ADMIN LAW ROMAN NUMERAL II
Dario vs Mison
SARMIENTO, J.:
The Court writes finis to this contreversy that has raged bitterly for the several months. It does so out of ligitimate
presentement of more suits reaching it as a consequence of the government reorganization and the instability it has
wrought on the performance and efficiency of the bureaucracy. The Court is apprehensive that unless the final word is
given and the ground rules are settled, the issue will fester, and likely foment on the constitutional crisis for the nation,
itself biset with grave and serious problems.
The facts are not in dispute.
On March 25, 1986, President Corazon Aquino promulgated Proclamation No. 3, "DECLARING A NATIONAL
POLICY TO IMPLEMENT THE REFORMS MANDATED BY THE PEOPLE, PROTECTING THEIR BASIC
RIGHTS, ADOPTING A PROVISIONAL CONSTITUTION, AND PROVIDING FOR AN ORDERLY TRANSITION
TO A GOVERNMENT UNDER A NEW CONSTITUTION." Among other things, Proclamation No. 3 provided:
SECTION 1. ...
The President shall give priority to measures to achieve the mandate of the people to:
(a) Completely reorganize the government, eradicate unjust and oppressive structures, and all iniquitous vestiges of the
previous regime; 1
...
Pursuant thereto, it was also provided:
SECTION 1. In the reorganization of the government, priority shall be given to measures to promote economy,
efficiency, and the eradication of graft and corruption.
SECTION 2. All elective and appointive officials and employees under the 1973 Constitution shall continue in office
until otherwise provided by proclamation or executive order or upon the appointment and qualification of their
successors, if such is made within a period of one year from February 25, 1986.
SECTION 3. Any public officer or employee separated from the service as a result of the organization effected under this
Proclamation shall, if entitled under the laws then in force, receive the retirement and other benefits accruing thereunder.
SECTION 4. The records, equipment, buildings, facilities and other properties of all government offices shall be carefully
preserved. In case any office or body is abolished or reorganized pursuant to this Proclamation, its FUNDS and properties
shall be transferred to the office or body to which its powers, functions and responsibilities substantially pertain. 2
Actually, the reorganization process started as early as February 25, 1986, when the President, in her first act in office,
called upon "all appointive public officials to submit their courtesy resignation(s) beginning with the members of the
Supreme Court."3 Later on, she abolished the Batasang Pambansa4 and the positions of Prime Minister and
Cabinet 5 under the 1973 Constitution.
Since then, the President has issued a number of executive orders and directives reorganizing various other government
offices, a number of which, with respect to elected local officials, has been challenged in this Court, 6and two of which,
with respect to appointed functionaries, have likewise been questioned herein. 7
On May 28, 1986, the President enacted Executive Order No. 17, "PRESCRIBING RULES AND REGULATIONS FOR
THE IMPLEMENTATION OF SECTION 2, ARTICLE III OF THE FREEDOM CONSTITUTION." Executive Order
No. 17 recognized the "unnecessary anxiety and demoralization among the deserving officials and employees" the
ongoing government reorganization had generated, and prescribed as "grounds for the separation/replacement of
personnel," the following:
SECTION 3. The following shall be the grounds for separation replacement of personnel:
1) Existence of a case for summary dismissal pursuant to Section 40 of the Civil Service Law;
2) Existence of a probable cause for violation of the Anti-Graft and Corrupt Practices Act as determined by the Mnistry
Head concerned;
3) Gross incompetence or inefficiency in the discharge of functions;
4) Misuse of public office for partisan political purposes;
5) Any other analogous ground showing that the incumbent is unfit to remain in the service or his separation/replacement
is in the interest of the service.8
On January 30, 1987, the President promulgated Executive Order No. 127, "REORGANIZING THE MINISTRY OF
FINANCE." 9 Among other offices, Executive Order No. 127 provided for the reorganization of the Bureau of
Customs 10 and prescribed a new staffing pattern therefor.
Three days later, on February 2, 1987, 11 the Filipino people adopted the new Constitution.
On January 6, 1988, incumbent Commissioner of Customs Salvador Mison issued a Memorandum, in the nature of
"Guidelines on the Implementation of Reorganization Executive Orders," 12 prescribing the procedure in personnel
placement. It also provided:
1. By February 28, 1988, the employees covered by Executive Order 127 and the grace period extended to the Bureau of
Customs by the President of the Philippines on reorganization shall be:
a) informed of their re-appointment, or
b) offered another position in the same department or agency or
c) informed of their termination. 13
On the same date, Commissioner Mison constituted a Reorganization Appeals Board charged with adjudicating appeals
from removals under the above Memorandum. 14 On January 26, 1988, Commissioner Mison addressed several notices to
various Customs officials, in the tenor as follows:
Sir:
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ADMIN LAW ROMAN NUMERAL II
Please be informed that the Bureau is now in the process of implementing the Reorganization Program under Executive
Order No. 127.
Pursuant to Section 59 of the same Executive Order, all officers and employees of the Department of Finance, or the
Bureau of Customs in particular, shall continue to perform their respective duties and responsibilities in a hold-over
capacity, and that those incumbents whose positions are not carried in the new reorganization pattern, or who are not re-
appointed, shall be deemed separated from the service.
In this connection, we regret to inform you that your services are hereby terminated as of February 28, 1988. Subject to
the normal clearances, you may receive the retirement benefits to which you may be entitled under existing laws, rules
and regulations.
In the meantime, your name will be included in the consolidated list compiled by the Civil Service Commission so that
you may be given priority for future employment with the Government as the need arises.
Sincerely yours,
(Sgd) SALVADOR M. MISON
Commissione
Cesar Dario is the petitioner in G.R. No. 81954; Vicente Feria, Jr., is the petitioner in G.R. No. 81967; Messrs.
Adolfo Caserano Pacifico Lagleva Julian C. Espiritu, Dennis A. Azarraga Renato de Jesus, Nicasio C. Gamboa,
Mesdames Corazon Rallos Nieves and Felicitacion R. Geluz Messrs. Leodegario H. Floresca, Subaer Pacasum Ms.
Zenaida Lanaria Mr. Jose B. Ortiz, Ms. Gliceria R. Dolar, Ms. Cornelia Napa, Pablo B. Santos, Fermin
Rodriguez, Ms. Daligay Bautista, Messrs. Leonardo Jose, Alberto Lontok, Porfirio Tabino Jose Barredo, Roberto
Arnaldo, Ms. Ester Tan, Messrs. Pedro Bakal, Rosario David, Rodolfo Afuang, Lorenzo Catre,, Ms. Leoncia
Catre, and Roberto Abaca, are the petitioners in G.R. No. 82023; the last 279 16 individuals mentioned are the
private respondents in G.R. No. 85310.
As far as the records will likewise reveal, 17 a total of 394 officials and employees of the Bureau of Customs were
given individual notices of separation. A number supposedly sought reinstatement with the Reorganization
Appeals Board while others went to the Civil Service Commission. The first thirty-one mentioned above came
directly to this Court.
On June 30, 1988, the Civil Service Commission promulgated its ruling ordering the reinstatement of the 279
employees, the 279 private respondents in G.R. No. 85310, the dispositive portion of which reads as follows:
WHEREFORE, it is hereby ordered that:
1. Appellants be immediately reappointed to positions of comparable or equivalent rank in the Bureau of Customs
without loss of seniority rights;
2. Appellants be paid their back salaries reckoned from the dates of their illegal termination based on the rates
under the approved new staffing pattern but not lower than their former salaries.
This action of the Commission should not, however, be interpreted as an exoneration of the appellants from any
accusation of wrongdoing and, therefore, their reappointments are without prejudice to:
1. Proceeding with investigation of appellants with pending administrative cases, and where investigations have been
finished, to promptly, render the appropriate decisions;
2. The filing of appropriate administrative complaints against appellants with derogatory reports or information if
evidence so warrants.
SO ORDERED. 18
On July 15, 1988, Commissioner Mison, represented by the Solicitor General, filed a motion for reconsideration Acting
on the motion, the Civil Service Commission, on September 20, 1988, denied reconsideration. 19
On October 20, 1988, Commissioner Mison instituted certiorari proceedings with this Court, docketed, as above-
stated, as G.R. No. 85310 of this Court.
On November 16,1988, the Civil Service Commission further disposed the appeal (from the resolution of the
Reorganization Appeals Board) of five more employees, holding as follows:
WHEREFORE, it is hereby ordered that:
1. Appellants be immediately reappointed to positions of comparable or equivalent rank in the Bureau of Customs
without loss of seniority rights; and
2. Appellants be paid their back salaries to be reckoned from the date of their illegal termination based on the
rates under the approved new staffing pattern but not lower than their former salaries.
This action of the Commission should not, however, be interpreted as an exoneration of the herein appellants from
any accusation of any wrongdoing and therefore, their reappointments are without prejudice to:
1. Proceeding with investigation of appellants with pending administrative cases, if any, and where investigations
have been finished, to promptly, render the appropriate decisions; and
2. The filing of appropriate administrative complaints against appellant with derogatory reports or information, if
any, and if evidence so warrants.
SO ORDERED. 20
On January 6, 1989, Commissioner Mison challenged the Civil Service Commission's Resolution in this Court; his
petitioner has been docketed herein as G.R. No. 86241. The employees ordered to be reinstated are Senen
Dimaguila, Romeo Arabe, Bemardo Quintong,Gregorio Reyes, and Romulo Badillo. 21
On June 10, 1988, Republic Act No. 6656, "AN ACT TO PROTECT THE SECURITY OF TENURE OF CIVIL
SERVICE OFFICERS AND EMPLOYEES IN THE IMPLEMENTATION OF GOVERNMENT
REORGANIZATION," 22was signed into law. Under Section 7, thereof:
Sec. 9. All officers and employees who are found by the Civil Service Commission to have been separated in
violation of the provisions of this Act, shall be ordered reinstated or reappointed as the case may be without loss of
seniority and shall be entitled to full pay for the period of separation. Unless also separated for cause, all officers
and employees, including casuals and temporary employees, who have been separated pursuant to reorganization
shall, if entitled thereto, be paid the appropriate separation pay and retirement and other benefits under existing
laws within ninety (90) days from the date of the effectivity of their separation or from the date of the receipt of
the resolution of their appeals as the case may be: Provided, That application for clearance has been filed and no
action thereon has been made by the corresponding department or agency. Those who are not entitled to said
benefits shall be paid a separation gratuity in the amount equivalent to one (1) month salary for every year of
service. Such separation pay and retirement benefits shall have priority of payment out of the savings of the
department or agency concerned. 23
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ADMIN LAW ROMAN NUMERAL II
On June 23, 1988, Benedicto Amasa and William Dionisio, customs examiners appointed by Commissioner Mison
pursuant to the ostensible reorganization subject of this controversy, petitioned the Court to contest the validity of
the statute. The petition is docketed as G.R. No. 83737.
On October 21, 1988, thirty-five more Customs officials whom the Civil Service Commission had ordered
reinstated by its June 30,1988 Resolution filed their own petition to compel the Commissioner of Customs to
comply with the said Resolution. The petition is docketed as G.R. No. 85335.
On November 29, 1988, we resolved to consolidate all seven petitions.
On the same date, we resolved to set the matter for hearing on January 12, 1989. At the said hearing, the parties,
represented by their counsels (a) retired Justice Ruperto Martin; (b) retired Justice Lino Patajo. (c) former Dean
Froilan Bacungan (d) Atty. Lester Escobar (e) Atty. Faustino Tugade and (f) Atty. Alexander Padilla, presented
their arguments. Solicitor General Francisco Chavez argued on behalf of the Commissioner of Customs (except in
G.R. 85335, in which he represented the Bureau of Customs and the Civil Service
Commission).lâwphî1.ñèt Former Senator Ambrosio Padilla also appeared and argued as amicus
curiae Thereafter, we resolved to require the parties to submit their respective memoranda which they did in due
time.
There is no question that the administration may validly carry out a government reorganization — insofar as
these cases are concerned, the reorganization of the Bureau of Customs — by mandate not only of the Provisional
Constitution, supra, but also of the various Executive Orders decreed by the Chief Executive in her capacity as
sole lawmaking authority under the 1986-1987 revolutionary government. It should also be noted that under the
present Constitution, there is a recognition, albeit implied, that a government reorganization may be legitimately
undertaken, subject to certain conditions. 24
The Court understands that the parties are agreed on the validity of a reorganization per se the only question being, as
shall be later seen: What is the nature and extent of this government reorganization?
The Court disregards the questions raised as to procedure, failure to exhaust administrative remedies, the standing of
certain parties to sue, 25 and other technical objections, for two reasons, "[b]ecause of the demands of public interest,
including the need for stability in the public service,"26 and because of the serious implications of these cases on the
administration of the Philippine civil service and the rights of public servants.
The urgings in G.R. Nos. 85335 and 85310, that the Civil Service Commission's Resolution dated June 30, 1988 had
attained a character of finality for failure of Commissioner Mison to apply for judicial review or ask for reconsideration
seasonalbly under Presidential Decree No. 807, 27 or under Republic Act No. 6656, 28 or under the Constitution, 29 are
likewise rejected. The records show that the Bureau of Customs had until July 15, 1988 to ask for reconsideration or
come to this Court pursuant to Section 39 of Presidential Decree No. 807. The records likewise show that the Solicitor
General filed a motion for reconsideration on July 15, 1988.30 The Civil Service Commission issued its Resolution
denying reconsideration on September 20, 1988; a copy of this Resolution was received by the Bureau on September 23,
1988.31 Hence the Bureau had until October 23, 1988 to elevate the matter on certiorari to this Court.32 Since the
Bureau's petition was filed on October 20, 1988, it was filed on time.
We reject, finally, contentions that the Bureau's petition (in G.R. 85310) raises no jurisdictional questions, and is
therefore bereft of any basis as a petition for certiorari under Rule 65 of the Rules of Court. 33 We find that the questions
raised in Commissioner Mison's petition (in G.R. 85310) are, indeed, proper for certiorari, if by "jurisdictional questions"
we mean questions having to do with "an indifferent disregard of the law, arbitrariness and caprice, or omission to weigh
pertinent considerations, a decision arrived at without rational deliberation, 34 as distinguished from questions that require
"digging into the merits and unearthing errors of judgment 35 which is the office, on the other hand, of review under Rule
45 of the said Rules. What cannot be denied is the fact that the act of the Civil Service Commission of reinstating
hundreds of Customs employees Commissioner Mison had separated, has implications not only on the entire
reorganization process decreed no less than by the Provisional Constitution, but on the Philippine bureaucracy in general;
these implications are of such a magnitude that it cannot be said that — assuming that the Civil Service Commission
erred — the Commission committed a plain "error of judgment" that Aratuc says cannot be corrected by the extraordinary
remedy of certiorari or any special civil action. We reaffirm the teaching of Aratuc — as regards recourse to this Court
with respect to rulings of the Civil Service Commission — which is that judgments of the Commission may be brought to
the Supreme Court through certiorari alone, under Rule 65 of the Rules of Court.
In Aratuc we declared:
It is once evident from these constitutional and statutory modifications that there is a definite tendency to enhance and
invigorate the role of the Commission on Elections as the independent constitutional body charged with the safeguarding
of free, peaceful and honest elections. The framers of the new Constitution must be presumed to have definite knowledge
of what it means to make the decisions, orders and rulings of the Commission "subject to review by the Supreme Court'.
And since instead of maintaining that provision intact, it ordained that the Commission's actuations be instead 'brought to
the Supreme Court on certiorari", We cannot insist that there was no intent to change the nature of the remedy,
considering that the limited scope of certiorari, compared to a review, is well known in remedial law. 36
We observe no fundamental difference between the Commission on Elections and the Civil Service Commission (or the
Commission on Audit for that matter) in terms of the constitutional intent to leave the constitutional bodies alone in the
enforcement of laws relative to elections, with respect to the former, and the civil service, with respect to the latter (or the
audit of government accounts, with respect to the Commission on Audit). As the poll body is the "sole judge" 37 of all
election cases, so is the Civil Service Commission the single arbiter of all controversies pertaining to the civil service.
It should also be noted that under the new Constitution, as under the 1973 Charter, "any decision, order, or ruling of each
Commission may be brought to the Supreme Court on certiorari," 38 which, as Aratuc tells us, "technically connotes
something less than saying that the same 'shall be subject to review by the Supreme Court,' " 39 which in turn suggests an
appeal by petition for review under Rule 45. Therefore, our jurisdiction over cases emanating from the Civil Service
Commission is limited to complaints of lack or excess of jurisdiction or grave abuse of discretion tantamount to lack or
excess of jurisdiction, complaints that justify certiorari under Rule 65.
While Republic Act No. 6656 states that judgments of the Commission are "final and executory" 40 and hence,
unappealable, under Rule 65, certiorari precisely lies in the absence of an appeal. 41
Accordingly, we accept Commissioner Mison petition (G.R. No. 85310) which clearly charges the Civil Service
Commission with grave abuse of discretion, a proper subject of certiorari, although it may not have so stated in explicit
terms.
As to charges that the said petition has been filed out of time, we reiterate that it has been filed seasonably. It is to be
stressed that the Solicitor General had thirty days from September 23, 1988 (the date the Resolution, dated September
20,1988, of the Civil Service Commission, denying reconsideration, was received) to commence the
instant certiorari proceedings. As we stated, under the Constitution, an aggrieved party has thirty days within which to
challenge "any decision, order, or ruling" 42 of the Commission. To say that the period should be counted from the
Solicitor's receipt of the main Resolution, dated June 30, 1988, is to say that he should not have asked for reconsideration
But to say that is to deny him the right to contest (by a motion for reconsideration) any ruling, other than the main
decision, when, precisely, the Constitution gives him such a right. That is also to place him at a "no-win" situation
because if he did not move for a reconsideration, he would have been faulted for demanding certioraritoo early, under the
general rule that a motion for reconsideration should preface a resort to a special civil action. 43Hence, we must reckon
the thirty-day period from receipt of the order of denial.
We come to the merits of these cases.
G.R. Nos. 81954, 81967, 82023, and 85335:
The Case for the Employees
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ADMIN LAW ROMAN NUMERAL II
The petitioner in G.R. No. 81954, Cesar Dario was one of the Deputy Commissioners of the Bureau of Customs until his
relief on orders of Commissioner Mison on January 26, 1988. In essence, he questions the legality of his dismiss, which
he alleges was upon the authority of Section 59 of Executive Order No. 127, supra, hereinbelow reproduced as follows:
SEC. 59. New Structure and Pattern. Upon approval of this Executive Order, the officers and employees of the
Ministry shall, in a holdover capacity, continue to perform their respective duties and responsibilities and receive
the corresponding salaries and benefits unless in the meantime they are separated from government service
pursuant to Executive Order No. 17 (1986) or Article III of the Freedom Constitution.
The new position structure and staffing pattern of the Ministry shall be approved and prescribed by the Minister within
one hundred twenty (120) days from the approval of this Executive Order and the authorized positions created hereunder
shall be filled with regular appointments by him or by the President, as the case may be. Those incumbents whose
positions are not included therein or who are not reappointed shall be deemed separated from the service. Those
separated from the service shall receive the retirement benefits to which they may be entitled under existing laws,
rules and regulations. Otherwise, they shall be paid the equivalent of one month basic salary for every year of
service, or the equivalent nearest fraction thereof favorable to them on the basis of highest salary received but in
no case shall such payment exceed the equivalent of 12 months salary.
No court or administrative body shall issue any writ of preliminary injunction or restraining order to enjoin the
separation/replacement of any officer or employee effected under this Executive Order. 44
a provision he claims the Commissioner could not have legally invoked. He avers that he could not have been
legally deemed to be an "[incumbent] whose [position] [is] not included therein or who [is] not reappointed"45 to
justify his separation from the service. He contends that neither the Executive Order (under the second paragraph
of the section) nor the staffing pattern proposed by the Secretary of Finance 46 abolished the office of Deputy
Commissioner of Customs, but, rather, increased it to three. 47 Nor can it be said, so he further maintains, that he
had not been "reappointed" 48 (under the second paragraph of the section) because "[[r]eappointment therein
presupposes that the position to which it refers is a new one in lieu of that which has been abolished or although an
existing one, has absorbed that which has been abolished." 49 He claims, finally, that under the Provisional
Constitution, the power to dismiss public officials without cause ended on February 25, 1987, 50 and that thereafter,
public officials enjoyed security of tenure under the provisions of the 1987 Constitution. 51
Like Dario Vicente Feria, the petitioner in G.R. No. 81967, was a Deputy Commissioner at the Bureau until his
separation directed by Commissioner Mison. And like Dario he claims that under the 1987 Constitution, he has
acquired security of tenure and that he cannot be said to be covered by Section 59 of Executive Order No. 127,
having been appointed on April 22, 1986 — during the effectivity of the Provisional Constitution. He adds that
under Executive Order No. 39, "ENLARGING THE POWERS AND FUNCTIONS OF THE COMMISSIONER
OF CUSTOMS,"52 the Commissioner of Customs has the power "[t]o appoint all Bureau personnel, except those
appointed by the President," 53 and that his position, which is that of a Presidential appointee, is beyond the
control of Commissioner Mison for purposes of reorganization.
The petitioners in G.R. No. 82023, collectors and examiners in venous ports of the Philippines, say, on the other
hand, that the purpose of reorganization is to end corruption at the Bureau of Customs and that since there is no
finding that they are guilty of corruption, they cannot be validly dismissed from the service.
The Case for Commissioner Mison
In his comments, the Commissioner relies on this Court's resolution in Jose v. Arroyo54 in which the following
statement appears in the last paragraph thereof:
The contention of petitioner that Executive Order No. 127 is violative of the provision of the 1987 Constitution
guaranteeing career civil service employees security of tenure overlooks the provisions of Section 16, Article XVIII
(Transitory Provisions) which explicitly authorize the removal of career civil service employees "not for cause but as a
result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the
ratification of this Constitution." By virtue of said provision, the reorganization of the Bureau of Customs under
Executive Order No. 127 may continue even after the ratification of the Constitution, and career civil service employees
may be separated from the service without cause as a result of such reorganization.55
For this reason, Mison posits, claims of violation of security of tenure are allegedly no defense. He further states that the
deadline prescribed by the Provisional Constitution (February 25, 1987) has been superseded by the 1987 Constitution,
specifically, the transitory provisions thereof, 56 which allows a reorganization thereafter (after February 25, 1987) as this
very Court has so declared in Jose v. Arroyo. Mison submits that contrary to the employees' argument, Section 59 of
Executive Order No. 127 is applicable (in particular, to Dario and Feria in the sense that retention in the Bureau, under
the Executive Order, depends on either retention of the position in the new staffing pattern or reappointment of the
incumbent, and since the dismissed employees had not been reappointed, they had been considered legally separated.
Moreover, Mison proffers that under Section 59 incumbents are considered on holdover status, "which means that all
those positions were considered vacant." 57 The Solicitor General denies the applicability of Palma-Fernandez v. De la
Paz 58 because that case supposedly involved a mere transfer and not a separation. He rejects, finally, the force and effect
of Executive Order Nos. 17 and 39 for the reason that Executive Order No. 17, which was meant to implement the
Provisional Constitution, 59 had ceased to have force and effect upon the ratification of the 1987 Constitution, and that,
under Executive Order No. 39, the dismissals contemplated were "for cause" while the separations now under
question were "not for cause" and were a result of government reorganize organization decreed by Executive
Order No. 127. Anent Republic Act No. 6656, he expresses doubts on the constitutionality of the grant of
retroactivity therein (as regards the reinforcement of security of tenure) since the new Constitution clearly allows
reorganization after its effectivity.
G.R. Nos. 85310 and 86241
The Position of Commissioner Mison
Commissioner's twin petitions are direct challenges to three rulings of the Civil Service Commission: (1) the
Resolution, dated June 30, 1988, reinstating the 265 customs employees above-stated; (2) the Resolution, dated
September 20, 1988, denying reconsideration; and (3) the Resolution, dated November 16, 1988, reinstating five
employees. The Commissioner's arguments are as follows:
1. The ongoing government reorganization is in the nature of a "progressive" 60 reorganization "impelled by the
need to overhaul the entire government bureaucracy" 61 following the people power revolution of 1986;
2. There was faithful compliance by the Bureau of the various guidelines issued by the President, in particular, as
to deliberation, and selection of personnel for appointment under the new staffing pattern;
3. The separated employees have been, under Section 59 of Executive Order No. 127, on mere holdover standing,
"which means that all positions are declared vacant;" 62
4. Jose v. Arroyo has declared the validity of Executive Order No. 127 under the transitory provisions of the 1987
Constitution;
5. Republic Act No. 6656 is of doubtful constitutionality.
The Ruling of the Civil Service Commission
The position of the Civil Service Commission is as follows:
. 1. Reorganizations occur where there has been a reduction in personnel or redundancy of functions; there is no
showing that the reorganization in question has been carried out for either purpose — on the contrary, the
dismissals now disputed were carried out by mere service of notices;
2. The current Customs reorganization has not been made according to Malacañ;ang guidelines; information on
file with the Commission shows that Commissioner Mison has been appointing unqualified personnel;
3. Jose v. Arroyo, in validating Executive Order No. 127, did not countenance illegal removals;
4. Republic Act No. 6656 protects security of tenure in the course of reorganizations
The Court's ruling
Reorganization, Fundamental Principles of. —
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ADMIN LAW ROMAN NUMERAL II
I.
The core provision of law involved is Section 16 Article XVIII, of the 1987 Constitution. We quote:
Sec. 16. Career civil service employees separated from the service not for cause but as a result of the
reorganization pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the
ratification of this Constitution shag be entitled to appropriate separation pay and to retirement and other
benefits accruing to them under the laws of general application in force at the time of their separation. In lieul
thereof, at the option of the employees, they may be considered for employment in the Government or in any of its
subdivisions, instrumentalities, or agencies, including government-owned or controlled corporations and their
subsidiaries. This provision also applies to career officers whose resignation, tendered in line with the existing
policy, had been accepted. 63
The Court considers the above provision critical for two reasons: (1) It is the only provision — in so far as it mentions
removals not for cause — that would arguably support the challenged dismissals by mere notice, and (2) It is the single
existing law on reorganization after the ratification of the 1987 Charter, except Republic Act No. 6656, which came much
later, on June 10, 1988. [Nota been Executive Orders No. 116 (covering the Ministry of Agriculture & Food), 117
(Ministry of Education, Culture & Sports), 119 (Health), 120 (Tourism), 123 (Social Welfare & Development), 124
(Public Works & Highways), 125 transportation & Communications), 126 (Labor & Employment), 127 (Finance), 128
(Science & Technology), 129 (Agrarian Reform), 131 (Natural Resources), 132 (Foreign Affairs), and 133 (Trade &
Industry) were all promulgated on January 30,1987, prior to the adoption of the Constitution on February 2, 1987]. 64
It is also to be observed that unlike the grants of power to effect reorganizations under the past Constitutions, the above
provision comes as a mere recognition of the right of the Government to reorganize its offices, bureaus, and
instrumentalities. Under Section 4, Article XVI, of the 1935 Constitution:
Section 4. All officers and employees in the existing Government of the Philippine Islands shall continue in office until
the Congress shall provide otherwise, but all officers whose appointments are by this Constitution vested in the President
shall vacate their respective office(s) upon the appointment and qualification of their successors, if such appointment is
made within a period of one year from the date of the inauguration of the Commonwealth of the Philippines. 65
Under Section 9, Article XVII, of the 1973 Charter:
Section 9. All officials and employees in the existing Government of the Republic of the Philippines shall continue in
office until otherwise provided by law or decreed by the incumbent President of the Philippines, but all officials whose
appointments are by this Constitution vested in the Prime Minister shall vacate their respective offices upon the
appointment and qualification of their successors. 66
The Freedom Constitution is, as earlier seen, couched in similar language:
SECTION 2. All elective and appointive officials and employees under the 1973 Constitution shall continue in office
until otherwise provided by proclamation or executive order or upon the appointment and qualification of their
successors, if such is made within a period of one year from February 25, 1986. 67
Other than references to "reorganization following the ratification of this Constitution," there is no provision for
"automatic" vacancies under the 1987 Constitution.
Invariably, transition periods are characterized by provisions for "automatic" vacancies. They are dictated by the need to
hasten the passage from the old to the new Constitution free from the "fetters" of due process and security of tenure.
At this point, we must distinguish removals from separations arising from abolition of office (not by virtue of the
Constitution) as a result of reorganization carried out by reason of economy or to remove redundancy of functions.
In the latter case, the Government is obliged to prove good faith. 68 In case of removals undertaken to comply with clear
and explicit constitutional mandates, the Government is not hard put to prove anything, plainly and simply because the
Constitution allows it.
Evidently, the question is whether or not Section 16 of Article XVIII of the 1987 Constitution is a grant of a license upon
the Government to remove career public officials it could have validly done under an "automatic" vacancy-authority and
to remove them without rhyme or reason.
As we have seen, since 1935, transition periods have been characterized by provisions for "automatic" vacancies. We take
the silence of the 1987 Constitution on this matter as a restraint upon the Government to dismiss public servants at a
moment's notice.
What is, indeed, apparent is the fact that if the present Charter envisioned an "automatic" vacancy, it should have said so
in clearer terms, as its 1935, 1973, and 1986 counterparts had so stated.
The constitutional "lapse" means either one of two things: (1) The Constitution meant to continue the reorganization
under the prior Charter (of the Revolutionary Government), in the sense that the latter provides for "automatic" vacancies,
or (2) It meant to put a stop to those 'automatic" vacancies. By itself, however, it is ambiguous, referring as it does to two
stages of reorganization — the first, to its conferment or authorization under Proclamation No. 3 (Freedom Charter) and
the second, to its implementation on its effectivity date (February 2, 1987).lâwphî1.ñèt But as we asserted, if the intent of
Section 16 of Article XVIII of the 1987 Constitution were to extend the effects of reorganize tion under the Freedom
Constitution, it should have said so in clear terms. It is illogical why it should talk of two phases of reorganization when it
could have simply acknowledged the continuing effect of the first reorganization.
Second, plainly the concern of Section 16 is to ensure compensation for victims" of constitutional revamps — whether
under the Freedom or existing Constitution — and only secondarily and impliedly, to allow reorganization. We turn to
the records of the Constitutional Commission:
INQUIRY OF MR. PADILLA
On the query of Mr. Padilla whether there is a need for a specific reference to Proclamation No. 3 and not merely state
"result of the reorganization following the ratification of this Constitution', Mr. Suarez, on behalf of the Committee,
replied that it is necessary, inasmuch as there are two stages of reorganization covered by the Section.
Mr. Padilla pointed out that since the proposal of the Commission on Government Reorganization have not been
implemented yet, it would be better to use the phrase "reorganization before or after the ratification of the Constitution' to
simplify the Section. Mr. Suarez instead suggested the phrase "as a result of the reorganization effected before or after the
ratification of the Constitution' on the understanding that the provision would apply to employees terminated because of
the reorganization pursuant to Proclamation No. 3 and even those affected by the reorganization during the Marcos
regime. Additionally, Mr. Suarez pointed out that it is also for this reason that the Committee specified the two
Constitutions the Freedom Constitution — and the 1986 [1987] Constitution. 69
Simply, the provision benefits career civil service employees separated from the service. And the separation contemplated
must be due to or the result of (1) the reorganization pursuant to Proclamation No. 3 dated March 25, 1986, (2) the
reorganization from February 2, 1987, and (3) the resignations of career officers tendered in line with the existing policy
and which resignations have been accepted. The phrase "not for cause" is clearly and primarily exclusionary, to exclude
those career civil service employees separated "for cause." In other words, in order to be entitled to the benefits granted
under Section 16 of Article XVIII of the Constitution of 1987, two requisites, one negative and the other positive, must
concur, to wit:
1. the separation must not be for cause, and
2. the separation must be due to any of the three situations mentioned above.
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ADMIN LAW ROMAN NUMERAL II
By its terms, the authority to remove public officials under the Provisional Constitution ended on February 25, 1987,
advanced by jurisprudence to February 2, 1987. 70 It Can only mean, then, that whatever reorganization is taking place is
upon the authority of the present Charter, and necessarily, upon the mantle of its provisions and safeguards. Hence, it can
not be legitimately stated that we are merely continuing what the revolutionary Constitution of the Revolutionary
Government had started. We are through with reorganization under the Freedom Constitution — the first stage. We are
on the second stage — that inferred from the provisions of Section 16 of Article XVIII of the permanent basic document.
This is confirmed not only by the deliberations of the Constitutional Commission, supra, but is apparent from the
Charter's own words. It also warrants our holding in Esguerra and Palma-Fernandez, in which we categorically declared
that after February 2, 1987, incumbent officials and employees have acquired security of tenure, which is not a deterrent
against separation by reorganization under the quondam fundamental law.
Finally, there is the concern of the State to ensure that this reorganization is no "purge" like the execrated reorganizations
under martial rule. And, of course, we also have the democratic character of the Charter itself.
Commissioner Mison would have had a point, insofar as he contends that the reorganization is open-ended
("progressive"), had it been a reorganization under the revolutionary authority, specifically of the Provisional
Constitution. For then, the power to remove government employees would have been truly wide ranging and limitless,
not only because Proclamation No. 3 permitted it, but because of the nature of revolutionary authority itself, its
totalitarian tendencies, and the monopoly of power in the men and women who wield it.
What must be understood, however, is that notwithstanding her immense revolutionary powers, the President was,
nevertheless, magnanimous in her rule. This is apparent from Executive Order No. 17, which established safeguards
against the strong arm and ruthless propensity that accompanies reorganizations — notwithstanding the fact that removals
arising therefrom were "not for cause," and in spite of the fact that such removals would have been valid and
unquestionable. Despite that, the Chief Executive saw, as we said, the "unnecessary anxiety and demoralization" in the
government rank and file that reorganization was causing, and prescribed guidelines for personnel action. Specifically,
she said on May 28, 1986:
WHEREAS, in order to obviate unnecessary anxiety and demoralization among the deserving officials and employees,
particularly in the career civil service, it is necessary to prescribe the rules and regulations for implementing the said
constitutional provision to protect career civil servants whose qualifications and performance meet the standards of
service demanded by the New Government, and to ensure that only those found corrupt, inefficient and undeserving are
separated from the government service; 71
Noteworthy is the injunction embodied in the Executive Order that dismissals should be made on the basis of findings of
inefficiency, graft, and unfitness to render public service.*
The President's Memorandum of October 14, 1987 should furthermore be considered. We quote, in part:
Further to the Memorandum dated October 2, 1987 on the same subject, I have ordered that there will be no further
layoffs this year of personnel as a result of the government reorganization. 72
Assuming, then, that this reorganization allows removals "not for cause" in a manner that would have been permissible in
a revolutionary setting as Commissioner Mison so purports, it would seem that the Commissioner would have been
powerless, in any event, to order dismissals at the Customs Bureau left and right. Hence, even if we accepted his
"progressive" reorganization theory, he would still have to come to terms with the Chief Executive's subsequent
directives moderating the revolutionary authority's plenary power to separate government officials and employees.
Reorganization under the 1987 Constitution, Nature, Extent, and Limitations of; Jose v. Arroyo, clarified. —
The controversy seems to be that we have, ourselves, supposedly extended the effects of government reorganization
under the Provisional Constitution to the regime of the 1987 Constitution. Jose v. Arroyo73 is said to be the authority for
this argument. Evidently, if Arroyo indeed so ruled, Arroyo would be inconsistent with the earlier pronouncement
of Esguerra and the later holding of Palma-Fernandez. The question, however, is: Did Arroyo, in fact, extend the effects
of reorganization under the revolutionary Charter to the era of the new Constitution?
There are a few points about Arroyo that have to be explained. First, the opinion expressed therein that "[b]y virtue of
said provision the reorganization of the Bureau of Customs under Executive Order No. 127 may continue even after the
ratification of this constitution and career civil service employees may be separated from the service without cause as a
result of such reorganization" 74 is in the nature of an obiter dictum. We dismissed Jose's petition 75 primarily because it
was "clearly premature, speculative, and purely anticipatory, based merely on newspaper reports which do not show any
direct or threatened injury," 76 it appearing that the reorganization of the Bureau of Customs had not been, then, set in
motion. Jose therefore had no cause for complaint, which was enough basis to dismiss the petition. The remark anent
separation "without cause" was therefore not necessary for the disposition of the case. In Morales v. Parades,77 it was
held that an obiter dictum "lacks the force of an adjudication and should not ordinarily be regarded as such." 78
Secondly, Arroyo is an unsigned resolution while Palma Fernandez is a full-blown decision, although both are en
banc cases. While a resolution of the Court is no less forceful than a decision, the latter has a special weight.
Thirdly, Palma-Fernandez v. De la Paz comes as a later doctrine. (Jose v. Arroyo was promulgated on August 11, 1987
while Palma-Fernandez was decided on August 31, 1987.) It is well-established that a later judgment supersedes a prior
one in case of an inconsistency.
As we have suggested, the transitory provisions of the 1987 Constitution allude to two stages of the reorganization, the
first stage being the reorganization under Proclamation No. 3 — which had already been consummated — the second
stage being that adverted to in the transitory provisions themselves — which is underway. Hence, when we spoke,
in Arroyo, of reorganization after the effectivity of the new Constitution, we referred to the second stage of the
reorganization. Accordingly, we cannot be said to have carried over reorganization under the Freedom Constitution to its
1987 counterpart.
Finally, Arroyo is not necessarily incompatible with Palma-Fernandez (or Esguerra).
As we have demonstrated, reorganization under the aegis of the 1987 Constitution is not as stern as reorganization under
the prior Charter. Whereas the latter, sans the President's subsequently imposed constraints, envisioned a purgation, the
same cannot be said of the reorganization inferred under the new Constitution because, precisely, the new Constitution
seeks to usher in a democratic regime. But even if we concede ex gratia argumenti that Section 16 is an exception to due
process and no-removal-"except for cause provided by law" principles enshrined in the very same 1987
Constitution, 79 which may possibly justify removals "not for cause," there is no contradiction in terms here because,
while the former Constitution left the axe to fall where it might, the present organic act requires that removals "not for
cause" must be as a result of reorganization. As we observed, the Constitution does not provide for "automatic"
vacancies. It must also pass the test of good faith — a test not obviously required under the revolutionary government
formerly prevailing, but a test well-established in democratic societies and in this government under a democratic
Charter.
When, therefore, Arroyo permitted a reorganization under Executive Order No. 127 after the ratification of the 1987
Constitution, Arroyo permitted a reorganization provided that it is done in good faith. Otherwise, security of tenure would
be an insuperable implement. 80
Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. 81 As a general
rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more
efficient. In that event, no dismissal (in case of a dismissal) or separation actually occurs because the position itself ceases
to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the "abolition," which is
nothing else but a separation or removal, is done for political reasons or purposely to defeat sty of tenure, or otherwise not
in good faith, no valid "abolition' takes place and whatever "abolition' is done, is void ab initio. There is an invalid
"abolition" as where there is merely a change of nomenclature of positions, 82 or where claims of economy are belied by
the existence of ample funds. 83
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ADMIN LAW ROMAN NUMERAL II
It is to be stressed that by predisposing a reorganization to the yardstick of good faith, we are not, as a consequence,
imposing a "cause" for restructuring. Retrenchment in the course of a reorganization in good faith is still removal "not for
cause," if by "cause" we refer to "grounds" or conditions that call for disciplinary action.**
Good faith, as a component of a reorganization under a constitutional regime, is judged from the facts of each case.
However, under Republic Act No. 6656, we are told:
SEC. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and
hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished or
rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the
service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following
circumstances may be considered as evidence of bad faith in the removals made as a result of reorganization, giving rise
to a claim for reinstatement or reappointment by an aggrieved party: (a) Where there is a significant increase in the
number of positions in the new staffing pattern of the department or agency concerned; (b) Where an office is abolished
and another performing substantially the same functions is created; (c) Where incumbents are replaced by those less
qualified in terms of status of appointment, performance and merit; (d) Where there is a reclassification of offices in the
department or agency concerned and the reclassified offices perform substantially the same functions as the original
offices; (e) Where the removal violates the order of separation provided in Section 3 hereof. 84
It is in light hereof that we take up questions about Commissioner Mison's good faith, or lack of it.
Reorganization of the Bureau of Customs,
Lack of Good Faith in. —
The Court finds that after February 2, 1987 no perceptible restructuring of the Customs hierarchy — except for the
change of personnel — has occurred, which would have justified (an things being equal) the contested dismisses. The
contention that the staffing pattern at the Bureau (which would have furnished a justification for a personnel movement)
is the same s pattern prescribed by Section 34 of Executive Order No. 127 already prevailing when Commissioner Mison
took over the Customs helm, has not been successfully contradicted 85 There is no showing that legitimate structural
changes have been made — or a reorganization actually undertaken, for that matter — at the Bureau since Commissioner
Mison assumed office, which would have validly prompted him to hire and fire employees. There can therefore be no
actual reorganization to speak of, in the sense, say, of reduction of personnel, consolidation of offices, or abolition thereof
by reason of economy or redundancy of functions, but a revamp of personnel pure and simple.
The records indeed show that Commissioner Mison separated about 394 Customs personnel but replaced them with 522
as of August 18, 1988. 86 This betrays a clear intent to "pack" the Bureau of Customs. He did so, furthermore, in defiance
of the President's directive to halt further layoffs as a consequence of reorganization. 87Finally, he was aware that layoffs
should observe the procedure laid down by Executive Order No. 17.
We are not, of course, striking down Executive Order No. 127 for repugnancy to the Constitution. While the act is valid,
still and all, the means with which it was implemented is not. 88
Executive Order No. 127, Specific Case of. —
With respect to Executive Order No. 127, Commissioner Mison submits that under Section 59 thereof, "[t]hose
incumbents whose positions are not included therein or who are not reappointed shall be deemed separated from the
service." He submits that because the 394 removed personnel have not been "reappointed," they are considered
terminated. To begin with, the Commissioner's appointing power is subject to the provisions of Executive Order No. 39.
Under Executive Order No. 39, the Commissioner of Customs may "appoint all Bureau personnel, except those appointed
by the President." 89
Accordingly, with respect to Deputy Commissioners Cesar Dario and Vicente Feria, Jr., Commissioner Mison could not
have validly terminated them, they being Presidential appointees.
Secondly, and as we have asserted, Section 59 has been rendered inoperative according to our holding in Palma-
Fernandez.
That Customs employees, under Section 59 of Executive Order No. 127 had been on a mere holdover status cannot mean
that the positions held by them had become vacant. In Palma-Fernandez, we said in no uncertain terms:
The argument that, on the basis of this provision, petitioner's term of office ended on 30 January 1987 and that she
continued in the performance of her duties merely in a hold over capacity and could be transferred to another position
without violating any of her legal rights, is untenable. The occupancy of a position in a hold-over capacity was conceived
to facilitate reorganization and would have lapsed on 25 February 1987 (under the Provisional Constitution), but
advanced to February 2, 1987 when the 1987 Constitution became effective (De Leon. et al., vs. Hon. Benjamin B.
Esquerra, et. al., G.R. No. 78059, 31 August 1987). After the said date the provisions of the latter on security of tenure
govern. 90
It should be seen, finally, that we are not barring Commissioner Mison from carrying out a reorganization under the
transitory provisions of the 1987 Constitution. But such a reorganization should be subject to the criterion of good faith.
Resume. —
In resume, we restate as follows:
1. The President could have validly removed government employees, elected or appointed, without cause but only before
the effectivity of the 1987 Constitution on February 2, 1987 (De Leon v. Esguerra, supra; Palma-Fernandez vs. De la
Paz, supra); in this connection, Section 59 (on non-reappointment of incumbents) of Executive Order No. 127 cannot be a
basis for termination;
2. In such a case, dismissed employees shall be paid separation and retirement benefits or upon their option be given
reemployment opportunities (CONST. [1987], art. XVIII, sec. 16; Rep. Act No. 6656, sec. 9);
3. From February 2, 1987, the State does not lose the right to reorganize the Government resulting in the separation of
career civil service employees [CONST. (1987), supra] provided, that such a reorganization is made in good faith. (Rep.
Act No. 6656, supra.)
G.R. No. 83737
This disposition also resolves G.R. No. 83737. As we have indicated, G.R. No. 83737 is a challenge to the validity of
Republic Act No. 6656. In brief, it is argued that the Act, insofar as it strengthens security of tenure 91 and as far as it
provides for a retroactive effect, 92 runs counter to the transitory provisions of the new Constitution on removals not for
cause.
It can be seen that the Act, insofar as it provides for reinstatament of employees separated without "a valid cause and after
due notice and hearing" 93 is not contrary to the transitory provisions of the new Constitution. The Court reiterates that
although the Charter's transitory provisions mention separations "not for cause," separations thereunder must nevertheless
be on account of a valid reorganization and which do not come about automatically. Otherwise, security of tenure may be
invoked. Moreover, it can be seen that the statute itself recognizes removals without cause. However, it also
acknowledges the possibility of the leadership using the artifice of reorganization to frustrate security of tenure. For this
reason, it has installed safeguards. There is nothing unconstitutional about the Act.
We recognize the injury Commissioner Mison's replacements would sustain. We also commisserate with them. But our
concern is the greater wrong inflicted on the dismissed employees on account of their regal separation from the civil
service.
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ADMIN LAW ROMAN NUMERAL II
WHEREFORE, THE RESOLUTIONS OF THE CIVIL SERVICE COMMISSION, DATED JUNE 30, 1988,
SEPTEMBER 20, 1988, NOVEMBER 16, 1988, INVOLVED IN G.R. NOS. 85310, 85335, AND 86241, AND MAY 8,
1989, INVOLVED IN G.R. NO. 85310, ARE AFFIRMED.
THE PETITIONS IN G.R. NOS. 81954, 81967, 82023, AND 85335 ARE GRANTED. THE PETITIONS IN G.R. NOS.
83737, 85310 AND 86241 ARE DISMISSED.
THE COMMISSIONER OF CUSTOMS IS ORDERED TO REINSTATE THE EMPLOYEES SEPARATED AS A
RESULT OF HIS NOTICES DATED JANUARY 26, 1988.
THE EMPLOYEES WHOM COMMISSIONER MISON MAY HAVE APPOINTED AS REPLACEMENTS ARE
ORDERED TO VACATE THEIR POSTS SUBJECT TO THE PAYMENT OF WHATEVER BENEFITS THAT MAY
BE PROVIDED BY LAW.
G.R. No. 93355 April 7, 1992
LUIS B. DOMINGO, petitioner,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES and CIVIL SERVICE
COMMISSION, respondents.
REGALADO, J.:
This special civil action impugns the resolution 1 of respondent Civil Service Commission (CSC) promulgated on April
10, 1990 in CSC Case No. 473 setting aside its earlier resolution of November 27, 1989 and affirming the separation of
petitioner Luis B. Domingo as Senior Training and Career Development Officer of the Development Bank of the
Philippines (DBP).
Petitioner was employed by DBP as Senior Training and Career Development Officer on permanent status from
February, 1979 to December 1986.
On December 3, 1986, Executive Order No 81 (The Revised Charter of DBP) was passed authorizing the reorganization
of DBP in this wise:
Sec. 32. Authority to Reorganize. — In view of the new scope of operations of the Bank, a
reorganization of the Bank and a reduction in force are hereby authorized to achieve simplicity
and economy in operations, including adopting a new staffing pattern to suit the reduced
operations envisioned. The formulation of the program of reorganization shall be completed
within six months after the approval of this Charter, and the full implementation of the
reorganization program within thirty months thereafter.
Further, Sections 33 and 34 thereof provide:
Sec. 33. Implementing Details; Organization and Staffing of the Bank.
xxx xxx xxx
In the implementation of the reorganization of the Bank, as authorized under the preceding
section, qualified personnel of the Bank may be appointed to appropriate positions in the new
staffing pattern thereof and those not so appointed are deemed separated from the service. No
preferential or priority rights shall be given to or enjoyed by any officer or personnel of the
Bank for appointment to any position in the new staffing pattern nor shall any officer or
personnel be considered as having prior or vested rights with respect to retention in the Bank or
in any position as may have been created in its new staffing pattern, even if he should be the
incumbent of a similar position therein.
xxx xxx xxx
Sec. 34. Separation Benefits. — All those who shall retire from the service or are separated
therefrom on account of the reorganization of the Bank under the provisions of this Charter
shall be entitled to all gratuities and benefits provided for under existing laws and/or
supplementary retirement plans adopted by and effective in the Bank: . . .
Pursuant thereto, DBP issued Board Resolution No. 304-87 allowing the issuance of temporary appointments to all DBP
personnel in order to fully implement the reorganization. The resolution states in part:
It is understood that pursuant to Section 32 of the new DBP Charter full implementation of the
reorganization program shall be completed within a period of thirty-six (36) months from the
approval of this Charter. In this connection, the plantilla approved and appointments issued are
purely interim and the Bank is reserving its right to put in place the permanent structure of the
Bank as well as the permanent appointments thereto until the end of the 36-month period. 2
In effect, said resolution authorized the issuance of temporary appointments to all DBP personnel to allow maximum
flexibility in the implementation of the reorganization. Such temporary appointments issued had a maximum period of
twelve (12) months during which period the performance of the incumbents were assessed on the basis of the results of
their evaluation.
With the passage of Executive Order No. 81 and Board Resolution No. 304 87, DBP undertook the evaluation and
comparative assessment of all its personnel under the CSC approved New Performance Appraisal System, a peer and
control rating process which served as an assessment tool of DBP's screening process.
Petitioner Domingo was issued a temporary appointment on January 2, 1987 for a period of one (1) year, which was
renewed for another period up to November 30, 1988. Thereafter, in a memorandum 3 dated November 23, 1988 issued
by the Final Review Committee, petitioner got a performance rating of "below average," by reason of which his
appointment was "made to lapse."
Consequently, petitioner, together with a certain Evangeline Javier, filed with the CSC a joint verified complaint 4against
DBP for illegal dismissal. The complainants therein alleged that their dismissal constituted a violation of the Civil
Service Law against the issuance of temporary appointments to permanent employees, as well as of their right to security
of tenure and due process.
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ADMIN LAW ROMAN NUMERAL II
On November 27, 1989, CSC issued a resolution 5 in CSC Case No. 473 directing "the reappointment of Mr. Domingo
and Ms. Javier as Senior Training and Career Development Officer and Research Analyst or any such equivalent rank
under the staffing pattern of DBP." The order for reappointment was premised on the findings of the CSC that "(t)he
action of the DBP to issue temporary appointments to all DBP personnel in order to allow for the maximum flexibility in
evaluating the performance of incumbents is not in accord with civil service law rules," in that "(t)o issue a temporary
appointment to one who has been on permanent status before will deprive the employee of benefits accorded permanent
employees and will adversely affect his security of tenure," aside from the fact that such an act is contrary to Section 25
(a) of Presidential Decree No. 807.
6
DBP filed a motion for reconsideration on December 27, 1989 alleging, inter alia, that the issuance of temporary
appointments to all the DBP employees was purely an interim arrangement; that in spite of the temporary appointment,
they continued to enjoy the salary, allowances and other benefits corresponding to permanent employees; that there can
be no impairment of herein petitioner's security of tenure since the new DBP charter expressly provides that "qualified
personnel of the bank may be appointed to appropriate positions in the new staffing pattern and those not so appointed are
deemed separated from the service;" that petitioner was evaluated and comparatively assessed under a rating system
approved by the respondent commission; and that petitioner cannot claim that he was denied due process of law
considering that, although several appeals were received by the Final Review Committee from other employees similarly
situated, herein petitioner never appealed his rating or the extension of his temporary appointment although he was
advised to do so by his direct supervisor.
On April 10, 1990, CSC rendered the questioned resolution setting aside its previous decision and affirming the
separation of herein petitioner. In so ruling, CSC explained that:
While it is true that this Commission ruled that the issuance of temporary appointment to all
DBP personnel in order to allow "for maximum flexibility" in evaluating the performance of
incumbents is not in accord with civil service laws and rules, however it cannot lose sight of the
fact that appellants are among those who indeed got a below average rating (unsatisfactory)
when their performance were reevaluated and comparatively reassessed by the Final Review
Committee of the Bank approved by the Vice Chairman.
xxx xxx xxx
In effect, the determinative factor for retention and the separation from the service is the
individual performance rating.
While the Commission supports the principle of merit and fitness and strongly protects the
security of tenure of civil service officials and employees which are the essence of careerism in
the civil service, it does not however, sanction the reappointment of said officials and
employees who have fallen short of the performance necessary in order to maintain at all times
efficiency and effectiveness in the Office.
It bears stressing that the DBP submitted the records and documents in support of its allegations
that Mr. Domingo and Ms. Javier have indeed got(ten) a below average rating (unsatisfactory)
during the filing of the instant motion for reconsideration. Had DBP promptly submitted the
records/documents supporting its allegations, this Commission at the outset should have
sustained the separation of the appellants from the service on ground of poor performance
(below average rating, unsatisfactory) after the reassessment and re-evaluation by the Bank
through the Final Review Committee. The CSC could not have guessed that such was the basis
of the DBP's termination of Domingo and Javier until the papers were submitted to it. . . .
It must be pointed out that appellants' separation from the service was the lapse of their
temporary appointment. The non-extension or non-issuance of permanent appointments were
principally based on their below average rating (unsatisfactory) performance after they were
reevaluated and comparatively reassessed by the Final Review Committee of the Bank. After
all, the 1986 DBP Revised Charter (E.O. No. 81) gives the Bank a wide latitude of discretion in
the reappointment of its personnel, subject to existing civil service laws, rules and regulations.
There is no doubt that the DBP conducted a reevaluation and comparative reassessment of its
employees for placement/retention (for permanent) and for separation from the service and
found out that appellants are wanting of performance, having been rated as "Below Average." 7
Hence this petition, whereby petitioner raises the following issues:
1. Petitioner's tenure of office was violated by respondents;
2. Petitioner was not afforded a day in court and was denied procedural due process in the
unilateral evaluation by his peers of his efficiency ratings for the years 1987 and 1988;
3. Average and below average efficiency ratings are not valid grounds for termination of the
service of petitioner;
4. Section 5 of the rules implementing Republic Act No. 6656 is repugnant to the constitutional
mandate that "no officer or employee of the Civil Service be removed or suspended except for
causeprovided by law;" and
5. Section 16, Article XVIII, Transitory Provisions of the New Constitution was also violated
by respondents. 8
I. Petitioner puts in issue the validity of the reorganization implemented by DBP in that the same violates his right to
security of tenure. He contends that government reorganization cannot be a valid ground to terminate the services of
government employees, pursuant to the ruling in the case of Dario vs. Mison, et al.9
This statement of petitioner is incomplete and inaccurate, if not outright erroneous. Either petitioner misunderstood or he
totally overlooked what was stated in the aforecited decision which held that "reorganizations in this jurisdiction have
been regarded as valid provided they are pursued in good faith." As we said in Dario:
Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in
good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the
purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case
of dismissal) or separation actually occurs because the position itself ceases to exist. And in that
case, security of tenure would not be a Chinese wall.
Clearly, from our pronouncements in Dario, reorganization is a recognized valid ground for separation of civil service
employees, subject only to the condition that it be done in good faith. No less than the Constitution itself in Section 16 of
the Transitory Provisions, together with Sections 33 and 34 of Executive Order No. 81 and Section 9 of Republic Act No.
6656, support this conclusion with the declaration that all those not so appointed in the implementation of said
reorganization shall be deemed separated from the service with the concomitant recognition of their entitlement to
appropriate separation benefits and/or retirement plans of the reorganized government agency.
The facts of this case, particularly the evaluation process adopted by DBP, bear out the existence of good faith in the
course of reorganization.
As a tool in the assessment process, a bank-wide peer and control rating process was implemented. Under this process,
the peers and supervisors rated the DBP employees. 10
To make the reorganization as open, representative and fair as possible, two principal groups were formed: (1) the Group
Placement Screening Committee (GPSC) and (2) the Central Placement Screening Committee (CPSC), to review all
recommendations (for retention or separation) prior to submissions to the Chairman an the Board of Directors. The
members of the two screening committees were the Department and Group Heads and representatives from the Career
Officials Association and the DBP Employees Union. The CPSC was further represented by the DBP Civil Service
Officer, who sat as consultant to help resolve questions on Civil Service rules and regulations.
As an assessment tool to the Bank's screening process, a peer and control rating process was implemented bank-wide, the
results of which were used as a gauge to determine the suitability of an employee to stay in the Bank. Through this rating,
the Bank determines the value of the individual employee to the Bank with the help of his peers (peer rating) and his
supervisors (control
rating). 11
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ADMIN LAW ROMAN NUMERAL II
Also, as part of the evaluation process, a Final Review Committee, composed of the group, department or unit head, the
heads of the Human Resource Center and of the Personnel Services, and representatives from the Career Officials
Association and the Employees Union, was created to screen further and to recommend the change in status of the
employee's appointment from temporary to permanent beginning 1988. For the rank and file level, the committee was
chaired by the Vice-Chairman while the officer level was presided over by the Chairman of the Bank. 12
The performance rating system used and adopted by DBP was duly approved by the Civil Service Commission. Herein
petitioner was evaluated and comparatively assessed under this approved rating system. This is shown by the
memorandum to the Vice-Chairman from the DBP Final Review Committee wherein petitioner, among other DBP
employees, was evaluated and rated on his performance, and was shown to have gotten a rating of "below average." 13
14
In the comment filed by DBP with the CSC, respondent bank explained the procedure it adopted in the evaluation of
herein petitioner, together with one Evangeline Javier, to wit:
xxx xxx xxx
4. During the second phase of the screening process, the Bank used several instruments for
determining proficiency or skills on the job. More than skills, however, the evaluation also
covered trait factors to determine a positive work attitude. The Bank placed a premium on work
attitude because it believes that technical and professional skills can easily be acquired by an
ordinary normal individual as long as he has the right attitude towards learning.
5. These attitudes are part of the new corporate culture outlined in the corporate philosophy
instituted for the Bank and disseminated thru the various corporate culture seminars, monthly
tertulias, speeches of the Chairman and numerous various internal communications and
bulletins. One of the most important values emphasized was TEAMWORK due to the very lean
personnel force that the Bank was left with and the competition it has to contend with in the
industry.
6. Mr. Domingo and Miss Javier were subjected to this rating process as all other employees of
the Bank were.
xxx xxx xxx
8. Mr. Domingo and Miss Javier were recommended for a renewal of temporary status after
assessment of their performance because of several indications of lack of skill and their inability
to work with others in the department where they were stationed. In a compassionate stance, it
was considered in the Central Personnel Committee to transfer them to another department or
unit of the Bank where they may be more effective and productive, but they expressed
preference to stay in the training unit of the Bank, the Human Resource Center.
9. Along with others whose performance for 1987 was found wanting, Mr. Domingo and Miss
Javier were recommended for reappointment as temporary for another period from January to
November 1988 to give the Bank sufficient time to consider their cases. However, in an
evaluation of performance for all extendees in November 1988, Mr. Domingo and Miss Javier
were again found wanting having both acquired a rating of "Below Average."
In addition, it is not disputed that DBP now has less than 2,000 employees from a former high level of around 4,000
employees in 1986. And, under Section 27 of Presidential Decree No. 807, the Government is authorized to lay off
employees in case of a reduction due to reorganization, thus:
Sec. 27. Reduction in Force. — Whenever it becomes necessary because of lack of work or
funds or due to a change in the scope or nature of an agency's program, or as a result of
reorganization, to reduce the staff of any department or agency, those in the same group or class
of positions in one or more agencies within the particular department or agency wherein the
reduction is to be effected shall be reasonably compared in terms of relative fitness, efficiency
and length of service, and those found to be least qualified for the remaining positions shall be
laid off.
Lastly, petitioner failed to invoke the presence of any of the circumstances enumerated under Section 2 of Republic Act
No. 6656 which would show or tend to show the existence of bad faith in the implementation of the reorganization.
Quintessentially, the reorganization having been conducted in accordance with the mandate of Dario, it can safely be
concluded that indeed the reorganization was attended by good faith, ergo, valid. The dismissal of herein petitioner is a
removal for cause which, therefore, does not violate his security of tenure.
As a final note on this issue, we quote with approval the statement of Mme. Justice Ameurfina A. Melencio-Herrera in
her dissenting opinion in the above-cited case:
To be sure, the reorganization could affect the tenure of members of the career service as
defined in Section 5, Article IV of Presidential Decree No. 807, and may even result in the
separation from office of some meritorious employees. But even then, the greater good of the
greatest number and the right of the citizenry to a good government, and as they themselves
have mandated through the vehicle of Proclamation No. 3, provide the justification for the said
injury to the individual. In terms of values, the interest of an employee to security of tenure
must yield to the interest of the entire populace and to an efficient and honest government.
II. Petitioner also maintains that "average" and "below average" efficiency ratings are not valid grounds for his
termination from the service.
It has become a basic and primordial concern of the State to insure and promote the constitutional mandate that
appointments in the civil service shall be made only according to merit and fitness pursuant to its adopted policy of
requiring public officers and employees to serve with the highest degree of responsibility, integrity, loyalty and
efficiency. 15 As a matter of fact, the development and retention of a competent and efficient work force in the public
service is considered as a primary concern of the Government. 16 Hence, employees are selected on the basis of merit and
fitness to perform the duties and assume the responsibilities of the position to which they are appointed. 17Concomitantly,
the government has committed itself to engender a continuing program of career and personnel development for all
government employees, 18 by establishing a performance evaluation system to be administered in such manner as to
continually foster the improvement of individual employee efficiency and organizational effectiveness. 19
All these abundantly show that the State puts a premium on an individual's efficiency, merit and fitness before one is
accepted into the career service. A civil service employee's efficiency rating, therefore, is a decisive factor for his
continued service with the Government. The inescapable conclusion is that a "below average" efficiency rating is
sufficient justification for the termination of a government employee such as herein petitioner. This is the reason why,
painful as it may be, petitioner's separation must be affirmed if public good is to be subserved. In the words of respondent
commission in its questioned resolution, it cannot "sanction the reappointment of said officials and employees who have
fallen short of the performance necessary in order to maintain at all times efficiency and effectiveness in the Office." 20
III. Petitioner finally contends that where the purpose of the evaluation proceeding is to ascertain whether he should be
retained or separated from the service, it is a proceeding to determine the existence of a ground for his termination and,
therefore, he should be afforded a day in court, pursuant to the requirements of procedural due process, to defend himself
against any adverse findings in the process of evaluation of his performance.
Petitioner's contention cannot be sustained.
Section 2 of Republic Act No. 6656 provides that "no officer or employee in the career service shall be removed except
for a valid cause and after due notice and hearing." Thus, there is no question that while dismissal due to a bona
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ADMIN LAW ROMAN NUMERAL II
fide reorganization is recognized as a valid cause, this does not justify a detraction from the mandatory requirement of
notice and hearing. However, it is equally true and it is a basic rule of due process that "what the law prohibits is not the
absence of previous notice but the absolute absence thereof and the lack of opportunity to be heard." 21 There is no
violation of procedural due process even where no hearing was conducted for as long as the party was given a chance to
present his evidence and defend himself.
The records show that petitioner had the opportunity to present his side and/or to contest the results of the evaluation
proceedings. In DBP's motion for the reconsideration of the original decision of respondent commission, respondent bank
averred:
It may be stated that although several appeals were received by the Final Review Committee
from other employees similarly situated (i.e., also given temporary appointments for 1988), Mr.
Domingo and Miss Javier never appealed their ratings or the extension of their temporary
appointments in 1988. Even at this writing, the Bank has not received any formal appeal from
them although they were advised to do so by their direct supervisor. 22
The fact that petitioner made no appeal to the Final Review Committee was duly considered by respondent commission
in resolving said motion for reconsideration and in affirming the separation of petitioner from the service, noting that
"appellants Mr. Domingo, and Miss Javier did not file or submit their opposition to the motion for reconsideration."
Consequently, petitioner cannot, by his own inaction, legally claim that he was denied due process of law.
Considering petitioner's years of service, despite the unfortunate result of the reorganization insofar as he is concerned, he
should be allowed separation and other retirement benefits accruing to him by reason of his termination, as provided for
in Section 16, Article XVIII of the 1987 Constitution, as well as in Section 9 of Republic Act No. 6656 and Section 34 of
Executive Order No. 81.
WHEREFORE, no grave abuse of discretion having been committed by respondent Civil Service Commission, its
challenged resolution of April 10, 1990 is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera, Cruz, Paras, Padilla, Bidin, Griño-Aquino, Medialdea, Davide, Jr., Romero and Nocon, JJ., concur.
Miller vs Mardo
G.R. No. L-15138
July 31, 1961
These appeals, although originating from different Courts of First Instance, are here treated together in this single
decision because they present but one identical question of law, namely, the validity of Reorganization Plan No. 20-A,
prepared and submitted by the Government Survey and Reorganization Commission under the authority of Republic Act
No. 997, as amended by Republic Act No. 1241, insofar as it confers jurisdiction to the Regional Offices of the
Department of Labor created in said Plan to decide claims of laborers for wages, overtime and separation pay, etc.
In G.R. No. L-15138, Manuel Gonzales filed with Regional Office No. 3 of the Department of Labor, in Manila, a
complaint (IS-1148) against Bill Miller (owner and manager of Miller Motors) claiming to be a driver of Miller from
December 1, 1956 to October 31, 1957, on which latter date he was allegedly arbitrarily dismissed, without being paid
separation pay. He prayed for judgement for the amount due him as separation pay plus damages. Upon receipt of said
complaint, Chief Hearing Officer Atanacio Mardo of Regional Office No. 3 of the Department of Labor required Miller
to file an answer. Whereupon, Miller filed with the Court of First Instance of Baguio a petition (Civil Case No. 759)
praying for judgment prohibiting the Hearing Officer from proceeding with the case, for the reason that said Hearing
Officer had no jurisdiction to hear and decide the subject matter of the complaint. The court then required the Hearing
Officer and Gonzales to answer and, as prayed for, issued a writ of preliminary injunction. The latter file their separate
motions to dismiss the petition, on the ground of lack of jurisdiction, improper venue, and non-exhaustion of
administrative remedies, it being argued that pursuant to Republic Acts Nos. 997 and 1241, as implemented by Executive
Order No. 218, series of 1956 and Reorganization Plan No. 20-A, regional offices of the Department of labor have
exclusive and original jurisdiction over all cases affecting money claims arising from violations of labor standards or
working conditions. Said motions to dismiss were denied by the court. Answers were then filed and the case was heard.
Thereafter, the court rendered a decision holding that Republic Acts Nos. 997 and 1241, as well as Executive Order No.
218, series of 1956 and Reorganization Plan No. 20-A issued pursuant thereto, did not repeal the provision of the
Judiciary Act conferring on courts of first instance original jurisdiction to take cognizance of money claims arising from
violations of labor standards. The question of venue was also dismissed for being moot, the same having been already
raised and decided in a petition for certiorari and prohibition previously filed with this Court in G.R. No. L-14007
(Mardo, etc. v. De Veyra, etc.) which was dismissed for lack of merit in our resolution of July 7, 1958. From the decision
of the Court of First Instance of Baguio, respondents Hearing Officer and Gonzales interposed the present appeal now
before us.
In G.R. No. L-16781, Cresencio Estano filed with Regional Office No. 3 of the Department of Labor, a complaint (RO 3
Ls. Case No. 874) against Chin Hua Trading Co. and/or Lao Kang Suy and Ke Bon Chiong, as Manager and Assistant
Manager thereof, respectively, claiming to have been their driver from June 17, 1947 to June 4, 1955, for which service
he was not paid overtime pay (for work in excess of 8 hours and for Sundays and legal holidays) and vacation leave pay.
He prayed for judgment for the amount due him, plus attorney's fees. Chin Hua Trading, et al., filed their answer and,
issues having been joined, hearing thereof was started before Chief Hearing Officer Atanacio Mardo and Hearing Officer
Jorge Benedicto. Before trial of the case could be terminated, however, Chin Hua Trading, et al., filed with the Court of
First Instance of Manila a petition for prohibition with preliminary injunction (Civil Case No. 26826)), to restrain the
hearing officers from proceeding with the disposition of the case, on the ground that they have no jurisdiction to entertain
the same, as Reorganization Plan No. 20-A and Executive Order No. 218, series of 1956, in relation to Republic Act No.
997, as amended by Republic Act No. 1241, empowering them to adjudicate the complaint, is invalid or unconstitutional.
As prayed for, a preliminary injunction was issued by the court. After due hearing the court rendered a decision holding
that Reorganization Plan No. 20-A is null and void and therefore, granted the writ of prohibition making permanent the
preliminary injunction previously issued. From this decision, the claimant and the hearing officers appealed to the Court
of Appeals, which certified the case to us, as it involves only questions of law.
In G.R. No. L-15377, appellant Numeriana Raganas filed with the Court of First Instance of Cebu a complaint (Civil Case
No. R-5535) against appellees Sen Bee Trading Company, Macario Tan and Sergio Tan, claiming that she was employed
by appellees as a seamstress from June 5, 1952 to January 11, 1958, for which service she was underpaid and was not
given overtime, as well as vacation and sick leave pay. She prayed for judgment on the amount due her for the same plus
damages. To said complaint, appellees filed a motion to dismiss, on the ground that the trial court has no jurisdiction to
hear the case as it involves a money claim and should, under Reorganization Plan No. 20-A be filed with the Regional
Office of the Department of Labor; and there is pending before the regional office of the Department of Labor, a claim
for separation vacation, sick and maternity leave pay filed by the same plaintiff (appellant) against the same defendants-
appellees). Acting on said motion, the court dismissed the case, relying on the provision of Section 25, Article VI of
Reorganization Plan No. 20-A and on our resolution in the case of NASSCO v. Arca, et al. (G.R. No. L-12249, May 6,
1957). From this order, appellant Raganas appealed to the Court of Appeals, but said court certified the case to us.
In G.R. No. L-16660, Vicente B. Romero filed with Regional Officer No. 2 of the Department of Labor a complaint
(Wage Case No. 196-W) against Sia Seng, for recovery of alleged unpaid wages, overtime and separation pay. Sia Seng,
filed an answer. At the date set for hearing the latter did not appear despite due notice to him and counsel. Upon his
petition, Romero was allowed to present his evidence. Thereafter, a decision was rendered by the Hearing Officer in favor
of Romero. Upon the latter's motion for execution, the records of the case were referred to Regional Labor Administrator
Angel Hernando for issuance of said writ of execution, being the officer charged with the duty of issuing the same.
Hernando, believing that Sia Seng should be given a chance to present his evidence, refused to issue the writ of execution
and ordered a re-hearing. As a consequence, Romero filed with the Court of First Instance of Isabela a petition
for mandamus (Case No. Br. II-35) praying that an order be issued commanding respondent Regional Labor
Administrator to immediately issue a writ of execution of the decision in Wage Case No. 196-W. To this petition,
respondent Regional Labor Administrator filed a motion to dismiss, on the ground that it states no cause of action, but
action thereon was deferred until the case is decided on the merits. Sia Seng filed his answer questioning the validity of
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ADMIN LAW ROMAN NUMERAL II
the rules and regulations issued under the authority of Reorganization Plan No. 20-A. After hearing, the court rendered a
decision ordering, inter alia, respondent Regional Labor Administrator to forthwith issue the corresponding writ of
execution, as enjoined by Section 48, of the Rules and Regulations No. 1 of the Labor Standards Commission. From this
decision of the Court of First Instance, Sia Seng and Regional Labor Administrator Hernando appealed to us. Appellant
Sia Seng urges in his appeal that the trial court erred in not dismissing the petition, in spite of the fact that the decision
sought to be enforced by appellee Romero was rendered by a hearing officer who had no authority to render the same,
and in failing to hold that Reorganization Plan No. 20-A was not validly passed as a statute and is unconstitutional.
In G.R. No. L-17056, Mariano Pabillare instituted in Regional Office No. 3 of the Department of Labor a complaint (IS-
2168) against petitioner Fred Wilson & Co., Inc., alleging that petitioner engaged his services as Chief Mechanic, Air
conditioning Department, from October 1947 to February 19, 1959, when he was summarily dismissed without cause and
without sufficient notice and separation pay. He also claimed that during his employment he was not paid for overtime
rendered by him. He prayed for judgment for the amount due him for such overtime and separation pay. Petitioner moved
to dismiss the complaint, on the ground that said regional office "being purely an administrative body, has no power,
authority, nor jurisdiction to adjudicate the claim sought to be recovered in the action." Said motion to dismiss having
been denied by respondent Hearing Officer Meliton Parducho, petitioner Fred Wilson & Co., Inc. filed with the Court of
First Instance of Manila a petition for certiorari and prohibition, with preliminary injunction (Civil Case No. 41954) to
restrain respondent hearing officer from proceeding with the case, and praying, among others, that Reorganization Plan
No. 20-A, insofar as it vests original and exclusive jurisdiction over money claims (to the exclusion of regular courts of
justice) on the Labor Standards Commission or the Regional Offices of the Department of Labor, be declared null and
void and unconstitutional. As prayed for, the court granted a writ of preliminary injunction. Respondents Hearing Officer
and Pabillare filed answer and the case was heard. After hearing, the court rendered a decision declaring that "by the
force of Section 6 of R.A. No. 997, as amended by R.A. 1241, Plan No. 20-A was deemed approved by Congress when it
adjourned its session in 1956' (Res. of May 6, 1957 in National Shipyards Steel Corporation v. Vicente Area, G.R. No. L-
12249). It follows that the questioned reorganization Plan No. 20-A is valid.".
Petitioner Fred Wilson & Co., Inc. appealed directly to us from this decision.
The specific legal provision invoked for the authority of the regional offices to take cognizance of the subject matter
involved in these cases is paragraph 25 of Article VI of Reorganization Plan No. 20-A, which is hereunder quoted:
25 Each regional office shall have original and exclusive jurisdiction over all cases falling under the Workmen's
Compensation law, and cases affecting all money claims arising from violations of labor standards on working conditions
including but not restrictive to: unpaid wages, underpayment, overtime, separation pay and maternity leave of employees
and laborers; and unpaid wages, overtime, separation pay, vacation pay and payment for medical services of domestic
help.
Under this provision, the regional offices have been given original and exclusive jurisdiction over:
(a) all cases falling under the Workmen's Compensation law;
(b) all cases affecting money claims arising from violations of labor standards on working conditions, unpaid wages,
underpayment, overtime, separation pay and maternity leave of employees and laborers; and .
(c) all cases for unpaid wages, overtime, separation pay, vacation pay and payment for medical services of domestic help.
Before the effectivity of Reorganization Plan No. 20-A, however, the Department of Labor, except the Workmen's
Compensation Commission with respect to claims for compensation under the Workmen's Compensation law, had no
compulsory power to settle cases under (b) and (c) above, the only authority it had being to mediate merely or arbitrate
when the parties so agree in writing, In case of refusal by a party to submit to such settlement, the remedy is to file a
complaint in the proper court.1
It is evident, therefore, that the jurisdiction to take cognizance of cases affecting money claims such as those sought to be
enforced in these proceedings, is a new conferment of power to the Department of Labor not theretofore exercised by it.
The question thus presented by these cases is whether this is valid under our Constitution and applicable statutes.
It is true that in Republic Act No. 1241, amending Section 4 of Republic Act 997, which created the Government Survey
and Reorganization Commission, the latter was empowered —
(2) To abolish departments, offices, agencies, or functions which may not be necessary, or create those which way be
necessary for the efficient conduct of the government service, activities, and functions. (Emphasis supplied.)
But these "functions" which could thus be created, obviously refer merely to administrative, not judicial functions. For
the Government Survey and Reorganization Commission was created to carry out the reorganization of the Executive
Branch of the National Government (See Section 3 of R.A. No. 997, as amended by R.A. No. 1241), which plainly did
not include the creation of courts. And the Constitution expressly provides that "the Judicial power shall be vested in one
Supreme Court and in such inferior courts as may be established by law.(Sec. 1, Art. VII of the Constitution). Thus,
judicial power rests exclusively in the judiciary. It may be conceded that the legislature may confer on administrative
boards or bodies quasi-judicial powers involving the exercise of judgment and discretion, as incident to the performance
of administrative functions.2 But in so doing, the legislature must state its intention in express terms that would leave no
doubt, as even such quasi-judicial prerogatives must be limited, if they are to be valid, only to those incidental to or in
connection with the performance of jurisdiction over a matter exclusively vested in the courts.3
If a statute itself actually passed by the Congress must be clear in its terms when clothing administrative bodies
with quasi-judicial functions, then certainly such conferment can not be implied from a mere grant of power to a body
such as the Government Survey and Reorganization Commission to create "functions" in connection with the
reorganization of the Executive Branch of the Government.
And so we held in Corominas et al. v. Labor Standards Commission, et al. (G.R. No. L-14837 and companion cases, June
30, 1961);
. . . it was not the intention of Congress, in enacting Republic Act No. 997, to authorize the transfer of powers and
jurisdiction granted to the courts of justice, from these to the officials to be appointed or offices to be created by the
Reorganization Plan. Congress is well aware of the provisions of the Constitution that judicial powers are vested 'only in
the Supreme Court and in such courts as the law may establish'. The Commission was not authorized to create courts of
justice, or to take away from these their jurisdiction and transfer said jurisdiction to the officials appointed or offices
created under the Reorganization Plan. The Legislature could not have intended to grant such powers to the
Reorganization Commission, an executive body, as the Legislature may not and cannot delegate its power to legislate or
create courts of justice any other agency of the Government. (Chinese Flour Importers Assoc. vs. Price Stabilization
Board, G.R. No. L-4465, July 12, 1951; Surigao Consolidated vs. Collector of Internal Revenue G.R. No. L-5692, March
5, 1954; U.S. vs. Shreveport, 287 U.S. 77, 77 L. ed 175, and Johnson vs. San Diego, 42 P. 249, cited in 11 Am. Jur 921-
922.) (Emphasis supplied.)
But it is urged, in one of the cases, that the defect in the conferment of judicial or quasi-judicial functions to the Regional
offices, emanating from the lack of authority of the Reorganization Commission has been cured by the non-disapproval
of Reorganization Plan No. 20-A by Congress under the provisions of Section 6(a) of Republic Act No. 997, as amended.
It is, in effect, argued that Reorganization Plan No. 20-A is not merely the creation of the Reorganization Commission,
exercising its delegated powers, but is in fact an act of Congress itself, a regular statute directly and duly passed by
Congress in the exercise of its legislative powers in the mode provided in the enabling act.
The pertinent provision of Republic Act No. 997, as amended, invoked in favor of this argument reads as follows:
SEC. 6 (a) The provisions of the reorganization plan or plans submitted by the President during the Second Session of the
Third Congress shall be deemed approved after the adjournment of the said session, and those of the plan or plans or
modifications of any plan or plans to be submitted after the adjournment of the Second Session, shall be deemed
12
ADMIN LAW ROMAN NUMERAL II
approved after the expiration of the seventy session days of the Congress following the date on which the plan is
transmitted to it, unless between the date of transmittal and the expiration of such period, either House by simple
resolution disapproves the reorganization plan or any, modification thereof. The said plan of reorganization or any
modification thereof may, likewise, be approved by Congress in a concurrent Resolution within such period.
It is an established fact that the Reorganization Commission submitted Reorganization Plan No. 20-A to the President
who, in turn, transmitted the same to Congress on February 14, 1956. Congress adjourned its sessions without passing a
resolution disapproving or adopting the said reorganization plan. It is now contended that, independent of the matter of
delegation of legislative authority (discussed earlier in this opinion), said plan, nevertheless became a law by non-action
on the part of Congress, pursuant to the above-quoted provision.
Such a procedure of enactment of law by legislative in action is not countenanced in this jurisdiction. By specific
provision of the Constitution —
interpreted as another mode of passing or enacting any law or measure by the legislature, as seems to be the impression
expressed in one these cases.
On the basis of the foregoing considerations, we hold ad declare that Reorganization Plan No. 20-A, insofar as confers
judicial power to the Regional Offices over cases other than these falling under the Workmen's Compensation on Law, is
invalid and of no effect.
This ruling does not affect the resolution of this Court in the case of National Steel & Shipyards Corporation v. Arca et
al., G.R. No. L-12249, dated May 6, 1957, considering that the said case refers to a claim before the Workmen's
Compensation Commission, which exercised quasi-judicial powers even before the reorganization of the Department of
Labor.
WHEREFORE

No bill shall be passed or become a law unless it shall have been printed and copies thereof in its final form furnished the (a) The decision of the Court of First Instance of Baguio involved in case G.R. No. L-15138 is hereby affirmed, without
Members at least three calendar clays prior to its passage by the National Assembly (Congress), except when the costs;
President shall have certified to the necessity of its immediate enactment. Upon the last reading of a bill no amendment
thereof shall be allowed, and the question upon its final passage shall be taken immediately thereafter, and (b) The decision of the Court of First Instance of Manila questioned in case G.R. No. L-16781 is hereby affirmed, without
the yeas and nays entered on the Journal. (Sec. 21-[a], Art. VI). costs;

Every bill passed by the Congress shall, before it becomes a law, be presented to the President. If he approves the same, (c) The order of dismissal issued by the Court of First Instance of Cebu appealed from in case G.R. No. L-15377 is set
he shall sign it, but if not, he shall return it with his objections to the House where it originated, which shall enter the aside and the case remanded to the court of origin for further proceedings, without costs;
objections at large on its Journal and proceed to reconsider it. If, after such reconsideration, two-thirds of all the Members
of such House shall agree to pass the bill, it shall be sent, together with the objections, to the other House by which it (d) In case G.R. No. L-16660, the decision of the Court of First Instance of Isabela, directing the Regional Labor
shall likewise be reconsidered, and if approved by two-thirds of all the Members voting for and against shall be entered Administrator to issue a writ of execution of the order of the Regional Office No. 2, is hereby reversed, without costs; and
on its journal. If any bill shall not be returned by the President as herein provided within twenty days (Sundays excepted) .
after it shall have been presented to him, the same shall become a law in like manner as if he has signed it, unless the
Congress by adjournment prevent its return, in which case it shall become a law unless vetoed by the President within (e) In case G.R. No. L-17056, the decision rendered after hearing by the Court of First Instance of Manila, dismissing the
thirty days after adjournment. (Sec. 20[1]. Art. VI of the Constitution). complaint for annulment of the proceedings before the Regional office No. 3, is hereby reversed and the preliminary
injunction at first issued by the trial court is revived and made permanents without costs. SO ORDERED.
A comparison between the procedure of enactment provided in section 6 (a) of the Reorganization Act and that
prescribed by the Constitution will show that the former is in distinct contrast to the latter. Under the first, consent or Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Dizon, De Leon and Natividad, JJ., concur.
approval is to be manifested by silence or adjournment or by "concurrent resolution." In either case, the contemplated Bautista Angelo, J., on leave, took no part.
procedure violates the constitutional provisions requiring positive and separate action by each House of Congress. It is Concepcion and Paredes JJ., took no part.
contrary to the "settled and well-understood parliamentary law (which requires that the) two houses are to hold separate
sessions for their deliberations, and the determination of the one upon a proposed law is to be submitted to the separate
determination of the other," (Cooley, Constitutional Limitations, 7th ed., p. 187).
G.R. No. L-12859 November 18, 1959
CEBU UNITED ENTERPRISES, plaintiff-appellee,
Furthermore, Section 6 (a) of the Act would dispense with the "passage" of any measure, as that word is commonly used vs.
and understood, and with the requirement presentation to the President. In a sense, the section, if given the effect JOSE GALLOFIN, Collector of Customs, Cebu Port, defendant-appellant.
suggested in counsel's argument, would be a reversal of the democratic processes required by the Constitution, for under Manuel A. Zoza for appellee.
it, the President would propose the legislative action by action taken by Congress. Such a procedure would constitute a First Assistant Solicitor General Guillermo E. Torres and Solicitors Frine C. Zaballero and Pedro Ocampo for
very dangerous precedent opening the way, if Congress is so disposed, because of weakness or indifference, to eventual appellant.
abdication of its legislative prerogatives to the Executive who, under our Constitution, is already one of the strongest REYES, J.B.L., J.:
among constitutional heads of state. To sanction such a procedure will be to strike at the very root of the tri-departmental
scheme four democracy.
This suit for mandatory injunction was instituted in the Court of First Instance of Cebu United Enterprise to compel Jose
Gallofin, as collector of Customs, Cebu Port, to release and deliver to the plaintiff two imported shipments of 7,834 bales
Even in the United States (in whose Federal Constitution there is no counterpart to the specific method of passaging laws of over issue newspapers purchased by the latter from the United States. As ancillary relief during the pendency of the
prescribed in Section 21[2] of our Constitution) and in England (under whose parliamentary system the Prime Minister, action, the plaintiff prayed for the issuance of a writ of preliminary mandatory injunction, which was granted by the court
real head of the Government, is a member of Parliament), the procedure outlined in Section 6(a) herein before quoted, is after the plaintiff posted a bond in the amount of P60,000.00 in favor of the defendant. Thereafter, the goods were
but a technique adopted in the delegation of the rule-making power, to preserve the control of the legislature and its share released to the plaintiff, it appearing further that the advance sales tax due on the same had been duly paid upon arrival of
in the responsibility for the adoption of proposed regulations. 4 The procedure has ever been intended or utilized or the merchandise at port.

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ADMIN LAW ROMAN NUMERAL II
The importation of the aforesaid shipments was made under and by virtue of an Import Control Commission License No.
1225, issued by the defunct Import Control Commission. Under the terms of the license, the plaintiff could import, on a
no-dollar remittance basis, over issue newspapers up to the amount or value of $118,000.00.
The refusal of the defendant to deliver the imported items is premised on his contention that while the five bills of lading
covering the two shipments of the over issue newspapers were all dated at Los Angeles, U.S.A. December 17, 1953, or
one day before the expiration of the import license in question, the vessels M/S VENTURA and M/S BATAAN, carrying
on board the said merchandise, actually left the ports of embarkation, Los Angeles, and San Francisco, on January 12 and
January 16, 1954 respectively. Hence, according to the defendant, the importation must be considered as having been
made without a valid import license, because under the regulations issued by the Central Bank and the Monetary Board,
"all shipments that left the port of origin after June 30, 1953, and are covered by ICC licenses, may be released by the
Bureau of Customs without the need of a Central Bank release certificate; provided they left the port of origin within the
period of validity of the licenses". No Central Bank certificate for the release of the goods having been shown or
presented to the defendant, the latter refused to make the delivery.
The lower court was thus conformed with the issue of determining whether the valid period of the license in question
should be counted up to the time when the vessels carrying the imported items left the ports of origin on January 12 and
January 16, 1954, or when the corresponding bills of lading were dated, or December 17, 1953. The court chose the latter
date, and held:
In view therefore, this Court pronounces judgment making writ of preliminary mandatory injunction issued against
defendant permanent, with orders for the cancellation of plaintiff's bond, this after whatever advance sales tax or any
taxes, surcharges and so forth might be due on the goods shall have been paid, without costs.
The defendant appealed to the Court of Appeals. The question raised, however, being purely one of law, the appeal was
certified to us pursuant to a resolution of said court dated July 19, 1957. The appeal has no merit.
The authority of the appellee to import was contained in the Import Control Commission License No. 17225, validated on
June 18, 1953, and under Resolution 70 of the Commission (adopted March 27, 1952), the same had a six-month period
of validity counted from the said date June 18, 1953. This license states, among other conditions, that —
Commodities covered by this license must be shipped from the country of origin before the expiry date of the license, and
are subject to sec. 13 of Republic Act. No. 650.
Although Republic Act No. 650, creating the Import Control Commission, expired on July 31, 1953, it is to be conceded
that its duly executed acts can have valid effects even beyond the life span of said governmental agency.
What is important to consider only is the legal connotation of the word "shipped" as the term was used in the license.
Defendant maintains that it is when the vessel leaves the port of embarkation, while plaintiff holds that it is the dates of
the bills of lading, which are usually issued after the cargo is placed on board the vessel. The date of the shipment is the
date when the goods for dispatch are loaded on board the vessel, and not necessarily when the ship puts to sea, is clearly
implied from our ruling in the case of U.S Tobacco Corporation vs. Rufino Luna, et al., (87 Phil., 4), wherein we said:
By section 6 of Act No. 426, all goods including leaf tobacco have been placed under control. Petitioner's
merchandise left the port of departure before the passage of that Act but arrived in Manila after its approval. For the
purpose of enforcing or applying said section 6, there can only be one date of importation. Which was the date? The date
the goods were ordered, the date they were put on board vessel, or the date they reached the port of destination? We are
of the opinion that the date of importation is the date of shipment and not the date of Arrival in Manila. (Emphasis
supplied)
The issuance of the bill of lading, furthermore, presupposes or carries the presumption that the goods were delivered to
the carrier for immediate shipment (13 C.J.S. sec. 123 (2), p. 235, and cases cited therein). It does not appear here that the
bill of lading specified any designated day on which the vessel were to lift anchor, nor was it shown that plaintiff had any
knowledge that the vessel M/S VENTURA and M/S BATAAN were not to depart soon after he placed his cargo on board
and the corresponding bills of lading issued to him. From this latter time, the goods in contemplation of law, are deemed
already in transit (New Civil Code, Arts. 1531 and 1736).
It should also be considered that it is entirely outside the shipper's hands to fix the dates of departure, route or arrival of a
vessel (unless he charters the whole ship [see Art. 656, Code of Commerce]).
Defendant's reliance upon Central Bank regulations that the shipment licensed must have "left the port of origin within
the period of validity of the "license" is not maintainable in the present case, because the regulations came onto effect
only on July 1, 1953 already after issuance of the appellee' license and cannot be read into the same.
The Solicitor General's contention that, assuming the six months are counted up to the date the imports goods were placed
on board the vessels for shipment the period of validity had likewise already elapsed because, legally six months mean
180 days, which in this case expired on December 15, cannot now be entertained because the defendant-appellant, under
paragraph 3 of his answer to the Complaint, expressly admitted that the date appearing on the bills of lading (December
17, 1953) as the date of loading on board the vessels "is one day before the expiration of the validity of the import
license". What he only questioned in the court below is the legal connotation of the word "shipped" under the import
license.
In the light of the resolution we have taken on the main issue, it becomes unnecessary for us to dwell further upon the
other questions raised by the parties.
Wherefore, the appeal should be dismissed and the judgment of the lower court affirmed. So rendered.
BOY SCOUTS OF THE PHILIPPINES, vs Commission on Audit
G.R. No. 177131
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 prohibition[1] 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. 99-011[5] on August 19, 1999 (the COA Resolution), with the
subject Defining the Commissions 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
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ADMIN LAW ROMAN NUMERAL II
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 letter[9] 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 Commissions 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 BSPs 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 cases 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 letter[12] dated July 3, 2000, Director Crescencio S. Sunico, Corporate Audit Officer (CAO) I of the COA, furnished
the BSP with a copy of the Memorandum[13]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
Courts 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 BSPs 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 BSPs 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 BSPs 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
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ADMIN LAW ROMAN NUMERAL II
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 COAs 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 COAs 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 Audit[22] 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 introduced by Republic Act No. 7278 constituted a supervening event that
changed the BSPs corporate identity in the same way that the governments privatization program changed PALs, the BSP
makes the case that the government no longer has control over it; thus, the COA cannot use the Boy Scouts of the
Philippines v. National Labor Relations Commission as its basis for the exercise of its jurisdiction and the issuance of
COA Resolution No. 99-011.[24] The BSP further claims as follows:
It is not far-fetched, in fact, to concede that BSPs funds and assets are private in character. Unlike ordinary public
corporations, such as provinces, cities, and municipalities, or government-owned and controlled corporations, such as
Land Bank of the Philippines and the Development Bank of the Philippines, the assets and funds of BSP are not derived
from any government grant. For its operations, BSP is not dependent in any way on any government appropriation; as a
matter of fact, it has not even been included in any appropriations for the government. To be sure, COA has not alleged,
in its Resolution No. 99-011 or in the Memorandum of its General Counsel, that BSP received, receives or continues to
receive assets and funds from any agency of the government. The foregoing simply point to the private nature of the
funds and assets of petitioner BSP.
xxxx
As stated in petitioners third argument, BSPs assets and funds were never acquired from the government. Its operations
are not in any way financed by the government, as BSP has never been included in any appropriations act for the
government. Neither has the government invested funds with BSP. BSP, has not been, at any time, a user of government
property or funds; nor have properties of the government been held in trust by BSP. This is precisely the reason why,
until this time, the COA has not attempted to subject BSP to its audit jurisdiction. x x x.[25]
To summarize its other arguments, the BSP contends that it is not a government-owned or controlled corporation; neither
is it an instrumentality, agency, or subdivision of the government.
In its Comment,[26] the COA argues as follows:
1. The BSP is a public corporation created under Commonwealth Act No. 111 dated October 31, 1936, and whose
functions relate to the fostering of public virtues of citizenship and patriotism and the general improvement of the moral
spirit and fiber of the youth. The manner of creation and the purpose for which the BSP was created indubitably prove
that it is a government agency.
2. Being a government agency, the funds and property owned or held in trust by the BSP are subject to the audit
authority of respondent Commission on Audit pursuant to Section 2 (1), Article IX-D of the 1987 Constitution.
3. Republic Act No. 7278 did not change the character of the BSP as a government-owned or controlled
corporation and government instrumentality.[27]
The COA maintains that the functions of the BSP that include, among others, the teaching to the youth of patriotism,
courage, self-reliance, and kindred virtues, are undeniably sovereign functions enshrined under the Constitution and
discussed by the Court in Boy Scouts of the Philippines v. National Labor Relations Commission. The COA contends that
any attempt to classify the BSP as a private corporation would be incomprehensible since no less than the law which
created it had designated it as a public corporation and its statutory mandate embraces performance of sovereign
functions.[28]
The COA claims that the only reason why the BSP employees fell within the scope of the Civil Service Commission even
before the 1987 Constitution was the fact that it was a government-owned or controlled corporation; that as an attached
agency of the Department of Education, Culture and Sports (DECS), the BSP is an agency of the government; and that
the BSP is a chartered institution under Section 1(12) of the Revised Administrative Code of 1987, embraced under the
term government instrumentality.[29]
The COA concludes that being a government agency, the funds and 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 1987 Constitution.
In support of its arguments, the COA cites The Veterans Federation of the Philippines (VFP) v. Reyes,[30] wherein the
Court held that among the reasons why the VFP is a public corporation is that its charter, Republic Act No. 2640,
designates it as one. Furthermore, the COA quotes the Court as saying in that case:
In several cases, we have dealt with the issue of whether certain specific activities can be classified as sovereign
functions. These cases, which deal with activities not immediately apparent to be sovereign functions, upheld the public
sovereign nature of operations needed either to promote social justice or to stimulate patriotic sentiments and love of
country.
xxxx
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ADMIN LAW ROMAN NUMERAL II
Petitioner claims that its funds are not public funds because no budgetary appropriations or government funds have been
released to the VFP directly or indirectly from the DBM, and because VFP funds come from membership dues and lease
rentals earned from administering government lands reserved for the VFP.
The fact that no budgetary appropriations have been released to the VFP does not prove that it is a private corporation.
The DBM indeed did not see it fit to propose budgetary appropriations to the VFP, having itself believed that the VFP is a
private corporation. If the DBM, however, is mistaken as to its conclusion regarding the 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 governments policy to stimulate patriotic sentiments and love of country, the BSPs 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 BSPs funds may not bar the subsequent exercise of its audit
jurisdiction.
The BSP filed its Reply[33] 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 COAs 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 COAs audit jurisdiction.
Thereafter, considering the BSPs claim that it is a private corporation, this Court, in a Resolution[34] 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 Courts resolution, the parties filed their respective Comments.
In its Comment[35] 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 COAs 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 BSPs 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 latters 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 Comment[42] 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 COAs 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:
Petitioners 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 petitioners 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. Petitioners 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. [46] The 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 BSPs 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 COAs 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:
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ADMIN LAW ROMAN NUMERAL II
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 amended, are hereby amended to read as follows:
"Sec. 5. The governing body of the said corporation shall consist of a National Executive Board, the members of
which shall be Filipino citizens of good moral character. The Board shall be composed of the following:
"(a) One (1) charter member of the Boy Scouts of the Philippines who shall be elected by the members of the National
Council at its meeting called for this purpose;
"(b) The regional chairmen of the scout regions who shall be elected by the representatives of all the local scout councils
of the region during its meeting called for this purpose: Provided, That a candidate for regional chairman need not be the
chairman of a local scout council;
"(c) The Secretary of Education, Culture and Sports;
"(d) The National President of the Girl Scouts of the Philippines;
"(e) One (1) senior scout, each from Luzon, Visayas and Mindanao areas, to be elected by the senior scout delegates of
the local scout councils to the scout youth forums in their respective areas, in its meeting called for this purpose, to
represent the boy scout membership;
"(f) Twelve (12) regular members to be elected by the members of the National Council in its meeting called for this
purpose;
"(g) At least ten (10) but not more than fifteen (15) additional members from the private sector who shall be 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 newly reconstituted National Executive Board which shall be held
immediately after the meeting of the National Council wherein the twelve (12) regular members and the one (1) charter
member were elected.
xxxx
"Sec. 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 or by a foreign government or by
private, entities and individuals shall be expended by the National Executive Board in pursuance of this Act.
The BSP as a Public Corporation under Par. 2, Art. 2 of the Civil Code
There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently constituted under
Republic Act No. 7278, falls under the second classification. Article 44 reads:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose created by law; their personality
begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each shareholder, partner or member. (Emphases supplied.)
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 Code, which provides:
Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating or
recognizing them.
Private corporations are regulated by laws of general application on the subject.
Partnerships and associations for private interest or purpose are governed by the provisions of this Code concerning
partnerships. (Emphasis and underscoring supplied.)
The purpose of the BSP as stated in its amended charter shows that it was created in order to implement a State policy
declared in Article II, Section 13 of the Constitution, which reads:
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ADMIN LAW ROMAN NUMERAL II
ARTICLE II - DECLARATION OF PRINCIPLES AND STATE POLICIES
Section 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.
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 BSPs 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 long as policy and program coordination is achieved by
having at least one representative of government in its governing board, which in the case of the BSP is the DECS
Secretary. In this sense, the BSP is not under government control or supervision and control. Still this characteristic does
not make the attached chartered agency a private corporation covered by the constitutional proscription in question.
Art. XII, Sec. 16 of the Constitution refers to private corporations created by government for proprietary or
economic/business purposes
At the outset, it should be noted that the provision of Section 16 in issue is found in Article XII of the Constitution,
entitled National Economy and Patrimony. Section 1 of Article XII is quoted as follows:
SECTION 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all, especially the underprivileged.
The State shall promote industrialization and full employment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of human and natural resources, and which are competitive in
both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign
competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity
to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be
encouraged to broaden the base of their ownership.
The scope and coverage of Section 16, Article XII of the Constitution can be seen from the aforementioned declaration of
state policies and goals which pertains to national economy and patrimony and the interests of the people in economic
development.
Section 16, Article XII deals with the formation, organization, or regulation of private corporations,[52] which should
be done through a general law enacted by Congress, provides for an exception, that is: if the corporation is government
owned or controlled; its creation is in the interest of the common good; and it meets the test of economic viability. The
rationale behind Article XII, Section 16 of the 1987 Constitution was explained in Feliciano v. Commission on
Audit,[53] in the following manner:
The Constitution emphatically prohibits the creation of private corporations except by a general law applicable to all
citizens. The purpose of this constitutional provision is to ban private corporations created by special charters,
which historically gave certain individuals, families or groups special privileges denied to other
citizens.[54] (Emphasis added.)
It may be gleaned from the above discussion that Article XII, Section 16 bans the creation of private corporations by
special law. The said constitutional provision should not be construed so as to prohibit the creation of public
corporations or a corporate agency or instrumentality of the government intended to serve a public interest or purpose,
which should not be measured on the 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
Code of 1987.
The BSP is a Public Corporation Not Subject to the Test of Government Ownership or Control and Economic
Viability
The BSP is a public corporation or a government agency or instrumentality with juridical personality, which does not fall
within the constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to its charter. Not all
corporations, which are not government owned or controlled, are ipso facto to be considered private corporations as there
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ADMIN LAW ROMAN NUMERAL II
exists another distinct class of corporations or chartered institutions which are otherwise known as public
corporations. These corporations are treated by law as agencies or instrumentalities of the government which are not
subject to the tests of ownership or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative relationship to the government or any
of its Departments or Offices.
Classification of Corporations Under Section 16, Article XII of the Constitution on National Economy and
Patrimony
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,
The dissenting opinion of Associate Justice Antonio T. Carpio, citing a line of cases, insists that the Constitution shall require a different meaning:
recognizes only two classes of corporations: private corporations under a general law, and government-owned or
controlled corporations created by special charters. xxxx

We strongly disagree. Section 16, Article XII should not be construed so as to prohibit Congress from creating public (10) "Instrumentality" refers to any agency of the National Government, not integrated within the department
corporations. In fact, Congress has enacted numerous laws creating public corporations or government agencies or framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
instrumentalities vested with corporate powers. Moreover, Section 16, Article XII, which relates to National Economy powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term
and Patrimony, could not have tied the hands of Congress in creating public corporations to serve any of the includes regulatory agencies, chartered institutions and government-owned or controlled corporations. 

constitutional policies or objectives.
In his dissent, Justice Carpio contends that this ponente introduces a totally different species of corporation, which is
xxxx
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
(12) "Chartered institution" refers to any agency organized or operating under a special charter, and vested by law with
government owned or controlled corporation.
functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges
and the monetary authority of the State.
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
(13) "Government-owned or controlled corporation" refers to any agency organized as a stock or non-stock
said case pertinently stated:
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
While the BSP may be seen to be a mixed type of entity, combining aspects of both public and private entities, we
corporations, to the extent of at least fifty-one (51) per cent of its capital stock: Provided, That government-owned or
believe that considering the character of its purposes and its functions, the statutory designation of the BSP as "a public
controlled corporations may be further categorized by the Department of the Budget, the Civil Service
corporation" and the substantial participation of the Government in the selection of members of the National Executive
Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective powers,
Board of the BSP, the BSP, as presently constituted under its charter, is a government-controlled corporation within
functions and responsibilities with respect to such corporations.
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
Assuming for the sake of argument that the BSP ceases to be owned or controlled by the government because of
attached agencies of the Department of Education, Culture and Sports ("DECS"). An "agency of the Government" is
reduction of the number of representatives of the government in the BSP Board, it does not follow that it also ceases to be
defined as referring to any of the various units of the Government including a department, bureau, office, instrumentality,
a government instrumentality as it still retains all the characteristics of the latter as an attached agency of the DECS under
government-owned or -controlled corporation, or local government or distinct unit therein. "Government instrumentality"
the Administrative Code. Vesting corporate powers to an attached agency or instrumentality of the government is not
is in turn defined in the 1987 Administrative Code in the following manner:
constitutionally prohibited and is allowed by the above-mentioned provisions of the Civil Code and the 1987
Administrative 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
Economic Viability and Ownership and Control Tests Inapplicable to Public Corporations
special funds, and enjoying operational autonomy usually through a charter. This term includes regulatory agencies,
chartered institutions and government-owned or controlled corporations.

As presently constituted, the BSP still remains an instrumentality of the national government. It is a public corporation
The same Code describes a "chartered institution" in the following terms:
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
Chartered institution - refers to any agency organized or operating under a special charter, and vested by law with
justify its existence under a special law.
functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges,
and the monetary authority of the State.
The dissent of Justice Carpio also submits that by recognizing a new class of public corporation(s) created by special
We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987 Administrative
charter that will not be subject to the test of economic viability, the constitutional provision will be circumvented.
Code.

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ADMIN LAW ROMAN NUMERAL II
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 prevent the formation of a government
corporation in accordance with a special charter given by Congress. However, we are raising the standard a little
bit so that, in the future, corporations established by the government will meet the test of the common good but
within that framework we should also build a certain standard of economic viability.
xxxx
THE PRESIDENT. Commissioner Padilla is recognized.
MR. PADILLA. This is an inquiry to the committee. With regard to corporations created by a special charter for
government-owned or controlled corporations, will these be in the pioneer fields or in places where the private enterprise
does not or cannot enter? Or is this so general that these government corporations can compete with private corporations
organized under a general law?
MR. MONSOD. Madam President, x x x. There are two types of government corporations those that are involved
in performing governmental functions, like garbage disposal, Manila waterworks, and so on; and those government
corporations that are involved in business functions. As we said earlier, there are two criteria that should be followed
for corporations that want to go into business. First is for government corporations to first prove that they can be
efficient in the areas of their proper functions. This is one of the problems now because they go into all kinds of activities
but are not even efficient in their proper functions. Secondly, they should not go into activities that the private sector can
do better.
MR. PADILLA. There is no question about corporations performing governmental functions or functions that are
impressed with public interest. But the question is with regard to matters that are covered, perhaps not
exhaustively, by private enterprise. It seems that under this provision the only qualification is economic viability and
common good, but shall government, through government-controlled corporations, compete with private enterprise?
MR. MONSOD. No, Madam President. As we said, the government should not engage in activities that private enterprise
is engaged in and can do better. x x x.[56] (Emphases supplied.)
Thus, the test of economic viability clearly does not apply to public 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 creation of public corporations where the economic viability test would be irrelevant. The said test would only
apply if the corporation is engaged in some economic activity or business function for the government.
It is undisputed that the BSP performs functions that are impressed with public interest. In fact, during the consideration
of the Senate Bill that eventually became Republic Act No. 7278, which amended the BSP Charter, one of the bills
sponsors, Senator Joey Lina, described the BSP as follows:
Senator Lina. Yes, I can only think of two organizations involving the masses of our youth, Mr. President, that should be
given this 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 think there are other groups similarly situated.
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ADMIN LAW ROMAN NUMERAL II
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 considering the importance of
having an organization such as this that will inculcate moral uprightness among the young people, and further
considering that the development of these young people at that tender age of seven to sixteen is vital in the
development of the country producing good citizens, I believe that we can make an exception of the Boy Scouting
movement of the Philippines from this general prohibition against providing tax exemption and privileges. [57]
Furthermore, this Court cannot agree with the dissenting opinion which equates the changes introduced by Republic Act
No. 7278 to the BSP Charter as clear manifestation of the intent of Congress to return the BSP to the private sector. It was
not the intent of Congress in enacting Republic Act No. 7278 to give up all interests in this basic youth organization,
which has been its partner in forming responsible citizens for decades.
In fact, as may be seen in the deliberation of the House Bills that eventually resulted to Republic Act No. 7278, Congress
worked closely with the BSP to rejuvenate the organization, to bring it back to its former glory reached under its original
charter, Commonwealth Act No. 111, and to correct the perceived ills introduced by the amendments to its Charter under
Presidential Decree No. 460. The BSP suffered from low morale and decrease in number because the Secretaries of the
different departments in government who were too busy to attend the meetings of the BSPs National Executive Board
(the Board) sent representatives who, as it turned out, changed from meeting to meeting. Thus, the Scouting Councils
established in the provinces and cities were not in touch with what was happening on the national level, but they were left
to implement what was decided by the Board. [58]
A portion of the legislators discussion is quoted below to clearly show their intent:
HON. DEL MAR. x x x I need not mention to you the value and the tremendous good that the Boy Scout
Movement has done not only for the youth in particular but for the country in general. And that is why, if we look
around, our past and present national leaders, prominent men in the various fields of endeavor, public servants in
government offices, and civic leaders in the communities all over the land, and not only in our country but all over
the world many if 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 shouldnt it be, this rhetorical
question, shouldnt it be better for this organization to seek a mandate from, lets 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 thats a rhetorical question, they may or they may not
answer, ano. I dont 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 dont 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,
dont take that as an objection, Im not objecting. Im 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 dont 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, thats 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 BSPs 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:
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ADMIN LAW ROMAN NUMERAL II
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 xxxx
substantial interest on the part of the party raising the constitutional question; (3) recourse to judicial review is HON. AMATONG: Mr. Chairman, in connection with that.
made at the earliest opportunity; and (4) the constitutional question is the lis mota of the case.[61] (Emphasis added.)
THE CHAIRMAN: Yeah, Gentleman from Zamboanga.

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 dissents 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.
HON. AMATONG: There is no auditing being made because theres 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?

Re: the COAs Jurisdiction THE CHAIRMAN: Yes, gentleman.

Regarding the COAs 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.
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: 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:

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 COAs 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?
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.

MR. ESCUDERO: Mr. Chairman, we are not. Our funds is not subjected. We dont fall under the jurisdiction of the COA. WHEREFORE, premises considered, the instant petition for prohibition is DISMISSED.
HON. AQUINO: All right, but before were you?
MR. ESCUDERO: No, Mr. Chairman. SO ORDERED.
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.
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