G.R. No. 82819 February 8, 1989
It is the 1987 Constitution, and not the case law embodied
LUZ LUMANTA, ET AL., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
FOOD TERMINAL, INC., respondents.
RESOLUTION
FELICIANO, J.:
The present Petition for certiorari seeks to annul and set aside the
Decision of the National Labor Relations Commission rendered on
18 March 1988 in NLRC-NCR Case No. 00- 0301035-87, entitled
"Luz Lumanta, et al., versus Food Terminal Incorporated." The
Decision affirmed an order of the Labor Arbiter dated 31 August
1987 dismissing petitioners' complaint for lack of Jurisdiction.
On 20 March 1987, petitioner Luz Lumanta, joined by fifty-four
(54) other retrenched employees, filed a complaint for unpaid 'd
retrenchment or separation pay against private respondent Food
Terminal, Inc. ("FTI") with the Department of Labor and
Employment. The complaint was later amended to include charges
of underpayment of wages and non-payment of emergency cost of
living allowances (ECOLA).
Private respondent FTI moved to dismiss the complaint on the
ground of lack of jurisdiction. It argued that being a government-
owned and controlled corporation, its employees are governed by
the Civil Service Law not by the Labor Code, and that claims arising
from employment fall within the jurisdiction of the Civil Service
Commission and not the Department of Labor and Employment.
The petitioners opposed the Motion to Dismiss contending that
although FTI is a corporation owned and controlled by the
government, it has still the marks of a private corporation: it
directly hires its employees without seeking approval from the Civil
Service Commission and its personnel are covered by the Social
Security System and not the Government Service Insurance
System. Petitioners also argued that being a government-owned
and controlled corporation without original charter, private
respondent FTl clearly falls outside the scope of the civil service as
marked out in Section 2 (1), Article IX of the 1987 Constitution.
On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra issued an
Order, 1 the dispositive part of which read:
On account of the above findings the instant case is
governed by the Civil Service Law. The case at bar lies
outside the jurisdictional competence of this Office.
WHEREFORE, premises considered this case is
hereby directed to be DISMISSED for lack of
jurisdiction of this Office to hear and decide the case.
SO ORDERED.
On 18 March 1988, the public respondent National Labor Relations
Commission affirmed on appeal the order of the Labor Arbiter and
dismissed the petitioners' appeal for lack of merit.
Hence this Petition for Certiorari.
The only question raised in the present Petition is whether or not a
labor law claim against a government-owned and controlled
corporation, such as private respondent FTI, falls within the
jurisdiction of the Department of Labor and Employment.
In refusing to take cognizance of petitioners' complaint against
private respondent, the Labor Arbiter and the National Labor
Relations Commission relied chiefly on this Court's ruling
in National Housing Authority v. Juco, 2which 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 rules and regulations.
Juco was decided under the 1973 Constitution, Article II-B, Section
1 (1) of which provided:
The civil service embraces every branch, agency,
subdivision, and instrumentality of the Government,
including every government-owned or controlled
corporation.
The 1987 Constitution which took effect on 2 February 1987, has
on this point a notably different provision which reads:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government-owned or controlled
corporations with original charter. (Article IX-B,
Section 2 [1]).
The Court, in National Service Corporation (NASECO) v.
National Labor Relations Commission, G.R. No. 69870,
promulgated on 29 November 1988, 3 quoting extensively from the
deliberations 4 of the 1986 Constitutional Commission in respect of
the intent and meaning of the new phrase "with original charter,"
in effect held that government-owned and controlled
corporations with original charter refer to corporations
chartered by special law as distinguished from corporations
organized under our general incorporation statute-the
Corporation Code. In NASECO, the company involved had been
organized under the general incorporation statute and was a
subsidiary of the National Investment Development Corporation
(NIDC) which in turn was a subsidiary of the Philippine National
Bank, a bank chartered by a special statute. Thus, government-
owned or controlled corporations like NASECO are effectively
excluded from the scope of the Civil Service.
in Juco, 5 which applies in the case at bar, under the principle that
jurisdiction is determined as of the time of the filing of the
complaint. 6 At the time the complaint against private respondent
FTI was filed (i.e., 20 March 1987), and at the time the decisions of
the respondent Labor Arbiter and National Labor Relations
Commission were rendered (i.e., 31 August 1987 and 18 March
1988, respectively), the 1987 Constitution had already come into
effect. latter of Instruction No. 1013, dated 19 April 1980, included
Food Terminal, Inc. in the category of "government-owned or
controlled corporations." 7 Since then, FTI served as the marketing
arm of the National Grains Authority (now known as the National
Food Authority). The pleadings show that FTI was previously a
privately owned enterprise, created and organized under the
general incorporation law, with the corporate name "Greater
Manila Food Terminal Market, Inc." 8 The record does not indicate
the precise amount of the capital stock of FM that is owned by the
government; the petitioners' claim, and this has not been disputed,
that FTl is not hundred percent (100%) government-owned and
that it has some private shareholders.
We conclude that because respondent FTI is government-owned
and controlled corporation without original charter, it is the
Department of Labor and Employment, and not the Civil Service
Commission, which has jurisdiction over the dispute arising from
employment of the petitioners with private respondent FTI, and
that consequently, the terms and conditions of such employment
are governed by the Labor Code and not by the Civil Service Rules
and Regulations.
Public respondent National Labor Relations Commission acted
without or in excess of its jurisdiction in dismissing petitioners
complaint.
ACCORDINGLY, the Petition for certiorari is hereby GRANTED
and the Decision of public respondent Labor Arbiter dated 31
August 1987 and the Decision of public respondent Commission
dated 18 March 1988, both in NLRC-NCR Case No. 00-03-01035-
87 are hereby SET ASIDE. The case is hereby REMANDED to the
Labor Arbiter for further appropriate proceedings.
G.R. No. 166365 September 30, 2005
DUTY FREE PHILIPPINES, Petitioners,
vs.
ROSSANO J. MOJICA, Respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari1 under Rule 45 of the Rules of
Court seeks to annul and set aside the August 31, 2004 Decision2 of
the Court of Appeals in CA-G.R. SP No. 76995, and its December
13, 2004 Resolution3denying the motion for reconsideration.
The antecedent facts show that on November 28, 1997, the
Discipline Committee of Duty Free Philippines (DFP) rendered a
decision4 in DISCOM Case No. 97-027 finding Stock Clerk Rossano
A. Mojica guilty of Neglect of Duty by causing considerable damage
to or loss of materials, assets and property of DFP. Thus, Mojica
was considered forcibly resigned from the service with forfeiture of
all benefits except his salary and the monetary value of the accrued
leave credits.5
Mojica was formally informed of his forced resignation on January
14, 1998. Thereupon, he filed a complaint for illegal dismissal with
prayer for reinstatement, payment of full back wages, damages,
and attorney’s fees, against DFP before the National Labor
Relations Commission (NLRC).
On February 2, 2000, Labor Arbiter Facundo L. Leda rendered a
Decision finding that Mojica was illegally dismissed. The
dispositive portion of the Decision reads:
WHEREFORE, decision is hereby rendered declaring the dismissal
of complainant Rossano J. Mojica to be illegal such that
respondent Duty Free Philippines is directed to reinstate him to his
former or substantially equivalent position without loss of
seniority rights and other privileges and to pay him the amount of
TWO HUNDRED FIFTY NINE THOUSAND SEVENTEEN PESOS
& 08/100 (P259,017.08) representing his backwages and
attorney’s fees, both awards being subject to further computation
until actual reinstatement.
SO ORDERED.6
The NLRC reversed the ruling of the arbiter. It found that the
dismissal was valid and with just cause.
Mojica’s motion for reconsideration was denied,7 hence he filed a
Petition for Certiorari under Rule 65 of the Rules of Court before
the Court of Appeals, docketed as CA-G.R. SP No. 76995.
The appellate court agreed with the arbiter that Mojica was not
guilty of gross or habitual negligence that would warrant his
dismissal. It found that there was no convincing evidence to prove
that Mojica connived with other personnel in pilfering the stocks
of DFP.
Hence, this petition.
Respondent Mojica is a civil service employee; therefore,
jurisdiction is lodged not with the NLRC, but with the Civil Service
Commission.
DFP was created under Executive Order (EO) No. 468 on
September 4, 1986 primarily to augment the service facilities for
tourists and to generate foreign exchange and revenue for the
government. In order for the government to exercise direct and
effective control and regulation over the tax and duty free shops,
their establishment and operation was vested in the Ministry, now
Department of Tourism (DOT), through its implementing arm, the
Philippine Tourism Authority (PTA).9 All the net profits from the
merchandising operations of the shops accrued to the DOT.
As provided under Presidential Decree (PD) No. 564,10 PTA is a
corporate body attached to the DOT. As an attached agency, the
recruitment, transfer, promotion and dismissal of all its personnel
was governed by a merit system established in accordance with the
civil service rules.11 In fact, all PTA officials and employees are
subject to the Civil Service rules and regulations.12
Accordingly, since DFP is under the exclusive authority of the PTA,
it follows that its officials and employees are likewise subject to the
Civil Service rules and regulations. Clearly then, Mojica’s recourse
to the Labor Arbiter was not proper. He should have followed the
procedure laid down in DFP’s merit system and the Civil Service
rules and regulations.
PD No. 807 or The Civil Service Decree of the
Philippines13 declared that the Civil Service Commission shall be
the central personnel agency to set standards and to enforce the
laws governing the discipline of civil servants.14 It categorically
described the scope of Civil Service as embracing every branch,
agency, subdivision, and instrumentality of the government,
including every government-owned or controlled corporation
whether performing governmental or proprietary function.15 It
construed an agency to mean any bureau, office, commission,
administration, board, committee, institute, corporation, whether
performing governmental or proprietary function, or any other
unit of the National Government, as well as provincial, city or
municipal government, except as otherwise provided.16
Subsequently, EO No. 18017 defined "government employees" as all
employees of all branches, subdivisions, instrumentalities, and
agencies, of the Government, including government-owned or
controlled corporations with original charters.18 It provided that
the Civil Service and labor laws shall be followed in the resolution
of complaints, grievances and cases involving government
employees.19
EO No. 292 or The Administrative Code of 1987 empowered the
Civil Service Commission to hear and decide administrative cases
instituted by or brought before it directly or on appeal, including
contested appointments, and review decisions and actions of its
offices and of the agencies attached to it.20
Thus, we held in Zamboanga City Water District v. Buat21 that:
There is no dispute that petitioner, a water district with an original
charter, is a government-owned and controlled corporation. The
established rule is that the hiring and firing of employees of
government-owned and controlled corporations are governed by
provisions of the Civil Service Law and Civil Service Rules and
Regulations. Jurisdiction over the strike and the dismissal of
private respondents is therefore lodged not with the NLRC but with
the Civil Service Commission. (Citations omitted)
In Philippine Amusement and Gaming Corp. v. Court of
Appeals22 we also held that:
It is now settled that, conformably to Article IX-B, Section 2(1), [of
the 1987 Constitution] government-owned or controlled
corporations shall be considered part of the Civil Service only if
they have original charters, as distinguished from those created
under general law.
PAGCOR belongs to the Civil Service because it was created
directly by PD 1869 on July 11, 1983. Consequently, controversies
concerning the relations of the employee with the management of
PAGCOR should come under the jurisdiction of the Merit System
Protection Board and the Civil Service Commission, conformably
to the Administrative Code of 1987.
Section 16(2) of the said Code vest in the Merit System Protection
Board the power inter alia to:
a) Hear and decide on appeal administrative cases involving
officials and employees of the Civil Service. Its decision shall be
final except those involving dismissal or separation from the
service which may be appealed to the Commission.
Applying this rule, we have upheld the jurisdiction of Civil Service
Authorities, as against that of the labor authorities, in
controversies involving the terms of employment, and other
related issues, of the Civil Service official and employees...
EO No. 292 provided that civil service employees have the right to
present their complaints or grievances to management and have
them adjudicated as expeditiously as possible in the best interest
of the agency, the government as a whole, and the employee
concerned. Such complaint or grievances shall be resolved at the
lowest possible level in the department or agency, as the case may
be, and the employee shall have the right to appeal such decision
to higher authorities. In case any dispute remains unresolved after
exhausting all the available remedies under existing laws and
procedure, the parties may jointly refer the dispute in the Public
Sector Labor Management Council for appropriate action.23
In sum, the labor arbiter and the NLRC erred in taking cognizance
of the complaint as jurisdiction over the complaint for illegal
dismissal is lodged with the Civil Service Commission. The Court
of Appeals likewise erred in sustaining the labor arbiter.
WHEREFORE, the August 31, 2004 Decision of the Court of
Appeals in CA-G.R. SP No. 76995; and its December 13, 2004
Resolution, are ANNULLED and SET ASIDE. The complaint for
illegal dismissal with prayer for reinstatement, payment of
backwages and attorney’s fees, is DISMISSED.
SO ORDERED.
G.R. No. 80767 April 22, 1991
BOY SCOUTS OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
FORTUNATO ESGUERRA, ROBERTO MALABORBOR,
ESTANISLAO MISA, VICENTE EVANGELISTA, and
MARCELINO GARCIA, respondents.
FELICIANO, J.:
This Petition for Certiorari is directed at (1) the Decision,1 dated
27 February 1987, and (2) the Resolution2 dated 16 October 1987,
both issued by the National Labor Relations Commission
("NLRC") in Case No. 1637-84.
Private respondents Fortunato C. Esquerra, Roberto O.
Malaborbor, Estanislao M. Misa, Vicente N. Evangelista and
Marcelino P. Garcia, had all been rank-and-file employees of
petitioner Boy Scouts of the Philippines ("BSP"). At the time of
termination of their services in February 1985, private respondents
were stationed at the BSP Camp in Makiling, Los Baños, Laguna.
The events which led to such termination of services are as follows:
On 19 October 1984, the Secretary-General of petitioner BSP
issued Special Orders Nos. 80, 81, 83, 84 and 85 addressed
separately to the five (5) private respondents, informing them that
on 20 November 1984, they were to be transferred from the BSP
Camp in Makiling to the BSP Land Grant in Asuncion, Davao del
Norte. These Orders were opposed by private respondents who, on
4 November 1984, appealed the matter to the BSP National
President.
On 6 November 1984, petitioner BSP conducted a pre-transfer
briefing at its National Headquarters in Manila. Private
respondents were in attendance during the briefing and they were
there assured that their transfer to Davao del Norte would not
involve any diminution in salary, and that each of them would
receive a relocation allowance equivalent to one (1) month's basic
pay. This assurance, however, failed to persuade private
respondents to abandon their opposition to the transfer orders
issued by the BSP Secretary-General.
On 13 November 1984, a complaint3
(docketed as NLRC Case No. 16-84J) for illegal transfer was filed
with the then Ministry of Labor and Employment, Sub-Regional
Arbitration Branch IV, San Pablo City, Laguna. Private
respondents there sought to enjoin implementation of Special
Orders Nos. 80, 81, 83, 84 and 85, alleging, among other things,
that said orders were "indubitable and irrefutable action[s]
prejudicial not only to [them] but to [their] families and [would] The Court notes at the outset that in the Position Paper6 filed by
seriously affect [their] economic stability and solvency considering petitioner BSP with the Labor Arbiter, it was alleged in the second
the present cost of living." paragraph thereof, that petitioner is a "civic service, non-stock and
non-profit organization, relying mostly [on] government and
public support, existing under and by virtue of Commonwealth
On 21 November 1984 (or the day immediately following the date
Act No. 111, as amended, by Presidential Decree No. 460 . . . " A
of scheduled transfer), the BSP Camp Manager in Makiling issued
similar allegation was contained in the Brief for Appellee7 and in
a Memorandum requiring the five (5) private respondents to
the Petition8 and Memorandum9 filed by petitioner BSP with
explain why they should not be charged administratively for
public respondent NLRC and this Court, respectively. The same
insubordination. The Memorandum was a direct result of the
allegation, moreover, appeared in the Comment10 (also treated as
refusal by private respondents, two (2) days earlier, to accept from
the Memorandum) submitted to this Court by the Solicitor General
petitioner BSP their respective boat tickets to Davao del Norte and
on behalf of public respondent NLRC; for their part, private
their relocation allowances.
respondents stated in their Appeal Memorandum11 with the NLRC
that petitioner BSP is "by mandate of law a Public Corporation,"
Meanwhile, in a letter of the same date, the BSP National President a statement reiterated by them in their Memorandum12 before this
informed private respondents that their refusal to comply with the Court.
Special Orders was not sufficiently justified and constituted rank
disobedience. Memoranda subsequently issued by the BSP
In a Resolution dated 9 August 1989, this Court required the
Secretary-General stressed that such refusal as well as the
parties and the Office of the Government Corporate Counsel to file
explanations proffered therefor, were unacceptable and could
a comment on the question of whether or not petitioner BSP is in
altogether result in termination of employment with petitioner
fact a government-owned or controlled corporation.
BSP. These warnings notwithstanding, private respondents
continued pertinaciously to disobey the disputed transfer orders.
Petitioner, private respondents, the Office of the Solicitor General
and the Office of the Government Corporate Counsel filed their
Petitioner BSP consequently imposed a five-day suspension on the
respective comments.
five (5) private respondents, in the latter part of January 1985.
Subsequently, by Special Order dated 12 February 1985 issued by
the BSP Secretary-General, private respondents' services were The central issue is whether or not the BSP is embraced within the
ordered terminated effective 15 February 1985. Civil Service as that term is defined in Article IX (B) (2) (1) of the
1987 Constitution which reads as follows:
On 22 February 1985, private respondents amended their original
complaint to include charges of illegal dismissal and unfair labor The Civil Service embraces all branches, subdivisions,
practice against petitioner BSP.4 instrumentality mentalities and agencies of the
Government, including government-owned or
controlled corporations with original charters.
The Labor Arbiter thereafter proceeded to hear the complaint.
xxx xxx xxx
In a decision5 dated 31 July 1985, the Labor Arbiter ordered the
dismissal of private respondents' complaint for lack of merit.
The answer to the central issue will determine whether or not
private respondent NLRC had jurisdiction to render the Decision
On 27 February 1987, however, the ruling of the Labor Arbiter was
and Resolution which are here sought to be nullified.
reversed by public respondent, NLRC, which held that private
respondents had been illegally dismissed by petitioner BSP. The
dispositive portion of the NLRC decision read: The responses of the parties, on the one hand, and of the Office of
the Solicitor General and the Office of the Government Corporate
Counsel, upon the other hand, in compliance with the Resolution
WHEREFORE, premises considered the Decision
of this Court of 9 August 1989, present a noteworthy uniformity.
appealed from is hereby SET ASIDE and a new one
Petitioner BSP and private respondents submit substantially the
entered ordering the respondent-appellee [petitioner
same view "that the BSP is a purely private organization". In
BSP] to reinstate the complainants-appellants [private
contrast, the Solicitor General and the Government Corporate
respondents] to their former positions without loss of
Counsel take much the same position, that is, that the BSP is a
seniority rights and other benefits appurtenant thereto
"public corporation' or a "quasi-public corporation" and, as well, a
and with full backwages from the time they were illegally
"government controlled corporation." Petitioner BSP's compliance
dismissed from the service up to the date of their actual
with our Resolution invokes the following provisions of its
reinstatement.
Constitution and By-laws:
SO ORDERED.
 The Boy Scouts of the Philippines declares that it is an
independent, voluntary, non-political, non-sectarian
and non-governmental organization, with obligations
towards nation building and with international
orientation.
The BSP, petitioner stresses, does not receive any monetary or
financial subsidy from the Government whether on the national or
local level.13 Petitioner declares that it is a "purely private
organization" directed and controlled by its National Executive
Board the members of which are, it is said, all "voluntary scouters,"
including seven (7) Cabinet Secretaries.14
Private respondents submitted a supplementary memorandum
arguing that while petitioner BSP was created as a public
corporation, it had lost that status when Section 2 of
Commonwealth Act No. 111 as amended by P.D. No. 460 conferred
upon it the powers which ordinary private corporations organized
under the Corporation Code have:
Sec. 2. The said corporation shall have perpetual
succession with power to sue and be sued; to hold such
real and personal estate as shall be necessary for
corporate purposes, and to receive real and personal
property by gift, devise, or bequest; to adopt a seal, and
to alter or destroy the same at pleasure; to have offices
and conduct its business and affairs in the City of Manila
and in the several provinces; to make and adopt by-laws,
rules and regulations not inconsistent with the laws of
the Philippines, and generally to do all such acts and
things (including the establishment of regulations for
the election of associates and successors: as may be
necessary to carry into effect the provisions of the Act
and promote the purposes of said corporation.
Private respondents also point out that the BSP is registered as a
private employer with the Social Security System and that all its
staff members and employees are covered by the Social Security
Act, indicating that the BSP had lost its personality or standing as
a public corporation. It is further alleged that the BSP's assets and
liabilities, official transactions and financial statements have never
been subjected to audit by the government auditing office, i.e., the
Commission on Audit, being audited rather by the private auditing
firm of Sycip Gorres Velayo and Co. Private respondents finally
state that the appointments of BSP officers and staff were not
approved or confirmed by the Civil Service Commission.
The views of the Office of the Solicitor General and the Office of the
Government Corporate Counsel on the above issue appeared to be
generally similar. The Solicitor General's Office, although it had
appeared for the NLRC and filed a Comment on the latter's behalf
on the merits of the Petition for Certiorari, submitted that the BSP
is a government-owned or controlled corporation, having been
created by virtue of Commonwealth Act No. 111 entitled "An Act to
Create a Public Corporation to be known as the Boy Scouts of the
Philippines and to Define its Powers and Purposes." The Solicitor
General stressed that the BSP was created in order to "promote,
through organization, and cooperation with other agencies the
ability of boys to do things for themselves and others, to train them
in scoutcraft, and to teach them patriotism, courage, self-reliance,
and kindred virtues, using the methods which are now in common
use by boy scouts."5 He further noted that the BSP's objectives and
purposes are "solely of a benevolent character and not for
pecuniary profit by its members.16 The Solicitor General also
underscored the extent of government participation in the BSP
under its charter as reflected in the composition of its governing
body:
The governing body of the said corporation shall consist
of a National Executive Board composed of (a)
the President of the Philippines or his representative; (b)
the charter and life members of the Boy Scouts of the
Philippines; (c) the Chairman of the Board of Trustees of
the Philippine Scouting Foundation; (d) the Regional
Chairman of the Scout Regions of the Philippines; (e) the
Secretary of Education and Culture, the Secretary of
Social Welfare, the Secretary of National Defense, the
Secretary of Labor, the Secretary of Finance, the
Secretary of Youth and Sports, and the Secretary of
local Government and Community Development; (f) an
equal number of individuals from the private sector; (g)
the National President of the Girl Scouts of the
Philippines; (h) one Scout of Senior age from each Scout
Region to represent the boy membership; and (i) three
representatives of the cultural minorities. Except for the
Regional Chairman who shall be elected by the Regional
Scout Councils during their annual meetings, and the
Scouts of their respective regions, all members of the
National Executive Board shall be either by
appointment or cooption, subject to ratification and
confirmation by the Chief Scout, who shall be the Head
of State. . . .17 (Emphasis supplied)
The Government Corporate Counsel, like the Solicitor General,
describes the BSP as a "public corporation" but, unlike the Solicitor
General, suggests that the BSP is more of a "quasi corporation"
than a "public corporation." The BSP, unlike most public
corporations which are created for a political purpose, is not vested
with political or governmental powers to be exercised for the public
good or public welfare in connection with the administration of
civil government. The Government Corporate Counsel submits,
more specifically, that the BSP falls within the ambit of the term
"government-owned or controlled corporation" as defined in
Section 2 of P.D. No. 2029 (approved on 4 February 1986) which
reads as follows:
A government-owned or controlled corporation is a
stock or a non-stock corporation, whether performing
governmental or proprietary functions, which is
directly chartered by special law or if organized under
the general corporation law is owned or controlled by the
government directly, or indirectly through a parent
corporation or subsidiary corporation, to the extent of at
least a majority of its outstanding capital stock or its
outstanding voting capital stock.
xxx xxx xxx
(Emphasis supplied)
Examining the relevant statutory provisions and the arguments
outlined above, the Court considers that the following need to be
considered in arriving at the appropriate legal characterization of
the BSP for purposes of determining whether its officials and staff
members are embraced in the Civil Service. Firstly, BSP's functions
as set out in its statutory charter do have a public aspect. BSP's
functions do relate to the fostering of the public virtues of
citizenship and patriotism and the general improvement of the
moral spirit and fiber of our youth. The social value of activities like
those to which the BSP dedicates itself by statutory mandate have
in fact, been accorded constitutional recognition. Article II of the
1987 Constitution includes in the "Declaration of Principles and
State Policies," the following:
Sec. 13. The State recognizes the vital role of the youth in
nation-building and shall promote and protect their
physical, moral, spiritual, intellectual, and social well-
being. It shall inculcate in the youth patriotism and
nationalism, and encourage their involvement in public
and civic affairs.
At the same time, BSP's sanctions do not relate to the governance
of any part of territory of the Philippines; BSP is not a public
corporation in the same sense that municipal corporations or local
governments are public corporations. BSP's functions can not also
be described as proprietary functions in the same sense that the
functions or activities of government-owned or controlled
corporations like the National Development Company or the
National Steel Corporation can be described as proprietary or
"business-like" in character. Nevertheless, the public character of
BSP's functions and activities must be conceded, for they pertain
to the educational, civic and social development of the youth which
constitutes a very substantial and important part of the nation.
The second aspect that the Court must take into account relates to
the governance of the BSP. The composition of the National
Executive Board of the BSP includes, as noted from Section 5 of its
charter quoted earlier, includes seven (7) Secretaries of Executive
Departments. The seven (7) Secretaries (now six [6] in view of the
abolition of the Department of Youth and Sports and merger
thereof into the Department of Education, Culture and Sports) by
themselves do not constitute a majority of the members of the
National Executive Board. We must note at the same time that the
appointments of members of the National Executive Board, except
only the appointments of the Regional Chairman and Scouts of
Senior age from the various Scout Regions, are subject to
ratification and confirmation by the Chief Scout, who is the
President of the Philippines. Vacancies to the Board are filled by a
majority vote of the remaining members thereof, but again subject
to ratification and confirmation by the Chief Scout.18 We must
assume that such confirmation or ratification involves the exercise
of choice or discretion on the part of ratifying or confirming power.
It does appears therefore that there is substantial governmental
(i.e., Presidential) participation or intervention in the choice of the
majority of the members of the National Executive Board of the
BSP.
The third aspect relates to the character of the assets and funds of
the BSP. The original assets of the BSP were acquired by purchase
or gift or other equitable arrangement with the Boy Scouts of
America, of which the BSP was part before the establishment of the
Commonwealth of the Philippines. The BSP charter, however, does
not indicate that such assets were public or statal in character or
had originated from the Government or the State. According to
petitioner BSP, its operating funds used for carrying out its
purposes and programs, are derived principally from membership
dues paid by the Boy Scouts themselves and from property rentals.
In this respect, the BSP appears similar to private non-stock, non-
profit corporations, although its charter expressly envisages
donations and contributions to it from the Government and any of
its agencies and instrumentalities.19 We note only that BSP funds
have not apparently heretofore been regarded as public funds by
the Commission on Audit, considering that such funds have not
been audited by the Commission.
While the BSP may be seen to be a mixed type of entity, combining
aspects of both public and private entities, we believe that
considering the character of its purposes and its functions, the
statutory designation of the BSP as "a public corporation" and the
substantial participation of the Government in the selection of
members of the National Executive Board of the BSP, the BSP, as
presently constituted under its charter, is a government-controlled
corporation within the meaning of Article IX. (B) (2) (1) of the
Constitution.
We are fortified in this conclusion when we note that the
Administrative Code of 1987 designates the BSP as one of the
attached agencies of the Department of Education, Culture and
Sports ("DECS").20 An "agency of the Government" is defined as
referring to any of the various units of the Government including a
department, bureau, office, instrumentality, government-owned
or-controlled corporation, or local government or distinct unit
therein.21"Government instrumentality" is in turn defined in the
1987 Administrative Code in the following manner:
Instrumentality –– refers to any agency of the National
Government, not integrated within the department
framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational
autonomy usually through a charter. This term
includesregulatory agencies, chartered institutions and
government-owned or controlled
corporations.22 (Emphasis supplied)
The same Code describes a "chartered institution" in the following
terms:
Chartered institution –– refers to any agency organized
or operating under a special charter, and vested by law
with functions relating to specific constitutional policies
or objectives. This term includes the state universities
and colleges, and the monetary authority of the
State.23 (Emphasis supplied)
We believe that the BSP is appropriately regarded as "a
government instrumentality" under the 1987 Administrative Code.
It thus appears that the BSP may be regarded as both a
"government controlled corporation with an original charter" and
as an "instrumentality" of the Government within the meaning of
Article IX (B) (2) (1) of the Constitution. It follows that the
employees of petitioner BSP are embraced within the Civil Service
and are accordingly governed by the Civil Service Law and
Regulations.
It remains only to note that even before the effectivity of the 1987
Constitution employees of the BSP already fell within the scope of
the Civil Service. In National Housing Corporation v.
Juco,24 decided in 1985, the Court, speaking through Mr. Justice
Gutierrez, held:
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 rules and regulations.
Section 1, Article XII-B of the [19731 Constitution
specifically provides:
The Civil Service embraces every branch, agency,
subdivision and instrumentality of the Government,
including every government-owned or controlled
corporation. . . .
The 1935 Constitution had a similar provision in its
Section 1, Article XII which stated:
A Civil Service embracing all branches and subdivisions
of the Government shall be provided by law.1âwphi1
The inclusion of "government-owned or controlled
corporations" within the embrace of the civil service
shows a deliberate effort of the framers to plug an earlier
loophole which allowed government-owned or
controlled corporations to avoid the full consequences of
the all encompassing coverage of the civil service system.
The same explicit intent is shown by the addition of
"agency" and "instrumentality" to branches and
subdivisions of the Government. All offices and firms of
the government are covered. The amendments
introduced in 1973 are not idle exercises or meaningless
gestures. They carry the strong message that civil service
coverage is broad and all-embracing insofar as
employment in the government in any of its
governmental or corporate arms is concerned.25
The complaint in NLRC Case No. 1637-84 having been filed on 13
November 1984, when the 1973 Constitution was still in force, our
ruling in Juco applies in the case at bar.26
In view of the foregoing, we hold that both the Labor Arbiter and
public respondent NLRC had no jurisdiction over the complaint
filed by private respondents in NLRC Case No. 1637-84; neither
labor agency had before it any matter which could validly have
been passed upon by it in the exercise of original or appellate
jurisdiction. The appealed Decision and Resolution in this case,
having been rendered without jurisdiction, vested no rights and
imposed no liabilities upon any of the parties here involved. That
neither party had expressly raised the issue of jurisdiction in the
pleadings poses no obstacle to this ruling of the Court, which
may motu proprio take cognizance of the issue of existence or
absence of jurisdiction and pass upon the same.27
ACCORDINGLY, the Decision of the Labor Arbiter dated 31 July
1985, and the Decision dated 27 February 1987 and Resolution
dated 16 October 1987, issued by public respondent NLRC, in
NLRC Case No. 1637-84, are hereby SET ASIDE. All other orders
and resolutions rendered in this case by the Labor Arbiter and the
NLRC are likewise SET ASIDE. No pronouncement as to costs.
G.R. No. 177131 June 7, 2011
BOY SCOUTS OF THE PHILIPPINES, Petitioner,
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
The jurisdiction of the Commission on Audit (COA) over the Boy
Scouts of the Philippines (BSP) is the subject matter of this
controversy that reached us via petition for prohibition1 filed by the
BSP under Rule 65 of the 1997 Rules of Court. In this petition, the
BSP seeks that the COA be prohibited from implementing its June
18, 2002 Decision,2 its February 21, 2007 Resolution,3 as well as all
other issuances arising therefrom, and that all of the foregoing be
rendered null and void. 4
Antecedent Facts and Background of the Case
This case arose when the COA issued Resolution No. 99-0115 on
August 19, 1999 ("the COA Resolution"), with the subject "Defining
the Commission’s policy with respect to the audit of the Boy Scouts
of the Philippines." In its whereas clauses, the COA Resolution
stated that the BSP was created as a public corporation under
Commonwealth Act No. 111, as amended by Presidential Decree
No. 460 and Republic Act No. 7278; that in Boy Scouts of the
Philippines v. National Labor Relations Commission,6 the
Supreme Court ruled that the BSP, as constituted under its charter,
was a "government-controlled corporation within the meaning of
Article IX(B)(2)(1) of the Constitution"; and that "the BSP is
appropriately regarded as a government instrumentality under the
1987 Administrative Code."7 The COA Resolution also cited its
constitutional mandate under Section 2(1), Article IX (D). Finally,
the COA Resolution reads:
NOW THEREFORE, in consideration of the foregoing premises,
the COMMISSION PROPER HAS RESOLVED, AS IT DOES
HEREBY RESOLVE, to conduct an annual financial audit of the
Boy Scouts of the Philippines in accordance with generally
accepted auditing standards, and express an opinion on whether
the financial statements which include the Balance Sheet, the
Income Statement and the Statement of Cash Flows present fairly
its financial position and results of operations.
xxxx
BE IT RESOLVED FURTHERMORE, that for purposes of audit
supervision, the Boy Scouts of the Philippines shall be classified
among the government corporations belonging to the Educational,
Social, Scientific, Civic and Research Sector under the Corporate
Audit Office I, to be audited, similar to the subsidiary corporations,
by employing the team audit approach.8 (Emphases supplied.)
The BSP sought reconsideration of the COA Resolution in a
letter9 dated November 26, 1999 signed by the BSP National
President Jejomar C. Binay, who is now the Vice President of the
Republic, wherein he wrote:
It is the position of the BSP, with all due respect, that it is not
subject to the Commission’s jurisdiction on the following grounds:
1. We reckon that the ruling in the case of Boy Scouts of
the Philippines vs. National Labor Relations
Commission, et al. (G.R. No. 80767) classifying the BSP
as a government-controlled corporation is anchored on
the "substantial Government participation" in the
National Executive Board of the BSP. It is to be noted
that the case was decided when the BSP Charter is
defined by Commonwealth Act No. 111 as amended by
Presidential Decree 460.
However, may we humbly refer you to Republic Act No. 7278 which
amended the BSP’s charter after the cited case was decided. The
most salient of all amendments in RA No. 7278 is the alteration of
the composition of the National Executive Board of the BSP.
The said RA virtually eliminated the "substantial government
participation" in the National Executive Board by removing: (i) the
President of the Philippines and executive secretaries, with the
exception of the Secretary of Education, as members thereof; and
(ii) the appointment and confirmation power of the President of
the Philippines, as Chief Scout, over the members of the said
Board.
The BSP believes that the cited case has been superseded by RA
7278. Thereby weakening the case’s conclusion that the BSP is a
government-controlled corporation (sic). The 1987 Administrative
Code itself, of which the BSP vs. NLRC relied on for some terms,
defines government-owned and controlled corporations as
agencies organized as stock or non-stock corporations which the
BSP, under its present charter, is not.
Also, the Government, like in other GOCCs, does not have funds
invested in the BSP. What RA 7278 only provides is that the
Government or any of its subdivisions, branches, offices, agencies
and instrumentalities can from time to time donate and contribute
funds to the BSP.
xxxx
Also the BSP respectfully believes that the BSP is not
"appropriately regarded as a government instrumentality under
the 1987 Administrative Code" as stated in the COA resolution. As
defined by Section 2(10) of the said code, instrumentality refers to
"any agency of the National Government, not integrated within the
department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy,
usually through a charter."
The BSP is not an entity administering special funds. It is not even
included in the DECS National Budget. x x x
It may be argued also that the BSP is not an "agency" of the
Government. The 1987 Administrative Code, merely referred the
BSP as an "attached agency" of the DECS as distinguished from an
actual line agency of departments that are included in the National
Budget. The BSP believes that an "attached agency" is different
from an "agency." Agency, as defined in Section 2(4) of the
Administrative Code, is defined as any of the various units of the
Government including a department, bureau, office,
instrumentality, government-owned or controlled corporation or
local government or distinct unit therein.
Under the above definition, the BSP is neither a unit of the
Government; a department which refers to an executive
department as created by law (Section 2[7] of the Administrative
Code); nor a bureau which refers to any principal subdivision or
unit of any department (Section 2[8], Administrative Code).10
Subsequently, requests for reconsideration of the COA Resolution
were also made separately by Robert P. Valdellon, Regional Scout
Director, Western Visayas Region, Iloilo City and Eugenio F.
Capreso, Council Scout Executive of Calbayog City.11
In a letter12 dated July 3, 2000, Director Crescencio S. Sunico,
Corporate Audit Officer (CAO) I of the COA, furnished the BSP
with a copy of the Memorandum13 dated June 20, 2000 of Atty.
Santos M. Alquizalas, the COA General Counsel. In said
Memorandum, the COA General Counsel opined that Republic Act
No. 7278 did not supersede the Court’s ruling in Boy Scouts of the
Philippines v. National Labor Relations Commission, even though
said law eliminated the substantial government participation in the
selection of members of the National Executive Board of the BSP.
The Memorandum further provides:
Analysis of the said case disclosed that the substantial government
participation is only one (1) of the three (3) grounds relied upon by
the Court in the resolution of the case. Other considerations
include the character of the BSP’s purposes and functions which
has a public aspect and the statutory designation of the BSP as a
"public corporation". These grounds have not been deleted by R.A.
No. 7278. On the contrary, these were strengthened as evidenced
by the amendment made relative to BSP’s purposes stated in
Section 3 of R.A. No. 7278.
On the argument that BSP is not appropriately regarded as "a
government instrumentality" and "agency" of the government,
such has already been answered and clarified. The Supreme Court
has elucidated this matter in the BSP case when it declared that
BSP is regarded as, both a "government-controlled corporation
with an original charter" and as an "instrumentality" of the
Government. Likewise, it is not disputed that the Administrative
Code of 1987 designated the BSP as one of the attached agencies of
DECS. Being an attached agency, however, it does not change its
nature as a government-controlled corporation with original
charter and, necessarily, subject to COA audit jurisdiction. Besides,
Section 2(1), Article IX-D of the Constitution provides that COA
shall have the power, authority, and duty to examine, audit and
settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust
by, or pertaining to, the Government, or any of its subdivisions,
agencies or instrumentalities, including government-owned or
controlled corporations with original charters.14
Based on the Memorandum of the COA General Counsel, Director
Sunico wrote:
In view of the points clarified by said Memorandum upholding
COA Resolution No. 99-011, we have to comply with the provisions
of the latter, among which is to conduct an annual financial audit
of the Boy Scouts of the Philippines.15
In a letter dated November 20, 2000 signed by Director Amorsonia
B. Escarda, CAO I, the COA informed the BSP that a preliminary
survey of its organizational structure, operations and accounting
system/records shall be conducted on November 21 to 22, 2000.16
Upon the BSP’s request, the audit was deferred for thirty (30) days.
The BSP then filed a Petition for Review with Prayer for
Preliminary Injunction and/or Temporary Restraining Order
before the COA. This was denied by the COA in its questioned
Decision, which held that the BSP is under its audit jurisdiction.
The BSP moved for reconsideration but this was likewise denied
under its questioned Resolution.17
This led to the filing by the BSP of this petition for prohibition with
preliminary injunction and temporary restraining order against
the COA.
The Issue
As stated earlier, the sole issue to be resolved in this case is whether
the BSP falls under the COA’s audit jurisdiction.
The Parties’ Respective Arguments
The BSP contends that Boy Scouts of the Philippines v. National
Labor Relations Commission is inapplicable for purposes of
determining the audit jurisdiction of the COA as the issue therein
was the jurisdiction of the National Labor Relations Commission
over a case for illegal dismissal and unfair labor practice filed by
certain BSP employees.18
While the BSP concedes that its functions do relate to those that
the government might otherwise completely assume on its own, it
avers that this alone was not determinative of the COA’s audit
jurisdiction over it. The BSP further avers that the Court in Boy
Scouts of the Philippines v. National Labor Relations Commission
"simply stated x x x that in respect of functions, the BSP is akin to
a public corporation" but this was not synonymous to holding that
the BSP is a government corporation or entity subject to audit by
the COA. 19
The BSP contends that Republic Act No. 7278 introduced crucial
amendments to its charter; hence, the findings of the Court in Boy
Scouts of the Philippines v. National Labor Relations Commission
are no longer valid as the government has ceased to play a
controlling influence in it. The BSP claims that the
pronouncements of the Court therein must be taken only within
the context of that case; that the Court had categorically found that
its assets were acquired from the Boy Scouts of America and not
from the Philippine government, and that its operations are
financed chiefly from membership dues of the Boy Scouts
themselves as well as from property rentals; and that "the BSP may
correctly be characterized as non-governmental, and hence,
beyond the audit jurisdiction of the COA." It further claims that the
designation by the Court of the BSP as a government agency or
instrumentality is mere obiter dictum.20
The BSP maintains that the provisions of Republic Act No. 7278
suggest that "governance of BSP has come to be overwhelmingly a
private affair or nature, with government participation restricted
to the seat of the Secretary of Education, Culture and Sports."21 It
cites Philippine Airlines Inc. v. Commission on Audit22 wherein the
Court declared that, "PAL, having ceased to be a government-
owned or controlled corporation is no longer under the audit
jurisdiction of the COA."23 Claiming that the amendments 3. Republic Act No. 7278 did not change the character of
introduced by Republic Act No. 7278 constituted a supervening the BSP as a government-owned or controlled
event that changed the BSP’s corporate identity in the same way corporation and government instrumentality.27
that the government’s privatization program changed PAL’s, the
BSP makes the case that the government no longer has control over
The COA maintains that the functions of the BSP that include,
it; thus, the COA cannot use the Boy Scouts of the Philippines v.
among others, the teaching to the youth of patriotism, courage,
National Labor Relations Commission as its basis for the exercise
self-reliance, and kindred virtues, are undeniably sovereign
of its jurisdiction and the issuance of COA Resolution No. 99-
functions enshrined under the Constitution and discussed by the
011.24 The BSP further claims as follows:
Court in Boy Scouts of the Philippines v. National Labor Relations
Commission. The COA contends that any attempt to classify the
It is not far-fetched, in fact, to concede that BSP’s funds and assets BSP as a private corporation would be incomprehensible since no
are private in character. Unlike ordinary public corporations, such less than the law which created it had designated it as a public
as provinces, cities, and municipalities, or government-owned and corporation and its statutory mandate embraces performance of
controlled corporations, such as Land Bank of the Philippines and sovereign functions.28
the Development Bank of the Philippines, the assets and funds of
BSP are not derived from any government grant. For its operations,
The COA claims that the only reason why the BSP employees fell
BSP is not dependent in any way on any government
within the scope of the Civil Service Commission even before the
appropriation; as a matter of fact, it has not even been included in
1987 Constitution was the fact that it was a government-owned or
any appropriations for the government. To be sure, COA has not
controlled corporation; that as an attached agency of the
alleged, in its Resolution No. 99-011 or in the Memorandum of its
Department of Education, Culture and Sports (DECS), the BSP is
General Counsel, that BSP received, receives or continues to
an agency of the government; and that the BSP is a chartered
receive assets and funds from any agency of the government. The
institution under Section 1(12) of the Revised Administrative Code
foregoing simply point to the private nature of the funds and assets
of 1987, embraced under the term government instrumentality.29
of petitioner BSP.
The COA concludes that being a government agency, the funds and
xxxx
property owned or held by the BSP are subject to the audit
authority of the COA pursuant to Section 2(1), Article IX (D) of the
As stated in petitioner’s third argument, BSP’s assets and funds 1987 Constitution.
were never acquired from the government. Its operations are not
in any way financed by the government, as BSP has never been
In support of its arguments, the COA cites The Veterans Federation
included in any appropriations act for the government. Neither has
of the Philippines (VFP) v. Reyes,30 wherein the Court held that
the government invested funds with BSP. BSP, has not been, at any
among the reasons why the VFP is a public corporation is that its
time, a user of government property or funds; nor have properties
charter, Republic Act No. 2640, designates it as one. Furthermore,
of the government been held in trust by BSP. This is precisely the
the COA quotes the Court as saying in that case:
reason why, until this time, the COA has not attempted to subject
BSP to its audit jurisdiction. x x x.25
In several cases, we have dealt with the issue of whether certain
specific activities can be classified as sovereign functions. These
To summarize its other arguments, the BSP contends that it is not
cases, which deal with activities not immediately apparent to be
a government-owned or controlled corporation; neither is it an
sovereign functions, upheld the public sovereign nature of
instrumentality, agency, or subdivision of the government.
operations needed either to promote social justice or to stimulate
patriotic sentiments and love of country.
In its Comment,26 the COA argues as follows:
xxxx
1. The BSP is a public corporation created under
Commonwealth Act No. 111 dated October 31, 1936, and
Petitioner claims that its funds are not public funds because no
whose functions relate to the fostering of public virtues
budgetary appropriations or government funds have been released
of citizenship and patriotism and the general
to the VFP directly or indirectly from the DBM, and because VFP
improvement of the moral spirit and fiber of the youth.
funds come from membership dues and lease rentals earned from
The manner of creation and the purpose for which the
administering government lands reserved for the VFP.
BSP was created indubitably prove that it is a
government agency.
The fact that no budgetary appropriations have been released to
the VFP does not prove that it is a private corporation. The DBM
2. Being a government agency, the funds and property
indeed did not see it fit to propose budgetary appropriations to the
owned or held in trust by the BSP are subject to the audit
VFP, having itself believed that the VFP is a private corporation. If
authority of respondent Commission on Audit pursuant
the DBM, however, is mistaken as to its conclusion regarding the
to Section 2 (1), Article IX-D of the 1987 Constitution.
nature of VFP's incorporation, its previous assertions will not
prevent future budgetary appropriations to the VFP. The
erroneous application of the law by public officers does not bar a
subsequent correct application of the law.31(Citations omitted.)
The COA points out that the government is not precluded by law
from extending financial support to the BSP and adding to its
funds, and that "as a government instrumentality which continues
to perform a vital function imbued with public interest and
reflective of the government’s policy to stimulate patriotic
sentiments and love of country, the BSP’s funds from whatever
source are public funds, and can be used solely for public purpose
in pursuance of the provisions of Republic Act No. [7278]."32
The COA claims that the fact that it has not yet audited the BSP’s
funds may not bar the subsequent exercise of its audit jurisdiction.
The BSP filed its Reply33 on August 29, 2007 maintaining that its
statutory designation as a "public corporation" and the public
character of its purpose and functions are not determinative of the
COA’s audit jurisdiction; reiterating its stand that Boy Scouts of the
Philippines v. National Labor Relations Commission is not
applicable anymore because the aspect of government ownership
and control has been removed by Republic Act No. 7278; and
concluding that the funds and property that it either owned or held
in trust are not public funds and are not subject to the COA’s audit
jurisdiction.
Thereafter, considering the BSP’s claim that it is a private
corporation, this Court, in a Resolution34 dated July 20, 2010,
required the parties to file, within a period of twenty (20) days from
receipt of said Resolution, their respective comments on the issue
of whether Commonwealth Act No. 111, as amended by Republic
Act No. 7278, is constitutional.
In compliance with the Court’s resolution, the parties filed their
respective Comments.
In its Comment35 dated October 22, 2010, the COA argues that the
constitutionality of Commonwealth Act No. 111, as amended, is not
determinative of the resolution of the present controversy on the
COA’s audit jurisdiction over petitioner, and in fact, the
controversy may be resolved on other grounds; thus, the requisites
before a judicial inquiry may be made, as set forth in Commissioner
of Internal Revenue v. Court of Tax Appeals,36 have not been fully
met.37 Moreover, the COA maintains that behind every law lies the
presumption of constitutionality.38 The COA likewise argues that
contrary to the BSP’s position, repeal of a law by implication is not
favored.39 Lastly, the COA claims that there was no violation of
Section 16, Article XII of the 1987 Constitution with the creation or
declaration of the BSP as a government corporation. Citing
Philippine Society for the Prevention of Cruelty to Animals v.
Commission on Audit,40 the COA further alleges:
The true criterion, therefore, to determine whether a corporation
is public or private is found in the totality of the relation of the
corporation to the State. If the corporation is created by the State
as the latter’s own agency or instrumentality to help it in carrying
out its governmental functions, then that corporation is considered
public; otherwise, it is private. x x x.41
For its part, in its Comment42 filed on December 3, 2010, the BSP
submits that its charter, Commonwealth Act No. 111, as amended
by Republic Act No. 7278, is constitutional as it does not violate
Section 16, Article XII of the Constitution. The BSP alleges that
"while [it] is not a public corporation within the purview of COA’s
audit jurisdiction, neither is it a private corporation created by
special law falling within the ambit of the constitutional
prohibition x x x."43 The BSP further alleges:
Petitioner’s purpose is embodied in Section 3 of C.A. No. 111, as
amended by Section 1 of R.A. No. 7278, thus:
xxxx
A reading of the foregoing provision shows that petitioner was
created to advance the interest of the youth, specifically of young
boys, and to mold them into becoming good citizens. Ultimately,
the creation of petitioner redounds to the benefit, not only of those
boys, but of the public good or welfare. Hence, it can be said that
petitioner’s purpose and functions are more of a public rather than
a private character. Petitioner caters to all boys who wish to join
the organization without any distinction. It does not limit its
membership to a particular class of boys. Petitioner’s members are
trained in scoutcraft and taught patriotism, civic consciousness
and responsibility, courage, self-reliance, discipline and kindred
virtues, and moral values, preparing them to become model
citizens and outstanding leaders of the country.44
The BSP reiterates its stand that the public character of its purpose
and functions do not place it within the ambit of the audit
jurisdiction of the COA as it lacks the government ownership or
control that the Constitution requires before an entity may be
subject of said jurisdiction.45 It avers that it merely stated in its
Reply that the withdrawal of government control is akin to
privatization, but it does not necessarily mean that petitioner is a
private corporation.46The BSP claims that it has a unique
characteristic which "neither classifies it as a purely public nor a
purely private corporation";47 that it is not a quasi-public
corporation; and that it may belong to a different class altogether.48
The BSP claims that assuming arguendo that it is a private
corporation, its creation is not contrary to the purpose of Section
16, Article XII of the Constitution; and that the evil sought to be
avoided by said provision is inexistent in the enactment of the
BSP’s charter,49 as, (i) it was not created for any pecuniary purpose;
(ii) those who will primarily benefit from its creation are not its
officers but its entire membership consisting of boys being trained
in scoutcraft all over the country; (iii) it caters to all boys who wish
to join the organization without any distinction; and (iv) it does not
limit its membership to a particular class or group of boys. Thus,
the enactment of its charter confers no special privilege to
particular individuals, families, or groups; nor does it bring about
the danger of granting undue favors to certain groups to the
prejudice of others or of the interest of the country, which are the
evils sought to be prevented by the constitutional provision
involved.50
Finally, the BSP states that the presumption of constitutionality of
a legislative enactment prevails absent any clear showing of its
repugnancy to the Constitution.51
The Ruling of the Court
After looking at the legislative history of its amended charter and
carefully studying the applicable laws and the arguments of both
parties, we find that the BSP is a public corporation and its funds
are subject to the COA’s audit jurisdiction.
The BSP Charter (Commonwealth Act No. 111, approved on
October 31, 1936), entitled "An Act to Create a Public Corporation
to be Known as the Boy Scouts of the Philippines, and to Define its
Powers and Purposes" created the BSP as a "public corporation" to
serve the following public interest or purpose:
Sec. 3. The purpose of this corporation shall be to promote through
organization and cooperation with other agencies, the ability of
boys to do useful things for themselves and others, to train them in
scoutcraft, and to inculcate in them patriotism, civic consciousness
and responsibility, courage, self-reliance, discipline and kindred
virtues, and moral values, using the method which are in common
use by boy scouts.
Presidential Decree No. 460, approved on May 17, 1974, amended
Commonwealth Act No. 111 and provided substantial changes in
the BSP organizational structure. Pertinent provisions are quoted
below:
Section II. Section 5 of the said Act is also amended to read as
follows:
The governing body of the said corporation shall consist of a
National Executive Board composed of (a) the President of the
Philippines or his representative; (b) the charter and life members
of the Boy Scouts of the Philippines; (c) the Chairman of the Board
of Trustees of the Philippine Scouting Foundation; (d) the Regional
Chairman of the Scout Regions of the Philippines; (e) the Secretary
of Education and Culture, the Secretary of Social Welfare, the
Secretary of National Defense, the Secretary of Labor, the
Secretary of Finance, the Secretary of Youth and Sports, and the
Secretary of Local Government and Community Development; (f)
an equal number of individuals from the private sector; (g) the
National President of the Girl Scouts of the Philippines; (h) one
Scout of Senior age from each Scout Region to represent the boy
membership; and (i) three representatives of the cultural
minorities. Except for the Regional Chairman who shall be elected
by the Regional Scout Councils during their annual meetings, and
the Scouts of their respective regions, all members of the National
Executive Board shall be either by appointment or cooption,
subject to ratification and confirmation by the Chief Scout, who
shall be the Head of State. Vacancies in the Executive Board shall
be filled by a majority vote of the remaining members, subject to
ratification and confirmation by the Chief Scout. The by-laws may
prescribe the number of members of the National Executive Board
necessary to constitute a quorum of the board, which number may
be less than a majority of the whole number of the board. The
National Executive Board shall have power to make and to amend
the by-laws, and, by a two-thirds vote of the whole board at a
meeting called for this purpose, may authorize and cause to be
executed mortgages and liens upon the property of the
corporation.
Subsequently, on March 24, 1992, Republic Act No. 7278 further
amended Commonwealth Act No. 111 "by strengthening the
volunteer and democratic character" of the BSP and reducing
government representation in its governing body, as follows:
Section 1. Sections 2 and 3 of Commonwealth Act. No. 111, as
amended, is hereby amended to read as follows:
"Sec. 2. The said corporation shall have the powers of perpetual
succession, to sue and be sued; to enter into contracts; to acquire,
own, lease, convey and dispose of such real and personal estate,
land grants, rights and choses in action as shall be necessary for
corporate purposes, and to accept and receive funds, real and
personal property by gift, devise, bequest or other means, to
conduct fund-raising activities; to adopt and use a seal, and the
same to alter and destroy; to have offices and conduct its business
and affairs in Metropolitan Manila and in the regions, provinces,
cities, municipalities, and barangays of the Philippines, to make
and adopt by-laws, rules and regulations not inconsistent with this
Act and the laws of the Philippines, and generally to do all such acts
and things, including the establishment of regulations for the
election of associates and successors, as may be necessary to carry
into effect the provisions of this Act and promote the purposes of
said corporation: Provided, That said corporation shall have no
power to issue certificates of stock or to declare or pay dividends,
its objectives and purposes being solely of benevolent character
and not for pecuniary profit of its members.
"Sec. 3. The purpose of this corporation shall be to promote
through organization and cooperation with other agencies, the
ability of boys to do useful things for themselves and others, to
train them in scoutcraft, and to inculcate in them patriotism, civic
consciousness and responsibility, courage, self-reliance, discipline
and kindred virtues, and moral values, using the method which are
in common use by boy scouts."
Sec. 2. Section 4 of Commonwealth Act No. 111, as amended, is
hereby repealed and in lieu thereof, Section 4 shall read as follows:
"Sec. 4. The President of the Philippines shall be the Chief Scout of
the Boy Scouts of the Philippines."
Sec. 3. Sections 5, 6, 7 and 8 of Commonwealth Act No. 111, as The BSP as a Public Corporation under Par. 2, Art. 2 of the Civil
amended, are hereby amended to read as follows: Code
"Sec. 5. The governing body of the said corporation shall consist of There are three classes of juridical persons under Article 44 of the
a National Executive Board, the members of which shall be Filipino Civil Code and the BSP, as presently constituted under Republic
citizens of good moral character. The Board shall be composed of Act No. 7278, falls under the second classification. Article 44 reads:
the following:
Art. 44. The following are juridical persons:
"(a) One (1) charter member of the Boy Scouts of the
Philippines who shall be elected by the members of the
(1) The State and its political subdivisions;
National Council at its meeting called for this purpose;
(2) Other corporations, institutions and entities
"(b) The regional chairmen of the scout regions who
for public interest or purpose created by law;
shall be elected by the representatives of all the local
their personality begins as soon as they have
scout councils of the region during its meeting called for
been constituted according to law;
this purpose: Provided, That a candidate for regional
chairman need not be the chairman of a local scout
council; (3) Corporations, partnerships and associations
for private interest or purpose to which the law
grants a juridical personality, separate and distinct from
"(c) The Secretary of Education, Culture and Sports;
that of each shareholder, partner or member. (Emphases
supplied.)
"(d) The National President of the Girl Scouts of the
Philippines;
The BSP, which is a corporation created for a public interest or
purpose, is subject to the law creating it under Article 45 of the Civil
"(e) One (1) senior scout, each from Luzon, Visayas and Code, which provides:
Mindanao areas, to be elected by the senior scout
delegates of the local scout councils to the scout youth
Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the
forums in their respective areas, in its meeting called for
preceding article are governed by the laws creating or
this purpose, to represent the boy scout membership;
recognizing them.
"(f) Twelve (12) regular members to be elected by the
Private corporations are regulated by laws of general application
members of the National Council in its meeting called
on the subject.
for this purpose;
Partnerships and associations for private interest or purpose are
"(g) At least ten (10) but not more than fifteen (15)
governed by the provisions of this Code concerning partnerships.
additional members from the private sector who shall be
(Emphasis and underscoring supplied.)
elected by the members of the National Executive Board
referred to in the immediately preceding paragraphs (a),
(b), (c), (d), (e) and (f) at the organizational meeting of The purpose of the BSP as stated in its amended charter shows that
the newly reconstituted National Executive Board which it was created in order to implement a State policy declared in
shall be held immediately after the meeting of the Article II, Section 13 of the Constitution, which reads:
National Council wherein the twelve (12) regular
members and the one (1) charter member were elected.
ARTICLE II - DECLARATION OF PRINCIPLES AND STATE
POLICIES
xxxx
Section 13. The State recognizes the vital role of the youth in
"Sec. 8. Any donation or contribution which from time to time may nation-building and shall promote and protect their physical,
be made to the Boy Scouts of the Philippines by the Government or moral, spiritual, intellectual, and social well-being. It shall
any of its subdivisions, branches, offices, agencies or inculcate in the youth patriotism and nationalism, and encourage
instrumentalities or by a foreign government or by private, entities their involvement in public and civic affairs.
and individuals shall be expended by the National Executive Board
in pursuance of this Act.
Evidently, the BSP, which was created by a special law to serve a
public purpose in pursuit of a constitutional mandate, comes
within the class of "public corporations" defined by paragraph 2,
Article 44 of the Civil Code and governed by the law which creates
it, pursuant to Article 45 of the same Code.
The BSP’s Classification Under the Administrative Code of 1987
The public, rather than private, character of the BSP is recognized
by the fact that, along with the Girl Scouts of the Philippines, it is
classified as an attached agency of the DECS under Executive
Order No. 292, or the Administrative Code of 1987, which states:
TITLE VI – EDUCATION, CULTURE AND SPORTS
Chapter 8 – Attached Agencies
SEC. 20. Attached Agencies. – The following agencies are hereby
attached to the Department:
xxxx
(12) Boy Scouts of the Philippines;
(13) Girl Scouts of the Philippines.
The administrative relationship of an attached agency to the
department is defined in the Administrative Code of 1987 as
follows:
BOOK IV
THE EXECUTIVE BRANCH
Chapter 7 – ADMINISTRATIVE RELATIONSHIP
SEC. 38. Definition of Administrative Relationship. – Unless
otherwise expressly stated in the Code or in other laws defining the
special relationships of particular agencies, administrative
relationships shall be categorized and defined as follows:
xxxx
(3) Attachment. – (a) This refers to the lateral relationship between
the department or its equivalent and the attached agency or
corporation for purposes of policy and program coordination. The
coordination may be accomplished by having the department
represented in the governing board of the attached agency or
corporation, either as chairman or as a member, with or without
voting rights, if this is permitted by the charter; having the attached
corporation or agency comply with a system of periodic reporting
which shall reflect the progress of programs and projects; and
having the department or its equivalent provide general policies
through its representative in the board, which shall serve as the
framework for the internal policies of the attached corporation or
agency. (Emphasis ours.)
As an attached agency, the BSP enjoys operational autonomy, as purpose of this constitutional provision is to ban private
long as policy and program coordination is achieved by having at corporations created by special charters, which historically gave
least one representative of government in its governing board, certain individuals, families or groups special privileges denied to
which in the case of the BSP is the DECS Secretary. In this sense, other citizens.54 (Emphasis added.)
the BSP is not under government control or "supervision and
control." Still this characteristic does not make the attached
It may be gleaned from the above discussion that Article XII,
chartered agency a private corporation covered by the
Section 16 bans the creation of "private corporations" by special
constitutional proscription in question.
law. The said constitutional provision should not be construed so
as to prohibit the creation of public corporations or a corporate
Art. XII, Sec. 16 of the Constitution refers to "private agency or instrumentality of the government intended to serve a
corporations" created by government for proprietary or public interest or purpose, which should not be measured on the
economic/business purposes basis of economic viability, but according to the public interest or
purpose it serves as envisioned by paragraph (2), of Article 44 of
the Civil Code and the pertinent provisions of the Administrative
At the outset, it should be noted that the provision of Section 16 in
Code of 1987.
issue is found in Article XII of the Constitution, entitled "National
Economy and Patrimony." Section 1 of Article XII is quoted as
follows: The BSP is a Public Corporation Not Subject to the Test of
Government Ownership or Control and Economic Viability
SECTION 1. The goals of the national economy are a more
equitable distribution of opportunities, income, and wealth; a The BSP is a public corporation or a government agency or
sustained increase in the amount of goods and services produced instrumentality with juridical personality, which does not fall
by the nation for the benefit of the people; and an expanding within the constitutional prohibition in Article XII, Section 16,
productivity as the key to raising the quality of life for all, especially notwithstanding the amendments to its charter. Not all
the underprivileged. corporations, which are not government owned or controlled, are
ipso facto to be considered private corporations as there exists
another distinct class of corporations or chartered institutions
The State shall promote industrialization and full employment
which are otherwise known as "public corporations." These
based on sound agricultural development and agrarian reform,
corporations are treated by law as agencies or instrumentalities of
through industries that make full and efficient use of human and
the government which are not subject to the tests of ownership or
natural resources, and which are competitive in both domestic and
control and economic viability but to different criteria relating to
foreign markets. However, the State shall protect Filipino
their public purposes/interests or constitutional policies and
enterprises against unfair foreign competition and trade practices.
objectives and their administrative relationship to the government
or any of its Departments or Offices.
In the pursuit of these goals, all sectors of the economy and all
regions of the country shall be given optimum opportunity to
Classification of Corporations Under Section 16, Article XII of the
develop. Private enterprises, including corporations, cooperatives,
Constitution on National Economy and Patrimony
and similar collective organizations, shall be encouraged to
broaden the base of their ownership.
The dissenting opinion of Associate Justice Antonio T. Carpio,
citing a line of cases, insists that the Constitution recognizes only
The scope and coverage of Section 16, Article XII of the
two classes of corporations: private corporations under a general
Constitution can be seen from the aforementioned declaration of
law, and government-owned or controlled corporations created by
state policies and goals which pertains to national economy and
special charters.
patrimony and the interests of the people in economic
development.
We strongly disagree. Section 16, Article XII should not be
construed so as to prohibit Congress from creating public
Section 16, Article XII deals with "the formation, organization, or
corporations. In fact, Congress has enacted numerous laws
regulation of private corporations,"52 which should be done
creating public corporations or government agencies or
through a general law enacted by Congress, provides for an
instrumentalities vested with corporate powers. Moreover, Section
exception, that is: if the corporation is government owned or
16, Article XII, which relates to National Economy and Patrimony,
controlled; its creation is in the interest of the common good; and
could not have tied the hands of Congress in creating public
it meets the test of economic viability. The rationale behind Article
corporations to serve any of the constitutional policies or
XII, Section 16 of the 1987 Constitution was explained in Feliciano
objectives.
v. Commission on Audit,53 in the following manner:
In his dissent, Justice Carpio contends that this ponente
The Constitution emphatically prohibits the creation of private
introduces "a totally different species of corporation, which is
corporations except by a general law applicable to all citizens. The
neither a private corporation nor a government owned or
controlled corporation" and, in so doing, is missing the fact that
the BSP, "which was created as a non-stock, non-profit
corporation, can only be either a private corporation or a
government owned or controlled corporation."
Note that in Boy Scouts of the Philippines v. National Labor
Relations Commission, the BSP, under its former charter, was
regarded as both a government owned or controlled corporation
with original charter and a "public corporation." The said case
pertinently stated:
While the BSP may be seen to be a mixed type of entity, combining
aspects of both public and private entities, we believe that
considering the character of its purposes and its functions, the
statutory designation of the BSP as "a public corporation" and the
substantial participation of the Government in the selection of
members of the National Executive Board of the BSP, the BSP, as
presently constituted under its charter, is a government-controlled
corporation within the meaning of Article IX (B) (2) (1) of the
Constitution.
We are fortified in this conclusion when we note that the
Administrative Code of 1987 designates the BSP as one of the
attached agencies of the Department of Education, Culture and
Sports ("DECS"). An "agency of the Government" is defined as
referring to any of the various units of the Government including a
department, bureau, office, instrumentality, government-owned
or -controlled corporation, or local government or distinct unit
therein. "Government instrumentality" is in turn defined in the
1987 Administrative Code in the following manner:
Instrumentality - refers to any agency of the National Government,
not integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying
operational autonomy usually through a charter. This term
includes regulatory agencies, chartered institutions and
government-owned or controlled corporations.
The same Code describes a "chartered institution" in the following
terms:
Chartered institution - refers to any agency organized or operating
under a special charter, and vested by law with functions relating
to specific constitutional policies or objectives. This term includes
the state universities and colleges, and the monetary authority of
the State.
We believe that the BSP is appropriately regarded as "a
government instrumentality" under the 1987 Administrative Code.
It thus appears that the BSP may be regarded as both a
"government controlled corporation with an original
charter" and as an "instrumentality" of the Government within the
meaning of Article IX (B) (2) (1) of the Constitution. x x
x.55(Emphases supplied.)
The existence of public or government corporate or juridical
entities or chartered institutions by legislative fiat distinct from
private corporations and government owned or controlled
corporation is best exemplified by the 1987 Administrative Code
cited above, which we quote in part:
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:
xxxx
(10) "Instrumentality" refers to any agency of the National
Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. This
term includes regulatory agencies, chartered institutions and
government-owned or controlled corporations. 

xxxx
(12) "Chartered institution" refers to any agency organized or
operating under a special charter, and vested by law with functions
relating to specific constitutional policies or objectives. This term
includes the state universities and colleges and the monetary
authority of the State.
(13) "Government-owned or controlled corporation" refers to any
agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fifty-one
(51) per cent of its capital stock: Provided, That government-owned
or controlled corporations may be further categorized by the
Department of the Budget, the Civil Service Commission, and the
Commission on Audit for purposes of the exercise and discharge of
their respective powers, functions and responsibilities with respect
to such corporations.
Assuming for the sake of argument that the BSP ceases to be owned
or controlled by the government because of reduction of the
number of representatives of the government in the BSP Board, it
does not follow that it also ceases to be a government
instrumentality as it still retains all the characteristics of the latter
as an attached agency of the DECS under the Administrative Code.
Vesting corporate powers to an attached agency or instrumentality
of the government is not constitutionally prohibited and is allowed
by the above-mentioned provisions of the Civil Code and the 1987
Administrative Code.
Economic Viability and Ownership and Control Tests Inapplicable
to Public Corporations
As presently constituted, the BSP still remains an instrumentality
of the national government. It is a public corporation created by
law for a public purpose, attached to the DECS pursuant to its
Charter and the Administrative Code of 1987. It is not a private
corporation which is required to be owned or controlled by the
government and be economically viable to justify its existence
under a special law.
The dissent of Justice Carpio also submits that by recognizing "a
new class of public corporation(s)" created by special charter that
will not be subject to the test of economic viability, the
constitutional provision will be circumvented.
However, a review of the Record of the 1986 Constitutional
Convention reveals the intent of the framers of the highest law of
our land to distinguish between government corporations
performing governmental functions and corporations involved in
business or proprietary functions:
THE PRESIDENT. Commissioner Foz is recognized.
MR. FOZ. Madam President, I support the proposal to insert
"ECONOMIC VIABILITY" as one of the grounds for organizing
government corporations. x x x.
MR. OPLE. Madam President, the reason for this concern is really
that when the government creates a corporation, there is a sense in
which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government
corporation loses, then it makes its claim upon the taxpayers’
money through new equity infusions from the government and
what is always invoked is the common good. x x x
Therefore, when we insert the phrase "ECONOMIC VIABILITY"
together with the "common good," this becomes a restraint on
future enthusiasts for state capitalism to excuse themselves from
the responsibility of meeting the market test so that they become
viable. x x x.
xxxx
THE PRESIDENT. Commissioner Quesada is recognized.
MS. QUESADA. Madam President, may we be clarified by the
committee on what is meant by economic viability?
THE PRESIDENT. Please proceed.
MR. MONSOD. Economic viability normally is determined by cost-
benefit ratio that takes into consideration all benefits, including
economic external as well as internal benefits. These are what they
call externalities in economics, so that these are not strictly
financial criteria. Economic viability involves what we call
economic returns or benefits of the country that are not
quantifiable in financial terms. x x x.
xxxx
MS. QUESADA. So, would this particular formulation now really
limit the entry of government corporations into activities engaged
in by corporations?
MR. MONSOD. Yes, because it is also consistent with the economic
philosophy that this Commission approved – that there should be
minimum government participation and intervention in the
economy.
MS. QUESDA. Sometimes this Commission would just refer to
Congress to provide the particular requirements when the
government would get into corporations. But this time around, we
specifically mentioned economic viability. x x x.
MR. VILLEGAS. Commissioner Ople will restate the reason for his
introducing that amendment.
MR. OPLE. I am obliged to repeat what I said earlier in moving for
this particular amendment jointly with Commissioner Foz. During
the past three decades, there had been a proliferation of
government corporations, very few of which have succeeded, and
many of which are now earmarked by the Presidential
Reorganization Commission for liquidation because they failed the
economic test. x x x.
xxxx
MS. QUESADA. But would not the Commissioner say that the
reason why many of the government-owned or controlled
corporations failed to come up with the economic test is due to the
management of these corporations, and not the idea itself of
government corporations? It is a problem of efficiency and
effectiveness of management of these corporations which could be
remedied, not by eliminating government corporations or the idea
of getting into state-owned corporations, but improving
management which our technocrats should be able to do, given the
training and the experience.
MR. OPLE. That is part of the economic viability, Madam
President.
MS. QUESADA. So, is the Commissioner saying then that the
Filipinos will benefit more if these government-controlled
corporations were given to private hands, and that there will be
more goods and services that will be affordable and within the
reach of the ordinary citizens?
MR. OPLE. Yes. There is nothing here, Madam President, that will the Senate Bill that eventually became Republic Act No. 7278,
prevent the formation of a government corporation in accordance which amended the BSP Charter, one of the bill’s sponsors, Senator
with a special charter given by Congress. However, we are raising Joey Lina, described the BSP as follows:
the standard a little bit so that, in the future, corporations
established by the government will meet the test of the common
Senator Lina. Yes, I can only think of two organizations involving
good but within that framework we should also build a certain
the masses of our youth, Mr. President, that should be given this
standard of economic viability.
kind of a privilege – the Boy Scouts of the Philippines and the Girl
Scouts of the Philippines. Outside of these two groups, I do not
xxxx think there are other groups similarly situated.
THE PRESIDENT. Commissioner Padilla is recognized. The Boy Scouts of the Philippines has a long history of providing
value formation to our young, and considering how huge the
population of the young people is, at this point in time, and also
MR. PADILLA. This is an inquiry to the committee. With regard to
considering the importance of having an organization such as this
corporations created by a special charter for government-owned or
that will inculcate moral uprightness among the young people, and
controlled corporations, will these be in the pioneer fields or in
further considering that the development of these young people at
places where the private enterprise does not or cannot enter? Or is
that tender age of seven to sixteen is vital in the development of the
this so general that these government corporations can compete
country producing good citizens, I believe that we can make an
with private corporations organized under a general law?
exception of the Boy Scouting movement of the Philippines from
this general prohibition against providing tax exemption and
MR. MONSOD. Madam President, x x x. There are two types of privileges.57
government corporations – those that are involved in performing
governmental functions, like garbage disposal, Manila waterworks,
Furthermore, this Court cannot agree with the dissenting opinion
and so on; and those government corporations that are involved in
which equates the changes introduced by Republic Act No. 7278 to
business functions. As we said earlier, there are two criteria that
the BSP Charter as clear manifestation of the intent of Congress "to
should be followed for corporations that want to go into business.
return the BSP to the private sector." It was not the intent of
First is for government corporations to first prove that they can be
Congress in enacting Republic Act No. 7278 to give up all interests
efficient in the areas of their proper functions. This is one of the
in this basic youth organization, which has been its partner in
problems now because they go into all kinds of activities but are
forming responsible citizens for decades.
not even efficient in their proper functions. Secondly, they should
not go into activities that the private sector can do better.
In fact, as may be seen in the deliberation of the House Bills that
eventually resulted to Republic Act No. 7278, Congress worked
MR. PADILLA. There is no question about corporations
closely with the BSP to rejuvenate the organization, to bring it back
performing governmental functions or functions that are
to its former glory reached under its original charter,
impressed with public interest. But the question is with regard to
Commonwealth Act No. 111, and to correct the perceived ills
matters that are covered, perhaps not exhaustively, by private
introduced by the amendments to its Charter under Presidential
enterprise. It seems that under this provision the only qualification
Decree No. 460. The BSP suffered from low morale and decrease
is economic viability and common good, but shall government,
in number because the Secretaries of the different departments in
through government-controlled corporations, compete with
government who were too busy to attend the meetings of the BSP’s
private enterprise?
National Executive Board ("the Board") sent representatives who,
as it turned out, changed from meeting to meeting. Thus, the
MR. MONSOD. No, Madam President. As we said, the government Scouting Councils established in the provinces and cities were not
should not engage in activities that private enterprise is engaged in in touch with what was happening on the national level, but they
and can do better. x x x.56 (Emphases supplied.) were left to implement what was decided by the Board.58
A portion of the legislators’ discussion is quoted below to clearly
Thus, the test of economic viability clearly does not apply to public
show their intent:
corporations dealing with governmental functions, to which
category the BSP belongs. The discussion above conveys the
constitutional intent not to apply this constitutional ban on the
HON. DEL MAR. x x x I need not mention to you the value and the
creation of public corporations where the economic viability test
tremendous good that the Boy Scout Movement has done not only
would be irrelevant. The said test would only apply if the
for the youth in particular but for the country in general. And that
corporation is engaged in some economic activity or business
is why, if we look around, our past and present national leaders,
function for the government.
prominent men in the various fields of endeavor, public servants
in government offices, and civic leaders in the communities all over
It is undisputed that the BSP performs functions that are the land, and not only in our country but all over the world many if
impressed with public interest. In fact, during the consideration of not most of them have at one time or another been beneficiaries of
the Scouting Movement. And so, it is along this line, Mr. Chairman,
that we would like to have the early approval of this measure if only
to pay back what we owe much to the Scouting Movement. Now,
going to the meat of the matter, Mr. Chairman, if I may just – the
Scouting Movement was enacted into law in October 31, 1936
under Commonwealth Act No. 111. x x x [W]e were acknowledged
as the third biggest scouting organization in the world x x x. And to
our mind, Mr. Chairman, this erratic growth and this decrease in
membership [number] is because of the bad policy measures that
were enunciated with the enactment or promulgation by the
President before of Presidential Decree No. 460 which we feel is
the culprit of the ills that is flagging the Boy Scout Movement
today. And so, this is specifically what we are attacking, Mr.
Chairman, the disenfranchisement of the National Council in the
election of the national board. x x x. And so, this is what we would
like to be appraised of by the officers of the Boy [Scouts] of the
Philippines whom we are also confident, have the best interest of
the Boy Scout Movement at heart and it is in this spirit, Mr.
Chairman, that we see no impediment towards working together,
the Boy Scout of the Philippines officers working together with the
House of Representatives in coming out with a measure that will
put back the vigor and enthusiasm of the Boy Scout Movement. x x
x.59 (Emphasis ours.)
The following is another excerpt from the discussion on the House
version of the bill, in the Committee on Government Enterprises:
HON. AQUINO: x x x Well, obviously, the two bills as well as the
previous laws that have created the Boy Scouts of the Philippines
did not provide for any direct government support by way of
appropriation from the national budget to support the activities of
this organization. The point here is, and at the same time they have
been subjected to a governmental intervention, which to their
mind has been inimical to the objectives and to the institution per
se, that is why they are seeking legislative fiat to restore back the
original mandate that they had under Commonwealth Act 111. Such
having been the experience in the hands of government, meaning,
there has been negative interference on their part and inasmuch as
their mandate is coming from a legislative fiat, then shouldn’t it be,
this rhetorical question, shouldn’t it be better for this organization
to seek a mandate from, let’s say, the government the Corporation
Code of the Philippines and register with the SEC as non-profit
non-stock corporation so that government intervention could be
very very minimal. Maybe that’s a rhetorical question, they may or
they may not answer, ano. I don’t know what would be the benefit
of a charter or a mandate being provided for by way of legislation
versus a registration with the SEC under the Corporation Code of
the Philippines inasmuch as they don’t get anything from the
government anyway insofar as direct funding. In fact, the only
thing that they got from government was intervention in their
affairs. Maybe we can solicit some commentary comments from
the resource persons. Incidentally, don’t take that as an objection,
I’m not objecting. I’m all for the objectives of these two bills. It just
occurred to me that since you have had very bad experience in the
hands of government and you will always be open to such possible
intervention even in the future as long as you have a legislative
mandate or your mandate or your charter coming from legislative
action.
xxxx
MR. ESCUDERO: Mr. Chairman, there may be a disadvantage if
the Boy Scouts of the Philippines will be required to register with
the SEC. If we are registered with the SEC, there could be a danger
of proliferation of scout organization. Anybody can organize and
then register with the SEC. If there will be a proliferation of this,
then the organization will lose control of the entire organization.
Another disadvantage, Mr. Chairman, anybody can file a complaint
in the SEC against the Boy Scouts of the Philippines and the SEC
may suspend the operation or freeze the assets of the organization
and hamper the operation of the organization. I don’t know, Mr.
Chairman, how you look at it but there could be a danger for
anybody filing a complaint against the organization in the SEC and
the SEC might suspend the registration permit of the organization
and we will not be able to operate.
HON. AQUINO: Well, that I think would be a problem that will not
be exclusive to corporations registered with the SEC because even
if you are government corporation, court action may be taken
against you in other judicial bodies because the SEC is simply
another quasi-judicial body. But, I think, the first point would be
very interesting, the first point that you raised. In effect, what you
are saying is that with the legislative mandate creating your
charter, in effect, you have been given some sort of a franchise with
this movement.
MR. ESCUDERO: Yes.
HON. AQUINO: Exclusive franchise of that movement?
MR. ESCUDERO: Yes.
HON. AQUINO: Well, that’s very well taken so I will proceed with
other issues, Mr. Chairman. x x x.60 (Emphases added.)
Therefore, even though the amended BSP charter did away with
most of the governmental presence in the BSP Board, this was done
to more strongly promote the BSP’s objectives, which were not
supported under Presidential Decree No. 460. The BSP objectives,
as pointed out earlier, are consistent with the public purpose of the
promotion of the well-being of the youth, the future leaders of the
country. The amendments were not done with the view of changing
the character of the BSP into a privatized corporation. The BSP
remains an agency attached to a department of the government,
the DECS, and it was not at all stripped of its public character.
The ownership and control test is likewise irrelevant for a public
corporation like the BSP. To reiterate, the relationship of the BSP,
an attached agency, to the government, through the DECS, is
defined in the Revised Administrative Code of 1987. The BSP meets
the minimum statutory requirement of an attached government
agency as the DECS Secretary sits at the BSP Board ex officio, thus
facilitating the policy and program coordination between the BSP
and the DECS.
Requisites for Declaration of Unconstitutionality Not Met in this
Case
The dissenting opinion of Justice Carpio improperly raised the
issue of unconstitutionality of certain provisions of the BSP
Charter. Even if the parties were asked to Comment on the validity
of the BSP charter by the Court, this alone does not comply with
the requisites for judicial review, which were clearly set forth in a
recent case:
When questions of constitutional significance are raised, the Court
can exercise its power of judicial review only if the following
requisites are present: (1) the existence of an actual and
appropriate case; (2) the existence of personal and substantial
interest on the part of the party raising the constitutional question;
(3) recourse to judicial review is made at the earliest opportunity;
and (4) the constitutional question is the lis mota of the
case.61(Emphasis added.)
Thus, when it comes to the exercise of the power of judicial review,
the constitutional issue should be the very lis mota, or threshold
issue, of the case, and that it should be raised by either of the
parties. These requirements would be ignored under the dissent’s
rather overreaching view of how this case should have been
decided. True, it was the Court that asked the parties to comment,
but the Court cannot be the one to raise a constitutional issue.
Thus, the Court chooses to once more exhibit restraint in the
exercise of its power to pass upon the validity of a law.
Re: the COA’s Jurisdiction
Regarding the COA’s jurisdiction over the BSP, Section 8 of its
amended charter allows the BSP to receive contributions or
donations from the government. Section 8 reads:
Section 8. Any donation or contribution which from time to time
may be made to the Boy Scouts of the Philippines by the
Government or any of its subdivisions, branches, offices, agencies
or instrumentalities shall be expended by the Executive Board in
pursuance of this Act.lawph!1
The sources of funds to maintain the BSP were identified before
the House Committee on Government Enterprises while the bill
was being deliberated, and the pertinent portion of the discussion
is quoted below:
MR. ESCUDERO. Yes, Mr. Chairman. The question is the sources
of funds of the organization. First, Mr. Chairman, the Boy Scouts
of the Philippines do not receive annual allotment from the
government. The organization has to raise its own funds through
fund drives and fund campaigns or fund raising activities. Aside
from this, we have some revenue producing projects in the
organization that gives us funds to support the operation. x x x
From time to time, Mr. Chairman, when we have special activities
we request for assistance or financial assistance from government
agencies, from private business and corporations, but this is only
during special activities that the Boy Scouts of the Philippines
would conduct during the year. Otherwise, we have to raise our
own funds to support the organization.62
The nature of the funds of the BSP and the COA’s audit jurisdiction
were likewise brought up in said congressional deliberations, to
wit:
HON. AQUINO: x x x Insofar as this organization being a
government created organization, in fact, a government
corporation classified as such, are your funds or your finances
subjected to the COA audit?
MR. ESCUDERO: Mr. Chairman, we are not. Our funds is not
subjected. We don’t fall under the jurisdiction of the COA.
HON. AQUINO: All right, but before were you?
MR. ESCUDERO: No, Mr. Chairman.
MR. JESUS: May I? As historical backgrounder, Commonwealth
Act 111 was written by then Secretary Jorge Vargas and before and
up to the middle of the Martial Law years, the BSP was receiving a
subsidy in the form of an annual… a one draw from the
Sweepstakes. And, this was the case also with the Girl Scouts at the
Anti-TB, but then this was… and the Boy Scouts then because of
this funding partly from government was being subjected to audit
in the contributions being made in the part of the Sweepstakes. But
this was removed later during the Martial Law years with the
creation of the Human Settlements Commission. So the situation
right now is that the Boy Scouts does not receive any funding from
government, but then in the case of the local councils and this
legislative charter, so to speak, enables the local councils even the
national headquarters in view of the provisions in the existing law
to receive donations from the government or any of its
instrumentalities, which would be difficult if the Boy Scouts is
registered as a private corporation with the Securities and
Exchange Commission. Government bodies would be estopped
from making donations to the Boy Scouts, which at present is not
the case because there is the Boy Scouts charter, this
Commonwealth Act 111 as amended by PD 463.
xxxx
HON. AMATONG: Mr. Chairman, in connection with that.
THE CHAIRMAN: Yeah, Gentleman from Zamboanga.
HON. AMATONG: There is no auditing being made because there’s
no money put in the organization, but how about donated funds to
this organization? What are the remedies of the donors of how will
they know how their money are being spent?
MR. ESCUDERO: May I answer, Mr. Chairman?
THE CHAIRMAN: Yes, gentleman.
MR. ESCUDERO: The Boy Scouts of the Philippines has an
external auditor and by the charter we are required to submit a
financial report at the end of each year to the National Executive
Board. So all the funds donated or otherwise is accounted for at the
end of the year by our external auditor. In this case the SGV.63
Historically, therefore, the BSP had been subjected to government
audit in so far as public funds had been infused thereto. However,
this practice should not preclude the exercise of the audit
jurisdiction of COA, clearly set forth under the Constitution, which
pertinently provides:
Section 2. (1) The Commission on Audit shall have the power,
authority, and duty to examine, audit, and settle all accounts
pertaining to the revenue and receipts of, and expenditures or uses
of funds and property, owned or held in trust by, or pertaining to,
the Government, or any of its subdivisions, agencies, or
instrumentalities, including government-owned and controlled
corporations with original charters, and on a post-audit basis: (a)
constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous
state colleges and universities; (c) other government-owned or
controlled corporations with original charters and their
subsidiaries; and (d) such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or through the
Government, which are required by law of the granting institution
to submit to such audit as a condition of subsidy or equity. x x x. 64
Since the BSP, under its amended charter, continues to be a public
corporation or a government instrumentality, we come to the
inevitable conclusion that it is subject to the exercise by the COA of
its audit jurisdiction in the manner consistent with the provisions
of the BSP Charter.
WHEREFORE, premises considered, the instant petition for
prohibition is DISMISSED.
SO ORDERED.
G.R. No. 193462 February 4, 2014
DENNIS A.B. FUNA, Petitioner,
vs.
MANILA ECONOMIC AND CULTURAL OFFICE and the
COMMISSION ON AUDIT, Respondents.
DECISION
PEREZ, J.:
This is a petition for mandamus1 to compel:
1.) the Commission on Audit (COA) to audit and examine
the funds of the Manila Economic and Cultural Office
(MECO), and
2.) the MECO to submit to such audit and examination.
The antecedents:
Prelude
The aftermath of the Chinese civil war2 left the country of China
with two (2) governments in a stalemate espousing competing
assertions of sovereignty.3 On one hand is the communist People’s
Republic of China (PROC) which controls the mainland territories,
and on the other hand is the nationalist Republic of China (ROC)
which controls the island of Taiwan. For a better part of the past
century, both the PROC and ROC adhered to a policy of "One
China" i.e., the view that there is only one legitimate government
in China, but differed in their respective interpretation as to which
that government is.4
With the existence of two governments having conflicting claims of
sovereignty over one country, came the question as to which of the
two is deserving of recognition as that country’s legitimate
government. Even after its relocation to Taiwan, the ROC used to
enjoy diplomatic recognition from a majority of the world’s states,
partly due to being a founding member of the United Nations
(UN).5 The number of states partial to the PROC’s version of the
One China policy, however, gradually increased in the 1960s and
70s, most notably after the UN General Assembly adopted the
monumental Resolution 2758 in 1971.6 Since then, almost all of the
states that had erstwhile recognized the ROC as the legitimate
government of China, terminated their official relations with the
said government, in favor of establishing diplomatic relations with
the PROC.7 The Philippines is one of such states.
The Philippines formally ended its official diplomatic relations
with the government in Taiwan on 9 June 1975, when the country
and the PROC expressed mutual recognition thru the Joint
Communiqué of the Government of the Republic of the Philippines
and the Government of the People’s Republic of China (Joint
Communiqué).8
Under the Joint Communiqué, the Philippines categorically stated
its adherence to the One China policy of the PROC. The pertinent
portion of the Joint Communiqué reads:9
The Philippine Government recognizes the Government of the
People’s Republic of China as the sole legal government of China,
fully understands and respects the position of the Chinese
Government that there is but one China and that Taiwan is an
integral part of Chinese territory, and decides to remove all its
official representations from Taiwan within one month from the
date of signature of this communiqué. (Emphasis supplied)
The Philippines’ commitment to the One China policy of the PROC,
however, did not preclude the country from keeping unofficial
relations with Taiwan on a "people-to-people" basis.10 Maintaining
ties with Taiwan that is permissible by the terms of the Joint
Communiqué, however, necessarily required the Philippines, and
Taiwan, to course any such relations thru offices outside of the
official or governmental organs.
Hence, despite ending their diplomatic ties, the people of Taiwan
and of the Philippines maintained an unofficial relationship
facilitated by the offices of the Taipei Economic and Cultural
Office, for the former, and the MECO, for the latter.11
The MECO12 was organized on 16 December 1997 as a non-stock,
non-profit corporation under Batas Pambansa Blg. 68 or the
Corporation Code.13 The purposes underlying the incorporation of
MECO, as stated in its articles of incorporation,14 are as follows:
1. To establish and develop the commercial and
industrial interests of Filipino nationals here and
abroad, and assist on all measures designed to promote
and maintain the trade relations of the country with the
citizens of other foreign countries;
2. To receive and accept grants and subsidies that are
reasonably necessary in carrying out the corporate
purposes provided they are not subject to conditions
defeatist for or incompatible with said purpose;
3. To acquire by purchase, lease or by any gratuitous title
real and personal properties as may be necessary for the
use and need of the corporation, and to dispose of the
same in like manner when they are no longer needed or
useful; and
4. To do and perform any and all acts which are deemed
reasonably necessary to carry out the purposes.
(Emphasis supplied)
From the moment it was incorporated, the MECO became the
corporate entity "entrusted" by the Philippine government with the
responsibility of fostering "friendly" and "unofficial" relations with
the people of Taiwan, particularly in the areas of trade, economic
cooperation, investment, cultural, scientific and educational
exchanges.15To enable it to carry out such responsibility, the MECO
was "authorized" by the government to perform certain "consular
and other functions" that relates to the promotion, protection and
facilitation of Philippine interests in Taiwan.16
At present, it is the MECO that oversees the rights and interests of
Overseas Filipino Workers (OFWs) in Taiwan; promotes the
Philippines as a tourist and investment destination for the
Taiwanese; and facilitates the travel of Filipinos and Taiwanese
from Taiwan to the Philippines, and vice versa.17
Facts Leading to the Mandamus Petition
On 23 August 2010, petitioner sent a letter18 to the COA requesting
for a "copy of the latest financial and audit report" of the MECO
invoking, for that purpose, his "constitutional right to information
on matters of public concern." The petitioner made the request on
the belief that the MECO, being under the "operational
supervision" of the Department of Trade and Industry (DTI), is a
government owned and controlled corporation (GOCC) and thus
subject to the audit jurisdiction of the COA.19
Petitioner’s letter was received by COA Assistant Commissioner
Jaime P. Naranjo, the following day.
On 25 August 2010, Assistant Commissioner Naranjo issued a
memorandum20 referring the petitioner’s request to COA Assistant
Commissioner Emma M. Espina for "further disposition." In this
memorandum, however, Assistant Commissioner Naranjo
revealed that the MECO was "not among the agencies audited by
any of the three Clusters of the Corporate Government Sector."21
On 7 September 2010, petitioner learned about the 25 August 2010
memorandum and its contents.
Mandamus Petition
Taking the 25 August 2010 memorandum as an admission that the
COA had never audited and examined the accounts of the MECO,
the petitioner filed the instant petition for mandamus on 8
September 2010. Petitioner filed the suit in his capacities as
"taxpayer, concerned citizen, a member of the Philippine Bar and
law book author."22 He impleaded both the COA and the MECO.
Petitioner posits that by failing to audit the accounts of the MECO,
the COA is neglecting its duty under Section 2(1), Article IX-D of
the Constitution to audit the accounts of an otherwise bona fide
GOCC or government instrumentality. It is the adamant claim of
the petitioner that the MECO is a GOCC without an original charter
or, at least, a government instrumentality, the funds of which
partake the nature of public funds.23
According to petitioner, the MECO possesses all the essential
characteristics of a GOCC and an instrumentality under the
Executive Order No. (EO) 292, s. 1987 or the Administrative Code:
it is a non-stock corporation vested with governmental functions
relating to public needs; it is controlled by the government thru a
board of directors appointed by the President of the Philippines;
and while not integrated within the executive departmental
framework, it is nonetheless under the operational and policy
supervision of the DTI.24 As petitioner substantiates:
1. The MECO is vested with government functions. It
performs functions that are equivalent to those of an
embassy or a consulate of the Philippine
government.25 A reading of the authorized functions of
the MECO as found in EO No. 15, s. 2001, reveals that
they are substantially the same functions performed by
the Department of Foreign Affairs (DFA), through its
diplomatic and consular missions, per the
Administrative Code.26
2. The MECO is controlled by the government. It is the
President of the Philippines that actually appoints the
directors of the MECO, albeit indirectly, by way of
"desire letters" addressed to the MECO’s board of
directors.27 An illustration of this exercise is the
assumption by Mr. Antonio Basilio as chairman of the
board of directors of the MECO in 2001, which was
accomplished when former President Gloria Macapagal-
Arroyo, through a memorandum28 dated 20 February
2001, expressed her "desire" to the board of directors of
the MECO for the election of Mr. Basilio as chairman.29
3. The MECO is under the operational and policy
supervision of the DTI. The MECO was placed under the
operational supervision of the DTI by EO No. 328, s. of
2004, and again under the policy supervision of the
same department by EO No. 426, s. 2005.30
To further bolster his position that the accounts of the MECO ought
to be audited by the COA, the petitioner calls attention to the
practice, allegedly prevailing in the United States of America,
wherein the American Institute in Taiwan (AIT)—the counterpart
entity of the MECO in the United States—is supposedly audited by
that country’s Comptroller General.31 Petitioner claims that this
practice had been confirmed in a decision of the United States
Court of Appeals for the District of Columbia Circuit, in the case of
Wood, Jr., ex rel. United States of America v. The American
Institute in Taiwan, et al.32
The Position of the MECO
The MECO prays for the dismissal of the mandamus petition on
procedural and substantial grounds.
On procedure, the MECO argues that the mandamus petition was
prematurely filed.33
The MECO posits that a cause of action for mandamus to compel
the performance of a ministerial duty required by law only ripens
once there has been a refusal by the tribunal, board or officer
concerned to perform such a duty.34The MECO claims that there
was, in this case, no such refusal either on its part or on the COA’s
because the petitioner never made any demand for it to submit to
an audit by the COA or for the COA to perform such an audit, prior
to filing the instant mandamus petition.35 The MECO further
points out that the only "demand" that the petitioner made was his
request to the COA for a copy of the MECO’s latest financial and
audit report— which request was not even finally disposed of by the
time the instant petition was filed.36
On the petition’s merits, the MECO denies the petitioner’s claim
that it is a GOCC or a government instrumentality.37While
performing public functions, the MECO maintains that it is not
owned or controlled by the government, and its funds are private
funds.38 The MECO explains:
1. It is not owned or controlled by the government.
Contrary to the allegations of the petitioner, the
President of the Philippines does not appoint its board
of directors.39 The "desire letter" that the President
transmits is merely recommendatory and not binding on
the corporation.40 As a corporation organized under the
Corporation Code, matters relating to the election of its
directors and officers, as well as its membership, are
governed by the appropriate provisions of the said code,
its articles of incorporation and its by-laws.41 Thus, it is
the directors who elect the corporation’s officers; the
members who elect the directors; and the directors who
admit the members by way of a unanimous resolution.
All of its officers, directors, and members are private
individuals and are not government officials.42
2. The government merely has policy supervision over it.
Policy supervision is a lesser form of supervision
wherein the government’s oversight is limited only to
ensuring that the corporation’s activities are in tune with
the country’s commitments under the One China policy
of the PROC.43 The day-to-day operations of the
corporation, however, remain to be controlled by its duly
elected board of directors.44
The MECO emphasizes that categorizing it as a GOCC or a
government instrumentality can potentially violate the country’s
commitment to the One China policy of the PROC.45 Thus, the
MECO cautions against applying to the present mandamus
petition the pronouncement in the Wood decision regarding the
alleged auditability of the AIT in the United States.46
The Position of the COA
The COA, on the other hand, advances that the mandamus petition
ought to be dismissed on procedural grounds and on the ground of
mootness.
The COA argues that the mandamus petition suffers from the
following procedural defects:
1. The petitioner lacks locus standi to bring the suit. The
COA claims that the petitioner has not shown, at least in
a concrete manner, that he had been aggrieved or
prejudiced by its failure to audit the accounts of the
MECO.47
2. The petition was filed in violation of the doctrine of
hierarchy of courts. The COA faults the filing of the
instant mandamus petition directly with this Court,
when such petition could have very well been presented,
at the first instance, before the Court of Appeals or any
Regional Trial Court.48 The COA claims that the
petitioner was not able to provide compelling reasons to
justify a direct resort to the Supreme Court.49
At any rate, the COA argues that the instant petition already
became moot when COA Chairperson Maria Gracia M. Pulido-Tan
(Pulido-Tan) issued Office Order No. 2011-69850 on 6 October
2011.51 The COA notes that under Office Order No. 2011-698,
Chairperson Pulido-Tan already directed a team of auditors to
proceed to Taiwan, specifically for the purpose of auditing the
accounts of, among other government agencies based therein, the
MECO.52
In conceding that it has audit jurisdiction over the accounts of the
MECO, however, the COA clarifies that it does not consider the
former as a GOCC or a government instrumentality. On the
contrary, the COA maintains that the MECO is a non-
governmental entity.53
The COA argues that, despite being a non-governmental entity, the
MECO may still be audited with respect to the "verification fees"
for overseas employment documents that it collects from
Taiwanese employers on behalf of the DOLE.54 The COA claims
that, under Joint Circular No. 3-99,55 the MECO is mandated to
remit to the Department of Labor and Employment (DOLE) a
portion of such "verification fees."56 The COA, therefore, classifies
the MECO as a non-governmental entity "required to pay xxx
government share" subject to a partial audit of its accounts under
Section 26 of the Presidential Decree No. 1445 or the State Audit
Code of the Philippines (Audit Code).57
OUR RULING
We grant the petition in part. We declare that the MECO is a non-
governmental entity. However, under existing laws, the accounts
of the MECO pertaining to the "verification fees" it collects on
behalf of the DOLE as well as the fees it was authorized to collect
under Section 2(6) of EO No. 15, s. 2001, are subject to the audit
jurisdiction of the COA. Such fees pertain to the government and
should be audited by the COA.
I
We begin with the preliminary issues.
Mootness of Petition
The first preliminary issue relates to the alleged mootness of the
instant mandamus petition, occasioned by the COA’s issuance of
Office Order No. 2011-698. The COA claims that by issuing Office
Order No. 2011-698, it had already conceded its jurisdiction over
the accounts of the MECO and so fulfilled the objective of the
instant petition.58 The COA thus urges that the instant petition be
dismissed for being moot and academic.59
We decline to dismiss the mandamus petition on the ground of
mootness.
A case is deemed moot and academic when, by reason of the
occurrence of a supervening event, it ceases to present any
justiciable controversy.60 Since they lack an actual controversy
otherwise cognizable by courts, moot cases are, as a rule,
dismissible.61
The rule that requires dismissal of moot cases, however, is not
absolute. It is subject to exceptions. In David v. Macapagal-
Arroyo,62 this Court comprehensively captured these exceptions
scattered throughout our jurisprudence:
The "moot and academic" principle is not a magical formula that
can automatically dissuade the courts in resolving a case. Courts
will decide cases, otherwise moot and academic, if: first, there is a
grave violation of the Constitution;63second, the exceptional
character of the situation and the paramount public interest is
involved;64 third, when constitutional issue raised requires
formulation of controlling principles to guide the bench, the bar,
and the public;65and fourth, the case is capable of repetition yet
evading review.66
In this case, We find that the issuance by the COA of Office Order
No. 2011-698 indeed qualifies as a supervening event that
effectively renders moot and academic the main prayer of the
instant mandamus petition. A writ of mandamus to compel the
COA to audit the accounts of the MECO would certainly be a mere
superfluity, when the former had already obliged itself to do the
same.
Be that as it may, this Court refrains from dismissing outright the
petition. We believe that the mandamus petition was able to craft
substantial issues presupposing the commission of a grave
violation of the Constitution and involving paramount public
interest, which need to be resolved nonetheless:
First. The petition makes a serious allegation that the COA had
been remiss in its constitutional or legal duty to audit and examine
the accounts of an otherwise auditable entity in the MECO.
Second. There is paramount public interest in the resolution of the
issue concerning the failure of the COA to audit the accounts of the
MECO. The propriety or impropriety of such a refusal is
determinative of whether the COA was able to faithfully fulfill its
constitutional role as the guardian of the public treasury, in which
any citizen has an interest.
Third. There is also paramount public interest in the resolution of
the issue regarding the legal status of the MECO; a novelty insofar
as our jurisprudence is concerned. We find that the status of the
MECO—whether it may be considered as a government agency or
not—has a direct bearing on the country’s commitment to the One
China policy of the PROC.67
An allegation as serious as a violation of a constitutional or legal
duty, coupled with the pressing public interest in the resolution of
all related issues, prompts this Court to pursue a definitive ruling
thereon, if not for the proper guidance of the government or agency
concerned, then for the formulation of controlling principles for
the education of the bench, bar and the public in general.68 For this
purpose, the Court invokes its symbolic function.69
If the foregoing reasons are not enough to convince, We still add
another:
Assuming that the allegations of neglect on the part of the COA
were true, Office Order No. 2011-698 does not offer the strongest
certainty that they would not be replicated in the future. In the first
place, Office Order No. 2011-698 did not state any legal
justification as to why, after decades of not auditing the accounts
of the MECO, the COA suddenly decided to do so. Neither does it
state any determination regarding the true status of the MECO.
The justifications provided by the COA, in fact, only appears in the
memorandum70 it submitted to this Court for purposes of this case.
Thus, the inclusion of the MECO in Office Order No. 2011-698
appears to be entirely dependent upon the judgment of the
incumbent chairperson of the COA; susceptible of being undone,
with or without reason, by her or even her successor. Hence, the
case now before this Court is dangerously capable of being
repeated yet evading review.
Verily, this Court should not dismiss the mandamus petition on the
ground of mootness.
Standing of Petitioner
The second preliminary issue is concerned with the standing of the
petitioner to file the instant mandamus petition. The COA claims
that petitioner has none, for the latter was not able to concretely
establish that he had been aggrieved or prejudiced by its failure to
audit the accounts of the MECO.71
Related to the issue of lack of standing is the MECO’s contention
that petitioner has no cause of action to file the instant mandamus
petition. The MECO faults petitioner for not making any demand
for it to submit to an audit by the COA or for the COA to perform
such an audit, prior to filing the instant petition.72
We sustain petitioner’s standing, as a concerned citizen, to file the In view of the transcendental importance of the issues raised in the
instant petition. mandamus petition, as earlier mentioned, this Court waives this
last procedural issue in favor of a resolution on the merits.76
The rules regarding legal standing in bringing public suits, or locus
standi, are already well-defined in our case law. Again, We cite II
David, which summarizes jurisprudence on this point:73
To the merits of this petition, then.
By way of summary, the following rules may be culled from the
cases decided by this Court.1a\^/phi1 Taxpayers, voters,
The single most crucial question asked by this case is whether the
concerned citizens, and legislators may be accorded standing to
COA is, under prevailing law, mandated to audit the accounts of
sue, provided that the following requirements are met:
the MECO. Conversely, are the accounts of the MECO subject to
the audit jurisdiction of the COA?
(1) the cases involve constitutional issues;
Law, of course, identifies which accounts of what entities are
(2) for taxpayers, there must be a claim of illegal subject to the audit jurisdiction of the COA.
disbursement of public funds or that the tax measure is
unconstitutional;
Under Section 2(1) of Article IX-D of the Constitution,77 the COA
was vested with the "power, authority and duty" to "examine, audit
(3) for voters, there must be a showing of obvious and settle" the "accounts" of the following entities:
interest in the validity of the election law in question;
1. The government, or any of its subdivisions, agencies
(4) for concerned citizens, there must be a showing that and instrumentalities;
the issues raised are of transcendental importance which
must be settled early; and
2. GOCCs with original charters;
(5) for legislators, there must be a claim that the official
3. GOCCs without original charters;
action complained of infringes upon their prerogatives
as legislators.
4. Constitutional bodies, commissions and offices that
have been granted fiscal autonomy under the
We rule that the instant petition raises issues of transcendental
Constitution; and
importance, involved as they are with the performance of a
constitutional duty, allegedly neglected, by the COA. Hence, We
hold that the petitioner, as a concerned citizen, has the requisite 5. Non-governmental entities receiving subsidy or
legal standing to file the instant mandamus petition. equity, directly or indirectly, from or through the
government, which are required by law or the granting
institution to submit to the COA for audit as a condition
To be sure, petitioner does not need to make any prior demand on
of subsidy or equity.78
the MECO or the COA in order to maintain the instant petition. The
duty of the COA sought to be compelled by mandamus, emanates
from the Constitution and law, which explicitly require, or The term "accounts" mentioned in the subject constitutional
"demand," that it perform the said duty. To the mind of this Court, provision pertains to the "revenue," "receipts," "expenditures" and
petitioner already established his cause of action against the COA "uses of funds and property" of the foregoing entities.79
when he alleged that the COA had neglected its duty in violation of
the Constitution and the law.
Complementing the constitutional power of the COA to audit
accounts of "non-governmental entities receiving subsidy or equity
Principle of Hierarchy of Courts xxx from or through the government" is Section 29(1)80 of the Audit
Code, which grants the COA visitorial authority over the following
non-governmental entities:
The last preliminary issue is concerned with the petition’s non-
observance of the principle of hierarchy of courts. The COA assails
the filing of the instant mandamus petition directly with this Court, 1. Non-governmental entities "subsidized by the
when such petition could have very well been presented, at the first government";
instance, before the Court of Appeals or any Regional Trial
Court.74 The COA claims that the petitioner was not able to provide
compelling reasons to justify a direct resort to the Supreme Court.75 2. Non-governmental entities "required to pay levy or
government share";
 3. Non-governmental entities that have "received
counterpart funds from the government"; and
4. Non-governmental entities "partly funded by
donations through the government."
Section 29(1) of the Audit Code, however, limits the audit of the
foregoing non-governmental entities only to "funds xxx coming
from or through the government."81 This section of the Audit Code
is, in turn, substantially reproduced in Section 14(1), Book V of the
Administrative Code.82
In addition to the foregoing, the Administrative Code also
empowers the COA to examine and audit "the books, records and
accounts" of public utilities "in connection with the fixing of rates
of every nature, or in relation to the proceedings of the proper
regulatory agencies, for purposes of determining franchise tax."83
Both petitioner and the COA claim that the accounts of the MECO
are within the audit jurisdiction of the COA, but vary on the extent
of the audit and on what type of auditable entity the MECO is. The
petitioner posits that all accounts of the MECO are auditable as the
latter is a bona fide GOCC or government instrumentality.84 On the
other hand, the COA argues that only the accounts of the MECO
that pertain to the "verification fees" it collects on behalf of the
DOLE are auditable because the former is merely a non-
governmental entity "required to pay xxx government share" per
the Audit Code.85
We examine both contentions.
The MECO Is Not a GOCC or
Government Instrumentality
We start with the petitioner’s contention.
Petitioner claims that the accounts of the MECO ought to be
audited by the COA because the former is a GOCC or government
instrumentality. Petitioner points out that the MECO is a non-
stock corporation "vested with governmental functions relating to
public needs"; it is "controlled by the government thru a board of
directors appointed by the President of the Philippines"; and it
operates "outside of the departmental framework," subject only to
the "operational and policy supervision of the DTI."86 The MECO
thus possesses, petitioner argues, the essential characteristics of a
bona fide GOCC and government instrumentality.87
We take exception to petitioner’s characterization of the MECO as
a GOCC or government instrumentality. The MECO is not a GOCC
or government instrumentality.
Government instrumentalities are agencies of the national
government that, by reason of some "special function or
jurisdiction" they perform or exercise, are allotted "operational
autonomy" and are "not integrated within the department
framework."88 Subsumed under the rubric "government
instrumentality" are the following entities:89
1. regulatory agencies,
2. chartered institutions,
3. government corporate entities or government
instrumentalities with corporate powers
(GCE/GICP),90 and
4. GOCCs
The Administrative Code defines a GOCC:91
(13) Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fifty-one
(51) per cent of its capital stock: x x x.
The above definition is, in turn, replicated in the more recent
Republic Act No. 10149 or the GOCC Governance Act of 2011, to
wit:92
(o) Government-Owned or -Controlled Corporation (GOCC) refers
to any agency organized as a stock or non-stock corporation, vested
with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government of the
Republic of the Philippines directly or through its
instrumentalities either wholly or, where applicable as in the case
of stock corporations, to the extent of at least a majority of its
outstanding capital stock: x x x.
GOCCs, therefore, are "stock or non-stock" corporations "vested
with functions relating to public needs" that are "owned by the
Government directly or through its instrumentalities."93 By
definition, three attributes thus make an entity a GOCC: first, its
organization as stock or non-stock corporation;94 second, the
public character of its function; and third, government ownership
over the same.
Possession of all three attributes is necessary to deem an entity a
GOCC.
In this case, there is not much dispute that the MECO possesses
the first and second attributes. It is the third attribute, which the
MECO lacks.
The MECO Is Organized as a Non-Stock Corporation
The organization of the MECO as a non-stock corporation cannot
at all be denied. Records disclose that the MECO was incorporated
as a non-stock corporation under the Corporation Code on 16
December 1977.95 The incorporators of the MECO were Simeon R.
Roxas, Florencio C. Guzon, Manuel K. Dayrit, Pio K. Luz and
Eduardo B. Ledesma, who also served as the corporation’s original
members and directors.96
The purposes for which the MECO was organized also establishes
its non-profit character, to wit:97
1. To establish and develop the commercial and
industrial interests of Filipino nationals here and abroad
and assist on all measures designed to promote and
maintain the trade relations of the country with the
citizens of other foreign countries;
2. To receive and accept grants and subsidies that are
reasonably necessary in carrying out the corporate
purposes provided they are not subject to conditions
defeatist for or incompatible with said purpose;
3. To acquire by purchase, lease or by any gratuitous title
real and personal properties as may be necessary for the
use and need of the corporation, and in like manner
when they are
4. To do and perform any and all acts which are deemed
reasonably necessary to carry out the purposes.
(Emphasis supplied)
The purposes for which the MECO was organized are somewhat
analogous to those of a trade, business or industry chamber,98 but
only on a much larger scale i.e., instead of furthering the interests
of a particular line of business or industry within a local sphere, the
MECO seeks to promote the general interests of the Filipino people
in a foreign land.
Finally, it is not disputed that none of the income derived by the
MECO is distributable as dividends to any of its members,
directors or officers.
Verily, the MECO is organized as a non-stock corporation.
The MECO Performs Functions with a Public Aspect.
The public character of the functions vested in the MECO cannot
be doubted either. Indeed, to a certain degree, the functions of the
MECO can even be said to partake of the nature of governmental
functions. As earlier intimated, it is the MECO that, on behalf of
the people of the Philippines, currently facilitates unofficial
relations with the people in Taiwan.
Consistent with its corporate purposes, the MECO was
"authorized" by the Philippine government to perform certain
"consular and other functions" relating to the promotion,
protection and facilitation of Philippine interests in Taiwan.99The
full extent of such authorized functions are presently detailed in
Sections 1 and 2 of EO No. 15, s. 2001:
SECTION 1. Consistent with its corporate purposes and subject to
the conditions stated in Section 3 hereof, MECO is hereby
authorized to assist in the performance of the following functions:
1. Formulation and implementation of a program to
attract and promote investments from Taiwan to
Philippine industries and businesses, especially in
manufacturing, tourism, construction and other
preferred areas of investments;
2. Promotion of the export of Philippine products and
Filipino manpower services, including Philippine
management services, to Taiwan;
3. Negotiation and/or assistance in the negotiation and
conclusion of agreements or other arrangements
concerning trade, investment, economic cooperation,
technology transfer, banking and finance, scientific,
cultural, educational and other modes of cooperative
endeavors between the Philippines and Taiwan, on a
people-to-people basis, in accordance with established
rules and regulations;
4. Reporting on, and identification of, employment and
business opportunities in Taiwan for the promotion of
Philippine exports, manpower and management
services, and tourism;
5. Dissemination in Taiwan of information on the
Philippines, especially in the fields of trade, tourism,
labor, economic cooperation, and cultural, educational
and scientific endeavors;
6. Conduct of periodic assessment of market conditions
in Taiwan, including submission of trade statistics and
commercial reports for use of Philippine industries and
businesses; and
7. Facilitation, fostering and cultivation of cultural,
sports, social, and educational exchanges between the
peoples of the Philippines and Taiwan.
SECTION 2. In addition to the above-mentioned authority and
subject to the conditions stated in Section 3 hereof, MECO,
through its branch offices in Taiwan, is hereby authorized to
perform the following functions:
1. Issuance of temporary visitors’ visas and transit and
crew list visas, and such other visa services as may be
authorized by the Department of Foreign Affairs;
2. Issuance, renewal, extension or amendment of
passports of Filipino citizens in accordance with existing
regulations, and provision of such other passport
services as may be required under the circumstances;
3. Certification or affirmation of the authenticity of
documents submitted for authentication;
4. Providing translation services;
5. Assistance and protection to Filipino nationals and
other legal/juridical persons working or residing in
Taiwan, including making representations to the extent
allowed by local and international law on their behalf
before civil and juridical authorities of Taiwan; and
6. Collection of reasonable fees on the first four (4)
functions enumerated above to defray the cost of its
operations.
A perusal of the above functions of the MECO reveals its uncanny
similarity to some of the functions typically performed by the DFA
itself, through the latter’s diplomatic and consular missions.100 The
functions of the MECO, in other words, are of the kind that would
otherwise be performed by the Philippines’ own diplomatic and
consular organs, if not only for the government’s acquiescence that
they instead be exercised by the MECO.
Evidently, the functions vested in the MECO are impressed with a
public aspect.
The MECO Is Not Owned or Controlled by the Government
Organization as a non-stock corporation and the mere
performance of functions with a public aspect, however, are not by
themselves sufficient to consider the MECO as a GOCC. In order to
qualify as a GOCC, a corporation must also, if not more
importantly, be owned by the government.
The government owns a stock or non-stock corporation if it has
controlling interest in the corporation. In a stock corporation, the
controlling interest of the government is assured by its ownership
of at least fifty-one percent (51%) of the corporate capital
stock.101 In a non-stock corporation, like the MECO, jurisprudence
teaches that the controlling interest of the government is affirmed
when "at least majority of the members are government officials
holding such membership by appointment or designation"102 or
there is otherwise "substantial participation of the government in
the selection" of the corporation’s governing board.103
In this case, the petitioner argues that the government has
controlling interest in the MECO because it is the President of the
Philippines that indirectly appoints the directors of the
corporation.104 The petitioner claims that the President appoints
directors of the MECO thru "desire letters" addressed to the
corporation’s board.105 As evidence, the petitioner cites the
assumption of one Mr. Antonio Basilio as chairman of the board of
directors of the MECO in 2001, which was allegedly accomplished
when former President Macapagal-Arroyo, through a
memorandum dated 20 February 2001, expressed her "desire" to
the board of directors of the MECO for the election of Mr. Basilio
as chairman.106
The MECO, however, counters that the "desire letters" that the
President transmits are merely recommendatory and not binding
on it.107 The MECO maintains that, as a corporation organized
under the Corporation Code, matters relating to the election of its
directors and officers, as well as its membership, are ultimately
governed by the appropriate provisions of the said code, its articles
of incorporation and its by-laws.108
As between the contrasting arguments, We find the contention of
the MECO to be the one more consistent with the law.
The fact of the incorporation of the MECO under the Corporation
Code is key. The MECO was correct in postulating that, as a
corporation organized under the Corporation Code, it is governed
by the appropriate provisions of the said code, its articles of
incorporation and its by-laws. In this case, it is the by-laws109 of the
MECO that stipulates that its directors are elected by its members;
its officers are elected by its directors; and its members, other than
the original incorporators, are admitted by way of a unanimous
board resolution, to wit:
SECTION II. MEMBERSHIP
Article 2. Members shall be classified as (a) Regular and (b)
Honorary.
(a) Regular members – shall consist of the original
incorporators and such other members who, upon
application for membership, are unanimously admitted
by the Board of Directors.
(b) Honorary member – A person of distinction in
business who as sympathizer of the objectives of the
corporation, is invited by the Board to be an honorary
member.
SECTION III. BOARD OF DIRECTORS
Article 3. At the first meeting of the regular members, they shall
organize and constitute themselves as a Board composed of five (5)
members, including its Chairman, each of whom as to serve until
such time as his own successor shall have been elected by the
regular members in an election called for the purpose. The number
of members of the Board shall be increased to seven (7) when
circumstances so warrant and by means of a majority vote of the
Board members and appropriate application to and approval by
the Securities and Exchange Commission. Unless otherwise
provided herein or by law, a majority vote of all Board members
present shall be necessary to carry out all Board resolutions.
During the same meeting, the Board shall also elect its own
officers, including the designation of the principal officer who shall
be the Chairman. In line with this, the Chairman shall also carry
the title Chief Executive Officer. The officer who shall head the
branch or office for the agency that may be established abroad shall
have the title of Director and Resident Representative. He will also
be the Vice-Chairman. All other members of the Board shall have
the title of Director.
xxxx
SECTION IV. EXECUTIVE COMMITTEE
Article 5. There shall be established an Executive Committee
composed of at least three (3) members of the Board. The members
of the Executive Committee shall be elected by the members of the
Board among themselves.
xxxx
SECTION VI. OFFICERS: DUTIES, COMPENSATION
Article 8. The officers of the corporation shall consist of a
Chairman of the Board, Vice-Chairman, Chief Finance Officer, and
a Secretary. Except for the Secretary, who is appointed by the
Chairman of the Board, other officers and employees of the
corporation shall be appointed by the Board.
The Deputy Representative and other officials and employees of a
branch office or agency abroad are appointed solely by the Vice
Chairman and Resident Representative concerned. All such
appointments however are subject to ratification by the Board.
It is significant to note that none of the original incorporators of
the MECO were shown to be government officials at the time of the
corporation’s organization. Indeed, none of the members, officers
or board of directors of the MECO, from its incorporation up to the
present day, were established as government appointees or public
officers designated by reason of their office. There is, in fact, no law
or executive order that authorizes such an appointment or
designation. Hence, from a strictly legal perspective, it appears that
the presidential "desire letters" pointed out by petitioner—if such
letters even exist outside of the case of Mr. Basilio—are, no matter
how strong its persuasive effect may be, merely recommendatory.
The MECO Is Not a Government Instrumentality; It Is a Sui
Generis Entity.
The categorical exclusion of the MECO from a GOCC makes it
easier to exclude the same from any other class of government
instrumentality. The other government instrumentalities i.e., the
regulatory agencies, chartered institutions and GCE/GICP are all,
by explicit or implicit definition, creatures of the law.110 The MECO
cannot be any other instrumentality because it was, as mentioned
earlier, merely incorporated under the Corporation Code.
Hence, unless its legality is questioned, and in this case it was not,
the fact that the MECO is operating under the policy supervision of
the DTI is no longer a relevant issue to be reckoned with for
purposes of this case.
For whatever it is worth, however, and without justifying anything,
it is easy enough for this Court to understand the rationale, or
necessity even, of the executive branch placing the MECO under
the policy supervision of one of its agencies.
It is evident, from the peculiar circumstances surrounding its
incorporation, that the MECO was not intended to operate as any
other ordinary corporation. And it is not. Despite its private
origins, and perhaps deliberately so, the MECO was
"entrusted"111 by the government with the "delicate and
precarious"112 responsibility of pursuing "unofficial"113 relations
with the people of a foreign land whose government the Philippines
is bound not to recognize. The intricacy involved in such
undertaking is the possibility that, at any given time in fulfilling the
purposes for which it was incorporated, the MECO may find itself
engaged in dealings or activities that can directly contradict the
Philippines’ commitment to the One China policy of the PROC.
Such a scenario can only truly be avoided if the executive
department exercises some form of oversight, no matter how
limited, over the operations of this otherwise private entity.
Indeed, from hindsight, it is clear that the MECO is uniquely
situated as compared with other private corporations. From its
over-reaching corporate objectives, its special duty and authority
to exercise certain consular functions, up to the oversight by the
executive department over its operations—all the while
maintaining its legal status as a non-governmental entity—the
MECO is, for all intents and purposes, sui generis.
Certain Accounts of the MECO May
Be Audited By the COA.
We now come to the COA’s contention.
The COA argues that, despite being a non-governmental entity, the
MECO may still be audited with respect to the "verification fees"
for overseas employment documents that the latter collects from
Taiwanese employers on behalf of the DOLE.114 The COA claims
that, under Joint Circular No. 3-99, the MECO is mandated to
remit to the national government a portion of such "verification
fees."115 The COA, therefore, classifies the MECO as a non-
governmental entity "required to pay xxx government share" per
the Audit Code.116
We agree that the accounts of the MECO pertaining to its collection
of "verification fees" is subject to the audit jurisdiction of the COA.
However, We digress from the view that such accounts are the only
ones that ought to be audited by the COA. Upon careful evaluation
of the information made available by the records vis-à-vis the spirit
and the letter of the laws and executive issuances applicable, We
find that the accounts of the MECO pertaining to the fees it was
authorized to collect under Section 2(6) of EO No. 15, s. 2001, are
likewise subject to the audit jurisdiction of the COA.
Verification Fees Collected by the MECO
In its comment,117 the MECO admitted that roughly 9% of its
income is derived from its share in the "verification fees" for
overseas employment documents it collects on behalf of the DOLE.
The "verification fees" mentioned here refers to the "service fee for
the verification of overseas employment contracts, recruitment
agreement or special powers of attorney" that the DOLE was
authorized to collect under Section 7 of EO No. 1022,118 which was
issued by President Ferdinand E. Marcos on 1 May 1985. These fees
are supposed to be collected by the DOLE from the foreign
employers of OFWs and are intended to be used for "the promotion
of overseas employment and for welfare services to Filipino
workers within the area of jurisdiction of [concerned] foreign
missions under the administration of the [DOLE]."119
Joint Circular 3-99 was issued by the DOLE, DFA, the Department
of Budget Management, the Department of Finance and the COA
in an effort to implement Section 7 of Executive Order No.
1022.120 Thus, under Joint Circular 3-99, the following officials
have been tasked to be the "Verification Fee Collecting Officer" on
behalf of the DOLE:121
1. The labor attaché or duly authorized overseas labor
officer at a given foreign post, as duly designated by the
DOLE Secretary;
2. In foreign posts where there is no labor attaché or duly
authorized overseas labor officer, the finance officer or
collecting officer of the DFA duly deputized by the DOLE
Secretary as approved by the DFA Secretary;
3. In the absence of such finance officer or collecting
officer, the alternate duly designated by the head of the
foreign post.
Since the Philippines does not maintain an official post in Taiwan,
however, the DOLE entered into a "series" of Memorandum of
Agreements with the MECO, which made the latter the former’s
collecting agent with respect to the "verification fees" that may be
due from Taiwanese employers of OFWs.122 Under the 27 February
2004 Memorandum of Agreement between DOLE and the MECO,
the "verification fees" to be collected by the latter are to be allocated
as follows: (a) US$ 10 to be retained by the MECO as
administrative fee, (b) US $10 to be remitted to the DOLE, and (c)
US$ 10 to be constituted as a common fund of the MECO and
DOLE.123
Evidently, the entire "verification fees" being collected by the
MECO are receivables of the DOLE.124 Such receipts pertain to the
DOLE by virtue of Section 7 of EO No. 1022.
Consular Fees Collected by the MECO
Aside from the DOLE "verification fees," however, the MECO also
collects "consular fees," or fees it collects from the exercise of its
delegated consular functions.
The authority behind "consular fees" is Section 2(6) of EO No. 15,
s. 2001. The said section authorizes the MECO to collect
"reasonable fees" for its performance of the following consular
functions:
1. Issuance of temporary visitors’ visas and transit and
crew list visas, and such other visa services as may be
authorized by the DFA;
2. Issuance, renewal, extension or amendment of
passports of Filipino citizens in accordance with existing
regulations, and provision of such other passport
services as may be required under the circumstances;
3. Certification or affirmation of the authenticity of
documents submitted for authentication; and
4. Providing translation services.
Evidently, and just like the peculiarity that attends the DOLE
"verification fees," there is no consular office for the collection of
the "consular fees." Thus, the authority for the MECO to collect the
"reasonable fees," vested unto it by the executive order.
The "consular fees," although held and expended by the MECO by
virtue of EO No. 15, s. 2001, are, without question, derived from
the exercise by the MECO of consular functions—functions it
performs by and only through special authority from the
government. There was never any doubt that the visas, passports
and other documents that the MECO issues pursuant to its
authorized functions still emanate from the Philippine government
itself.
Such fees, therefore, are received by the MECO to be used strictly
for the purpose set out under EO No. 15, s. 2001. They must be
reasonable as the authorization requires. It is the government that
has ultimate control over the disposition of the "consular fees,"
which control the government did exercise when it provided in
Section 2(6) of EO No. 15, s. 2001 that such funds may be kept by
the MECO "to defray the cost of its operations."
The Accounts of the MECO Pertaining to the Verification Fees and
Consular Fees May Be Audited by the COA.
Section 14(1), Book V of the Administrative Code authorizes the
COA to audit accounts of non-governmental entities "required to
pay xxx or have government share" but only with respect to "funds
xxx coming from or through the government." This provision of
law perfectly fits the MECO:
First. The MECO receives the "verification fees" by reason of being
the collection agent of the DOLE—a government agency. Out of its
collections, the MECO is required, by agreement, to remit a portion
thereof to the DOLE. Hence, the MECO is accountable to the
government for its collections of such "verification fees" and, for
that purpose, may be audited by the COA.
Second. Like the "verification fees," the "consular fees" are also
received by the MECO through the government, having been
derived from the exercise of consular functions entrusted to the
MECO by the government. Hence, the MECO remains accountable
to the government for its collections of "consular fees" and, for that
purpose, may be audited by the COA.
Tersely put, the 27 February 2008 Memorandum of Agreement
between the DOLE and the MECO and Section 2(6) of EO No. 15,
s. 2001, vis-à-vis, respectively, the "verification fees" and the
"consular fees," grant and at the same time limit the authority of
the MECO to collect such fees. That grant and limit require the
audit by the COA of the collections thereby generated.
Conclusion
The MECO is not a GOCC or government instrumentality. It is a
sui generis private entity especially entrusted by the government
with the facilitation of unofficial relations with the people in
Taiwan without jeopardizing the country’s faithful commitment to
the One China policy of the PROC. However, despite its non-
governmental character, the MECO handles government funds in
the form of the "verification fees" it collects on behalf of the DOLE
and the "consular fees" it collects under Section 2(6) of EO No. 15,
s. 2001. Hence, under existing laws, the accounts of the MECO
pertaining to its collection of such "verification fees" and "consular
fees" should be audited by the COA.
WHEREFORE, premises considered, the petition is PARTIALLY
GRANTED. The Manila Economic and Cultural Office is hereby
declared a non-governmental entity. However, the accounts of the
Manila Economic and Cultural Office pertaining to: the verification
fees contemplated by Section 7 of Executive Order No. 1022 issued
1 May 1985, that the former collects on behalf of the Department
of Labor and Employment, and the fees it was authorized to collect
under Section 2(6) of Executive Order No. 15 issued 16 May 2001,
are subject to the audit jurisdiction of the COA.
No costs.
SO ORDERED.
G.R. No. 169328 October 27, 2006
JULIAN A. ALZAGA, MEINRADO ENRIQUE A. BELLO,
and MANUEL S. SATUITO, petitioners,
vs.
HONORABLE SANDIGANBAYAN (2nd Division) and
PEOPLE OF THE PHILIPPINES, respondents.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Certiorari assails the April 25, 2005 and August
10, 2005 Resolutions1 of the Sandiganbayan in Criminal Case Nos.
25681-25684, which respectively reversed the May 27, 2004
Resolution2 of the court a quo and denied petitioners’ Motion for
Reconsideration.3
On October 7, 1999,4 four separate Informations for violation of
Section 3(e) of Republic Act (R.A.) No. 3019 were filed against
petitioners Julian A. Alzaga, Meinrado Enrique A. Bello and
Manuel S. Satuito relative to alleged irregularities which attended
the purchase of four lots in Tanauan, Batangas, by the Armed
Forces of the Philippines Retirement and Separation Benefits
System (AFP-RSBS). Alzaga was the Head of the Legal Department
of AFP-RSBS when one of the lots was purchased. Bello was a
Police Superintendent and he succeeded Alzaga as Head of the
Legal Department. It was during his tenure when the other three
lots were purchased. Both were Vice Presidents of AFP-RSBS. On
the other hand, Satuito was the Chief of the Documentation and
Assistant Vice President of the AFP-RSBS.5
Petitioners filed their respective Motions to Quash and/or Dismiss
the informations alleging that the Sandiganbayan has no
jurisdiction over them and their alleged offenses because the AFP-
RSBS is a private entity created for the benefit of its members and
that their positions and salary grade levels do not fall within the
jurisdiction of the Sandiganbayan pursuant to Section 4 of
Presidential Decree (P.D.) No. 1606 (1978),6 as amended by R.A.
No. 8249 (1997).7
On May 27, 2004, the Sandiganbayan granted petitioners’ motions
to dismiss for lack of jurisdiction.
However, in a Resolution dated April 25, 2005, the Sandiganbayan
reversed its earlier resolution. It held that the AFP-RSBS is a
government-owned or controlled corporation thus subject to its
jurisdiction. It also found that the positions held by Alzaga and
Bello, who were Vice Presidents, and Satuito who was an Assistant
Vice President, are covered and embraced by, and in fact higher
than the position of managers mentioned under Section 4 of P.D.
No. 1606, as amended, thus under the jurisdiction of the
Sandiganbayan.
Petitioners’ Motion for Reconsideration8 was denied, hence, this
petition raising the following issues:
I
THE COURT A QUO COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DECIDING A QUESTION OF
SUBSTANCE IN A MANNER NOT ACCORD WITH
LAW AND APPLICABLE JURISPRUDENCE THAT IT
HAS JURISDICTION OVER THE PERSON OF THE
PETITIONERS
II
THE COURT A QUO COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DECIDING A QUESTION OF
SUBSTANCE IN A MANNER NOT IN ACCORD WITH
LAW OR JURISPRUDENCE THAT THE ARMED
FORCES RETIREMENT AND SEPARATION
BENEFITS SYSTEM (AFP-RSBS) IS A GOVERNMENT-
OWNED OR CONTROLLED CORPORATION
III
THE COURT A QUO COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DECIDING A QUESTION OF
SUBSTANCE IN A MANNER NOT IN ACCORD WITH
LAW OR JURISPRUDENCE THAT PETITIONERS
ALZAGA AND BELLO[,] WHO WERE BOTH VICE-
PRESIDENTS OF THE AFP-RSBS[,] AND
PETITIONER SATUITO[,] WHO WAS ASSISTANT
VICE-PRESIDENT OF THE AFP-RSBS[,] ARE
COVERED AND EMBRACED BY THE POSITION
"MANAGERS" MENTIONED UNDER SECTION 4 a (1)
(g) OF PD NO. 1606, AS AMENDED.9
The petition is without merit.
The AFP-RSBS was established by virtue of P.D. No. 361 (1973)10 in
December 1973 to guarantee continuous financial support to the
AFP military retirement system, as provided for in R.A. No. 340
(1948).11 It is similar to the Government Service Insurance System
(GSIS) and the Social Security System (SSS) since it serves as the higher but who are by express provision of law placed under the
system that manages the retirement and pension funds of those in jurisdiction of the said court. In the latter category, it is the position
the military service.12 held and not the salary grade which determines the jurisdiction of
the Sandiganbayan. Thus, presidents, directors or trustees, or
managers of government owned and controlled corporations, are
The AFP-RSBS is administered by the Chief of Staff of the AFP
under the jurisdiction of the Sandiganbayan.
through a Board of Trustees and Management Group,13 and funded
from congressional appropriations and compulsory contributions
from members of the AFP; donations, gifts, legacies, bequests and In the instant case, petitioners Alzaga and Bello were Head of the
others to the system; and all earnings of the system which shall not Legal Department while petitioner Satuito was Chief of the
be subject to any tax whatsoever.14 Documentation with corresponding ranks of Vice Presidents and
Assistant Vice President. These positions are not specifically
enumerated in RA. No. 8249; however, as correctly observed by the
Section 4 of P.D. No. 1606, as further amended by R.A. No. 8249,
Sandiganbayan, their ranks as Vice Presidents and Assistant Vice
grants jurisdiction to the Sandiganbayan over:
President are even higher than that of "managers" mentioned in
RA. No. 8249.
a. Violations of Republic Act No. 3019, as amended,
otherwise known as the Anti-graft and Corrupt Practices
In sum, the Sandiganbayan correctly ruled that the AFP-RSBS is a
Act, Republic Act No. 1379, and Chapter II, Section 2,
government-owned and controlled corporation and that it has
Title VII, Book II of the Revised Penal Code, where one
jurisdiction over the persons of petitioners who were Vice
or more of the accused are officials occupying the
Presidents and Assistant Vice President when the charges against
following positions in the government whether in a
them were allegedly committed.
permanent, acting or interim capacity, at the time of the
commission of the offense:
WHEREFORE, the instant Petition
for Certiorari is DISMISSED. The assailed Resolution of the
(1) Officials of the executive branch occupying the
Sandiganbayan dated April 25, 2005 that the AFP-RSBS is a
positions of regional director and higher, otherwise
government-owned and controlled corporation and that it has
classified as Grade ‘27’ and higher, of the Compensation
jurisdiction over the persons of the petitioners and the Resolution
and Position Classification Act of 1989 (Republic Act No.
dated August 10, 2005 denying petitioners’ motion for
6758), specifically including:
reconsideration, are AFFIRMED.
xxxx
SO ORDERED.
(g) Presidents, directors or trustees, or managers of
G.R. No. 81490 August 31, 1988
government-owned or controlled corporations, state
universities or educational institutions or foundations;
HAGONOY WATER DISTRICT represented by its
General Manager CELESTINO S. VENGCO, petitioner,
In People v. Sandiganbayan,15 where herein petitioners Alzaga
vs.
and Satuito were respondents, this Court has ruled that the
THE HON. NATIONAL LABOR RELATIONS
character and operations of the AFP-RSBS are imbued with public
COMMISSION, EXECUTIVE LABOR ARBITER
interest thus the same is a government entity and its funds are in
VLADIMIR P.L. SAMPANG, DEPUTY SHERIFF JOSE A.
the nature of public funds. In Ramiscal, Jr. v.
CRUZ and DANTE VILLANUEVA, respondents.
Sandiganbayan,16 we held that the AFP-RSBS is a government-
owned and controlled corporation under R.A. No. 9182, otherwise
known as The Special Purpose Vehicle Act of 2002. These rulings FELICIANO, J.:
render unmeritorious petitioners’ assertion that the AFP-RSBS is
a private entity.
The present petition for certiorari seeks to annul and set aside: a)
the decision of the Labor Arbiter dated 17 March 1987 in NLRC
There is likewise no merit in petitioners’ claim that the Case No. RAB-III-8-2354-85, entitled "Dante Villanueva versus
Sandiganbayan has no jurisdiction over them since their positions LWA-Hagonoy Waterworks District/Miguel Santos;" and b) the
as vice presidents and assistant vice president are not covered nor Resolution of the National Labor Relations Commission dated 20
embraced by the term "managers" under section 4 of RA. No. 8249. August 1987 affirming the mentioned decision.
We held in Geduspan v. People,17 that while the first part of section Private respondent Dante Villanueva was employed as service
4 covers only officials of the executive branch with the salary grade foreman by petitioner Hagonoy Water District ("Hagonoy") from 3
27 and higher, the second part "specifically includes" other January 1977 until 16 May 1985, when he was indefinitely
executive officials whose positions may not be of grade 27 and
suspended and thereafter dismissed on 12 July 1985 for
abandonment of work and conflict of interest.
On 14 August 1985, private respondent filed a complaint for illegal
dismissal, illegal suspension and underpayment of wages and
emergency cost of living allowance against petitioner Hagonoy
with the then Ministry of Labor and Employment, Regional
Arbitration Branch III, San Fernando, Pampanga.
Petitioner immediately moved for outright dismissal of the
complaint on the ground of lack of jurisdiction. Being a
government entity, petitioner claimed, its personnel are governed
by the provisions of the Civil Service Law, not by the Labor Code,
and protests concerning the lawfulness of dismissals from the
service fall within the jurisdiction of the Civil Service Commission,
not the Ministry of Labor and Employment. Petitioner cited
Resolution No. 1540 of the Social Security Commission cancelling
petitioner's compulsory coverage from the system effective 16 May
1979 "considering the rulings that local water districts are
instrumentalities owned and controlled by the government and
that their officers and employees are government employees." In
opposing the motion, private respondent Villanueva contended
that local water districts, like petitioner Hagonoy, though quasi-
public corporations, are in the nature of private corporations since
they perform proprietary functions for the government.
The Labor Arbiter proceeded to hear and try the case and, on 17
March 1986, rendered a Decision in favor of the private respondent
and against petitioner Hagonoy. The dispositive part of the
decision read:
WHEREFORE, premises considered,
respondents are hereby ordered to reinstate
petitioner immediately to his former position
as Service Foreman, without loss of seniority
rights and privileges, with full backwages,
including all benefits provided by law, from
the date he was terminated up to his actual
date of reinstatement.
In addition, respondents are hereby ordered
to pay the petitioner the amount of P4,927.50
representing the underpayments of wages
from July 1983 to May 16, 1985.
SO ORDERED.
On appeal, the National Labor Relations Commission affirmed the
decision of the Labor Arbiter in a Resolution dated 20 August 1987.
The petitioner moved for reconsideration, insisting that public
respondents had no jurisdiction over the case. Meanwhile, a Writ
of Execution was issued by the Labor Arbiter on 16 November 1987.
The writ was enforced by garnishing petitioner Hagonoy's deposits
with the Planters Development Bank of Hagonoy.
Petitioner then filed a Motion to Quash the Writ of Execution with Thus, Section 25 of P.D. 198 exempting the employees of water
Application for Writ of Preliminary Injunction arguing that the districts from the application of the Civil Service Law was removed
writ was prematurely issued as its motion for reconsideration had from the statute books.
not yet been resolved. By Resolution dated 10 December 1987,
public respondent Commission denied the application for a
This is not the first time that officials of the Department of Labor
preliminary injunction. The motion to quash was similarly denied
and Employment have taken the position that the Labor Arbiter
by the Commission which directed petitioner to reinstate
here adopted. In Baguio Water District vs. Cresenciano B.
immediately private respondent and to pay him the amount of
Trajano, etc. et al., 1 the petitioner Water District sought review of
P63,577.75 out of petitioner's garnished deposits.
a decision of the Bureau of Labor Relations which affirmed that of
a Med-Arbiter calling for a certification election among the regular
Hence, the instant petition. rank-and-file employees of the Baguio Water District (BWD). In
granting the petition, the Court said:
The only question here in whether or not local water districts are
government owned or controlled corporations whose employees The Baguio Water District was formed
are subject to the provisions of the Civil Service Law. The Labor pursuant to Title II-Local Water District Law
Arbiter asserted jurisdiction over the alleged illegal dismissal of of P.D. No. 198, as amended, The BWD is by
private respondent Villanueva by relying on Section 25 of Sec. 6 of that decree 'a quasi-public
Presidential Decree No. 198, known as the "Provincial Water corporation performing public service and
Utilities Act of 1973" which went into effect on 25 May 1973, and supplying public wants.
which provides as follows:
A part of the public respondent's decision
Exemption from Civil Service. — The district rendered in September, 1983, reads in part:
and its employees, being engaged in a
proprietary function, are hereby exempt from
We find the appeal [of the BWD] to be devoid
the provisions of the Civil Service Law.
of merit. The records show that the operation
Collective Bargaining shall be available only to
and administration of BWD is governed and
personnel below supervisory levels: Provided,
regulated by special laws, that is, Presidential
however, That the total of all salaries, wages,
Decrees Nos. 198 and 1479 which created local
emoluments, benefits or other compensation
water districts throughout the country.
paid to all employees in any month shall not
Section 25 of Presidential Decree (PD) 198
exceed fifty percent (50%) of average net
clearly provides that the district and its
monthly revenue, said net revenue
employees shall be exempt from the
representing income from water sales and
provisions of the Civil Service Law and that its
sewerage service charges, lease pro-rata share
personnel below supervisory level shall have
of debt service and expenses for fuel or energy
the right to collectively bargain. Contrary to
for pumping during the preceding fiscal year.
appellant's claim, said provision has not been
amended much more abrogated expressly or
The Labor Arbiter however failed to take into account the impliedly by PD 1479 which does not make
provisions of Presidential Decree No. 1479, which went into effect mention of any matter on Civil Service Law or
on 11 June 1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 collective bargaining. (Rollo, p. 590.)
quoted above, and Section 26 of P.D. 198 was renumbered as
Section 25 in the following manner:
We grant the petition for the following reasons:
Section 26 of the same decree [P.D. 198] is
1. Section 25 of P.D. No. 198 was repealed by
hereby amended to read as Section 25 as
Sec. 3 of P.D. No. 1479; Sec. 26 of P.D. No. 198
follows:
was amended to read as Sec. 25 by Sec. 4 of
P.D. No. 1479. The amendatory decree took
Section 25. Authorization. — The district may effect on June 11, 1978.
exercise all the powers which are expressly
granted by this Title or which are necessarily
xxx xxx xxx
implied from or incidental to the powers and
purposes herein stated. For the purpose of
carrying out the objectives of this Act, a 3. The BWD is a corporation created pursuant
district is hereby granted the power of to a special law — P.D. No. 198, as amended.
eminent domain, the exercise thereof shall, As such its officers and employees are part of
however, be subject to review by the
Administration.
 the Civil Service. (Sec. 1, Art. XII-B, [1973]
Constitution; P.D. No. 686.)
The broader question of whether employees of government owned
or controlled corporations are governed by the Civil Service Law
and Civil Service Rules and Regulations was addressed by this
Court in 1985 in National Housing Corporation vs. Juco. 2 After a
review of constitutional, statutory and case law on the matter, the
Court, through Mr. Justice Gutierrez, held:
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 rules and
regulations.
Section 1. Article XII-B of the [1973]
Constitution specifically provides:
The Civil Service embraces every branch,
agency, subdivision, and instrumentality of
the Government, including every
government-owned or controlled corporation.
...
The 1935 Constitution had a similar provision
in its Section 1, Article XII which stated:
A Civil Service embracing all branches and
subdivisions of the Government shall be
provided by law.
The inclusion of "government-owned or
controlled corporations" within the embrace
of the civil service shows a deliberate effort of
the framers to plug an earlier loophole which
allowed government-owned or controlled
corporations to avoid the full consequences of
the all encompassing coverage of the, civil
service system. The same explicit intent is
shown by the addition of "agency" and
"instrumentality" to branches and
subdivisions of the Government. All offices
and firms of the government are covered.
The amendments introduced in 1973 are not
Idle exercises or meaningless gestures. They
carry the strong message that civil service
coverage is broad and all-embracing insofar as
employment in the government in any of its
governmental. or corporate arms is
concerned.
xxx xxx xxx
Section I of Article XII-B, [1973] Constitution
uses the word "every" to modify the phrase
"government-owned or controlled
corporation."
"Every" means each one of a group, without
exception. It means all possible and all, taken
one by one. Of course, our decision in this case
refers to a corporation created as a
government-owned or controlled entity. It
does not cover cases involving private firms
taken over by the government in foreclosure
or similar proceedings. We reserve judgment
on these latter cases when the appropriate
controversy is brought to this Court. 3
In Juco, the Court spelled out the law on the issue at bar as such
law existed under the 1973 Constitution and the Provisional
Constitution of 1984, 4 until just before the effectivity of the 1987
Constitution. Public respondent Commission, in confirming the
Labor Arbiter's assumption of jurisdiction over this case,
apparently relied upon Article IX (B), Section 2 (1) of the 1987
Constitution, which provides that:
[T]he Civil Service embraces ... government
owned or controlled corporations with
original charters.(Emphasis supplied)
The NLRC took the position that although petitioner Hagonoy is a
government owned or controlled corporation, it had no original
charter having been created simply by resolution of a local
legislative council. The NLRC concluded that therefore petitioner
Hagonoy fell outside the scope of the civil service.
At the time the dispute in the case at bar arose, and at the time the
Labor Arbiter rendered his decision (i.e., 17 March 1986), there is
no question that the applicable law was that spelled out in National
Housing Corporation vs. Juco (supra) and Baguio Water District
vs. Cresenciano B. Trajano (supra) and that under such applicable
law, the Labor Arbiter had no jurisdiction to render the decision
that he in fact rendered. By the time the public respondent
Commission rendered its decision of 20 August 1987 which is here
assailed, the 1987 Constitution had already come into
effect. 5 There is, nonetheless, no necessity for this Court at the
present time and in the present case to pass upon the question of
the effect of the provisions of Article DC (B), Section 2 (1) of the
1987 Constitution upon the pre-existing statutory and case law. For
whatever that effect might be, — and we will deal with that when
an appropriate case comes before the Court — we believe and so
hold that the 1987 Constitution did not operate retrospectively so
as to confer jurisdiction upon the Labor Arbiter to render a
decision which, under the law applicable at the time of the
rendition of such decision, was clearly outside the scope of
competence of the Labor Arbiter. Thus, the respondent
Commission had nothing before it which it could pass upon in the
exercise of its appellate jurisdiction. For it is self-evident that a
decision rendered by the Labor Arbiter without jurisdiction over
the case is a complete nullity, vesting no rights and imposing no
liabilities.
ACCORDINGLY, the Petition for certiorari is GRANTED. The
decision of the Labor Arbiter dated 17 March 1986, and public
respondent Commission's Resolution dated 20 August 1987 and all
other Resolutions and Orders issued by the Commission in this
case subsequent thereto, are hereby SET ASIDE. This decision is,
however, without prejudice to the right of private respondent
Villanueva to refile, if he so wishes, this complaint in an
appropriate forum. No pronouncement as to costs.
SO ORDERED.
G.R. No. 95237-38 September 13, 1991
DAVAO CITY WATER DISTRICT, CAGAYAN DE ORO
CITY WATER DISTRICT, METRO CEBU WATER
DISTRICT, ZAMBOANGA CITY WATER DISTRICT,
LEYTE METRO WATER DISTRICT, BUTUAN CITY
WATER DISTRICT, CAMARINES NORTE WATER
DISTRICT, LAGUNA WATER DISTRICT, DUMAGUETE
CITY WATER DISTRICT, LA UNION WATER DISTRICT,
BAYBAY WATER DISTRICT, METRO LINGAYEN
WATER DISTRICT, URDANETA WATER DISTRICT,
COTABATO CITY WATER DISTRICT, MARAWI WATER
DISTRICT, TAGUM WATER DISTRICT, DIGOS WATER
DISTRICT, BISLIG WATER DISTRICT, and
MECAUAYAN WATER DISTRICT,petitioners,
vs.
CIVIL SERVICE COMMISSION, and COMMISSION ON
AUDIT, respondents.
MEDIALDEA, J.:p
Whether or not the Local Water Districts formed and created
pursuant to the provisions of Presidential Decree No. 198, as
amended, are government-owned or controlled corporations with
original charter falling under the Civil Service Law and/or covered
by the visitorial power of the Commission on Audit is the issue
which the petitioners entreat this Court, en banc, to shed light on.
Petitioners are among the more than five hundred (500) water
districts existing throughout the country formed pursuant to the
provisions of Presidential Decree No. 198, as amended by
Presidential Decrees Nos. 768 and 1479, otherwise known as the
"Provincial Water Utilities Act of 1973."
Presidential Decree No. 198 was issued by the then President
Ferdinand E. Marcos by virtue of his legislative power under
Proclamation No. 1081. It authorized the different local legislative
bodies to form and create their respective water districts through a
resolution they will pass subject to the guidelines, rules and
regulations therein laid down. The decree further created and
formed the "Local Water Utilities Administration" (LWUA), a
national agency attached to the National Economic and
Development Authority (NEDA), and granted with regulatory
power necessary to optimize public service from water utilities
operations.
The respondents, on the other hand, are the Civil Service
Commission (CSC) and the Commission on Audit (COA), both
government agencies and represented in this case by the Solicitor
General.
On April 17, 1989, this Court ruled in the case of Tanjay Water
District v. Gabaton, et al. (G.R. No. 63742, 172 SCRA 253):
Significantly, Article IX (B), Section 2(1) of the 1987
Constitution provides that the Civil Service embraces all
branches, subdivisions, instrumentalities, and agencies
of the government, including government-owned and
controlled corporations with original charters.
Inasmuch as PD No. 198, as amended, is the original
charter of the petitioner, Tanjay Water District, and
respondent Tarlac Water District and all water districts
in the country, they come under the coverage of the Civil
Service Law, rules and regulations. (Sec. 35, Art. VIII
and Sec. 37, Art. IX of PD No. 807).
As an offshoot of the immediately cited ruling, the CSC. issued
Resolution No. 90-575, the dispositive portion of which reads:
NOW THEREFORE, in view of all the foregoing, the
Commission resolved, as it hereby resolves to rule that
Local Water Districts, being quasi-public corporations
created by law to perform public services and supply
public wants, the matter of hiring and firing of its
officers and employees should be governed by the Civil
Service Law, rules and regulations. Henceforth, all
appointments of personnel of the different local water
districts in the country shall be submitted to the
Commission for appropriate action. (Rollo. p. 22).
However, on May 16, 1990, in G.R. No. 85760, entitled "Metro
Iloilo Water District v. National Labor Relations Commission, et
al.," the Third Division of this Court ruled in a minute resolution:
xxx xxx xxx
Considering that PD 198 is a general legislation
empowering and/or authorizing government agencies
and entities to create water districts, said PD 198 cannot
be considered as the charter itself creating the Water
District. Public respondent NLRC did not commit any
grave abuse of discretion in holding that the operative
act, that created the Metro Iloilo Water District was the
resolution of the Sangguniang Panglunsod of Iloilo City.
Hence, the employees of Water Districts are not covered
by Civil Service Laws as the latter do (sic) not have
original charters.
In adherence to the just cited ruling, the CSC suspended the
implementation of Resolution No. 90-575 by issuing Resolution
No. 90-770 which reads:
xxx xxx xxx
NOW, THEREFORE, in view of all the foregoing, the
Commission resolved to rule, as it hereby rules, that the
implementation of CSC. Resolution No. 575 dated June
27, 1990 be deferred in the meantime pending
clarification from the Supreme Court are regards its
conflicting decisions in the cases of Tanjay Water
District v. Gabaton and Metro Iloilo Water District v.
National Labor Relations Commission. (p. 26, Rollo)
In the meanwhile, there exists a divergence of opinions between
COA on one hand, and the (LWUA), on the other hand, with
respect to the authority of COA to audit the different water
districts.
COA opined that the audit of the water districts is simply an act of
discharging the visitorial power vested in them by law (letter of
COA to LWUA dated August 13, 1985, pp. 29-30, Rollo).
On the other hand, LWUA maintained that only those water
districts with subsidies from the government fall within the COA's
jurisdiction and only to the extent of the amount of such subsidies,
pursuant to the provision of the Government Auditing Code of the
Phils.
It is to be observed that just like the question of whether the
employees of the water districts falls under the coverage of the Civil
Service Law, the conflict between the water districts and the COA
is also dependent on the final determination of whether or not
water districts are government-owned or controlled corporations
with original charter. The reason behind this is Sec. 2(1), Article
IX-D of the 1987 constitution which reads:
Sec. 2(1) The Commission on Audit shall have the power,
authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or
held in trust by, or pertaining to the Government, or any
of its subdivisions, agencies or
instrumentalities, including government-owned or
controlled corporations with original charters, and on
a post audit basis. (emphasis supplied)
Petitioners' main argument is that they are private corporations
without original charter, hence they are outside the jurisdiction of
respondents CSC and COA. Reliance is made on the Metro Iloilo
case which declared petitioners as quasi-public corporations
created by virtue of PD 198, a general legislation which cannot be
considered as the charter itself creating the water districts. Holding
on to this ruling, petitioners contend that they are private
corporations which are only regarded as quasi-public or semi-
public because they serve public interest and convenience and that
since PD 198 is a general legislation, the operative act which
created a water district is not the said decree but the resolution of
the sanggunian concerned.
After a fair consideration of the parties' arguments coupled with a
careful study of the applicable laws as well as the constitutional
provisions involved, We rule against the petitioners and reiterate
Our ruling in Tanjay case declaring water districts government-
owned or controlled corporations with original charter.
As early as Baguio Water District v. Trajano, et al., (G.R. No.
65428, February 20, 1984, 127 SCRA 730), We already ruled that a
water district is a corporation created pursuant to a special law —
P.D. No. 198, as amended, and as such its officers and employees
are covered by the Civil Service Law.
In another case (Hagonoy Water District v. NLRC, G.R. No. 81490,
August 31, 1988, 165 SCRA 272), We ruled once again that local
water districts are quasi-public corporations whose employees
belong to the Civil Service. The Court's pronoucement in this case,
as extensively quoted in the Tanjay case, supra, partly reads:
"The only question here is whether or not local water
districts are governmkent owned or controlled
corporations whose employees are subject to the
provisions of the Civil Service Law. The Labor Arbiter
asserted jurisdiction over the alleged illegal dismissal of
private respondent Villanueva by relying on Section 25
of Presidential decree No. 198, known as the Provincial
Water Utilities Act of 1973" which went onto effect in 25
May 1973, and which provides as follows:
Exemption from Civil Service. — The district
and its employees, being engaged in a
proprietary function, are hereby exempt from
the provisions of the Civil Service Law.
Collective Bargaining shall be available only to
personnel below supervisory levels: Provided,
however, That the total of all salaries, wages
emoluments, benefits or other compensation
paid to all employees in any month shall not
exceed fifty percent (50%) of average net
monthy revenue. Said net revenue
representing income from water sales and
sewerage service charges, less pro-rata share
of debt service and expenses for fuel or energy
for pumping during the preceding fiscal year.
The Labor Arbiter failed to take into accout the
provisions of Presidential Decree No. 1479, which went
into effect on 11 June 1978, P.D. No. 1479, wiped away
Section 25 of PD 198 quoted above, and Section 26 of PD
 198 was renumbered as Section 25 in the following
manner:
Section 26 of the same decree PD 198 is hereby amended
to read as Section 25 as follows:
Section 25. Authorization. — The district may exercise
all the powers which are expressly granted by this Title
or which are necessarily implied from or incidental to
the powers and purposes herein stated. For the purpose
of carrying out the objectives of this Act, a district is
hereby granted the power of eminent domain, the
exercise thereof shall, however, be subject to review by
the Administration.
Thus, Section 25 of PD 198 exempting the employees of
water districts from the application of the Civil Service
Law was removed from the statute books:
xxx xxx xxx
We grant the petition for the following reasons:
1. Section 25 of PD No. 198 was repealed by Section 3 of
PD No. 1479; Section 26 of PD No. 198 was amended ro
read as Sec. 25 by Sec. 4 of PD No. 1479. The amendatory
decree took effect on June 11, 1978.
xxx xxx xxx
3. The BWD is a corporation created pursuant to a
special law — PD No. 198, as amended. As such its
officers and employees are part of the Civil Service (Sec.
1, Art. XII-B, [1973] Constitution; PD No. 868).
Ascertained from a consideration of the whole statute, PD 198 is a
special law applicable only to the different water districts created
pursuant thereto. In all its essential terms, it is obvious that it
pertains to a special purpose which is intended to meet a particular
set of conditions and cirmcumstances. The fact that said decree
generally applies to all water districts throughout the country does
not change the fact that PD 198 is a special law. Accordingly, this
Court's resolution in Metro Iloilo case declaring PD 198 as a
general legislation is hereby abandoned.
By "government-owned or controlled corporation with original
charter," We mean government owned or controlled corporation
created by a special law and not under the Corporation Code of the
Philippines. Thus, in the case of Lumanta v. NLRC (G.R. No.
82819, February 8, 1989, 170 SCRA 79, 82), We held:
The Court, in National Service Corporation (NASECO)
v. National Labor Relations Commission, G.R. No
69870, promulgated on 29 November 1988, quoting
extensively from the deliberations of 1986
Constitutional Commission in respect of the intent and
meaning of the new phrase "with original character," in
effect held that government-owned and controlled
corporations with original charter refer to
corporations chartered by special law as distinguished
from corporations organized under our general
incorporation statute — the Corporations Code. In
NASECO, the company involved had been organized
under the general incorporation statute and was a
sbusidiary of the National Investment Development
Corporation (NIDC) which in turn was a subsidiary of
the Philippine National Bank, a bank chartered by a
special statute. Thus, government-owned or controlled
corporations like NASECO are effectively, excluded from
the scope of the Civil Service. (emphasis supplied)
From the foregoing pronouncement, it is clear that what has been
excluded from the coverage of the CSC are those corporations
created pursuant to the Corporation Code. Significantly,
petitioners are not created under the said code, but on the contrary,
they were created pursuant to a special law and are governed
primarily by its provision.
No consideration may thus be given to petitioners' contention that
the operative act which created the water districts are the
resolutions of the respective local sanggunians and that
consequently, PD 198, as amended, cannot be considered as their
charter.
It is to be noted that PD 198, as amended is the source of
authorization and power to form and maintain a district. Section 6
of said decree provides:
Sec. 6. Formation of District. — This Act is the source of
authorization and power to form and maintain a district.
Once formed, a district is subject to the provisions of this
Act and not under the jurisdiction of any political
subdivision, . . . .
Moreover, it must be observed that PD 198, contains all the
essential terms necessary to constitute a charter creating a juridical
person. For example, Section 6(a) provides for the name that will
be used by a water district, thus:
Sec. 6. . . . To form a district, the legislative body of any
city, municipality or province shall enact a resolution
containing the following:
a) The name of the local water district, which shall
include the name of the city, municipality, or province,
or region thereof, served by said system, followed by the
words "Water District."
It also prescribes for the numbers and qualifications of the
members of the Board of Directors:
Sec. 8. Number and Qualification. — The Board of
Directors of a district shall be composed of five citizens
of the Philippines who are of voting age and residents
within the district. One member shall be a representative
of civic-oriented service clubs, one member of
representative of professional associations, one member
a representative of business, commercial or financial
organizations, one member a representative of
educational institutions and one member a
representative of women's organization. No public
official shall serve as director. Provided, however, that if
the district has availed of the financial assistance of the
Administration, the Administration may appoint any of
its personnel to sit in the board of directors with all the
rights and privileges appertaining to a regular member
for such period as the indebtedness remains unpaid in
which case the board shall be composed of six members;
(as amended by PDs Nos. 768 and 1479).
the manner of their appointment and nominations;
Sec. 9. Appointment. — Board members shall be
appointed by the appointing authority. Said
appointments shall be made from a list of nominees, if
any, submitted pursuant to Section 10. If no
nominations are submitted, the appointing authority
shall appoint any qualified person of the category to the
vacant position;
Sec.10. Nominations. — On or before October 1 of each
even numbered year, the secretary of the district shall
contact each known organization, association, or
institution being represented by the director whose term
will expire on December 31 and solicit nominations from
these organizations to fill the position for the ensuing
term. One nomination may be submitted in writing by
each such organization to the Secretary of the district on
or before November 1 of such year: This list of nominees
shall be transmitted by the Secretary of the district to the
office of the appointing authority on or before November
15 of such year and he shall make his appointment from
the list submitted on or before December 15. In the event
the appointing authority fails to make his appointments
on or before December 15, selection shall be made from
said list of nominees by majority vote of the seated
directors of the district constituting a quorum. Initial
nominations for all five seats of the board shall be
solicited by the legislative body or bodies at the time of
adoption of the resolution forming the district. Thirty
days thereafter, a list of nominees shall be submitted to
the provincial governor in the event the resolution
forming the district is by a provincial board, or the
mayor of the city or municipality in the event the
resolution forming the adoption of the district is by the
city or municipal board of councilors, who shall select
 the initial directors therefrom within 15 days after
receipt of such nominations;
their terms of office:
Sec. 11. Term of Office. — Of the five initial directors of
each newly formed district, two shall be appointed for a
maximum term of two years, two for a maximum term
of four years, and one for a maximum term of six years.
Terms of office of all directors in a given district shall be
such that the term of at least one director, but not more
then two, shall expire on December 31 of each even-
numbered year. Regular terms of office after the initial
terms shall be for six years commencing on January 1 of
odd-numbered years. Directors may be removed for
cause only, subject to review and approval of the
Administration; (as amended by PD 768).
the manner of filling up vacancies:
Sec. 12. Vacancies. — In the event of a vacancy in the
board of directors occurring more than six months
before expiration of any director's term, the remaining
directors shall within 30 days, serve notice to or request
the secretary of the district for nominations and within
30 days, thereafter a list of nominees shall be submitted
to the appointing authority for his appointment of a
replacement director from the list of nominees. In the
absence of such nominations, the appointing authority
shall make such appointment. If within 30 days after
submission to him of a list of nominees the appointing
authority fails to make an appointment, the vacancy
shall be filled from such list by a majority vote of the
remaining members of the Board of Directors
constituting a quorum. Vacancies occurring within the
last six months of an unexpired term shall also be filled
by the Board in the above manner. The director thus
appointed shall serve the unexpired term only; (as
amended by PD 768).
and the compensation and personal liability of the members of the
Board of Directors:
Sec. 13. Compensation. — Each director shall receive a
per diem, to be determined by the board, for each
meeting of the board actually attended by him, but no
director shag receive per diems in any given month in
excess of the equivalent of the total per diems of four
meetings in any given month. No director shall receive
other compensation for services to the district.
Any per diem in excess of P50.00 shall be subject to
approval of the Administration (as amended by PD 768).
Sec. 14. Personal Liability. — No director may be held to
be personally liable for any action of the district.
Noteworthy, the above quoted provisions of PD 198, as amended,
are similar to those which are actually contained in other corporate
charters. The conclusion is inescapable that the said decree is in
truth and in fact the charter of the different water districts for it
clearly defines the latter's primary purpose and its basic
organizational set-up. In other words, PD 198, as amended, is the
very law which gives a water district juridical personality. While it
is true that a resolution of a local sanggunian is still necessary for
the final creation of a district, this Court is of the opinion that said
resolution cannot be considered as its charter, the same being
intended only to implement the provisions of said decree. In
passing a resolution forming a water district, the local sanggunian
is entrusted with no authority or discretion to grant a charter for
the creation of a private corporation. It is merely given the
authority for the formation of a water district, on a local option
basis, to be exercised under and in pursuance of PD 198.
More than the aforequoted provisions, what is of important
interest in the case at bar is Section 3, par. (b) of the same decree
which reads:
Sec. 3(b). Appointing authority. — The person
empowered to appoint the members of the Board of
Directors of a local water district, depending upon the
geographic coverage and population make-up of the
particular district. In the event that more than seventy-
five percent of the total active water service connections
of a local water districts are within the boundary of any
city or municipality, the appointing authority shall be
the mayor of that city or municipality, as the case may
be; otherwise, the appointing authority shall be the
governor of the province within which the district is
located: Provided, That if the existing waterworks
system in the city or municipality established as a water
district under this Decree is operated and managed by
the province, initial appointment shall be extended by
the governor of the province. Subsequent appointments
shall be as specified herein.
If portions of more than one province are included
within the boundary of the district, and the appointing
authority is to be the governors then the power to
appoint shall rotate between the governors involved with
the initial appointments made by the governor in whose
province the greatest number of service connections
exists (as amended by PD 768).
The above-quoted section definitely sets to naught petitioners'
contention that they are private corporations. It is clear therefrom
that the power to appoint the members who will comprise the
Board of Directors belongs to the local executives of the local
subdivision units where such districts are located. In contrast, the
members of the Board of Directors or trustees of a private
corporation are elected from among the members and
stockholders thereof. It would not be amiss to emphasize at this
point that a private corporation is created for the private purpose,
benefit, aim and end of its members or stockholders. Necessarily,
said members or stockholders should be given a free hand to
choose those who will compose the governing body of their
corporation. But this is not the case here and this clearly indicates
that petitioners are definitely not private corporations.
The foregoing disquisition notwithstanding, We are, however, not
unaware of the serious repercussion this may bring to the
thousands of water districts' employees throughout the country
who stand to be affected because they do not have the necessary
civil service eligibilities. As these employees are equally protected
by the constitutional guarantee to security of tenure, We find it
necessary to rule for the protection of such right which cannot be
impaired by a subsequent ruling of this Court. Thus, those
employees who have already acquired their permanent
employment status at the time of the promulgation of this decision
cannot be removed by the mere reason that they lack the necessary
civil service eligibilities.
ACCORDINGLY, the petition is hereby DISMISSED. Petitioners
are declared "government-owned or controlled corporations with
original charter" which fall under the jurisdiction of the public
respondents CSC and COA.
SO ORDERED.
G.R. No. 149154 June 10, 2003
RODOLFO S. DE JESUS, EDELWINA DG. PARUNGAO,
HERMILO S. BALUCAN, AVELINO C. CASTILLO,
DANILO B. DE LEON (Interim Board of Directors,
Catbalogan Water District), and ALICE MARIE C.
OSORIO (Board Secretary), Petitioners,
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for certiorari1 to annul the Decision dated 12
September 2000 of the Commission on Audit ("COA") and its
Resolution dated 5 July 2001. The COA affirmed the disallowance
of payment of allowances and bonuses to members of the interim
Board of Directors of the Catbalogan Water District.
The Antecedents
An auditing team from the COA Regional Office No. VIII in
Candahug, Palo, Leyte, audited the accounts of the Catbalogan
Water District ("CWD") in Catbalogan, Samar. The auditing team
discovered that between May to December 1997 and April to June
1998, members of CWD’s interim Board of Directors ("Board")
granted themselves the following benefits: Representation and
Transportation Allowance ("RATA"), Rice Allowance, Productivity
Incentive Bonus, Anniversary Bonus, Year-End Bonus and cash
gifts. These allowances and bonuses were authorized under
Resolution No. 313, series of 1995, of the Local Water Utilities
Administration ("LWUA").
During the audit, the COA audit team issued two notices of
disallowance dated 1 October 1998 disallowing payment of the
allowances and bonuses received by petitioners, namely: Rodolfo
S. De Jesus, Edelwina DG. Parungao, Hermilo S. Balucan, Avelino
C. Castillo and Danilo B. De Leon as members of the CWD Board
as well as Alice Marie C. Osorio as the Board’s secretary
(collectively "petitioners"). The audit team disallowed the
allowances and bonuses on the ground that they run counter to
Section 13 of Presidential Decree No. 198 ("PD 198").
Petitioners appealed to the COA Regional Office No. VIII but COA
Regional Director Dominador T. Tersol denied the appeal.
Aggrieved, petitioners filed a petition for review with the COA
which in a decision dated 12 September 2000 denied the petition.
The COA also denied on 5 July 2001 petitioners’ motion for
reconsideration.
Hence, the instant petition.
The COA’s Ruling
The COA explained that members of the CWD Board cannot
receive compensation and other benefits in addition to the per
diems allowed by Section 13 of PD 198. We quote the relevant
portion of the COA’s decision:
Resolution No. 313, s. 1995, as amended, which grants
compensation and other benefits to the members of the Board of
Directors of CWD is not in harmony with the aforequoted
provisions of Sec. 13, PD 198, which speaks only of per diems, the
amount of which is subject to approval by the administrator if more
than P50.00 each for every meeting.
It is a fundamental rule in statutory construction that if a statute is
clear, plain and free from ambiguity, it must be given literal
meaning and applied without attempted interpretation. Thus, any
resolution granting allowances to directors of Water Districts other
than that authorized in Sec. 13 of PD 198 is null and void. A
statutorily proscribed benefit may not be amended by a mere
administrative fiat.2
The Issues
Petitioners contend that the COA committed grave abuse of
discretion amounting to lack or excess of jurisdiction in -
1. Motu proprio exercising jurisdiction to declare LWUA
Board Resolution No. 313, Series of 1995, as amended,
not in conformity with Section 13 of PD 198, as
amended;
2. Ruling that Section 13 of PD 198, as amended,
prohibits payment to petitioners of RATA, extraordinary
and miscellaneous expenses ("EME"), and other
allowances and bonuses;
3. Demanding the refund of the disallowed allowances
and bonuses received by petitioners as interim members
and secretary of the CWD Board.
The Court’s Ruling
The petition is meritorious in part.
The Catbalogan Water District was created pursuant to PD 198, as
amended,3 otherwise known as the Provincial Water Utilities Act
of 1973. PD 198 authorized the local legislative bodies, through an
enabling resolution, to create their respective water districts,
subject to the guidelines and regulations under PD 198. PD 198
further created the Local Water Utilities Administration
("LWUA"), a national agency, and granted LWUA regulatory
powers necessary to optimize public service from water districts.
COA ‘s Authority to Disallow Allowances and Benefits Granted
under LWUA Board Resolution No. 313, Series 1995
For authority to grant themselves additional allowances and
bonuses, petitioners rely on LWUA Resolution No. 131, series of
1995, entitled Policy Guidelines on Compensation and Other
Benefits to WD Board of Directors. Petitioners assert that LWUA
is the government agency tasked to regulate and control water
districts created pursuant to PD 198 and that LWUA has the power
to issue regulations to implement effectively PD 198. Petitioners
claim that the COA has no jurisdiction to construe any provision of
PD 198 on the compensation and other benefits granted to LWUA-
designated members of the board of water districts. By
exercising motu proprio plenary jurisdiction to construe and apply
Section 13 of PD 198, the COA encroached on the powers of the
LWUA. The COA also violated the presumption of legality and
regularity generally accorded to policy circulars issued by the
administrative agency entrusted to enforce the law.
Petitioners further claim that it is the Department of Budget and
Management ("DBM"), not the COA, that has the power to
administer the compensation and classification system of the
government service and to revise it as necessary. Finally,
citing Eslao v. COA,4 petitioners contend that the COA "can do
no less than to faithfully observe and carry into effect the mandate"
of LWUA Board Resolution No. 313, until it is declared void in the
proper forum.
Petitioners’ contentions are untenable.
Section 2, Subdivision D, Article IX of the 1987 Constitution
expressly provides:
Sec. 2(1). The Commission on Audit shall have the power,
authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or
held in trust by, or pertaining to the Government, or any
of its subdivisions, agencies or instrumentalities, including
government-owned and controlled corporations with
original charters, and on a post audit basis: (a) constitutional
bodies, commissions and offices that have been granted fiscal
autonomy under this constitution; (b) autonomous state colleges
and state universities; (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such non-
governmental entities receiving subsidy or equity, directly or
indirectly, from or through the government, which are required by
law or the granting institution to submit such audit as a condition
of subsidy or equity. However, where the internal control system
of the audited agencies is inadequate, the Commission may adopt
such measures, including temporary or special preaudit, as are
necessary and appropriate to correct the deficiencies. It shall keep
the general accounts of the government and, for such period as may
be provided by law, preserve the vouchers and other supporting
papers pertaining thereto.
(2) The Commission shall have exclusive authority, subject to the
limitations in this article, to define the scope of its audit and
examination, establish the techniques and methods required
therefore, and promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of
irregular, unnecessary, excessive, extravagant, or unconscionable
expenditures, or uses of government funds and properties.
(Emphasis supplied)
The Constitution and existing laws5 mandate the COA to audit all
government agencies, including government-owned and
controlled corporations with original charters. Indeed, the
Constitution specifically vests in the COA the authority to
determine whether government entities comply with laws and
regulations in disbursing government funds, and to disallow illegal
or irregular disbursements of government funds.6 This
independent constitutional body is tasked to be vigilant and
conscientious in safeguarding the proper use of the government’s,
and ultimately, the people’s property.7
The Court already ruled in several cases8 that a water district is a
government-owned and controlled corporation with a special
charter since it is created pursuant to a special law, PD 198. The
COA has the authority to investigate whether directors, officials or
employees of government-owned and controlled corporations,
receiving additional allowances and bonuses, are entitled to such
benefits under applicable laws. Thus, water districts are subject to
the jurisdiction of the COA.9
We cannot sustain petitioners’ claim that the COA usurped the
functions of the LWUA in construing PD 198 and disallowing
payment of the additional allowances and bonuses. Such a theory
leads to the absurd situation where the board of an administrative
agency, by the mere act of issuing a resolution, can put to naught
the broad and extensive powers granted to the COA by the
Constitution. This will prevent the COA from discharging its
constitutional duty as an effective, efficient and independent
watchdog of the financial operations of the government.10
Petitioners’ reliance on Eslao11 is misplaced. In Eslao, the
Department of Environment and Natural Resources and the
Pangasinan State University entered into an agreement to evaluate
government reforestation programs. The Asian Development Bank
granted a loan to fund the implementation of the agreement. The
personnel involved in the project were paid under the DBM-issued
National Compensation Circular No. 53, which dealt with foreign-
assisted projects. The COA disallowed the payment on the ground
that the compensation should fall under the DBM-issued
Compensation Policy Guidelines No. 80-4, which governs all
projects and provides for lower compensation rates. In reversing
the COA, the Court held that National Compensation Circular No.
53 amended Compensation Policy Guidelines No. 80-4 by
excepting from the latter’s scope foreign-assisted projects. The
Court declared that the COA cannot "substitute its own judgment
for any applicable x x x administrative regulation with the
wisdom or propriety of which, however, it does not agree, at least
not before such x x x regulation is set aside by the x x x courts x x
x."
Clearly, Eslao is not in point. The difference is that in Eslao, the
COA accepted the wisdom of Compensation Policy Guidelines No.
80-4 but refused to accept the propriety of the exception to the
circular embodied in National Compensation Circular No. 53. The
DBM issued both compensation regulations under its legislative
authority to "classify positions and determine appropriate salaries
for specific position classes and. review appropriate salaries for
specific position classes and review the compensation benefits
programs of agencies x x x."12 Clearly, the COA had ample
legislative authority to issue both compensation regulations. In the
instant case, the COA was simply exercising its constitutional duty
to examine and audit disbursements of public funds that are
patently beyond what the law allows.
Petitioners confuse the COA which is an independent
constitutional body with the DBM which is under the executive
branch of the government. The DBM is responsible for formulating
and implementing the national budget.13 It is tasked to -
assist the President in the preparation of a national resources and
expenditures budget, preparation, execution and control of the
National budget, preparation and maintenance of accounting
systems essential to the budgetary process, achievement of more
economy and efficiency in the management of government
operations, administration of compensation and position
classification systems, assessment of organization effectiveness
and review and evaluation of legislative proposals having
budgetary or organizational implications.14
While the DBM is the government agency tasked to release
government funds, the duty to examine and audit government
accounts and expenditure properly pertains to the COA.15
PD 198 Expressly Prohibits the Grant of RATA, EME, and Bonuses
to Members of the Board of Water Districts
Section 13 of PD 198, as amended, reads as follows:
Compensation. - Each director shall receive a per diem, to be
determined by the board, for each meeting of the board actually
attended by him, but no director shall receive per diems in any
given month in excess of the equivalent of the total per diems of
four meetings in any given month. No director shall receive
other compensation for services to the district.
Any per diem in excess of P50 shall be subject to approval of the
Administration. (Emphasis supplied)
Petitioners argue that the term "compensation" in Section 13 of PD
198 does not include RATA, EME, bonuses and other similar
benefits disallowed in this case.
This issue was already resolved in the similar case of Baybay
Water District v. Commission on Audit.16 In Baybay
Water District, the members of the board of Baybay Water
District also questioned the disallowance by the COA of payment
of RATA, rice allowance and excessive per diems. The Court ruled
that PD 198 governs the compensation of members of the board of
water districts. Thus, members of the board of water districts
cannot receive allowances and benefits more than those allowed by
PD 198. Construing Section 13 of PD 198, the Court declared:
xxx Under S 13 of this Decree, per diem is precisely intended to be
the compensation of members of board of directors of water
districts. Indeed, words and phrases in a statute must be given
their natural, ordinary, and commonly-accepted meaning, due
regard being given to the context in which the words and phrases
are used. By specifying the compensation which a director is
entitled to receive and by limiting the amount he/she is allowed to
receive in a month, and, in the same paragraph, providing "No
director shall receive other compensation" than the amount
provided for per diems, the law quite clearly indicates that
directors of water districts are authorized to receive only the per
diem authorized by law and no other compensation or allowance
in whatever form.
Section 13 of PD 198 is clear enough that it needs no interpretation.
It expressly prohibits the grant of compensation other than the
payment of per diems, thus preempting the exercise of any
discretion by water districts in paying other allowances and
bonuses.17
Refund of the Allowances and Benefits Received in Good Faith
Relying mainly on Civil Liberties Union v. Executive
Secretary,18 petitioners claim that the COA grossly erred in
requiring them to refund the allowances and bonuses they received
in good faith. In Civil Liberties Union, the Court declared
Executive Order No. 284 unconstitutional as it allows Cabinet
members, undersecretaries or assistant secretaries to hold
multiple positions in violation of the express prohibition in Section
13, Article VII of the 1987 Constitution. However, the Court held
that during their tenure in the questioned positions, respondents
are de facto officers and entitled to emoluments for actual services
rendered. The Court explained that "in cases were there is no de
jure officer, a de facto officer, who in good faith has had possession
of the office and has discharged the duties pertaining thereto, is
legally entitled to the emoluments of the office, and may in an
appropriate action recover the salary, fees and other
compensations attached to the office."19 The Court considered it
unjust that the public should benefit from the services of a de
facto officer and then be freed from all liability to pay for such,
services. Thus, the Court ruled that any per diem, allowances or
other emoluments received by the respondents in Civil Liberties
Union for actual services rendered in the questioned positions may
be retained by them.
The scenario in petitioners’ case is different. The CWD Board
appointed petitioners pursuant to PD 198. Petitioners received
allowances and bonuses other than those granted to their office by
PD 198. Petitioners cannot claim any compensation other than the
per diem provided by PD 198 precisely because no other
compensation is attached to their office.
Nevertheless, our pronouncement in Blaquera v.
Alcala20 supports petitioners’ position on the refund of the
benefits they received. In Blaquera, the officials and employees
of several government departments and agencies were paid
incentive benefits which the COA disallowed on the ground that
Administrative Order No. 29 dated 19 January 1993 prohibited
payment of these benefits. While the Court sustained the COA on
the disallowance, it nevertheless declared that:
Considering, however, that all the parties here acted in good faith,
we cannot countenance the refund of subject incentive benefits for
the year 1992, which amounts the petitioners have already
received. Indeed, no indicia of bad faith can be detected under the
attendant facts and circumstances. The officials and chiefs of
offices concerned disbursed such incentive benefits in the honest
belief that the amounts given were due to the recipients and the
latter accepted the same with gratitude, confident that they richly
deserve such benefits.
This ruling in Blaquera applies to the instant
case.1âwphi1 Petitioners here received the additional allowances
and bonuses in good faith under the honest belief that LWUA
Board Resolution No. 313 authorized such payment. At the time
petitioners received the additional allowances and bonuses, the
Court had not yet decided Baybay Water District.21Petitioners
had no knowledge that such payment was without legal basis.
Thus, being in good faith, petitioners need not refund the
allowances and bonuses they received but disallowed by the COA.
WHEREFORE, the Decision of the Commission on Audit dated
12 September 2000 as well as its Resolution dated 5 July 2001 are
AFFIRMED with MODIFICATION. Petitioners need not refund
the Representation and Transportation Allowance, Rice
Allowance, Productivity Incentive Bonus, Anniversary Bonus,
Year-End Bonus and cash gifts, received per Resolution No. 313,
series of 1995, of the Local Water Utilities Administration, between
May to December 1997 and April to June 1998.
SO ORDERED.
G.R. No. 100947 May 31, 1993
PNOC ENERGY DEVELOPMENT CORPORATION and
MARCELINO TONGCO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
MANUEL S. PINEDA, respondents.
NARVASA, C.J.:
The applicability to private respondent Manuel S. Pineda of
Section 66 of the Election Code is what is chiefly involved in the
case at bar. Said section reads as follows:
Sec. 66. Candidates holding appointive office or
position.— Any person holding a public appointive
office or position, including active members of the
Armed Forces of the Philippines, and officers and
employees in government-owned or controlled
corporations, shall be considered ipso facto resigned
from his office upon the filing of his certificate of
candidacy.
Manuel S. Pineda was employed with the Philippine National Oil
Co.-Energy Development Corp. (PNOC-EDC), as subsidiary of the
Philippine National Oil Co., from September 17, 1981, when he was
hired as clerk, to January 26, 1989, when his employment was
terminated. The events leading to his dismissal from his job are not
disputed.
In November, 1987, while holding the position of Geothermal
Construction Secretary, Engineering and Construction
Department, at Tongonan Geothermal Project, Ormoc City, Pineda
decided to run for councilor of the Municipality of Kananga, Leyte,
in the local elections scheduled in January, 1988, and filed the
corresponding certificate of candidacy for the position. Objection
to Pineda's being a candidate while retaining his job in the PNOC-
EDC was shortly thereafter registered by Mayor Arturo Cornejos of
Kananga, Leyte. The mayor communicated with the PNOC-EDC —
thru Engr. Ernesto Patanao, Resident Manager, Tongonan
Geothermal Project — to express the view that Pineda could not
actively participate in politics unless he officially resigned from
PNOC-EDC.1 Nothing seems to have resulted from this protest.
The local elections in Leyte, scheduled for January, 1988, were
reset to and held on February 1, 1988. Pineda was among the
official candidates voted for, and eventually proclaimed elected to,
the office of councilor. Some vacillation appears to have been
evinced by Pineda at about this time. On February 8, 1988, he
wrote to the COMELEC Chairman, expressing his desire to
withdraw from the political contest on account of what he
considered to be election irregularities;2 and on March 19, 1988, he
wrote to the Secretary of Justice seeking legal opinion on the
question, among others, of whether or not he was "considered
automatically resigned upon . . . filing of . . . (his) certificate of
candidacy," and whether or not, in case he was elected, he could
"remain appointed to any corporate offspring of a government-
owned or controlled corporation."3 Nevertheless, Pineda took his
oath of office in June, 1988 as councilor-elect of the Municipality
of Kananga, Leyte.4 And despite so qualifying as councilor, and
assuming his duties as such, he continued working for PNOC-EDC
as the latter's Geothermal Construction Secretary, Engineering and
Construction Department, at Tongonan Geothermal Project,
Ormoc City.
On June 7, 1988, Marcelino M. Tongco, Department Manager of
the Engineering and Construction Department, PNOC-EDC,
addressed an inquiry to the latter's Legal Department regarding
the status of Manuel S. Pineda as employee in view of his candidacy
for the office of municipal councilor.5 In response, the Legal
Department rendered an opinion to the effect that Manuel S.
Pineda should be considered ipso facto resigned upon the filing of
his Certificate of Candidacy in November, 1987, in accordance with
Section 66 of the Omnibus Election Code.6
Pineda appealed the PNOC-EDC Legal Department's ruling to N.C.
Vasquez, the Vice-President of PNOC-EDC, on July 14, 1988. In his
letter of appeal,7 he invoked a "court ruling in the case of Caagusan
and Donato vs. PNOC-Exploration Corp. . . . (to the effect that)
while the government-owned or controlled corporations are
covered by the Civil Service Law (as is taken to mean in Sec. 66 of
the Omnibus Election Code of 1985) (sic), the subsidiaries or
corporate offsprings are not." In the same letter he declared his
wish to continue resign from his position as councilor/member of
the Sangguniang Bayan.
He also wrote a letter dated October 1, 1988 to the Department of
Local Government inquiring about the status of his employment
with PNOC-EDC in relation to his election as member of the
Sangguniang Bayan. He was advised by DLG Undersecretary
Jacinto T. Rubillo, Jr., by letter dated March 31, 1989, that there
was no legal impediment to his continuing in his employment with
PNOC-EDC while holding at the same time the elective position of
municipal councilor. Cited as basis by Undersecretary Rubillo was
Section 2(1) Article IX-B of the 1987 Constitution and this Court's
ruling in NASECO vs. NLRC, 168 SCRA 122. Undersecretary
Rubillo went on to say that Pineda could receive his per diems as
municipal councilor as well as the corresponding representation
and transportation allowance [RATA] "provided the PNOC-EDC
charter does not provide otherwise and public shall not be
prejudiced."8
The PNOC-EDC did not, however, share the Undersecretary's
views. On January 26, 1989, the PNOC-EDC, through Marcelino
Tongco (Manager, Engineering and Construction Department),
notified Manuel S. Pineda in writing (1) that after having given him
"ample time" to make some major adjustments before . . .
separation from the company," his employment was being
terminated pursuant to Section 66 of the Omnibus Election Code,
effective upon receipt of notice, and (2) that he was entitled to
"proper compensation" for the services rendered by him from the
time he filed his certificate of candidacy until his actual separation
from the service.9
On October 16, 1989, Pineda lodged a complaint for illegal
dismissal in the Regional Arbitration Branch No. VIII, NLRC,
Tacloban City. Impleaded as respondents were the PNOC-EDC and
the Manager of its Engineering and Construction Department,
Marcelino M. Tongco.10
After due proceedings, Labor Arbiter Araceli H. Maraya, to whom
the case was assigned, rendered a decision on December 28,
1990,11 declaring Manuel S. Pineda's dismissal from the service
illegal, and ordering his reinstatement to his former position
without loss of seniority rights and payment of full back wages
corresponding to the period from his illegal dismissal up to the
time of actual reinstatement. The Arbiter pointed out that the
ruling relied upon by PNOC-EDC to justify Pineda's dismissal from
the service, i.e., NHA v. Juco,12 had already been abandoned; and
that "as early as November 29, 1988," the governing principle laid
down by case law — in light of Section 2 (1), Article IX-B of the 1987
Constitution13 — has been that government-owned or controlled
corporations incorporated under the Corporation Code, the
general law — as distinguished from those created by special
charter — are not deemed to be within the coverage of the Civil
Service Law, and consequently their employees, like those of the
PNOC-EDC, are subject to the provisions of the Labor Code rather
than the Civil Service Law.14
The PNOC-EDC filed an appeal with the National Labor Relations
Commission. The latter dismissed the appeal for lack of merit in a
decision dated April 24, 1991. 15 PNOC-EDC sought
reconsideration;16 its motion was denied by the Commission in a
Resolution dated June 21, 1991.17
It is this decision of April 24, 1991 and the Resolution of June 21,
1991 that the PNOC-EDC seeks to be annulled and set aside in the
special civil action for certiorari at bar. It contends that the
respondent Commission gravely abused its discretion:
1) when it ruled that Manuel S. Pineda was not
covered by the Civil Service Rules when he
filed his candidacy for the 1988 local
government elections in November 1987;
2) when it ruled that Pineda was not covered
by the Omnibus Election Code at the time he
filed his certificate of candidacy for the 1988
local elections;
 3) when it ruled that Pineda was illegally
dismissed despite the fact that he was
considered automatically resigned pursuant
to Section 66 of the Omnibus Election Code;
and
4) when it ruled that Pineda could occupy a
local government position and be
simultaneously employed in a government-
owned or controlled corporation, a situation
patently violative of the constitutional
prohibition on additional compensation.
Acting on the petition, this Court issued a temporary restraining
order enjoining the respondent NLRC from implementing or
enforcing its decision and resolution dated April 24, 1991 and June
21, 1991, respectively.
In the comment required of him by the Court, the Solicitor General
expressed agreement with the respondent Commission's holding
that Manuel Pineda had indeed been illegally separated from his
employment in the PNOC-EDC; in other words, that his running
for public office and his election thereto had no effect on his
employment with the PNOC-EDC, a corporation not embraced
within the Civil Service.
Petitioner PNOC-EDC argues that at the time that Pineda filed his
certificate of candidacy for municipal councilor in November,
1987, the case law "applicable as far as coverage of government-
owned or controlled corporations are concerned . . . ( was to the
following effect):18
As correctly pointed out by the Solicitor
General, the issue of jurisdiction had been
resolved in a string of cases starting with
the National Housing Authority vs. Juco (134
SCRA 172) followed by Metropolitan
Waterworks and Sewerage System
vs. Hernandez (143 SCRA 602) and the
comparatively recent case of Quimpo
vs. Sandiganbayan (G.R. No. 72553, Dec. 2,
1986) in which this Court squarely ruled that
PNOC subsidiaries, whether or not originally
created as government-owned or controlled
corporations are governed by the Civil
Service Law.
This doctrine, petitioner further argues, was not "automatically
reversed" by the 1987 Constitution because not "amended or
repealed by the Supreme Court or the Congress;"19 and this Court's
decision in November, 1988, in National Service Corporation
vs. NLRC, supra20 — abandoning the Juco ruling — "cannot be
given retroactive effect . . . (in view of ) the time-honored principle
. . . that laws (judicial decisions included) shall have no retroactive
effect, unless the contrary is provided (Articles 4 and 8 of the New
Civil Code of the Philippines)."
Section 2 (1), Article IX of the 1987 Constitution provides as
follows:
The civil service embraces all branches,
subdivisions, instrumentalities, and agencies
of the Government, including government-
owned or controlled corporations with
original charters.
Implicit in the provision is that government-owned or controlled
corporations without original charters — i.e., organized under the
general law, the Corporation Code — are not comprehended within
the Civil Service Law. So has this Court construed the provision.21
In National Service Corporation (NASECO), et al. v. NLRC, et al.,
etc.,22 decided on November 29, 1988, it was ruled that the 1987
Constitution "starkly varies" from the 1973 charter — upon which
the Juco doctrine rested — in that unlike the latter, the present
constitution qualifies the term, "government-owned or controlled
corporations," by the phrase, "with original charter;" hence, the
clear implication is that the Civil Service no longer includes
government-owned or controlled corporations without original
charters, i.e., those organized under the general corporation
law.23 NASECO further ruled that the Juco ruling should not apply
retroactively, considering that prior to its promulgation on
January 17, 1985, this Court had expressly recognized the
applicability of the Labor Code to government-owned or controlled
corporations.24
Lumanta, et al. v. NLRC, et al.,25 decided on February 8, 1989,
made the same pronouncement: that Juco had been superseded by
the 1987 Constitution for implicit in the language of Section 2 (1),
Article IX thereof, is the proposition that government-owned or
controlled corporations without original charter do not fall under
the Civil Service Law but under the Labor Code.
And in PNOC-EDC v. Leogardo, etc., et al.,26 promulgated on July
5, 1989, this Court ruled that conformably with the apparent
intendment of the NASECO case, supra, since the PNOC-EDC, a
government-owned or controlled company had been incorporated
under the general Corporation Law, its employees are subject to
the provisions of the Labor Code.
It is thus clear that the Juco doctrine prevailing at the time of the
effectivity of the fundamental charter in 1987 — i.e., that
government-owned or controlled corporations were part of the
Civil Service and its employees subject to Civil Service laws and
regulations,27 regardless of the manner of the mode of their
organization or incorporation — is no longer good law, being at
"stark variance," to paraphrase NASECO, with the 1987
Constitution. In other words, and contrary to the petitioner's view,
as of the effectivity of the 1987 Constitution, government-owned or
controlled corporations without original charters, or, as Mr.
Justice Cruz insists in his concurring opinion in NASECO
v.NLRC,28 a legislative charter (i.e., those organized under the
Corporation Code), ceased to pertain to the Civil Service and its
employees could no longer be considered as subject to Civil Service
Laws, rules or regulations.
The basic question is whether an employee in a government-owned
or controlled corporations without an original charter (and
therefore not covered by Civil Service Law) nevertheless falls
within the scope of Section 66 of the Omnibus Election Code, viz.:
Sec. 66. Candidates holding appointive office
or position.— Any person holding a public
appointive office or position, including active
members of the Armed Forces of the
Philippines, and officers and employees in
government-owned or controlled
corporations, shall be considered ipso
facto resigned from his office upon the filing
of his certificate of candidacy.
When the Congress of the Philippines reviewed the Omnibus
Election Code of 1985, in connection with its deliberations on and
subsequent enactment of related and repealing legislation — i.e.,
Republic Acts Numbered 7166: "An Act Providing for
Synchronized National and Local Elections and for Electoral
Reforms, Authorizing Appropriations Therefor, and for Other
Purposes" (effective November 26, 1991), 6646: "An Act
Introducing Additional Reforms in the Electoral System and for
Other Purposes" (effective January 5, 1988) and 6636: "An Act
Resetting the Local Elections, etc., (effective November 6, 1987), it
was no doubt aware that in light of Section 2 (1), Article IX of the
1987 Constitution: (a) government-owned or controlled
corporations were of two (2) categories — those with original
charters, and those organized under the general law — and (b)
employees of these corporations were of two (2) kinds — those
covered by the Civil Service Law, rules and regulations because
employed in corporations having original charters, and those not
subject to Civil Service Law but to the Labor Code because
employed in said corporations organized under the general law, or
the Corporation Code. Yet Congress made no effort to distinguish
between these two classes of government-owned or controlled
corporations or their employees in the Omnibus Election Code or
subsequent related statutes, particularly as regards the rule that
any employee "in government-owned or controlled corporations,
shall be considered ipso facto resigned from his office upon the
filing of his certificate of candidacy."29
Be this as it may, it seems obvious to the Court that a government-
owned or controlled corporation does not lose its character as such
because not possessed of an original charter but organized under
the general law. If a corporation's capital stock is owned by the
Government, or it is operated and managed by officers charged
with the mission of fulfilling the public objectives for which it has
been organized, it is a government-owned or controlled
corporation even if organized under the Corporation Code and not
under a special statute; and employees thereof, even if not covered
by the Civil Service but by the Labor Code, are nonetheless
"employees in government-owned or controlled corporations,"
and come within the letter of Section 66 of the Omnibus Election
Code, declaring them "ipso facto resigned from . . . office upon the
filing of . . . (their) certificate of candidacy."
What all this imports is that Section 66 of the Omnibus Election
Code applies to officers and employees in government-owned or
controlled corporations, even those organized under the general
laws on incorporation and therefore not having an original or
legislative charter, and even if they do not fall under the Civil
Service Law but under the Labor Code. In other words, Section 66
constitutes just cause for termination of employment in addition
to those set forth in the Labor Code, as amended.
The conclusions here reached make unnecessary discussion and
resolution of the other issues raised in this case.
WHEREFORE, the petition is GRANTED; the decision of public
respondent National Labor Relations Commission dated April 24,
1991 and its Resolution dated June 21, 1991 are NULLIFIED AND
SET ASIDE; and the complaint of Manuel S. Pineda is
DISMISSED. No costs.
SO ORDERED.
G.R. No. 104389 May 27, 1994
ZAMBOANGA CITY WATER DISTRICT, petitioner,
vs.
PRESIDING COMMISSIONER MUSIB M. BUAT,
COMMISSIONERS LEON G. GONZAGA, JR., and OSCAR
N. ABELLA, and PRIVATE RESPONDENTS LUIS C.
MARIANO, FELIX G. LAQUIO, FRANCISCO C.
OLIVEROS, MARITTA S. DELOS REYES,
FRANCISBELLO D. CRUZ, EXEQUIEL M. DAYOT, JR.,
ERIC A. DELGADO, RICARDO M. FERRER, JOVITO
DUHAYLUNGSOD, ANTONIO F. ALCANTARA,
RICARDO M. CORTEZ, TEOBALDO M. FLORES, ZOILO
J. CAPUY, BERNARDINO T. ALDINETE, ANGIEL M.
ESPINA, WINIFRIDO P. CASIMIRO, ENRIQUE M.
MANUEL, JR., JOSE P. ATILANO, ANTONIO F. DELOS
REYES, JR., ELEUTERIO S. TARROZA, ANTONIO B.
DESPALO, ROLANDO B. GARCIA, CESAR P. REYES,
GENEROSO L. CODINO, MARIO E. FERNANDO,
BERNARDO B. GEROLAGA, ANTONIO F. VESAGAS,
ANTONIO L. TUBIG, SAILILLA A. ABDULLA, NOEL A.
FERNANDO, SEVERIANO CASIMIRO, RODOLFO
DESCALZO, ARTEMIO DE LEON, and SANTIAGO
FERRER, respondents.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules
of Court to reverse and set aside the Resolutions dated October 24,
1991 and February 19, 1992 of the National Labor Relations
Commission (NLRC) in NLRC CA No. M-000352.
I On May 17, the Executive Labor Arbiter issued an order denying
The Zamboanga City Water District, petitioner herein, is a
government-owned and controlled corporation engaged in the
business of supplying water in the City of Zamboanga. Private
respondents are all employees of petitioner.
In March 1987, a strike occurred in the company. It was conducted
and participated in by private respondents, for which reason they
were separated from their employment. Petitioner thereafter filed
on March 17, 1987 a complaint. before the Labor Arbiter to declare
the said strike illegal (NLRC Case No. RAB-IX-03-0090-87). The
following day, March 18, the Zamboanga Utilities Labor Union
(ZULU), to which private respondents belonged, filed before the
Labor Arbiter, a complaint against petitioner for illegal dismissal
and unpaid wages (NLRC Case No. RAB-IX-03-0092-87).
The two cases were consolidated and heard together, and on April
19, 1988, a consolidated decision was rendered by the Executive
Labor Arbiter declaring both the strike and the dismissal of private
respondents illegal and ordering the reinstatement of private
respondents to their former positions, without loss of seniority
rights and privileges, but without back wages.
Petitioner appealed to the NLRC. On July 17, 1990, the NLRC,
through respondent Commissioners, affirmed the decision of the
Executive Labor Arbiter, with the sole modification that the strike
leader, respondent Felix Laquio herein, be suspended from work
without pay for a period of six months, effective ten days from
receipt of the decision.
Petitioner received a copy of the decision of the NLRC on August
27 (Rollo, p. 32). Three days later, private respondents filed with
the Executive Labor Arbiter a motion for execution of the said
decision. On September 24, the Executive Labor Arbiter granted
the writ of execution and ordered petitioner to reinstate all private
respondents.
On September 28, this Court issued a restraining order in G.R. Nos.
95219-20 enjoining, until further orders, the execution of the
NLRC Decision dated July 17, 1990. However, on March 13, 1991,
we dismissed the petition, affirmed the NLRC Decision dated July
17, 1990 and lifted the restraining order granted earlier.
Petitioner received a copy of the decision of the Supreme Court on
April 10 and on April 16, it reinstated 27 of the respondent
employees. On the same day, petitioner informed the Executive
Labor Arbiter that respondent Laquio would be reinstated on
October 16 after the expiration of Laquio's six-month suspension.
On April 17, private respondents filed a motion to compel the
immediate reinstatement of respondent Laquio and the payment
of their back wages. According to private respondents, the decision
of the NLRC was executory immediately upon receipt by petitioner
of a copy thereof on August 27, 1990.
private respondents' motion. Private respondents then appealed to
the NLRC (NLRC CA No. M-00352). On October 24, the NLRC set
aside the questioned order of the Executive Labor Arbiter and
ordered respondent Laquio's reinstatement, if not yet reinstated,
and granted full back wages to him from March 6, 1991 up to the
day prior to his actual reinstatement; and to the other private
respondents from March 21, 1989 up to April 15, 1991, including
the period of effectivity of the temporary restraining order of this
Court in G.R. Nos. 95219-20.
Petitioner moved for a reconsideration, which the NLRC however
denied on February 19, 1992.
Hence, this petition.
II
Petitioner contends that the NLRC had no jurisdiction to issue the
resolutions in question because jurisdiction over labor disputes is
vested in the Civil Service Commission. It also argues that the
NLRC committed grave abuse of discretion amounting to lack or in
excess of jurisdiction when it ordered the payment of the salaries
of private respondent during the effectivity of the restraining order
of this Court in G.R. Nos. 95219-20.
There is no dispute that petitioner, a water district with an original
charter, is a government-owned and controlled corporation. The
established rule is that the hiring and firing of employees of
government-owned and controlled corporations are governed by
the provisions of the Civil Service Law and Civil Service Rules and
Regulations (Tanjay Water District v. Gabaton, 172 SCRA 253
[1989]; Hagonoy Water District v. National Labor Relations
Commission, 165 SCRA 272 [1988]; National Housing Corporation
v. Juco, 134 SCRA 172 [1985]; Baguio Water District v. Trajano, 127
SCRA 730 [1984]. Jurisdiction over the strike and the dismissal of
private respondents is therefore lodged not with the NLRC but with
the Civil Service Commission.
Nevertheless, petitioner never raised the issue of lack of
jurisdiction before the Executive Labor Arbiter, the NLRC or even
this Court in G.R. Nos. 95219-20. In fact, petitioner itself filed the
complaint before the Executive Labor Arbiter in NLRC Case No.
RAB-IX-03-0090-87, sought affirmative relief therefrom and even
participated actively in the proceedings below. It is only now in this
case before us, after the NLRC ordered payment of back wages, that
petitioner raises the issue of lack of jurisdiction. Indeed, it is not
fair for a party who has voluntarily invoked the jurisdiction of a
tribunal in a particular matter to secure an affirmative relief
therefrom, to afterwards repudiate and deny that very same
jurisdiction to escape a penalty (Ocheda v. Court of Appeals, 214
SCRA 629 [1992]; Royales v. Intermediate Appellate Court, 127
SCRA 470 [1984]; Tijam v. Sibonghanoy, 23 SCRA 29 [1968]).
Petitioner is thus estopped from assailing the jurisdiction of the
NLRC and is bound to respect all the proceedings below.
The second issue involves the determination of when private
respondents should be reinstated as ordered by the decision of the
Executive Labor Arbiter dated April 19, 1988. Their salaries start
to toll from said date.
Petitioner claims that private respondents, except respondent
Laquio, were entitled to reinstatement only after April 10, 1991
when it received a copy of the decision of the Supreme Court in
G.R. Nos. 95219-20. Petitioner reinstated said private respondents
on April 16, 1991. In the case of respondent Laquio, petitioner
reinstated him on October 16, 1991 after the expiration of the six-
month suspension.
Petitioner argues that the execution of the NLRC decision dated
July 17, 1990 was suspended by the temporary restraining order
issued by this Court in G.R. Nos. 95219-20.
The Executive Labor Arbiter agreed with petitioner's contention.
The NLRC was of the view that private respondents should have
been reinstated on March 21, 1989 and paid their back wages from
that date to April 15, 1991 including the period of effectivity of the
temporary restraining order of this Court in G.R. Nos. 95219-20.
Respondent Laquio on the other hand, should have been reinstated
on March 6, 1991 and paid his back wages from said date up to the
day prior to his actual reinstatement.
The reckoning date of March 21, 1989 used by the NLRC was the
date of effectivity of R.A. No. 6715, amending the third paragraph
of Article 223 of the Labor Code which provides.
xxx xxx xxx
In any event, the decision of the Labor Arbiter
reinstating a dismissed or separated
employee, insofar as the reinstatement aspect
is concerned, shall immediately be executory,
even pending appeal. The employee shall
either be admitted back to work under the
same terms and conditions prevailing prior to
his dismissal or separation or, at the option of
the employer, merely reinstated in the payroll.
The posting of a bond by the employer shall
not stay the execution for reinstatement
provided herein (Emphasis supplied).
xxx xxx xxx
Under the said provision of law, the decision of the Labor Arbiter
reinstating a dismissed or separated employee insofar as the
reinstatement aspect is concerned, shall be immediately executory,
even pending appeal. The employer shall reinstate the employee
concerned either by: (a) actually admitting him back to work under
the same terms and conditions prevailing prior to his dismissal or
separation; or (b) at the option of the employer, merely reinstating
him in the payroll. Immediate reinstatement is mandated and is
not stayed by the fact that the employer has appealed, or has posted
a cash or surety bond pending appeal.
The issuance of the temporary restraining order in G.R. Nos.
95219-20 did not nullify the rights of private respondents to their
reinstatement and to collect their wages during the period of the
effectivity of the order but merely suspended the implementation
thereof pending the determination of the validity of the NLRC
resolutions subject of the petition. Naturally, a finding of this Court
that private respondents were not entitled to reinstatement would
mean that they had no right to collect any back wages. On the other
hand, where the Court affirmed the decision of the NLRC and
recognized the right of private respondents to reinstatement, as in
G.R. Nos. 95219-20, private respondents are entitled to the wages
accruing during the effectivity of the temporary restraining order.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
G.R. No. 113212 December 29, 1995
THE DEPARTMENT OF HEALTH (DR. JOSE N.
RODRIGUEZ MEMORIAL HOSPITAL) and CESAR J.
VIARDO, M.D., in his capacity as Director of the Dr. Jose
N. Rodriguez Memorial Hospital, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR
ARBITER CORNELIO L. LINSANGAN and CEFERINO R.
LAUR, respondents.
HERMOSISIMA, JR., J.:
The eternal problem of jurisdiction over Government employees is
again posed in this case: Which Government agency — the National
Labor Relations Commission or the Civil Service Commission —
has jurisdiction over contests relating to the civil service?
This is a Petition for Certiorari and Prohibition filed by the
Department of Health in behalf of the Dr. Jose N. Rodriguez
Memorial Hospital (DJRMH) and its Director, Cesar J. Viardo,
seeking to review and set aside the Resolution of the National
Labor Relations Commission in NLRC NCR CA No. 002864-92
(NLRC Case No. 00-09-05194-90), dated September 7, 1993,
which dismissed herein petitioners' appeal from the January 2,
1992 Decision of Labor Arbiter Cornelio L. Linsangan.
The antecedent facts, culled from the assailed Decision rendered
by Labor Arbiter Cornelio Linsangan and that of the NLRC,
respectively, as well as from the pleadings of the parties, are not in
dispute:
Private respondent Ceferino R Laur was a patient of the then Tala
Leprosarium (now Jose N. Rodriguez Memorial Hospital), having
been admitted thereto in 1951 for treatment of Hansen's disease,
commonly termed leprosy. He was discharged in 1956 after he was
deemed to have been cured of his affliction.
In 1975, he was employed at the DJRMH as a patient-assistant by
the then Hospital Director, Dr. Artemio F. Runez, upon the
recommendation of the Barangay Captain of Tala. Specifically
assigned as a member of the Patient-Assistant Police Force, he was
accorded a compensation/salary, initially, in the amount of
P110.00. This was gradually increased through the years,
depending upon the availability of funds. His salary was chargeable
to the maintenance and operating expenses of the hospital.
On September 15, 1989, complaints for Alarm and Scandal, Oral
Defamation, Grave Threats, Concealment of Deadly Weapon,
Violation of the Code of Ethics of Policemen, and Conduct
Unbecoming of a Police Officer were filed against said private
respondent, pursuant to a report made by his Chief of Police. Upon
a finding of guilt of the aforesaid offenses, the said private
respondent was meted the penalty of suspension for sixty (60)
days, with a stern warning that a repetition of the same would
result in his outright dismissal by petitioner Dr. Cesar J. Viardo in
his capacity as Chief of Hospital.1
On July 15, 1990, private respondent Laur got involved in the
mauling of one, Jake Bondoc, along with two policemen, Corporal
Ferrer and Patrolman Berdon, Private respondent's account of the
incident is to the effect that, while private respondent and his
companions were manning their posts at the hospital's
Administration Building, a group of twelve (12) young boys
engaged another group of four male youngsters (4) in a stone-
throwing encounter. This resulted in damage to the windows of the
nearby Holy Rosary College. The caretaker of the college, Agustin
Chan, while assessing the damage caused, was chased by the
smaller group and threw stones at him. Agustin Chan ran and took
refuge at the administration building where private respondent
and the two policemen were on guard duty. It was at this point that
one of the policemen hit one of the stone throwers with a night
stick.2
A complaint filed by a certain Jake Bondoc, one of the young boys,
against private respondent and his companions provoked an
investigation conducted on July 27, 1990, during which
complainant Bondoc pointed to private respondent as the party
responsible for his injuries even as Patrolman Berdon admitted to
having hit Bondoc.
On August 21, 1990, private respondent was dismissed by the Chief
of Hospital, Dr. Cesar J. Viardo per Office Order No. 101, s-90, on
the basis of the Public Assistance Complaints Unit's (PACU)
report/investigation finding private respondent and his
companions to have indeed mauled Jake Bondoc. The two
policemen were merely suspended.
Consequently, on September 26, 1990, private respondent filed
with the National Labor Relations Commission a complaint for
illegal dismissal with additional claims for payment of wage
differentials, holiday pay, overtime pay and 13th month pay, as well
as payment of moral and exemplary damages, attorney's fees and
expenses of litigation and with prayer for reinstatement without
loss of seniority rights against Dr. Jose N. Rodriguez Memorial
Hospital (DJRMH) and Dr. Cesar J. Viardo. This was docketed as
"NLRC NCR Case No. 00-09-05194-90" and subsequently
assigned to Labor Arbiter Cornelio Linsangan.
On January 2, 1993, Labor Arbiter Cornelio Linsangan rendered
his Decision in private respondent's favor, the dispositive portion
of which reads:
WHEREFORE, judgment is hereby rendered
ordering the respondent hospital to:
1. reinstate complainant to his former position
or if not possible, pay him separation pay
equivalent to one month salary for every year
of service;
2. pay complainant the amount of
P198,000.00 representing underpaid wages,
unpaid overtime, holiday pay and 13th month
pay;
3. pay the complainant full backwages which
as of this date amounts to P49,088.00;
4. pay the complainant the amount of
P20,000.00 as moral and exemplary
damages; and
5. pay the complainant attorney's fees
equivalent to 10% of the total award. 3
Respondent Labor Arbiter Linsangan so ruled because first, he has
determined that, contrary to the petitioners' position that private
respondent's employment was part of his medication and
rehabilitative therapy, private respondent was in truth an
employee in contemplation of the Labor Code, the existence of an
employer-employee relationship between petitioner hospital and
private respondent being evident from the fact that private
respondent's work is necessary and desirable for the operation of
the hospital. Private respondent was allegedly performing such
functions as were inherent to and undertaken by the members of
the regular police force. This, the respondent Labor Arbiter
believes to be an indication that what private respondent was
assigned to do was definitely beyond his rehabilitative therapy.
Second, private respondent's dismissal was illegal because it was
not for a just cause. The mauling incident was not sufficiently
established, and, even if so established, the same would not justify
his dismissal. Such dismissal was wanting in due process in view of
the non-observance of the procedure prescribed for a valid exercise
of the power to dismiss under Sections 2, 5 and 6 of Rule XIV of
the Rules Implementing B.P. Blg. 130.4
The aforesaid decision was appealed to the NLRC. In its
Resolution, dated September 27, 1993, the NLRC dismissed the
appeal, the dispositive portion of which reads:
WHEREFORE, respondents appeal is hereby
dismissed for its failure to perfect the same on
time. 5
The petitioners, thus, instituted this petition for certiorari.
The principal issue presented in this case is whether or not
respondents NLRC and Labor Arbiter Cornelio L. Linsangan
committed serious error in their decisions and acted without
jurisdiction when they took cognizance of the complaint filed by
private respondent Ceferino R Laur before the NLRC instead of the
Civil Service Commission.
The petitioners mainly contend that since the DJRMH is a
government hospital, its employees are covered by Civil Service
rules and regulations and not by the Labor Code. Therefore, any
controversy concerning the relationship between the employees on
the one hand and the hospital's administration on the other, as is
the case of private respondent, comes under the jurisdiction of the
Merit Systems Board and the Civil Service Commission.
We find the petition to be impressed with merit
The petitioner-hospital, the DJRMH, originally known as the Tala
Leprosarium, was one of three leper colonies established under
Commonwealth Act No. 161. Maintained to this day as a public
medical center and health facility attached to the Department of
Health, the DJRMH exercises strictly governmental functions
relating to the management and control of the dreaded
communicable Hansen's disease, commonly known as leprosy. As
it is clearly an agency of the Government, the DJRMH falls well
within the scope and/or coverage of the Civil Service Law in
accordance with paragraph 1., Section 2, Article IX B, 1987
Constitution and the provisions of Executive Order No. 292,
otherwise known as the Administrative Code of 1987 and
Presidential Decree No. 807, otherwise known as the Civil Service
Decree of the Philippines.
As the central personnel agency of the Government, the Civil
Service Commission administers the Civil Service Law. It is,
therefore, the single arbiter of all contests relating to the civil
service.6 The discharge of this particular function was formerly
lodged in one of its offices, the Merit Systems Protection Board
(MSPB) which was vested with the power, among others, "to hear
and decide on appeal administrative cases involving officials and
employees of the civil service and its decision shall be final except
those involving dismissal or separation from the service which may
be appealed to the Commission".7 However, with the issuance of
Civil Service Commission Resolution No. 93-2387 on June 29,
1993, such appeals shall now be filed directly with the Civil Service
Commission. Pertinent portion of said resolution reads:
xxx xxx xxx
NOW, THEREFORE, pursuant to the
provisions of Section 17 of Book V of the
Administrative Code of 1987 which authorizes
the Commission, as an independent
constitutional body, to effect changes in its
organization as the need arises, the
Commission Resolves as it is hereby Resolved
to effect the following changes:
1. Decisions in administrative cases involving
officials and employees of the civil service
appealable to the Commission pursuant to
Section 47 of Book V of the Code including
personnel actions such as contested
appointments shall now be appealed directly
to the Commission and not the MSPB; 8
xxx xxx xxx
Worthy to note in this connection is the fact that the Labor Code
itself provides that "the terms and conditions of employment of
government employees shall be governed by the Civil Service Law,
rules and regulations".9
Conformably to the foregoing, it is, indeed, the Civil Service
Commission which has jurisdiction over the present controversy.
Its decisions are subject to review by the Supreme Court. 10
Jurisdiction is conferred by law. Where there is none, no
agreement of the parties can provide one. 11 Consequently, it was
incorrect for the respondent labor arbiter to have proceeded to
hear the case, simply because private respondent Ceferino Laur
happened to lodge his complaint before his office, 12 or to hold that
petitioners are estopped from assailing the respondent labor
authorities' jurisdiction over the present case simply because the
petitioners have earlier submitted themselves to the said
jurisdiction by virtue of their participation in all the stages of the
proceedings in the office of respondent Labor Arbiter Linsangan
and in the NLRC, and that they failed to raise the issue of
jurisdiction in the said proceedings. 13
Considering that the decision of a tribunal not vested with
appropriate jurisdiction is null and void, 14 the respondent labor
arbiter's finding of an employer-employee relationship between
the petitioner government agency and the private respondent
should serve no purpose whatsoever. Respondent labor arbiter's
order of payment of private respondent's monetary claims is
likewise null and should not be given effect.
WHEREFORE, finding the Dr. Jose N. Rodriguez Memorial
Hospital to be within the scope of the Civil Service Law and not of
the Labor Code, the questioned decision of the respondent labor
arbiter dated January 2, 1992 and the resolution of the NLRC,
dated September 7, 1993, are hereby REVERSED and SET ASIDE
for having been rendered without jurisdiction. The Temporary
Restraining Order issued on February 28, 1994 is hereby made
permanent.
SO ORDERED.
G.R. No. 131529 April 30, 1999
IRINEO V. INTIA, JR., Postmaster General, Philippine
Postal Corporation, and the Legal Officers of the PPC-
Main namely: WILFREDO B. SERRANO, MA. TERESA A.
LORICO-GONZALES, LEONARDO C. DARANTINAO,
JR., HENRY C. FAUSTO, LEE P. VICERAL, ROMAN T.
COBRADO, JESSIE R. REOTUTAR, ROMUALDO L.
RANAN, and ELEN I. NAGTALON, petitioners,
vs.
THE COMMISSION ON AUDIT and the CORPORATE
AUDITOR FOR PHILIPPINE POSTAL CORPORATION,
respondents.
ROMERO, J
In this special civil action under Rule 64 of the New Rules of Court,
in relation to Rule 65 thereof, petitioner seek the reversal of the
Decision 1 dated November 4, 1997 of public respondent
Commission on Audit (COA) which affirmed the disallowances
made by respondent Corporate Auditor for Philippine Postal
Corporation (PPC) of the Representation and Transportation
Allowance (RATA) of certain officials of PPC. The dispositive
portion of said decision reads:
Upon all the foregoing considerations, this
Commission affirms the disallowances made
by the Auditor as concurred in by the Director,
Corporate Audit Office II, this Commission.
Accordingly, the instant appeal has to be, as it
is hereby denied for lack of merit.
The facts are as follows:
On April 7, 1992, Republic Act No. 7354, otherwise known as "The
Postal Service Act of 1992," was enacted and approved creating the
Philippine Postal Corporation and defining its powers, functions,
and responsibilities.
Pursuant to the powers granted to It by the said charter, the PPC
Board of Directors issued and approved Board Resolution No 9-
50, 2 entitled "Approving the three-year progressive increase of
Representation and Travel Allowance (RATA) benefits equivalent
to 40% of the basic salary of the officials of the Philippine Postal
Corporation, subject to the existing rules and regulations." The
resolution reads in part.
BOARD RESOLUTION NO. 95-50
RESOLVED, as it is hereby resolved that the
three year progressive increase of the . . .
(RATA) benefits of officials of the Philippine
Postal Corporation . . . equivalent to 40% of
their basic salary, be approved subject to the
existing rules and regulations.
RESOLVED FURTHER, that the increases of
RATA for 1995 of the following officials to be
implemented in the following manner, be
confirmed . . . (c) of the 40% basic salaries of
all officials holding positions below the
Assistant Postmaster Generals up to Division
Managers.
RESOLVED STILL FURTHER that an
additional fifty percent (50%) increase of the
remaining balance thereof be implemented in
1996;
RESOLVED STILL FURTHER that the
increase of the aforesaid benefit equivalent to
40% of the basic salary of all concerned
officials be fully implemented in 1997.
xxx xxx xxx
On April 26, 1995, to implement the foregoing board resolution,
then Postmaster General Eduardo P. Pilapil issued Circular No. 95-
22, 3 entitled "Guidelines Implementing Board Resolution No. 95-
50 prescribing new rates of RATA of PPC officials. To reproduce
the relevant parts of the circular:
CIRCULAR NO. 95-22
1 The following Officials and employees are
entitled to RATA:
xxx xxx xxx
1.6 Regional Operation
Managers
1.7 Division Managers
Chiefs of equivalent
2. Payment of RATA, whether commutable or
reimbursable, shall be in accordance with the
rates prescribed below for the total allowances
(50/50 share for each type of allowances):
Position 1995 1996 1997
xxx xxx xxx
2.7 Operation Managers
or equivalent (SG 26) P5,100 P5,400 P5,740
2.8 Division Managers Chiefs or equivalent
(SG 25) 4,700 4,900 5,234
(SG 24) 4,200 4,400 4,734
Meanwhile, Republic Act No. 8174, otherwise known as "The
General Appropriations Act of 1996" was approved, Section 35 of
which fixes the monthly RATA rates of government officials, to wit:
Sec. 35. Representation and Transportation
Allowances. The following officials and those
of equivalent rank as may be determined by
the Department of Budget and Management
while in the actual performance of their
respective functions are hereby granted
monthly commutable representation amd
transportation allowance payable from the
programmed appropriation provided for by
their respective offices not exceeding the rates
indicated below, which shall apply to each
type of allowance:
xxx xxx xxx
e. At P1,750 for assistant Bureau Regional
directors or equivalent;
f. At P1,625 for Chief of Division, identified as
such in the Personal Service Itemization . . .
On October 23, 1996, respondent Corporate Auditor for Philippine
Postal Corporation (PPC) served the following Notices of
Disallowance (ND) on PPC:
(a) ND No. 96-0002-101(96) dated
September 23, 1996, covering the RATA of
petitioner for the month of April 1996 in the
total amount of P65,650.00.
 (b) ND No. 96-0004-101(96) dated
September 23, 1996 covering the RATA of
petitioner for May 1996 amounting to
P65,350.00.
On December 12, 1996, the Auditor served another notice, ND No.
96-0007-101(96) dated November 27, 1996, covering the RATA of
petitioners for June 1996 in the amount of P64,525.00.
Subsequently, respondent Auditor served other Notices of
Disallowance covering the RATA allegedly paid in excess of that
authorized under Section 35, R.A. 8174.
On February 7, 1997, the new Postmaster General, Ireneo V. Intia,
Jr. requested respondent Auditor to hold in abeyance the
settlement of the above disallowances pending receipt of the legal
opinion they had sought from the Office of the Government
Corporate Counsel (OGCC). To this, respondent Auditor replied
that the proper remedy of petitioners is appeal under Section 37,
Title VII of COA Manual on Certificate of Settlement and Balances
(CSB).
Accordingly, petitioners filed their Memorandum of Appeal with
respondent Commission for the reversal of the Auditor's decision
and the allowance of the implementation of PPC Circular No. 95-
22 as authorized by Board Resolution No. 96-50. They relied on the
following grounds:
1. Sections 21, 22, and 25 of R A No 7354 (The
Postal Service Act of 1992), expressly
empower the PPC to established its own
progressive compensation; structure and fix
the salaries and emoluments of personnel —
including the grant of additional benefits like
RATA — without being subjected to the rules
and regulations of the Compensation and
Position Classification Office or the Salary
Standardization Law (R.A. No. 6758).
2. The legal opinion of the Department of
Budget and Management (DBM) dated March
14, 1996 on which the COA based its decision
and which states that pursuant to Section 6 of
P.D. No. 1527, the compensation structure of
PPC is subjected to review and approval by the
DBM, is not correct because Section 6 of P. D.
1597 is unconstitutional as it violates the rule
against the passage of irrepealable laws.
3. Section 13 of R.A. No 7354 categorically
exempts PPC from submitting to Congress its
annual budget unless the PPC requires
subsidy guaranty of its liability from the
National Treasury.
4. Paragraph 1 of the special provisions in R.A
No. 8174 admits that corporations exempted
from the provisions of R.A. No. 6738 like PPC
shall pay the salaries and allowances not in
accordance with the Salary Standardization
Law.
5. RATA is included in the term
"emoluments," the payment of which PPC is
authorized to make under R.A. No. 7354.
On November 4, 1997, respondent Commission rendered the
decision now subject of the instant petition. The assailed decision
is reproduced in part:
After a careful and judicious evaluation of the
facts and pertinent laws, rules and regulations
herein obtaining, this Commission finds the
appeal devoid of merit. It must be noted that
Sections 21, 22 and 25 of R.A. 7354 never
intended to exempt the PPC from the ambit of
R.A 6758 What these specific sections
provide, especially Section 25, is the
exemption of the PPC from the coverage of the
rules and regulations of the Compensation
and Position Classification Office which
relates only to the qualification, position and
salary grade of the employees concerned and
not to the payment of additional benefits
including the increase in the Representation
and Transportation Allowance (RATA)
Section 22 when provides for a progressive
corporation (sic) structure for PPC personnel
authorizes the Corporation to grant salary
increases subject to either of two conditions
stated therein. As to the constitutionality of
Section 6 of P.D. No. 1587, the matter is
beyond the competence of this Commission to
rule upon. Thus, in the absence of contrary
ruling by competent authority, this
Commission finds no cogent reason to hold
the same as being unconstitutional as alleged
by herein appellants.
Insofar as the validity of resolution fixing the
allowances (e.g. RATA) of its employees by
PPC's Board the Directors is concerned, this
Commission fully adopts the stand taken by
the DBM in its legal opinion, dated March 14,
1996, which states that:
Accordingly, the
Resolutions or Circulars,
of the PPC granting
additional benefits or
compensation to its
employees without the
requisite review and
approval by the
President of the
Philippines upon
recommendation of the
DBM is believed to be an
ultra vires act of the
corporation which
cannot be given legal
effect and recognition.
Additional benefits or
compensation that may
be granted to
government
officials/employees
require a law and may
not be done by a mere
expedient of a resolution
or a circular of a GOCC,
as in the case of the PPC.
The above legal opinion according to the DBM
is based on the following reasons:
1. While there may be a semblance of
exemption for the PPC from the rules and
regulations of the Compensation and Position
Classification Bureau, such exemption is
subject to the qualification that PPC's own
system of compensation and classification
conforms as closely as possible with that
provided for under R.A. No. 6758.
2. Such PPC exemption should be appreciated
in correlation with the provision of Section 6
of P.D. 1597 . . .
While it is true that Section 13 of R.A. No. 7354
exempts the PPC from submitting to Congress
its annual budget unless it seeks
subsidy/guaranty of its liability from the
National Treasury, it is also true that Section
18 of the same Act provides that the PPC thru
its board shall submit to both Houses of
Congress, together with the Auditor's Report
on the relevant accounts, an annual report
generally dealing with the activities and
operations of the Corporation during the
preceding year . . . The exemption under
Section 13 of R.A. No. 7354 does not in any
way intend or show that the Corporation is
exempt from R.A. 6758. 4
Aggrieved by the aforequoted decision, petitioner filed this petition
before this Court, assigning the following errors:
 I. THE COMMISSION ERRED IN HOLDING
THAT PPC IS NOT EXEMPT FROM THE
SALARY STANDARDIZATION LAW (R.A.
NO. 3758).
II. THE COMMISSION ERRED IN
CONFORMING WITH THE DBM THAT THE
RESOLUTION AND CIRCULAR OF THE PPC
GRANTING ADDITIONAL BENEFITS TO
ITS EMPLOYEES WITHOUT THE
REQUISITE REVIEW AND APPROVAL BY
THE PRESIDENT OF THE PHILIPPINES
THROUGH THE DBM IS AN ULTRA VIRES
ACT OF THE CORPORATION.
III. THE COMMISSION ERRED WHEN IT
RULED THAT THE MONTHLY RATA OF
PPC OFFICIALS MUST CONFORM TO THE
AMOUNTS PRESCRIBED IN SECTION 35
OF REPUBLIC ACT NO. 8174.
As to the first issue, petitioners argued that Sections 21, 22, and 25
of the PPC charter (R.A. No. 7354) exempt it from the Salary
Standardization Law or the Compensation and Position
Classification Office rules. The said provisions read:
Sec. 21. Powers and Function of the
Postmaster General. — As the Chief Executive
Officer, the Postmaster General shall have the
following powers and functions:
xxx xxx xxx
c) subject to the approval of the Board to
determine the staffing pattern and the
number of personnel, define their duties and
responsibilities, and fix their salaries and
emoluments in accordance with the approved
compensations structure of the Corporation.
xxx xxx xxx
Sec. 22. Merit System — The Corporation shall
establish a human resources management
system which shall govern the selection,
hiring, appointment, transfer, promotion, or
dismissal of all personal. Such system shall
aim to establish professionalism and
excellence at all levels of the postal
organization in accordance with sound
principles of management.
A progressive compensation structure, which
shall be based on job evaluation studies and
wage surveys and subject to the Board's
approval, shall be instituted as an integral
component of the Corporation's human
resources development program. The
Corporation, however, may grant across the
board salary increase or modify its
compensation structure as to result in higher
salaries, subject to either of the following
conditions.
a) there are evidences of prior improvement in
employee productivity, measured by such
quantitative indicators as mail volume per
employee and delivery times.
b) a law raising the minimum wage has been
enacted with application to all government
employees or has the effect of classifying some
positions in the postal service as below the
floor wage.
Sec. 25. Exemption from Rules and
Regulations of the Compensation and
Position Classification Office. — All personnel
and positions of the Corporation shall be
governed by Section 22 hereof, and as such
shall be exempt from the coverage of the rules
and regulations of the Compensation and
Position Classification Office. The
Corporation, however, shall see to it that its
own system conforms as closely as possible
with that provided for under Republic Act No.
6758.
Petitioners averred that since the PPC has the power under
Sections 21 and of R.A. No. 7354 to fix its own compensation
scheme and Section 25 of said charter expressly exempts it from
the rules of the Compensation and Position Classification Office, it
is clear that PPC Board Resolution No. 95-50 and PPC Circular 95-
22 are valid corporate acts that can be the basis of the payment of
RATA to PPC officials without prior approval from the DBM.
As for the DBM legal opinion which was the basis for the
disallowance of the payments of the RATA, petitioner assailed the
same for being erroneous. According to the DBM, notwithstanding
the exemption of PPC from the rules of CPCO granted under
Section 25 of R.A 7354, the DBM has the power to review and
approve the compensation structure of PPC because of Section 6 of
P.D. No. 1597.
Sec. 6. Exemption from OCPC Rules and
Regulations. Agencies, position or groups of
officials and employees of the national
government, including government-owned
and controlled corporations, who are
hereafter exempted by law from OCPC
coverage, shall observe such guidelines and
policies as may be issued by the President
governing position classification, salary rates,
levels of allowances, project and other
honoria, overtime rates, and other forms of
compensation and fringe
benefits. Exemptions notwithstanding
agencies shall report to the President,
through the Budget Commission, on their
position classification and compensation
plans, policies, rates and other related details
following such specifications as may be
prescribed by the President. (emphasis
supplied)
Petitioners, however, argued that Section 6, P.D. No. 1597 has
already been repealed by Section 35 of R.A. No. 7354 which reads:
Sec. 35. All acts, decrees, orders, executive
orders, instructions, rules and regulations,
inconsistent with the provisions of this Act are
repealed or modified accordingly.
They pointed out further that R.A. No. 7354 (The Postal Service Act
of 1992) P.D. No. 1597, a general law which refers to all government
agencies and GOCCs covered by and those exempted from the rules
of the CPCO. For these reasons, petitioners claimed that the power
of the DBM to review and approve PPC's resolution and circulars
implementing the latter's compensation plans its no longer in
force.
Petitioner likewise posited that Section 6, P.D. No. 1597 has no
legal effect, it being in the nature of an irrepealable provision of
law. They pointed to the phrase "agencies . . . of the national
government, including government-owned and controlled
corporations, who are hereafter exempted by law from coverage . .
.," as violative of the Constitutional provision that legislative power
shall be vested in the legislature and the prohibition against the
passage of irrepealable laws. In effect, petitioner maintained.
Section 6 limits the lawmaking powers of Congress by providing
for conditions to be applied to agencies or GOCCs that are yet to be
created.
Even assuming arguendo that Section 6, P.D. No. 1597 has legal
effects, petitioners theorized, it cannot be considered as requiring
prior approval of the DBM since provision only requires the PPC to
observe the guidelines on compensation schemes and to report to
the President about its position classification and compensation
system.
Furthermore, petitioners asserted that scrutinizing the Senate
deliberations, it is clear that the management and budgetary
system of the PPC was being taken out of the control of the DBM.
As to the applicability of Section 35 of R.A. No. 8174 limiting the
amounts of RATA granted to certain employees, petitioners argued
that said provision does not apply to the monthly RATA rates of
PPC corporate officials, as PPC's budget is not covered by the
Appropriations Act or R.A No. 8174. This, they said, is clear from
Section 13 of the PPC Charter (R.A. No 7354):
Sec. 13. Annual Budget — . . . Unless the
Corporation shall require a subsidy and/or a
guarantee of its liability from the National
Treasury, its budget for the year need not be
submitted to Congress for approval and
inclusion in the General Appropriations Act.
On the other hand, in its comment, the Office of the Solicitor
General argued Section 6 of P.D. 1597 is valid and subsisting, there
having been no express or implied repeal of the assailed provision.
Moreover, the Solicitor General explained that although Section 25
of the PPC charter exempts the corporation from the CPCO rules
and regulations, under Section 6 of P.D. No. 1597, however, it is
still required to report the details of its compensation system to the
President through the DBM. The two provisions in question are
thus compatible and reconcilable.
With respect to the argument that the PPC is exempted from the
coverage of CPCO rules and regulations, the Solicitor General
observed that the said exemption is not absolute as it refers only to
exemption from the application of rules and regulations relating to
position and compensation classification. Moreover, the Solicitor
General added, the term "compensation" in said law refers to the
salary structure of government personnel and not to allowances.
From the foregoing, the issues of the present controversy may
therefore be summed up as follows: (1) whether the PPC Board of
Directors can, by itself, grant through a resolution an increase in
allowances to its officials without said resolution going to the DBM
for review and approval and (2) whether the RATA granted to PPC
officials falls within the amounts provided in the General
Appropriations Act.
This Court rules in the negative on both issues.
First, it is conceded that the PPC, by virtue of its charter, R.A. No.
7354, has the power to fix the salaries and emoluments of its
employees. This function, being lodged in the Postmaster General,
the same must be exercised with the approval of the Board of
Directors. This is clear from Sections 21 and 22 of said charter.
Petitioners correctly noted that since the PPC Board of Directors
are authorized to approve the Corporation's compensation
structure, it is also within the Board's power to grant or increase
the allowances of PPC officials or employees. As can be gleaned
from Sections 10 and 17 of P.D. No. 985 (A Decree Revising the
Position Classification and Compensation System in the National
Government, and Integrating the Same), the term "compensation"
includes salaries, wages, allowances, and other benefits.
Sec. 10. The Compensation System — The
Compensation System consists of (a) a Salary
Schedule, (b) a Wage Schedule; (c) policies
relating to allowances, bonuses, pension
plans, and other benefits accruing to
employees covered . . . (emphasis supplied).
Sec. 11. Powers and Functions. — The Budget
Commission principally through the OCPC
shall, in addition to those provided under
other sections of this Decree, have the
following powers and functions:
xxx xxx xxx
(g) Provide the required criteria and
guidelines, in consultation with agency heads
as may be deemed necessary and subject to
the approval of the Commissioner of Budget,
for the grant of all types of allowances and
additional forms of compensation to
employees in all agencies of the government.
Besides, allowances such as RATA are included in the term
"emoluments" which, under Section 21 of RA 7354, the Postmaster
General is authorized to grant to PPC personnel with the approval
of the Board of Directors. Black's Law Dictionary defines
"emolument" as that which is received as a compensation for
services, or which is annexed to the possession of office as salary,
fees and perquisites.
The Commission on Audit was, therefore, in error when it held in
its decision that "the exemption of the PPC from the coverage of
the rules and regulations of the Compensation and Position
Classification Office . . . relates only to the qualification, position
and salary grade of the employees concerned and not to the
payment of additional benefits including the increase in the
Representation and Transportation Allowance (RATA).
While the PPC Board of Directors admittedly acted within its
powers when it granted the RATA increases in question, the same
should have first been reviewed by the DBM before they were
implemented Sections 21, 22, and 25 of the PPC charter should be
read in conjunction with Section 6 of P.D. No. 1597:
Sec 6. Exemption from OCPC Rules and
Regulations. Agencies, position or groups of
officials and employees of the national
government, including government-owned
and controlled corporations, who are
hereafter exempted by law from OCPC
coverage, shall observed such guidelines and
policies as may be issued by the President
governing position classification, salary rates,
levels of allowances, project and other
honoraria, overtime rates, and other forms of
compensation and fringe benefits. Exemption
notwithstanding, agencies shall report to the
Presidents, through the Budget Commission,
on their position classification and
compensation plans, policies, rates and other
related details following such specifications
as may be prescribed by the President.
(emphasis supplied).
Contrary to petitioners' position, provision still applies and has not
been repealed either expressly or impliedly. Their reliance on the
general repealing clause in Section 35 5 of R.A. No. 7354 is
erroneous. The holding of this Court in Mecano vs. COA 6 is
instructive: "The question that should be asked is: What is the
nature of this repealing clause? It is certainly not an express
repealing clause because it fails to identify or designate the act or
acts that are intended to be repealed. Rather, it is an example of a
general repealing provision, as stated in Opinion No. 73, s. 1991. It
is a clause which predicates the intended repeal under the
condition that a substantial conflict must be found in existing and
prior acts. The failure to add a specific repealing clause indicates
that the intent was not to repeal any existing law, unless an
irreconcilable inconsistency and repugnancy exist in the terms of
the new and old laws. This latter situation falls under the category
of an implied repeal."
As the Solicitor General correctly observed, there is no express
repeal of Section 6 P.D. No. 1597 by R.A. No. 7354. Neither is there
an implied repeal thereof because there is no irreconcilable conflict
between the two laws. On the one hand. Section 25 of R.A. No. 7354
provides for the exemption of PPC from the rules and regulations
of the CPCO On the other hand, Section 6 of P.D. 1597 requires PPC
to report to the President, through the DBM, the details of its salary
and compensation system. Thus, while the PPC is allowed to fix its
own personnel compensation structure through its Board of
Directors, the latter is required to follow certain standards in
formulating said compensation system. One such standard is
specifically stated in Section 25 of R.A. No. 7354:
Sec. 25. Exemption from Rules and
Regulations of the Compensation and
Position Classification Office. — All personnel
and positions of the Corporation shall be
governed by Section 22 hereof, and as such
shall exempt from the coverage of the rules
and regulations of the Compensation and
Position Classification Office. The
Corporation, however, shall see it that its
own system conforms as closely as possible
with that provided for under Republic Act
No. 6758. (emphasis supplied)
To sustain petitioners' claim that it is the PPC and PPC alone that
should ensure that its compensation system conforms as closely as
possible with that of R.A. No. 6758 will result in an invalid
delegation of legislative power. If such interpretation is adopted,
the law would, in effect, be granting PPC unfettered discretion to
fix its compensation structure, something the legislature could not
have intended.
As the Solicitor General put it, Section 6 of P.D. No. 1597 is the
"detail" intended to fill the gap in such laws as R.A. No. 7354 in
order to ensure that delegation of legislative authority will be
"canalized within banks to keep it from overflowing."
It should be emphasized that the review by the DBM of any PPC
resolution affecting the compensation structure of as personnel
should not be interpreted to mean that the DBM can dictate upon
the PPC Board of Directors and deprive the latter of its discretion
on the matter. Rather, the DBM's function is merely to ensure that
the action taken by the Board of Directors complies with the
requirements of the law, specifically, that PPC's compensation
system "conforms as closely as possible with that provided for
under R.A. No. 6758."
Sec. 25 of R.A. No. 7353 and Section 6 of P.D. No. 1597 can thus be
read together and harmonized to give effect to both provisions.
This Court has held that statutes should be construed in light of the
objective to be achieved and the evil or mischief to be suppressed,
and they should be given such construction as will advance the
object, suppress the mischief, and secure the benefits intended. 7
Clearly, therefore, no implied repeal can be deduced in this case.
Worth reiterating is the rule in statutory construction that repeals
by implication are not favored. When statutes are in pari materia,
they should be construed together. A law cannot be deemed
repealed unless it is clearly manifest that the legislature so
intended it.
As regards petitioners' argument that P.D. No. 1597 cannot be
given any legal effect as it is unconstitutional because it is in the
nature of an irrepealable law, suffice it to say that this Court will
refrain from striking down a law if the case can be decided on other
grounds. The Court will not touch the issue of unconstitutionality
unless it is the very lis mota of the case. Thus, the Supreme Court
held. "It is a well-established rule that a court should not pass upon
a constitutional question and decide a law to be unconstitutional
or invalid, unless such question is raised by the parties and that
when it is raised, if the record also present some other ground upon
which the court may raise its judgment, that course will be adopted
and the constitutional question will be left for consideration until
such question will be unavoidable. 8
With respect to the second issue of whether the RATA granted to
PPC officials must fall within the amounts provided for the in the
General Appropriations Act as stated we rule in the negative.
Sec. 13 of the PPC charter expressly provides for PPC's fiscal
autonomy. Thus, unless PPC requires a subsidy and/or a guarantee
of its liability from the National Treasury, its annual budget need
not be submitted to Congress for approval and included in the
General Appropriations Act.
The intention of the lawmakers here is to promote the efficiency of
the postal service by allowing the PPC to use its profits from its
operations to upgrade its facilities and equipment and provide
incentives for its personnel to render better services. Specifically,
fiscal autonomy allows the PPC to attract and keep professional
and competent people within its ranks.
To sum up, the PPC being a government-owned and controlled
corporation with an original charter, it falls within the scope of the
Civil
Service. 9 Thus, as regards personnel matters, the Civil Service Law
applies to the PPC. Its Board of Directors is authorized under its
charter to formulate and implement its own system of
compensation for its personnel, including the payment of RATA.
In the exercise of such power, it is not required to observe the rules
and regulations of the Compensation and Position Classification
Office. Neither is it required to follow strictly the amounts provided
for in the General Appropriations Act as its annual budget is not
covered thereby. However, since the PPC charter expressly
exempts it from the rules and regulations of the CPCO, said Board
is not required to follow the CPCO's guidelines in formulating a
compensation system for the PPC employees. 10
In other words, the general rule is that the PPC is covered by the
Civil Service Law as regards all personnel matters except those
affecting the compensation structure and position classification in
the corporation which are left to the PPC Board of Directors to
formulate in accordance with law. It must be stressed that the
Board's discretion on the matter of personnel compensation is not
absolute as the same must be exercised in accordance with the
standard laid down by law, that is, its compensation system,
including the allowances granted by the Board to PPC employees,
must strictly conform with that provided for other government
agencies under R.A. No. 6758 (Salary Standardization Law) in
relation to the General Appropriations Act. To ensure such
compliance, the resolutions of the Board affecting such matters
should first be reviewed and approved by the Department of
Budget and Management pursuant to Section 6 of P.D. No. 1597.
WHEREFORE, premises considered, the petition is hereby
DISMISSED and the assailed decision dated November 4, 1997 is
AFFIRMED with the following MODIFICATIONS:
(a) The exemption of the Philippine Postal Corporation from the
coverage of the rules and regulations of the Compensation and
Position Classification Office includes, not only the fixing of the
qualification, position, and salary grade of the Corporation's
employees but also the payment of additional benefits, including
increases in their Representation and Transportation Allowance;
(b) The Representation and Transportation Allowance granted to
the concerned employees of the Corporation need not be limited to
the amounts provided for in the General Appropriations Act; and
(c) However, the compensation system set up must conforms as
closely as possible with that provided for other government
agencies under R.A. No. 6758 in relation to the General
Appropriations Act and must, moreover, be reviewed and
approved by the Department of Budget and Management pursuant
to Section 6 of P.D. No. 1597.1âwphi1.nêt
SO ORDERED.
G.R. No. 143784 February 5, 2003
PHILIPPINE RETIREMENT AUTHORITY
(PRA), petitioner,
vs.
JESUSITO L. BUÑAG and ERLINA P.
LOZADA, respondents.
DECISION
PUNO, J.:
Before the Court is a Petition for Review on Certiorari involving
alleged overpayment by the petitioner Philippine Retirement
Authority (PRA) of certain benefits and allowances to its
employees, particularly respondents herein. Petitioner PRA asks
the Court to resolve the legal question of whether disbursements
made by PRA of compensation, allowances and other benefits to its
employees prior to the effectivity of R.A. No. 6758 or the
Compensation and Position Classification Act of 19891 is subject to
the review of the Department of Budget and Management.
Petitioner PRA is a government-owned and controlled corporation
created on July 4, 1985 under Executive Order No. 1037.2 PRA
became operational on September 8, 1986.3 Private respondent
Jesusito L. Buñag is the former deputy general manager of
petitioner PRA while private respondent Erlina P. Lozada is the
incumbent department manager of petitioner PRA.
As of July 1, 1989, in addition to their basic salaries, private
respondents were each receiving from PRA the following
allowances and benefits: a) Cost of Living Allowance (COLA), 40%
of the basic salary; b) Amelioration Allowance, 10% of the basic
salary; c) additional COLA, ₱300.00 a month; d) rice subsidy,
₱400.00 per month; e) meal subsidy, ₱525.00 a month; f) children
allowance, ₱30.00 a month; and g) Representation and
Transportation Allowance (RATA) in various amounts.4
In a letter dated December 29, 1992, the Office of the President,
through then Executive Secretary Edelmiro A. Amante, Sr.
approved the Corporate Operating Budget of petitioner PRA for
calendar year 1992 in the amount of ₱25,288,091.00. In the same
letter, the amount of ₱9,129,833.00 representing
unjustified/unauthorized allowances, fringe benefits and other
items was disallowed.5
In a letter dated February 1, 1993, PRA sought reconsideration
from the Office of the President on the disallowances, in particular,
the amount of ₱1,324,822.00 out of the ₱9,129,833.00 disallowed
disbursements representing supposed over-provision and
payment of benefits and allowances to PRA employees. The
amount of ₱1,324,822.00 is itemized as follows:6
 a) Over-provision of RATA
₱193,200.00
…..……………………..
b) Transition Allowance
611,454.00
………………..…………...
c) Provision for Hospitalization
100,000.00
….…………………
d) Provision for Provident Fund
420,168.00
Contribution
TOTAL ₱1,324,822.00
The Office of the President denied the request for reconsideration
in a letter dated September 23, 1993.7 On October 12, 1993, PRA
filed a request for clarification of the order denying the request for
reconsideration.8 In reply thereto, the Office of the President
explained in a letter dated November 11, 1993 that the approved
Corporate Operating Budget of PRA for calendar year 1992 is
subject to the following restrictions:9
"1. The approval refers to expenditures/ceilings for each
expenditure class and shall not be construed as approval
of specific items of expenditure;
2. Salaries, wages, allowances and benefits shall be in
accordance with the approved Position Allocation List,
pursuant to the Compensation and Position
Classification Act of 1989 (R.A. 6758);
3. Payment of other benefits, such as bonuses, clothing,
representation, transportation allowances, and such
other allowances shall be in accordance with Sections
5.4, 5.5, and 5.6 of Corporate Compensation Circular No.
10, National Compensation Circular (NCC) No. 66,
dated September 12 1991, and NCC No. 67, dated
January 1, 1992; and
4. All expenditures shall be made within the limits of
available funds realized by PRA from corporate
revenues."
Hence, petitioner PRA reduced the compensation of private
respondents and stopped the payment of RATA and other
allowances to private respondents.
Feeling aggrieved, private respondents sought the legal opinion of
the Department of Budget and Management on the disallowance
and reduction of amount of fringe benefits and other allowances
previously received by them. On January 11, 1995, the Department
of Budget and Management opined that "the total monthly
compensation and allowances sought have no legal basis."10 The
Department of Budget and Management explained:
"[I]t is worthy to note that the salaries actually received by the
concerned personnel as of June 30, 1989 which were used as a
basis in computing the allowances to be integrated and in
determining the transition allowance to be granted were not the
basic salaries as certified and authorized by the DBM. Hence, there
appears to be over computation of allowances to the integrated and
transition allowances granted." (emphasis supplied)
Private respondents then elevated the matter to the Office of the
President. The case was docketed as O.P. Case No. 95-L-6336.
On December 18, 1995, the Office of the President reversed the
ruling of the Department of Budget and Management and awarded
to the private respondents the allowances and benefits claimed. It
ruled that "the exemption of PRA from the jurisdiction of [the
Department of Budget and Management], as provided under the
PRA charter, remained effective and legally impervious to the
assertions by [the Department of Budget and Management] of its
authority."11 As no prior approval or authority is required from the
Department of Budget and Management with respect to the
compensation scheme of PRA and the grant of allowances by it to
its employees, the Office of the President held that disbursements
made by PRA representing compensation and allowances of PRA
officials and employees prior to the effectivity of July 1, 1989 were
valid. It applied the principle of "non-diminution of benefits"
embodied in the transitory provisions of R.A No. 6758 and
concluded that private respondents are entitled to continue
receiving the compensation and benefits previously enjoyed by
them. Thus, the Office of the President directed the Department of
Budget and Management to provide enough funds to cover the
salaries and allowances of the PRA officials and employees. The
subsequent Motions for Reconsideration filed by the Department
of Budget and Management and by petitioner PRA were denied by
the Office of the President.
Consequently, petitioner PRA filed a Petition for Review with the
Court of Appeals in accordance with Rule 43 of the Rules of Court,
as amended. On December 14, 1999, the Court of Appeals rendered
a decision affirming the ruling of the Office of the President. On
June 19, 2000, it denied petitioner’s Motion for Reconsideration.
In the instant petition, PRA, through the Office of the Government
Corporate Counsel, argues that the Court of Appeals erred in
applying the transitory provisions of R.A. No. 6758 in upholding
the continued grant of compensation and allowances received by
private respondents prior to the effectivity of said law. PRA
maintained that these allowances and benefits were not authorized
or approved by the Department of Budget and Management,
contrary to E.O. No. 1037 (PRA Charter) in relation to P.D No.
98512 and P.D. No. 159713 . PRA explains that prior to R.A. No. 6758,
disbursements of compensation, allowances and other benefits to
PRA employees are subject to the review of the Department of
Budget and Management in accordance with P.D. No. 985 and P.D.
No. 1597. PRA reasoned that the transitory provisions of R.A. No.
6758 which authorize the continued grant of allowances and
benefits received by incumbents as of the effectivity of the said law
is not applicable as the law could not have contemplated the
continued disbursement of unauthorized allowances and benefits.
Further, PRA manifests that while E.O. No. 1037 grants the PRA
Board the power to provide a compensation scheme for its
employees and fix reasonable allowances and benefits, PRA has not
approved or acted on any matter in this respect.
Private respondents, on the other hand, argue that PRA has the
requisite power and authority to impose and implement a
compensation scheme for its employees without need of prior
approval or authority from the Department of Budget and
Management. They cite as basis Section 6 (f) of E.O. No. 1037
which grants the PRA Board the power to "establish and fix, review,
revise and adjust the appropriate compensation scheme of the
officers and employees of [PRA] with reasonable allowances,
bonuses and other incentives." They allege that by virtue of this
provision, prior to R.A. No. 6758, PRA was exempt from the
regulatory authority of the Office of Compensation and Position
Classification, notwithstanding the provisions of P.D. No. 985 and
P.D. No. 1597. Moreover, private respondents argue that the
disallowances in question were based on Department of Budget
and Management Corporate Compensation Circular No. 10 (DBM-
CCC No. 10), an issuance which was subsequently rendered
ineffective by this Court due to its non-publication in the Official
Gazette.14
The proper resolution of the case at bar involves a determination
of the applicable law, rules and regulations governing the
imposition of allowable compensation, allowances and monetary
incentives to the employees of the PRA prior to the effectivity of
R.A. No. 6758 and the legal effects of the subsequent passage of
R.A. No. 6758.
This issue is not without precedent.
In the case of Intia, Jr. v. Commission on Audit,15 the Philippine
Postal Corporation (PPC) argued that by virtue of the provisions of
its charter, 16 PPC may unilaterally grant and/or increase the
Representation and Transportation Allowance of its officials
without the prior approval of the Department of Budget and
Management. The PPC cited Section 21 (c) of its charter which
grants the PPC the power and authority to "fix salaries and
emoluments [of its employees] in accordance with the approved
compensation structure of [PPC]." Further, the PPC argued that
Section 25 of its charter exempts the PPC "from the coverage of the
rules and regulations of the Compensation and Position
Classification Office."
In ruling against PPC, this Court declared that the provisions of the
PPC charter should be read in conjunction with Section 6 of P.D.
No. 1597.17 The said section reads:
"Sec. 6. Exemption from OCPC Rules and Regulations.—Agencies,
positions or groups of officials and employees of the national
government, including government-owned and controlled
corporations, who are hereafter exempted by law from OCPC
coverage, shall observe such guidelines and policies as may be
issued by the President governing position classification, salary
rates, levels of allowances, project and other honoraria, overtime
rates, and other forms of compensation and fringe benefits.
Exemptions notwithstanding, agencies shall report to the
President, through the Budget Commission, on their position
classification and compensation plans, policies, rates and other
related details following such specifications as may be prescribed
by the President."
This Court ruled in Intia that contrary to PPC’s assertion, Section
6 of P.D. No. 1597 still applies and has not been repealed expressly
or impliedly. Although its charter grants PPC the power to fix the
compensation and benefits of its employees and exempts PPC from
the coverage of the rules and regulations of the Compensation and
Position Classification Office, by virtue of Section 6 of P.D. No.
1597, the compensation system established by the PPC is subject to
the review of the Department of Budget and Management. In this
respect, the function of the Department of Budget and
Management is to ensure that the proposed compensation scheme
is consistent with applicable laws and regulations. In reconciling
the provisions of the PPC Charter and the provisions of P.D. No.
1597, this Court explained:
18
"It should be emphasized that the review by the DBM of any PPC
resolution affecting the compensation structure of its personnel
should not be interpreted to mean that the DBM can dictate upon
the PPC Board of Directors and deprive the latter of its discretion
on the matter. Rather, the DBM’s function is merely to ensure that
the action taken by the Board of Directors complies with the
requirements of the law, specifically that PPC’s compensation
system "conforms as closely as possible with that provided for
under R.A. No. 6758." (emphasis supplied)
Similarly, under P.D. No. 1037, PRA was granted the power and
authority to "establish and fix, review, revise and adjust the
appropriate compensation scheme of the officers and employees of
[PRA] with reasonable allowances, bonuses and other incentives as
may be recommended by the Chief Executive Officer/General
Manager of the [PRA]."19 Further, Section 13 of P.D. No. 1037 also
exempts officers and employees of PRA from the rules and
regulations of the Office of Compensation and Position
Classification.20
In accordance with the ruling of this Court in Intia, we agree with
petitioner PRA that these provisions should be read together with
P.D. No. 985 and P.D. No. 1597, particularly Section 6 of P.D. No.
1597.21 Thus, notwithstanding exemptions from the authority of the
Office of Compensation and Position Classification granted to PRA
under its charter, PRA is still required to 1) observe the policies and
guidelines issued by the President with respect to position
classification, salary rates, levels of allowances, project and other
honoraria, overtime rates, and other forms of compensation and
fringe benefits and 2) report to the President, through the Budget
Commission, on their position classification and compensation
plans, policies, rates and other related details following such
specifications as may be prescribed by the President.
Despite the power granted to the Board of Directors of PRA to
establish and fix a compensation and benefits scheme for its
employees, the same is subject to the review of the Department of
Budget and Management. However, in view of the express powers
granted to PRA under its charter, the extent of the review authority
of the Department of Budget and Management is limited. As stated
in Intia, the task of the Department of Budget and Management is
simply to review the compensation and benefits plan of the
government agency or entity concerned and determine if the same
complies with the prescribed policies and guidelines issued in this
regard. The role of the Department of Budget and Management is
supervisorial in nature, its main duty being to ascertain that the
proposed compensation, benefits and other incentives to be given
to PRA officials and employees adhere to the policies and
guidelines issued in accordance with applicable laws.
The rationale for the review authority of the Department of Budget
and Management is obvious. Even prior to R.A. No. 6758, the
declared policy of the national government is to provide "equal pay
for substantially equal work and to base differences in pay upon
substantive differences in duties and responsibilities, and
qualification requirements of the positions."22 To implement this
policy, P.D. No. 985 provided for the standardized compensation
of government employees and officials, including those in
government-owned and controlled corporations. Subsequently,
P.D. No. 1597 was enacted prescribing the duties to be followed by
agencies and offices exempt from coverage of the rules and
regulations of the Office of Compensation and Position
Classification. The intention, therefore, was to provide a
compensation standardization scheme such that notwithstanding
any exemptions from the coverage of the Office of Compensation
and Position Classification, the exempt government entity or office
is still required to observe the policies and guidelines issued by the
President and to submit a report to the Budget Commission on
matters concerning position classification and compensation
plans, policies, rates and other related details. This ought to be the
interpretation if the avowed policy of compensation
standardization in government is to be given full effect. The policy
of "equal pay for substantially equal work" will be an empty
directive if government entities exempt from the coverage of the
Office of Compensation and Position Classification may freely
impose any type of salary scheme, benefit or monetary incentive to
its employees in any amount, without regard to the compensation
plan implemented in the other government agencies or entities.
Thus, even prior to the passage of R.A No. 6758, consistent with
the salary standardization laws in effect, the compensation and
benefits scheme of PRA is subject to the review of the Department
of Budget and Management.
Private respondents argue, however, that by virtue of the effectivity
of R.A. No. 6758, they are entitled to receive the compensation and
allowances previously granted to them as the transitory provisions
in the said law allow the continued payment of compensation and
allowances to incumbents as of July 1, 1989. They allege that by
being incumbents as of said date, the transitory provisions of R.A.
No. 6758 should apply. The pertinent provisions are Sections 12
and 17 of R.A. No. 6758, viz:
"Section 12. Consolidation of Allowances and Compensation.—All
allowances, except for representation and transportation
allowances, clothing and laundry allowances; subsistence
allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign
service personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may determined
by the [Department of Budget and Management], shall be deemed
included in the standardized salary rates herein prescribed. Such
other additional compensation, whether in cash or in kind, being
received by incumbents only as of July 1, 1989 not integrated into
the standardized salary rates shall continue to be authorized.
….
Section 17. Salaries of Incumbents.—Incumbents of positions
presently receiving salaries and additional compensation/fringe
benefits including those absorbed from local government units and
other emoluments, the aggregate of which exceeds the
standardized salary rate as herein prescribed, shall continue to
receive such excess compensation, which shall be referred to as
transition allowance. The transition allowance shall be reduced by
the amount of salary adjustment that the incumbent shall receive
in the future.
…."
The transitory provisions embody the legislative intent to protect
incumbents who are receiving salaries and allowances in excess of
those granted under R.A. No. 6758 under the principle of non-
diminution of pay and consistent with the rule that laws should
only be applied prospectively in the spirit of justice and fair
play.23 However, we subscribe to petitioner’s view that the
foregoing transitory provisions do not contemplate a situation
where the grant of unauthorized or irregular compensation and
benefits would be continued or subsequently authorized by the
passage of the law. It is a settled principle that in construing
legislative enactments, it is presumed that the legislature never
intended undesirable consequences or absurd results.24 Statutes
must receive a sensible construction that will give effect to the
legislative intention and avoid an unjust or absurd conclusion.25
Consequently, despite the passage of R.A. No. 6758 providing for
the continued grant of salaries and benefits to incumbents as of
July 1, 1989, private respondents are not entitled to receive
salaries, benefits and allowances that were granted without the
prior review and approval of the Department of Budget and
Management.
Upon the effectivity of R.A. No. 6758, it is not disputed that
government-owned and controlled corporations are included in
the Compensation and Position Classification System provided in
R.A. No. 6758. Section 16 thereof repeals "[a]ll laws, decrees,
executive orders, corporate charters, and other issuances or parts
thereof that exempt agencies from the coverage of the
[Compensation and Position Classification] System, or that
authorize and fix position classification, salaries, pay rates or
allowances of specified positions, or groups of officials and
employees or of agencies."26 Although the applicable legal regime
with respect to salary standardization for government–owned and
controlled corporations is clear, the resolution of the instant
controversy would not be complete without a discussion on the
application of DBM-CCC No. 10 implementing the provisions of
R.A No. 6758, initially issued by the Department of Budget and
Management and made effective on November 1, 1989.
It appears that one of the grounds for the disallowance of particular
items in PRA’s Corporate Operating Budget for calendar year 1992
relied upon by the Office of the President in its letters dated
December 29, 1992 and November 11, 1993, which triggered the
present controversy, are the provisions of DBM-CCC No. 10.27
In the case of De Jesus v. Commission on Audit,28 this Court held
that DBM-CCC No. 10 is without legal force and effect due to the
absence of prior publication in the Official Gazette or in a
newspaper of general circulation. The Court further ruled that such
prior publication is a condition sine qua non to the effectiveness
and enforceability of DBM-CCC No. 10.29 As a result of its
nullification, DBM-CCC No. 10 was subsequently re-issued in its
entirety on February 15, 1999 and was published in the Official
Gazette on March 1, 1999.30
As to the legal effect of the nullification of DBM-CCC No. 10 and its
subsequent re-issuance and publication, this Court, in Philippine
International Trading Corporation v. Commission on Audit,31 ruled
that the re-issuance and publication of DBM-CCC No. 10 does not
cure its previous defect and hence, cannot have retroactive effect.
The Court cited precisely the reason that publication is a condition
precedent to the effectivity of the law to inform the public of its
contents before their rights are affected by the
same.32 Consequently, disallowances made by the Commission on
Audit in the said case that were based on DBM-CCC No. 10, prior
to its re-issuance and publication, were nullified by this Court.
Although cited as basis for the disallowance of particular benefits
granted to private respondents, the records of the case at bar do
not clearly show what particular items contested by private
respondents are disallowed on the basis of DBM-CCC No. 10. At
any rate, for a complete resolution of the present controversy and
to prevent any confusion or misapplication, in accordance with this
Court’s ruling in Philippine International Trading Corporation v.
Commission on Audit,33 with respect to particular items of
allowances or benefits that have been disallowed by the Office of
the President based on the provisions of DBM-CCC No. 10 prior to
its re-issuance and publication, the said items of disallowance
cannot be given legal effect in view of the nullity of DBM-CCC No.
10.
In sum, this Court rules that prior to R.A. No. 6758, the
compensation and benefits scheme of petitioner PRA is subject to
the review authority of the Department of Budget and
Management. Hence, compensation, allowances and other benefits
received by PRA officials and employees without the requisite
approval or authority of the Department of Budget and
Management are unauthorized and irregular and this defect
cannot be cured by the transitory provisions in R.A No. 6758.
However, the function of the Department of Budget and
Management in this regard is simply to ensure that the proposed
compensation and benefits scheme complies with the
requirements of applicable laws, rules and regulations. With
respect to particular items of allowances and benefits that have
been disallowed in the Corporate Operating Budget of PRA for
Calendar Year 1992, which disallowance is based solely on
particular provisions of DBM-CCC No. 10, the said disallowances
cannot be given legal effect in view of the nullity of DBM-CCC No.
10 prior to its re-issuance and publication.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP
No. 47818 is MODIFIED as follows:
(a) Compensation and allowances granted to private
respondents prior to the effectivity of R.A. No. 6758
without the authority or approval of the Department of
Budget and Management are unauthorized and
disallowed; and
(b) Particular items of disallowance of the Corporate
Operating Budget of PRA for Calendar Year 1992
representing various allowances and benefits in the
amount of ₱1,324,822.00 based solely on particular
provisions of DBM-CCC No. 10, in view of the nullity of
DBM-CCC No. 10, are void.
The Department of Budget and Management is directed to effect
the necessary adjustments in the compensation, allowances and
other benefits of private respondents in accordance with the
foregoing pronouncements.
SO ORDERED.
REPUBLIC ACT No. 10149
AN ACT TO PROMOTE FINANCIAL VIABILITY AND
FISCAL DISCIPLINE IN GOVERNMENT-OWNED OR -
CONTROLLED CORPORATIONS AND TO STRENGTHEN
THE ROLE OF THE STATE IN ITS GOVERNANCE AND
MANAGEMENT TO MAKE THEM MORE RESPONSIVE
TO THE NEEDS OF PUBLIC INTEREST AND FOR
OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:
CHAPTER I
GENERAL PROVISIONS
Section 1. Short Title. - This Act shall be known as the "GOCC
Governance Act of 2011l".
Section 2. Declaration of Policy. - The State recognizes the
potential of government-owned or -controlled corporations
(GOCCs) as significant tools for economic development. It is thus
the policy of the State to actively exercise its ownership rights in
GOCCs and to promote growth by ensuring that operations are
consistent with national development policies and programs.
Towards this end, the State shall ensure that:
(a) The corporate form of organization through which
government carries out activities is utilized judiciously;
(b) The operations of GOCCs are rationalized and
monitored centrally in order that government assets and
resources are used efficiently and the government
exposure to all forms of liabilities including subsidies is
warranted and incurred through prudent means;
(c) The governance of GOCCs is carried out in a
transparent, responsible and accountable manner and
with the utmost degree of professionalism and
effectiveness;
(d) A reporting and evaluation system, which will
require the periodic disclosure and examination of the
operations and management of the GOCCs, their assets
and finances, revenues and expenditures, is enforced;
(e) The governing boards of every GOCC and its
subsidiaries are competent to carry out its functions,
fully accountable to the State as its fiduciary, and acts in
the best interest of the State;
(f) Reasonable, justifiable and appropriate
remuneration schemes are adopted for the
directors/trustees, officers and employees of GOCCs and
their subsidiaries to prevent or deter the granting of
unconscionable and excessive remuneration packages;
and
(g) There is a clear separation between the regulatory
and proprietary activities of GOCCs, in order to achieve
a level playing field with corporations in the private
sector performing similar commercial activities for the
public.
Section 3. Definition of Terms. –
(a) Affiliate refers to a corporation fifty percent (50%) or
less of the outstanding capital stock of which is owned or
controlled, directly or indirectly, by the GOCC.
(b) Appointive Director refers to:
 (1) In the case of chartered GOCCs, all
members of its Board of Directors/Trustees
who are not ex officio members thereof;
(2) In the case of nonchartered GOCCs,
members of its Board of Directors/Trustees
whom the State is entitled to nominate, to the
extent of its percentage shareholdings in such
GOCC; and
(3) In the case of subsidiaries and affiliates,
members of its Board of Directors/Trustees
whom the GOCC is entitled to nominate to the
extent of its percentage shareholdings in such
subsidiary or affiliate.
(c) Board of Directors/Trustees or Board refers to the
governing body that exercises the corporate powers of a
GOCC.
(d) Breakthrough Results refer to the achievement of
corporate goals or other performance indicators as
determined by the GOCC or its supervising department.
(e) Charter Statement refers to a statement of the
GOCC's vision, mission and core values.
(f) Chartered GGCC refers to a GOCC, including
Government Financial Institutions, created and vested
with functions by a special law.
(g) Chief Executive Officer (CEO) refers to the highest
ranking corporate executive, who could be the President
or the General Manager, Chairman or the Administrator
of a GOCC.
(h) Department refers to an executive department
created by law. This shall include any instrumentality
having or assigned the rank of a department, regardless
of its name or designation.
(i) Ex Officio Board Member refers to any individual who
sits or acts as a member of the Board of Directors/
Trustees by virtue of one's title to another office, and
without further warrant or appointment.
(j) Fit and Proper Rule refers to the standard for
determining whether a member of the Board of
Directors/ Trustees or CEO is fit and proper to hold a
position in a GOCC which shall include, but not be
limited to, standards on integrity, experience, education,
training and competence.
(k) Government Agency refers to any of the various units
of the Government of the Republic of the Philippines,
including a department, bureau, office, instrumentality
or GOCC, or a local government or a distinct unit
therein.
(l) Government Corporate Governance Standards refer
to a set of principles derived from law and practices,
rules and standards prescribed by the Governance
Commission for Government-Owned or -Controlled
Corporations (GCG) that generate long-term and
desirable economic value for the State. It shall also refer
to a system whereby shareholders, creditors, and other
stakeholders of a corporation ensure that management
enhances the value of the corporation as it competes in
an increasingly global market place.
(m) Government Financial Institutions (GFls) refer to
financial institutions or corporations in which the
government directly or indirectly owns majority of the
capital stock and which are either: (1) registered with or
directly supervised by the Bangko Sentral ng Pilipinas;
or (2) collecting or transacting funds or contributions
from the public and places them in financial instruments
or assets such as deposits, loans, bonds and equity
including, but not limited to, the Government Service
Insurance System and the Social Security System.
(n) Government Instrumentalities with Corporate
Powers (GICP)/Government Corporate Entities (GCE)
refer to instrumentalities or agencies of the government,
which are neither corporations nor agencies integrated
within the departmental framework, but vested by law
with special functions or jurisdiction, endowed with
some if not all corporate powers, administering special
funds, and enjoying operational autonomy usually
through a charter including, but not limited to, the
following: the Manila International Airport Authority
(MIAA), the Philippine Ports Authority (PPA), the
Philippine Deposit Insurance Corporation (PDIC), the
Metropolitan Waterworks and Sewerage System
(MWSS), the Laguna Lake Development Authority
(LLDA), the Philippine Fisheries Development
Authority (PFDA), the Bases Conversion and
Development Authority (DCDA), the Cebu Port
Authority (CPA), the Cagayan de Oro Port Authority, the
San Fernando Port Authority, the Local Water Utilities
Administration (LWUA) and the Asian Productivity
Organization (APO).
(o) Government-Owned or -Controlled Corporation
(GOCC) refers to any agency organized as a stock or
nonstock corporation, vested with functions relating to
public needs whether governmental or proprietary in
nature, and owned by the Government of the Republic of
the Philippines directly or through its instrumentalities
either wholly or, where applicable as in the case of stock
corporations, to the extent of at least a majority of its
outstanding capital stock: Provided, however, That for
purposes of this Act, the term "GOCC" shall include
GlCP/GCE and GFI as defined herein.
(p) Nonchartered GOCC refers to a GOCC organized and
operating under Batas Pambansa Bilang 68, or "The
Corporation Code of the Philippines".
(q) Officers refer to the corporate officers of the GOCC
as provided in its charter or bylaws, such as the CEO,
Chief Financial Officer, Chief Investment Officer,
President, Vice President, General Manager, Treasurer
and Corporate Secretary.
(r) Ownership Manuals refer to guidelines and rules
pertaining to the ownership by the State or corporations
and enterprises or the exercise of such ownership
governing the GOCCs or any classification thereof.
(s) Per Diems refer to the compensation granted to
members of the Board of Directors or Trustees of a
GOCC for actual attendance in meetings.
(t) Performance Evaluation System refers to the process
of appraising the accomplishments of GOCCs in a given
fiscal year based on set performance criteria, targets and
weights,
(u) Performance Scorecard refers to a governance and
management tool forming part of the performance
evaluation system which consists of a set of measures,
targets and initiatives that facilitate the achievement of
breakthrough results and performance through the
effective and efficient monitoring and coordination of
the strategic objectives of the GOCC.
(v) President refers to the President of the Republic of
the Philippines.
(w) Related Corporation refers to a subsidiary or affiliate
of a GOCC.
(x) Secretary refers to the person vested with the
authority and responsibility for the exercise of the
mandate of the Department, for the discharge of its
powers and functions, and who shall have supervision
and control of the Department.
(y) Strategy Map refers to an integrated set of strategic
choices or objectives drawn by the governing body, the
successful execution of which results in the achievement
of the GOCC's vision in relation to its mission or purpose
for having been created.
 (z) Subsidiary refers to a corporation where at least a
majority of the outstanding capital stock is owned or
controlled, directly or indirectly, through one or more
intermediaries, by the GOCC.
Section 4. Coverage. - This Act shall be applicable to all GOCCs,
GICPs/GCEs, and government financial institutions, including
their subsidiaries, but excluding the Bangko Sentral ng Pilipinas,
state universities and colleges, cooperatives, local water districts,
economic zone authorities and research institutions: Provided,
That in economic zone authorities and research institutions, the
President shall appoint one-third (1/3) of the board members from
the list submitted by the GCG.
CHAPTER II
THE GOVERNANCE COMMISSION FOR
GOVERNMENT-OWNED OR -CONTROLLED
CORPORATIONS (GCG)
Section 5. Creation of the Governance Commission for
Government-Owned or -Controlled Corporations. - There is hereby
created a central advisory, monitoring, and oversight body with
authority to formulate, implement and coordinate policies to be
known as the Governance Commission for Government-Owned or
-Controlled Corporations, hereinafter referred to as the GCG,
which shall be attached to the Office of the President. The GCG
shall have the following powers and functions:
(a) Evaluate the performance and determine the
relevance of the GOCC, to ascertain whether such GOCC
should be reorganized, merged, streamlined, abolished
or privatized, in consultation with the department or
agency to which a GOCC is attached. For this purpose,
the GCG shall be guided by any of the following
standards:
(1) The functions or purposes for which the
GOCC was created are no longer relevant to
the State or no longer consistent with the
national development policy of the State;
(2) The GOCC's functions or purposes
duplicate or unnecessarily overlap with
functions, programs, activities or projects
already provided by a Government Agency;
(3) The GOCC is not producing the desired
outcomes, or no longer achieving the
objectives and purposes for which it was
originally designed and implemented, and/or
not cost efficient and does not generate the
level of social, physical and economic returns
vis-a-vis the resource inputs;
(4) The GOCC is in fact dormant or
nonoperational;
(5) The GOCC is involved in an activity best
carried out by the private sector; and
(6) The functions, purpose or nature of
operations of any group of GOCCs require
consolidation under a holding company.
Upon determination by the GCG that it is to
the best interest of the State that a GOCC
should be reorganized, merged, streamlined,
abolished or privatized, it shall:
(i) Implement the reorganization,
merger or streamlining of the
GOCC, unless otherwise directed by
the President; or
(ii) Recommend to the President
the abolition or privatization of the
GOCC, and upon the approval of the
President, implement such
abolition or privatization, unless
the President designates another
agency to implement such abolition
or privatization.
(b) Classify GOCCs into: (1) Developmental/Social
Corporations; (2) Proprietary Commercial
Corporations; (3) Government Financial, Investment
and Trust Institutions; (4) Corporations with Regulatory
Functions; and (5) Others as may be classified by the
GCG, without prejudice to further subclassifications in
each category and/or any other classification based on
parameters as it may find relevant or material such as,
but not limited to, industry type. The classification shall
guide the GCG in exercising its powers and functions as
provided herein;
(c) In consultation with the relevant government
agencies and stakeholders, adopt within one hundred
eighty (180) days from its constitution, an ownership
and operations manual and the government corporate
standards governing GOCCs: Provided, That the
government corporate governance. Standards
applicable to GOCCs shall be no less rigorous than those
required by the Philippine Stock Exchange or the,
Securities and Exchange Commission of listed
companies, or those required by the Bangko Sentral ng
Pilipinas or the Insurance Commission for banking
institutions and insurance companies, as the case may
be. The manual shall be consistent with the Medium-
Term Philippine Development Plan issued by the
National Economic and Development Authority (NEDA)
and shall include:
(1) Objectives of State ownership;
(2) Role of national government in the
governance of GOCCs;
(3) Modes of implementation of the
ownership policy;
(4) Guidelines on the monitoring of the
operations of all GOCCs including their
Related Corporations. These shall include
Strategy Maps, Charter Statements,
Performance Commitments and such other
mechanisms;
(5) The roles, relationships and
responsibilities of the State, the Government
Agencies to which the GOCC is attached, and
the GOCC;
(6) Disclosure and transparency
requirements;
(7) Code of Ethics of Directors and Officers;
(8) Creation of board committees and similar
oversight bodies;
(9) Integrated corporate reporting system;
(10) Statement of the social responsibilities of
the GOCC; and
(11) Such other matters as the GCG may deem
proper to include in the ownership policy.
(d) Without prejudice to the filing of administrative and
criminal charges, recommend to the Board of Directors
or Trustees the suspension of any member of the Board
of Directors or Trustees who participated by commission
or omission in the approval of the act giving rise to the
violation or noncompliance with the ownership manual
for a period depending on the nature and extent of
damage caused, during which period the director or
trustee shall not be entitled to any emolument;
(e) In addition to the qualifications required under the
individual charter of the GOCCs and in the bylaws of
GOCCs without original charters, the GCG shall identify
necessary skills and qualifications required for
Appointive Directors and recommend to the President a
shortlist of suitable and qualified candidates for
Appointive Directors;
(f) Establish the performance evaluation systems
including performance score cards which shall apply to
all GOCCs in general and to the various GOCC
classification;
(g) Conduct periodic study, examination, evaluation and
assessment of the performance of the GOCCs, receive,
and in appropriate cases, require reports on the
operations and management of the GOCCs including,
but not limited to, the management of the assets and
finances of the GOCCs;
(h) Conduct compensation studies, develop and
recommend to the President a competitive
compensation and remuneration system which shall
attract and retain talent, at the same time allowing the
GOCC to be financially sound and sustainable;
(i) Provide technical advice and assistance to the
government agencies to which the GOCCs are attached
in setting performance objectives and targets for the
GOCCs and in monitoring GOCCs performance vis-a-vis
established objectives and targets;
(j) Coordinate and monitor the operations of GOCCs,
ensuring alignment and consistency with the national
development policies and programs. It shall meet at
least quarterly to:
(1) Review Strategy Maps and Performance
Scorecards of all GOCCs;
(2) Review and assess existing performance-
related policies including the
compensation/remuneration of Board of
Directors/ Trustees and Officers and
recommend appropriate revisions and
actions; and
(3) Prepare performance reports of the
GOCCs for submission to the President.
(k) Prepare a semi-annual progress report to be
submitted to the President and the Congress. In its
report, the GCG will provide its performance assessment
of the GOCCs and recommend clear and specific actions.
Within one hundred twenty (120) days from the close of
the year, the GCG shall prepare an annual report on the
performance of the GOCCs and submit it to the
President and the Congress; and
(1) Review the functions of each of the GOCC and, upon
determination that there is a conflict between the
regulatory and commercial functions of a GOCC,
recommend to the President m consultation with the
Government Agency to which such GOOC is attached,
the privatization of the GOCCs commercial operations,
or the transfer of the regulatory functions to the
appropriate government agency, or such other plan of
action to ensure that the commercial functions of the
GOCC do not conflict with such regulatory functions.
In the performance of its functions under subsections
(a), (c), (e), (f), (g), (h) and (1) herein and in any other
review or evaluation of a GOCC that the GCG may
conduct, the GCG shall engage the participation of the
Secretary or highest ranking official of the relevant
agency or department, as the case may be.
Section 6. Composition of the GCG. - The GCG shall be composed
of five (5) members. The Chairman with the rank of Cabinet
Secretary and two (2) members with the rank of Undersecretary
shall be appointed by the President. The Secretaries of the
Department of Budget and Management and the Department of
Finance shall sit as ex officio members.
Section 7. Powers and Functions of the Chairman. – The
management of the GCG shall be vested in the Chairman who shall
have the following powers and duties;
(a) Preside over the meetings of the GCG;
(b) Direct and manage the day -to-day affairs and
business of the GCG;
(c) With the approval of the GCG, determine the staffing
pattern and the number of personnel of the GOG and
define their duties and responsibilities;
(d) With the approval of the GCG, to appoint, remove,
suspend, or otherwise discipline for cause, any employee
of the GCG; and
(e) Perform such other duties as may he delegated or
assigned to him by the GCG from time to time.
CHAPTER III
COMPENSATION AND POSITION CLASSIFICATION
SYSTEM FOR GOCCs
Section 8. Coverage of the Compensation and Position
Classification System. - The GCG, after conducting a compensation
study, shall develop a Compensation and Position Classification
System which shall apply to all officers and employees of the
GOCCs whether under the Salary Standardization Law or exempt
therefrom and shall consist of classes of positions grouped into
such categories as the GCG may determine, subject to the approval
of the President.
Section 9. Position Titles and Salary Grades. - All positions in the
Position Classification System, as determined by the GCG and as
approved by the President, shall be, allocated to their proper
position titles and salary grades in accordance with an Index of
Occupational Services, Position Titles and Salary Grades of the
Compensation and Position Classification System, which shall be
prepared by the GCG and approved by the President.
The following principles shall govern the Compensation and
Position Classification System:
(a) All GOCC personnel shall be paid just and equitable
wages in accordance with the principle of equal pay for
work of equal value. Differences in pay shall be based on
verifiable Compensation and Position Classification
factors in due regard to the financial capability of the
GOCC;
(b) Basic compensation for all personnel in the GOCC
shall generally be comparable with those in the private
sector doing comparable work, and must be in
accordance with prevailing laws on minimum wages.
The total compensation provided for GOCC personnel
shall be maintained at a reasonable level with due regard
to the provisions of existing compensation and position
classification laws including Joint Resolution No.4,
Series of 2009, and the GOCCs operating budget; and
(c) A review of the GOCC compensation rates, taking
into account the performance of the GOCC, its overall
contribution to the national economy and the possible
erosion in purchasing power due to inflation and other
factors, shall be conducted periodically.
Any law to the contrary notwithstanding, no GOCC shall
be exempt from the coverage of the Compensation and
Position Classification System developed by the GCG
under this Act.
Section 10. Additional Incentives. - The GCG may recommend to
the President, incentives for certain position titles in consideration
of the good performance of the GOCC; Provided, That no incentives
shall be granted unless the GOCC has fully paid all taxes for which
it is liable, and the GOCC has declared and paid all the dividends
required to be paid under its charter or any other laws.
Section 11. Non-diminution of Salaries. – The Compensation and
Position Classification System to be developed and recommended
by the GCG and as approved by the President shall apply to all
positions, on full or part-time basis, now existing or hereafter
created in the GOCC; Provided, That in no case shall there be any
diminution in the authorized salaries as of December 31, 2010 of to the approval of the President, prescribe, pass upon and review (c) Avoid conflicts of interest and declare any interest
incumbent employees of GOCCs, including those exempt under the qualifications and disqualifications of individuals appointed as they may have in any particular matter before the Board;
Republic Act No. 6758, as amended, upon the implementation of officers, directors or elected CEO of the GOCC and shall disqualify
the Compensation and Position Classification System for GOCCs. those found unfit.
(d) Apply sound business principles to ensure the
financial soundness of the GOCC; and
CHAPTER IV In determining whether an individual is fit and proper to hold the
BOARD OF DIRECTORS/TRUSTEES/OFFICERS OF position of an officer, director or CEO of the GOCC, due regard
(e) Elect and/or employ only Officers who are fit and
GOVERNMENT OWNED OR CONTROLLED shall be given to one's integrity, experience, education, training
proper to hold such office with due regard to the
CORPORATIONS and competence.
qualifications, competence, experience and integrity.

Section 12. Coverage. - The duties, obligations, responsibilities
and standards of care provided under this Chapter shall be
applicable to all members of the Board of Directors/Trustees and
Officers of GOCCs and subsidiaries now existing or hereafter
created including government appointed directors in affiliate
corporations. These duties, obligations and responsibilities shall
be in addition to the powers and functions provided in the
individual charters or articles of incorporation and bylaws of the
respective GOCCs.
Section 13. Number of Directors/Trustees. - The present number
of Directors/Trustees provided in the charter of the GOCCs shall
be maintained.
Section 14. Ex Officio Alternates. - The ex officio members of the
GOCC may designate their respective alternates who shall be the
officials next-in-rank to them, and whose acts shall be considered
the acts of their principals.
Section 15. Appointment of the Board of Directors/Trustees of
GOCCs. - An Appointive Director shall be appointed by the
President of the Philippines from a shortlist prepared by the GCG.
The GCG shall formulate its rules and criteria in the selection and
nomination of prospective appointees and shall cause the creation
of search committees to achieve the same. All nominees included
in the list submitted by the GCG to the President shall meet the Fit
and Proper Rule as defined under this Act and such other
qualifications which: the GCG may determine taking into
consideration the unique requirements of each GOCC. The GCG
shall ensure that the shortlist shall exceed by at least fifty percent
(50%) of the number of directors/trustees to be appointed. In the
event that the President does not see fit to appoint any of the
nominees included in the shortlist, the President shall ask the GCG
to submit additional nominees.
Section 16. Fit and Proper. - All members of the Board, the CEO
and other officers of the GOCCs including appointive directors in
subsidiaries and affiliate corporations shall be qualified by the Fit
and Proper Rule to be determined by the GCG in consultation and
coordination with the relevant government agencies to which the
GOCC is attached and approved by the President.
To maintain the quality of management of the GOCCs, the GCG, in
coordination with the relevant government agencies shall, subject
Section 17. Term of Office. - Any provision in the charters of each
GOCC to the contrary notwithstanding, the term of office of each
Appointive Director shall be for one (1) year, unless sooner
removed for cause: Provided, however, That the Appointive
Director shall continue to hold office until the successor is
appointed. An Appointive Director may he nominated by the GCG
for reappointment by the President only if one obtains a
performance score of above average or its equivalent or higher in
the immediately preceding year of tenure as Appointive Director
based on the performance criteria for Appointive Directors for the
GOCC.
Appointment to any vacancy shall be only for the unexpired term
of the predecessor. The appointment of a director to fill such
vacancy shall be in accordance with the manner provided in
Section 15 of this Act.
Any provision of law to the contrary notwithstanding, all
incumbent CEOs and appointive members of the Board of GOCCs
shall, upon approval of this Act, have a term of office until June 30,
2011, unless sooner replaced by the President: Provided, however,
That the incumbent CEOs and appointive members of the Board
shall continue in office until the successors have been appointed by
the President.
Section 18. The Chief Executive Officer of the GOCC. - The CEO
or the highest-ranking officer provided in the charters of the
GOCCs, shall be elected annually by the members of the Board
from among its ranks. The CEO shall be subject to the disciplinary
powers of the Board and may be removed by the Board for cause.
Section 19. Fiduciary Duties of the Board and Officers. As
fiduciaries of the State, members of the Board of
Directors/Trustees and the Officers of GOCCs have the legal
obligation and duty to always act in the best interest of the GOCC,
with utmost good faith in all its dealings with the property and
monies of the GOCC.
The members of the Board and Officers of GOCCs shall:
(a) Act with utmost and undivided loyalty to the GOCC;
(b) Act with due care, extraordinary diligence, skill and
good faith in the conduct of the business of the GOCC;
Where a member of the Board or an Officer, by virtue of the office,
acquires or receives for oneself a benefit or profit, of whatever kind
or nature including, but not limited to, the acquisition of shares in
corporations where the: GOCC has an interest, using the properties
of the GOCC for their own benefit, receiving commission on
contracts from the GOCC's assets, or taking advantage of corporate
opportunities of the GOCC, all such profits or benefits shall be
subject to restitution under Section 24 of this Act, without
prejudice to any administrative, civil or criminal action against
members of the Board of Directors/Trustees or Officers. This
provision shall be applicable notwithstanding the fact that such
member of the Board or Officer risked one's own funds in the
venture.
Section 20. Trustee Relation to the Properties, Interests and
Monies of the GOCC. - Except for the per diem received for actual
attendance in board meetings and the reimbursement for actual
and reasonable expenses and incentives as authorized by the GCG,
any and all realized and unrealized profits and/or benefits
including, but not limited to, the share In the profits, incentives of
members of the Board or Officers in excess of that authorized by
the GCG, stock options, dividends and other similar offers or
grants from corporations where the GOCC is a stockholder or
investor, and any benefit from the performance of members of the
Board or Officers of the Corporation acting for and in behalf of the
GOCC in dealing with its properties, investments in other
corporations, management of subsidiaries and other interest, are
to be held in trust by such member of the Board or Officer for the
exclusive benefit of the GOCC represented.
Section 21. Care, Diligence and Skill in the Conduct of the
Business of the GOCC. - The members of the Board and the Officers
must exercise extraordinary diligence In the conduct of the
business and in dealing with the properties of the GOCC. Such
degree of diligence requires using the utmost diligence of very
cautious person with due regard for all the circumstances.
Section 22. Power of the Board of Directors/Trustees to
Discipline, Remove Officers of GOCC. - Subject to existing civil
service laws, rules and regulations, the Board shall have the
authority to discipline the CEO, or order the removal from office,
upon a majority vote of the members of the Board who actually
took part in the investigation and deliberation.
Section 23. Limits to Compensation, Per Diems, Allowances and
Incentives. - The charters of each of the GOCCs to the contrary
notwithstanding, the compensation, per diems, allowances and
incentives of the members of the Board of Directors/Trustees of
the GOCCs shall be determined by the GCG using as a reference,
among others, Executive Order No. 24 dated February 10, 2011:
Provided, however, That Directors/Trustees shall not be entitled to
retirement benefits as such directors/trustees.
In case of GOCCs organized solely for the promotion of social
welfare and the common good Without regard to profit, the total
yearly per diems and incentives in the aggregate which the
members of the Board of such GOCCs may receive shall be
determined by the President upon the recommendation of the GCG
based on the achievement by such GOCC of its performance
targets.
Section 24. Restitution. - Upon the determination and report of
the Commission on Audit (COA) that properties or monies
belonging to the GOGG are in the possession of a member of the
Board or Officer without authority, or that profits are earned by the
member of the Board or Officer in violation of the fiduciary duty,
or the aggregate per diems, allowances and incentives received in
a particular year are in excess of the limits provided under this Act,
the member of the Board or Officer receiving such properties or
monies shall return the same to the GOCC.
Failure to make the restitution within thirty (30) days after a
written demand has been served shall, after trial and final
judgment, be punished by an imprisonment of one (1) year and a
fine equivalent to twice the amount to be restituted, and in the
discretion of the court of competent jurisdiction, disqualification
to hold public office.
GHAPTER V performance by the GCG of its functions, the Chairman
DISCLOSURE REQUIREMENTS
Section 25. Full Disclosure. - All GOCCs shall maintain a website
and post therein for unrestricted public access:
(a) Their latest annual audited financial and
performance report within thirty (30) days from receipt
of such report;
(b) Audited financial statements in the immediate past
five (5) years;
(c) Quarterly, annual reports and trial balance;
(d) Current corporate operating budget;
(e) Complete compensation package of all the board
members and officers, including travel, representation,
transportation and any other form of expenses or
allowances;
(f) Local and foreign borrowings;
(g) Performance scorecards and strategy maps;
(h) Government subsides and net lending;
(i) All borrowings guaranteed by the government; and
(j) Such other information or report the GCG may
require.
Section 26. Special Audit. –
(a) The thirty (30) GOCCs with the highest total assets
shall be subject to periodic special audit by the COA. The
periodic audit shall. at the minimum make a
determination whether:
(1) The accounting records of the GOCCs are
complete and in accordance with generally
accepted accounting practices and standards;
and
(2) The statements prepared from the
accounts present fairly and comprehensively
their GOCCs financial position and the results
of its financial operations.
(b) As may be necessary or convenient in the
of the GCG may direct at any time a special COA audit of
any other GOCC for any specific purpose or when
authorized by law, direct an audit by independent
auditors.
CHAPTER VI
CREATION AND ACQUISITION OF A GOCC OR
RELATED CORPORATION
Section 27. Requisites for the Creation of a New GOCC or Related
Corporation under the Corporation Code. – A government agency
seeking to establish a GOCC or Related Corporation under "The
Corporation Code of the Philippines" shall submit its proposal to
the GCG for review and recommendation to the President for
approval before registering the same with the Securities and
Exchange Commission (SEC). The SEC shall not register the
articles of incorporation and bylaws of a proposed GOCC or
Related Corporation, unless the application for registration is
accompanied by an endorsement from the GCG stating that the
President has approved the same.
Section 28. Requisites for the Acquisition of Controlling Interest
in Another Corporation. - Any government agency seeking to
purchase a corporation or acquire controlling interest therein shall
submit its proposal to the GCG for review and approval of the
President.
CHAPTER VII
MISCELLANEOUS PROVISIONS
Section 29. Appropriations. - The amount of Ten million pesos
(P10,000,000.00) for the initial operation of the GOG shall be
sourced from the Contingent Fund of the President.
Subsequent funding requirements shall be included in the annual
General Appropriations Act.
Section 30. Suppletory Application of The Corporation Code and
Charters of the GOCCs. - The provisions of "The Corporation Code
of the Philippines" and the provisions of the charters of the relevant
GOCC, insofar as they are not inconsistent with the provisions of
this Act, shall apply suppletorily to GOCCs.
Section 31. Transitory Provision. - The Privatization Council and
the Privatization and Management Office created under Executive
Order No. 323, Series of 2000, shall continue to implement and
finish the privatization of GOCCs that have been identified by the
said Privatization Council arid approved for privatization by the
President prior to the effectivity of this Act: Provided, however,
That the privatization of said GOCCs that remain unfinished at the
end of two (2) years after the effectivity of this Act shall be
automatically transferred to the GCG which shall continue the
privatization of the GOCCs.
Section 32. Repealing Clause. - The charters of the GOCCs under
existing laws and all other laws, executive orders including
Executive Order No. 323, Series of 2000, administrative orders,
rules, regulations, decrees and other issuances or parts thereof
which are inconsistent with the provisions of this Act are hereby
revoked, repealed or modified accordingly.
Section 33. Separability Clause. - Should any provision of this Act
be declared unconstitutional, the same shall not affect the validity
of the other provisions of this Act.
Section 34. Effectivity. - This Act shall take effect after fifteen (15)
days following its publication in the Official Gazette or in two (2)
newspapers of general circulation.