIIF companies were organized as
stock corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, 91.24% of the

shares of GRANEXPORT, and 92.85% of the shares of UNITED COCONUT. [15] Obviously, the below
51% shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or
controlled corporation. Our concern has thus been limited to GRANEXPORT and UNITED
COCONUT as we go back to the second requisite. Unfortunately, it is in this regard that petitioner
failed to substantiate his contentions. There is no showing that GRANEXPORT and/ or UNITED
COCONUT was vested with functions relating to public needs whether governmental or proprietary in
nature unlike PETROPHIL in Quimpo. The Court thus concludes that the CIIF companies are, as
found by public respondent, private corporations not within the scope of its jurisdiction. Sclex

With the foregoing conclusion, we find it unnecessary to resolve the other issues raised by petitioner.

A brief note on private respondents' charge of forum shopping. Executive Secretary v. Gordon [16] is
instructive that forum shopping consists of filing multiple suits involving the same parties for the same
cause of action, either simultaneously or successively, for the purpose of obtaining a favorable
judgment. It is readily apparent that the present charge will not prosper because the cause of action
herein, i. e., violation of The Anti-Graft and Corrupt Practices Act, is different from the cause of action
in the case pending before the trial court which is collection of a sum of money plus damages. miso

WHEREFORE, the petition is DISMISSED. The Resolution of public respondent Office of the
Ombudsman of 30 January 1998 which dismissed the complaint of petitioner Manuel M. Leyson Jr.,
as well as its Order of 4 June 1998 denying his motion for reconsideration, is AFFIRMED. Costs
against petitioner.

SO ORDERED.apdc

Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

CASE 4 Baluyot v. Holganza, G.R. No. 136374, February 9, 2000

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 136374 February 9, 2000

FRANCISCA S. BALUYOT, petitioner,

vs.
PAUL E. HOLGANZA and the OFFICE OF THE OMBUDSMAN (VISAYAS) represented by its
Deputy Ombudsman for the Visayas ARTURO C. MOJICA, Director VIRGINIA PALANCA-
SANTIAGO, and Graft Investigation Officer I ANNA MARIE P. MILITANTE, respondents.

DE LEON, JR., J.:

Before us is a special civil action for certiorari, seeking the reversal of the Orders dated August 21,
1998 and October 28, 1998 issued by the Office of the Ombudsman, which denied petitioner's motion
to dismiss and motion for reconsideration, respectively.1âwphi1.nêt

The facts are:

During a spot audit conducted on March 21, 1977 by a team of auditors from the Philippine National
Red Cross (PNRC) headquarters, a cash shortage of P154,350.13 was discovered in the funds of its
Bohol chapter. The chapter administrator, petitioner Francisca S. Baluyot, was held accountable for
the shortage. Thereafter, on January 8, 1998, private respondent Paul E. Holganza, in his capacity as
a member of the board of directors of the Bohol chapter, filed an affidavit-complaint1 before the Office
of the Ombudsman charging petitioner of malversation under Article 217 of the Revised Penal Code.
The complaint was docketed as OMB-VIS-CRIM-98-0022. However, upon recommendation by
respondent Anna Marie P. Militante, Graft Investigation Officer I, an administrative docket for
dishonesty was also opened against petitioner; hence, OMB-VIS-ADM-98-0063.2

On February 6, 1998, public respondent issued an Order3 requiring petitioner to file her counter-
affidavit to the charges of malversation and dishonesty within ten days from notice, with a warning
that her failure to comply would be construed as a waiver on her part to refute the charges, and that
the case would be resolved based on the evidence on record. On March 14, 1998, petitioner filed her
counter-affidavit,4 raising principally the defense that public respondent had no jurisdiction over the
controversy. She argued that the Ombudsman had authority only over government-owned or
controlled corporations, which the PNRC was not, or so she claimed.

On August 21, 1998, public respondent issued the first assailed Order5 denying petitioner's motion to
dismiss. It further scheduled a clarificatory hearing on the criminal aspect of the complaint and a
preliminary conference on its administrative aspect on September 2, 1998. Petitioner received the
order on August 26, 1998 and she filed a motion for reconsideration6 the next day.

On October 28, 1998, public respondent issued the second assailed Order 7 denying petitioner's
motion for reconsideration. Hence, this recourse.

We dismiss the petition.

Petitioner contends that the Ombudsman has no jurisdiction over the subject matter of the
controversy since the PNRC is allegedly a private voluntary organization. The following
circumstances, she insists, are indicative of the private character of the organization: (1) the PNRC
does not receive any budgetary support from the government, and that all money given to it by the
latter and its instrumentalities become private funds of the organization; (2) funds for the payment of
personnel's salaries and other emoluments come from yearly fund campaigns, private contributions
and rentals from its properties; and (3) it is not audited by the Commission on Audit. Petitioner states
that the PNRC falls under the International Federation of Red Cross, a Switzerland-based
organization, and that the power to discipline employees accused of misconduct, malfeasance, or
immorality belongs to the PNRC Secretary General by virtue of Section "G", Article IX of its by-
laws.8 She threatens that "to classify the PNRC as a government-owned or controlled corporation
would create a dangerous precedent as it would lose its neutrality, independence and
impartiality . . . .9

Practically the same issue was addressed in Camporedondo v. National Labor Relations
Commission, et. al.,10where an almost identical set of facts obtained. Petitioner therein was the

administrator of the Surigao del Norte chapter of the PNRC. An audit conducted by a field auditor
revealed a shortage in the chapter funds in the sum of P109,000.00. When required to restitute the
amount of P135,927.78, petitioner therein instead applied for early retirement, which was denied by
the Secretary General of the PNRC. Subsequently, the petitioner filed a complaint for illegal dismissal
and damages against PNRC before the National Labor Relations Commission. In turn, PNRC moved
to dismiss the complaint on the ground of lack of jurisdiction, averring that PNRC was a government
corporation whose employees are embraced by civil service regulation. The labor arbiter dismissed
the complaint, and the Commission sustained his order. The petitioner assailed the dismissal of his
complaint via a petition for certiorari, contending that the PNRC is a private organization and not a
government-owned or controlled corporation. In dismissing the petition, we ruled thus:

Resolving the issue set out in the opening paragraph of this opinion, we rule that the Philippine
National Red Cross (PNRC) is a government owned and controlled corporation, with an
original charter under Republic Act No. 95, as amended. The test to determine whether a
corporation is government owned or controlled, or private in nature is simple. Is it created by its
own charter for the exercise of a public function, or by incorporation under the general
corporation law? Those with special charters are government corporations subject to its
provisions, and its employees are under the jurisdiction of the Civil Service Commission, and
are compulsory members of the Government Service Insurance System. The PNRC was not
"impliedly converted to a private corporation" simply because its charter was amended to vest
in it the authority to secure loans, be exempted from payment of all duties, taxes, fees and
other charges of all kinds on all importations and purchases for its exclusive use, on donations
for its disaster relief work and other services and in its benefits and fund raising drives, and be
allotted one lottery draw a year by the Philippine Charity Sweepstakes Office for the support of
its disaster relief operation in addition to its existing lottery draws for blood program.

Clearly then, public respondent has jurisdiction over the matter, pursuant to Section 13, of Republic
Act No. 6770, otherwise known as "The Ombudsman Act of 1989", to wit:

Sec. 13. Mandate. — The Ombudsman and his Deputies, as protectors of the people, shall act
promptly on complaints filed in any form or manner against officers or employees of the
Government, or of any subdivision, agency or instrumentality thereof, including government-
owned or controlled corporations, and enforce their administrative, civil and criminal liability in
ever case where the evidence warrants in order to promote efficient service by the
Government to the people.11

WHEREFORE, the petition for certiorari is hereby DISMISSED. Costs against petitioner.

SO ORDERED.1âwphi1.nêt

Quisumbing and Buena, JJ., concur.

Bellosillo, J., no part due relation of a party.
Mendoza, J., no part due to personal relation to one of parties.
CASE 5 PNCC v. Fabion, G.R. No. 131715, December 8, 1999

THIRD DIVISION

[G.R. No. 131715. December 8, 1999]

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs. ERNESTO PABION and

LOUELLA RAMIRO, respondents.

DECISION
PANGANIBAN, J.:

The Securities and Exchange Commission (SEC) has jurisdiction over corporations organized pursuant to
the Corporation Code, even if the majority or controlling shares are owned by the government.Hence, it can
competently order the holding of a shareholders meeting for the purpose of electing the corporate board of
directors. While the SEC may not have authority over government corporations with original charters or those
created by special law, it does have jurisdiction over acquired asset corporations as defined in AO
59. Specifically, the Philippine National Construction Company (PNCC) may be ordered by SEC to hold a
shareholders meeting to elect its board of directors in accordance with its Articles of Incorporation and By-
Laws as well as with the Corporation Code. The chairman and the members of the PNCC Board of Directors
hold office by virtue of their election by the shareholders, not by their appointment thereto by the President of
the Republic.

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision
of the Court of Appeals[1] (CA) promulgated on October 23, 1997, as well as its subsequent Resolution[2] dated
December 2, 1997, denying petitioners Motion for Reconsideration.
The CA effectively affirmed[3] the October 2, 1996 Order issued by the Securities and Exchange
Commission,[4] which disposed as follows:

WHEREFORE, premises considered, this Petition is hereby GRANTED. The President or the Chairman of the
PNCC is hereby ordered to call a special stockholders meeting within thirty (30) days from receipt of this order
for the purpose of electing the members of the Board to hold office up to March, 1997 or until the next
stockholders meeting will be held. Accordingly, the Corporate Secretary of PNCC is hereby directed to issue
required notices to the stockholders.[5]

In a subsequent Resolution dated April 11, 1997,[6] SEC denied reconsideration, clarification and
annulment of said Order.
The Facts

The Court of Appeals adequately narrates the facts in this wise:

On September 16, 1994, private respondents Ernesto Pabion and Louella Ramiro, claiming to be stockholders
of the PNCC, filed with the SEC a verified petition, therein alleging that since 1982 or for a period of twelve
(12) years, there has been no stockholders meeting of the PNCC to elect the corporations board of directors,
thus enabling the incumbent directors to hold on to their position beyond their 1-year term, in violation of
PNCCs By-Laws and the Corporation Code. Pabion and Ramiro, therefore, prayed the SEC to issue an order
ordering the officers of PNCC or, in the alternative, authorizing petitioners, to call and hold a meeting of the
stockholders x x x for the purpose of electing new directors x x x. Docketed as SEC Case No. 09-94-4876, the
verified petition was assigned to SEC Hearing Officer Manuel Perea.

In due time, PNCC filed its answer. Therein, PNCC claimed that it is a government-owned corporation whose
organizational and functional management, administration, and supervision are governed by Administrative
Order (AO) No. 59, issued by then President Corazon Aquino on February 16, 1988. PNCC asserts that its
board of directors does not hold office by virtue of a stockholders election but by appointment of the President
of the Philippines, relying on Article IV, Section 16 [1], of AO No. 59, which reads:

(1) Governing Boards. - GOCC (government-owned and/or controlled corporation) shall be governed by a
Board of Directors or equivalent body composed of an appropriate number of members to be appointed by the
President of the Philippines upon the recommendation of the Secretary of whose Department the GOCC is
attached. The Chairman of the board shall likewise be appointed by the President upon the recommendation of
the Secretary

In the same answer, PNCC expressed the fear that if granted, the prayer in the verified petition would amount
to a contravention of AO No. 59 and an interference with the Presidents power of control and appointment over
government-owned and/or controlled corporations (GOCCs). PNCC added that under Executive Order No. 399,
series of 1951, a GOCC is not required to hold a general meeting of stockholders but, instead, the general
manager thereof is merely required to submit an annual report to the President of the Philippines.

In the ensuing pre-trial conference conducted by Hearing Officer Perea, the parties defined the issues, as
follows:

(a) Whether or not PNCC is a GOCC subject to and governed by LOI 1295 (1983), AO No. 59 (1988)
and Executive Order No. 399 (1951), or by its articles-of-incorporation and by-laws only.
(b) Whether or not PNCC is required to call a regular annual stockholders meetings

on the basis of which the parties agreed to submit the case for resolution after they shall have filed their
respective memoranda, which they did.

It appears, however, that in a motion dated September 4, 1995, Pabion and Ramiro prayed for the re-opening
of the pre-trial conference on the ground that the common assumption on the 75% ownership by several
government financial institutions (GFIs) in the PNCC was proved false by their discovery that the GFI[s] are
merely a minority among the owners of PNCC. They, therefore, moved that a trial be conducted to determine
the extent of ownership by the government in the PNCC.
Acting on the aforementioned motion, SEC Hearing Officer Perea issued, on January 30, 1996, the following
order:

In view of the necessity of a prior determination of whether or not respondent Philippine National Construction
Corporation (PNCC) is a government owned or controlled corporation before resolving the instant incident,
either or both of the parties are hereby directed to secure a ruling/opinion from competent authority as to
whether or not the PNCC is a government corporation or not, as the matter does not fall within the competence
of the Commission to determine.

Unless said ruling/opinion is obtained by either or both parties, further proceedings should be held in abeyance.

SO ORDERED

Their motion for reconsideration of the aforequoted order having been denied by the same Hearing Officer in
his subsequent order of April 10, 1996, Pabion and Ramiro then went to the Commission en banc via a petition
for certiorari. Thus came about SEC-EB No. 495 wherein therein petitioners Pabion and Ramiro sought the
nullification of Hearing Officer Pereas twin orders of January 30, 1996 and April 10, 1996 for having been
allegedly issued with grave abuse of discretion amounting to lack or in excess of jurisdiction. In the same
recourse, the two likewise asked the SEC en banc to direct Perea to proceed with the trial on the merits of SEC
Case No. 09-94-4876.

In its first assailed order of October 2, 1996, the SEC en banc declared Hearing Officer Perea to have acted
with grave abuse of discretion in issuing his two (2) questioned orders. The Commission ruled that Perea should
have conducted a trial on the merits to resolve the factual issue of whether PNCC is majority or only minority-
owned by the government. Explains the Commission en banc in its challenged order:

Sec. 5 [b] of P.D. # 902-A confers on SEC original and exclusive jurisdiction to hear and decide intra-
corporate controversies. The main issue in the petition is clearly an intra-corporate dispute as it is a
controversy between the petitioners as stockholders of PNCC and respondent corporation PNCC regarding the
holding of regular stockholders meeting. This matter, therefore, falls within the scope of the jurisdiction of the
SEC. In resolving the main issue of whether PNCC should hold regular stockholders meetings, the hearing
officer has jurisdiction to resolve the incidental issue of whether PNCC is a GOCC or not. Having validly
acquired original and exclusive jurisdiction over the instant petition, the public respondent is mandated to hear
and decide all the issues involved in the dispute.

In the same order, the Commission en banc, instead of remanding the case to the Hearing Officer to resolve the
question of whether PNCC is government-owned or controlled, itself resolved the issue by holding that
PNCC, being incorporated under the Corporation Code, is, therefore, subject to Section 50 of the
Corporation Code which requires the holding of regular stockholders meeting for the purpose of selecting
PNCCs Board of Directors, citing, as basis therefor the ruling in PNOC-EDC vs. NLRC, 20 SCRA 487, to the
effect that the determination as to what law governs a corporation is the manner of its creation, adding that
PNCC is an acquired asset corporation which, by express provision of Section 2 of AO No. 59, is not
considered as a GOCC. And taking judicial notice of PNCCs by-laws thereunder the corporations
directors shall be elected at the annual meeting of the stockholders, the Commission en banc concluded that
PNCC is, therefore, required to conduct a regular stockholders meeting for the purpose of electing its Board
of Directors, considering that the Corporation Code and its own By-Laws require the holding of such
meeting.
xxx xxx xxx

A timely motion for reconsideration was filed by the PNCC but the same was denied by the Commission en
banc in its assailed Resolution of April 11, 1997.[7] (citations omitted but bold types and italics found in
originial)

Ruling of the Court of Appeals

Upholding SEC, the Court of Appeals declared that PNCC, though majority-owned by government
financial institutions (GFIs), retained its character as a private corporation. As such, PNCC was required under
the Corporation Code to hold regular shareholders meetings to elect its board of directors. The CA ruled:

The petition lacks merit.

Although the case reached the SEC en banc through a petition for certiorari, the said body is not helpless to
resolve the controversy on its substantive merits. There are indications that PNCC is not a GOCC which the
SEC en banc cannot ignore. A trial for the purpose of determining the status of PNCC is unnecessary since the
issue can be resolved on the basis of records. A remand will only delay the resolution of the case and frustrate
the ends of justice.

It may be so, as pointed out by petitioner PNCC, that the rule which allows the SEC en banc to correct instances
of grave abuse of discretion is patterned after Rule 65 of the 1997 Rules of Civil Procedure, and therefore, it is
only proper that the SEC en banc adhere to the pronouncements of the Supreme Court on the proper treatment
of petitions for review on certiorari under Rule 65. It is equally true, however, that the rule enunciated in several
cases to the effect that the inquiry in a petition for certiorari is limited only to searching for traces of grave
abuse [of] discretion is not cast in stone. For sure, the Supreme Court no less has resolved factual issues in
certiorari cases on the basis of the records before it. If the Supreme Court can relax the restriction on the
disposition of certiorari cases, We see no reason why a mere quasi-administrative body unsaddled by the
stringent rules of procedure, like the SEC en banc, cannot follow the High Courts example, more so when, as
rationalized by the same Court in Gokongwei, Jr. vs. Securities and Exchange Commission, et. al., 89 SCRA
336, 360, the underlying justification for the relaxation of the rule applies to the instant case as well. Says the
High Court in that case:

It is an accepted rule of procedure that the Supreme court should always strive to settle the entire controversy
in a single proceeding, leaving no root or branch to bear the seeds of future litigation. Thus, inFrancisco v.
City of Davao (12 SCRA 682), this Court resolved to decide the case on the merits instead of remanding it to
the trial court for further proceedings since the ends of justice would not be subserved by the remand of the
case. In Republic v. Security Credit and Acceptance Corporation, et. al. (19 SCRA 58), this Court, finding that
the main issue is one of law, resolved to decide the case on the merits because public interest demands an early
disposition of the case, and in Republic v. Central Surety and Insurance Company, (25 SCRA 641), this Court
denied remand of the third-party complaint to the trial court for further proceedings, citing precedents where
this Court, in similar situations, resolved to decide the cases on the merits, instead of remanding them to the
trial court where (a) the ends of justice would not be subserved by the remand of the case; or (b) where public
interest demand an early disposition of the case; or (c) where the trial court ha[s] already received all the
evidence presented by both parties and the Supreme Court is now in a position, based upon said evidence, to
decide the case on the merits. xxx
Moreover, it cannot be denied that the parties herein are embroiled in an intra-corporate controversy and the
question on the identity of PNCC is only an incident of that controversy. Pabion and Ramiro are among the
stockholders of PNCC, a circumstance which classifies the dispute as an intra-corporate controversy. The
authority of the Commission to determine whether or not PNCC can be compelled to hold a stockholders
meeting is unquestioned as even PNCC itself concedes that the issues of the propriety of calling a stockholders
meeting is within the competence of the SEC. The source of authority of the SEC over the present case can be
found in Section 5(b) of Presidential Decree (PD) No. 902-A, as amended, which empowers the SEC to hear
and resolve cases involving controversies arising out of intra-corporate or partnership relations, between and
among stockholders, members, or associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates, respectively; and between such corporation,
partnership or association and the State insofar as it concerns their individual franchise or right to exist as
such entity.

The finding of the SEC en banc that PNCC is not a GOCC was made in the exercise of its jurisdiction over an
intra-corporate controversy. To disallow the Commission to determine the nature of petitioner PNCC is to
deprive it of the power to resolve the intra-corporate controversy between the parties. The jurisdiction of the
SEC over intra-corporate controversies emanates from law and PNCC cannot divest the Commission of that
jurisdiction. As the body charged with exclusive authority over intra-corporate controversies, aside from being
possessed under Section 3 of PD No. 902-A, as amended, with absolute jurisdiction over all corporations which
are grantees of primary franchise from the government, the SEC en banc can be trusted with the competence to
distinguish a private corporation from a GOCC.

The second assigned error must likewise fall.

Administrative Order No. 59 does not consider the so-called acquired asset corporations, although majority
owned by the government, as GOCCs. The salient provisions of AO No. 59 read, as follows:

SEC. 2. Definition of Terms. - As used in this Administrative Order, the following terms shall mean:

(a) Government-owned and/or controlled corporation, hereinafter referred to as GOCC or government

corporation, is a corporation which is created by special law or organized under the Corporation
Code in which the government, directly or indirectly, has ownership of the majority of the capital or
has voting control; Provided, That an acquired asset corporation as defined in the next paragraph
shall not be considered as GOCC or government corporation.
(b) Acquired asset corporation is a corporation (1) which is under private ownership, the voting or
outstanding shares of which (i) were conveyed to the government agency, instrumentality or
corporation in satisfaction of debts whether by foreclosure or otherwise, or (ii) were duly acquired
by the government through final judgment in a sequestration proceeding; or (2) which is a
subsidiary of a government corporation organized exclusively to own and manage, or lease, or
operate specific physical assets acquired by a government financial institution in satisfaction of
debts incurred therewith, and which in any case by law or by enunciated policy is required to be
disposed of to private ownership within a specified period of time.

In order to be considered as an acquired asset corporation, the aforequoted provision requires, among other
things, that the corporations conveyance of its outstanding shares to the government must be aimed at the
satisfaction of its debts. While, on one breath, petitioner admits that the GFIs gained majority ownership of
PNCC by converting their loans into equity, on another breath, petitioner denies that the debt-to-equity
conversion resulted in the satisfaction of the outstanding debts of PNCC because it did not pay the loans. If the
loans remained unpaid as maintained by PNCC, what then was the effect on its debt when the GFIs converted
their loans into equity? It would be the height of irresponsibility for PNCC to surrender majority ownership of
its voting or outstanding shares without getting something in return.When PNCC ceded the majority ownership
to the GFIs, there could be no other motivation behind the action than PNCCs desire to satisfy its obligation to
the creditors. PNCCs effort to ward off the exclusionary proviso of AO No. 59 only produces incongruity in its
position.

The case of Quimpo vs. Tanodbayan, 146 SCRA 137, cannot assist the petitioners cause. There, the Supreme
Courts inquiry centered on whether or not Petrophil Corporation is a GOCC because an affirmative answer will
affirm the Tanodbayans jurisdiction over the Petrophil employees pursuant to the provisions of the Anti-Graft
and Corrupt Practices Act. In declaring that Petrophil is a GOCC, the Supreme Court deemed it crucial to its
conclusion that Petrophil was purchased by the government through the Philippine National Oil Corporation,
itself a GOCC. The situation of Petrophil bears no parallelism with that of PNCC because the latter was not
purchased by the GFIs. The GFIs became majority owners of PNCC because they converted their loans into
equity. The manner of partial acquisition of PNCC by the GFIs fits the condition set forth in Section 2,
paragraph (b), subparagraph, (1) (i) of AO no. 59, supra.

PNCCs position that it cannot be considered as an acquired asset corporation in the absence of law or
enunciated policy mandating its privatization within a definite period can only be a product of strained
interpretation of AO No. 59. The Administrative Order shows that there are only two (2) classes of acquired
asset corporations. Although the description of each class is compressed in a single paragraph, the disjunctive
word or separates the first class from the second class which connotes a variance in their characteristics. The
word or is a disjunctive term signifying disassociation and independence of one thing from each of the other
things enumerated. It should, as a rule, be construed in the sense in which it ordinarily implies, as a disjunctive
word. Each class has its own set of conditions. The conversion by the GFIs of their loans into equity in PNOC is
sufficient to transform it as an acquired asset corporation. The requirement for a pretender for the status of an
acquired asset corporation to be subject to a law or policy that commands its privatization applies to another
class of acquired asset corporations which does not include PNCC.[8] (citations omitted, emphasis in the
original)

The Issues

Disagreeing with the appellate court, petitioner lodged this recourse before us[9] and presents these issues:

1. WHETHER OR NOT PNCC IS A GOCC;

2. WHETHER OR NOT THE SEC HAS JURISDICTION TO ORDER PNCC TO HOLD A

STOCKHOLDERS MEETING FOR THE PURPOSE OF ELECTING THE MEMBERS OF ITS BOARD OF
DIRECTORS;

3. WHETHER OR NOT PNCC IS REQUIRED UNDER THE LAW TO HOLD A STOCKHOLDERS

MEETING FOR THIS PURPOSE; AND

4. WHETHER OR NOT THE SEC, IN CERTIORARI PROCEEDINGS, CAN RULE ON THE MERITS OF A
CASE EVEN BEFORE THE HEARING OFFICER HAS RECEIVED EVIDENCE.[10]
 We shall take up the above issues in the following sequence: 1) whether SEC can determine the corporate
status of PNCC, 2) whether SEC has jurisdiction over GOCCs, and 3) whether PNCC is an acquired asset
corporation.

The Courts Ruling

The Petition has no merit. Simply stated, PNCC claims that SEC has no jurisdiction over it and that
members of the corporations board of directors hold office, not by virtue of a shareholders election but by
appointment of the President of the Philippines. We hold that SEC has authority over PNCC and that the latter's
directors owe their offices to their shareholders and not to presidential fiat. To justify these plain conclusions,
we need to wade through rather complicated legal processes and reasoning in resolving seriatim the legal issues
raised by petitioners.

First Issue: May SEC Determine Whether PNCC Is a GOCC?

Underlying this confusing controversy is the misconception that government owned and/or controlled
corporations (GOCCs) are beyond the jurisdiction of SEC. From this broad and sweeping assumption, petitioner
asserts that SEC is without competence to determine whether PNCC is a GOCC.[11] It insists that such a
determination falls solely upon the President of Philippines and is therefore beyond SECs jurisdiction.
We disagree. It is certainly absurd to say that SEC is without jurisdiction to determine if PNCC is a GOCC
simply because the latter claims to be one. The President does not determine whether a corporation is a GOCC
or not. It is the law that does. PNCCs status as a GOCC can be ruled upon by SEC -- as well as by other
competent authorities for that matter -- based on law, specifically the Revised Administrative Code of
1987[12] which provides inter alia as follows:

Sec. 2. General Terms Defined. --- Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:

xxx xxx xxx

(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 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. (emphasis ours)

Thus, we agree with the CA that the SEC en banc can be trusted with the competence to distinguish a
private corporation from a GOCC.[13] Whether such determination is correct would be an altogether different
matter.
SEC Ruled on the Merits

Petitioner argues that certiorari, which was used by private respondents to challenge the ruling of the
hearing officer before the SEC en banc, is generally limited to determining whether or not there has been grave
abuse of discretion committed by the officer below. It further claims that the SEC rule[14] used by respondents
was patterned after Rule 65 of the 1997 Rules of Court.[15] Hence, the same principles governing the latter
should apply to the former. It thus submits that SEC erred when it ruled not only on the issue of jurisdiction but
also on the merits of the case. It contends that SEC en banc should have limited itself to the issue of grave abuse
and thereafter remanded the case below for further proceedings.
Again, we disagree. What petitioner invokes is a general rule that admits of exceptions.[16] As the CA aptly
pointed out, this general rule is not cast in stone.[17] Indeed, one chiseled exception arises when the court or
administrative agency is in a position to resolve the dispute on the merits based on the records before it. [18] That
is, a reviewing court or agency may decide the lis mota of a case on its merits if there are enough undisputed
facts to warrant such resolution.
Here we stress that SECs ruling was factually based on the judicial admission of petitioner that there was a
debt-to-equity conversion of PNCCs obligations to several government financial institutions (GFIs) pursuant to
LOI 1295.[19] PNCC admits that at least 76.48 percent of its equity is owned by GFI's.[20] Thus, in view of such
admission extant on the records, SEC en banc was in a position to validly dispose of the controversy directly,
without need of remanding the matter to the hearing officer. It aptly based its actions on the fact that PNCC was
organized pursuant to the general corporation law and is thus subject to SEC regulation.
We agree with SEC because a remand would have merely delayed unnecessarily the resolution of the
question. As we have said before and say so again:

A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of
movement and position, entraps and destroys the other. It is, rather, a contest in which each contending party
fully and fairly lays before the court the facts in issue and then, brushing aside as wholly trivial and indecisive
all imperfections of form and technicalities of procedure, asks that justice be done upon the merits. Lawsuits,
unlike duels, are not to be won by a rapiers thrust. Technicality, when it deserts its proper office as an aid to
justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There
should be no vested rights in technicalities.[21]

Indeed, justice unnecessarily delayed is justice necessarily denied.

Second Issue: Does SEC Have Jurisdiction over GOCCs?

As adverted to above, petitioner proceeds from the erroneous proposition that SECs jurisdiction does not
extend to x x x [a] government-owned and controlled corporation or GOCC x x x.[22] This is an inaccurate
generalization. GOCCs may either be (1) with original charter or created by special law; or (2) incorporated
under general law,[23] via either the Old Corporation Code[24] or the New Corporation Code.[25]
We concede that SEC has no jurisdiction over corporations of the first type -- GOCCs with original charter
or created by special law -- primarily because they are governed by their charters.[26] But even this concession is
not absolute, since the Corporation Code may apply suppletorily, either by operation of law [27] or through
express provisions in the charter.[28]
 On the other hand, we have no doubt that over GOCCs established or organized under the Corporation
Code, SEC can exercise jurisdiction. These GOCCs are regarded as private corporations despite common
misconceptions.[29] That the government may own the controlling shares in the corporation does not diminish
the fact that the latter owes its existence to the Corporation Code. More pointedly, Section 143 of the
Corporation Code[30] gives SEC the authority and power to implement its provisions, specifically for the
purpose of regulating the entities created pursuant to such provisions. These entities include corporations in
which the controlling shares are owned by the government or its agencies.
Glaringly erroneous, therefore, is petitioners reliance on Quimpo v. Tanodbayan [31] and its theory that it is
immaterial whether a corporation is acquired by purchase or through the conversion of the loans of the GFIs
into equity in a corporation [because] such corporation loses its status as a private corporation and attains a new
status as a GOCC.[32] First, based on the discussions above, PNCC does not lose its status as a private
corporation, even if we were to assume that it is a GOCC. Second, neither would such loss of status prevent it
from being further classified into an acquired asset corporation, as will be discussed below.

The Controversy Is Within SEC Jurisdiction

SECs assumption of jurisdiction over this case is proper, as the controversy involves the election of PNCCs
directors. Petitioner does not really contradict the nature of the question presented and agrees that there is an
intra-corporate question involved. However, it emphasizes that the main question to be resolved is the status of
PNCC as a GOCC[33] which, it submits, is outside SECs competence to rule on.[34] As already explained, there is
no reason why SEC cannot make such determination which, though not final and may be subject to review, is
nonetheless made pursuant to its exercise of its original andexclusive jurisdiction over cases involving
controversies in the election of directors.[35]

SEC May Compel Stockholders' Meeting

Prescinding from the above premises, it necessarily follows that SEC can compel PNCC to hold a
stockholders meeting for the purpose of electing members of the latter's board of directors. [36] This is clearly
provided for by Section 50 of the Corporation Code, which we quote:

Sec. 50. Regular and special meetings of stockholders or members. -- x x x Whenever, for any cause, there is no
person authorized to call a meeting, the Securities and Exchange Commission, upon petition of a stockholder or
member, and on the showing of good cause therefor, may issue an order to the petitioning stockholder or
member directing him to call a meeting of the corporation by giving proper notice required by this Code or by
the by-laws. The petitioning stockholder or member shall preside thereat until at least a majority of the
stockholders or members present have chosen one of their member[s] as presiding officer. (emphasis ours)

As respondents point out, the SECs action is also justified by its regulatory and administrative powers [37] to
implement the Corporation Code, specifically to compel the PNCC to hold a stockholders meeting for election
purposes. Apropos here is the SECs ruling as follows:

The Commission takes judicial notice of the PNCC by-laws as follows:

Art. V, Sec. 5

(1) The Board of Directors shall be composed of eleven (11) directors.

(2) The directors shall be elected at the annual meeting of the stockholders, each director to hold office for a
term on one (1) year and until his successor is duly elected and qualified.

Art. IV Sec. 4

(1) The annual meeting of the stockholders shall be held at 3:00 P.M. on the fourth (4th) Tuesday of March
every year.

Respondent PNCC is therefore required to conduct a regular stockholders meeting for the purpose of electing its
Board of Directors, considering that the Corporation Code and its own By-Laws require the holding of such
meeting. The failure of PNCC to call and hold annual stockholders meetings since 1983 or for thirteen (13)
years constitutes a gross, continuing violation of its by-laws and the Corporation Code. For the refusal of
PNCCs Board of Directors to call said meeting, petitioners, as stockholders of PNCC, can rightfully petition the
SEC to order the same.

Third Issue: What is the Status of PNCC?

Petitioner differs from the foregoing conclusion and avers that there is no necessity to hold a stockholders
meeting to elect members of the board of directors, because the President of the Philippines is empowered to
appoint them, by virtue of Article IV, Section 16 (1) of Administrative Order No. 59[38] (December 5, 1988):

xxxxxxxxx

(1) Governing Boards. -- A GOCC shall be governed by a Board of Directors or equivalent body
composed of an appropriate number of members to be appointed by the President of the Philippines
upon the recommendation of the Secretary to whose Department the GOCC is attached. The
Chairman of the Board shall likewise be appointed by the President upon the recommendation of
the Secretary.
Respondents counter that the above-quoted provision is inapplicable, since PNCC is not a GOCC. Instead,
it is an acquired asset corporation, based on the definition given in Section 2 (a) of the same law, AO 59:

xxxxxxxxx

(a) Government-owned and/or controlled corporation, hereinafter referred to as GOCC or government

corporation, is a corporation which is created by special law or organized under the Corporation
Code in which the Government, directly or indirectly, has ownership of the majority of the capital
or has voting control; Provided that an acquired asset corporation as defined in the next paragraph
shall not be considered as GOCC or government corporation.
(b) Acquired asset corporation is a corporation (1) which is under private ownership, the voting or
outstanding shares of which (i) were conveyed to the government or to a government agency,
instrumentality or corporation in satisfaction of debts whether by foreclosure or otherwise, or (ii)
were duly acquired by the government through final judgment in a sequestration proceeding; or (2)
which is a subsidiary of a government corporation organized exclusively to own and manage, or
lease, or operate specific physical assets acquired by a government financial institution in
satisfaction of debts incurred therewith, and which in any case by law or by enunciated policy is
required to be disposed of to private ownership within a specified period of time. (emphasis
supplied)
 Thus, at this point these questions arise: (a) Is PNCC an acquired asset corporation? (b) Is Section 2 of AO
59 inconsistent with Section 2 (13) of EO 292? (c) Is Section 16 of AO 59 applicable to PNCC?

PNCC Is an Acquired Asset Corporation

We agree with the respondents that PNCC falls under the exception carved out from Section 2 (a and b)
above which removes an acquired asset corporation from the category of a GOCC.[39] In the context of the
entire administrative order and in relation to presidential issuances,[40] these provisions clearly indicate that
PNCC is indeed an acquired asset corporation. This is because PNCC is a corporation that is, to quote said AO,
under private ownership, the voting or outstanding shares of which (i) were conveyed to the government
financial institutions in satisfaction of debts x x x
Petitioner posits the interpretation that an acquired asset corporation is one that is set to be privatized
pursuant to a law or an enunciated policy.[41] On this particular point, we agree. It should be noted that under
Section 2 (b) of AO 59, there are two kinds of acquired asset corporations: one, a corporation which is under
private ownership, the voting or outstanding shares of which were either conveyed to the government or to a
government agency, instrumentality or corporation in satisfaction of debts whether by foreclosure or otherwise,
or were duly acquired by the government in a sequestration proceeding; and two, a corporation which is a
subsidiary of a government entity organized exclusively to own and manage or lease or operate specific
physical assets acquired by a government financial institution in satisfaction of debts incurred therewith.
Both kinds of acquired asset corporations are by law or by enunciated policy required to be privatized
within a specified period. Such interpretation of AO 59 is supported by Section 18 thereof which provides:

SEC. 18. Dissolution of Acquired Asset Corporations. -- All executive agencies, offices and instrumentalities
shall take steps to dissolve any acquired asset corporation which has not been disposed of to the private
sector within five (5) years from the date of the decision to dissolve the corporation. xxx[42] (emphasis supplied)

Reading these sections together, it becomes evident that an acquired asset corporation is singled out for
eventual disposition to the private sector or, failing in that, for dissolution.[43]
True, respondents failed to show that PNCC was headed either for privatization or for dissolution. However,
Article I, Section 1 of Proclamation No. 50,[44] provides the enunciated policy required under AO 59 in this
wise:

SECTION 1. Statement of Policy. -- It shall be the policy of the State to promote privatization through an
orderly, coordinated and efficient program for the prompt disposition of the large number of non-performing
assets of the government financial institutions, and certain government-owned or controlled corporations which
have been found unnecessary or inappropriate for the government sector to maintain.

Pursuant to this policy, AO 64,[45] which was issued by then President Corazon Aquino, transferred to the
national government certain assets held by the Philippine Export and Foreign Loan Guarantee (Philguarantee)
and the National Development Company (NDC). Certain shares in PNCC were included. This fact was
confirmed by President Fidel V. Ramos who issued AO 397[46] on May 13, 1998. The said administrative order
states that PNCC is one of the corporations slated to be privatized.[47]
When confronted with the same question, the Department of Justice (DOJ) in DOJ Opinion No. 37, Series
of 1995, stated that PNCC was an acquired asset corporation, as follows:
At the outset, we note from the attached papers that in its letter dated May 20, 1991 to the PNCC, the Office of
the President already declared that PNCC is an acquired asset corporation as defined in Administrative Order
No. 59. (emphasis supplied)

DOJ Opinion No. 22, Series of 1998, had a similar tenor:

The question whether PNCC is a government-owned or controlled corporation (GOCC) and, therefore, a
government entity ha[s] been previously passed upon by the Office of the President. In a letter dated May 20,
1991, Deputy Executive Secretary Sonny Coloma informed the then PNCC President that PNCC is an acquired
asset corporation as defined under Section 2 of Administrative Order No. 59. The conclusion, although not
explicitly stated in said letter, is that PNCC is not a GOCC. (emphasis supplied)

While not controlling, official opinions of the justice secretary are persuasive. We uphold such opinions in
the present milieu.

There Is No Inconsistency With the Administrative Code

Its earlier posturing notwithstanding, petitioner simultaneously asserts that AO 59 is insufficient in its
definition of "GOCC," which is allegedly inconsistent with that found in Executive Order (EO)
292,[48] otherwise known as the Revised Administrative Code (RAC). The inconsistency, according to petitioner,
lies in the fact that AO 59 distinguishes between a GOCC and an acquired asset corporation, while EO 292 does
not. Petitioner maintains that [s]ince A.O. No. 59 is a mere administrative issuance of the President, it is clear
that its definition of a GOCC cannot prevail over that given by E.O. No. 292, which is a law.[49]
We do not find any inconsistency. The definition given in AO 59 explicitly applies only to that particular
administrative order. We quote the section in full:

Sec. 2. Definition of Terms. --- As used in this Administrative Order, the following terms shall mean:

(a) Government-owned and/or controlled corporation, hereinafter referred to as GOCC or government

corporation, is a corporation which is created by special law or organized under the Corporation
Code in which the Government, directly or indirectly, has ownership of the majority of the capital
or has voting control; Provided that an acquired asset corporation as defined in the next paragraph
shall not be considered as GOCC or government corporation.
(b) Acquired asset corporation is a corporation (1) which is under private ownership, the voting or
outstanding shares of which (i) were conveyed to the government or to a government agency,
instrumentality or corporation in satisfaction of debts whether by foreclosure or otherwise, or (ii)
were duly acquired by the government through final judgment in a sequestration proceeding; or (2)
which is a subsidiary of a government corporation organized exclusively to own and manage, or
lease, or operate specific physical assets acquired by a government financial institution in
satisfaction of debts incurred therewith, and which in any case by law or by enunciated policy is
required to be disposed of to private ownership within a specified period of time. (boldface and
italics supplied)
AO 59 does not purport to have established a new kind of corporation that supersedes EO 292. Neither does
the former seek to revise the definition of "GOCC" given in the latter. What AO 59 in fact does is to distinguish
GOCCs in general from those that are sought to be privatized. In fact, the definition given in EO 292 itself
states that the GOCCs may be further categorized.[50] This caveat suggests that the definition is broad enough to
admit distinctions as to the kinds of GOCCs defined under AO 59.
Thus, contrary to respondents assertion that PNCC is not a GOCC,[51] we hold that it may be deemed so
under EO 292. However, for purposes of AO 59, particularly in the application of Section 16 thereof, PNCC is
an acquired asset corporation. In this light, the alleged inconsistency is more apparent than real. It should be
emphasized that an acquired asset corporation is a GOCC set to be privatized pursuant to the governments
policy[52] as enunciated in Proclamation 50,[53] which defines "assets" to include GOCCs thus:

Sec. 2. Definition of Terms. -- As used in this Proclamation and unless the context otherwise requires, the term:

(1) Assets shall include xxx (iv) the government institutions themselves, whether as parent or subsidiary
corporations.

(2) Government institutions shall refer to government-owned or controlled corporations, financial or otherwise,
whether organized by special charter as in the case of a parent cooperation, or under general law as in the case
of a subsidiary corporation. (emphasis ours)

Under Section 5[54] of same Proclamation thereof, the Committee on Privatization is empowered to identify
and transfer these assets for disposition to the private sector.
The allusions to an implied repeal by EO 292 of Section 2 (a and b) of AO 59 deserves scant
consideration. Suffice it to say that, as respondents pointed out, it would be absurd for an earlier law to
impliedly repeal a subsequent one.[55] In any case, implied repeal is generally not favored.[56] Equally important,
there is really no inconsistency.

Section 16 of AO 59 Is Inapplicable to PNCC

Assuming arguendo that PNCC is a GOCC and not an acquired asset corporation under AO 59, Section 16
thereof is inapplicable. First, the GOCC referred to in Section 16 (1) of AO 59 is that which is attached to a
department of the executive branch vis--vis the inter-departmental supervision announced in the said
Administrative Order. Here, the President shall appoint members of the board upon the recommendation of the
Secretary to whose Department the GOCC is attached. Second, the GOCC referred to in Section 16 is one with
an original charter, and not one created under general corporation law.This is evident from a reading of Section
16 (2) of AO 59:

(2) Powers and Functions of the Board. --- Insofar as it is not inconsistent with the charter of a given GOCC,
the Board of Directors or equivalent body shall have the following powers and functions:

x x x x x x x x x (emphasis supplied)

In sum, it is clear that PNCC is an acquired asset corporation under AO 59. Thus, Section 16 (1) of AO 59
is inapplicable. The alleged derogation of the Presidents power over GOCCs is without basis.We note, at this
point, petitioners admission that members of the PNCC board of directors are nominated by the GFIs in
proportion to their equity ownership therein.[57] Petitioners vacillation in seeking to apply Section 16 (1) of AO
59 while at same time asserting the invalidity of Section 2 (a and b) thereof betrays the stark weakness of its
position.
 One final point. Petitioner is represented in this litigation by private counsel, not by the government
corporate counsel or by the solicitor general. In fact, the OSGs Memorandum submitted in representation of
SEC debunks the Petition and sides with respondents. Petitioner should not find it strange then that it is rightly
adjudged as a private corporation subject to regulation by the SEC, since by its very act of retaining private
counsel and by the government's act of opposing its claims, it is indeed a SEC-regulated entity.

Epilogue

Lest the focus of our disposition of this case be lost in the maze of arguments strewn before us, we stress
that PNCC is a corporation created in accordance with the general corporation statute. Hence, it isessentially a
private corporation, notwithstanding the governments interest therein through the debt-to-equity conversion
imposed by PD 1295. Being a private corporation, PNCC is subject to SEC regulation and jurisdiction.
Petitioner contends that Proclamation 50[58] and AO 59[59] limit the exercise of that jurisdiction. But, after
wading into the complex issues submitted by the parties, we have shown that such laws and issuances are not
applicable to this particular case. We must emphasize also, and this should be clear to all concerned, that our
ruling here does not in any way affect the factual issue of whether the government owns a majority of the shares
in PNCC. This matter, as can be gleaned from the factual narration of the CA, was not settled below. However,
from our painstaking explanation above, it should be obvious that this issue of fact is irrelevant to the
disposition of the legal issues herein raised. To repeat, whether PNCC is majority-owned by the government or
not is unimportant since our decision is essentially based on the verity that PNCC is a private corporation
created pursuant to the general corporation law.
WHEREFORE, the Petition is hereby DENIED. The assailed Decision and the Resolution of the Court of
Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

CASE 6 Liban v. Gordon, G.R. No. 175352, July 15, 2009

EN BANC
 DANTE V. LIBAN, G.R. No. 175352
REYNALDO M. BERNARDO,
and SALVADOR M. VIARI, Present:
Petitioners,
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
CORONA,
CARPIO MORALES,
CHICO-NAZARIO,
- versus - VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA, and
BERSAMIN, JJ.

RICHARD J. GORDON,
Respondent. Promulgated:
July 15, 2009

x--------------------------------------------------x

DECISION

CARPIO, J.:

The Case

This is a petition to declare Senator Richard J. Gordon (respondent) as having forfeited his seat in the Senate.

The Facts

Petitioners Dante V. Liban, Reynaldo M. Bernardo, and Salvador M. Viari (petitioners) filed with this Court
a Petition to Declare Richard J. Gordon as Having Forfeited His Seat in the Senate. Petitioners are officers of
the Board of Directors of the Quezon City Red Cross Chapter while respondent is Chairman of the Philippine
National Red Cross (PNRC) Board of Governors.
During respondents incumbency as a member of the Senate of the Philippines,[1] he was elected Chairman of the
PNRC during the 23 February 2006 meeting of the PNRC Board of Governors. Petitioners allege that by
accepting the chairmanship of the PNRC Board of Governors, respondent has ceased to be a member of the
Senate as provided in Section 13, Article VI of the Constitution, which reads:

SEC. 13. No Senator or Member of the House of Representatives may hold any other office or
employment in the Government, or any subdivision, agency, or instrumentality thereof, including
government-owned or controlled corporations or their subsidiaries, during his term without
forfeiting his seat. Neither shall he be appointed to any office which may have been created or
the emoluments thereof increased during the term for which he was elected.
Petitioners cite Camporedondo v. NLRC,[2] which held that the PNRC is a government-owned or controlled
corporation. Petitioners claim that in accepting and holding the position of Chairman of the PNRC Board of
Governors, respondent has automatically forfeited his seat in the Senate, pursuant to Flores v. Drilon,[3] which
held that incumbent national legislators lose their elective posts upon their appointment to another government
office.

In his Comment, respondent asserts that petitioners have no standing to file this petition which appears to be an
action for quo warranto, since the petition alleges that respondent committed an act which, by provision of law,
constitutes a ground for forfeiture of his public office. Petitioners do not claim to be entitled to the Senate office
of respondent. Under Section 5, Rule 66 of the Rules of Civil Procedure, only a person claiming to be entitled to
a public office usurped or unlawfully held by another may bring an action for quo warranto in his own name. If
the petition is one for quo warranto, it is already barred by prescription since under Section 11, Rule 66 of the
Rules of Civil Procedure, the action should be commenced within one year after the cause of the public officers
forfeiture of office. In this case, respondent has been working as a Red Cross volunteer for the past 40 years.
Respondent was already Chairman of the PNRC Board of Governors when he was elected Senator in May 2004,
having been elected Chairman in 2003 and re-elected in 2005.

Respondent contends that even if the present petition is treated as a taxpayers suit, petitioners cannot be allowed
to raise a constitutional question in the absence of any claim that they suffered some actual damage or
threatened injury as a result of the allegedly illegal act of respondent. Furthermore, taxpayers are allowed to sue
only when there is a claim of illegal disbursement of public funds, or that public money is being diverted to any
improper purpose, or where petitioners seek to restrain respondent from enforcing an invalid law that results in
wastage of public funds.

Respondent also maintains that if the petition is treated as one for declaratory relief, this Court would have no
jurisdiction since original jurisdiction for declaratory relief lies with the Regional Trial Court.
Respondent further insists that the PNRC is not a government-owned or controlled corporation and that the
prohibition under Section 13, Article VI of the Constitution does not apply in the present case since volunteer
service to the PNRC is neither an office nor an employment.

In their Reply, petitioners claim that their petition is neither an action for quo warranto nor an action for
declaratory relief. Petitioners maintain that the present petition is a taxpayers suit questioning the unlawful
disbursement of funds, considering that respondent has been drawing his salaries and other compensation as a
Senator even if he is no longer entitled to his office. Petitioners point out that this Court has jurisdiction over
this petition since it involves a legal or constitutional issue which is of transcendental importance.

The Issues

Petitioners raise the following issues:

1. Whether the Philippine National Red Cross (PNRC) is a government- owned or controlled
corporation;

2. Whether Section 13, Article VI of the Philippine Constitution applies to the case of respondent
who is Chairman of the PNRC and at the same time a Member of the Senate;

3. Whether respondent should be automatically removed as a Senator pursuant to Section

13, Article VI of the Philippine Constitution; and

4. Whether petitioners may legally institute this petition against respondent.[4]

The substantial issue boils down to whether the office of the PNRC Chairman is a government office or an
office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI
of the Constitution.

The Courts Ruling

We find the petition without merit.

Petitioners Have No Standing to File this Petition

A careful reading of the petition reveals that it is an action for quo warranto. Section 1, Rule 66 of the Rules of
Court provides:
 Section 1. Action by Government against individuals. An action for the usurpation of a public
office, position or franchise may be commenced by a verified petition brought in the name of
the Republic of the Philippines against:
(a) A person who usurps, intrudes into, or unlawfully holds or exercises a public office, position
or franchise;
(b) A public officer who does or suffers an act which by provision of law, constitutes a ground for the
forfeiture of his office; or
(c) An association which acts as a corporation within the Philippines without being legally incorporated or
without lawful authority so to act. (Emphasis supplied)

Petitioners allege in their petition that:

4. Respondent became the Chairman of the PNRC when he was elected as such during the First
Regular Luncheon-Meeting of the Board of Governors of the PNRC held on February 23, 2006,
the minutes of which is hereto attached and made integral part hereof as Annex A.
5. Respondent was elected as Chairman of the PNRC Board of Governors, during his
incumbency as a Member of the House of Senate of the Congress of the Philippines, having been
elected as such during the national elections last May 2004.

6. Since his election as Chairman of the PNRC Board of Governors, which position he duly accepted,
respondent has been exercising the powers and discharging the functions and duties of said office, despite the
fact that he is still a senator.
7. It is the respectful submission of the petitioner[s] that by accepting the chairmanship of the Board of
Governors of the PNRC, respondent has ceased to be a Member of the House of Senate as provided
in Section 13, Article VI of the Philippine Constitution, x x x
xxxx
10. It is respectfully submitted that in accepting the position of Chairman of the Board of Governors of the
PNRC on February 23, 2006, respondent has automatically forfeited his seat in the House of Senate and,
therefore, has long ceased to be a Senator, pursuant to the ruling of this Honorable Court in the case of
FLORES, ET AL. VS. DRILON AND GORDON, G.R. No. 104732, x x x
11. Despite the fact that he is no longer a senator, respondent continues to act as such and still performs the
powers, functions and duties of a senator, contrary to the constitution, law and jurisprudence.
12. Unless restrained, therefore, respondent will continue to falsely act and represent himself as a senator or
member of the House of Senate, collecting the salaries, emoluments and other compensations, benefits and
privileges appertaining and due only to the legitimate senators, to the damage, great and irreparable injury of the
Government and the Filipino people.[5] (Emphasis supplied)

Thus, petitioners are alleging that by accepting the position of Chairman of the PNRC Board of Governors,
respondent has automatically forfeited his seat in the Senate. In short, petitioners filed an action for usurpation
of public office against respondent, a public officer who allegedly committed an act which constitutes a ground
for the forfeiture of his public office. Clearly, such an action is for quo warranto, specifically under Section 1(b),
Rule 66 of the Rules of Court.

Quo warranto is generally commenced by the Government as the proper party plaintiff. However, under Section
5, Rule 66 of the Rules of Court, an individual may commence such an action if he claims to be entitled to the
public office allegedly usurped by another, in which case he can bring the action in his own name. The person
instituting quo warranto proceedings in his own behalf must claim and be able to show that he is entitled to the
office in dispute, otherwise the action may be dismissed at any stage.[6] In the present case, petitioners do not
claim to be entitled to the Senate office of respondent. Clearly, petitioners have no standing to file the present
petition.

Even if the Court disregards the infirmities of the petition and treats it as a taxpayers suit, the petition would
still fail on the merits.

PNRC is a Private Organization Performing Public Functions

On 22 March 1947, President Manuel A. Roxas signed Republic Act No. 95,[7] otherwise known as the PNRC
Charter. The PNRC is a non-profit, donor-funded, voluntary, humanitarian organization, whose mission is to
bring timely, effective, and compassionate humanitarian assistance for the most vulnerable without
consideration of nationality, race, religion, gender, social status, or political affiliation. [8] The PNRC provides
six major services: Blood Services, Disaster Management, Safety Services, Community Health and Nursing,
Social Services and Voluntary Service.[9]

The Republic of the Philippines, adhering to the Geneva Conventions, established the PNRC as a voluntary
organization for the purpose contemplated in the Geneva Convention of 27 July 1929.[10] The Whereas clauses
of the PNRC Charter read:

WHEREAS, there was developed at Geneva, Switzerland, on August 22, 1864, a convention by
which the nations of the world were invited to join together in diminishing, so far lies within
their power, the evils inherent in war;
WHEREAS, more than sixty nations of the world have ratified or adhered to the subsequent
revision of said convention, namely the Convention of Geneva of July 29 [sic], 1929 for the
Amelioration of the Condition of the Wounded and Sick of Armies in the Field (referred to in
this Charter as the Geneva Red Cross Convention);
WHEREAS, the Geneva Red Cross Convention envisages the establishment in each country of a
voluntary organization to assist in caring for the wounded and sick of the armed forces and to furnish
supplies for that purpose;
WHEREAS, the Republic of the Philippines became an independent nation on July 4, 1946
and proclaimed its adherence to the Geneva Red Cross Convention on February 14, 1947,
and by that action indicated its desire to participate with the nations of the world in
mitigating the suffering caused by war and to establish in the Philippines a voluntary
organization for that purpose as contemplated by the Geneva Red Cross Convention;
WHEREAS, there existed in the Philippines since 1917 a Charter of the American National Red
Cross which must be terminated in view of the independence of the Philippines; and
WHEREAS, the volunteer organizations established in the other countries which have ratified or
adhered to the Geneva Red Cross Convention assist in promoting the health and welfare of their
people in peace and in war, and through their mutual assistance and cooperation directly and
through their international organizations promote better understanding and sympathy among the
peoples of the world. (Emphasis supplied)

The PNRC is a member National Society of the International Red Cross and Red Crescent Movement
(Movement), which is composed of the International Committee of the Red Cross (ICRC), the International
Federation of Red Cross and Red Crescent Societies (International Federation), and the National Red Cross and
Red Crescent Societies (National Societies). The Movement is united and guided by its seven Fundamental
Principles:

1. HUMANITY The International Red Cross and Red Crescent Movement, born of a desire to
bring assistance without discrimination to the wounded on the battlefield, endeavors, in its
international and national capacity, to prevent and alleviate human suffering wherever it may
be found. Its purpose is to protect life and health and to ensure respect for the human being. It
promotes mutual understanding, friendship, cooperation and lasting peace amongst all
peoples.
2. IMPARTIALITY It makes no discrimination as to nationality, race, religious beliefs, class or political
opinions. It endeavors to relieve the suffering of individuals, being guided solely by their needs, and to give
priority to the most urgent cases of distress.
3. NEUTRALITY In order to continue to enjoy the confidence of all, the Movement may
not take sides in hostilities or engage at any time in controversies of a political, racial,
religious or ideological nature.
4. INDEPENDENCE The Movement is independent. The National Societies, while
auxiliaries in the humanitarian services of their governments and subject to the laws of
their respective countries, must always maintain their autonomy so that they may be
able at all times to act in accordance with the principles of the Movement.
5. VOLUNTARY SERVICE It is a voluntary relief movement not prompted in any manner by
desire for gain.
6. UNITY There can be only one Red Cross or one Red Crescent Society in any one country. It must be open to
all. It must carry on its humanitarian work throughout its territory.
7. UNIVERSALITY The International Red Cross and Red Crescent Movement, in which all Societies have
equal status and share equal responsibilities and duties in helping each other, is worldwide. (Emphasis supplied)

The Fundamental Principles provide a universal standard of reference for all members of the Movement. The
PNRC, as a member National Society of the Movement, has the duty to uphold the Fundamental Principles and
ideals of the Movement. In order to be recognized as a National Society, the PNRC has to be autonomous and
must operate in conformity with the Fundamental Principles of the Movement.[11]
The reason for this autonomy is fundamental. To be accepted by warring belligerents as neutral workers during
international or internal armed conflicts, the PNRC volunteers must not be seen as belonging to any side of the
armed conflict. In the Philippines where there is a communist insurgency and a Muslim separatist rebellion, the
PNRC cannot be seen as government-owned or controlled, and neither can the PNRC volunteers be identified as
government personnel or as instruments of government policy. Otherwise, the insurgents or separatists will treat
PNRC volunteers as enemies when the volunteers tend to the wounded in the battlefield or the displaced
civilians in conflict areas.
Thus, the PNRC must not only be, but must also be seen to be, autonomous, neutral and independent in order to
conduct its activities in accordance with the Fundamental Principles. The PNRC must not appear to be an
instrument or agency that implements government policy; otherwise, it cannot merit the trust of all and cannot
effectively carry out its mission as a National Red Cross Society.[12] It is imperative that the PNRC must be
autonomous, neutral, and independent in relation to the State.

To ensure and maintain its autonomy, neutrality, and independence, the PNRC cannot be owned or controlled
by the government. Indeed, the Philippine government does not own the PNRC. The PNRC does not have
government assets and does not receive any appropriation from the Philippine Congress.[13] The PNRC is
financed primarily by contributions from private individuals and private entities obtained through solicitation
campaigns organized by its Board of Governors, as provided under Section 11 of the PNRC Charter:

SECTION 11. As a national voluntary organization, the Philippine National Red Cross shall
be financed primarily by contributions obtained through solicitation campaigns throughout
the year which shall be organized by the Board of Governors and conducted by the
Chapters in their respective jurisdictions. These fund raising campaigns shall be conducted
independently of other fund drives by other organizations. (Emphasis supplied)

The government does not control the PNRC. Under the PNRC Charter, as amended, only six of the thirty
members of the PNRC Board of Governors are appointed by the President of the Philippines. Thus,
twenty-four members, or four-fifths (4/5), of the PNRC Board of Governors are not appointed by the
President. Section 6 of the PNRC Charter, as amended, provides:

SECTION 6. The governing powers and authority shall be vested in a Board of Governors
composed of thirty members, six of whom shall be appointed by the President of the Philippines,
eighteen shall be elected by chapter delegates in biennial conventions and the remaining six shall
be selected by the twenty-four members of the Board already chosen. x x x.

Thus, of the twenty-four members of the PNRC Board, eighteen are elected by the chapter delegates of the
PNRC, and six are elected by the twenty-four members already chosena select group where the private sector
members have three-fourths majority. Clearly, an overwhelming majority of four-fifths of the PNRC Board
are elected or chosen by the private sector members of the PNRC.

The PNRC Board of Governors, which exercises all corporate powers of the PNRC, elects the PNRC Chairman
and all other officers of the PNRC. The incumbent Chairman of PNRC, respondent Senator Gordon, was
elected, as all PNRC Chairmen are elected, by a private sector-controlled PNRC Board four-fifths of whom
are private sector members of the PNRC. The PNRC Chairman is not appointed by the President or by any
subordinate government official.

Under Section 16, Article VII of the Constitution,[14] the President appoints all officials and employees in the
Executive branch whose appointments are vested in the President by the Constitution or by law. The President
also appoints those whose appointments are not otherwise provided by law. Under this Section 16, the law may
also authorize the heads of departments, agencies, commissions, or boards to appoint officers lower in rank than
such heads of departments, agencies, commissions or boards.[15] In Rufino v. Endriga,[16] the Court explained
appointments under Section 16 in this wise:

Under Section 16, Article VII of the 1987 Constitution, the President appoints three groups of
officers. The first group refers to the heads of the Executive departments, ambassadors, other
public ministers and consuls, officers of the armed forces from the rank of colonel or naval
captain, and other officers whose appointments are vested in the President by the Constitution.
The second group refers to those whom the President may be authorized by law to appoint. The
third group refers to all other officers of the Government whose appointments are not otherwise
provided by law.

Under the same Section 16, there is a fourth group of lower-ranked officers whose appointments Congress may
by law vest in the heads of departments, agencies, commissions, or boards. x x x

xxx

In a department in the Executive branch, the head is the Secretary. The law may not authorize the
Undersecretary, acting as such Undersecretary, to appoint lower-ranked officers in the Executive department. In
an agency, the power is vested in the head of the agency for it would be preposterous to vest it in the agency
itself. In a commission, the head is the chairperson of the commission. In a board, the head is also the
chairperson of the board. In the last three situations, the law may not also authorize officers other than the heads
of the agency, commission, or board to appoint lower-ranked officers.

xxx

The Constitution authorizes Congress to vest the power to appoint lower-ranked officers specifically in the
heads of the specified offices, and in no other person. The word heads refers to the chairpersons of the
commissions or boards and not to their members, for several reasons.

The President does not appoint the Chairman of the PNRC. Neither does the head of any department, agency,
commission or board appoint the PNRC Chairman. Thus, the PNRC Chairman is not an official or employee of
the Executive branch since his appointment does not fall under Section 16, Article VII of the
Constitution. Certainly, the PNRC Chairman is not an official or employee of the Judiciary or Legislature. This
leads us to the obvious conclusion that the PNRC Chairman is not an official or employee of the Philippine
Government. Not being a government official or employee, the PNRC Chairman, as such, does not hold a
government office or employment.

Under Section 17, Article VII of the Constitution,[17] the President exercises control over all government offices
in the Executive branch. If an office is legally not under the control of the President, then such office is not
part of the Executive branch. In Rufino v. Endriga,[18] the Court explained the Presidents power of control
over all government offices as follows:

Every government office, entity, or agency must fall under the Executive, Legislative, or Judicial
branches, or must belong to one of the independent constitutional bodies, or must be a quasi-
judicial body or local government unit. Otherwise, such government office, entity, or agency has
no legal and constitutional basis for its existence.

The CCP does not fall under the Legislative or Judicial branches of government. The CCP is also not one of the
independent constitutional bodies. Neither is the CCP a quasi-judicial body nor a local government unit. Thus,
the CCP must fall under the Executive branch. Under the Revised Administrative Code of 1987, any agency not
placed by law or order creating them under any specific department falls under the Office of the President.

Since the President exercises control over all the executive departments, bureaus, and offices, the President
necessarily exercises control over the CCP which is an office in the Executive branch. In mandating that the
President shall have control of all executive . . . offices, Section 17, Article VII of the 1987 Constitution does
not exempt any executive office one performing executive functions outside of the independent constitutional
bodies from the Presidents power of control. There is no dispute that the CCP performs executive, and not
legislative, judicial, or quasi-judicial functions.

The Presidents power of control applies to the acts or decisions of all officers in the Executive branch.
This is true whether such officers are appointed by the President or by heads of departments, agencies,
commissions, or boards. The power of control means the power to revise or reverse the acts or decisions
of a subordinate officer involving the exercise of discretion.

In short, the President sits at the apex of the Executive branch, and exercises control of all the executive
departments, bureaus, and offices. There can be no instance under the Constitution where an officer of the
Executive branch is outside the control of the President. The Executive branch is unitary since there is only one
President vested with executive power exercising control over the entire Executive branch.Any office in the
Executive branch that is not under the control of the President is a lost command whose existence is without any
legal or constitutional basis. (Emphasis supplied)

An overwhelming four-fifths majority of the PNRC Board are private sector individuals elected to the PNRC
Board by the private sector members of the PNRC. The PNRC Board exercises all corporate powers of the
PNRC. The PNRC is controlled by private sector individuals. Decisions or actions of the PNRC Board are not
reviewable by the President. The President cannot reverse or modify the decisions or actions of the PNRC
Board. Neither can the President reverse or modify the decisions or actions of the PNRC Chairman. It is
the PNRC Board that can review, reverse or modify the decisions or actions of the PNRC Chairman. This
proves again that the office of the PNRC Chairman is a private office, not a government office.
Although the State is often represented in the governing bodies of a National Society, this can be justified by the
need for proper coordination with the public authorities, and the government representatives may take part in
decision-making within a National Society. However, the freely-elected representatives of a National Societys
active members must remain in a large majority in a National Societys governing bodies.[19]

The PNRC is not government-owned but privately owned. The vast majority of the thousands of PNRC
members are private individuals, including students. Under the PNRC Charter, those who contribute to the
annual fund campaign of the PNRC are entitled to membership in the PNRC for one year. Thus, any one
between 6 and 65 years of age can be a PNRC member for one year upon contributing P35, P100, P300, P500
or P1,000 for the year.[20] Even foreigners, whether residents or not, can be members of the PNRC. Section 5 of
the PNRC Charter, as amended by Presidential Decree No. 1264,[21] reads:

SEC. 5. Membership in the Philippine National Red Cross shall be open to the entire population
in the Philippines regardless of citizenship. Any contribution to the Philippine National Red
Cross Annual Fund Campaign shall entitle the contributor to membership for one year and said
contribution shall be deductible in full for taxation purposes.

Thus, the PNRC is a privately owned, privately funded, and privately run charitable organization. The PNRC is
not a government-owned or controlled corporation.

Petitioners anchor their petition on the 1999 case of Camporedondo v. NLRC,[22] which ruled that the PNRC is a
government-owned or controlled corporation. In ruling that the PNRC is a government-owned or controlled
corporation, the simple test used was whether the corporation was created by its own special charter for the
exercise of a public function or by incorporation under the general corporation law. Since the PNRC was
created under a special charter, the Court then ruled that it is a government corporation. However,
the Camporedondo ruling failed to consider the definition of a government-owned or controlled corporation as
provided under Section 2(13) of the Introductory Provisions of the Administrative Code of 1987:

SEC. 2. General Terms Defined. x x x

(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: 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.(Boldfacing and underscoring supplied)
A government-owned or controlled corporation must be owned by the government, and in the case of a stock
corporation, at least a majority of its capital stock must be owned by the government. In the case of a non-stock
corporation, by analogy at least a majority of the members must be government officials holding such
membership by appointment or designation by the government. Under this criterion, and as discussed earlier,
the government does not own or control PNRC.

The PNRC Charter is Violative of the Constitutional Proscription against the Creation of Private
Corporations by Special Law

The 1935 Constitution, as amended, was in force when the PNRC was created by special charter on 22 March
1947. Section 7, Article XIV of the 1935 Constitution, as amended,reads:

SEC. 7. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations, unless such corporations are owned or
controlled by the Government or any subdivision or instrumentality thereof.

The subsequent 1973 and 1987 Constitutions contain similar provisions prohibiting Congress from creating
private corporations except by general law. Section 1 of the PNRC Charter, as amended, creates the PNRC as
a body corporate and politic, thus:

SECTION 1. There is hereby created in the Republic of the Philippines a body corporate
and politic to be the voluntary organization officially designated to assist the Republic of
the Philippines in discharging the obligations set forth in the Geneva Conventions and to
perform such other duties as are inherent upon a National Red Cross Society. The national
headquarters of this Corporation shall be located in Metropolitan Manila. (Emphasis supplied)

In Feliciano v. Commission on Audit,[23] the Court explained the constitutional provision prohibiting Congress
from creating private corporations in this wise:

We begin by explaining the general framework under the fundamental law. The Constitution
recognizes two classes of corporations. The first refers to private corporations created under a
general law. The second refers to government-owned or controlled corporations created by
special charters. Section 16, Article XII of the Constitution provides:

Sec. 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or
controlled corporations may be created or established by special charters in the
interest of the common good and subject to the test of economic viability.

The Constitution emphatically prohibits the creation of private corporations except by general
law applicable to all citizens. The purpose of this constitutional provision is to ban private
corporations created by special charters, which historically gave certain individuals, families or
groups special privileges denied to other citizens.
 In short, Congress cannot enact a law creating a private corporation with a special charter.
Such legislation would be unconstitutional. Private corporations may exist only under a
general law. If the corporation is private, it must necessarily exist under a general
law. Stated differently, only corporations created under a general law can qualify as private
corporations. Under existing laws, the general law is the Corporation Code, except that the
Cooperative Code governs the incorporation of cooperatives.

The Constitution authorizes Congress to create government-owned or controlled corporations

through special charters. Since private corporations cannot have special charters, it follows that
Congress can create corporations with special charters only if such corporations are government-
owned or controlled.[24] (Emphasis supplied)

In Feliciano, the Court held that the Local Water Districts are government-owned or controlled corporations
since they exist by virtue of Presidential Decree No. 198, which constitutes their special charter. The seed
capital assets of the Local Water Districts, such as waterworks and sewerage facilities, were public property
which were managed, operated by or under the control of the city, municipality or province before the assets
were transferred to the Local Water Districts. The Local Water Districts also receive subsidies and loans from
the Local Water Utilities Administration (LWUA). In fact, under the 2009 General Appropriations Act, [25] the
LWUA has a budget amounting toP400,000,000 for its subsidy requirements.[26] There is no private capital
invested in the Local Water Districts. The capital assets and operating funds of the Local Water Districts all
come from the government, either through transfer of assets, loans, subsidies or the income from such assets or
funds.

The government also controls the Local Water Districts because the municipal or city mayor, or the provincial
governor, appoints all the board directors of the Local Water Districts. Furthermore, the board directors and
other personnel of the Local Water Districts are government employees subject to civil service laws and anti-
graft laws. Clearly, the Local Water Districts are considered government-owned or controlled corporations not
only because of their creation by special charter but also because the government in fact owns and controls the
Local Water Districts.
Just like the Local Water Districts, the PNRC was created through a special charter. However, unlike the Local
Water Districts, the elements of government ownership and control are clearly lacking in the PNRC.
Thus, although the PNRC is created by a special charter, it cannot be considered a government-owned or
controlled corporation in the absence of the essential elements of ownership and control by the government. In
creating the PNRC as a corporate entity, Congress was in fact creating a private corporation. However, the
constitutional prohibition against the creation of private corporations by special charters provides no exception
even for non-profit or charitable corporations. Consequently, the PNRC Charter, insofar as it creates the PNRC
as a private corporation and grants it corporate powers,[27] is void for being unconstitutional. Thus, Sections
1,[28] 2,[29] 3,[30] 4(a),[31] 5,[32] 6,[33] 7,[34] 8,[35] 9,[36] 10,[37] 11,[38] 12,[39] and 13[40] of the PNRC Charter, as
amended, are void.

The other provisions[41] of the PNRC Charter remain valid as they can be considered as a recognition by the
State that the unincorporated PNRC is the local National Society of the International Red Cross and Red
Crescent Movement, and thus entitled to the benefits, exemptions and privileges set forth in the PNRC Charter.
The other provisions of the PNRC Charter implement the Philippine Governments treaty obligations under
Article 4(5) of the Statutes of the International Red Cross and Red Crescent Movement, which provides that to
be recognized as a National Society, the Society must be duly recognized by the legal government of its country
on the basis of the Geneva Conventions and of the national legislation as a voluntary aid society, auxiliary to the
public authorities in the humanitarian field.

In sum, we hold that the office of the PNRC Chairman is not a government office or an office in a government-
owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the 1987
Constitution. However, since the PNRC Charter is void insofar as it creates the PNRC as a private corporation,
the PNRC should incorporate under the Corporation Code and register with the Securities and Exchange
Commission if it wants to be a private corporation.

WHEREFORE, we declare that the office of the Chairman of the Philippine National Red Cross is not a
government office or an office in a government-owned or controlled corporation for purposes of the prohibition
in Section 13, Article VI of the 1987 Constitution. We also declare that Sections 1, 2, 3, 4(a), 5, 6, 7, 8, 9, 10, 11,
12, and 13 of the Charter of the Philippine National Red Cross, or Republic Act No. 95, as amended by
Presidential Decree Nos. 1264 and 1643, are VOID because they create the PNRC as a private corporation or
grant it corporate powers.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

CASE 7 Ang v. Philippine National Bank, G.R. No. 178762, June 16, 2010

SECOND DIVISION

LUZVIMINDA A. ANG, G.R. No. 178762

Petitioner,
Present:
CARPIO, J., Chairperson,
- versus - NACHURA,

PERALTA,

ABAD, and

PEREZ,* JJ.
PHILIPPINE NATIONAL BANK,

Respondent. Promulgated:

June 16, 2010

x --------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:

This case is about the dismissal of an employee for offenses committed during her employment in a
government-owned corporation but which offenses were discovered after the privatized corporation rehired
her to work for it.

The Facts and the Case

In her Position Paper,[1] petitioner Luzviminda A. Ang (Ang) claimed that respondent Philippine National Bank
(PNB), then a government-owned corporation, hired her on December 4, 1967 as a probationary clerk. But she
rose from the ranks, eventually becoming an Assistant Department Manager I, a position she held when the
PNB was privatized on May 26, 1996 and when she, like her co-employees, was deemed automatically
retired. The bank computed Angs gratuity benefits, the monetary value of her leave credits, and the other
benefits due her and cleared her of any accountability.

But the PNB re-employed Ang as Assistant Manager effective on May 27, 1996 and assigned her in its
Tuguegarao, Cagayan Branch.[2] Less than four months later, however, or on September 3, 1996 the PNB
administratively charged her with serious misconduct and willful breach of trust for taking part in a scam,
called kiting operation, where a depositor used a conduit bank account for depositing several unfunded checks
drawn against the same depositors other current accounts and from which conduit bank account he later
withdrew those checks. The PNB alleged that Ang had allowed this illegal activity from January 2 to April 3,
1996 while she was the Assistant Department Manager I in its Tuguegarao Branch.[3]

On September 16, 1996 the PNB heaped other charges against Ang of serious misconduct and gross violation
of the banks rules and regulations as follows:
 -- She issued six certificates of deposit between June 5, 1992 up to January 10, 1996 in amounts
exceeding the true deposit balance of various depositors;

-- She issued two bank commitments dated January 24, 1994 and for providing a credit
line in favor of a government contractor without authority and in violation of SEL Cir. 2-166/91
of July 10, 1996; and

-- She committed tardiness and under time from October to December 1995 and
January to March 1996 in violation of Gen. Cir. 1-61/91 of February 1, 1991.[4]

In answer to the first charge, Ang claimed that it was not a kiting operation, but an accommodation of
a very valued client. She admitted that the checks were not funded and were converted into account
receivables or accommodation loans that the client had settled, including interests, penalties, and other
charges. Consequently, the PNB did not suffer any loss from those transactions; it even reaped enormous
profits from them.[5]

On the second charge, Ang claimed that the issuance of the certificates had been tolerated to
accommodate valued clients as a marketing strategy and prevent their move to other banks. These had been
open transactions, said Ang, which were known to all the officers of the branch. Again, the PNB did not suffer
any loss on account of the issuance of those certificates. The clients involved maintained their loyalty to the
bank.[6]

On the third charge, Ang claimed that the PNBs loan commitments in those cases amounted to mere
recommendations since she had no authority to approve loans. Furthermore, she could not have violated SEL
Cir. 2-166/91 dated July 10, 1996 since this was not yet in effect when she issued those commitments on
January 24, 1994. Besides, the circular merely prescribed the fees to be collected.[7]

On the last charge, Ang claimed that she was not covered by the circular governing office hours
because she was a bank officer. Managerial employees, according to her, worked beyond the usual eight
hours and even worked on Saturdays and Sundays. She added that, since the bank had already made
deductions for tardiness on her pay check, she cannot anymore be administratively charged for it.[8]

Ang further pointed out that the causes for her termination took place when she was yet a government
official. The PNB had since ceased to be government-owned. If she were to be charged for those causes, the
jurisdiction over her case would lie with the Civil Service Commission. Even then, since she already retired
from the government service, the employment that could be terminated no longer existed.[9]
 Ang added that the causes for her termination had also become academic after the PNB cleared her of
any accountability when she once retired from employment with it.

Pending administrative investigation, the PNB assigned Ang to its Aparri Branch on April 3, 1997. [10] Its
Inspection and Investigation Unit recommended her dismissal on June 3, 1997 to the Board of Inquiry. [11] Ang
alleged that the PNB dismissed her from work on July 25, 1997, withholding her fringe benefits, gratuity
benefits, monetary value of her leave credits, rights and interests in the provident fund, and other benefits
due her as of May 26, 1996.[12] She sought reconsideration, but the bank denied it.

On January 27, 1998 Ang filed a complaint against the PNB before the National Labor Relations Commission
(NLRC), Regional Arbitration Branch II, Tuguegarao, Cagayan in NLRC RAB II CN 01-00022-98 for illegal
dismissal, illegal deductions, non-payment of 13th month pay, allowances, separation pay, and retirement
benefits with prayer for payment of moral and exemplary damages, attorneys fees, and litigation expenses.

Answering the complaint, the PNB claimed that it observed due process in terminating Ang, notifying her of
the charges and giving her a chance to defend herself in a formal hearing but she waived this and opted to
submit a position paper. The PNB Board of Inquiry informed her of its decision before implementing the
same. Indeed, she even sought its reconsideration.[13] The PNB pointed out that since it separated petitioner
Ang for a just cause, she was not entitled to termination pay. Further she ceased to be entitled to the benefits
she claimed.[14]

The PNB also pointed out that although it cleared Ang of any accountability before her retirement as a civil
servant, it premised such clearance from existing knowledge and records. The PNB had not yet discovered her
frauds and omissions when it issued the clearance. Besides, what the PNB issued was not really a clearance
but a certification that Ang had no pending administrative case. It issued that certification on August 12, 1996
and filed the first administrative charge against her on September 3, 1996.[15]

On March 30, 1999 the Labor Arbiter (LA) rendered a Decision,[16] finding the PNBs dismissal of Ang
illegal for failure to show that the dismissal was for a valid cause and after notice and hearing. Specifically, the
PNB failed to prove any basis for loss of trust. The LA ordered the reinstatement of petitioner Ang to her
former position or its substantial equivalent, without loss of seniority rights and with full backwages and other
benefits or their money value from the time of her actual dismissal on July 25, 1996 up to her reinstatement.

Further, the LA ordered the PNB to pay Ang P488,567.87 in gratuity pay plus 1 percent interest per
month from the time it fell due until actual payment, P1 million as moral damages, and P500,000.00 as
exemplary damages plus 10 percent of the total monetary award as attorneys fees. The LA made the
monetary value of her fringe benefits and others, not included in the computed amount, subject to
recomputation upon the finality of the NLRC decision. In case reinstatement was not feasible, Ang was to have
the option to be paid separation pay of at least one month pay for every year of her 30 years of service in
addition to her full backwages and gratuity benefits.

The PNB appealed the decision to the NLRC but the latter dismissed the appeal on January 30, 2004. [17] Upon
motion for reconsideration, however, or on October 29, 2004 the NLRC reconsidered its finding of lack of due
process, considering Angs admission during direct examination that the PNB informed her of the charges
against her and gave her a chance to present her side with the assistance of a counsel. The NLRC deleted the
award of damages because of absence of bad faith on the part of the PNB officers but maintained the LAs
finding that the PNB had not proved loss of trust as a ground for dismissal.

On petition for certiorari with the Court of Appeals (CA), the latter rendered a decision on January 30,
2007,[18] finding valid reason to uphold Angs dismissal from the service for willful breach of the trust reposed
in her by the PNB. As to the procedural aspect, the CA found that without doubt the PNB observed due
process in dismissing Ang. She received two memoranda; first informing her of the charges against her, and
second informing her of the decision to terminate her services. The CA reversed the NLRC Decision and
dismissed Angs complaint. She moved for reconsideration, but this was denied.

The Issues Presented

Petitioner presents the following issues:

1. Whether or not the CA erred in finding that the PNB dismissed Ang based on the evidence that she
betrayed its trust in her as a bank officer;

2. Whether or not the CA erred in holding that the PNB accorded Ang due process when it dismissed
her from the service; and

3. Whether or not the CA erred in holding that Ang was not entitled to the benefits that the PNB
withheld from her.
The Courts Ruling

One. Ang claims that her dismissal by PNB, the private corporation, was illegal since she had committed no
offense under its employ. The offense for which she was removed took place when the government still
owned PNB and she was then a government employee. But while PNB began as a government corporation, it
did not mean that its corporate being ceased and was subsequently reestablished when it was privatized. It
remained the same corporate entity before, during, and after the change over with no break in its life as a
corporation.

Consequently, the offenses that Ang committed against the bank before its privatization continued to
be offenses against the bank after the privatization. But, since the PNB was already a private corporation
when it looked into Angs offenses, the provisions of the Labor Code governed its disciplinary action.

Ordinarily, the Court would not inquire into factual issues raised in a petition for review but, since the
findings of the CA clashed with those of the LA and the NLRC, such inquiry would be justified in this case. As to
the existence of just cause, it is clear to the Court that Ang did not deny the acts and omissions constituting
the offense. The transcript of stenographic notes taken during her direct examination on April 22, 1998 before
the NLRC Regional Arbitration Branch in Tuguegarao, Cagayan, shows that her defense consisted in her claim
that she accommodated a clients unfunded checks and issued false bank certificates with the knowledge and
consent of the branch manager and comptroller.

But such uncorroborated defense is unsatisfactory, revealing a mind that was willing to disregard bank
rules and regulations when other branch officers concurred. The PNB rightfully separated her from
work for willful breach of the trust that it reposed in her under the Labor Code. Her defense that the PNB did
not suffer any loss is of no moment. The focal point is that she betrayed the trust of the bank in her fidelity to
its interest and rules.

Two. As to the issue of due process, a review of the transcript of stenographic notes taken during Angs
cross-examination on December 17, 1998 before the NLRC Regional Arbitration Branch in Tuguegarao,
Cagayan, reveals that she admitted having received from the PNB a memorandum of September 15, 1996,
containing the administrative charges against her and a memorandum of June 3, 1997 containing the decision
to terminate her service.[19] She likewise admitted that the bank gave her a chance to present her side and to
consult a lawyer.
Three. Ang claims that she is entitled to the monetary value of her leave credits, gratuity benefits, retirement
pay, rights and interests in the provident fund, and other benefits due her as of May 26, 1996.

The PNB points out, however, that Ang did not seek reconsideration from the NLRC of its deletion of the LAs
award of accrued compensation and other benefits to her. And, although she received an unfavorable decision
from the CA, her motion for reconsideration did not raise the matter of accrued compensation and other
benefits. Only before this Court did she raise them for the first time. But, contrary to the PNBs position, what
the NLRC decision deleted was only the award of damages. It did not touch the benefits
mentioned. Consequently, when the CA apparently deleted these as well, Ang has a right to elevate the issue
before this Court.

Although the transformation of the PNB from a government-owned corporation to a private one did
not result in a break in its life as juridical person, the same idea of continuity cannot be said of its
employees. Section 27 of Presidential Proclamation 50 provided for the automatic termination of employer-
employee relationship upon privatization of a government-owned and controlled corporation. Further, such
privatization cannot deprive the government employees involved of their accrued benefits or
compensation. Thus:

Sec. 27. Automatic Termination of Employer-Employee Relations. Upon the sale or

other disposition of the ownership and/or controlling interest of the government in a
corporation held by the Trust, or all or substantially all of the assets of such corporation, the
employer-employee relations between the government and the officers and other personnel
of such corporations shall terminate by operation of law. None of such officers or employees
shall retain any vested right to future employment in the privatized or disposed corporation,
and the new owners or controlling interest holders thereof shall have full and absolute
discretion to retain or dismiss said officers and employees and to hire the replacement or
replacements of any one or all of them as the pleasure and confidence of such owners or
controlling interest holders may dictate.

Nothing in this section shall, however, be construed to deprive said officers and
employees of their vested entitlements in accrued benefits or the compensation and other
benefits incident to their employment or attaching to termination under applicable
employment contracts, collective bargaining agreements, and applicable legislation.
 Here, when PNB was privatized, Angs employment with it as a government-owned corporation
ceased. Indeed, the PNB already computed the retirement and other benefits to which she was entitled as a
result of the cessation of her employment. Since she had no pending administrative case on the day she
ceased to be a PNB employee and had been cleared of any accountability,[20] all those benefits already accrued
to her on the date of her termination.

Of course, the PNB rehired her immediately but that is another story. In the eyes of the law, her record
as employee of the government-owned PNB was untarnished at the time of her separation from it. In fact, the
PNB already computed the benefits to which she was entitled and readied their payment. The GSIS rule that
the PNB now relies on applied only to employees with pending administrative charge at the time of their
retirement. Since Ang had none of that, the cited rule did not apply to her. The Court sees no reason why she
should not receive the benefits which she earned or which accrued to her as of May 26, 1996.

As for possible benefits accruing to Ang after May 26, 1996, the same should be deemed governed by the
Labor Code since the PNB that rehired her on May 27, 1996 has become a private corporation. Under the
Omnibus Rules Implementing the Labor Code, Book VI, Rule I, Section 7, the employees separation from work
for a just cause does not entitle her to termination pay. Thus, the PNB may rightfully withhold Angs
termination pay that accrued beginning on May 27, 1996 because of her dismissal.

WHEREFORE, the Court AFFIRMS the Court of Appeals decision dated January 30, 2007 and its resolution
dated July 6, 2007 in CA-G.R. SP 88449 in favor of respondent Philippine National Bank but with
the MODIFICATION that it directs the latter to pay petitioner Luzviminda A. Ang the benefits due her from the
bank as of the date of her retirement on May 26, 1996.

SO ORDERED.

ROBERTO A. ABAD

Associate Justice

_________________________________________________________________________________________________________________________
CASE 8: NSC vs. NLRC, 168 SCRA 122 (1988)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-69870 November 29, 1988

NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,

vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION, MINISTRY
OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents.

G.R. No. 70295 November 29,1988

EUGENIA C. CREDO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION AND
ARTURO L. PEREZ, respondents.

The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.

Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:

Consolidated special civil actions for certiorari seeking to review the decision * of the Third Division,
National Labor Relations Commission in Case No. 11-4944-83 dated 28 November 1984 and its
resolution dated 16 January 1985 denying motions for reconsideration of said decision.

Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domestic
corporation which provides security guards as well as messengerial, janitorial and other similar
manpower services to the Philippine National Bank (PNB) and its agencies. She was first employed
with NASECO as a lady guard on 18 July 1975. Through the years, she was promoted to Clerk Typist,
then Personnel Clerk until she became Chief of Property and Records, on 10 March 1980. 1

Sometime before 7 November 1983, Credo was administratively charged by Sisinio S. Lloren,
Manager of Finance and Special Project and Evaluation Department of NASECO, stemming from her
non-compliance with Lloren's memorandum, dated 11 October 1983, regarding certain entry
procedures in the company's Statement of Billings Adjustment. Said charges alleged that Credo "did
not comply with Lloren's instructions to place some corrections/additional remarks in the Statement of
Billings Adjustment; and when [Credo] was called by Lloren to his office to explain further the said
instructions, [Credo] showed resentment and behaved in a scandalous manner by shouting and
uttering remarks of disrespect in the presence of her co-employees." 2
On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General Manager of
NASECO, to explain her side before Perez and NASECO's Committee on Personnel Affairs in
connection with the administrative charges filed against her. After said meeting, on the same date,
Credo was placed on "Forced Leave" status for 1 5 days, effective 8 November 1983. 3

Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a complaint,
docketed as Case No. 114944-83, with the Arbitration Branch, National Capital Region, Ministry of
Labor and Employment, Manila, against NASECO for placing her on forced leave, without due
process. 4

Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on
Personnel Affairs deliberated and evaluated a number of past acts of misconduct or infractions
attributed to her. 5 As a result of this deliberation, said committee resolved:

1. That, respondent [Credo] committed the following offenses in the Code of Discipline,
viz:

OFFENSE vs. Company Interest & Policies

No. 3 — Any discourteous act to customer, officer and employee of client company or
officer of the Corporation.

OFFENSE vs. Public Moral

No. 7 — Exhibit marked discourtesy in the course of official duties or use of profane or
insulting language to any superior officer.

OFFENSE vs. Authority

No. 3 — Failure to comply with any lawful order or any instructions of a superior officer.

2. That, Management has already given due consideration to respondent's [Credo]

scandalous actuations for several times in the past. Records also show that she was
reprimanded for some offense and did not question it. Management at this juncture, has
already met its maximum tolerance point so it has decided to put an end to respondent's
[Credo] being an undesirable employee. 6
7
The committee recommended Credo's termination, with forfeiture of benefits.

On 1 December 1983, Credo was called age to the office of Perez to be informed that she was being
charged with certain offenses. Notably, these offenses were those which NASECO's Committee on
Personnel Affairs already resolved, on 22 November 1983 to have been committed by Credo.

In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was
made to explain her side in connection with the charges filed against her; however, due to her failure
to do so, 8 she was handed a Notice of Termination, dated 24 November 1983, and made effective 1
December 1983. 9 Hence, on 6 December 1983, Credo filed a supplemental complaint for illegal
dismissal in Case No. 11-4944-83, alleging absence of just or authorized cause for her dismissal and
lack of opportunity to be heard. 10
After both parties had submitted their respective position papers, affidavits and other documentary
evidence in support of their claims and defenses, on 9 May 1984, the labor arbiter rendered a
decision: 1) dismissing Credo's complaint, and 2) directing NASECO to pay Credo separation pay
equivalent to one half month's pay for every year of service. 11

Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on 28
November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to her former position,
or substantially equivalent position, with six (6) months' backwages and without loss of seniority rights
and other privileges appertaining thereto, and 2) dismissing Credo's claim for attorney's fees, moral
and exemplary damages. As a consequence, both parties filed their respective motions for
reconsideration, 12 which the NLRC denied in a resolution of 16 January 1985. 13

Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as grave abuse
of discretion the dispositive portion of the 28 November 1984 decision which ordered Credo's
reinstatement with backwages. 14 Petitioners contend that in arriving at said questioned order, the
NLRC acted with grave abuse of discretion in finding that: 1) petitioners violated the requirements
mandated by law on termination, 2) petitioners failed in the burden of proving that the termination of
Credo was for a valid or authorized cause, 3) the alleged infractions committed by Credo were not
proven or, even if proved, could be considered to have been condoned by petitioners, and 4) the
termination of Credo was not for a valid or authorized cause. 15

On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion the
dispositive portion of the 28 November 1984 decision which dismissed her claim for attorney's fees,
moral and exemplary damages and limited her right to backwages to only six (6) months. 16

As guidelines for employers in the exercise of their power to dismiss employees for just causes, the
law provides that:

Section 2. Notice of dismissal. — Any employer who seeks to dismiss a worker shall
furnish him a written notice stating the particular acts or omission constituting the
grounds for his dismissal.

xxx xxx xxx

Section 5. Answer and Hearing. — The worker may answer the allegations stated
against him in the notice of dismissal within a reasonable period from receipt of such
notice. The employer shall afford the worker ample opportunity to be heard and to
defend himself with the assistance of his representative, if he so desires.

Section 6. Decision to dismiss. — The employer shall immediately notify a worker in

writing of a decision to dismiss him stating clearly the reasons therefor. 17

These guidelines mandate that the employer furnish an employee sought to be dismissed two (2)
written notices of dismissal before a termination of employment can be legally effected. These are the
notice which apprises the employee of the particular acts or omissions for which his dismissal is
sought and the subsequent notice which informs the employee of the employer's decision to dismiss
him.

Likewise, a reading of the guidelines in consonance with the express provisions of law on protection
to labor 18(which encompasses the right to security of tenure) and the broader dictates of procedural
due process necessarily mandate that notice of the employer's decision to dismiss an employee, with
reasons therefor, can only be issued after the employer has afforded the employee concerned ample
opportunity to be heard and to defend himself.

In the case at bar, NASECO did not comply with these guidelines in effecting Credo's dismissal.
Although she was apprised and "given the chance to explain her side" of the charges filed against her,
this chance was given so perfunctorily, thus rendering illusory Credo's right to security of tenure. That
Credo was not given ample opportunity to be heard and to defend herself is evident from the fact that
the compliance with the injunction to apprise her of the charges filed against her and to afford her a
chance to prepare for her defense was dispensed in only a day. This is not effective compliance with
the legal requirements aforementioned.

The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss her)
was dated 24 November 1983 and made effective 1 December 1983 shows that NASECO was
already bent on terminating her services when she was informed on 1 December 1983 of the charges
against her, and that any hearing which NASECO thought of affording her after 24 November 1983
would merely be pro forma or an exercise in futility.

Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry procedures in
the company's Statement of Billings Adjustment did not warrant the severe penalty of dismissal of the
NLRC correctly held that:

... on the charge of gross discourtesy, the CPA found in its Report, dated 22 November
1983 that, "In the process of her testimony/explanations she again exhibited a conduct
unbecoming in front of NASECO Officers and argued to Mr. S. S. Lloren in a sarcastic
and discourteous manner, notwithstanding, the fact that she was inside the office of the
Acctg. General Manager." Let it be noted, however, that the Report did not even
describe how the so called "conduct unbecoming" or "discourteous manner" was done
by complainant. Anent the "sarcastic" argument of complainant, the purported
transcript 19 of the meeting held on 7 November 1983 does not indicate any sarcasm on
the part of complainant. At the most, complainant may have sounded insistent or
emphatic about her work being more complete than the work of Ms. de Castro, yet, the
complaining officer signed the work of Ms. de Castro and did not sign hers.

As to the charge of insubordination, it may be conceded, albeit unclear, that

complainant failed to place same corrections/additional remarks in the Statement of
Billings Adjustments as instructed. However, under the circumstances obtaining, where
complainant strongly felt that she was being discriminated against by her superior in
relation to other employees, we are of the considered view and so hold, that a
reprimand would have sufficed for the infraction, but certainly not termination from
services. 20

As this Court has ruled:

... where a penalty less punitive would suffice, whatever missteps may be committed by
labor ought not to be visited with a consequence so severe. It is not only because of the
law's concern for the working man. There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on those dependent on the wage-
earner. 21
Of course, in justifying Credo's termination of employment, NASECO claims as additional lawful
causes for dismissal Credo's previous and repeated acts of insubordination, discourtesy and sarcasm
towards her superior officers, alleged to have been committed from 1980 to July 1983. 22

If such acts of misconduct were indeed committed by Credo, they are deemed to have been
condoned by NASECO. For instance, sometime in 1980, when Credo allegedly "reacted in a
scandalous manner and raised her voice" in a discussion with NASECO's Acting head of the
Personnel Administration 23 no disciplinary measure was taken or meted against her. Nor was she
even reprimanded when she allegedly talked 'in a shouting or yelling manner" with the Acting
Manager of NASECO's Building Maintenance and Services Department in 1980 24 or when she
allegedly "shouted" at NASECO's Corporate Auditor "in front of his subordinates displaying arrogance
and unruly behavior" in 1980, or when she allegedly shouted at NASECO's Internal Control
Consultant in 1981. 25 But then, in sharp contrast to NASECO's penchant for ignoring the aforesaid
acts of misconduct, when Credo committed frequent tardiness in August and September 1983, she
was reprimanded. 26

Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily proven,
NASECO's condonation thereof is gleaned from the fact that on 4 October 1983, Credo was given a
salary adjustment for having performed in the job "at least [satisfactorily]" 27 and she was then rated
"Very Satisfactory" 28as regards job performance, particularly in terms of quality of work, quantity of
work, dependability, cooperation, resourcefulness and attendance.

Considering that the acts or omissions for which Credo's employment was sought to be legally
terminated were insufficiently proved, as to justify dismissal, reinstatement is proper. For "absent the
reason which gave rise to [the employee's] separation from employment, there is no intention on the
part of the employer to dismiss the employee concerned." 29 And, as a result of having been
wrongfully dismissed, Credo is entitled to three (3) years of backwages without deduction and
qualification. 30

However, while Credo's dismissal was effected without procedural fairness, an award of exemplary
damages in her favor can only be justified if her dismissal was effected in a wanton, fraudulent,
oppressive or malevolent manner. 31 A judicious examination of the record manifests no such conduct
on the part of management. However, in view of the attendant circumstances in the case, i.e., lack of
due process in effecting her dismissal, it is reasonable to award her moral damages. And, for having
been compelled to litigate because of the unlawful actuations of NASECO, a reasonable award for
attorney's fees in her favor is in order.

In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no jurisdiction
to order Credo's reinstatement. NASECO claims that, as a government corporation (by virtue of its
being a subsidiary of the National Investment and Development Corporation (NIDC), a subsidiary
wholly owned by the Philippine National Bank (PNB), which in turn is a government owned
corporation), the terms and conditions of employment of its employees are governed by the Civil
Service Law, rules and regulations. In support of this argument, NASECO cites National Housing
Corporation vs. JUCO, 33 where this Court held that "There should no longer be any question at this
time that employees of government-owned or controlled corporations are governed by the civil
service law and civil service rifles and regulations."

It would appear that, in the interest of justice, the holding in said case should not be given retroactive
effect, that is, to cases that arose before its promulgation on 17 January 1985. To do otherwise would
be oppressive to Credo and other employees similarly situated, because under the same 1973
Constitution ,but prior to the ruling in National Housing Corporation vs. Juco, this Court had
recognized the applicability of the Labor Code to, and the authority of the NLRC to exercise
jurisdiction over, disputes involving terms and conditions of employment in government owned or
controlled corporations, among them, the National Service Corporation (NASECO).<äre||anº•1àw> 34

Furthermore, in the matter of coverage by the civil service of government-owned or controlled

corporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon which National
Housing Corporation vs. Juco is based. Under the 1973 Constitution, it was provided that:

The civil service embraces every branch, agency, subdivision, and instrumentality of the
Government, including every government-owned or controlled corporation. ... 35On the
other hand, the 1987 Constitution provides that:

The civil service embraces all branches, subdivisions, instrumentalities, and agencies of
the Government, including government-owned or controlled corporations with original
charter. 36(Emphasis supplied)

Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court in the
National Housing . Corporation case in the following manner —

The infirmity of the respondents' position lies in its permitting a circumvention or

emasculation of Section 1, Article XII-B of the constitution. It would be possible for a
regular ministry of government to create a host of subsidiary corporations under the
Corporation Code funded by a willing legislature. A government-owned corporation
could create several subsidiary corporations. These subsidiary corporations would enjoy
the best of two worlds. Their officials and employees would be privileged individuals,
free from the strict accountability required by the Civil Service Decree and the
regulations of the Commission on Audit. Their incomes would not be subject to the
competitive restrains of the open market nor to the terms and conditions of civil service
employment. Conceivably, all government-owned or controlled corporations could be
created, no longer by special charters, but through incorporations under the general law.
The Constitutional amendment including such corporations in the embrace of the civil
service would cease to have application. Certainly, such a situation cannot be allowed
to exist. 37

appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil Service
embraces government-owned or controlled corporations with original charter; and, therefore, by clear
implication, the Civil Service does not include government-owned or controlled corporations which are
organized as subsidiaries of government-owned or controlled corporations under the general
corporation law.

The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional intent
and meaning in the use of the phrase "with original charter." Thus

THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is

recognized.

MR. ROMULO. I beg the indulgence of the Committee. I was reading the
wrong provision.
I refer to Section 1, subparagraph I which reads:

The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies
of the government, including government-owned or controlled corporations.

My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the
Commissioner please state his previous question?

MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1, under

the Civil Service Commission, says: "including government-owned or
controlled corporations.' Does that include a corporation, like the
Philippine Airlines which is government-owned or controlled?

MR. FOZ. I would like to throw a question to the Commissioner. Is the

Philippine Airlines controlled by the government in the sense that the
majority of stocks are owned by the government?

MR. ROMULO. It is owned by the GSIS. So, this is what we might call a
tertiary corporation. The GSIS is owned by the government. Would this be
covered because the provision says "including government-owned or
controlled corporations."

MR. FOZ. The Philippine Airlines was established as a private corporation.

Later on, the government, through the GSIS, acquired the controlling
stocks. Is that not the correct situation?

MR. ROMULO. That is true as Commissioner Ople is about to explain.

There was apparently a Supreme Court decision that destroyed that
distinction between a government-owned corporation created under the
Corporation Law and a government-owned corporation created by its own
charter.

MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA
vs. Juco to the effect that all government corporations irrespective of the
manner of creation, whether by special charter or by the private
Corporation Law, are deemed to be covered by the civil service because
of the wide-embracing definition made in this section of the existing 1973
Constitution. But we recall the response to the question of Commissioner
Ople that our intendment in this provision is just to give a general
description of the civil service. We are not here to make any declaration as
to whether employees of government-owned or controlled corporations
are barred from the operation of laws, such as the Labor Code of the
Philippines.

MR. ROMULO. Yes.

MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name

has been mentioned by both sides.
 MR. ROMULO. I yield part of my time.

THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is

recognized.

MR. OPLE. In connection with the coverage of the Civil Service Law in
Section 1 (1), may I volunteer some information that may be helpful both
to the interpellator and to the Committee. Following the proclamation of
martial law on September 21, 1972, this issue of the coverage of the
Labor Code of the Philippines and of the Civil Service Law almost
immediately arose. I am, in particular, referring to the period following the
coming into force and effect of the Constitution of 1973, where the Article
on the Civil Service was supposed to take immediate force and effect. In
the case of LUZTEVECO, there was a strike at the time. This was a
government-controlled and government-owned corporation. I think it was
owned by the PNOC with just the minuscule private shares left. So, the
Secretary of Justice at that time, Secretary Abad Santos, and myself sat
down, and the result of that meeting was an opinion of the Secretary of
Justice which 9 became binding immediately on the government that
government corporations with original charters, such as the GSIS, were
covered by the Civil Service Law and corporations spun off from the GSIS,
which we called second generation corporations functioning as private
subsidiaries, were covered by the Labor Code. Samples of such second
generation corporations were the Philippine Airlines, the Manila

Hotel and the Hyatt. And that demarcation worked very well. In fact, all of these
companies I have mentioned as examples, except for the Manila Hotel, had collective
bargaining agreements. In the Philippine Airlines, there were, in fact, three collective
bargaining agreements; one, for the ground people or the PALIA one, for the flight
attendants or the PASAC and one for the pilots of the ALPAC How then could a
corporation like that be covered by the Civil Service law? But, as the Chairman of the
Committee pointed out, the Supreme Court decision in the case of NHA vs. Juco
unrobed the whole thing. Accordingly, the Philippine Airlines, the Manila Hotel and the
Hyatt are now considered under that decision covered by the Civil Service Law. I also
recall that in the emergency meeting of the Cabinet convened for this purpose at the
initiative of the Chairman of the Reorganization Commission, Armand Fabella, they
agreed to allow the CBA's to lapse before applying the full force and effect of the
Supreme Court decision. So, we were in the awkward situation when the new
government took over. I can agree with Commissioner Romulo when he said that this is
a problem which I am not exactly sure we should address in the deliberations on the
Civil Service Law or whether we should be content with what the Chairman said that
Section 1 (1) of the Article on the Civil Service is just a general description of the
coverage of the Civil Service and no more.

Thank you, Mr. Presiding Officer.

MR. ROMULO. Mr. Presiding Officer, for the moment, I would be satisfied
if the Committee puts on records that it is not their intent by this provision
and the phrase "including government-owned or controlled corporations"
 to cover such companies as the Philippine Airlines.

MR. FOZ. Personally, that is my view. As a matter of fact, when this draft
was made, my proposal was really to eliminate, to drop from the provision,
the phrase "including government- owned or controlled corporations."

MR. ROMULO. Would the Committee indicate that is the intent of this
provision?

MR. MONSOD. Mr. Presiding Officer, I do not think the Committee can
make such a statement in the face of an absolute exclusion of
government-owned or controlled corporations. However, this does not
preclude the Civil Service Law to prescribe different rules and procedures,
including emoluments for employees of proprietary corporations, taking
into consideration the nature of their operations. So, it is a general
coverage but it does not preclude a distinction of the rules between the
two types of enterprises.

MR. FOZ. In other words, it is something that should be left to the

legislature to decide. As I said before, this is just a general description and
we are not making any declaration whatsoever.

MR. MONSOD. Perhaps if Commissioner Romulo would like a definitive

understanding of the coverage and the Gentleman wants to exclude
government-owned or controlled corporations like Philippine Airlines, then
the recourse is to offer an amendment as to the coverage, if the
Commissioner does not accept the explanation that there could be a
distinction of the rules, including salaries and emoluments.

MR. ROMULO. So as not to delay the proceedings, I will reserve my right

to submit such an amendment.

xxx xxx xxx

THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is

recognized.

MR. ROMULO. On page 2, line 5, I suggest the following amendment after

"corporations": Add a comma (,) and the phrase EXCEPT THOSE
EXERCISING PROPRIETARY FUNCTIONS.

THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?

SUSPENSION OF SESSION

MR. MONSOD. May we have a suspension of the session?

THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.

 It was 7:16 p.m.

RESUMPTION OF SESSION

At 7:21 p.m., the session was resumed.

THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.

Commissioner Romulo is recognized.

MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment

to now read as follows: "including government-owned or controlled corporations WITH
ORIGINAL CHARTERS." The purpose of this amendment is to indicate that government
corporations such as the GSIS and SSS, which have original charters, fall within the
ambit of the civil service. However, corporations which are subsidiaries of these
chartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt are excluded
from the coverage of the civil service.

THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?

MR. FOZ. Just one question, Mr. Presiding Officer. By the term "original
charters," what exactly do we mean?

MR. ROMULO. We mean that they were created by law, by an act of

Congress, or by special law.

MR. FOZ. And not under the general corporation law.

MR. ROMULO. That is correct. Mr. Presiding Officer.

MR. FOZ. With that understanding and clarification, the Committee

accepts the amendment.

MR. NATIVIDAD. Mr. Presiding officer, so those created by the general

corporation law are out.

MR. ROMULO. That is correct: 38

On the premise that it is the 1987 Constitution that governs the instant case because it is the
Constitution in place at the time of decision thereof, the NLRC has jurisdiction to accord relief to the
parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the NASECO is a
government-owned or controlled corporation without original charter.

Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion
in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694;
also published in 78 Phil. 221) on the effectivity of the principle of social justice embodied in the 1935
Constitution, said:
 Certainly, this principle of social justice in our Constitution as generously conceived and
so tersely phrased, was not included in the fundamental law as a mere popular gesture.
It was meant to (be) a vital, articulate, compelling principle of public policy. It should be
observed in the interpretation not only of future legislation, but also of all laws already
existing on November 15, 1935. It was intended to change the spirit of our laws, present
and future. Thus, all the laws which on the great historic event when the Commonwealth
of the Philippines was born, were susceptible of two interpretations strict or liberal,
against or in favor of social justice, now have to be construed broadly in order to
promote and achieve social justice. This may seem novel to our friends, the advocates
of legalism but it is the only way to give life and significance to the above-quoted
principle of the Constitution. If it was not designed to apply to these existing laws, then it
would be necessary to wait for generations until all our codes and all our statutes shall
have been completely charred by removing every provision inimical to social justice,
before the policy of social justice can become really effective. That would be an absurd
conclusion. It is more reasonable to hold that this constitutional principle applies to all
legislation in force on November 15, 1935, and all laws thereafter passed.

WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with
modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295, are
ordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her termination, or if
such reinstatement is not possible, to place her in a substantially equivalent position, with three (3)
years backwages, from 1 December 1983, without qualification or deduction, and without loss of
seniority rights and other privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for
moral damages and P5,000.00 for attorney's fees.

If reinstatement in any event is no longer possible because of supervening events, petitioners in G.R.
No. 69870, who are the private respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo,
in addition to her backwages and damages as above described, separation pay equivalent to one-half
month's salary for every year of service, to be computed on her monthly salary at the time of her
termination on 1 December 1983.

SO ORDERED.

Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, Griño-Aquino,
Medialdea and Regalado, JJ., concur.

Narvasa, J., is on leave.

Gutierrez, Jr., J., in the result.

Separate Opinions

CRUZ, J., concurring:

While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again
my disappointment over still another avoidable ambiguity in the 1987 Constitution.
It is clear now from the debates of the Constitutional Commission that the government-owned or
controlled corporations included in the Civil Service are those with legislative charters. Excluded are
its subsidiaries organized under the Corporation Code.

If that was the intention, the logical thing, I should imagine, would have been to simply say so. This
would have avoided the suggestion that there are corporations with duplicate charters as
distinguished from those with original charters.

All charters are original regardless of source unless they are amended. That is the acceptable
distinction. Under the provision, however, the charter is still and always original even if amended as
long it was granted by the legislature.

It would have been clearer, I think, to say "including government owned or controlled corporations
with legislative charters." Why this thought did not occur to the Constitutional Commission places one
again in needless puzzlement.

Separate Opinions

CRUZ, J., concurring:

While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again
my disappointment over still another avoidable ambiguity in the 1987 Constitution.

It is clear now from the debates of the Constitutional Commission that the government-owned or
controlled corporations included in the Civil Service are those with legislative charters. Excluded are
its subsidiaries organized under the Corporation Code.

If that was the intention, the logical thing, I should imagine, would have been to simply say so. This
would have avoided the suggestion that there are corporations with duplicate charters as
distinguished from those with original charters.

All charters are original regardless of source unless they are amended. That is the acceptable
distinction. Under the provision, however, the charter is still and always original even if amended as
long it was granted by the legislature.

It would have been clearer, I think, to say "including government owned or controlled corporations
with legislative charters." Why this thought did not occur to the Constitutional Commission places one
again in needless puzzlement.
Career and Non-career Service:

CASE 9: De Leon v. CA, G.R. No. 127182

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 127182 January 22, 2001

HON. ALMA G. DE LEON, Chairman, HON. THELMA P. GAMINDE, Commissioner, and HON.
RAMON P. ERENETA, JR., Commissioner, Civil Service Commission, and SECRETARY RAFAEL
M. ALUNAN, III,Department of Interior and Local Government, petitioners,
vs.
HON. COURT OF APPEALS and JACOB F. MONTESA, respondents.

YNARES-SANTIAGO, J.:

Can person who lacks the necessary qualifications for a public position be appointed to it in a
permanent capacity?

Before the Court is a Petition for Review on Certiorari assailing the April 25, 1996 Decision,1 and
November 20, 1996 Resolution2 of the Court of Appeals in CA-G.R. SP No. 38664, which set aside
Resolution Nos. 9532683 and 9552014 of the Civil Service Commission; and declared as null and void
- (1) Department Order No. 94-370,5issued by the Department of Interior and Local Government,
relieving private respondent of his duties as Department Legal Counsel/Director III and reassigning
him as Director III (Assistant Regional Director), Region XI; and (2) Administrative Order No. 235
issued by then President Fidel V. Ramos, dropping private respondent from the rolls of public service,
for serious neglect of duty and absences without official leave.1âwphi1.nêt

On August 28, 1986, private respondent Atty. Jacob F. Montesa, who is not a Career Executive
Service Officer (CESO) or a member of the Career Executive Service, was appointed as "Ministry
Legal Counsel - CESO IV in the Ministry of Local Government" (now Department of Interior and Local
Government [hereafter referred to as Department]), by then Minister Aquilino Pimentel, Jr. Private
respondent's appointment was approved as permanent by the Civil Service Commission.

On July 25, 1987, then President Corazon C. Aquino promulgated Executive Order No. 262,
reorganizing the Department. On April 8, 1988, then Secretary Luis T. Santos, who succeeded
Minister Pimental, designated Nicanor M. Patricio as chief, Legal Service in place of private
respondent who, in turn, was directed to report to the office of the Secretary to perform special
assignments.

Consequently, private respondent filed before this Court a petition for quo warranto, docketed as G.R.
No. 83470,6 against then Secretary Luis T. Santos and Nicanor Patricio. On September 26, 1990, we
ruled in favor of private respondent Montesa and ordered his reinstatement to his former position.
Meanwhile, Republic Act No. 6758 (otherwise known as the Salary Standardization Law) took effect
on July 1, 1989. Pursuant thereto, the position of "Department Service Chiefs," which include the
Department Legal Counsel, was reclassified and ranked with "Assistant Bureau Directors" under the
generic position title of "Director III".7

Hence, in the execution of the decision of this Court in G.R. No. 83470, respondent was reinstated to
the position: "Department Legal Counsel and/or Director III."8

On July 26, 1994, then Secretary Rafael M. Alunan III, citing as reasons the interest of public service
and the smooth flow of operations in the concerned offices, issued Department Order No. 94-370,
relieving private respondent of his current duties and responsibilities and reassigning him as "Director
III (Assistant Regional Director), Region XI,"9 Private respondent, however, did not report to his new
assigned position. Instead, he filed a 90-day sick leave, and upon the expiration thereof on December
5, 1994, he submitted a memorandum for then acting Secretary Alexander P. Aguirre, signifying his
intention to re-assume his position as Department Legal Counsel/Chief, Legal Services. 10

Thereupon, Acting Secretary Aguirre, by memorandum dated December 6, 1994, 11 reiterated to

private respondent that the issuance of Department Order No. 94-370, transferring him to Region XI,
was in keeping with the interest of the public service and of the Career Executive Service (CES)
provision on assignment, reassignment, and transfer. Accordingly, private respondent was advised to
report to Region XI immediately.

Private respondent wrote a memorandum dated December 12, 1994, 12 requesting for reconsideration
of Department Order No. 94-370, but to no avail. Private respondent appealed to the Civil Service
Commission and the latter issued Resolution No. 95-3268,13 dated May 23, 1995 which sustained his
reassignment to Region XI, on the ground that: 1) the subject reassignment was not violative of the
due process clause of the Constitution or of private respondent's right to security of tenure; 2) the
reassignment did not entail any reduction in rank or status; 3) private respondent could be reassigned
from one station to another without his consent as the rule against unconsented transfer applies only
to an officer who is appointed to a particular station, and not merely assigned thereto. Private
respondent's motion for reconsideration of the aforesaid Resolution was similarly denied by the
Commission in Resolution No. 955201 dated August 22, 1995.14

On October 10, 1995, the Department directed private respondent to report to his new assigned post
in Region XI, stressing that his continued non-compliance with D.O. No. 94-370 is prejudicial to the
interest of public service, particularly in Region XI. Private respondent was also warned that upon his
failure to comply, the Department shall be constrained to consider him on Absence Without Leave
(AWOL) and as a consequence, drop him from the rolls of public service.15

Instead of complying therewith, private respondent, on October 23, 1995, filed with the Court of
Appeals a Petition for Review with prayer for the issuance of a temporary restraining order and/or
preliminary injunction. No restraining order or preliminary injunction, however, was issued by the
court,.

On December 13, 1995, then President Fidel V. Ramos, upon the recommendation of the Department,
issued Administrative Order No. 235, dropping private respondent Atty. Jacob F. Montesa, Director III.
Legal Service, from the roster of public servants for serious neglect of duty and absences without
leave (AWOL).16
On April 25, 1996, the Court of Appeals rendered its decision in favor of private respondent, holding
as follows:

WHEREFORE, the petition is GRANTED. Department Order No. 94-370 in so far as it affects
petitioner, Jacob F. Montesa, is hereby declared null and void. Petitioner is hereby ordered
retained in his position as "Chief, Legal Service" or "Department Legal Counsel" in the DILG,
without loss of seniority, rank, emolument and privileges. The DILG Secretary is hereby
ordered to release to petitioner his withheld salaries corresponding to the period July 15-21,
1995 and his back salaries, if also withheld, corresponding to the period July 22, 1995 to
September 27, 1995.

Finding that petitioner has not paid the amount of P 500.00 as deposit for costs (page 1, Rollo),
he is hereby ordered to pay the same to the Clerk of this Court within five (5) days from receipt
of this decision

SO ORDERED.17

Both petitioners and private respondent moved for reconsideration. In his Motion for Clarification
and/or Partial Motion for Reconsideration, private respondent prayed for "backwages to cover the
period from October 5, 1995 up to his actual reinstatement to office, the period from August 1, 1994
to July 14, 1995 having been covered by approved leave of absences with pay, while the period July
15-21, 1995 is the period where his name was included in the payroll but release of his salary was
illegally withheld by private respondent Alunan on July 21, 1995, and the period of July 22 to October
4, 1995 is the period where respondent Alunan withheld his salary even before CSC Resolution No.
95-9201 (should be No. 95-3268) became executory."18 Respondent likewise prayed for the award of
RATA during the period of his illegal dismissal.

Petitioners, on the other hand, posited that the decision of the Court of Appeals is not confluent with
Administrative Order No. 235, issued on December 13, 1995 by then President Ramos which
dropped petitioner from the roster of public servants. They further argued that until and unless the
said Order is declared illegal and/or invalid, the presumption is in favor of its validity and it is
incumbent upon private respondent to comply therewith so as not to prejudice the public service.

On November 20, 1996, the Court of Appeals issued the assailed resolution modifying its April 25,
1996 decision, thus:

WHEREFORE, premises considered, the Motion for Reconsideration filed by public

respondents is hereby DENIED for lack of merit. Petitioner's Motion for Clarification and/or
Partial Motion for Reconsideration is hereby GRANTED. The dispositive portion of the decision
is hereby modified to read as follows:

WHEREFORE, the petition is GRANTED. Department Order No. 94-370 in so far as it

affects petitioner, Jacob Montesa, and Administrative Order No. 235 are hereby
declared null and void. Petitioner is hereby ordered reinstated to his position as "Chief
Legal Service" or "Department legal Counsel" in the DILG, without loss of seniority, rank,
emolument and privileges. The DILG Secretary is hereby ordered to release to
petitioner his withheld salaries and backwages,
including allowances(RATA) and other benefits, to which petitioner would have been ent
itled had he not been illegallyremoved, corresponding to the period July 15,
 1995 up to his actual reinstatement to office.

SO ORDERED.19

Dissatisfied, petitioners filed the instant petition with this Court, contending that:

REPONDENT COURT GARVELY ERRED IN RULING THAT RESPONDENT MONTESA'S

REASSIGNMENT IS ACTUALLY AN UNCONSENTED TRANSFER.

II

RESPONDENT COURT GRAVELY ERRED IN RULING THAT RESPONDENT MONTESA'S

"TRANFER" CHANGES HIS APPOINMENT FROM PERMANENT TO TEMPORARY AND
VIOLATES HIS CONSTITUTIONAL RIGHT TO SECURITY OF TENURE.

III

RESPONDENT COURT GRAVELY ERRED AND COMMITTED GRAVE ABUSE OF

DISCRETION IN ORDERING THE REINSTATEMENT OF RESPONDENT MONTESA IN
OPEN DISREGARD OF ADMINISTRATIVE ORDER NO. 235 ISSUED BY THE PRESIDENT
OF THE PHILIPPINES DROPPING HIM FROM THE ROSTER OF PUBLIC SERVANTS.

IV

RESPONDENT COURT GRAVELY ERRED IN RULING THAT RESPONDENT MONTESA IS

ENTITLED TO BACKAGES, INCLUDING RATA AND OTHER BENEFITS,
CORRESPONDING TO THE PERIOD FROM JULY 15, 1995 UP TO HIS ACTUAL
REINSTATEMENT.20

Succinctly put, the pivot of inquiry here boils down to the nature of the appointment of private
respondent Atty. Jacob F. Montesa.

At the outset, it must be stressed that the position of Ministry Legal Counsel – CESO IV is embraced
in the Career Executive Service. Under the Integrated Reorganization Plan, appointment thereto shall
be made as follows:

c. Appointment. Appointment to appropriate classes in the Career Executive Service shall be

made by the President from a list of career executive eligible recommended by the Board.
Such appointments shall be made on the basis of rank; provided that appointments to the
higher ranks which qualify the incumbents to assignments as undersecretary and heads of
bureaus and offices and equivalent positions shall be with the confirmation of the Commission
on Appointments. The President may, however, in exceptional cases, appoint any person who
is not a Career Executive Service eligible; provided that such appointee shall subsequently
take the required Career Executive Service examination and that he shall not be promoted to a
higher class until qualifies in such examination.
 At the initial implementation of this Plan, an incumbent who holds a permanent appointment to
a position embraced in the Career Executive Service shall continue to hold his position, but
may not advance to a higher class of position in the Career Executive Service unless or until
he qualifies for membership in the Career Executive Service.21

Corollarily, the required Career Executive Service eligibility may be then acquired in the following
manner:

Career Executive Service Eligibility

Passing the CES examination entitles the examinee to a conferment of a CES eligibility and
the inclusion of his name in the roster of CES eligible. Conferment of CES eligibility is done by
the Board through a formal Board Resolution after an evaluation of the examinee's
performance in the four stages of the CES eligibility examinations. 22

In the case at bar, there is no question that private respondent does not have the required CES
eligibility. As admitted by private respondent in his Comment, he is "not a CESO or a member of the
Career Executive Service."

In the case of Achacoso v. Macaraig, et al.,23 the Court held that:

It is settled that a permanent appointment can be issued only 'to a person who meets all the
requirements for the position to which he is being appointed, including the appropriate eligibility
prescribed." Achacoso did not. At best, therefore, his appointment could be regarded only as
temporary. And being so, it could be withdrawn at will by the appointing authority and "at a
moment's notice," conformably to established jurisprudence.

The Court, having considered these submissions and the additional arguments of the parties in
the petitioner's Reply and the Solicitor-General's Rejoinder, must find for the respondents.

The mere fact that a position belongs to the Career Service does not automatically confer
security or tenure on its occupant even if he does not possess the required qualifications. Such
right will have to depend on the nature of his appointment, which in turn depends on his
eligibility or lack of it. A person who does not have the requisite qualifications for the position
cannot be appointed to it in the first place or, only as an exception to the rule, may be
appointed to it merely in an acting capacity in the absence of appropriate eligible. The
appointment extended to him cannot be regarded as permanent even if it may be so
designated.

Evidently, private respondent's appointment did not attain permanency. Not having taken the
necessary Career Executive Service examination to obtain requisite eligibility, he did not at the time
of his appointment and up to the present, possess the needed eligibility for a position in the Career
Executive Service. Consequently, his appointment as Ministry Legal Counsel – CESO IV/ Department
Legal Counsel and/or Director III, was merely temporary. Such being the case, he could be
transferred or reassigned without violating the constitutionally guaranteed right to security of
tenure.1âwphi1.nêt

Private respondent capitalizes on his lack of CES eligibility by adamantly contending that the mobility
and flexibility concepts in the assignment of personnel under the Career Executive Service24 do not
apply to him because he is not a Career Executive Service Officer. Obviously, the contention is
without merit. As correctly pointed out by the Solicitor General, non-eligible holding permanent
appointments to CES positions were never meant to remain immobile in their status. Otherwise, their
lack of eligibility would be a premium vesting them with permanency in the CES positions, a privilege
even their eligible counterparts do not enjoy.

Then too, the cases on unconsented transfer invoked by private respondent find no application in the
present case. To reiterate, private respondent's appointment is merely temporary; hence, he could be
transferred or reassigned to other positions without violating his right to security of tenure.

WHEREFORE, based on the foregoing, the Petition is GRANTED. The April 25, 1996 Decision and
the November 20, 1996 Resolution of the Court of Appeals in CA-G.R. SP No. 38664
are REVERSED and SET ASIDE.Resolution Nos. 953268 and 9555201 of the Civil Service
Commission are REINSTATED. No pronouncement as to costs.

SO ORDERED.

Davide, Jr., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo,
Buena, Gonzaga-Gonazaga-Reyes, De Leon, Jr., Sandoval-Gutierrez, JJ., concur.

CASE 10 General v. Roco, G.R. No. 143366, January 29, 2001

FIRST DIVISION

[G.R. No. 143366. January 29, 2001]

LUIS MARIO M. GENERAL, petitioner, vs. RAMON S. ROCO, respondent.

[G.R. No. 143524. January 29, 2001]

THE EXECUTIVE SECRETARY, SECRETARY OF TRANSPORTATION and COMMUNICATIONS,

UNDERSECRETARY FOR STAFF SERVICES of the DOTC and the ASSISTANT
SECRETARY for LAND TRANSPORTATION, petitioners, vs. RAMON S. ROCO, respondent.

DECISION
YNARES-SANTIAGO, J.:

Respondent Ramon S. Roco was appointed by then President Fidel V. Ramos on August 26, 1996 as
Regional Director of the Land Transportation Office (LTO) in Region V, a position equivalent to CES rank
level V. He forthwith began to assume and discharge the duties and responsibilities of the said
office. Subsequently, then President Joseph E. Estrada re-appointed him to the same position on February 8,
1999. At the time of respondents appointment in 1996 and 1999, he was not a CES eligible. However, during
his incumbency, or on August 13, 1999, he was conferred CES eligibility by the Career Executive Service
Board.
On September 7, 1999, petitioner Luis Mario General, who is not a CES eligible,[1] was appointed by
President Estrada as Regional Director of the LTO in Region V, the same position being occupied by
respondent. Pursuant thereto, DOTC Undersecretary Herminio B. Coloma, Jr., as Officer-in-Charge of the
Department, issued a Memorandum directing petitioner General to assume the said office immediately and for
respondent Roco to report to the Office of the Secretary for further instructions. Accordingly, petitioner General
assumed office on September 16, 1999.
Aggrieved, respondent Roco filed before the Court of Appeals a petition for quo warranto with prayer for
the issuance of a writ of preliminary injunction and/or temporary restraining order. The Court of Appeals issued
a TRO enabling respondent Roco to re-assume the disputed office. After the lapse of 60 days, there being no
writ of preliminary injunction issued, petitioner General again assumed the said office. On March 10, 2000, the
Court of Appeals rendered a decision affirming the appointment of respondent Roco to the Office of Regional
Director of the LTO, Region V, nullified the appointment of petitioner General and ordered him to vacate the
subject post in favor of respondent Roco.[2] Upon motion of respondent Roco, the Court of Appeals issued a
writ of execution pending appeal.[3]
From the Court of Appeals decision, two separate petitions for review under Rule 45 were filed before this
Court. The first one, which was filed by General against Roco, was docketed as G.R. No. 143366; while the
second petition was filed by the Solicitor General on behalf of the Executive Secretary, the Secretary,
Undersecretary and Assistant Secretary of the DOTC, also against Roco, and was docketed as G.R. No.
143524. On June 26, 2000, the Court issued a Resolution in G.R. No. 143366 directing the parties to maintain
the status quo ante.[4] Both petitions were later consolidated.
The thrust of respondents argument is that a career executive service (CES) eligibility is all that an
employee needs to acquire security of tenure in the service; and that appointment to a CES rank is not necessary
for the acquisition of such security of tenure. On the other hand, petitioners in G.R. No. 143524 and G.R. No.
143366, claim that CES eligibility alone will not suffice. Petitioners contended that unless and until an
employee in the career executive service is appointed to the appropriate CES rank, he acquires no security of
tenure.
The petitions are impressed with merit.
Section 27 (1), of the Civil Service Law (Subtitle A, Tittle I, Book V of E.O. No. 292), provides:

(1) Permanent status. - A permanent appointment shall be issued to a person who meets all the requirements for
the position to which he is being appointed, including the appropriate eligibility prescribed, in accordance with
the provisions of law, rules and standards promulgated in pursuance thereof.

In the career executive service, the acquisition of security of tenure which presupposes a permanent
appointment is governed by the rules and regulations promulgated by the CES Board,[5] thus:

Career Executive Service Eligibility

Passing the CES examination entitles the examinee to a conferment of a CES eligibility and the inclusion of
his name in the roster of CES eligibles. Conferment of CES eligibility is done by the Board through a formal
Board Resolution after an evaluation is done of the examinees performance in the four stages of the CES
eligibility examinations.
xxxxxxxxx

Appointment to CES Rank

Upon conferment of a CES eligibility and compliance with the other requirements prescribed by the Board, an
incumbent of a CES position may qualify for appointment to a CES rank. Appointment to a CES rank is made by
the President upon the recommendation of the Board. This process completes the officials membership in the
CES and most importantly, confers on him security of tenure in the CES.

There are six (6) ranks in the CES ranking structure. The highest rank is that of a Career Executive Service
Officer I (CESO I), while the lowest is that of CESO VI.

The appropriate CESO rank to which a CES eligible may be appointed depends on two major qualification
criteria, namely: (1) level of managerial responsibility; and, (2) performance.

Performance is determined by the officials performance rating obtained in the annual CESPES. On the other
hand, managerial responsibility is based on the level of the general duties and responsibilities which an eligible
is performing, as follows:

Levels of Duties Rank

and Equivalen
Responsibilities t

if level of I
managerial
responsibilities
are
comparable to II

that of an III

Undersecretary

if comparable IV
to that of an
Assistant
Secretary
V
if comparable
to that of a
Bureau
Director, or a VI
Department
Regional
Director

if comparable
to that of an
 Assistant
Bureau
Director,
Department
Assistant
Regional
Director or
Department
Service Chief

if comparable
to that of
Bureau
Regional
Director

if comparable
to that of a
Bureau
Assistant
Regional
Director

As a general rule, a CES eligible will be recommended for appointment to the rank equivalent of the level of his
managerial responsibility if his performance rating is Satisfactory or higher. If the performance rating is
Outstanding, he will be recommended one rank higher than his level of managerial responsibility. (Emphasis
supplied)

So also, pertinent provisions of the Integrated Reorganization Plan,[6] read:

c. Appointment. Appointment to appropriate classes in the Career Executive Service shall be made by the
President from a list of career executive eligibles recommended by the Board. Such appointments shall be made
on the basis of rank; provided that appointments to higher ranks which qualify the incumbents to assignments
as undersecretary and heads of bureaus and offices and equivalent positions shall be with the confirmation of
the Commission on Appointments. The President may, however, in exceptional cases, appoint any person who is
not a Career Executive Service eligible; provided that such appointee shall subsequently take the required
Career Executive Service examination and that he shall not be promoted to a higher class until he qualifies in
such examination.

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e. Assignments Reassignments and Transfers. Depending upon their ranks, members of the Service shall be
assigned to occupy positions of undersecretary, Assistant Secretary. Bureau Director, Assistant Bureau
Director, Regional Director, Assistant Regional Director, Chief of Department Service and other officers of
equivalent rank as may be identified by the Board on the basis of the members functional expertise.

As clearly set forth in the foregoing provisions, two requisites must concur in order that an employee in the
career executive service may attain security of tenure, to wit:
a) CES eligibility; and
 b) Appointment to the appropriate CES rank.
In addition, it must be stressed that the security of tenure of employees in the career executive service
(except first and second-level employees in the civil service), pertains only to rank and not to the office or to the
position to which they may be appointed. Thus, a career executive service officer may be transferred or
reassigned from one position to another without losing his rank which follows him wherever he is transferred or
reassigned. In fact, a CESO suffers no diminution of salary even if assigned to a CES position with lower salary
grade, as he is compensated according to his CES rank and not on the basis of the position or office he
occupies.[7]
In the case at bar, there is no question that respondent Ramon S. Roco, though a CES eligible, does not
possess the appropriate CES rank, which is - CES rank level V, for the position of Regional Director of the LTO
(Region V). Falling short of one of the qualifications that would complete his membership in the CES,
respondent cannot successfully interpose violation of security of tenure. Accordingly, he could be validly
reassigned to other positions in the career executive service. Thus, in Achacoso v. Macaraig,[8] the Court held
that:

It is settled that a permanent appointment can be issued only to a person who meets all the requirement for the
position to which he is being appointed, including the appropriate eligibility prescribed. Achacoso did not. At
best, therefore, his appointment could be regarded only as temporary. And being so, it could be withdrawn at
will by the appointing authority and at a moments notice, conformably to established jurisprudence.

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The mere fact that a position belongs to the Career Service does not automatically confer security of tenure on
its occupant even if he does not possess the required qualifications. Such right will have to depend on the nature
of his appointment, which in turn depends on his eligibility or lack of it. A person who does not have the
requisite qualifications for the position cannot be appointed to it in the first place or, as an exception to the rule,
may be appointed to it merely in an acting capacity in the absence of appropriate eligibles. The appointment
extended to him cannot be regarded as permanent even if it may be so designated.

Moreover, under the mobility and flexibility principles[9] of the Integrated Reorganization Plan, CES
personnel may be reassigned or transferred from one position to another, thus:

e. Assignments, Reassignments and Transferees ...

Any provision of law to the contrary notwithstanding, members of the Career Executive Service may be
reassigned or transferred from one position to another and from one department, bureau or office to another;
provided that such reassignment or transfer is made in the interest of public service and involves no reduction
in rank or salary; provided, further, that no member shall be reassigned or transferred oftener than every two
years; and provided, furthermore, that if the officer concerned believes that his reassignment or transfer is not
justified, he may appeal his case to the President.[10]

One last point. Respondent capitalizes on the fact that petitioner Luis Mario M. General is not a CES
eligible. The absence, however, of such CES eligibility is of no moment. As stated in Part III, Chapter I, Article
IV, paragraph 5(c), of the Integrated Reorganization Plan -

...the President may, in exceptional cases, appoint any person who is not a Career Executive Service eligible;
provided that such appointee shall subsequently take the required Career Executive Service examination and
that he shall not be promoted to a higher class until he qualified in such examination.
 Evidently, the law allows appointment of those who are not CES eligible, subject to the obtention of said
eligibility, in the same manner that the appointment of respondent who does not possess the required CES rank
(CES rank level V) for the position of Regional Director of the LTO, is permitted in a temporary capacity.
WHEREFORE, the petition is GRANTED, and the March 10, 2000 Decision and the June 9, 2000
Resolution of the Court of Appeals in CA-G.R. SP No. 55000, is SET ASIDE. The petition for quo
warranto and prohibition filed by respondent is hereby DISMISSED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.