G.R. No. 82819 February 8, 1989 SO ORDERED.

It is the 1987 Constitution, and not the case law embodied

in Juco, 5 which applies in the case at bar, under the principle that
jurisdiction is determined as of the time of the filing of the
LUZ LUMANTA, ET AL., petitioners, On 18 March 1988, the public respondent National Labor Relations
complaint. 6 At the time the complaint against private respondent
vs. Commission affirmed on appeal the order of the Labor Arbiter and
FTI was filed (i.e., 20 March 1987), and at the time the decisions of
NATIONAL LABOR RELATIONS COMMISSION and dismissed the petitioners' appeal for lack of merit.
the respondent Labor Arbiter and National Labor Relations
FOOD TERMINAL, INC., respondents.
Commission were rendered (i.e., 31 August 1987 and 18 March
Hence this Petition for Certiorari. 1988, respectively), the 1987 Constitution had already come into
RESOLUTION effect. latter of Instruction No. 1013, dated 19 April 1980, included
Food Terminal, Inc. in the category of "government-owned or
The only question raised in the present Petition is whether or not a controlled corporations." 7 Since then, FTI served as the marketing
FELICIANO, J.: labor law claim against a government-owned and controlled arm of the National Grains Authority (now known as the National
corporation, such as private respondent FTI, falls within the Food Authority). The pleadings show that FTI was previously a
jurisdiction of the Department of Labor and Employment. privately owned enterprise, created and organized under the
The present Petition for certiorari seeks to annul and set aside the
Decision of the National Labor Relations Commission rendered on general incorporation law, with the corporate name "Greater
18 March 1988 in NLRC-NCR Case No. 00- 0301035-87, entitled In refusing to take cognizance of petitioners' complaint against Manila Food Terminal Market, Inc." 8 The record does not indicate
"Luz Lumanta, et al., versus Food Terminal Incorporated." The private respondent, the Labor Arbiter and the National Labor the precise amount of the capital stock of FM that is owned by the
Decision affirmed an order of the Labor Arbiter dated 31 August Relations Commission relied chiefly on this Court's ruling government; the petitioners' claim, and this has not been disputed,
1987 dismissing petitioners' complaint for lack of Jurisdiction. in National Housing Authority v. Juco, 2which held that "there that FTl is not hundred percent (100%) government-owned and
should no longer be any question at this time that employees of that it has some private shareholders.
government-owned or controlled corporations are governed by the
On 20 March 1987, petitioner Luz Lumanta, joined by fifty-four
civil service law and civil service rules and regulations. We conclude that because respondent FTI is government-owned
(54) other retrenched employees, filed a complaint for unpaid 'd
retrenchment or separation pay against private respondent Food and controlled corporation without original charter, it is the
Terminal, Inc. ("FTI") with the Department of Labor and Juco was decided under the 1973 Constitution, Article II-B, Section Department of Labor and Employment, and not the Civil Service
Employment. The complaint was later amended to include charges 1 (1) of which provided: Commission, which has jurisdiction over the dispute arising from
of underpayment of wages and non-payment of emergency cost of employment of the petitioners with private respondent FTI, and
living allowances (ECOLA). that consequently, the terms and conditions of such employment
The civil service embraces every branch, agency, are governed by the Labor Code and not by the Civil Service Rules
subdivision, and instrumentality of the Government, and Regulations.
Private respondent FTI moved to dismiss the complaint on the including every government-owned or controlled
ground of lack of jurisdiction. It argued that being a government- corporation.
owned and controlled corporation, its employees are governed by Public respondent National Labor Relations Commission acted
the Civil Service Law not by the Labor Code, and that claims arising without or in excess of its jurisdiction in dismissing petitioners
The 1987 Constitution which took effect on 2 February 1987, has complaint.
from employment fall within the jurisdiction of the Civil Service
on this point a notably different provision which reads:
Commission and not the Department of Labor and Employment.
ACCORDINGLY, the Petition for certiorari is hereby GRANTED
The civil service embraces all branches, subdivisions, and the Decision of public respondent Labor Arbiter dated 31
The petitioners opposed the Motion to Dismiss contending that
instrumentalities, and agencies of the Government, August 1987 and the Decision of public respondent Commission
although FTI is a corporation owned and controlled by the
including government-owned or controlled dated 18 March 1988, both in NLRC-NCR Case No. 00-03-01035-
government, it has still the marks of a private corporation: it
corporations with original charter. (Article IX-B, 87 are hereby SET ASIDE. The case is hereby REMANDED to the
directly hires its employees without seeking approval from the Civil
Section 2 [1]). Labor Arbiter for further appropriate proceedings.
Service Commission and its personnel are covered by the Social
Security System and not the Government Service Insurance
System. Petitioners also argued that being a government-owned The Court, in National Service Corporation (NASECO) v. G.R. No. 166365 September 30, 2005
and controlled corporation without original charter, private National Labor Relations Commission, G.R. No. 69870,
respondent FTl clearly falls outside the scope of the civil service as promulgated on 29 November 1988, 3 quoting extensively from the
marked out in Section 2 (1), Article IX of the 1987 Constitution. deliberations 4 of the 1986 Constitutional Commission in respect of DUTY FREE PHILIPPINES, Petitioners,
the intent and meaning of the new phrase "with original charter," vs.
in effect held that government-owned and controlled ROSSANO J. MOJICA, Respondent.
On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra issued an
corporations with original charter refer to corporations
Order, 1 the dispositive part of which read:
chartered by special law as distinguished from corporations DECISION
organized under our general incorporation statute-the
On account of the above findings the instant case is Corporation Code. In NASECO, the company involved had been
governed by the Civil Service Law. The case at bar lies organized under the general incorporation statute and was a YNARES-SANTIAGO, J.:
outside the jurisdictional competence of this Office. subsidiary of the National Investment Development Corporation
(NIDC) which in turn was a subsidiary of the Philippine National
This petition for review on certiorari1 under Rule 45 of the Rules of
Bank, a bank chartered by a special statute. Thus, government-
WHEREFORE, premises considered this case is Court seeks to annul and set aside the August 31, 2004 Decision2 of
owned or controlled corporations like NASECO are effectively
hereby directed to be DISMISSED for lack of the Court of Appeals in CA-G.R. SP No. 76995, and its December
excluded from the scope of the Civil Service.
jurisdiction of this Office to hear and decide the case. 13, 2004 Resolution3denying the motion for reconsideration.
The antecedent facts show that on November 28, 1997, the effective control and regulation over the tax and duty free shops, private respondents is therefore lodged not with the NLRC but with
Discipline Committee of Duty Free Philippines (DFP) rendered a their establishment and operation was vested in the Ministry, now the Civil Service Commission. (Citations omitted)
decision4 in DISCOM Case No. 97-027 finding Stock Clerk Rossano Department of Tourism (DOT), through its implementing arm, the
A. Mojica guilty of Neglect of Duty by causing considerable damage Philippine Tourism Authority (PTA).9 All the net profits from the
In Philippine Amusement and Gaming Corp. v. Court of
to or loss of materials, assets and property of DFP. Thus, Mojica merchandising operations of the shops accrued to the DOT.
Appeals22 we also held that:
was considered forcibly resigned from the service with forfeiture of
all benefits except his salary and the monetary value of the accrued
As provided under Presidential Decree (PD) No. 564,10 PTA is a
leave credits.5 It is now settled that, conformably to Article IX-B, Section 2(1), [of
corporate body attached to the DOT. As an attached agency, the
the 1987 Constitution] government-owned or controlled
recruitment, transfer, promotion and dismissal of all its personnel
corporations shall be considered part of the Civil Service only if
Mojica was formally informed of his forced resignation on January was governed by a merit system established in accordance with the
they have original charters, as distinguished from those created
14, 1998. Thereupon, he filed a complaint for illegal dismissal with civil service rules.11 In fact, all PTA officials and employees are
under general law.
prayer for reinstatement, payment of full back wages, damages, subject to the Civil Service rules and regulations.12
and attorney’s fees, against DFP before the National Labor
Relations Commission (NLRC). PAGCOR belongs to the Civil Service because it was created
Accordingly, since DFP is under the exclusive authority of the PTA,
directly by PD 1869 on July 11, 1983. Consequently, controversies
it follows that its officials and employees are likewise subject to the
concerning the relations of the employee with the management of
On February 2, 2000, Labor Arbiter Facundo L. Leda rendered a Civil Service rules and regulations. Clearly then, Mojica’s recourse
PAGCOR should come under the jurisdiction of the Merit System
Decision finding that Mojica was illegally dismissed. The to the Labor Arbiter was not proper. He should have followed the
Protection Board and the Civil Service Commission, conformably
dispositive portion of the Decision reads: procedure laid down in DFP’s merit system and the Civil Service
to the Administrative Code of 1987.
rules and regulations.
WHEREFORE, decision is hereby rendered declaring the dismissal
Section 16(2) of the said Code vest in the Merit System Protection
of complainant Rossano J. Mojica to be illegal such that PD No. 807 or The Civil Service Decree of the
Board the power inter alia to:
respondent Duty Free Philippines is directed to reinstate him to his Philippines13 declared that the Civil Service Commission shall be
former or substantially equivalent position without loss of the central personnel agency to set standards and to enforce the
seniority rights and other privileges and to pay him the amount of laws governing the discipline of civil servants.14 It categorically a) Hear and decide on appeal administrative cases involving
TWO HUNDRED FIFTY NINE THOUSAND SEVENTEEN PESOS described the scope of Civil Service as embracing every branch, officials and employees of the Civil Service. Its decision shall be
& 08/100 (P259,017.08) representing his backwages and agency, subdivision, and instrumentality of the government, final except those involving dismissal or separation from the
attorney’s fees, both awards being subject to further computation including every government-owned or controlled corporation service which may be appealed to the Commission.
until actual reinstatement. whether performing governmental or proprietary function.15 It
construed an agency to mean any bureau, office, commission,
administration, board, committee, institute, corporation, whether Applying this rule, we have upheld the jurisdiction of Civil Service
SO ORDERED.6 Authorities, as against that of the labor authorities, in
performing governmental or proprietary function, or any other
unit of the National Government, as well as provincial, city or controversies involving the terms of employment, and other
municipal government, except as otherwise provided.16 related issues, of the Civil Service official and employees...
The NLRC reversed the ruling of the arbiter. It found that the
dismissal was valid and with just cause.
Subsequently, EO No. 18017 defined "government employees" as all EO No. 292 provided that civil service employees have the right to
employees of all branches, subdivisions, instrumentalities, and present their complaints or grievances to management and have
Mojica’s motion for reconsideration was denied,7 hence he filed a
agencies, of the Government, including government-owned or them adjudicated as expeditiously as possible in the best interest
Petition for Certiorari under Rule 65 of the Rules of Court before
controlled corporations with original charters.18 It provided that of the agency, the government as a whole, and the employee
the Court of Appeals, docketed as CA-G.R. SP No. 76995.
the Civil Service and labor laws shall be followed in the resolution concerned. Such complaint or grievances shall be resolved at the
of complaints, grievances and cases involving government lowest possible level in the department or agency, as the case may
The appellate court agreed with the arbiter that Mojica was not employees.19 be, and the employee shall have the right to appeal such decision
guilty of gross or habitual negligence that would warrant his to higher authorities. In case any dispute remains unresolved after
dismissal. It found that there was no convincing evidence to prove exhausting all the available remedies under existing laws and
that Mojica connived with other personnel in pilfering the stocks EO No. 292 or The Administrative Code of 1987 empowered the procedure, the parties may jointly refer the dispute in the Public
of DFP. Civil Service Commission to hear and decide administrative cases Sector Labor Management Council for appropriate action.23
instituted by or brought before it directly or on appeal, including
contested appointments, and review decisions and actions of its
Hence, this petition. offices and of the agencies attached to it.20 In sum, the labor arbiter and the NLRC erred in taking cognizance
of the complaint as jurisdiction over the complaint for illegal
dismissal is lodged with the Civil Service Commission. The Court
Respondent Mojica is a civil service employee; therefore, Thus, we held in Zamboanga City Water District v. Buat21 that: of Appeals likewise erred in sustaining the labor arbiter.
jurisdiction is lodged not with the NLRC, but with the Civil Service
Commission.
There is no dispute that petitioner, a water district with an original WHEREFORE, the August 31, 2004 Decision of the Court of
charter, is a government-owned and controlled corporation. The Appeals in CA-G.R. SP No. 76995; and its December 13, 2004
DFP was created under Executive Order (EO) No. 468 on established rule is that the hiring and firing of employees of Resolution, are ANNULLED and SET ASIDE. The complaint for
September 4, 1986 primarily to augment the service facilities for government-owned and controlled corporations are governed by illegal dismissal with prayer for reinstatement, payment of
tourists and to generate foreign exchange and revenue for the provisions of the Civil Service Law and Civil Service Rules and backwages and attorney’s fees, is DISMISSED.
government. In order for the government to exercise direct and Regulations. Jurisdiction over the strike and the dismissal of
SO ORDERED. prejudicial not only to [them] but to [their] families and [would] The Court notes at the outset that in the Position Paper6 filed by
seriously affect [their] economic stability and solvency considering petitioner BSP with the Labor Arbiter, it was alleged in the second
the present cost of living." paragraph thereof, that petitioner is a "civic service, non-stock and
G.R. No. 80767 April 22, 1991
non-profit organization, relying mostly [on] government and
public support, existing under and by virtue of Commonwealth
On 21 November 1984 (or the day immediately following the date
BOY SCOUTS OF THE PHILIPPINES, petitioner, Act No. 111, as amended, by Presidential Decree No. 460 . . . " A
of scheduled transfer), the BSP Camp Manager in Makiling issued
vs. similar allegation was contained in the Brief for Appellee7 and in
a Memorandum requiring the five (5) private respondents to
NATIONAL LABOR RELATIONS COMMISSION, the Petition8 and Memorandum9 filed by petitioner BSP with
explain why they should not be charged administratively for
FORTUNATO ESGUERRA, ROBERTO MALABORBOR, public respondent NLRC and this Court, respectively. The same
insubordination. The Memorandum was a direct result of the
ESTANISLAO MISA, VICENTE EVANGELISTA, and allegation, moreover, appeared in the Comment10 (also treated as
refusal by private respondents, two (2) days earlier, to accept from
MARCELINO GARCIA, respondents. the Memorandum) submitted to this Court by the Solicitor General
petitioner BSP their respective boat tickets to Davao del Norte and
on behalf of public respondent NLRC; for their part, private
their relocation allowances.
respondents stated in their Appeal Memorandum11 with the NLRC
FELICIANO, J.: that petitioner BSP is "by mandate of law a Public Corporation,"
Meanwhile, in a letter of the same date, the BSP National President a statement reiterated by them in their Memorandum12 before this
This Petition for Certiorari is directed at (1) the Decision,1 dated informed private respondents that their refusal to comply with the Court.
27 February 1987, and (2) the Resolution2 dated 16 October 1987, Special Orders was not sufficiently justified and constituted rank
both issued by the National Labor Relations Commission disobedience. Memoranda subsequently issued by the BSP
In a Resolution dated 9 August 1989, this Court required the
("NLRC") in Case No. 1637-84. Secretary-General stressed that such refusal as well as the
parties and the Office of the Government Corporate Counsel to file
explanations proffered therefor, were unacceptable and could
a comment on the question of whether or not petitioner BSP is in
altogether result in termination of employment with petitioner
Private respondents Fortunato C. Esquerra, Roberto O. fact a government-owned or controlled corporation.
BSP. These warnings notwithstanding, private respondents
Malaborbor, Estanislao M. Misa, Vicente N. Evangelista and continued pertinaciously to disobey the disputed transfer orders.
Marcelino P. Garcia, had all been rank-and-file employees of Petitioner, private respondents, the Office of the Solicitor General
petitioner Boy Scouts of the Philippines ("BSP"). At the time of and the Office of the Government Corporate Counsel filed their
termination of their services in February 1985, private respondents Petitioner BSP consequently imposed a five-day suspension on the
respective comments.
were stationed at the BSP Camp in Makiling, Los Baños, Laguna. five (5) private respondents, in the latter part of January 1985.
Subsequently, by Special Order dated 12 February 1985 issued by
the BSP Secretary-General, private respondents' services were The central issue is whether or not the BSP is embraced within the
The events which led to such termination of services are as follows: ordered terminated effective 15 February 1985. Civil Service as that term is defined in Article IX (B) (2) (1) of the
1987 Constitution which reads as follows:
On 19 October 1984, the Secretary-General of petitioner BSP On 22 February 1985, private respondents amended their original
issued Special Orders Nos. 80, 81, 83, 84 and 85 addressed complaint to include charges of illegal dismissal and unfair labor The Civil Service embraces all branches, subdivisions,
separately to the five (5) private respondents, informing them that practice against petitioner BSP.4 instrumentality mentalities and agencies of the
on 20 November 1984, they were to be transferred from the BSP Government, including government-owned or
Camp in Makiling to the BSP Land Grant in Asuncion, Davao del controlled corporations with original charters.
Norte. These Orders were opposed by private respondents who, on The Labor Arbiter thereafter proceeded to hear the complaint.
4 November 1984, appealed the matter to the BSP National
President. xxx xxx xxx
In a decision5 dated 31 July 1985, the Labor Arbiter ordered the
dismissal of private respondents' complaint for lack of merit.
On 6 November 1984, petitioner BSP conducted a pre-transfer The answer to the central issue will determine whether or not
briefing at its National Headquarters in Manila. Private private respondent NLRC had jurisdiction to render the Decision
On 27 February 1987, however, the ruling of the Labor Arbiter was
respondents were in attendance during the briefing and they were and Resolution which are here sought to be nullified.
reversed by public respondent, NLRC, which held that private
there assured that their transfer to Davao del Norte would not
respondents had been illegally dismissed by petitioner BSP. The
involve any diminution in salary, and that each of them would
dispositive portion of the NLRC decision read: The responses of the parties, on the one hand, and of the Office of
receive a relocation allowance equivalent to one (1) month's basic
the Solicitor General and the Office of the Government Corporate
pay. This assurance, however, failed to persuade private
Counsel, upon the other hand, in compliance with the Resolution
respondents to abandon their opposition to the transfer orders WHEREFORE, premises considered the Decision
of this Court of 9 August 1989, present a noteworthy uniformity.
issued by the BSP Secretary-General. appealed from is hereby SET ASIDE and a new one
Petitioner BSP and private respondents submit substantially the
entered ordering the respondent-appellee [petitioner
same view "that the BSP is a purely private organization". In
BSP] to reinstate the complainants-appellants [private
On 13 November 1984, a complaint3 contrast, the Solicitor General and the Government Corporate
respondents] to their former positions without loss of
Counsel take much the same position, that is, that the BSP is a
seniority rights and other benefits appurtenant thereto
"public corporation' or a "quasi-public corporation" and, as well, a
(docketed as NLRC Case No. 16-84J) for illegal transfer was filed and with full backwages from the time they were illegally
"government controlled corporation." Petitioner BSP's compliance
with the then Ministry of Labor and Employment, Sub-Regional dismissed from the service up to the date of their actual
with our Resolution invokes the following provisions of its
Arbitration Branch IV, San Pablo City, Laguna. Private reinstatement.
Constitution and By-laws:
respondents there sought to enjoin implementation of Special
Orders Nos. 80, 81, 83, 84 and 85, alleging, among other things,
SO ORDERED.
that said orders were "indubitable and irrefutable action[s]
 The Boy Scouts of the Philippines declares that it is an through organization, and cooperation with other agencies the xxx xxx xxx
independent, voluntary, non-political, non-sectarian ability of boys to do things for themselves and others, to train them
and non-governmental organization, with obligations in scoutcraft, and to teach them patriotism, courage, self-reliance,
(Emphasis supplied)
towards nation building and with international and kindred virtues, using the methods which are now in common
orientation. use by boy scouts."5 He further noted that the BSP's objectives and
purposes are "solely of a benevolent character and not for Examining the relevant statutory provisions and the arguments
pecuniary profit by its members.16 The Solicitor General also outlined above, the Court considers that the following need to be
The BSP, petitioner stresses, does not receive any monetary or
underscored the extent of government participation in the BSP considered in arriving at the appropriate legal characterization of
financial subsidy from the Government whether on the national or
under its charter as reflected in the composition of its governing the BSP for purposes of determining whether its officials and staff
local level.13 Petitioner declares that it is a "purely private
body: members are embraced in the Civil Service. Firstly, BSP's functions
organization" directed and controlled by its National Executive
as set out in its statutory charter do have a public aspect. BSP's
Board the members of which are, it is said, all "voluntary scouters,"
functions do relate to the fostering of the public virtues of
including seven (7) Cabinet Secretaries.14 The governing body of the said corporation shall consist
citizenship and patriotism and the general improvement of the
of a National Executive Board composed of (a)
moral spirit and fiber of our youth. The social value of activities like
the President of the Philippines or his representative; (b)
Private respondents submitted a supplementary memorandum those to which the BSP dedicates itself by statutory mandate have
the charter and life members of the Boy Scouts of the
arguing that while petitioner BSP was created as a public in fact, been accorded constitutional recognition. Article II of the
Philippines; (c) the Chairman of the Board of Trustees of
corporation, it had lost that status when Section 2 of 1987 Constitution includes in the "Declaration of Principles and
the Philippine Scouting Foundation; (d) the Regional
Commonwealth Act No. 111 as amended by P.D. No. 460 conferred State Policies," the following:
Chairman of the Scout Regions of the Philippines; (e) the
upon it the powers which ordinary private corporations organized
Secretary of Education and Culture, the Secretary of
under the Corporation Code have:
Social Welfare, the Secretary of National Defense, the Sec. 13. The State recognizes the vital role of the youth in
Secretary of Labor, the Secretary of Finance, the nation-building and shall promote and protect their
Sec. 2. The said corporation shall have perpetual Secretary of Youth and Sports, and the Secretary of physical, moral, spiritual, intellectual, and social well-
succession with power to sue and be sued; to hold such local Government and Community Development; (f) an being. It shall inculcate in the youth patriotism and
real and personal estate as shall be necessary for equal number of individuals from the private sector; (g) nationalism, and encourage their involvement in public
corporate purposes, and to receive real and personal the National President of the Girl Scouts of the and civic affairs.
property by gift, devise, or bequest; to adopt a seal, and Philippines; (h) one Scout of Senior age from each Scout
to alter or destroy the same at pleasure; to have offices Region to represent the boy membership; and (i) three
representatives of the cultural minorities. Except for the At the same time, BSP's sanctions do not relate to the governance
and conduct its business and affairs in the City of Manila
Regional Chairman who shall be elected by the Regional of any part of territory of the Philippines; BSP is not a public
and in the several provinces; to make and adopt by-laws,
Scout Councils during their annual meetings, and the corporation in the same sense that municipal corporations or local
rules and regulations not inconsistent with the laws of
Scouts of their respective regions, all members of the governments are public corporations. BSP's functions can not also
the Philippines, and generally to do all such acts and
National Executive Board shall be either by be described as proprietary functions in the same sense that the
things (including the establishment of regulations for
appointment or cooption, subject to ratification and functions or activities of government-owned or controlled
the election of associates and successors: as may be
confirmation by the Chief Scout, who shall be the Head corporations like the National Development Company or the
necessary to carry into effect the provisions of the Act
of State. . . .17 (Emphasis supplied) National Steel Corporation can be described as proprietary or
and promote the purposes of said corporation.
"business-like" in character. Nevertheless, the public character of
BSP's functions and activities must be conceded, for they pertain
Private respondents also point out that the BSP is registered as a The Government Corporate Counsel, like the Solicitor General, to the educational, civic and social development of the youth which
private employer with the Social Security System and that all its describes the BSP as a "public corporation" but, unlike the Solicitor constitutes a very substantial and important part of the nation.
staff members and employees are covered by the Social Security General, suggests that the BSP is more of a "quasi corporation"
Act, indicating that the BSP had lost its personality or standing as than a "public corporation." The BSP, unlike most public
corporations which are created for a political purpose, is not vested The second aspect that the Court must take into account relates to
a public corporation. It is further alleged that the BSP's assets and
with political or governmental powers to be exercised for the public the governance of the BSP. The composition of the National
liabilities, official transactions and financial statements have never
good or public welfare in connection with the administration of Executive Board of the BSP includes, as noted from Section 5 of its
been subjected to audit by the government auditing office, i.e., the
civil government. The Government Corporate Counsel submits, charter quoted earlier, includes seven (7) Secretaries of Executive
Commission on Audit, being audited rather by the private auditing
more specifically, that the BSP falls within the ambit of the term Departments. The seven (7) Secretaries (now six [6] in view of the
firm of Sycip Gorres Velayo and Co. Private respondents finally
"government-owned or controlled corporation" as defined in abolition of the Department of Youth and Sports and merger
state that the appointments of BSP officers and staff were not
Section 2 of P.D. No. 2029 (approved on 4 February 1986) which thereof into the Department of Education, Culture and Sports) by
approved or confirmed by the Civil Service Commission.
reads as follows: themselves do not constitute a majority of the members of the
National Executive Board. We must note at the same time that the
The views of the Office of the Solicitor General and the Office of the appointments of members of the National Executive Board, except
Government Corporate Counsel on the above issue appeared to be A government-owned or controlled corporation is a only the appointments of the Regional Chairman and Scouts of
generally similar. The Solicitor General's Office, although it had stock or a non-stock corporation, whether performing Senior age from the various Scout Regions, are subject to
appeared for the NLRC and filed a Comment on the latter's behalf governmental or proprietary functions, which is ratification and confirmation by the Chief Scout, who is the
on the merits of the Petition for Certiorari, submitted that the BSP directly chartered by special law or if organized under President of the Philippines. Vacancies to the Board are filled by a
is a government-owned or controlled corporation, having been the general corporation law is owned or controlled by the majority vote of the remaining members thereof, but again subject
created by virtue of Commonwealth Act No. 111 entitled "An Act to government directly, or indirectly through a parent to ratification and confirmation by the Chief Scout.18 We must
Create a Public Corporation to be known as the Boy Scouts of the corporation or subsidiary corporation, to the extent of at assume that such confirmation or ratification involves the exercise
Philippines and to Define its Powers and Purposes." The Solicitor least a majority of its outstanding capital stock or its of choice or discretion on the part of ratifying or confirming power.
General stressed that the BSP was created in order to "promote, outstanding voting capital stock. It does appears therefore that there is substantial governmental
(i.e., Presidential) participation or intervention in the choice of the with functions relating to specific constitutional policies employment in the government in any of its
majority of the members of the National Executive Board of the or objectives. This term includes the state universities governmental or corporate arms is concerned.25
BSP. and colleges, and the monetary authority of the
State.23 (Emphasis supplied)
The complaint in NLRC Case No. 1637-84 having been filed on 13
The third aspect relates to the character of the assets and funds of November 1984, when the 1973 Constitution was still in force, our
the BSP. The original assets of the BSP were acquired by purchase We believe that the BSP is appropriately regarded as "a ruling in Juco applies in the case at bar.26
or gift or other equitable arrangement with the Boy Scouts of government instrumentality" under the 1987 Administrative Code.
America, of which the BSP was part before the establishment of the
In view of the foregoing, we hold that both the Labor Arbiter and
Commonwealth of the Philippines. The BSP charter, however, does
It thus appears that the BSP may be regarded as both a public respondent NLRC had no jurisdiction over the complaint
not indicate that such assets were public or statal in character or
"government controlled corporation with an original charter" and filed by private respondents in NLRC Case No. 1637-84; neither
had originated from the Government or the State. According to
as an "instrumentality" of the Government within the meaning of labor agency had before it any matter which could validly have
petitioner BSP, its operating funds used for carrying out its
Article IX (B) (2) (1) of the Constitution. It follows that the been passed upon by it in the exercise of original or appellate
purposes and programs, are derived principally from membership
employees of petitioner BSP are embraced within the Civil Service jurisdiction. The appealed Decision and Resolution in this case,
dues paid by the Boy Scouts themselves and from property rentals.
and are accordingly governed by the Civil Service Law and having been rendered without jurisdiction, vested no rights and
In this respect, the BSP appears similar to private non-stock, non-
Regulations. imposed no liabilities upon any of the parties here involved. That
profit corporations, although its charter expressly envisages
neither party had expressly raised the issue of jurisdiction in the
donations and contributions to it from the Government and any of
pleadings poses no obstacle to this ruling of the Court, which
its agencies and instrumentalities.19 We note only that BSP funds It remains only to note that even before the effectivity of the 1987
may motu proprio take cognizance of the issue of existence or
have not apparently heretofore been regarded as public funds by Constitution employees of the BSP already fell within the scope of
absence of jurisdiction and pass upon the same.27
the Commission on Audit, considering that such funds have not the Civil Service. In National Housing Corporation v.
been audited by the Commission. Juco,24 decided in 1985, the Court, speaking through Mr. Justice
Gutierrez, held: ACCORDINGLY, the Decision of the Labor Arbiter dated 31 July
1985, and the Decision dated 27 February 1987 and Resolution
While the BSP may be seen to be a mixed type of entity, combining
dated 16 October 1987, issued by public respondent NLRC, in
aspects of both public and private entities, we believe that There should no longer be any question at this time
NLRC Case No. 1637-84, are hereby SET ASIDE. All other orders
considering the character of its purposes and its functions, the that employees of government-owned or controlled
and resolutions rendered in this case by the Labor Arbiter and the
statutory designation of the BSP as "a public corporation" and the corporations are governed by the civil service law and
NLRC are likewise SET ASIDE. No pronouncement as to costs.
substantial participation of the Government in the selection of civil service rules and regulations.
members of the National Executive Board of the BSP, the BSP, as
presently constituted under its charter, is a government-controlled G.R. No. 177131 June 7, 2011
corporation within the meaning of Article IX. (B) (2) (1) of the Section 1, Article XII-B of the [19731 Constitution
Constitution. specifically provides:
BOY SCOUTS OF THE PHILIPPINES, Petitioner,
vs.
We are fortified in this conclusion when we note that the The Civil Service embraces every branch, agency,
COMMISSION ON AUDIT, Respondent.
Administrative Code of 1987 designates the BSP as one of the subdivision and instrumentality of the Government,
attached agencies of the Department of Education, Culture and including every government-owned or controlled
Sports ("DECS").20 An "agency of the Government" is defined as corporation. . . . DECISION
referring to any of the various units of the Government including a
department, bureau, office, instrumentality, government-owned The 1935 Constitution had a similar provision in its LEONARDO-DE CASTRO, J.:
or-controlled corporation, or local government or distinct unit Section 1, Article XII which stated:
therein.21"Government instrumentality" is in turn defined in the
1987 Administrative Code in the following manner: The jurisdiction of the Commission on Audit (COA) over the Boy
A Civil Service embracing all branches and subdivisions Scouts of the Philippines (BSP) is the subject matter of this
of the Government shall be provided by law.1âwphi1 controversy that reached us via petition for prohibition1 filed by the
Instrumentality –– refers to any agency of the National BSP under Rule 65 of the 1997 Rules of Court. In this petition, the
Government, not integrated within the department BSP seeks that the COA be prohibited from implementing its June
framework, vested with special functions or jurisdiction The inclusion of "government-owned or controlled
18, 2002 Decision,2 its February 21, 2007 Resolution,3 as well as all
by law, endowed with some if not all corporate powers, corporations" within the embrace of the civil service
other issuances arising therefrom, and that all of the foregoing be
administering special funds, and enjoying operational shows a deliberate effort of the framers to plug an earlier
rendered null and void. 4
autonomy usually through a charter. This term loophole which allowed government-owned or
includesregulatory agencies, chartered institutions and controlled corporations to avoid the full consequences of
government-owned or controlled the all encompassing coverage of the civil service system. Antecedent Facts and Background of the Case
corporations.22 (Emphasis supplied) The same explicit intent is shown by the addition of
"agency" and "instrumentality" to branches and
This case arose when the COA issued Resolution No. 99-0115 on
subdivisions of the Government. All offices and firms of
The same Code describes a "chartered institution" in the following August 19, 1999 ("the COA Resolution"), with the subject "Defining
the government are covered. The amendments
terms: the Commission’s policy with respect to the audit of the Boy Scouts
introduced in 1973 are not idle exercises or meaningless
of the Philippines." In its whereas clauses, the COA Resolution
gestures. They carry the strong message that civil service
stated that the BSP was created as a public corporation under
Chartered institution –– refers to any agency organized coverage is broad and all-embracing insofar as
Commonwealth Act No. 111, as amended by Presidential Decree
or operating under a special charter, and vested by law
No. 460 and Republic Act No. 7278; that in Boy Scouts of the (ii) the appointment and confirmation power of the President of In a letter12 dated July 3, 2000, Director Crescencio S. Sunico,
Philippines v. National Labor Relations Commission,6 the the Philippines, as Chief Scout, over the members of the said Corporate Audit Officer (CAO) I of the COA, furnished the BSP
Supreme Court ruled that the BSP, as constituted under its charter, Board. with a copy of the Memorandum13 dated June 20, 2000 of Atty.
was a "government-controlled corporation within the meaning of Santos M. Alquizalas, the COA General Counsel. In said
Article IX(B)(2)(1) of the Constitution"; and that "the BSP is Memorandum, the COA General Counsel opined that Republic Act
The BSP believes that the cited case has been superseded by RA
appropriately regarded as a government instrumentality under the No. 7278 did not supersede the Court’s ruling in Boy Scouts of the
7278. Thereby weakening the case’s conclusion that the BSP is a
1987 Administrative Code."7 The COA Resolution also cited its Philippines v. National Labor Relations Commission, even though
government-controlled corporation (sic). The 1987 Administrative
constitutional mandate under Section 2(1), Article IX (D). Finally, said law eliminated the substantial government participation in the
Code itself, of which the BSP vs. NLRC relied on for some terms,
the COA Resolution reads: selection of members of the National Executive Board of the BSP.
defines government-owned and controlled corporations as
The Memorandum further provides:
agencies organized as stock or non-stock corporations which the
NOW THEREFORE, in consideration of the foregoing premises, BSP, under its present charter, is not.
the COMMISSION PROPER HAS RESOLVED, AS IT DOES Analysis of the said case disclosed that the substantial government
HEREBY RESOLVE, to conduct an annual financial audit of the participation is only one (1) of the three (3) grounds relied upon by
Also, the Government, like in other GOCCs, does not have funds
Boy Scouts of the Philippines in accordance with generally the Court in the resolution of the case. Other considerations
invested in the BSP. What RA 7278 only provides is that the
accepted auditing standards, and express an opinion on whether include the character of the BSP’s purposes and functions which
Government or any of its subdivisions, branches, offices, agencies
the financial statements which include the Balance Sheet, the has a public aspect and the statutory designation of the BSP as a
and instrumentalities can from time to time donate and contribute
Income Statement and the Statement of Cash Flows present fairly "public corporation". These grounds have not been deleted by R.A.
funds to the BSP.
its financial position and results of operations. No. 7278. On the contrary, these were strengthened as evidenced
by the amendment made relative to BSP’s purposes stated in
xxxx Section 3 of R.A. No. 7278.
xxxx

Also the BSP respectfully believes that the BSP is not On the argument that BSP is not appropriately regarded as "a
BE IT RESOLVED FURTHERMORE, that for purposes of audit
"appropriately regarded as a government instrumentality under government instrumentality" and "agency" of the government,
supervision, the Boy Scouts of the Philippines shall be classified
the 1987 Administrative Code" as stated in the COA resolution. As such has already been answered and clarified. The Supreme Court
among the government corporations belonging to the Educational,
defined by Section 2(10) of the said code, instrumentality refers to has elucidated this matter in the BSP case when it declared that
Social, Scientific, Civic and Research Sector under the Corporate
"any agency of the National Government, not integrated within the BSP is regarded as, both a "government-controlled corporation
Audit Office I, to be audited, similar to the subsidiary corporations,
department framework, vested with special functions or with an original charter" and as an "instrumentality" of the
by employing the team audit approach.8 (Emphases supplied.)
jurisdiction by law, endowed with some if not all corporate powers, Government. Likewise, it is not disputed that the Administrative
administering special funds, and enjoying operational autonomy, Code of 1987 designated the BSP as one of the attached agencies of
The BSP sought reconsideration of the COA Resolution in a usually through a charter." DECS. Being an attached agency, however, it does not change its
letter9 dated November 26, 1999 signed by the BSP National nature as a government-controlled corporation with original
President Jejomar C. Binay, who is now the Vice President of the charter and, necessarily, subject to COA audit jurisdiction. Besides,
The BSP is not an entity administering special funds. It is not even Section 2(1), Article IX-D of the Constitution provides that COA
Republic, wherein he wrote:
included in the DECS National Budget. x x x shall have the power, authority, and duty to examine, audit and
settle all accounts pertaining to the revenue and receipts of, and
It is the position of the BSP, with all due respect, that it is not expenditures or uses of funds and property, owned or held in trust
It may be argued also that the BSP is not an "agency" of the
subject to the Commission’s jurisdiction on the following grounds: by, or pertaining to, the Government, or any of its subdivisions,
Government. The 1987 Administrative Code, merely referred the
BSP as an "attached agency" of the DECS as distinguished from an agencies or instrumentalities, including government-owned or
1. We reckon that the ruling in the case of Boy Scouts of actual line agency of departments that are included in the National controlled corporations with original charters.14
the Philippines vs. National Labor Relations Budget. The BSP believes that an "attached agency" is different
Commission, et al. (G.R. No. 80767) classifying the BSP from an "agency." Agency, as defined in Section 2(4) of the Based on the Memorandum of the COA General Counsel, Director
as a government-controlled corporation is anchored on Administrative Code, is defined as any of the various units of the Sunico wrote:
the "substantial Government participation" in the Government including a department, bureau, office,
National Executive Board of the BSP. It is to be noted instrumentality, government-owned or controlled corporation or
that the case was decided when the BSP Charter is local government or distinct unit therein. In view of the points clarified by said Memorandum upholding
defined by Commonwealth Act No. 111 as amended by COA Resolution No. 99-011, we have to comply with the provisions
Presidential Decree 460. of the latter, among which is to conduct an annual financial audit
Under the above definition, the BSP is neither a unit of the of the Boy Scouts of the Philippines.15
Government; a department which refers to an executive
However, may we humbly refer you to Republic Act No. 7278 which department as created by law (Section 2[7] of the Administrative
amended the BSP’s charter after the cited case was decided. The Code); nor a bureau which refers to any principal subdivision or In a letter dated November 20, 2000 signed by Director Amorsonia
most salient of all amendments in RA No. 7278 is the alteration of unit of any department (Section 2[8], Administrative Code).10 B. Escarda, CAO I, the COA informed the BSP that a preliminary
the composition of the National Executive Board of the BSP. survey of its organizational structure, operations and accounting
system/records shall be conducted on November 21 to 22, 2000.16
Subsequently, requests for reconsideration of the COA Resolution
The said RA virtually eliminated the "substantial government were also made separately by Robert P. Valdellon, Regional Scout
participation" in the National Executive Board by removing: (i) the Director, Western Visayas Region, Iloilo City and Eugenio F. Upon the BSP’s request, the audit was deferred for thirty (30) days.
President of the Philippines and executive secretaries, with the Capreso, Council Scout Executive of Calbayog City.11 The BSP then filed a Petition for Review with Prayer for
exception of the Secretary of Education, as members thereof; and Preliminary Injunction and/or Temporary Restraining Order
before the COA. This was denied by the COA in its questioned
Decision, which held that the BSP is under its audit jurisdiction. jurisdiction of the COA."23 Claiming that the amendments 3. Republic Act No. 7278 did not change the character of
The BSP moved for reconsideration but this was likewise denied introduced by Republic Act No. 7278 constituted a supervening the BSP as a government-owned or controlled
under its questioned Resolution.17 event that changed the BSP’s corporate identity in the same way corporation and government instrumentality.27
that the government’s privatization program changed PAL’s, the
BSP makes the case that the government no longer has control over
This led to the filing by the BSP of this petition for prohibition with The COA maintains that the functions of the BSP that include,
it; thus, the COA cannot use the Boy Scouts of the Philippines v.
preliminary injunction and temporary restraining order against among others, the teaching to the youth of patriotism, courage,
National Labor Relations Commission as its basis for the exercise
the COA. self-reliance, and kindred virtues, are undeniably sovereign
of its jurisdiction and the issuance of COA Resolution No. 99-
functions enshrined under the Constitution and discussed by the
011.24 The BSP further claims as follows:
Court in Boy Scouts of the Philippines v. National Labor Relations
The Issue
Commission. The COA contends that any attempt to classify the
It is not far-fetched, in fact, to concede that BSP’s funds and assets BSP as a private corporation would be incomprehensible since no
As stated earlier, the sole issue to be resolved in this case is whether are private in character. Unlike ordinary public corporations, such less than the law which created it had designated it as a public
the BSP falls under the COA’s audit jurisdiction. as provinces, cities, and municipalities, or government-owned and corporation and its statutory mandate embraces performance of
controlled corporations, such as Land Bank of the Philippines and sovereign functions.28
the Development Bank of the Philippines, the assets and funds of
The Parties’ Respective Arguments BSP are not derived from any government grant. For its operations,
The COA claims that the only reason why the BSP employees fell
BSP is not dependent in any way on any government
within the scope of the Civil Service Commission even before the
The BSP contends that Boy Scouts of the Philippines v. National appropriation; as a matter of fact, it has not even been included in
1987 Constitution was the fact that it was a government-owned or
Labor Relations Commission is inapplicable for purposes of any appropriations for the government. To be sure, COA has not
controlled corporation; that as an attached agency of the
determining the audit jurisdiction of the COA as the issue therein alleged, in its Resolution No. 99-011 or in the Memorandum of its
Department of Education, Culture and Sports (DECS), the BSP is
was the jurisdiction of the National Labor Relations Commission General Counsel, that BSP received, receives or continues to
an agency of the government; and that the BSP is a chartered
over a case for illegal dismissal and unfair labor practice filed by receive assets and funds from any agency of the government. The
institution under Section 1(12) of the Revised Administrative Code
certain BSP employees.18 foregoing simply point to the private nature of the funds and assets
of 1987, embraced under the term government instrumentality.29
of petitioner BSP.
While the BSP concedes that its functions do relate to those that The COA concludes that being a government agency, the funds and
the government might otherwise completely assume on its own, it xxxx
property owned or held by the BSP are subject to the audit
avers that this alone was not determinative of the COA’s audit authority of the COA pursuant to Section 2(1), Article IX (D) of the
jurisdiction over it. The BSP further avers that the Court in Boy As stated in petitioner’s third argument, BSP’s assets and funds 1987 Constitution.
Scouts of the Philippines v. National Labor Relations Commission were never acquired from the government. Its operations are not
"simply stated x x x that in respect of functions, the BSP is akin to in any way financed by the government, as BSP has never been
a public corporation" but this was not synonymous to holding that In support of its arguments, the COA cites The Veterans Federation
included in any appropriations act for the government. Neither has
the BSP is a government corporation or entity subject to audit by of the Philippines (VFP) v. Reyes,30 wherein the Court held that
the government invested funds with BSP. BSP, has not been, at any
the COA. 19 among the reasons why the VFP is a public corporation is that its
time, a user of government property or funds; nor have properties
charter, Republic Act No. 2640, designates it as one. Furthermore,
of the government been held in trust by BSP. This is precisely the
the COA quotes the Court as saying in that case:
The BSP contends that Republic Act No. 7278 introduced crucial reason why, until this time, the COA has not attempted to subject
amendments to its charter; hence, the findings of the Court in Boy BSP to its audit jurisdiction. x x x.25
Scouts of the Philippines v. National Labor Relations Commission In several cases, we have dealt with the issue of whether certain
are no longer valid as the government has ceased to play a specific activities can be classified as sovereign functions. These
To summarize its other arguments, the BSP contends that it is not
controlling influence in it. The BSP claims that the cases, which deal with activities not immediately apparent to be
a government-owned or controlled corporation; neither is it an
pronouncements of the Court therein must be taken only within sovereign functions, upheld the public sovereign nature of
instrumentality, agency, or subdivision of the government.
the context of that case; that the Court had categorically found that operations needed either to promote social justice or to stimulate
its assets were acquired from the Boy Scouts of America and not patriotic sentiments and love of country.
from the Philippine government, and that its operations are In its Comment,26 the COA argues as follows:
financed chiefly from membership dues of the Boy Scouts
xxxx
themselves as well as from property rentals; and that "the BSP may
1. The BSP is a public corporation created under
correctly be characterized as non-governmental, and hence,
Commonwealth Act No. 111 dated October 31, 1936, and
beyond the audit jurisdiction of the COA." It further claims that the Petitioner claims that its funds are not public funds because no
whose functions relate to the fostering of public virtues
designation by the Court of the BSP as a government agency or budgetary appropriations or government funds have been released
of citizenship and patriotism and the general
instrumentality is mere obiter dictum.20 to the VFP directly or indirectly from the DBM, and because VFP
improvement of the moral spirit and fiber of the youth.
funds come from membership dues and lease rentals earned from
The manner of creation and the purpose for which the
administering government lands reserved for the VFP.
The BSP maintains that the provisions of Republic Act No. 7278 BSP was created indubitably prove that it is a
suggest that "governance of BSP has come to be overwhelmingly a government agency.
private affair or nature, with government participation restricted The fact that no budgetary appropriations have been released to
to the seat of the Secretary of Education, Culture and Sports."21 It the VFP does not prove that it is a private corporation. The DBM
2. Being a government agency, the funds and property
cites Philippine Airlines Inc. v. Commission on Audit22 wherein the indeed did not see it fit to propose budgetary appropriations to the
owned or held in trust by the BSP are subject to the audit
Court declared that, "PAL, having ceased to be a government- VFP, having itself believed that the VFP is a private corporation. If
authority of respondent Commission on Audit pursuant
owned or controlled corporation is no longer under the audit the DBM, however, is mistaken as to its conclusion regarding the
to Section 2 (1), Article IX-D of the 1987 Constitution.
nature of VFP's incorporation, its previous assertions will not corporation to the State. If the corporation is created by the State the danger of granting undue favors to certain groups to the
prevent future budgetary appropriations to the VFP. The as the latter’s own agency or instrumentality to help it in carrying prejudice of others or of the interest of the country, which are the
erroneous application of the law by public officers does not bar a out its governmental functions, then that corporation is considered evils sought to be prevented by the constitutional provision
subsequent correct application of the law.31(Citations omitted.) public; otherwise, it is private. x x x.41 involved.50

The COA points out that the government is not precluded by law For its part, in its Comment42 filed on December 3, 2010, the BSP Finally, the BSP states that the presumption of constitutionality of
from extending financial support to the BSP and adding to its submits that its charter, Commonwealth Act No. 111, as amended a legislative enactment prevails absent any clear showing of its
funds, and that "as a government instrumentality which continues by Republic Act No. 7278, is constitutional as it does not violate repugnancy to the Constitution.51
to perform a vital function imbued with public interest and Section 16, Article XII of the Constitution. The BSP alleges that
reflective of the government’s policy to stimulate patriotic "while [it] is not a public corporation within the purview of COA’s
The Ruling of the Court
sentiments and love of country, the BSP’s funds from whatever audit jurisdiction, neither is it a private corporation created by
source are public funds, and can be used solely for public purpose special law falling within the ambit of the constitutional
in pursuance of the provisions of Republic Act No. [7278]."32 prohibition x x x."43 The BSP further alleges: 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
The COA claims that the fact that it has not yet audited the BSP’s Petitioner’s purpose is embodied in Section 3 of C.A. No. 111, as
are subject to the COA’s audit jurisdiction.
funds may not bar the subsequent exercise of its audit jurisdiction. amended by Section 1 of R.A. No. 7278, thus:

The BSP Charter (Commonwealth Act No. 111, approved on

The BSP filed its Reply33 on August 29, 2007 maintaining that its xxxx
October 31, 1936), entitled "An Act to Create a Public Corporation
statutory designation as a "public corporation" and the public
to be Known as the Boy Scouts of the Philippines, and to Define its
character of its purpose and functions are not determinative of the
A reading of the foregoing provision shows that petitioner was Powers and Purposes" created the BSP as a "public corporation" to
COA’s audit jurisdiction; reiterating its stand that Boy Scouts of the
created to advance the interest of the youth, specifically of young serve the following public interest or purpose:
Philippines v. National Labor Relations Commission is not
boys, and to mold them into becoming good citizens. Ultimately,
applicable anymore because the aspect of government ownership
the creation of petitioner redounds to the benefit, not only of those
and control has been removed by Republic Act No. 7278; and Sec. 3. The purpose of this corporation shall be to promote through
boys, but of the public good or welfare. Hence, it can be said that
concluding that the funds and property that it either owned or held organization and cooperation with other agencies, the ability of
petitioner’s purpose and functions are more of a public rather than
in trust are not public funds and are not subject to the COA’s audit boys to do useful things for themselves and others, to train them in
a private character. Petitioner caters to all boys who wish to join
jurisdiction. scoutcraft, and to inculcate in them patriotism, civic consciousness
the organization without any distinction. It does not limit its
and responsibility, courage, self-reliance, discipline and kindred
membership to a particular class of boys. Petitioner’s members are
virtues, and moral values, using the method which are in common
Thereafter, considering the BSP’s claim that it is a private trained in scoutcraft and taught patriotism, civic consciousness
use by boy scouts.
corporation, this Court, in a Resolution34 dated July 20, 2010, and responsibility, courage, self-reliance, discipline and kindred
required the parties to file, within a period of twenty (20) days from virtues, and moral values, preparing them to become model
receipt of said Resolution, their respective comments on the issue citizens and outstanding leaders of the country.44 Presidential Decree No. 460, approved on May 17, 1974, amended
of whether Commonwealth Act No. 111, as amended by Republic Commonwealth Act No. 111 and provided substantial changes in
Act No. 7278, is constitutional. the BSP organizational structure. Pertinent provisions are quoted
The BSP reiterates its stand that the public character of its purpose
below:
and functions do not place it within the ambit of the audit
In compliance with the Court’s resolution, the parties filed their jurisdiction of the COA as it lacks the government ownership or
respective Comments. control that the Constitution requires before an entity may be Section II. Section 5 of the said Act is also amended to read as
subject of said jurisdiction.45 It avers that it merely stated in its follows:
Reply that the withdrawal of government control is akin to
In its Comment35 dated October 22, 2010, the COA argues that the
privatization, but it does not necessarily mean that petitioner is a
constitutionality of Commonwealth Act No. 111, as amended, is not The governing body of the said corporation shall consist of a
private corporation.46The BSP claims that it has a unique
determinative of the resolution of the present controversy on the National Executive Board composed of (a) the President of the
characteristic which "neither classifies it as a purely public nor a
COA’s audit jurisdiction over petitioner, and in fact, the Philippines or his representative; (b) the charter and life members
purely private corporation";47 that it is not a quasi-public
controversy may be resolved on other grounds; thus, the requisites of the Boy Scouts of the Philippines; (c) the Chairman of the Board
corporation; and that it may belong to a different class altogether.48
before a judicial inquiry may be made, as set forth in Commissioner of Trustees of the Philippine Scouting Foundation; (d) the Regional
of Internal Revenue v. Court of Tax Appeals,36 have not been fully Chairman of the Scout Regions of the Philippines; (e) the Secretary
met.37 Moreover, the COA maintains that behind every law lies the The BSP claims that assuming arguendo that it is a private of Education and Culture, the Secretary of Social Welfare, the
presumption of constitutionality.38 The COA likewise argues that corporation, its creation is not contrary to the purpose of Section Secretary of National Defense, the Secretary of Labor, the
contrary to the BSP’s position, repeal of a law by implication is not 16, Article XII of the Constitution; and that the evil sought to be Secretary of Finance, the Secretary of Youth and Sports, and the
favored.39 Lastly, the COA claims that there was no violation of avoided by said provision is inexistent in the enactment of the Secretary of Local Government and Community Development; (f)
Section 16, Article XII of the 1987 Constitution with the creation or BSP’s charter,49 as, (i) it was not created for any pecuniary purpose; an equal number of individuals from the private sector; (g) the
declaration of the BSP as a government corporation. Citing (ii) those who will primarily benefit from its creation are not its National President of the Girl Scouts of the Philippines; (h) one
Philippine Society for the Prevention of Cruelty to Animals v. officers but its entire membership consisting of boys being trained Scout of Senior age from each Scout Region to represent the boy
Commission on Audit,40 the COA further alleges: in scoutcraft all over the country; (iii) it caters to all boys who wish membership; and (i) three representatives of the cultural
to join the organization without any distinction; and (iv) it does not minorities. Except for the Regional Chairman who shall be elected
limit its membership to a particular class or group of boys. Thus, by the Regional Scout Councils during their annual meetings, and
The true criterion, therefore, to determine whether a corporation
the enactment of its charter confers no special privilege to the Scouts of their respective regions, all members of the National
is public or private is found in the totality of the relation of the
particular individuals, families, or groups; nor does it bring about
Executive Board shall be either by appointment or cooption, Sec. 3. Sections 5, 6, 7 and 8 of Commonwealth Act No. 111, as The BSP as a Public Corporation under Par. 2, Art. 2 of the Civil
subject to ratification and confirmation by the Chief Scout, who amended, are hereby amended to read as follows: Code
shall be the Head of State. Vacancies in the Executive Board shall
be filled by a majority vote of the remaining members, subject to
"Sec. 5. The governing body of the said corporation shall consist of There are three classes of juridical persons under Article 44 of the
ratification and confirmation by the Chief Scout. The by-laws may
a National Executive Board, the members of which shall be Filipino Civil Code and the BSP, as presently constituted under Republic
prescribe the number of members of the National Executive Board
citizens of good moral character. The Board shall be composed of Act No. 7278, falls under the second classification. Article 44 reads:
necessary to constitute a quorum of the board, which number may
the following:
be less than a majority of the whole number of the board. The
National Executive Board shall have power to make and to amend Art. 44. The following are juridical persons:
the by-laws, and, by a two-thirds vote of the whole board at a "(a) One (1) charter member of the Boy Scouts of the
meeting called for this purpose, may authorize and cause to be Philippines who shall be elected by the members of the
executed mortgages and liens upon the property of the (1) The State and its political subdivisions;
National Council at its meeting called for this purpose;
corporation.
(2) Other corporations, institutions and entities
"(b) The regional chairmen of the scout regions who
Subsequently, on March 24, 1992, Republic Act No. 7278 further for public interest or purpose created by law;
shall be elected by the representatives of all the local
amended Commonwealth Act No. 111 "by strengthening the their personality begins as soon as they have
scout councils of the region during its meeting called for
volunteer and democratic character" of the BSP and reducing been constituted according to law;
this purpose: Provided, That a candidate for regional
government representation in its governing body, as follows: chairman need not be the chairman of a local scout
council; (3) Corporations, partnerships and associations
Section 1. Sections 2 and 3 of Commonwealth Act. No. 111, as for private interest or purpose to which the law
amended, is hereby amended to read as follows: grants a juridical personality, separate and distinct from
"(c) The Secretary of Education, Culture and Sports;
that of each shareholder, partner or member. (Emphases
supplied.)
"Sec. 2. The said corporation shall have the powers of perpetual "(d) The National President of the Girl Scouts of the
succession, to sue and be sued; to enter into contracts; to acquire, Philippines;
own, lease, convey and dispose of such real and personal estate, The BSP, which is a corporation created for a public interest or
land grants, rights and choses in action as shall be necessary for purpose, is subject to the law creating it under Article 45 of the Civil
corporate purposes, and to accept and receive funds, real and "(e) One (1) senior scout, each from Luzon, Visayas and Code, which provides:
personal property by gift, devise, bequest or other means, to Mindanao areas, to be elected by the senior scout
conduct fund-raising activities; to adopt and use a seal, and the delegates of the local scout councils to the scout youth
Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the
same to alter and destroy; to have offices and conduct its business forums in their respective areas, in its meeting called for
preceding article are governed by the laws creating or
and affairs in Metropolitan Manila and in the regions, provinces, this purpose, to represent the boy scout membership;
recognizing them.
cities, municipalities, and barangays of the Philippines, to make
and adopt by-laws, rules and regulations not inconsistent with this "(f) Twelve (12) regular members to be elected by the
Act and the laws of the Philippines, and generally to do all such acts Private corporations are regulated by laws of general application
members of the National Council in its meeting called
and things, including the establishment of regulations for the on the subject.
for this purpose;
election of associates and successors, as may be necessary to carry
into effect the provisions of this Act and promote the purposes of Partnerships and associations for private interest or purpose are
said corporation: Provided, That said corporation shall have no "(g) At least ten (10) but not more than fifteen (15)
governed by the provisions of this Code concerning partnerships.
power to issue certificates of stock or to declare or pay dividends, additional members from the private sector who shall be
(Emphasis and underscoring supplied.)
its objectives and purposes being solely of benevolent character elected by the members of the National Executive Board
and not for pecuniary profit of its members. referred to in the immediately preceding paragraphs (a),
(b), (c), (d), (e) and (f) at the organizational meeting of The purpose of the BSP as stated in its amended charter shows that
the newly reconstituted National Executive Board which it was created in order to implement a State policy declared in
"Sec. 3. The purpose of this corporation shall be to promote shall be held immediately after the meeting of the Article II, Section 13 of the Constitution, which reads:
through organization and cooperation with other agencies, the National Council wherein the twelve (12) regular
ability of boys to do useful things for themselves and others, to members and the one (1) charter member were elected.
train them in scoutcraft, and to inculcate in them patriotism, civic ARTICLE II - DECLARATION OF PRINCIPLES AND STATE
consciousness and responsibility, courage, self-reliance, discipline POLICIES
and kindred virtues, and moral values, using the method which are xxxx
in common use by boy scouts." Section 13. The State recognizes the vital role of the youth in
"Sec. 8. Any donation or contribution which from time to time may nation-building and shall promote and protect their physical,
Sec. 2. Section 4 of Commonwealth Act No. 111, as amended, is be made to the Boy Scouts of the Philippines by the Government or moral, spiritual, intellectual, and social well-being. It shall
hereby repealed and in lieu thereof, Section 4 shall read as follows: any of its subdivisions, branches, offices, agencies or inculcate in the youth patriotism and nationalism, and encourage
instrumentalities or by a foreign government or by private, entities their involvement in public and civic affairs.
and individuals shall be expended by the National Executive Board
"Sec. 4. The President of the Philippines shall be the Chief Scout of in pursuance of this Act.
the Boy Scouts of the Philippines." 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 As an attached agency, the BSP enjoys operational autonomy, as purpose of this constitutional provision is to ban private
it, pursuant to Article 45 of the same Code. long as policy and program coordination is achieved by having at corporations created by special charters, which historically gave
least one representative of government in its governing board, certain individuals, families or groups special privileges denied to
which in the case of the BSP is the DECS Secretary. In this sense, other citizens.54 (Emphasis added.)
The BSP’s Classification Under the Administrative Code of 1987
the BSP is not under government control or "supervision and
control." Still this characteristic does not make the attached
It may be gleaned from the above discussion that Article XII,
The public, rather than private, character of the BSP is recognized chartered agency a private corporation covered by the
Section 16 bans the creation of "private corporations" by special
by the fact that, along with the Girl Scouts of the Philippines, it is constitutional proscription in question.
law. The said constitutional provision should not be construed so
classified as an attached agency of the DECS under Executive
as to prohibit the creation of public corporations or a corporate
Order No. 292, or the Administrative Code of 1987, which states:
Art. XII, Sec. 16 of the Constitution refers to "private agency or instrumentality of the government intended to serve a
corporations" created by government for proprietary or public interest or purpose, which should not be measured on the
TITLE VI – EDUCATION, CULTURE AND SPORTS economic/business purposes basis of economic viability, but according to the public interest or
purpose it serves as envisioned by paragraph (2), of Article 44 of
the Civil Code and the pertinent provisions of the Administrative
Chapter 8 – Attached Agencies At the outset, it should be noted that the provision of Section 16 in
Code of 1987.
issue is found in Article XII of the Constitution, entitled "National
Economy and Patrimony." Section 1 of Article XII is quoted as
SEC. 20. Attached Agencies. – The following agencies are hereby follows: The BSP is a Public Corporation Not Subject to the Test of
attached to the Department: Government Ownership or Control and Economic Viability
SECTION 1. The goals of the national economy are a more
xxxx equitable distribution of opportunities, income, and wealth; a The BSP is a public corporation or a government agency or
sustained increase in the amount of goods and services produced instrumentality with juridical personality, which does not fall
(12) Boy Scouts of the Philippines; by the nation for the benefit of the people; and an expanding within the constitutional prohibition in Article XII, Section 16,
productivity as the key to raising the quality of life for all, especially notwithstanding the amendments to its charter. Not all
the underprivileged. corporations, which are not government owned or controlled, are
(13) Girl Scouts of the Philippines. ipso facto to be considered private corporations as there exists
another distinct class of corporations or chartered institutions
The State shall promote industrialization and full employment
The administrative relationship of an attached agency to the which are otherwise known as "public corporations." These
based on sound agricultural development and agrarian reform,
department is defined in the Administrative Code of 1987 as corporations are treated by law as agencies or instrumentalities of
through industries that make full and efficient use of human and
follows: the government which are not subject to the tests of ownership or
natural resources, and which are competitive in both domestic and
control and economic viability but to different criteria relating to
foreign markets. However, the State shall protect Filipino
their public purposes/interests or constitutional policies and
BOOK IV enterprises against unfair foreign competition and trade practices.
objectives and their administrative relationship to the government
THE EXECUTIVE BRANCH or any of its Departments or Offices.
In the pursuit of these goals, all sectors of the economy and all
Chapter 7 – ADMINISTRATIVE RELATIONSHIP regions of the country shall be given optimum opportunity to
Classification of Corporations Under Section 16, Article XII of the
develop. Private enterprises, including corporations, cooperatives,
Constitution on National Economy and Patrimony
and similar collective organizations, shall be encouraged to
SEC. 38. Definition of Administrative Relationship. – Unless broaden the base of their ownership.
otherwise expressly stated in the Code or in other laws defining the The dissenting opinion of Associate Justice Antonio T. Carpio,
special relationships of particular agencies, administrative citing a line of cases, insists that the Constitution recognizes only
relationships shall be categorized and defined as follows: The scope and coverage of Section 16, Article XII of the
two classes of corporations: private corporations under a general
Constitution can be seen from the aforementioned declaration of
law, and government-owned or controlled corporations created by
state policies and goals which pertains to national economy and
xxxx special charters.
patrimony and the interests of the people in economic
development.
(3) Attachment. – (a) This refers to the lateral relationship between We strongly disagree. Section 16, Article XII should not be
the department or its equivalent and the attached agency or construed so as to prohibit Congress from creating public
Section 16, Article XII deals with "the formation, organization, or
corporation for purposes of policy and program coordination. The corporations. In fact, Congress has enacted numerous laws
regulation of private corporations,"52 which should be done
coordination may be accomplished by having the department creating public corporations or government agencies or
through a general law enacted by Congress, provides for an
represented in the governing board of the attached agency or instrumentalities vested with corporate powers. Moreover, Section
exception, that is: if the corporation is government owned or
corporation, either as chairman or as a member, with or without 16, Article XII, which relates to National Economy and Patrimony,
controlled; its creation is in the interest of the common good; and
voting rights, if this is permitted by the charter; having the attached could not have tied the hands of Congress in creating public
it meets the test of economic viability. The rationale behind Article
corporation or agency comply with a system of periodic reporting corporations to serve any of the constitutional policies or
XII, Section 16 of the 1987 Constitution was explained in Feliciano
which shall reflect the progress of programs and projects; and objectives.
v. Commission on Audit,53 in the following manner:
having the department or its equivalent provide general policies
through its representative in the board, which shall serve as the In his dissent, Justice Carpio contends that this ponente
framework for the internal policies of the attached corporation or The Constitution emphatically prohibits the creation of private
introduces "a totally different species of corporation, which is
agency. (Emphasis ours.) corporations except by a general law applicable to all citizens. The
neither a private corporation nor a government owned or
controlled corporation" and, in so doing, is missing the fact that meaning of Article IX (B) (2) (1) of the Constitution. x x Economic Viability and Ownership and Control Tests Inapplicable
the BSP, "which was created as a non-stock, non-profit x.55(Emphases supplied.) to Public Corporations
corporation, can only be either a private corporation or a
government owned or controlled corporation."
The existence of public or government corporate or juridical As presently constituted, the BSP still remains an instrumentality
entities or chartered institutions by legislative fiat distinct from of the national government. It is a public corporation created by
Note that in Boy Scouts of the Philippines v. National Labor private corporations and government owned or controlled law for a public purpose, attached to the DECS pursuant to its
Relations Commission, the BSP, under its former charter, was corporation is best exemplified by the 1987 Administrative Code Charter and the Administrative Code of 1987. It is not a private
regarded as both a government owned or controlled corporation cited above, which we quote in part: corporation which is required to be owned or controlled by the
with original charter and a "public corporation." The said case government and be economically viable to justify its existence
pertinently stated: under a special law.
Sec. 2. General Terms Defined. – Unless the specific words of the
text, or the context as a whole, or a particular statute, shall require
While the BSP may be seen to be a mixed type of entity, combining a different meaning: The dissent of Justice Carpio also submits that by recognizing "a
aspects of both public and private entities, we believe that new class of public corporation(s)" created by special charter that
considering the character of its purposes and its functions, the will not be subject to the test of economic viability, the
xxxx
statutory designation of the BSP as "a public corporation" and the constitutional provision will be circumvented.
substantial participation of the Government in the selection of
members of the National Executive Board of the BSP, the BSP, as (10) "Instrumentality" refers to any agency of the National
However, a review of the Record of the 1986 Constitutional
presently constituted under its charter, is a government-controlled Government, not integrated within the department framework,
Convention reveals the intent of the framers of the highest law of
corporation within the meaning of Article IX (B) (2) (1) of the vested with special functions or jurisdiction by law, endowed with
our land to distinguish between government corporations
Constitution. some if not all corporate powers, administering special funds, and
performing governmental functions and corporations involved in
enjoying operational autonomy, usually through a charter. This
business or proprietary functions:
term includes regulatory agencies, chartered institutions and
We are fortified in this conclusion when we note that the
government-owned or controlled corporations. 

Administrative Code of 1987 designates the BSP as one of the
THE PRESIDENT. Commissioner Foz is recognized.
attached agencies of the Department of Education, Culture and
Sports ("DECS"). An "agency of the Government" is defined as xxxx
referring to any of the various units of the Government including a MR. FOZ. Madam President, I support the proposal to insert
department, bureau, office, instrumentality, government-owned "ECONOMIC VIABILITY" as one of the grounds for organizing
or -controlled corporation, or local government or distinct unit (12) "Chartered institution" refers to any agency organized or government corporations. x x x.
therein. "Government instrumentality" is in turn defined in the operating under a special charter, and vested by law with functions
1987 Administrative Code in the following manner: relating to specific constitutional policies or objectives. This term
includes the state universities and colleges and the monetary MR. OPLE. Madam President, the reason for this concern is really
authority of the State. that when the government creates a corporation, there is a sense in
Instrumentality - refers to any agency of the National Government, which this corporation becomes exempt from the test of economic
not integrated within the department framework, vested with performance. We know what happened in the past. If a government
special functions or jurisdiction by law, endowed with some if not (13) "Government-owned or controlled corporation" refers to any
corporation loses, then it makes its claim upon the taxpayers’
all corporate powers, administering special funds, and enjoying agency organized as a stock or non-stock corporation, vested with money through new equity infusions from the government and
operational autonomy usually through a charter. This term functions relating to public needs whether governmental or
what is always invoked is the common good. x x x
includes regulatory agencies, chartered institutions and proprietary in nature, and owned by the Government directly or
government-owned or controlled corporations. through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fifty-one Therefore, when we insert the phrase "ECONOMIC VIABILITY"
(51) per cent of its capital stock: Provided, That government-owned together with the "common good," this becomes a restraint on
The same Code describes a "chartered institution" in the following or controlled corporations may be further categorized by the future enthusiasts for state capitalism to excuse themselves from
terms: Department of the Budget, the Civil Service Commission, and the the responsibility of meeting the market test so that they become
Commission on Audit for purposes of the exercise and discharge of viable. x x x.
their respective powers, functions and responsibilities with respect
Chartered institution - refers to any agency organized or operating
to such corporations.
under a special charter, and vested by law with functions relating xxxx
to specific constitutional policies or objectives. This term includes
the state universities and colleges, and the monetary authority of Assuming for the sake of argument that the BSP ceases to be owned
the State. THE PRESIDENT. Commissioner Quesada is recognized.
or controlled by the government because of reduction of the
number of representatives of the government in the BSP Board, it
does not follow that it also ceases to be a government MS. QUESADA. Madam President, may we be clarified by the
We believe that the BSP is appropriately regarded as "a
government instrumentality" under the 1987 Administrative Code. instrumentality as it still retains all the characteristics of the latter committee on what is meant by economic viability?
as an attached agency of the DECS under the Administrative Code.
Vesting corporate powers to an attached agency or instrumentality
It thus appears that the BSP may be regarded as both a of the government is not constitutionally prohibited and is allowed THE PRESIDENT. Please proceed.
"government controlled corporation with an original by the above-mentioned provisions of the Civil Code and the 1987
charter" and as an "instrumentality" of the Government within the Administrative Code. 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 MR. OPLE. Yes. There is nothing here, Madam President, that will the Senate Bill that eventually became Republic Act No. 7278,
call externalities in economics, so that these are not strictly prevent the formation of a government corporation in accordance which amended the BSP Charter, one of the bill’s sponsors, Senator
financial criteria. Economic viability involves what we call with a special charter given by Congress. However, we are raising Joey Lina, described the BSP as follows:
economic returns or benefits of the country that are not the standard a little bit so that, in the future, corporations
quantifiable in financial terms. x x x. established by the government will meet the test of the common
Senator Lina. Yes, I can only think of two organizations involving
good but within that framework we should also build a certain
the masses of our youth, Mr. President, that should be given this
standard of economic viability.
xxxx kind of a privilege – the Boy Scouts of the Philippines and the Girl
Scouts of the Philippines. Outside of these two groups, I do not
xxxx think there are other groups similarly situated.
MS. QUESADA. So, would this particular formulation now really
limit the entry of government corporations into activities engaged
in by corporations? THE PRESIDENT. Commissioner Padilla is recognized. The Boy Scouts of the Philippines has a long history of providing
value formation to our young, and considering how huge the
population of the young people is, at this point in time, and also
MR. MONSOD. Yes, because it is also consistent with the economic MR. PADILLA. This is an inquiry to the committee. With regard to
considering the importance of having an organization such as this
philosophy that this Commission approved – that there should be corporations created by a special charter for government-owned or
that will inculcate moral uprightness among the young people, and
minimum government participation and intervention in the controlled corporations, will these be in the pioneer fields or in
further considering that the development of these young people at
economy. places where the private enterprise does not or cannot enter? Or is
that tender age of seven to sixteen is vital in the development of the
this so general that these government corporations can compete
country producing good citizens, I believe that we can make an
with private corporations organized under a general law?
MS. QUESDA. Sometimes this Commission would just refer to exception of the Boy Scouting movement of the Philippines from
Congress to provide the particular requirements when the this general prohibition against providing tax exemption and
government would get into corporations. But this time around, we MR. MONSOD. Madam President, x x x. There are two types of privileges.57
specifically mentioned economic viability. x x x. government corporations – those that are involved in performing
governmental functions, like garbage disposal, Manila waterworks,
Furthermore, this Court cannot agree with the dissenting opinion
and so on; and those government corporations that are involved in
MR. VILLEGAS. Commissioner Ople will restate the reason for his which equates the changes introduced by Republic Act No. 7278 to
business functions. As we said earlier, there are two criteria that
introducing that amendment. the BSP Charter as clear manifestation of the intent of Congress "to
should be followed for corporations that want to go into business.
return the BSP to the private sector." It was not the intent of
First is for government corporations to first prove that they can be
Congress in enacting Republic Act No. 7278 to give up all interests
MR. OPLE. I am obliged to repeat what I said earlier in moving for efficient in the areas of their proper functions. This is one of the
in this basic youth organization, which has been its partner in
this particular amendment jointly with Commissioner Foz. During problems now because they go into all kinds of activities but are
forming responsible citizens for decades.
the past three decades, there had been a proliferation of not even efficient in their proper functions. Secondly, they should
government corporations, very few of which have succeeded, and not go into activities that the private sector can do better.
many of which are now earmarked by the Presidential In fact, as may be seen in the deliberation of the House Bills that
Reorganization Commission for liquidation because they failed the eventually resulted to Republic Act No. 7278, Congress worked
MR. PADILLA. There is no question about corporations
economic test. x x x. closely with the BSP to rejuvenate the organization, to bring it back
performing governmental functions or functions that are
to its former glory reached under its original charter,
impressed with public interest. But the question is with regard to
Commonwealth Act No. 111, and to correct the perceived ills
xxxx matters that are covered, perhaps not exhaustively, by private
introduced by the amendments to its Charter under Presidential
enterprise. It seems that under this provision the only qualification
Decree No. 460. The BSP suffered from low morale and decrease
is economic viability and common good, but shall government,
MS. QUESADA. But would not the Commissioner say that the in number because the Secretaries of the different departments in
through government-controlled corporations, compete with
reason why many of the government-owned or controlled government who were too busy to attend the meetings of the BSP’s
private enterprise?
corporations failed to come up with the economic test is due to the National Executive Board ("the Board") sent representatives who,
management of these corporations, and not the idea itself of as it turned out, changed from meeting to meeting. Thus, the
government corporations? It is a problem of efficiency and MR. MONSOD. No, Madam President. As we said, the government Scouting Councils established in the provinces and cities were not
effectiveness of management of these corporations which could be should not engage in activities that private enterprise is engaged in in touch with what was happening on the national level, but they
remedied, not by eliminating government corporations or the idea and can do better. x x x.56 (Emphases supplied.) were left to implement what was decided by the Board.58
of getting into state-owned corporations, but improving
management which our technocrats should be able to do, given the A portion of the legislators’ discussion is quoted below to clearly
Thus, the test of economic viability clearly does not apply to public
training and the experience. show their intent:
corporations dealing with governmental functions, to which
category the BSP belongs. The discussion above conveys the
MR. OPLE. That is part of the economic viability, Madam constitutional intent not to apply this constitutional ban on the
HON. DEL MAR. x x x I need not mention to you the value and the
President. creation of public corporations where the economic viability test
tremendous good that the Boy Scout Movement has done not only
would be irrelevant. The said test would only apply if the
for the youth in particular but for the country in general. And that
corporation is engaged in some economic activity or business
MS. QUESADA. So, is the Commissioner saying then that the is why, if we look around, our past and present national leaders,
function for the government.
Filipinos will benefit more if these government-controlled prominent men in the various fields of endeavor, public servants
corporations were given to private hands, and that there will be in government offices, and civic leaders in the communities all over
more goods and services that will be affordable and within the It is undisputed that the BSP performs functions that are the land, and not only in our country but all over the world many if
reach of the ordinary citizens? impressed with public interest. In fact, during the consideration of not most of them have at one time or another been beneficiaries of
the Scouting Movement. And so, it is along this line, Mr. Chairman,
that we would like to have the early approval of this measure if only xxxx Requisites for Declaration of Unconstitutionality Not Met in this
to pay back what we owe much to the Scouting Movement. Now, Case
going to the meat of the matter, Mr. Chairman, if I may just – the
MR. ESCUDERO: Mr. Chairman, there may be a disadvantage if
Scouting Movement was enacted into law in October 31, 1936
the Boy Scouts of the Philippines will be required to register with The dissenting opinion of Justice Carpio improperly raised the
under Commonwealth Act No. 111. x x x [W]e were acknowledged
the SEC. If we are registered with the SEC, there could be a danger issue of unconstitutionality of certain provisions of the BSP
as the third biggest scouting organization in the world x x x. And to
of proliferation of scout organization. Anybody can organize and Charter. Even if the parties were asked to Comment on the validity
our mind, Mr. Chairman, this erratic growth and this decrease in
then register with the SEC. If there will be a proliferation of this, of the BSP charter by the Court, this alone does not comply with
membership [number] is because of the bad policy measures that
then the organization will lose control of the entire organization. the requisites for judicial review, which were clearly set forth in a
were enunciated with the enactment or promulgation by the
Another disadvantage, Mr. Chairman, anybody can file a complaint recent case:
President before of Presidential Decree No. 460 which we feel is
in the SEC against the Boy Scouts of the Philippines and the SEC
the culprit of the ills that is flagging the Boy Scout Movement
may suspend the operation or freeze the assets of the organization
today. And so, this is specifically what we are attacking, Mr. When questions of constitutional significance are raised, the Court
and hamper the operation of the organization. I don’t know, Mr.
Chairman, the disenfranchisement of the National Council in the can exercise its power of judicial review only if the following
Chairman, how you look at it but there could be a danger for
election of the national board. x x x. And so, this is what we would requisites are present: (1) the existence of an actual and
anybody filing a complaint against the organization in the SEC and
like to be appraised of by the officers of the Boy [Scouts] of the appropriate case; (2) the existence of personal and substantial
the SEC might suspend the registration permit of the organization
Philippines whom we are also confident, have the best interest of interest on the part of the party raising the constitutional question;
and we will not be able to operate.
the Boy Scout Movement at heart and it is in this spirit, Mr. (3) recourse to judicial review is made at the earliest opportunity;
Chairman, that we see no impediment towards working together, and (4) the constitutional question is the lis mota of the
the Boy Scout of the Philippines officers working together with the HON. AQUINO: Well, that I think would be a problem that will not case.61(Emphasis added.)
House of Representatives in coming out with a measure that will be exclusive to corporations registered with the SEC because even
put back the vigor and enthusiasm of the Boy Scout Movement. x x if you are government corporation, court action may be taken
x.59 (Emphasis ours.) Thus, when it comes to the exercise of the power of judicial review,
against you in other judicial bodies because the SEC is simply
the constitutional issue should be the very lis mota, or threshold
another quasi-judicial body. But, I think, the first point would be
issue, of the case, and that it should be raised by either of the
very interesting, the first point that you raised. In effect, what you
The following is another excerpt from the discussion on the House parties. These requirements would be ignored under the dissent’s
are saying is that with the legislative mandate creating your
version of the bill, in the Committee on Government Enterprises: rather overreaching view of how this case should have been
charter, in effect, you have been given some sort of a franchise with
decided. True, it was the Court that asked the parties to comment,
this movement.
but the Court cannot be the one to raise a constitutional issue.
HON. AQUINO: x x x Well, obviously, the two bills as well as the
Thus, the Court chooses to once more exhibit restraint in the
previous laws that have created the Boy Scouts of the Philippines
MR. ESCUDERO: Yes. exercise of its power to pass upon the validity of a law.
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 HON. AQUINO: Exclusive franchise of that movement? Re: the COA’s Jurisdiction
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 MR. ESCUDERO: Yes. Regarding the COA’s jurisdiction over the BSP, Section 8 of its
original mandate that they had under Commonwealth Act 111. Such amended charter allows the BSP to receive contributions or
having been the experience in the hands of government, meaning, donations from the government. Section 8 reads:
HON. AQUINO: Well, that’s very well taken so I will proceed with
there has been negative interference on their part and inasmuch as other issues, Mr. Chairman. x x x.60 (Emphases added.)
their mandate is coming from a legislative fiat, then shouldn’t it be, Section 8. Any donation or contribution which from time to time
this rhetorical question, shouldn’t it be better for this organization may be made to the Boy Scouts of the Philippines by the
to seek a mandate from, let’s say, the government the Corporation Therefore, even though the amended BSP charter did away with
Government or any of its subdivisions, branches, offices, agencies
Code of the Philippines and register with the SEC as non-profit most of the governmental presence in the BSP Board, this was done
or instrumentalities shall be expended by the Executive Board in
non-stock corporation so that government intervention could be to more strongly promote the BSP’s objectives, which were not
pursuance of this Act.lawph!1
very very minimal. Maybe that’s a rhetorical question, they may or supported under Presidential Decree No. 460. The BSP objectives,
they may not answer, ano. I don’t know what would be the benefit as pointed out earlier, are consistent with the public purpose of the
of a charter or a mandate being provided for by way of legislation promotion of the well-being of the youth, the future leaders of the The sources of funds to maintain the BSP were identified before
versus a registration with the SEC under the Corporation Code of country. The amendments were not done with the view of changing the House Committee on Government Enterprises while the bill
the Philippines inasmuch as they don’t get anything from the the character of the BSP into a privatized corporation. The BSP was being deliberated, and the pertinent portion of the discussion
government anyway insofar as direct funding. In fact, the only remains an agency attached to a department of the government, is quoted below:
thing that they got from government was intervention in their the DECS, and it was not at all stripped of its public character.
affairs. Maybe we can solicit some commentary comments from MR. ESCUDERO. Yes, Mr. Chairman. The question is the sources
the resource persons. Incidentally, don’t take that as an objection, The ownership and control test is likewise irrelevant for a public of funds of the organization. First, Mr. Chairman, the Boy Scouts
I’m not objecting. I’m all for the objectives of these two bills. It just corporation like the BSP. To reiterate, the relationship of the BSP, of the Philippines do not receive annual allotment from the
occurred to me that since you have had very bad experience in the an attached agency, to the government, through the DECS, is government. The organization has to raise its own funds through
hands of government and you will always be open to such possible defined in the Revised Administrative Code of 1987. The BSP meets fund drives and fund campaigns or fund raising activities. Aside
intervention even in the future as long as you have a legislative the minimum statutory requirement of an attached government from this, we have some revenue producing projects in the
mandate or your mandate or your charter coming from legislative agency as the DECS Secretary sits at the BSP Board ex officio, thus organization that gives us funds to support the operation. x x x
action. facilitating the policy and program coordination between the BSP From time to time, Mr. Chairman, when we have special activities
and the DECS. we request for assistance or financial assistance from government
agencies, from private business and corporations, but this is only MR. ESCUDERO: May I answer, Mr. Chairman? This is a petition for mandamus1 to compel:
during special activities that the Boy Scouts of the Philippines
would conduct during the year. Otherwise, we have to raise our
THE CHAIRMAN: Yes, gentleman. 1.) the Commission on Audit (COA) to audit and examine
own funds to support the organization.62
the funds of the Manila Economic and Cultural Office
(MECO), and
MR. ESCUDERO: The Boy Scouts of the Philippines has an
The nature of the funds of the BSP and the COA’s audit jurisdiction
external auditor and by the charter we are required to submit a
were likewise brought up in said congressional deliberations, to
financial report at the end of each year to the National Executive 2.) the MECO to submit to such audit and examination.
wit:
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
The antecedents:
HON. AQUINO: x x x Insofar as this organization being a
government created organization, in fact, a government
Historically, therefore, the BSP had been subjected to government
corporation classified as such, are your funds or your finances Prelude
audit in so far as public funds had been infused thereto. However,
subjected to the COA audit?
this practice should not preclude the exercise of the audit
jurisdiction of COA, clearly set forth under the Constitution, which The aftermath of the Chinese civil war2 left the country of China
MR. ESCUDERO: Mr. Chairman, we are not. Our funds is not pertinently provides: with two (2) governments in a stalemate espousing competing
subjected. We don’t fall under the jurisdiction of the COA. assertions of sovereignty.3 On one hand is the communist People’s
Republic of China (PROC) which controls the mainland territories,
Section 2. (1) The Commission on Audit shall have the power,
and on the other hand is the nationalist Republic of China (ROC)
HON. AQUINO: All right, but before were you? authority, and duty to examine, audit, and settle all accounts
which controls the island of Taiwan. For a better part of the past
pertaining to the revenue and receipts of, and expenditures or uses
century, both the PROC and ROC adhered to a policy of "One
of funds and property, owned or held in trust by, or pertaining to,
MR. ESCUDERO: No, Mr. Chairman. China" i.e., the view that there is only one legitimate government
the Government, or any of its subdivisions, agencies, or
in China, but differed in their respective interpretation as to which
instrumentalities, including government-owned and controlled
that government is.4
MR. JESUS: May I? As historical backgrounder, Commonwealth corporations with original charters, and on a post-audit basis: (a)
Act 111 was written by then Secretary Jorge Vargas and before and constitutional bodies, commissions and offices that have been
up to the middle of the Martial Law years, the BSP was receiving a granted fiscal autonomy under this Constitution; (b) autonomous With the existence of two governments having conflicting claims of
subsidy in the form of an annual… a one draw from the state colleges and universities; (c) other government-owned or sovereignty over one country, came the question as to which of the
Sweepstakes. And, this was the case also with the Girl Scouts at the controlled corporations with original charters and their two is deserving of recognition as that country’s legitimate
Anti-TB, but then this was… and the Boy Scouts then because of subsidiaries; and (d) such non-governmental entities receiving government. Even after its relocation to Taiwan, the ROC used to
this funding partly from government was being subjected to audit subsidy or equity, directly or indirectly, from or through the enjoy diplomatic recognition from a majority of the world’s states,
in the contributions being made in the part of the Sweepstakes. But Government, which are required by law of the granting institution partly due to being a founding member of the United Nations
this was removed later during the Martial Law years with the to submit to such audit as a condition of subsidy or equity. x x x. 64 (UN).5 The number of states partial to the PROC’s version of the
creation of the Human Settlements Commission. So the situation One China policy, however, gradually increased in the 1960s and
right now is that the Boy Scouts does not receive any funding from 70s, most notably after the UN General Assembly adopted the
Since the BSP, under its amended charter, continues to be a public
government, but then in the case of the local councils and this monumental Resolution 2758 in 1971.6 Since then, almost all of the
corporation or a government instrumentality, we come to the
legislative charter, so to speak, enables the local councils even the states that had erstwhile recognized the ROC as the legitimate
inevitable conclusion that it is subject to the exercise by the COA of
national headquarters in view of the provisions in the existing law government of China, terminated their official relations with the
its audit jurisdiction in the manner consistent with the provisions
to receive donations from the government or any of its said government, in favor of establishing diplomatic relations with
of the BSP Charter.
instrumentalities, which would be difficult if the Boy Scouts is the PROC.7 The Philippines is one of such states.
registered as a private corporation with the Securities and
Exchange Commission. Government bodies would be estopped WHEREFORE, premises considered, the instant petition for
The Philippines formally ended its official diplomatic relations
from making donations to the Boy Scouts, which at present is not prohibition is DISMISSED.
with the government in Taiwan on 9 June 1975, when the country
the case because there is the Boy Scouts charter, this
and the PROC expressed mutual recognition thru the Joint
Commonwealth Act 111 as amended by PD 463.
SO ORDERED. Communiqué of the Government of the Republic of the Philippines
and the Government of the People’s Republic of China (Joint
xxxx Communiqué).8
G.R. No. 193462 February 4, 2014

HON. AMATONG: Mr. Chairman, in connection with that. Under the Joint Communiqué, the Philippines categorically stated
DENNIS A.B. FUNA, Petitioner,
its adherence to the One China policy of the PROC. The pertinent
vs.
portion of the Joint Communiqué reads:9
THE CHAIRMAN: Yeah, Gentleman from Zamboanga. MANILA ECONOMIC AND CULTURAL OFFICE and the
COMMISSION ON AUDIT, Respondents.
The Philippine Government recognizes the Government of the
HON. AMATONG: There is no auditing being made because there’s
People’s Republic of China as the sole legal government of China,
no money put in the organization, but how about donated funds to DECISION
fully understands and respects the position of the Chinese
this organization? What are the remedies of the donors of how will
Government that there is but one China and that Taiwan is an
they know how their money are being spent?
PEREZ, J.: integral part of Chinese territory, and decides to remove all its
official representations from Taiwan within one month from the Taiwanese; and facilitates the travel of Filipinos and Taiwanese 1. The MECO is vested with government functions. It
date of signature of this communiqué. (Emphasis supplied) from Taiwan to the Philippines, and vice versa.17 performs functions that are equivalent to those of an
embassy or a consulate of the Philippine
government.25 A reading of the authorized functions of
The Philippines’ commitment to the One China policy of the PROC, Facts Leading to the Mandamus Petition
the MECO as found in EO No. 15, s. 2001, reveals that
however, did not preclude the country from keeping unofficial
they are substantially the same functions performed by
relations with Taiwan on a "people-to-people" basis.10 Maintaining
On 23 August 2010, petitioner sent a letter18 to the COA requesting the Department of Foreign Affairs (DFA), through its
ties with Taiwan that is permissible by the terms of the Joint
for a "copy of the latest financial and audit report" of the MECO diplomatic and consular missions, per the
Communiqué, however, necessarily required the Philippines, and
invoking, for that purpose, his "constitutional right to information Administrative Code.26
Taiwan, to course any such relations thru offices outside of the
on matters of public concern." The petitioner made the request on
official or governmental organs.
the belief that the MECO, being under the "operational
2. The MECO is controlled by the government. It is the
supervision" of the Department of Trade and Industry (DTI), is a
President of the Philippines that actually appoints the
Hence, despite ending their diplomatic ties, the people of Taiwan government owned and controlled corporation (GOCC) and thus
directors of the MECO, albeit indirectly, by way of
and of the Philippines maintained an unofficial relationship subject to the audit jurisdiction of the COA.19
"desire letters" addressed to the MECO’s board of
facilitated by the offices of the Taipei Economic and Cultural
directors.27 An illustration of this exercise is the
Office, for the former, and the MECO, for the latter.11
Petitioner’s letter was received by COA Assistant Commissioner assumption by Mr. Antonio Basilio as chairman of the
Jaime P. Naranjo, the following day. board of directors of the MECO in 2001, which was
The MECO12 was organized on 16 December 1997 as a non-stock, accomplished when former President Gloria Macapagal-
non-profit corporation under Batas Pambansa Blg. 68 or the Arroyo, through a memorandum28 dated 20 February
On 25 August 2010, Assistant Commissioner Naranjo issued a 2001, expressed her "desire" to the board of directors of
Corporation Code.13 The purposes underlying the incorporation of
memorandum20 referring the petitioner’s request to COA Assistant the MECO for the election of Mr. Basilio as chairman.29
MECO, as stated in its articles of incorporation,14 are as follows:
Commissioner Emma M. Espina for "further disposition." In this
memorandum, however, Assistant Commissioner Naranjo
1. To establish and develop the commercial and revealed that the MECO was "not among the agencies audited by 3. The MECO is under the operational and policy
industrial interests of Filipino nationals here and any of the three Clusters of the Corporate Government Sector."21 supervision of the DTI. The MECO was placed under the
abroad, and assist on all measures designed to promote operational supervision of the DTI by EO No. 328, s. of
and maintain the trade relations of the country with the 2004, and again under the policy supervision of the
On 7 September 2010, petitioner learned about the 25 August 2010 same department by EO No. 426, s. 2005.30
citizens of other foreign countries;
memorandum and its contents.

2. To receive and accept grants and subsidies that are To further bolster his position that the accounts of the MECO ought
Mandamus Petition to be audited by the COA, the petitioner calls attention to the
reasonably necessary in carrying out the corporate
purposes provided they are not subject to conditions practice, allegedly prevailing in the United States of America,
defeatist for or incompatible with said purpose; Taking the 25 August 2010 memorandum as an admission that the wherein the American Institute in Taiwan (AIT)—the counterpart
COA had never audited and examined the accounts of the MECO, entity of the MECO in the United States—is supposedly audited by
the petitioner filed the instant petition for mandamus on 8 that country’s Comptroller General.31 Petitioner claims that this
3. To acquire by purchase, lease or by any gratuitous title practice had been confirmed in a decision of the United States
September 2010. Petitioner filed the suit in his capacities as
real and personal properties as may be necessary for the Court of Appeals for the District of Columbia Circuit, in the case of
"taxpayer, concerned citizen, a member of the Philippine Bar and
use and need of the corporation, and to dispose of the Wood, Jr., ex rel. United States of America v. The American
law book author."22 He impleaded both the COA and the MECO.
same in like manner when they are no longer needed or Institute in Taiwan, et al.32
useful; and
Petitioner posits that by failing to audit the accounts of the MECO,
the COA is neglecting its duty under Section 2(1), Article IX-D of The Position of the MECO
4. To do and perform any and all acts which are deemed
the Constitution to audit the accounts of an otherwise bona fide
reasonably necessary to carry out the purposes.
GOCC or government instrumentality. It is the adamant claim of The MECO prays for the dismissal of the mandamus petition on
(Emphasis supplied)
the petitioner that the MECO is a GOCC without an original charter procedural and substantial grounds.
or, at least, a government instrumentality, the funds of which
From the moment it was incorporated, the MECO became the partake the nature of public funds.23
corporate entity "entrusted" by the Philippine government with the On procedure, the MECO argues that the mandamus petition was
responsibility of fostering "friendly" and "unofficial" relations with prematurely filed.33
According to petitioner, the MECO possesses all the essential
the people of Taiwan, particularly in the areas of trade, economic
characteristics of a GOCC and an instrumentality under the
cooperation, investment, cultural, scientific and educational
Executive Order No. (EO) 292, s. 1987 or the Administrative Code: The MECO posits that a cause of action for mandamus to compel
exchanges.15To enable it to carry out such responsibility, the MECO
it is a non-stock corporation vested with governmental functions the performance of a ministerial duty required by law only ripens
was "authorized" by the government to perform certain "consular
relating to public needs; it is controlled by the government thru a once there has been a refusal by the tribunal, board or officer
and other functions" that relates to the promotion, protection and
board of directors appointed by the President of the Philippines; concerned to perform such a duty.34The MECO claims that there
facilitation of Philippine interests in Taiwan.16
and while not integrated within the executive departmental was, in this case, no such refusal either on its part or on the COA’s
framework, it is nonetheless under the operational and policy because the petitioner never made any demand for it to submit to
At present, it is the MECO that oversees the rights and interests of supervision of the DTI.24 As petitioner substantiates: an audit by the COA or for the COA to perform such an audit, prior
Overseas Filipino Workers (OFWs) in Taiwan; promotes the to filing the instant mandamus petition.35 The MECO further
Philippines as a tourist and investment destination for the points out that the only "demand" that the petitioner made was his
request to the COA for a copy of the MECO’s latest financial and prejudiced by its failure to audit the accounts of the The first preliminary issue relates to the alleged mootness of the
audit report— which request was not even finally disposed of by the MECO.47 instant mandamus petition, occasioned by the COA’s issuance of
time the instant petition was filed.36 Office Order No. 2011-698. The COA claims that by issuing Office
Order No. 2011-698, it had already conceded its jurisdiction over
2. The petition was filed in violation of the doctrine of
the accounts of the MECO and so fulfilled the objective of the
On the petition’s merits, the MECO denies the petitioner’s claim hierarchy of courts. The COA faults the filing of the
instant petition.58 The COA thus urges that the instant petition be
that it is a GOCC or a government instrumentality.37While instant mandamus petition directly with this Court,
dismissed for being moot and academic.59
performing public functions, the MECO maintains that it is not when such petition could have very well been presented,
owned or controlled by the government, and its funds are private at the first instance, before the Court of Appeals or any
funds.38 The MECO explains: Regional Trial Court.48 The COA claims that the We decline to dismiss the mandamus petition on the ground of
petitioner was not able to provide compelling reasons to mootness.
justify a direct resort to the Supreme Court.49
1. It is not owned or controlled by the government.
Contrary to the allegations of the petitioner, the A case is deemed moot and academic when, by reason of the
President of the Philippines does not appoint its board At any rate, the COA argues that the instant petition already occurrence of a supervening event, it ceases to present any
of directors.39 The "desire letter" that the President became moot when COA Chairperson Maria Gracia M. Pulido-Tan justiciable controversy.60 Since they lack an actual controversy
transmits is merely recommendatory and not binding on (Pulido-Tan) issued Office Order No. 2011-69850 on 6 October otherwise cognizable by courts, moot cases are, as a rule,
the corporation.40 As a corporation organized under the 2011.51 The COA notes that under Office Order No. 2011-698, dismissible.61
Corporation Code, matters relating to the election of its Chairperson Pulido-Tan already directed a team of auditors to
directors and officers, as well as its membership, are proceed to Taiwan, specifically for the purpose of auditing the
The rule that requires dismissal of moot cases, however, is not
governed by the appropriate provisions of the said code, accounts of, among other government agencies based therein, the
absolute. It is subject to exceptions. In David v. Macapagal-
its articles of incorporation and its by-laws.41 Thus, it is MECO.52
Arroyo,62 this Court comprehensively captured these exceptions
the directors who elect the corporation’s officers; the
scattered throughout our jurisprudence:
members who elect the directors; and the directors who
In conceding that it has audit jurisdiction over the accounts of the
admit the members by way of a unanimous resolution.
MECO, however, the COA clarifies that it does not consider the
All of its officers, directors, and members are private The "moot and academic" principle is not a magical formula that
former as a GOCC or a government instrumentality. On the
individuals and are not government officials.42 can automatically dissuade the courts in resolving a case. Courts
contrary, the COA maintains that the MECO is a non-
will decide cases, otherwise moot and academic, if: first, there is a
governmental entity.53
grave violation of the Constitution;63second, the exceptional
2. The government merely has policy supervision over it.
character of the situation and the paramount public interest is
Policy supervision is a lesser form of supervision
The COA argues that, despite being a non-governmental entity, the involved;64 third, when constitutional issue raised requires
wherein the government’s oversight is limited only to
MECO may still be audited with respect to the "verification fees" formulation of controlling principles to guide the bench, the bar,
ensuring that the corporation’s activities are in tune with
for overseas employment documents that it collects from and the public;65and fourth, the case is capable of repetition yet
the country’s commitments under the One China policy
Taiwanese employers on behalf of the DOLE.54 The COA claims evading review.66
of the PROC.43 The day-to-day operations of the
that, under Joint Circular No. 3-99,55 the MECO is mandated to
corporation, however, remain to be controlled by its duly
remit to the Department of Labor and Employment (DOLE) a
elected board of directors.44 In this case, We find that the issuance by the COA of Office Order
portion of such "verification fees."56 The COA, therefore, classifies
No. 2011-698 indeed qualifies as a supervening event that
the MECO as a non-governmental entity "required to pay xxx
effectively renders moot and academic the main prayer of the
The MECO emphasizes that categorizing it as a GOCC or a government share" subject to a partial audit of its accounts under
instant mandamus petition. A writ of mandamus to compel the
government instrumentality can potentially violate the country’s Section 26 of the Presidential Decree No. 1445 or the State Audit
COA to audit the accounts of the MECO would certainly be a mere
commitment to the One China policy of the PROC.45 Thus, the Code of the Philippines (Audit Code).57
superfluity, when the former had already obliged itself to do the
MECO cautions against applying to the present mandamus
same.
petition the pronouncement in the Wood decision regarding the
OUR RULING
alleged auditability of the AIT in the United States.46
Be that as it may, this Court refrains from dismissing outright the
We grant the petition in part. We declare that the MECO is a non- petition. We believe that the mandamus petition was able to craft
The Position of the COA
governmental entity. However, under existing laws, the accounts substantial issues presupposing the commission of a grave
of the MECO pertaining to the "verification fees" it collects on violation of the Constitution and involving paramount public
The COA, on the other hand, advances that the mandamus petition behalf of the DOLE as well as the fees it was authorized to collect interest, which need to be resolved nonetheless:
ought to be dismissed on procedural grounds and on the ground of under Section 2(6) of EO No. 15, s. 2001, are subject to the audit
mootness. jurisdiction of the COA. Such fees pertain to the government and
First. The petition makes a serious allegation that the COA had
should be audited by the COA.
been remiss in its constitutional or legal duty to audit and examine
The COA argues that the mandamus petition suffers from the the accounts of an otherwise auditable entity in the MECO.
following procedural defects: I
Second. There is paramount public interest in the resolution of the
1. The petitioner lacks locus standi to bring the suit. The We begin with the preliminary issues. issue concerning the failure of the COA to audit the accounts of the
COA claims that the petitioner has not shown, at least in MECO. The propriety or impropriety of such a refusal is
a concrete manner, that he had been aggrieved or determinative of whether the COA was able to faithfully fulfill its
Mootness of Petition
constitutional role as the guardian of the public treasury, in which We sustain petitioner’s standing, as a concerned citizen, to file the In view of the transcendental importance of the issues raised in the
any citizen has an interest. instant petition. mandamus petition, as earlier mentioned, this Court waives this
last procedural issue in favor of a resolution on the merits.76
Third. There is also paramount public interest in the resolution of The rules regarding legal standing in bringing public suits, or locus
the issue regarding the legal status of the MECO; a novelty insofar standi, are already well-defined in our case law. Again, We cite II
as our jurisprudence is concerned. We find that the status of the David, which summarizes jurisprudence on this point:73
MECO—whether it may be considered as a government agency or
To the merits of this petition, then.
not—has a direct bearing on the country’s commitment to the One
By way of summary, the following rules may be culled from the
China policy of the PROC.67
cases decided by this Court.1a\^/phi1 Taxpayers, voters,
The single most crucial question asked by this case is whether the
concerned citizens, and legislators may be accorded standing to
COA is, under prevailing law, mandated to audit the accounts of
An allegation as serious as a violation of a constitutional or legal sue, provided that the following requirements are met:
the MECO. Conversely, are the accounts of the MECO subject to
duty, coupled with the pressing public interest in the resolution of
the audit jurisdiction of the COA?
all related issues, prompts this Court to pursue a definitive ruling
(1) the cases involve constitutional issues;
thereon, if not for the proper guidance of the government or agency
concerned, then for the formulation of controlling principles for Law, of course, identifies which accounts of what entities are
the education of the bench, bar and the public in general.68 For this (2) for taxpayers, there must be a claim of illegal subject to the audit jurisdiction of the COA.
purpose, the Court invokes its symbolic function.69 disbursement of public funds or that the tax measure is
unconstitutional;
Under Section 2(1) of Article IX-D of the Constitution,77 the COA
If the foregoing reasons are not enough to convince, We still add was vested with the "power, authority and duty" to "examine, audit
another: (3) for voters, there must be a showing of obvious and settle" the "accounts" of the following entities:
interest in the validity of the election law in question;
Assuming that the allegations of neglect on the part of the COA 1. The government, or any of its subdivisions, agencies
were true, Office Order No. 2011-698 does not offer the strongest (4) for concerned citizens, there must be a showing that and instrumentalities;
certainty that they would not be replicated in the future. In the first the issues raised are of transcendental importance which
place, Office Order No. 2011-698 did not state any legal must be settled early; and
justification as to why, after decades of not auditing the accounts 2. GOCCs with original charters;
of the MECO, the COA suddenly decided to do so. Neither does it
state any determination regarding the true status of the MECO. (5) for legislators, there must be a claim that the official
3. GOCCs without original charters;
The justifications provided by the COA, in fact, only appears in the action complained of infringes upon their prerogatives
memorandum70 it submitted to this Court for purposes of this case. as legislators.
4. Constitutional bodies, commissions and offices that
have been granted fiscal autonomy under the
Thus, the inclusion of the MECO in Office Order No. 2011-698 We rule that the instant petition raises issues of transcendental
Constitution; and
appears to be entirely dependent upon the judgment of the importance, involved as they are with the performance of a
incumbent chairperson of the COA; susceptible of being undone, constitutional duty, allegedly neglected, by the COA. Hence, We
with or without reason, by her or even her successor. Hence, the hold that the petitioner, as a concerned citizen, has the requisite 5. Non-governmental entities receiving subsidy or
case now before this Court is dangerously capable of being legal standing to file the instant mandamus petition. equity, directly or indirectly, from or through the
repeated yet evading review. government, which are required by law or the granting
institution to submit to the COA for audit as a condition
To be sure, petitioner does not need to make any prior demand on
of subsidy or equity.78
Verily, this Court should not dismiss the mandamus petition on the the MECO or the COA in order to maintain the instant petition. The
ground of mootness. duty of the COA sought to be compelled by mandamus, emanates
from the Constitution and law, which explicitly require, or The term "accounts" mentioned in the subject constitutional
"demand," that it perform the said duty. To the mind of this Court, provision pertains to the "revenue," "receipts," "expenditures" and
Standing of Petitioner petitioner already established his cause of action against the COA "uses of funds and property" of the foregoing entities.79
when he alleged that the COA had neglected its duty in violation of
the Constitution and the law.
The second preliminary issue is concerned with the standing of the Complementing the constitutional power of the COA to audit
petitioner to file the instant mandamus petition. The COA claims accounts of "non-governmental entities receiving subsidy or equity
that petitioner has none, for the latter was not able to concretely Principle of Hierarchy of Courts xxx from or through the government" is Section 29(1)80 of the Audit
establish that he had been aggrieved or prejudiced by its failure to Code, which grants the COA visitorial authority over the following
audit the accounts of the MECO.71 non-governmental entities:
The last preliminary issue is concerned with the petition’s non-
observance of the principle of hierarchy of courts. The COA assails
Related to the issue of lack of standing is the MECO’s contention the filing of the instant mandamus petition directly with this Court, 1. Non-governmental entities "subsidized by the
that petitioner has no cause of action to file the instant mandamus when such petition could have very well been presented, at the first government";
petition. The MECO faults petitioner for not making any demand instance, before the Court of Appeals or any Regional Trial
for it to submit to an audit by the COA or for the COA to perform Court.74 The COA claims that the petitioner was not able to provide
such an audit, prior to filing the instant petition.72 compelling reasons to justify a direct resort to the Supreme Court.75 2. Non-governmental entities "required to pay levy or
government share";
 3. Non-governmental entities that have "received autonomy" and are "not integrated within the department The organization of the MECO as a non-stock corporation cannot
counterpart funds from the government"; and framework."88 Subsumed under the rubric "government at all be denied. Records disclose that the MECO was incorporated
instrumentality" are the following entities:89 as a non-stock corporation under the Corporation Code on 16
December 1977.95 The incorporators of the MECO were Simeon R.
4. Non-governmental entities "partly funded by
Roxas, Florencio C. Guzon, Manuel K. Dayrit, Pio K. Luz and
donations through the government." 1. regulatory agencies,
Eduardo B. Ledesma, who also served as the corporation’s original
members and directors.96
Section 29(1) of the Audit Code, however, limits the audit of the 2. chartered institutions,
foregoing non-governmental entities only to "funds xxx coming
The purposes for which the MECO was organized also establishes
from or through the government."81 This section of the Audit Code
3. government corporate entities or government its non-profit character, to wit:97
is, in turn, substantially reproduced in Section 14(1), Book V of the
instrumentalities with corporate powers
Administrative Code.82
(GCE/GICP),90 and
1. To establish and develop the commercial and
industrial interests of Filipino nationals here and abroad
In addition to the foregoing, the Administrative Code also
4. GOCCs and assist on all measures designed to promote and
empowers the COA to examine and audit "the books, records and
maintain the trade relations of the country with the
accounts" of public utilities "in connection with the fixing of rates
citizens of other foreign countries;
of every nature, or in relation to the proceedings of the proper The Administrative Code defines a GOCC:91
regulatory agencies, for purposes of determining franchise tax."83
2. To receive and accept grants and subsidies that are
(13) Government-owned or controlled corporation refers to any reasonably necessary in carrying out the corporate
Both petitioner and the COA claim that the accounts of the MECO agency organized as a stock or non-stock corporation, vested with purposes provided they are not subject to conditions
are within the audit jurisdiction of the COA, but vary on the extent functions relating to public needs whether governmental or defeatist for or incompatible with said purpose;
of the audit and on what type of auditable entity the MECO is. The proprietary in nature, and owned by the Government directly or
petitioner posits that all accounts of the MECO are auditable as the through its instrumentalities either wholly, or, where applicable as
latter is a bona fide GOCC or government instrumentality.84 On the in the case of stock corporations, to the extent of at least fifty-one 3. To acquire by purchase, lease or by any gratuitous title
other hand, the COA argues that only the accounts of the MECO (51) per cent of its capital stock: x x x. real and personal properties as may be necessary for the
that pertain to the "verification fees" it collects on behalf of the use and need of the corporation, and in like manner
DOLE are auditable because the former is merely a non- when they are
governmental entity "required to pay xxx government share" per The above definition is, in turn, replicated in the more recent
the Audit Code.85 Republic Act No. 10149 or the GOCC Governance Act of 2011, to
wit:92 4. To do and perform any and all acts which are deemed
reasonably necessary to carry out the purposes.
We examine both contentions. (Emphasis supplied)
(o) Government-Owned or -Controlled Corporation (GOCC) refers
to any agency organized as a stock or non-stock corporation, vested
The MECO Is Not a GOCC or with functions relating to public needs whether governmental or The purposes for which the MECO was organized are somewhat
Government Instrumentality proprietary in nature, and owned by the Government of the analogous to those of a trade, business or industry chamber,98 but
Republic of the Philippines directly or through its only on a much larger scale i.e., instead of furthering the interests
instrumentalities either wholly or, where applicable as in the case of a particular line of business or industry within a local sphere, the
We start with the petitioner’s contention.
of stock corporations, to the extent of at least a majority of its MECO seeks to promote the general interests of the Filipino people
outstanding capital stock: x x x. in a foreign land.
Petitioner claims that the accounts of the MECO ought to be
audited by the COA because the former is a GOCC or government
GOCCs, therefore, are "stock or non-stock" corporations "vested Finally, it is not disputed that none of the income derived by the
instrumentality. Petitioner points out that the MECO is a non-
with functions relating to public needs" that are "owned by the MECO is distributable as dividends to any of its members,
stock corporation "vested with governmental functions relating to
Government directly or through its instrumentalities."93 By directors or officers.
public needs"; it is "controlled by the government thru a board of
definition, three attributes thus make an entity a GOCC: first, its
directors appointed by the President of the Philippines"; and it
organization as stock or non-stock corporation;94 second, the
operates "outside of the departmental framework," subject only to Verily, the MECO is organized as a non-stock corporation.
public character of its function; and third, government ownership
the "operational and policy supervision of the DTI."86 The MECO
over the same.
thus possesses, petitioner argues, the essential characteristics of a
The MECO Performs Functions with a Public Aspect.
bona fide GOCC and government instrumentality.87
Possession of all three attributes is necessary to deem an entity a
GOCC. The public character of the functions vested in the MECO cannot
We take exception to petitioner’s characterization of the MECO as
be doubted either. Indeed, to a certain degree, the functions of the
a GOCC or government instrumentality. The MECO is not a GOCC
MECO can even be said to partake of the nature of governmental
or government instrumentality. In this case, there is not much dispute that the MECO possesses
functions. As earlier intimated, it is the MECO that, on behalf of
the first and second attributes. It is the third attribute, which the
the people of the Philippines, currently facilitates unofficial
MECO lacks.
Government instrumentalities are agencies of the national relations with the people in Taiwan.
government that, by reason of some "special function or
jurisdiction" they perform or exercise, are allotted "operational The MECO Is Organized as a Non-Stock Corporation
Consistent with its corporate purposes, the MECO was 1. Issuance of temporary visitors’ visas and transit and In this case, the petitioner argues that the government has
"authorized" by the Philippine government to perform certain crew list visas, and such other visa services as may be controlling interest in the MECO because it is the President of the
"consular and other functions" relating to the promotion, authorized by the Department of Foreign Affairs; Philippines that indirectly appoints the directors of the
protection and facilitation of Philippine interests in Taiwan.99The corporation.104 The petitioner claims that the President appoints
full extent of such authorized functions are presently detailed in directors of the MECO thru "desire letters" addressed to the
2. Issuance, renewal, extension or amendment of
Sections 1 and 2 of EO No. 15, s. 2001: corporation’s board.105 As evidence, the petitioner cites the
passports of Filipino citizens in accordance with existing
assumption of one Mr. Antonio Basilio as chairman of the board of
regulations, and provision of such other passport
directors of the MECO in 2001, which was allegedly accomplished
SECTION 1. Consistent with its corporate purposes and subject to services as may be required under the circumstances;
when former President Macapagal-Arroyo, through a
the conditions stated in Section 3 hereof, MECO is hereby
memorandum dated 20 February 2001, expressed her "desire" to
authorized to assist in the performance of the following functions:
3. Certification or affirmation of the authenticity of the board of directors of the MECO for the election of Mr. Basilio
documents submitted for authentication; as chairman.106
1. Formulation and implementation of a program to
attract and promote investments from Taiwan to
4. Providing translation services; The MECO, however, counters that the "desire letters" that the
Philippine industries and businesses, especially in
President transmits are merely recommendatory and not binding
manufacturing, tourism, construction and other
on it.107 The MECO maintains that, as a corporation organized
preferred areas of investments; 5. Assistance and protection to Filipino nationals and under the Corporation Code, matters relating to the election of its
other legal/juridical persons working or residing in directors and officers, as well as its membership, are ultimately
Taiwan, including making representations to the extent governed by the appropriate provisions of the said code, its articles
2. Promotion of the export of Philippine products and
allowed by local and international law on their behalf of incorporation and its by-laws.108
Filipino manpower services, including Philippine
before civil and juridical authorities of Taiwan; and
management services, to Taiwan;
As between the contrasting arguments, We find the contention of
6. Collection of reasonable fees on the first four (4) the MECO to be the one more consistent with the law.
3. Negotiation and/or assistance in the negotiation and
functions enumerated above to defray the cost of its
conclusion of agreements or other arrangements
operations.
concerning trade, investment, economic cooperation,
The fact of the incorporation of the MECO under the Corporation
technology transfer, banking and finance, scientific,
Code is key. The MECO was correct in postulating that, as a
cultural, educational and other modes of cooperative A perusal of the above functions of the MECO reveals its uncanny corporation organized under the Corporation Code, it is governed
endeavors between the Philippines and Taiwan, on a similarity to some of the functions typically performed by the DFA by the appropriate provisions of the said code, its articles of
people-to-people basis, in accordance with established itself, through the latter’s diplomatic and consular missions.100 The incorporation and its by-laws. In this case, it is the by-laws109 of the
rules and regulations; functions of the MECO, in other words, are of the kind that would MECO that stipulates that its directors are elected by its members;
otherwise be performed by the Philippines’ own diplomatic and its officers are elected by its directors; and its members, other than
consular organs, if not only for the government’s acquiescence that the original incorporators, are admitted by way of a unanimous
4. Reporting on, and identification of, employment and
they instead be exercised by the MECO. board resolution, to wit:
business opportunities in Taiwan for the promotion of
Philippine exports, manpower and management
services, and tourism; Evidently, the functions vested in the MECO are impressed with a SECTION II. MEMBERSHIP
public aspect.
5. Dissemination in Taiwan of information on the
Article 2. Members shall be classified as (a) Regular and (b)
Philippines, especially in the fields of trade, tourism, The MECO Is Not Owned or Controlled by the Government Honorary.
labor, economic cooperation, and cultural, educational Organization as a non-stock corporation and the mere
and scientific endeavors; performance of functions with a public aspect, however, are not by
themselves sufficient to consider the MECO as a GOCC. In order to (a) Regular members – shall consist of the original
qualify as a GOCC, a corporation must also, if not more incorporators and such other members who, upon
6. Conduct of periodic assessment of market conditions
importantly, be owned by the government. application for membership, are unanimously admitted
in Taiwan, including submission of trade statistics and
by the Board of Directors.
commercial reports for use of Philippine industries and
businesses; and The government owns a stock or non-stock corporation if it has
controlling interest in the corporation. In a stock corporation, the (b) Honorary member – A person of distinction in
controlling interest of the government is assured by its ownership business who as sympathizer of the objectives of the
7. Facilitation, fostering and cultivation of cultural,
of at least fifty-one percent (51%) of the corporate capital corporation, is invited by the Board to be an honorary
sports, social, and educational exchanges between the
stock.101 In a non-stock corporation, like the MECO, jurisprudence member.
peoples of the Philippines and Taiwan.
teaches that the controlling interest of the government is affirmed
when "at least majority of the members are government officials
SECTION III. BOARD OF DIRECTORS
SECTION 2. In addition to the above-mentioned authority and holding such membership by appointment or designation"102 or
subject to the conditions stated in Section 3 hereof, MECO, there is otherwise "substantial participation of the government in
through its branch offices in Taiwan, is hereby authorized to the selection" of the corporation’s governing board.103 Article 3. At the first meeting of the regular members, they shall
perform the following functions: organize and constitute themselves as a Board composed of five (5)
members, including its Chairman, each of whom as to serve until
such time as his own successor shall have been elected by the
regular members in an election called for the purpose. The number The MECO Is Not a Government Instrumentality; It Is a Sui remit to the national government a portion of such "verification
of members of the Board shall be increased to seven (7) when Generis Entity. fees."115 The COA, therefore, classifies the MECO as a non-
circumstances so warrant and by means of a majority vote of the governmental entity "required to pay xxx government share" per
Board members and appropriate application to and approval by the Audit Code.116
The categorical exclusion of the MECO from a GOCC makes it
the Securities and Exchange Commission. Unless otherwise
easier to exclude the same from any other class of government
provided herein or by law, a majority vote of all Board members
instrumentality. The other government instrumentalities i.e., the We agree that the accounts of the MECO pertaining to its collection
present shall be necessary to carry out all Board resolutions.
regulatory agencies, chartered institutions and GCE/GICP are all, of "verification fees" is subject to the audit jurisdiction of the COA.
by explicit or implicit definition, creatures of the law.110 The MECO However, We digress from the view that such accounts are the only
During the same meeting, the Board shall also elect its own cannot be any other instrumentality because it was, as mentioned ones that ought to be audited by the COA. Upon careful evaluation
officers, including the designation of the principal officer who shall earlier, merely incorporated under the Corporation Code. of the information made available by the records vis-à-vis the spirit
be the Chairman. In line with this, the Chairman shall also carry and the letter of the laws and executive issuances applicable, We
the title Chief Executive Officer. The officer who shall head the find that the accounts of the MECO pertaining to the fees it was
Hence, unless its legality is questioned, and in this case it was not,
branch or office for the agency that may be established abroad shall authorized to collect under Section 2(6) of EO No. 15, s. 2001, are
the fact that the MECO is operating under the policy supervision of
have the title of Director and Resident Representative. He will also likewise subject to the audit jurisdiction of the COA.
the DTI is no longer a relevant issue to be reckoned with for
be the Vice-Chairman. All other members of the Board shall have
purposes of this case.
the title of Director.
Verification Fees Collected by the MECO
For whatever it is worth, however, and without justifying anything,
xxxx
it is easy enough for this Court to understand the rationale, or In its comment,117 the MECO admitted that roughly 9% of its
necessity even, of the executive branch placing the MECO under income is derived from its share in the "verification fees" for
SECTION IV. EXECUTIVE COMMITTEE the policy supervision of one of its agencies. overseas employment documents it collects on behalf of the DOLE.

Article 5. There shall be established an Executive Committee It is evident, from the peculiar circumstances surrounding its The "verification fees" mentioned here refers to the "service fee for
composed of at least three (3) members of the Board. The members incorporation, that the MECO was not intended to operate as any the verification of overseas employment contracts, recruitment
of the Executive Committee shall be elected by the members of the other ordinary corporation. And it is not. Despite its private agreement or special powers of attorney" that the DOLE was
Board among themselves. origins, and perhaps deliberately so, the MECO was authorized to collect under Section 7 of EO No. 1022,118 which was
"entrusted"111 by the government with the "delicate and issued by President Ferdinand E. Marcos on 1 May 1985. These fees
precarious"112 responsibility of pursuing "unofficial"113 relations are supposed to be collected by the DOLE from the foreign
xxxx
with the people of a foreign land whose government the Philippines employers of OFWs and are intended to be used for "the promotion
is bound not to recognize. The intricacy involved in such of overseas employment and for welfare services to Filipino
SECTION VI. OFFICERS: DUTIES, COMPENSATION undertaking is the possibility that, at any given time in fulfilling the workers within the area of jurisdiction of [concerned] foreign
purposes for which it was incorporated, the MECO may find itself missions under the administration of the [DOLE]."119
engaged in dealings or activities that can directly contradict the
Article 8. The officers of the corporation shall consist of a Philippines’ commitment to the One China policy of the PROC.
Chairman of the Board, Vice-Chairman, Chief Finance Officer, and Joint Circular 3-99 was issued by the DOLE, DFA, the Department
Such a scenario can only truly be avoided if the executive
a Secretary. Except for the Secretary, who is appointed by the of Budget Management, the Department of Finance and the COA
department exercises some form of oversight, no matter how
Chairman of the Board, other officers and employees of the in an effort to implement Section 7 of Executive Order No.
limited, over the operations of this otherwise private entity.
corporation shall be appointed by the Board. 1022.120 Thus, under Joint Circular 3-99, the following officials
have been tasked to be the "Verification Fee Collecting Officer" on
Indeed, from hindsight, it is clear that the MECO is uniquely behalf of the DOLE:121
The Deputy Representative and other officials and employees of a situated as compared with other private corporations. From its
branch office or agency abroad are appointed solely by the Vice over-reaching corporate objectives, its special duty and authority
Chairman and Resident Representative concerned. All such 1. The labor attaché or duly authorized overseas labor
to exercise certain consular functions, up to the oversight by the
appointments however are subject to ratification by the Board. officer at a given foreign post, as duly designated by the
executive department over its operations—all the while
DOLE Secretary;
maintaining its legal status as a non-governmental entity—the
It is significant to note that none of the original incorporators of MECO is, for all intents and purposes, sui generis.
the MECO were shown to be government officials at the time of the 2. In foreign posts where there is no labor attaché or duly
corporation’s organization. Indeed, none of the members, officers authorized overseas labor officer, the finance officer or
Certain Accounts of the MECO May
or board of directors of the MECO, from its incorporation up to the collecting officer of the DFA duly deputized by the DOLE
Be Audited By the COA.
present day, were established as government appointees or public Secretary as approved by the DFA Secretary;
officers designated by reason of their office. There is, in fact, no law
or executive order that authorizes such an appointment or We now come to the COA’s contention.
3. In the absence of such finance officer or collecting
designation. Hence, from a strictly legal perspective, it appears that
officer, the alternate duly designated by the head of the
the presidential "desire letters" pointed out by petitioner—if such
The COA argues that, despite being a non-governmental entity, the foreign post.
letters even exist outside of the case of Mr. Basilio—are, no matter
MECO may still be audited with respect to the "verification fees"
how strong its persuasive effect may be, merely recommendatory.
for overseas employment documents that the latter collects from
Since the Philippines does not maintain an official post in Taiwan,
Taiwanese employers on behalf of the DOLE.114 The COA claims
however, the DOLE entered into a "series" of Memorandum of
that, under Joint Circular No. 3-99, the MECO is mandated to
Agreements with the MECO, which made the latter the former’s
collecting agent with respect to the "verification fees" that may be reasonable as the authorization requires. It is the government that 1 May 1985, that the former collects on behalf of the Department
due from Taiwanese employers of OFWs.122 Under the 27 February has ultimate control over the disposition of the "consular fees," of Labor and Employment, and the fees it was authorized to collect
2004 Memorandum of Agreement between DOLE and the MECO, which control the government did exercise when it provided in under Section 2(6) of Executive Order No. 15 issued 16 May 2001,
the "verification fees" to be collected by the latter are to be allocated Section 2(6) of EO No. 15, s. 2001 that such funds may be kept by are subject to the audit jurisdiction of the COA.
as follows: (a) US$ 10 to be retained by the MECO as the MECO "to defray the cost of its operations."
administrative fee, (b) US $10 to be remitted to the DOLE, and (c)
No costs.
US$ 10 to be constituted as a common fund of the MECO and
The Accounts of the MECO Pertaining to the Verification Fees and
DOLE.123
Consular Fees May Be Audited by the COA.
SO ORDERED.
Evidently, the entire "verification fees" being collected by the
Section 14(1), Book V of the Administrative Code authorizes the
MECO are receivables of the DOLE.124 Such receipts pertain to the G.R. No. 169328 October 27, 2006
COA to audit accounts of non-governmental entities "required to
DOLE by virtue of Section 7 of EO No. 1022.
pay xxx or have government share" but only with respect to "funds
xxx coming from or through the government." This provision of JULIAN A. ALZAGA, MEINRADO ENRIQUE A. BELLO,
Consular Fees Collected by the MECO law perfectly fits the MECO: and MANUEL S. SATUITO, petitioners,
vs.
HONORABLE SANDIGANBAYAN (2nd Division) and
Aside from the DOLE "verification fees," however, the MECO also First. The MECO receives the "verification fees" by reason of being
PEOPLE OF THE PHILIPPINES, respondents.
collects "consular fees," or fees it collects from the exercise of its the collection agent of the DOLE—a government agency. Out of its
delegated consular functions. collections, the MECO is required, by agreement, to remit a portion
thereof to the DOLE. Hence, the MECO is accountable to the DECISION
government for its collections of such "verification fees" and, for
The authority behind "consular fees" is Section 2(6) of EO No. 15,
that purpose, may be audited by the COA. YNARES-SANTIAGO, J.:
s. 2001. The said section authorizes the MECO to collect
"reasonable fees" for its performance of the following consular
functions: Second. Like the "verification fees," the "consular fees" are also This Petition for Certiorari assails the April 25, 2005 and August
received by the MECO through the government, having been 10, 2005 Resolutions1 of the Sandiganbayan in Criminal Case Nos.
derived from the exercise of consular functions entrusted to the 25681-25684, which respectively reversed the May 27, 2004
1. Issuance of temporary visitors’ visas and transit and
MECO by the government. Hence, the MECO remains accountable Resolution2 of the court a quo and denied petitioners’ Motion for
crew list visas, and such other visa services as may be
to the government for its collections of "consular fees" and, for that Reconsideration.3
authorized by the DFA;
purpose, may be audited by the COA.
On October 7, 1999,4 four separate Informations for violation of
2. Issuance, renewal, extension or amendment of
Tersely put, the 27 February 2008 Memorandum of Agreement Section 3(e) of Republic Act (R.A.) No. 3019 were filed against
passports of Filipino citizens in accordance with existing
between the DOLE and the MECO and Section 2(6) of EO No. 15, petitioners Julian A. Alzaga, Meinrado Enrique A. Bello and
regulations, and provision of such other passport
s. 2001, vis-à-vis, respectively, the "verification fees" and the Manuel S. Satuito relative to alleged irregularities which attended
services as may be required under the circumstances;
"consular fees," grant and at the same time limit the authority of the purchase of four lots in Tanauan, Batangas, by the Armed
the MECO to collect such fees. That grant and limit require the Forces of the Philippines Retirement and Separation Benefits
3. Certification or affirmation of the authenticity of audit by the COA of the collections thereby generated. System (AFP-RSBS). Alzaga was the Head of the Legal Department
documents submitted for authentication; and of AFP-RSBS when one of the lots was purchased. Bello was a
Police Superintendent and he succeeded Alzaga as Head of the
Conclusion
Legal Department. It was during his tenure when the other three
4. Providing translation services.
lots were purchased. Both were Vice Presidents of AFP-RSBS. On
The MECO is not a GOCC or government instrumentality. It is a the other hand, Satuito was the Chief of the Documentation and
Evidently, and just like the peculiarity that attends the DOLE sui generis private entity especially entrusted by the government Assistant Vice President of the AFP-RSBS.5
"verification fees," there is no consular office for the collection of with the facilitation of unofficial relations with the people in
the "consular fees." Thus, the authority for the MECO to collect the Taiwan without jeopardizing the country’s faithful commitment to
Petitioners filed their respective Motions to Quash and/or Dismiss
"reasonable fees," vested unto it by the executive order. the One China policy of the PROC. However, despite its non-
the informations alleging that the Sandiganbayan has no
governmental character, the MECO handles government funds in
jurisdiction over them and their alleged offenses because the AFP-
the form of the "verification fees" it collects on behalf of the DOLE
The "consular fees," although held and expended by the MECO by RSBS is a private entity created for the benefit of its members and
and the "consular fees" it collects under Section 2(6) of EO No. 15,
virtue of EO No. 15, s. 2001, are, without question, derived from that their positions and salary grade levels do not fall within the
s. 2001. Hence, under existing laws, the accounts of the MECO
the exercise by the MECO of consular functions—functions it jurisdiction of the Sandiganbayan pursuant to Section 4 of
pertaining to its collection of such "verification fees" and "consular
performs by and only through special authority from the Presidential Decree (P.D.) No. 1606 (1978),6 as amended by R.A.
fees" should be audited by the COA.
government. There was never any doubt that the visas, passports No. 8249 (1997).7
and other documents that the MECO issues pursuant to its
authorized functions still emanate from the Philippine government WHEREFORE, premises considered, the petition is PARTIALLY
On May 27, 2004, the Sandiganbayan granted petitioners’ motions
itself. GRANTED. The Manila Economic and Cultural Office is hereby
to dismiss for lack of jurisdiction.
declared a non-governmental entity. However, the accounts of the
Manila Economic and Cultural Office pertaining to: the verification
Such fees, therefore, are received by the MECO to be used strictly fees contemplated by Section 7 of Executive Order No. 1022 issued
for the purpose set out under EO No. 15, s. 2001. They must be
However, in a Resolution dated April 25, 2005, the Sandiganbayan (GSIS) and the Social Security System (SSS) since it serves as the higher but who are by express provision of law placed under the
reversed its earlier resolution. It held that the AFP-RSBS is a system that manages the retirement and pension funds of those in jurisdiction of the said court. In the latter category, it is the position
government-owned or controlled corporation thus subject to its the military service.12 held and not the salary grade which determines the jurisdiction of
jurisdiction. It also found that the positions held by Alzaga and the Sandiganbayan. Thus, presidents, directors or trustees, or
Bello, who were Vice Presidents, and Satuito who was an Assistant managers of government owned and controlled corporations, are
The AFP-RSBS is administered by the Chief of Staff of the AFP
Vice President, are covered and embraced by, and in fact higher under the jurisdiction of the Sandiganbayan.
through a Board of Trustees and Management Group,13 and funded
than the position of managers mentioned under Section 4 of P.D.
from congressional appropriations and compulsory contributions
No. 1606, as amended, thus under the jurisdiction of the
from members of the AFP; donations, gifts, legacies, bequests and In the instant case, petitioners Alzaga and Bello were Head of the
Sandiganbayan.
others to the system; and all earnings of the system which shall not Legal Department while petitioner Satuito was Chief of the
be subject to any tax whatsoever.14 Documentation with corresponding ranks of Vice Presidents and
Petitioners’ Motion for Reconsideration8 was denied, hence, this Assistant Vice President. These positions are not specifically
petition raising the following issues: enumerated in RA. No. 8249; however, as correctly observed by the
Section 4 of P.D. No. 1606, as further amended by R.A. No. 8249,
Sandiganbayan, their ranks as Vice Presidents and Assistant Vice
grants jurisdiction to the Sandiganbayan over:
President are even higher than that of "managers" mentioned in
I
RA. No. 8249.
a. Violations of Republic Act No. 3019, as amended,
THE COURT A QUO COMMITTED GRAVE ABUSE OF otherwise known as the Anti-graft and Corrupt Practices
In sum, the Sandiganbayan correctly ruled that the AFP-RSBS is a
DISCRETION AMOUNTING TO LACK OR EXCESS OF Act, Republic Act No. 1379, and Chapter II, Section 2,
government-owned and controlled corporation and that it has
JURISDICTION IN DECIDING A QUESTION OF Title VII, Book II of the Revised Penal Code, where one
jurisdiction over the persons of petitioners who were Vice
SUBSTANCE IN A MANNER NOT ACCORD WITH or more of the accused are officials occupying the
Presidents and Assistant Vice President when the charges against
LAW AND APPLICABLE JURISPRUDENCE THAT IT following positions in the government whether in a
them were allegedly committed.
HAS JURISDICTION OVER THE PERSON OF THE permanent, acting or interim capacity, at the time of the
PETITIONERS commission of the offense:
WHEREFORE, the instant Petition
for Certiorari is DISMISSED. The assailed Resolution of the
II (1) Officials of the executive branch occupying the
Sandiganbayan dated April 25, 2005 that the AFP-RSBS is a
positions of regional director and higher, otherwise
government-owned and controlled corporation and that it has
classified as Grade ‘27’ and higher, of the Compensation
THE COURT A QUO COMMITTED GRAVE ABUSE OF jurisdiction over the persons of the petitioners and the Resolution
and Position Classification Act of 1989 (Republic Act No.
DISCRETION AMOUNTING TO LACK OR EXCESS OF dated August 10, 2005 denying petitioners’ motion for
6758), specifically including:
JURISDICTION IN DECIDING A QUESTION OF reconsideration, are AFFIRMED.
SUBSTANCE IN A MANNER NOT IN ACCORD WITH
LAW OR JURISPRUDENCE THAT THE ARMED xxxx
SO ORDERED.
FORCES RETIREMENT AND SEPARATION
BENEFITS SYSTEM (AFP-RSBS) IS A GOVERNMENT-
(g) Presidents, directors or trustees, or managers of
OWNED OR CONTROLLED CORPORATION G.R. No. 81490 August 31, 1988
government-owned or controlled corporations, state
universities or educational institutions or foundations;
III HAGONOY WATER DISTRICT represented by its
General Manager CELESTINO S. VENGCO, petitioner,
In People v. Sandiganbayan,15 where herein petitioners Alzaga
vs.
THE COURT A QUO COMMITTED GRAVE ABUSE OF and Satuito were respondents, this Court has ruled that the
THE HON. NATIONAL LABOR RELATIONS
DISCRETION AMOUNTING TO LACK OR EXCESS OF character and operations of the AFP-RSBS are imbued with public
COMMISSION, EXECUTIVE LABOR ARBITER
JURISDICTION IN DECIDING A QUESTION OF interest thus the same is a government entity and its funds are in
VLADIMIR P.L. SAMPANG, DEPUTY SHERIFF JOSE A.
SUBSTANCE IN A MANNER NOT IN ACCORD WITH the nature of public funds. In Ramiscal, Jr. v.
CRUZ and DANTE VILLANUEVA, respondents.
LAW OR JURISPRUDENCE THAT PETITIONERS Sandiganbayan,16 we held that the AFP-RSBS is a government-
ALZAGA AND BELLO[,] WHO WERE BOTH VICE- owned and controlled corporation under R.A. No. 9182, otherwise
PRESIDENTS OF THE AFP-RSBS[,] AND known as The Special Purpose Vehicle Act of 2002. These rulings FELICIANO, J.:
PETITIONER SATUITO[,] WHO WAS ASSISTANT render unmeritorious petitioners’ assertion that the AFP-RSBS is
VICE-PRESIDENT OF THE AFP-RSBS[,] ARE a private entity.
The present petition for certiorari seeks to annul and set aside: a)
COVERED AND EMBRACED BY THE POSITION
the decision of the Labor Arbiter dated 17 March 1987 in NLRC
"MANAGERS" MENTIONED UNDER SECTION 4 a (1)
There is likewise no merit in petitioners’ claim that the Case No. RAB-III-8-2354-85, entitled "Dante Villanueva versus
(g) OF PD NO. 1606, AS AMENDED.9
Sandiganbayan has no jurisdiction over them since their positions LWA-Hagonoy Waterworks District/Miguel Santos;" and b) the
as vice presidents and assistant vice president are not covered nor Resolution of the National Labor Relations Commission dated 20
The petition is without merit. embraced by the term "managers" under section 4 of RA. No. 8249. August 1987 affirming the mentioned decision.

The AFP-RSBS was established by virtue of P.D. No. 361 (1973)10 in We held in Geduspan v. People,17 that while the first part of section Private respondent Dante Villanueva was employed as service
December 1973 to guarantee continuous financial support to the 4 covers only officials of the executive branch with the salary grade foreman by petitioner Hagonoy Water District ("Hagonoy") from 3
AFP military retirement system, as provided for in R.A. No. 340 27 and higher, the second part "specifically includes" other January 1977 until 16 May 1985, when he was indefinitely
(1948).11 It is similar to the Government Service Insurance System executive officials whose positions may not be of grade 27 and
suspended and thereafter dismissed on 12 July 1985 for Petitioner then filed a Motion to Quash the Writ of Execution with Thus, Section 25 of P.D. 198 exempting the employees of water
abandonment of work and conflict of interest. Application for Writ of Preliminary Injunction arguing that the districts from the application of the Civil Service Law was removed
writ was prematurely issued as its motion for reconsideration had from the statute books.
not yet been resolved. By Resolution dated 10 December 1987,
On 14 August 1985, private respondent filed a complaint for illegal
public respondent Commission denied the application for a
dismissal, illegal suspension and underpayment of wages and This is not the first time that officials of the Department of Labor
preliminary injunction. The motion to quash was similarly denied
emergency cost of living allowance against petitioner Hagonoy and Employment have taken the position that the Labor Arbiter
by the Commission which directed petitioner to reinstate
with the then Ministry of Labor and Employment, Regional here adopted. In Baguio Water District vs. Cresenciano B.
immediately private respondent and to pay him the amount of
Arbitration Branch III, San Fernando, Pampanga. Trajano, etc. et al., 1 the petitioner Water District sought review of
P63,577.75 out of petitioner's garnished deposits.
a decision of the Bureau of Labor Relations which affirmed that of
a Med-Arbiter calling for a certification election among the regular
Petitioner immediately moved for outright dismissal of the
Hence, the instant petition. rank-and-file employees of the Baguio Water District (BWD). In
complaint on the ground of lack of jurisdiction. Being a
granting the petition, the Court said:
government entity, petitioner claimed, its personnel are governed
by the provisions of the Civil Service Law, not by the Labor Code, The only question here in whether or not local water districts are
and protests concerning the lawfulness of dismissals from the government owned or controlled corporations whose employees The Baguio Water District was formed
service fall within the jurisdiction of the Civil Service Commission, are subject to the provisions of the Civil Service Law. The Labor pursuant to Title II-Local Water District Law
not the Ministry of Labor and Employment. Petitioner cited Arbiter asserted jurisdiction over the alleged illegal dismissal of of P.D. No. 198, as amended, The BWD is by
Resolution No. 1540 of the Social Security Commission cancelling private respondent Villanueva by relying on Section 25 of Sec. 6 of that decree 'a quasi-public
petitioner's compulsory coverage from the system effective 16 May Presidential Decree No. 198, known as the "Provincial Water corporation performing public service and
1979 "considering the rulings that local water districts are Utilities Act of 1973" which went into effect on 25 May 1973, and supplying public wants.
instrumentalities owned and controlled by the government and which provides as follows:
that their officers and employees are government employees." In
A part of the public respondent's decision
opposing the motion, private respondent Villanueva contended
Exemption from Civil Service. — The district rendered in September, 1983, reads in part:
that local water districts, like petitioner Hagonoy, though quasi-
and its employees, being engaged in a
public corporations, are in the nature of private corporations since
proprietary function, are hereby exempt from
they perform proprietary functions for the government. We find the appeal [of the BWD] to be devoid
the provisions of the Civil Service Law.
of merit. The records show that the operation
Collective Bargaining shall be available only to
and administration of BWD is governed and
The Labor Arbiter proceeded to hear and try the case and, on 17 personnel below supervisory levels: Provided,
regulated by special laws, that is, Presidential
March 1986, rendered a Decision in favor of the private respondent however, That the total of all salaries, wages,
Decrees Nos. 198 and 1479 which created local
and against petitioner Hagonoy. The dispositive part of the emoluments, benefits or other compensation
water districts throughout the country.
decision read: paid to all employees in any month shall not
Section 25 of Presidential Decree (PD) 198
exceed fifty percent (50%) of average net
clearly provides that the district and its
monthly revenue, said net revenue
WHEREFORE, premises considered, employees shall be exempt from the
representing income from water sales and
respondents are hereby ordered to reinstate provisions of the Civil Service Law and that its
sewerage service charges, lease pro-rata share
petitioner immediately to his former position personnel below supervisory level shall have
of debt service and expenses for fuel or energy
as Service Foreman, without loss of seniority the right to collectively bargain. Contrary to
for pumping during the preceding fiscal year.
rights and privileges, with full backwages, appellant's claim, said provision has not been
including all benefits provided by law, from amended much more abrogated expressly or
the date he was terminated up to his actual The Labor Arbiter however failed to take into account the impliedly by PD 1479 which does not make
date of reinstatement. provisions of Presidential Decree No. 1479, which went into effect mention of any matter on Civil Service Law or
on 11 June 1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 collective bargaining. (Rollo, p. 590.)
quoted above, and Section 26 of P.D. 198 was renumbered as
In addition, respondents are hereby ordered
Section 25 in the following manner:
to pay the petitioner the amount of P4,927.50 We grant the petition for the following reasons:
representing the underpayments of wages
from July 1983 to May 16, 1985. Section 26 of the same decree [P.D. 198] is
1. Section 25 of P.D. No. 198 was repealed by
hereby amended to read as Section 25 as
Sec. 3 of P.D. No. 1479; Sec. 26 of P.D. No. 198
follows:
SO ORDERED. was amended to read as Sec. 25 by Sec. 4 of
P.D. No. 1479. The amendatory decree took
Section 25. Authorization. — The district may effect on June 11, 1978.
On appeal, the National Labor Relations Commission affirmed the
exercise all the powers which are expressly
decision of the Labor Arbiter in a Resolution dated 20 August 1987.
granted by this Title or which are necessarily
xxx xxx xxx
implied from or incidental to the powers and
The petitioner moved for reconsideration, insisting that public purposes herein stated. For the purpose of
respondents had no jurisdiction over the case. Meanwhile, a Writ carrying out the objectives of this Act, a 3. The BWD is a corporation created pursuant
of Execution was issued by the Labor Arbiter on 16 November 1987. district is hereby granted the power of to a special law — P.D. No. 198, as amended.
The writ was enforced by garnishing petitioner Hagonoy's deposits eminent domain, the exercise thereof shall, As such its officers and employees are part of
with the Planters Development Bank of Hagonoy. however, be subject to review by the
Administration.
 the Civil Service. (Sec. 1, Art. XII-B, [1973] Section I of Article XII-B, [1973] Constitution the case is a complete nullity, vesting no rights and imposing no
Constitution; P.D. No. 686.) uses the word "every" to modify the phrase liabilities.
"government-owned or controlled
corporation."
The broader question of whether employees of government owned ACCORDINGLY, the Petition for certiorari is GRANTED. The
or controlled corporations are governed by the Civil Service Law decision of the Labor Arbiter dated 17 March 1986, and public
and Civil Service Rules and Regulations was addressed by this "Every" means each one of a group, without respondent Commission's Resolution dated 20 August 1987 and all
Court in 1985 in National Housing Corporation vs. Juco. 2 After a exception. It means all possible and all, taken other Resolutions and Orders issued by the Commission in this
review of constitutional, statutory and case law on the matter, the one by one. Of course, our decision in this case case subsequent thereto, are hereby SET ASIDE. This decision is,
Court, through Mr. Justice Gutierrez, held: refers to a corporation created as a however, without prejudice to the right of private respondent
government-owned or controlled entity. It Villanueva to refile, if he so wishes, this complaint in an
does not cover cases involving private firms appropriate forum. No pronouncement as to costs.
There should no longer be any question at this
taken over by the government in foreclosure
time that employees of government-owned or
or similar proceedings. We reserve judgment
controlled corporations are governed by the SO ORDERED.
on these latter cases when the appropriate
civil service law and civil service rules and
controversy is brought to this Court. 3
regulations.
G.R. No. 95237-38 September 13, 1991
In Juco, the Court spelled out the law on the issue at bar as such
Section 1. Article XII-B of the [1973]
law existed under the 1973 Constitution and the Provisional DAVAO CITY WATER DISTRICT, CAGAYAN DE ORO
Constitution specifically provides:
Constitution of 1984, 4 until just before the effectivity of the 1987 CITY WATER DISTRICT, METRO CEBU WATER
Constitution. Public respondent Commission, in confirming the DISTRICT, ZAMBOANGA CITY WATER DISTRICT,
The Civil Service embraces every branch, Labor Arbiter's assumption of jurisdiction over this case, LEYTE METRO WATER DISTRICT, BUTUAN CITY
agency, subdivision, and instrumentality of apparently relied upon Article IX (B), Section 2 (1) of the 1987 WATER DISTRICT, CAMARINES NORTE WATER
the Government, including every Constitution, which provides that: DISTRICT, LAGUNA WATER DISTRICT, DUMAGUETE
government-owned or controlled corporation. CITY WATER DISTRICT, LA UNION WATER DISTRICT,
... BAYBAY WATER DISTRICT, METRO LINGAYEN
[T]he Civil Service embraces ... government
WATER DISTRICT, URDANETA WATER DISTRICT,
owned or controlled corporations with
COTABATO CITY WATER DISTRICT, MARAWI WATER
The 1935 Constitution had a similar provision original charters.(Emphasis supplied)
DISTRICT, TAGUM WATER DISTRICT, DIGOS WATER
in its Section 1, Article XII which stated:
DISTRICT, BISLIG WATER DISTRICT, and
The NLRC took the position that although petitioner Hagonoy is a MECAUAYAN WATER DISTRICT,petitioners,
A Civil Service embracing all branches and government owned or controlled corporation, it had no original vs.
subdivisions of the Government shall be charter having been created simply by resolution of a local CIVIL SERVICE COMMISSION, and COMMISSION ON
provided by law. legislative council. The NLRC concluded that therefore petitioner AUDIT, respondents.
Hagonoy fell outside the scope of the civil service.
The inclusion of "government-owned or MEDIALDEA, J.:p
controlled corporations" within the embrace At the time the dispute in the case at bar arose, and at the time the
of the civil service shows a deliberate effort of Labor Arbiter rendered his decision (i.e., 17 March 1986), there is
Whether or not the Local Water Districts formed and created
the framers to plug an earlier loophole which no question that the applicable law was that spelled out in National
pursuant to the provisions of Presidential Decree No. 198, as
allowed government-owned or controlled Housing Corporation vs. Juco (supra) and Baguio Water District
amended, are government-owned or controlled corporations with
corporations to avoid the full consequences of vs. Cresenciano B. Trajano (supra) and that under such applicable
original charter falling under the Civil Service Law and/or covered
the all encompassing coverage of the, civil law, the Labor Arbiter had no jurisdiction to render the decision
by the visitorial power of the Commission on Audit is the issue
service system. The same explicit intent is that he in fact rendered. By the time the public respondent
which the petitioners entreat this Court, en banc, to shed light on.
shown by the addition of "agency" and Commission rendered its decision of 20 August 1987 which is here
"instrumentality" to branches and assailed, the 1987 Constitution had already come into
subdivisions of the Government. All offices effect. 5 There is, nonetheless, no necessity for this Court at the Petitioners are among the more than five hundred (500) water
and firms of the government are covered. present time and in the present case to pass upon the question of districts existing throughout the country formed pursuant to the
the effect of the provisions of Article DC (B), Section 2 (1) of the provisions of Presidential Decree No. 198, as amended by
1987 Constitution upon the pre-existing statutory and case law. For Presidential Decrees Nos. 768 and 1479, otherwise known as the
The amendments introduced in 1973 are not whatever that effect might be, — and we will deal with that when "Provincial Water Utilities Act of 1973."
Idle exercises or meaningless gestures. They an appropriate case comes before the Court — we believe and so
carry the strong message that civil service hold that the 1987 Constitution did not operate retrospectively so
coverage is broad and all-embracing insofar as as to confer jurisdiction upon the Labor Arbiter to render a Presidential Decree No. 198 was issued by the then President
employment in the government in any of its decision which, under the law applicable at the time of the Ferdinand E. Marcos by virtue of his legislative power under
governmental. or corporate arms is rendition of such decision, was clearly outside the scope of Proclamation No. 1081. It authorized the different local legislative
concerned. competence of the Labor Arbiter. Thus, the respondent bodies to form and create their respective water districts through a
Commission had nothing before it which it could pass upon in the resolution they will pass subject to the guidelines, rules and
exercise of its appellate jurisdiction. For it is self-evident that a regulations therein laid down. The decree further created and
xxx xxx xxx
decision rendered by the Labor Arbiter without jurisdiction over formed the "Local Water Utilities Administration" (LWUA), a
national agency attached to the National Economic and by Civil Service Laws as the latter do (sic) not have created by virtue of PD 198, a general legislation which cannot be
Development Authority (NEDA), and granted with regulatory original charters. considered as the charter itself creating the water districts. Holding
power necessary to optimize public service from water utilities on to this ruling, petitioners contend that they are private
operations. corporations which are only regarded as quasi-public or semi-
In adherence to the just cited ruling, the CSC suspended the
public because they serve public interest and convenience and that
implementation of Resolution No. 90-575 by issuing Resolution
since PD 198 is a general legislation, the operative act which
The respondents, on the other hand, are the Civil Service No. 90-770 which reads:
created a water district is not the said decree but the resolution of
Commission (CSC) and the Commission on Audit (COA), both
the sanggunian concerned.
government agencies and represented in this case by the Solicitor
xxx xxx xxx
General.
After a fair consideration of the parties' arguments coupled with a
NOW, THEREFORE, in view of all the foregoing, the careful study of the applicable laws as well as the constitutional
On April 17, 1989, this Court ruled in the case of Tanjay Water
Commission resolved to rule, as it hereby rules, that the provisions involved, We rule against the petitioners and reiterate
District v. Gabaton, et al. (G.R. No. 63742, 172 SCRA 253):
implementation of CSC. Resolution No. 575 dated June Our ruling in Tanjay case declaring water districts government-
27, 1990 be deferred in the meantime pending owned or controlled corporations with original charter.
Significantly, Article IX (B), Section 2(1) of the 1987 clarification from the Supreme Court are regards its
Constitution provides that the Civil Service embraces all conflicting decisions in the cases of Tanjay Water
As early as Baguio Water District v. Trajano, et al., (G.R. No.
branches, subdivisions, instrumentalities, and agencies District v. Gabaton and Metro Iloilo Water District v.
65428, February 20, 1984, 127 SCRA 730), We already ruled that a
of the government, including government-owned and National Labor Relations Commission. (p. 26, Rollo)
water district is a corporation created pursuant to a special law —
controlled corporations with original charters.
P.D. No. 198, as amended, and as such its officers and employees
Inasmuch as PD No. 198, as amended, is the original
In the meanwhile, there exists a divergence of opinions between are covered by the Civil Service Law.
charter of the petitioner, Tanjay Water District, and
COA on one hand, and the (LWUA), on the other hand, with
respondent Tarlac Water District and all water districts
respect to the authority of COA to audit the different water
in the country, they come under the coverage of the Civil In another case (Hagonoy Water District v. NLRC, G.R. No. 81490,
districts.
Service Law, rules and regulations. (Sec. 35, Art. VIII August 31, 1988, 165 SCRA 272), We ruled once again that local
and Sec. 37, Art. IX of PD No. 807). water districts are quasi-public corporations whose employees
COA opined that the audit of the water districts is simply an act of belong to the Civil Service. The Court's pronoucement in this case,
discharging the visitorial power vested in them by law (letter of as extensively quoted in the Tanjay case, supra, partly reads:
As an offshoot of the immediately cited ruling, the CSC. issued
COA to LWUA dated August 13, 1985, pp. 29-30, Rollo).
Resolution No. 90-575, the dispositive portion of which reads:
"The only question here is whether or not local water
On the other hand, LWUA maintained that only those water districts are governmkent owned or controlled
NOW THEREFORE, in view of all the foregoing, the
districts with subsidies from the government fall within the COA's corporations whose employees are subject to the
Commission resolved, as it hereby resolves to rule that
jurisdiction and only to the extent of the amount of such subsidies, provisions of the Civil Service Law. The Labor Arbiter
Local Water Districts, being quasi-public corporations
pursuant to the provision of the Government Auditing Code of the asserted jurisdiction over the alleged illegal dismissal of
created by law to perform public services and supply
Phils. private respondent Villanueva by relying on Section 25
public wants, the matter of hiring and firing of its
of Presidential decree No. 198, known as the Provincial
officers and employees should be governed by the Civil
Water Utilities Act of 1973" which went onto effect in 25
Service Law, rules and regulations. Henceforth, all It is to be observed that just like the question of whether the May 1973, and which provides as follows:
appointments of personnel of the different local water employees of the water districts falls under the coverage of the Civil
districts in the country shall be submitted to the Service Law, the conflict between the water districts and the COA
Commission for appropriate action. (Rollo. p. 22). is also dependent on the final determination of whether or not Exemption from Civil Service. — The district
water districts are government-owned or controlled corporations and its employees, being engaged in a
with original charter. The reason behind this is Sec. 2(1), Article proprietary function, are hereby exempt from
However, on May 16, 1990, in G.R. No. 85760, entitled "Metro
IX-D of the 1987 constitution which reads: the provisions of the Civil Service Law.
Iloilo Water District v. National Labor Relations Commission, et
Collective Bargaining shall be available only to
al.," the Third Division of this Court ruled in a minute resolution:
personnel below supervisory levels: Provided,
Sec. 2(1) The Commission on Audit shall have the power, however, That the total of all salaries, wages
authority, and duty to examine, audit, and settle all emoluments, benefits or other compensation
xxx xxx xxx
accounts pertaining to the revenue and receipts of, and paid to all employees in any month shall not
expenditures or uses of funds and property, owned or exceed fifty percent (50%) of average net
Considering that PD 198 is a general legislation held in trust by, or pertaining to the Government, or any monthy revenue. Said net revenue
empowering and/or authorizing government agencies of its subdivisions, agencies or representing income from water sales and
and entities to create water districts, said PD 198 cannot instrumentalities, including government-owned or sewerage service charges, less pro-rata share
be considered as the charter itself creating the Water controlled corporations with original charters, and on of debt service and expenses for fuel or energy
District. Public respondent NLRC did not commit any a post audit basis. (emphasis supplied) for pumping during the preceding fiscal year.
grave abuse of discretion in holding that the operative
act, that created the Metro Iloilo Water District was the
Petitioners' main argument is that they are private corporations The Labor Arbiter failed to take into accout the
resolution of the Sangguniang Panglunsod of Iloilo City.
without original charter, hence they are outside the jurisdiction of provisions of Presidential Decree No. 1479, which went
Hence, the employees of Water Districts are not covered
respondents CSC and COA. Reliance is made on the Metro Iloilo into effect on 11 June 1978, P.D. No. 1479, wiped away
case which declared petitioners as quasi-public corporations Section 25 of PD 198 quoted above, and Section 26 of PD
 198 was renumbered as Section 25 in the following extensively from the deliberations of 1986 It also prescribes for the numbers and qualifications of the
manner: Constitutional Commission in respect of the intent and members of the Board of Directors:
meaning of the new phrase "with original character," in
effect held that government-owned and controlled
Section 26 of the same decree PD 198 is hereby amended Sec. 8. Number and Qualification. — The Board of
corporations with original charter refer to
to read as Section 25 as follows: Directors of a district shall be composed of five citizens
corporations chartered by special law as distinguished
of the Philippines who are of voting age and residents
from corporations organized under our general
within the district. One member shall be a representative
Section 25. Authorization. — The district may exercise incorporation statute — the Corporations Code. In
of civic-oriented service clubs, one member of
all the powers which are expressly granted by this Title NASECO, the company involved had been organized
representative of professional associations, one member
or which are necessarily implied from or incidental to under the general incorporation statute and was a
a representative of business, commercial or financial
the powers and purposes herein stated. For the purpose sbusidiary of the National Investment Development
organizations, one member a representative of
of carrying out the objectives of this Act, a district is Corporation (NIDC) which in turn was a subsidiary of
educational institutions and one member a
hereby granted the power of eminent domain, the the Philippine National Bank, a bank chartered by a
representative of women's organization. No public
exercise thereof shall, however, be subject to review by special statute. Thus, government-owned or controlled
official shall serve as director. Provided, however, that if
the Administration. corporations like NASECO are effectively, excluded from
the district has availed of the financial assistance of the
the scope of the Civil Service. (emphasis supplied)
Administration, the Administration may appoint any of
Thus, Section 25 of PD 198 exempting the employees of its personnel to sit in the board of directors with all the
water districts from the application of the Civil Service From the foregoing pronouncement, it is clear that what has been rights and privileges appertaining to a regular member
Law was removed from the statute books: excluded from the coverage of the CSC are those corporations for such period as the indebtedness remains unpaid in
created pursuant to the Corporation Code. Significantly, which case the board shall be composed of six members;
petitioners are not created under the said code, but on the contrary, (as amended by PDs Nos. 768 and 1479).
xxx xxx xxx they were created pursuant to a special law and are governed
primarily by its provision.
the manner of their appointment and nominations;
We grant the petition for the following reasons:
No consideration may thus be given to petitioners' contention that
Sec. 9. Appointment. — Board members shall be
1. Section 25 of PD No. 198 was repealed by Section 3 of the operative act which created the water districts are the
appointed by the appointing authority. Said
PD No. 1479; Section 26 of PD No. 198 was amended ro resolutions of the respective local sanggunians and that
appointments shall be made from a list of nominees, if
read as Sec. 25 by Sec. 4 of PD No. 1479. The amendatory consequently, PD 198, as amended, cannot be considered as their
any, submitted pursuant to Section 10. If no
decree took effect on June 11, 1978. charter.
nominations are submitted, the appointing authority
shall appoint any qualified person of the category to the
xxx xxx xxx It is to be noted that PD 198, as amended is the source of vacant position;
authorization and power to form and maintain a district. Section 6
of said decree provides:
3. The BWD is a corporation created pursuant to a Sec.10. Nominations. — On or before October 1 of each
special law — PD No. 198, as amended. As such its even numbered year, the secretary of the district shall
officers and employees are part of the Civil Service (Sec. Sec. 6. Formation of District. — This Act is the source of contact each known organization, association, or
1, Art. XII-B, [1973] Constitution; PD No. 868). authorization and power to form and maintain a district. institution being represented by the director whose term
Once formed, a district is subject to the provisions of this will expire on December 31 and solicit nominations from
Act and not under the jurisdiction of any political these organizations to fill the position for the ensuing
Ascertained from a consideration of the whole statute, PD 198 is a subdivision, . . . . term. One nomination may be submitted in writing by
special law applicable only to the different water districts created each such organization to the Secretary of the district on
pursuant thereto. In all its essential terms, it is obvious that it or before November 1 of such year: This list of nominees
pertains to a special purpose which is intended to meet a particular Moreover, it must be observed that PD 198, contains all the
shall be transmitted by the Secretary of the district to the
set of conditions and cirmcumstances. The fact that said decree essential terms necessary to constitute a charter creating a juridical
office of the appointing authority on or before November
generally applies to all water districts throughout the country does person. For example, Section 6(a) provides for the name that will
15 of such year and he shall make his appointment from
not change the fact that PD 198 is a special law. Accordingly, this be used by a water district, thus:
the list submitted on or before December 15. In the event
Court's resolution in Metro Iloilo case declaring PD 198 as a the appointing authority fails to make his appointments
general legislation is hereby abandoned. Sec. 6. . . . To form a district, the legislative body of any on or before December 15, selection shall be made from
city, municipality or province shall enact a resolution said list of nominees by majority vote of the seated
By "government-owned or controlled corporation with original containing the following: directors of the district constituting a quorum. Initial
charter," We mean government owned or controlled corporation nominations for all five seats of the board shall be
created by a special law and not under the Corporation Code of the solicited by the legislative body or bodies at the time of
a) The name of the local water district, which shall adoption of the resolution forming the district. Thirty
Philippines. Thus, in the case of Lumanta v. NLRC (G.R. No. include the name of the city, municipality, or province,
82819, February 8, 1989, 170 SCRA 79, 82), We held: days thereafter, a list of nominees shall be submitted to
or region thereof, served by said system, followed by the the provincial governor in the event the resolution
words "Water District." forming the district is by a provincial board, or the
The Court, in National Service Corporation (NASECO) mayor of the city or municipality in the event the
v. National Labor Relations Commission, G.R. No resolution forming the adoption of the district is by the
69870, promulgated on 29 November 1988, quoting city or municipal board of councilors, who shall select
 the initial directors therefrom within 15 days after Sec. 14. Personal Liability. — No director may be held to stockholders thereof. It would not be amiss to emphasize at this
receipt of such nominations; be personally liable for any action of the district. point that a private corporation is created for the private purpose,
benefit, aim and end of its members or stockholders. Necessarily,
said members or stockholders should be given a free hand to
their terms of office: Noteworthy, the above quoted provisions of PD 198, as amended,
choose those who will compose the governing body of their
are similar to those which are actually contained in other corporate
corporation. But this is not the case here and this clearly indicates
charters. The conclusion is inescapable that the said decree is in
Sec. 11. Term of Office. — Of the five initial directors of that petitioners are definitely not private corporations.
truth and in fact the charter of the different water districts for it
each newly formed district, two shall be appointed for a
clearly defines the latter's primary purpose and its basic
maximum term of two years, two for a maximum term
organizational set-up. In other words, PD 198, as amended, is the The foregoing disquisition notwithstanding, We are, however, not
of four years, and one for a maximum term of six years.
very law which gives a water district juridical personality. While it unaware of the serious repercussion this may bring to the
Terms of office of all directors in a given district shall be
is true that a resolution of a local sanggunian is still necessary for thousands of water districts' employees throughout the country
such that the term of at least one director, but not more
the final creation of a district, this Court is of the opinion that said who stand to be affected because they do not have the necessary
then two, shall expire on December 31 of each even-
resolution cannot be considered as its charter, the same being civil service eligibilities. As these employees are equally protected
numbered year. Regular terms of office after the initial
intended only to implement the provisions of said decree. In by the constitutional guarantee to security of tenure, We find it
terms shall be for six years commencing on January 1 of
passing a resolution forming a water district, the local sanggunian necessary to rule for the protection of such right which cannot be
odd-numbered years. Directors may be removed for
is entrusted with no authority or discretion to grant a charter for impaired by a subsequent ruling of this Court. Thus, those
cause only, subject to review and approval of the
the creation of a private corporation. It is merely given the employees who have already acquired their permanent
Administration; (as amended by PD 768).
authority for the formation of a water district, on a local option employment status at the time of the promulgation of this decision
basis, to be exercised under and in pursuance of PD 198. cannot be removed by the mere reason that they lack the necessary
the manner of filling up vacancies: civil service eligibilities.
More than the aforequoted provisions, what is of important
Sec. 12. Vacancies. — In the event of a vacancy in the interest in the case at bar is Section 3, par. (b) of the same decree ACCORDINGLY, the petition is hereby DISMISSED. Petitioners
board of directors occurring more than six months which reads: are declared "government-owned or controlled corporations with
before expiration of any director's term, the remaining original charter" which fall under the jurisdiction of the public
directors shall within 30 days, serve notice to or request respondents CSC and COA.
Sec. 3(b). Appointing authority. — The person
the secretary of the district for nominations and within
empowered to appoint the members of the Board of
30 days, thereafter a list of nominees shall be submitted
Directors of a local water district, depending upon the SO ORDERED.
to the appointing authority for his appointment of a
geographic coverage and population make-up of the
replacement director from the list of nominees. In the
particular district. In the event that more than seventy-
absence of such nominations, the appointing authority G.R. No. 149154 June 10, 2003
five percent of the total active water service connections
shall make such appointment. If within 30 days after
of a local water districts are within the boundary of any
submission to him of a list of nominees the appointing
city or municipality, the appointing authority shall be RODOLFO S. DE JESUS, EDELWINA DG. PARUNGAO,
authority fails to make an appointment, the vacancy
the mayor of that city or municipality, as the case may HERMILO S. BALUCAN, AVELINO C. CASTILLO,
shall be filled from such list by a majority vote of the
be; otherwise, the appointing authority shall be the DANILO B. DE LEON (Interim Board of Directors,
remaining members of the Board of Directors
governor of the province within which the district is Catbalogan Water District), and ALICE MARIE C.
constituting a quorum. Vacancies occurring within the
located: Provided, That if the existing waterworks OSORIO (Board Secretary), Petitioners,
last six months of an unexpired term shall also be filled
system in the city or municipality established as a water vs.
by the Board in the above manner. The director thus
district under this Decree is operated and managed by COMMISSION ON AUDIT, Respondent.
appointed shall serve the unexpired term only; (as
the province, initial appointment shall be extended by
amended by PD 768).
the governor of the province. Subsequent appointments
shall be as specified herein. DECISION
and the compensation and personal liability of the members of the
Board of Directors: CARPIO, J.:
If portions of more than one province are included
within the boundary of the district, and the appointing
Sec. 13. Compensation. — Each director shall receive a authority is to be the governors then the power to The Case
per diem, to be determined by the board, for each appoint shall rotate between the governors involved with
meeting of the board actually attended by him, but no the initial appointments made by the governor in whose
director shag receive per diems in any given month in province the greatest number of service connections This is a petition for certiorari1 to annul the Decision dated 12
excess of the equivalent of the total per diems of four exists (as amended by PD 768). September 2000 of the Commission on Audit ("COA") and its
meetings in any given month. No director shall receive Resolution dated 5 July 2001. The COA affirmed the disallowance
other compensation for services to the district. of payment of allowances and bonuses to members of the interim
The above-quoted section definitely sets to naught petitioners' Board of Directors of the Catbalogan Water District.
contention that they are private corporations. It is clear therefrom
Any per diem in excess of P50.00 shall be subject to that the power to appoint the members who will comprise the
approval of the Administration (as amended by PD 768). Board of Directors belongs to the local executives of the local The Antecedents
subdivision units where such districts are located. In contrast, the
members of the Board of Directors or trustees of a private An auditing team from the COA Regional Office No. VIII in
corporation are elected from among the members and Candahug, Palo, Leyte, audited the accounts of the Catbalogan
Water District ("CWD") in Catbalogan, Samar. The auditing team 1. Motu proprio exercising jurisdiction to declare LWUA Petitioners’ contentions are untenable.
discovered that between May to December 1997 and April to June Board Resolution No. 313, Series of 1995, as amended,
1998, members of CWD’s interim Board of Directors ("Board") not in conformity with Section 13 of PD 198, as
Section 2, Subdivision D, Article IX of the 1987 Constitution
granted themselves the following benefits: Representation and amended;
expressly provides:
Transportation Allowance ("RATA"), Rice Allowance, Productivity
Incentive Bonus, Anniversary Bonus, Year-End Bonus and cash
2. Ruling that Section 13 of PD 198, as amended,
gifts. These allowances and bonuses were authorized under Sec. 2(1). The Commission on Audit shall have the power,
prohibits payment to petitioners of RATA, extraordinary
Resolution No. 313, series of 1995, of the Local Water Utilities authority, and duty to examine, audit, and settle all
and miscellaneous expenses ("EME"), and other
Administration ("LWUA"). accounts pertaining to the revenue and receipts of, and
allowances and bonuses;
expenditures or uses of funds and property, owned or
held in trust by, or pertaining to the Government, or any
During the audit, the COA audit team issued two notices of
3. Demanding the refund of the disallowed allowances of its subdivisions, agencies or instrumentalities, including
disallowance dated 1 October 1998 disallowing payment of the
and bonuses received by petitioners as interim members government-owned and controlled corporations with
allowances and bonuses received by petitioners, namely: Rodolfo
and secretary of the CWD Board. original charters, and on a post audit basis: (a) constitutional
S. De Jesus, Edelwina DG. Parungao, Hermilo S. Balucan, Avelino
bodies, commissions and offices that have been granted fiscal
C. Castillo and Danilo B. De Leon as members of the CWD Board
autonomy under this constitution; (b) autonomous state colleges
as well as Alice Marie C. Osorio as the Board’s secretary The Court’s Ruling
and state universities; (c) other government-owned or controlled
(collectively "petitioners"). The audit team disallowed the
corporations and their subsidiaries; and (d) such non-
allowances and bonuses on the ground that they run counter to
The petition is meritorious in part. governmental entities receiving subsidy or equity, directly or
Section 13 of Presidential Decree No. 198 ("PD 198").
indirectly, from or through the government, which are required by
law or the granting institution to submit such audit as a condition
Petitioners appealed to the COA Regional Office No. VIII but COA The Catbalogan Water District was created pursuant to PD 198, as of subsidy or equity. However, where the internal control system
Regional Director Dominador T. Tersol denied the appeal. amended,3 otherwise known as the Provincial Water Utilities Act of the audited agencies is inadequate, the Commission may adopt
Aggrieved, petitioners filed a petition for review with the COA of 1973. PD 198 authorized the local legislative bodies, through an such measures, including temporary or special preaudit, as are
which in a decision dated 12 September 2000 denied the petition. enabling resolution, to create their respective water districts, necessary and appropriate to correct the deficiencies. It shall keep
The COA also denied on 5 July 2001 petitioners’ motion for subject to the guidelines and regulations under PD 198. PD 198 the general accounts of the government and, for such period as may
reconsideration. further created the Local Water Utilities Administration be provided by law, preserve the vouchers and other supporting
("LWUA"), a national agency, and granted LWUA regulatory papers pertaining thereto.
powers necessary to optimize public service from water districts.
Hence, the instant petition.
(2) The Commission shall have exclusive authority, subject to the
COA ‘s Authority to Disallow Allowances and Benefits Granted limitations in this article, to define the scope of its audit and
The COA’s Ruling under LWUA Board Resolution No. 313, Series 1995 examination, establish the techniques and methods required
therefore, and promulgate accounting and auditing rules and
The COA explained that members of the CWD Board cannot For authority to grant themselves additional allowances and regulations, including those for the prevention and disallowance of
receive compensation and other benefits in addition to the per bonuses, petitioners rely on LWUA Resolution No. 131, series of irregular, unnecessary, excessive, extravagant, or unconscionable
diems allowed by Section 13 of PD 198. We quote the relevant 1995, entitled Policy Guidelines on Compensation and Other expenditures, or uses of government funds and properties.
portion of the COA’s decision: Benefits to WD Board of Directors. Petitioners assert that LWUA (Emphasis supplied)
is the government agency tasked to regulate and control water
districts created pursuant to PD 198 and that LWUA has the power The Constitution and existing laws5 mandate the COA to audit all
Resolution No. 313, s. 1995, as amended, which grants
to issue regulations to implement effectively PD 198. Petitioners government agencies, including government-owned and
compensation and other benefits to the members of the Board of
claim that the COA has no jurisdiction to construe any provision of controlled corporations with original charters. Indeed, the
Directors of CWD is not in harmony with the aforequoted
PD 198 on the compensation and other benefits granted to LWUA- Constitution specifically vests in the COA the authority to
provisions of Sec. 13, PD 198, which speaks only of per diems, the
designated members of the board of water districts. By determine whether government entities comply with laws and
amount of which is subject to approval by the administrator if more
exercising motu proprio plenary jurisdiction to construe and apply regulations in disbursing government funds, and to disallow illegal
than P50.00 each for every meeting.
Section 13 of PD 198, the COA encroached on the powers of the or irregular disbursements of government funds.6 This
LWUA. The COA also violated the presumption of legality and independent constitutional body is tasked to be vigilant and
It is a fundamental rule in statutory construction that if a statute is regularity generally accorded to policy circulars issued by the conscientious in safeguarding the proper use of the government’s,
clear, plain and free from ambiguity, it must be given literal administrative agency entrusted to enforce the law. and ultimately, the people’s property.7
meaning and applied without attempted interpretation. Thus, any
resolution granting allowances to directors of Water Districts other
Petitioners further claim that it is the Department of Budget and The Court already ruled in several cases8 that a water district is a
than that authorized in Sec. 13 of PD 198 is null and void. A
Management ("DBM"), not the COA, that has the power to government-owned and controlled corporation with a special
statutorily proscribed benefit may not be amended by a mere
administer the compensation and classification system of the charter since it is created pursuant to a special law, PD 198. The
administrative fiat.2
government service and to revise it as necessary. Finally, COA has the authority to investigate whether directors, officials or
citing Eslao v. COA,4 petitioners contend that the COA "can do employees of government-owned and controlled corporations,
The Issues no less than to faithfully observe and carry into effect the mandate" receiving additional allowances and bonuses, are entitled to such
of LWUA Board Resolution No. 313, until it is declared void in the benefits under applicable laws. Thus, water districts are subject to
proper forum. the jurisdiction of the COA.9
Petitioners contend that the COA committed grave abuse of
discretion amounting to lack or excess of jurisdiction in -
We cannot sustain petitioners’ claim that the COA usurped the While the DBM is the government agency tasked to release Relying mainly on Civil Liberties Union v. Executive
functions of the LWUA in construing PD 198 and disallowing government funds, the duty to examine and audit government Secretary,18 petitioners claim that the COA grossly erred in
payment of the additional allowances and bonuses. Such a theory accounts and expenditure properly pertains to the COA.15 requiring them to refund the allowances and bonuses they received
leads to the absurd situation where the board of an administrative in good faith. In Civil Liberties Union, the Court declared
agency, by the mere act of issuing a resolution, can put to naught Executive Order No. 284 unconstitutional as it allows Cabinet
PD 198 Expressly Prohibits the Grant of RATA, EME, and Bonuses
the broad and extensive powers granted to the COA by the members, undersecretaries or assistant secretaries to hold
to Members of the Board of Water Districts
Constitution. This will prevent the COA from discharging its multiple positions in violation of the express prohibition in Section
constitutional duty as an effective, efficient and independent 13, Article VII of the 1987 Constitution. However, the Court held
watchdog of the financial operations of the government.10 Section 13 of PD 198, as amended, reads as follows: that during their tenure in the questioned positions, respondents
are de facto officers and entitled to emoluments for actual services
rendered. The Court explained that "in cases were there is no de
Petitioners’ reliance on Eslao11 is misplaced. In Eslao, the Compensation. - Each director shall receive a per diem, to be jure officer, a de facto officer, who in good faith has had possession
Department of Environment and Natural Resources and the determined by the board, for each meeting of the board actually of the office and has discharged the duties pertaining thereto, is
Pangasinan State University entered into an agreement to evaluate attended by him, but no director shall receive per diems in any legally entitled to the emoluments of the office, and may in an
government reforestation programs. The Asian Development Bank given month in excess of the equivalent of the total per diems of appropriate action recover the salary, fees and other
granted a loan to fund the implementation of the agreement. The four meetings in any given month. No director shall receive compensations attached to the office."19 The Court considered it
personnel involved in the project were paid under the DBM-issued other compensation for services to the district. unjust that the public should benefit from the services of a de
National Compensation Circular No. 53, which dealt with foreign-
facto officer and then be freed from all liability to pay for such,
assisted projects. The COA disallowed the payment on the ground
Any per diem in excess of P50 shall be subject to approval of the services. Thus, the Court ruled that any per diem, allowances or
that the compensation should fall under the DBM-issued
Administration. (Emphasis supplied) other emoluments received by the respondents in Civil Liberties
Compensation Policy Guidelines No. 80-4, which governs all
Union for actual services rendered in the questioned positions may
projects and provides for lower compensation rates. In reversing
be retained by them.
the COA, the Court held that National Compensation Circular No. Petitioners argue that the term "compensation" in Section 13 of PD
53 amended Compensation Policy Guidelines No. 80-4 by 198 does not include RATA, EME, bonuses and other similar
excepting from the latter’s scope foreign-assisted projects. The benefits disallowed in this case. The scenario in petitioners’ case is different. The CWD Board
Court declared that the COA cannot "substitute its own judgment appointed petitioners pursuant to PD 198. Petitioners received
for any applicable x x x administrative regulation with the allowances and bonuses other than those granted to their office by
wisdom or propriety of which, however, it does not agree, at least This issue was already resolved in the similar case of Baybay PD 198. Petitioners cannot claim any compensation other than the
not before such x x x regulation is set aside by the x x x courts x x Water District v. Commission on Audit.16 In Baybay per diem provided by PD 198 precisely because no other
x." Water District, the members of the board of Baybay Water compensation is attached to their office.
District also questioned the disallowance by the COA of payment
of RATA, rice allowance and excessive per diems. The Court ruled
Clearly, Eslao is not in point. The difference is that in Eslao, the that PD 198 governs the compensation of members of the board of Nevertheless, our pronouncement in Blaquera v.
COA accepted the wisdom of Compensation Policy Guidelines No. water districts. Thus, members of the board of water districts Alcala20 supports petitioners’ position on the refund of the
80-4 but refused to accept the propriety of the exception to the cannot receive allowances and benefits more than those allowed by benefits they received. In Blaquera, the officials and employees
circular embodied in National Compensation Circular No. 53. The PD 198. Construing Section 13 of PD 198, the Court declared: of several government departments and agencies were paid
DBM issued both compensation regulations under its legislative incentive benefits which the COA disallowed on the ground that
authority to "classify positions and determine appropriate salaries Administrative Order No. 29 dated 19 January 1993 prohibited
for specific position classes and. review appropriate salaries for xxx Under S 13 of this Decree, per diem is precisely intended to be payment of these benefits. While the Court sustained the COA on
specific position classes and review the compensation benefits the compensation of members of board of directors of water the disallowance, it nevertheless declared that:
programs of agencies x x x."12 Clearly, the COA had ample districts. Indeed, words and phrases in a statute must be given
legislative authority to issue both compensation regulations. In the their natural, ordinary, and commonly-accepted meaning, due
regard being given to the context in which the words and phrases Considering, however, that all the parties here acted in good faith,
instant case, the COA was simply exercising its constitutional duty
are used. By specifying the compensation which a director is we cannot countenance the refund of subject incentive benefits for
to examine and audit disbursements of public funds that are
entitled to receive and by limiting the amount he/she is allowed to the year 1992, which amounts the petitioners have already
patently beyond what the law allows.
receive in a month, and, in the same paragraph, providing "No received. Indeed, no indicia of bad faith can be detected under the
director shall receive other compensation" than the amount attendant facts and circumstances. The officials and chiefs of
Petitioners confuse the COA which is an independent provided for per diems, the law quite clearly indicates that offices concerned disbursed such incentive benefits in the honest
constitutional body with the DBM which is under the executive directors of water districts are authorized to receive only the per belief that the amounts given were due to the recipients and the
branch of the government. The DBM is responsible for formulating diem authorized by law and no other compensation or allowance latter accepted the same with gratitude, confident that they richly
and implementing the national budget.13 It is tasked to - in whatever form. deserve such benefits.

assist the President in the preparation of a national resources and Section 13 of PD 198 is clear enough that it needs no interpretation. This ruling in Blaquera applies to the instant
expenditures budget, preparation, execution and control of the It expressly prohibits the grant of compensation other than the case.1âwphi1 Petitioners here received the additional allowances
National budget, preparation and maintenance of accounting payment of per diems, thus preempting the exercise of any and bonuses in good faith under the honest belief that LWUA
systems essential to the budgetary process, achievement of more discretion by water districts in paying other allowances and Board Resolution No. 313 authorized such payment. At the time
economy and efficiency in the management of government bonuses.17 petitioners received the additional allowances and bonuses, the
operations, administration of compensation and position Court had not yet decided Baybay Water District.21Petitioners
classification systems, assessment of organization effectiveness had no knowledge that such payment was without legal basis.
and review and evaluation of legislative proposals having Refund of the Allowances and Benefits Received in Good Faith Thus, being in good faith, petitioners need not refund the
budgetary or organizational implications.14 allowances and bonuses they received but disallowed by the COA.
WHEREFORE, the Decision of the Commission on Audit dated The local elections in Leyte, scheduled for January, 1988, were The PNOC-EDC did not, however, share the Undersecretary's
12 September 2000 as well as its Resolution dated 5 July 2001 are reset to and held on February 1, 1988. Pineda was among the views. On January 26, 1989, the PNOC-EDC, through Marcelino
AFFIRMED with MODIFICATION. Petitioners need not refund official candidates voted for, and eventually proclaimed elected to, Tongco (Manager, Engineering and Construction Department),
the Representation and Transportation Allowance, Rice the office of councilor. Some vacillation appears to have been notified Manuel S. Pineda in writing (1) that after having given him
Allowance, Productivity Incentive Bonus, Anniversary Bonus, evinced by Pineda at about this time. On February 8, 1988, he "ample time" to make some major adjustments before . . .
Year-End Bonus and cash gifts, received per Resolution No. 313, wrote to the COMELEC Chairman, expressing his desire to separation from the company," his employment was being
series of 1995, of the Local Water Utilities Administration, between withdraw from the political contest on account of what he terminated pursuant to Section 66 of the Omnibus Election Code,
May to December 1997 and April to June 1998. considered to be election irregularities;2 and on March 19, 1988, he effective upon receipt of notice, and (2) that he was entitled to
wrote to the Secretary of Justice seeking legal opinion on the "proper compensation" for the services rendered by him from the
question, among others, of whether or not he was "considered time he filed his certificate of candidacy until his actual separation
SO ORDERED.
automatically resigned upon . . . filing of . . . (his) certificate of from the service.9
candidacy," and whether or not, in case he was elected, he could
G.R. No. 100947 May 31, 1993 "remain appointed to any corporate offspring of a government-
On October 16, 1989, Pineda lodged a complaint for illegal
owned or controlled corporation."3 Nevertheless, Pineda took his
dismissal in the Regional Arbitration Branch No. VIII, NLRC,
oath of office in June, 1988 as councilor-elect of the Municipality
PNOC ENERGY DEVELOPMENT CORPORATION and Tacloban City. Impleaded as respondents were the PNOC-EDC and
of Kananga, Leyte.4 And despite so qualifying as councilor, and
MARCELINO TONGCO, petitioners, the Manager of its Engineering and Construction Department,
assuming his duties as such, he continued working for PNOC-EDC
vs. Marcelino M. Tongco.10
as the latter's Geothermal Construction Secretary, Engineering and
NATIONAL LABOR RELATIONS COMMISSION and Construction Department, at Tongonan Geothermal Project,
MANUEL S. PINEDA, respondents. Ormoc City. After due proceedings, Labor Arbiter Araceli H. Maraya, to whom
the case was assigned, rendered a decision on December 28,
NARVASA, C.J.: 1990,11 declaring Manuel S. Pineda's dismissal from the service
On June 7, 1988, Marcelino M. Tongco, Department Manager of
illegal, and ordering his reinstatement to his former position
the Engineering and Construction Department, PNOC-EDC,
without loss of seniority rights and payment of full back wages
The applicability to private respondent Manuel S. Pineda of addressed an inquiry to the latter's Legal Department regarding
corresponding to the period from his illegal dismissal up to the
Section 66 of the Election Code is what is chiefly involved in the the status of Manuel S. Pineda as employee in view of his candidacy
time of actual reinstatement. The Arbiter pointed out that the
case at bar. Said section reads as follows: for the office of municipal councilor.5 In response, the Legal
ruling relied upon by PNOC-EDC to justify Pineda's dismissal from
Department rendered an opinion to the effect that Manuel S.
the service, i.e., NHA v. Juco,12 had already been abandoned; and
Pineda should be considered ipso facto resigned upon the filing of
Sec. 66. Candidates holding appointive office or that "as early as November 29, 1988," the governing principle laid
his Certificate of Candidacy in November, 1987, in accordance with
position.— Any person holding a public appointive down by case law — in light of Section 2 (1), Article IX-B of the 1987
Section 66 of the Omnibus Election Code.6
office or position, including active members of the Constitution13 — has been that government-owned or controlled
Armed Forces of the Philippines, and officers and corporations incorporated under the Corporation Code, the
employees in government-owned or controlled Pineda appealed the PNOC-EDC Legal Department's ruling to N.C. general law — as distinguished from those created by special
corporations, shall be considered ipso facto resigned Vasquez, the Vice-President of PNOC-EDC, on July 14, 1988. In his charter — are not deemed to be within the coverage of the Civil
from his office upon the filing of his certificate of letter of appeal,7 he invoked a "court ruling in the case of Caagusan Service Law, and consequently their employees, like those of the
candidacy. and Donato vs. PNOC-Exploration Corp. . . . (to the effect that) PNOC-EDC, are subject to the provisions of the Labor Code rather
while the government-owned or controlled corporations are than the Civil Service Law.14
covered by the Civil Service Law (as is taken to mean in Sec. 66 of
Manuel S. Pineda was employed with the Philippine National Oil the Omnibus Election Code of 1985) (sic), the subsidiaries or
Co.-Energy Development Corp. (PNOC-EDC), as subsidiary of the The PNOC-EDC filed an appeal with the National Labor Relations
corporate offsprings are not." In the same letter he declared his
Philippine National Oil Co., from September 17, 1981, when he was Commission. The latter dismissed the appeal for lack of merit in a
wish to continue resign from his position as councilor/member of
hired as clerk, to January 26, 1989, when his employment was decision dated April 24, 1991. 15 PNOC-EDC sought
the Sangguniang Bayan.
terminated. The events leading to his dismissal from his job are not reconsideration;16 its motion was denied by the Commission in a
disputed. Resolution dated June 21, 1991.17
He also wrote a letter dated October 1, 1988 to the Department of
Local Government inquiring about the status of his employment
In November, 1987, while holding the position of Geothermal It is this decision of April 24, 1991 and the Resolution of June 21,
with PNOC-EDC in relation to his election as member of the
Construction Secretary, Engineering and Construction 1991 that the PNOC-EDC seeks to be annulled and set aside in the
Sangguniang Bayan. He was advised by DLG Undersecretary
Department, at Tongonan Geothermal Project, Ormoc City, Pineda special civil action for certiorari at bar. It contends that the
Jacinto T. Rubillo, Jr., by letter dated March 31, 1989, that there
decided to run for councilor of the Municipality of Kananga, Leyte, respondent Commission gravely abused its discretion:
was no legal impediment to his continuing in his employment with
in the local elections scheduled in January, 1988, and filed the PNOC-EDC while holding at the same time the elective position of
corresponding certificate of candidacy for the position. Objection municipal councilor. Cited as basis by Undersecretary Rubillo was 1) when it ruled that Manuel S. Pineda was not
to Pineda's being a candidate while retaining his job in the PNOC- Section 2(1) Article IX-B of the 1987 Constitution and this Court's covered by the Civil Service Rules when he
EDC was shortly thereafter registered by Mayor Arturo Cornejos of ruling in NASECO vs. NLRC, 168 SCRA 122. Undersecretary filed his candidacy for the 1988 local
Kananga, Leyte. The mayor communicated with the PNOC-EDC — Rubillo went on to say that Pineda could receive his per diems as government elections in November 1987;
thru Engr. Ernesto Patanao, Resident Manager, Tongonan municipal councilor as well as the corresponding representation
Geothermal Project — to express the view that Pineda could not and transportation allowance [RATA] "provided the PNOC-EDC
actively participate in politics unless he officially resigned from charter does not provide otherwise and public shall not be 2) when it ruled that Pineda was not covered
PNOC-EDC.1 Nothing seems to have resulted from this protest. prejudiced."8 by the Omnibus Election Code at the time he
filed his certificate of candidacy for the 1988
local elections;
 3) when it ruled that Pineda was illegally Section 2 (1), Article IX of the 1987 Constitution provides as employees could no longer be considered as subject to Civil Service
dismissed despite the fact that he was follows: Laws, rules or regulations.
considered automatically resigned pursuant
to Section 66 of the Omnibus Election Code;
The civil service embraces all branches, The basic question is whether an employee in a government-owned
and
subdivisions, instrumentalities, and agencies or controlled corporations without an original charter (and
of the Government, including government- therefore not covered by Civil Service Law) nevertheless falls
4) when it ruled that Pineda could occupy a owned or controlled corporations with within the scope of Section 66 of the Omnibus Election Code, viz.:
local government position and be original charters.
simultaneously employed in a government-
Sec. 66. Candidates holding appointive office
owned or controlled corporation, a situation
Implicit in the provision is that government-owned or controlled or position.— Any person holding a public
patently violative of the constitutional
corporations without original charters — i.e., organized under the appointive office or position, including active
prohibition on additional compensation.
general law, the Corporation Code — are not comprehended within members of the Armed Forces of the
the Civil Service Law. So has this Court construed the provision.21 Philippines, and officers and employees in
Acting on the petition, this Court issued a temporary restraining government-owned or controlled
order enjoining the respondent NLRC from implementing or corporations, shall be considered ipso
In National Service Corporation (NASECO), et al. v. NLRC, et al.,
enforcing its decision and resolution dated April 24, 1991 and June facto resigned from his office upon the filing
etc.,22 decided on November 29, 1988, it was ruled that the 1987
21, 1991, respectively. of his certificate of candidacy.
Constitution "starkly varies" from the 1973 charter — upon which
the Juco doctrine rested — in that unlike the latter, the present
In the comment required of him by the Court, the Solicitor General constitution qualifies the term, "government-owned or controlled When the Congress of the Philippines reviewed the Omnibus
expressed agreement with the respondent Commission's holding corporations," by the phrase, "with original charter;" hence, the Election Code of 1985, in connection with its deliberations on and
that Manuel Pineda had indeed been illegally separated from his clear implication is that the Civil Service no longer includes subsequent enactment of related and repealing legislation — i.e.,
employment in the PNOC-EDC; in other words, that his running government-owned or controlled corporations without original Republic Acts Numbered 7166: "An Act Providing for
for public office and his election thereto had no effect on his charters, i.e., those organized under the general corporation Synchronized National and Local Elections and for Electoral
employment with the PNOC-EDC, a corporation not embraced law.23 NASECO further ruled that the Juco ruling should not apply Reforms, Authorizing Appropriations Therefor, and for Other
within the Civil Service. retroactively, considering that prior to its promulgation on Purposes" (effective November 26, 1991), 6646: "An Act
January 17, 1985, this Court had expressly recognized the Introducing Additional Reforms in the Electoral System and for
applicability of the Labor Code to government-owned or controlled Other Purposes" (effective January 5, 1988) and 6636: "An Act
Petitioner PNOC-EDC argues that at the time that Pineda filed his
corporations.24 Resetting the Local Elections, etc., (effective November 6, 1987), it
certificate of candidacy for municipal councilor in November,
was no doubt aware that in light of Section 2 (1), Article IX of the
1987, the case law "applicable as far as coverage of government-
1987 Constitution: (a) government-owned or controlled
owned or controlled corporations are concerned . . . ( was to the Lumanta, et al. v. NLRC, et al.,25 decided on February 8, 1989,
corporations were of two (2) categories — those with original
following effect):18 made the same pronouncement: that Juco had been superseded by
charters, and those organized under the general law — and (b)
the 1987 Constitution for implicit in the language of Section 2 (1),
employees of these corporations were of two (2) kinds — those
Article IX thereof, is the proposition that government-owned or
As correctly pointed out by the Solicitor covered by the Civil Service Law, rules and regulations because
controlled corporations without original charter do not fall under
General, the issue of jurisdiction had been employed in corporations having original charters, and those not
the Civil Service Law but under the Labor Code.
resolved in a string of cases starting with subject to Civil Service Law but to the Labor Code because
the National Housing Authority vs. Juco (134 employed in said corporations organized under the general law, or
SCRA 172) followed by Metropolitan And in PNOC-EDC v. Leogardo, etc., et al.,26 promulgated on July the Corporation Code. Yet Congress made no effort to distinguish
Waterworks and Sewerage System 5, 1989, this Court ruled that conformably with the apparent between these two classes of government-owned or controlled
vs. Hernandez (143 SCRA 602) and the intendment of the NASECO case, supra, since the PNOC-EDC, a corporations or their employees in the Omnibus Election Code or
comparatively recent case of Quimpo government-owned or controlled company had been incorporated subsequent related statutes, particularly as regards the rule that
vs. Sandiganbayan (G.R. No. 72553, Dec. 2, under the general Corporation Law, its employees are subject to any employee "in government-owned or controlled corporations,
1986) in which this Court squarely ruled that the provisions of the Labor Code. shall be considered ipso facto resigned from his office upon the
PNOC subsidiaries, whether or not originally filing of his certificate of candidacy."29
created as government-owned or controlled
It is thus clear that the Juco doctrine prevailing at the time of the
corporations are governed by the Civil
effectivity of the fundamental charter in 1987 — i.e., that Be this as it may, it seems obvious to the Court that a government-
Service Law.
government-owned or controlled corporations were part of the owned or controlled corporation does not lose its character as such
Civil Service and its employees subject to Civil Service laws and because not possessed of an original charter but organized under
This doctrine, petitioner further argues, was not "automatically regulations,27 regardless of the manner of the mode of their the general law. If a corporation's capital stock is owned by the
reversed" by the 1987 Constitution because not "amended or organization or incorporation — is no longer good law, being at Government, or it is operated and managed by officers charged
repealed by the Supreme Court or the Congress;"19 and this Court's "stark variance," to paraphrase NASECO, with the 1987 with the mission of fulfilling the public objectives for which it has
decision in November, 1988, in National Service Corporation Constitution. In other words, and contrary to the petitioner's view, been organized, it is a government-owned or controlled
vs. NLRC, supra20 — abandoning the Juco ruling — "cannot be as of the effectivity of the 1987 Constitution, government-owned or corporation even if organized under the Corporation Code and not
given retroactive effect . . . (in view of ) the time-honored principle controlled corporations without original charters, or, as Mr. under a special statute; and employees thereof, even if not covered
. . . that laws (judicial decisions included) shall have no retroactive Justice Cruz insists in his concurring opinion in NASECO by the Civil Service but by the Labor Code, are nonetheless
effect, unless the contrary is provided (Articles 4 and 8 of the New v.NLRC,28 a legislative charter (i.e., those organized under the "employees in government-owned or controlled corporations,"
Civil Code of the Philippines)." Corporation Code), ceased to pertain to the Civil Service and its and come within the letter of Section 66 of the Omnibus Election
Code, declaring them "ipso facto resigned from . . . office upon the I On May 17, the Executive Labor Arbiter issued an order denying
filing of . . . (their) certificate of candidacy." private respondents' motion. Private respondents then appealed to
the NLRC (NLRC CA No. M-00352). On October 24, the NLRC set
The Zamboanga City Water District, petitioner herein, is a
aside the questioned order of the Executive Labor Arbiter and
What all this imports is that Section 66 of the Omnibus Election government-owned and controlled corporation engaged in the
ordered respondent Laquio's reinstatement, if not yet reinstated,
Code applies to officers and employees in government-owned or business of supplying water in the City of Zamboanga. Private
and granted full back wages to him from March 6, 1991 up to the
controlled corporations, even those organized under the general respondents are all employees of petitioner.
day prior to his actual reinstatement; and to the other private
laws on incorporation and therefore not having an original or
respondents from March 21, 1989 up to April 15, 1991, including
legislative charter, and even if they do not fall under the Civil
In March 1987, a strike occurred in the company. It was conducted the period of effectivity of the temporary restraining order of this
Service Law but under the Labor Code. In other words, Section 66
and participated in by private respondents, for which reason they Court in G.R. Nos. 95219-20.
constitutes just cause for termination of employment in addition
were separated from their employment. Petitioner thereafter filed
to those set forth in the Labor Code, as amended.
on March 17, 1987 a complaint. before the Labor Arbiter to declare
Petitioner moved for a reconsideration, which the NLRC however
the said strike illegal (NLRC Case No. RAB-IX-03-0090-87). The
denied on February 19, 1992.
The conclusions here reached make unnecessary discussion and following day, March 18, the Zamboanga Utilities Labor Union
resolution of the other issues raised in this case. (ZULU), to which private respondents belonged, filed before the
Labor Arbiter, a complaint against petitioner for illegal dismissal Hence, this petition.
and unpaid wages (NLRC Case No. RAB-IX-03-0092-87).
WHEREFORE, the petition is GRANTED; the decision of public
respondent National Labor Relations Commission dated April 24, II
1991 and its Resolution dated June 21, 1991 are NULLIFIED AND The two cases were consolidated and heard together, and on April
SET ASIDE; and the complaint of Manuel S. Pineda is 19, 1988, a consolidated decision was rendered by the Executive
Petitioner contends that the NLRC had no jurisdiction to issue the
DISMISSED. No costs. Labor Arbiter declaring both the strike and the dismissal of private
resolutions in question because jurisdiction over labor disputes is
respondents illegal and ordering the reinstatement of private
vested in the Civil Service Commission. It also argues that the
respondents to their former positions, without loss of seniority
SO ORDERED. NLRC committed grave abuse of discretion amounting to lack or in
rights and privileges, but without back wages.
excess of jurisdiction when it ordered the payment of the salaries
of private respondent during the effectivity of the restraining order
G.R. No. 104389 May 27, 1994
Petitioner appealed to the NLRC. On July 17, 1990, the NLRC, of this Court in G.R. Nos. 95219-20.
through respondent Commissioners, affirmed the decision of the
ZAMBOANGA CITY WATER DISTRICT, petitioner, Executive Labor Arbiter, with the sole modification that the strike
There is no dispute that petitioner, a water district with an original
vs. leader, respondent Felix Laquio herein, be suspended from work
charter, is a government-owned and controlled corporation. The
PRESIDING COMMISSIONER MUSIB M. BUAT, without pay for a period of six months, effective ten days from
established rule is that the hiring and firing of employees of
COMMISSIONERS LEON G. GONZAGA, JR., and OSCAR receipt of the decision.
government-owned and controlled corporations are governed by
N. ABELLA, and PRIVATE RESPONDENTS LUIS C.
the provisions of the Civil Service Law and Civil Service Rules and
MARIANO, FELIX G. LAQUIO, FRANCISCO C.
Petitioner received a copy of the decision of the NLRC on August Regulations (Tanjay Water District v. Gabaton, 172 SCRA 253
OLIVEROS, MARITTA S. DELOS REYES,
27 (Rollo, p. 32). Three days later, private respondents filed with [1989]; Hagonoy Water District v. National Labor Relations
FRANCISBELLO D. CRUZ, EXEQUIEL M. DAYOT, JR.,
the Executive Labor Arbiter a motion for execution of the said Commission, 165 SCRA 272 [1988]; National Housing Corporation
ERIC A. DELGADO, RICARDO M. FERRER, JOVITO
decision. On September 24, the Executive Labor Arbiter granted v. Juco, 134 SCRA 172 [1985]; Baguio Water District v. Trajano, 127
DUHAYLUNGSOD, ANTONIO F. ALCANTARA,
the writ of execution and ordered petitioner to reinstate all private SCRA 730 [1984]. Jurisdiction over the strike and the dismissal of
RICARDO M. CORTEZ, TEOBALDO M. FLORES, ZOILO
respondents. private respondents is therefore lodged not with the NLRC but with
J. CAPUY, BERNARDINO T. ALDINETE, ANGIEL M.
the Civil Service Commission.
ESPINA, WINIFRIDO P. CASIMIRO, ENRIQUE M.
MANUEL, JR., JOSE P. ATILANO, ANTONIO F. DELOS On September 28, this Court issued a restraining order in G.R. Nos.
REYES, JR., ELEUTERIO S. TARROZA, ANTONIO B. 95219-20 enjoining, until further orders, the execution of the Nevertheless, petitioner never raised the issue of lack of
DESPALO, ROLANDO B. GARCIA, CESAR P. REYES, NLRC Decision dated July 17, 1990. However, on March 13, 1991, jurisdiction before the Executive Labor Arbiter, the NLRC or even
GENEROSO L. CODINO, MARIO E. FERNANDO, we dismissed the petition, affirmed the NLRC Decision dated July this Court in G.R. Nos. 95219-20. In fact, petitioner itself filed the
BERNARDO B. GEROLAGA, ANTONIO F. VESAGAS, 17, 1990 and lifted the restraining order granted earlier. complaint before the Executive Labor Arbiter in NLRC Case No.
ANTONIO L. TUBIG, SAILILLA A. ABDULLA, NOEL A. RAB-IX-03-0090-87, sought affirmative relief therefrom and even
FERNANDO, SEVERIANO CASIMIRO, RODOLFO participated actively in the proceedings below. It is only now in this
Petitioner received a copy of the decision of the Supreme Court on
DESCALZO, ARTEMIO DE LEON, and SANTIAGO case before us, after the NLRC ordered payment of back wages, that
April 10 and on April 16, it reinstated 27 of the respondent
FERRER, respondents. petitioner raises the issue of lack of jurisdiction. Indeed, it is not
employees. On the same day, petitioner informed the Executive
fair for a party who has voluntarily invoked the jurisdiction of a
Labor Arbiter that respondent Laquio would be reinstated on
tribunal in a particular matter to secure an affirmative relief
QUIASON, J.: October 16 after the expiration of Laquio's six-month suspension.
therefrom, to afterwards repudiate and deny that very same
jurisdiction to escape a penalty (Ocheda v. Court of Appeals, 214
This is a petition for certiorari under Rule 65 of the Revised Rules On April 17, private respondents filed a motion to compel the SCRA 629 [1992]; Royales v. Intermediate Appellate Court, 127
of Court to reverse and set aside the Resolutions dated October 24, immediate reinstatement of respondent Laquio and the payment SCRA 470 [1984]; Tijam v. Sibonghanoy, 23 SCRA 29 [1968]).
1991 and February 19, 1992 of the National Labor Relations of their back wages. According to private respondents, the decision
Commission (NLRC) in NLRC CA No. M-000352. of the NLRC was executory immediately upon receipt by petitioner
Petitioner is thus estopped from assailing the jurisdiction of the
of a copy thereof on August 27, 1990.
NLRC and is bound to respect all the proceedings below.
The second issue involves the determination of when private him in the payroll. Immediate reinstatement is mandated and is Private respondent Ceferino R Laur was a patient of the then Tala
respondents should be reinstated as ordered by the decision of the not stayed by the fact that the employer has appealed, or has posted Leprosarium (now Jose N. Rodriguez Memorial Hospital), having
Executive Labor Arbiter dated April 19, 1988. Their salaries start a cash or surety bond pending appeal. been admitted thereto in 1951 for treatment of Hansen's disease,
to toll from said date. commonly termed leprosy. He was discharged in 1956 after he was
deemed to have been cured of his affliction.
The issuance of the temporary restraining order in G.R. Nos.
Petitioner claims that private respondents, except respondent 95219-20 did not nullify the rights of private respondents to their
Laquio, were entitled to reinstatement only after April 10, 1991 reinstatement and to collect their wages during the period of the In 1975, he was employed at the DJRMH as a patient-assistant by
when it received a copy of the decision of the Supreme Court in effectivity of the order but merely suspended the implementation the then Hospital Director, Dr. Artemio F. Runez, upon the
G.R. Nos. 95219-20. Petitioner reinstated said private respondents thereof pending the determination of the validity of the NLRC recommendation of the Barangay Captain of Tala. Specifically
on April 16, 1991. In the case of respondent Laquio, petitioner resolutions subject of the petition. Naturally, a finding of this Court assigned as a member of the Patient-Assistant Police Force, he was
reinstated him on October 16, 1991 after the expiration of the six- that private respondents were not entitled to reinstatement would accorded a compensation/salary, initially, in the amount of
month suspension. mean that they had no right to collect any back wages. On the other P110.00. This was gradually increased through the years,
hand, where the Court affirmed the decision of the NLRC and depending upon the availability of funds. His salary was chargeable
recognized the right of private respondents to reinstatement, as in to the maintenance and operating expenses of the hospital.
Petitioner argues that the execution of the NLRC decision dated
G.R. Nos. 95219-20, private respondents are entitled to the wages
July 17, 1990 was suspended by the temporary restraining order
accruing during the effectivity of the temporary restraining order.
issued by this Court in G.R. Nos. 95219-20. On September 15, 1989, complaints for Alarm and Scandal, Oral
Defamation, Grave Threats, Concealment of Deadly Weapon,
WHEREFORE, the petition is DISMISSED. Violation of the Code of Ethics of Policemen, and Conduct
The Executive Labor Arbiter agreed with petitioner's contention.
Unbecoming of a Police Officer were filed against said private
respondent, pursuant to a report made by his Chief of Police. Upon
SO ORDERED.
The NLRC was of the view that private respondents should have a finding of guilt of the aforesaid offenses, the said private
been reinstated on March 21, 1989 and paid their back wages from respondent was meted the penalty of suspension for sixty (60)
that date to April 15, 1991 including the period of effectivity of the G.R. No. 113212 December 29, 1995 days, with a stern warning that a repetition of the same would
temporary restraining order of this Court in G.R. Nos. 95219-20. result in his outright dismissal by petitioner Dr. Cesar J. Viardo in
Respondent Laquio on the other hand, should have been reinstated his capacity as Chief of Hospital.1
THE DEPARTMENT OF HEALTH (DR. JOSE N.
on March 6, 1991 and paid his back wages from said date up to the
RODRIGUEZ MEMORIAL HOSPITAL) and CESAR J.
day prior to his actual reinstatement.
VIARDO, M.D., in his capacity as Director of the Dr. Jose On July 15, 1990, private respondent Laur got involved in the
N. Rodriguez Memorial Hospital, petitioners, mauling of one, Jake Bondoc, along with two policemen, Corporal
The reckoning date of March 21, 1989 used by the NLRC was the vs. Ferrer and Patrolman Berdon, Private respondent's account of the
date of effectivity of R.A. No. 6715, amending the third paragraph NATIONAL LABOR RELATIONS COMMISSION, LABOR incident is to the effect that, while private respondent and his
of Article 223 of the Labor Code which provides. ARBITER CORNELIO L. LINSANGAN and CEFERINO R. companions were manning their posts at the hospital's
LAUR, respondents. Administration Building, a group of twelve (12) young boys
engaged another group of four male youngsters (4) in a stone-
xxx xxx xxx throwing encounter. This resulted in damage to the windows of the
HERMOSISIMA, JR., J.: nearby Holy Rosary College. The caretaker of the college, Agustin
In any event, the decision of the Labor Arbiter Chan, while assessing the damage caused, was chased by the
reinstating a dismissed or separated The eternal problem of jurisdiction over Government employees is smaller group and threw stones at him. Agustin Chan ran and took
employee, insofar as the reinstatement aspect again posed in this case: Which Government agency — the National refuge at the administration building where private respondent
is concerned, shall immediately be executory, Labor Relations Commission or the Civil Service Commission — and the two policemen were on guard duty. It was at this point that
even pending appeal. The employee shall has jurisdiction over contests relating to the civil service? one of the policemen hit one of the stone throwers with a night
either be admitted back to work under the stick.2
same terms and conditions prevailing prior to
This is a Petition for Certiorari and Prohibition filed by the
his dismissal or separation or, at the option of A complaint filed by a certain Jake Bondoc, one of the young boys,
Department of Health in behalf of the Dr. Jose N. Rodriguez
the employer, merely reinstated in the payroll. against private respondent and his companions provoked an
Memorial Hospital (DJRMH) and its Director, Cesar J. Viardo,
The posting of a bond by the employer shall investigation conducted on July 27, 1990, during which
seeking to review and set aside the Resolution of the National
not stay the execution for reinstatement complainant Bondoc pointed to private respondent as the party
Labor Relations Commission in NLRC NCR CA No. 002864-92
provided herein (Emphasis supplied). responsible for his injuries even as Patrolman Berdon admitted to
(NLRC Case No. 00-09-05194-90), dated September 7, 1993,
which dismissed herein petitioners' appeal from the January 2, having hit Bondoc.
xxx xxx xxx 1992 Decision of Labor Arbiter Cornelio L. Linsangan.
On August 21, 1990, private respondent was dismissed by the Chief
Under the said provision of law, the decision of the Labor Arbiter The antecedent facts, culled from the assailed Decision rendered of Hospital, Dr. Cesar J. Viardo per Office Order No. 101, s-90, on
reinstating a dismissed or separated employee insofar as the by Labor Arbiter Cornelio Linsangan and that of the NLRC, the basis of the Public Assistance Complaints Unit's (PACU)
reinstatement aspect is concerned, shall be immediately executory, respectively, as well as from the pleadings of the parties, are not in report/investigation finding private respondent and his
even pending appeal. The employer shall reinstate the employee dispute: companions to have indeed mauled Jake Bondoc. The two
concerned either by: (a) actually admitting him back to work under policemen were merely suspended.
the same terms and conditions prevailing prior to his dismissal or
separation; or (b) at the option of the employer, merely reinstating
Consequently, on September 26, 1990, private respondent filed the non-observance of the procedure prescribed for a valid exercise be appealed to the Commission".7 However, with the issuance of
with the National Labor Relations Commission a complaint for of the power to dismiss under Sections 2, 5 and 6 of Rule XIV of Civil Service Commission Resolution No. 93-2387 on June 29,
illegal dismissal with additional claims for payment of wage the Rules Implementing B.P. Blg. 130.4 1993, such appeals shall now be filed directly with the Civil Service
differentials, holiday pay, overtime pay and 13th month pay, as well Commission. Pertinent portion of said resolution reads:
as payment of moral and exemplary damages, attorney's fees and
The aforesaid decision was appealed to the NLRC. In its
expenses of litigation and with prayer for reinstatement without
Resolution, dated September 27, 1993, the NLRC dismissed the xxx xxx xxx
loss of seniority rights against Dr. Jose N. Rodriguez Memorial
appeal, the dispositive portion of which reads:
Hospital (DJRMH) and Dr. Cesar J. Viardo. This was docketed as
"NLRC NCR Case No. 00-09-05194-90" and subsequently NOW, THEREFORE, pursuant to the
assigned to Labor Arbiter Cornelio Linsangan. WHEREFORE, respondents appeal is hereby provisions of Section 17 of Book V of the
dismissed for its failure to perfect the same on Administrative Code of 1987 which authorizes
time. 5 the Commission, as an independent
On January 2, 1993, Labor Arbiter Cornelio Linsangan rendered
constitutional body, to effect changes in its
his Decision in private respondent's favor, the dispositive portion
organization as the need arises, the
of which reads: The petitioners, thus, instituted this petition for certiorari.
Commission Resolves as it is hereby Resolved
to effect the following changes:
WHEREFORE, judgment is hereby rendered The principal issue presented in this case is whether or not
ordering the respondent hospital to: respondents NLRC and Labor Arbiter Cornelio L. Linsangan
1. Decisions in administrative cases involving
committed serious error in their decisions and acted without
officials and employees of the civil service
jurisdiction when they took cognizance of the complaint filed by
1. reinstate complainant to his former position appealable to the Commission pursuant to
private respondent Ceferino R Laur before the NLRC instead of the
or if not possible, pay him separation pay Section 47 of Book V of the Code including
Civil Service Commission.
equivalent to one month salary for every year personnel actions such as contested
of service; appointments shall now be appealed directly
The petitioners mainly contend that since the DJRMH is a to the Commission and not the MSPB; 8
government hospital, its employees are covered by Civil Service
2. pay complainant the amount of
rules and regulations and not by the Labor Code. Therefore, any
P198,000.00 representing underpaid wages, xxx xxx xxx
controversy concerning the relationship between the employees on
unpaid overtime, holiday pay and 13th month
the one hand and the hospital's administration on the other, as is
pay;
the case of private respondent, comes under the jurisdiction of the Worthy to note in this connection is the fact that the Labor Code
Merit Systems Board and the Civil Service Commission. itself provides that "the terms and conditions of employment of
3. pay the complainant full backwages which government employees shall be governed by the Civil Service Law,
as of this date amounts to P49,088.00; rules and regulations".9
We find the petition to be impressed with merit

4. pay the complainant the amount of Conformably to the foregoing, it is, indeed, the Civil Service
The petitioner-hospital, the DJRMH, originally known as the Tala
P20,000.00 as moral and exemplary Commission which has jurisdiction over the present controversy.
Leprosarium, was one of three leper colonies established under
damages; and Its decisions are subject to review by the Supreme Court. 10
Commonwealth Act No. 161. Maintained to this day as a public
medical center and health facility attached to the Department of
5. pay the complainant attorney's fees Health, the DJRMH exercises strictly governmental functions Jurisdiction is conferred by law. Where there is none, no
equivalent to 10% of the total award. 3 relating to the management and control of the dreaded agreement of the parties can provide one. 11 Consequently, it was
communicable Hansen's disease, commonly known as leprosy. As incorrect for the respondent labor arbiter to have proceeded to
it is clearly an agency of the Government, the DJRMH falls well hear the case, simply because private respondent Ceferino Laur
Respondent Labor Arbiter Linsangan so ruled because first, he has
within the scope and/or coverage of the Civil Service Law in happened to lodge his complaint before his office, 12 or to hold that
determined that, contrary to the petitioners' position that private
accordance with paragraph 1., Section 2, Article IX B, 1987 petitioners are estopped from assailing the respondent labor
respondent's employment was part of his medication and
Constitution and the provisions of Executive Order No. 292, authorities' jurisdiction over the present case simply because the
rehabilitative therapy, private respondent was in truth an
otherwise known as the Administrative Code of 1987 and petitioners have earlier submitted themselves to the said
employee in contemplation of the Labor Code, the existence of an
Presidential Decree No. 807, otherwise known as the Civil Service jurisdiction by virtue of their participation in all the stages of the
employer-employee relationship between petitioner hospital and
Decree of the Philippines. proceedings in the office of respondent Labor Arbiter Linsangan
private respondent being evident from the fact that private
and in the NLRC, and that they failed to raise the issue of
respondent's work is necessary and desirable for the operation of
jurisdiction in the said proceedings. 13
the hospital. Private respondent was allegedly performing such As the central personnel agency of the Government, the Civil
functions as were inherent to and undertaken by the members of Service Commission administers the Civil Service Law. It is,
the regular police force. This, the respondent Labor Arbiter therefore, the single arbiter of all contests relating to the civil Considering that the decision of a tribunal not vested with
believes to be an indication that what private respondent was service.6 The discharge of this particular function was formerly appropriate jurisdiction is null and void, 14 the respondent labor
assigned to do was definitely beyond his rehabilitative therapy. lodged in one of its offices, the Merit Systems Protection Board arbiter's finding of an employer-employee relationship between
Second, private respondent's dismissal was illegal because it was (MSPB) which was vested with the power, among others, "to hear the petitioner government agency and the private respondent
not for a just cause. The mauling incident was not sufficiently and decide on appeal administrative cases involving officials and should serve no purpose whatsoever. Respondent labor arbiter's
established, and, even if so established, the same would not justify employees of the civil service and its decision shall be final except order of payment of private respondent's monetary claims is
his dismissal. Such dismissal was wanting in due process in view of those involving dismissal or separation from the service which may likewise null and should not be given effect.
WHEREFORE, finding the Dr. Jose N. Rodriguez Memorial Corporation, subject to the existing rules and regulations." The rates prescribed below for the total allowances
Hospital to be within the scope of the Civil Service Law and not of resolution reads in part. (50/50 share for each type of allowances):
the Labor Code, the questioned decision of the respondent labor
arbiter dated January 2, 1992 and the resolution of the NLRC,
BOARD RESOLUTION NO. 95-50 Position 1995 1996 1997
dated September 7, 1993, are hereby REVERSED and SET ASIDE
for having been rendered without jurisdiction. The Temporary
Restraining Order issued on February 28, 1994 is hereby made RESOLVED, as it is hereby resolved that the xxx xxx xxx
permanent. three year progressive increase of the . . .
(RATA) benefits of officials of the Philippine
2.7 Operation Managers
Postal Corporation . . . equivalent to 40% of
SO ORDERED.
their basic salary, be approved subject to the
existing rules and regulations. or equivalent (SG 26) P5,100 P5,400 P5,740
G.R. No. 131529 April 30, 1999
RESOLVED FURTHER, that the increases of 2.8 Division Managers Chiefs or equivalent
IRINEO V. INTIA, JR., Postmaster General, Philippine RATA for 1995 of the following officials to be
Postal Corporation, and the Legal Officers of the PPC- implemented in the following manner, be
Main namely: WILFREDO B. SERRANO, MA. TERESA A. confirmed . . . (c) of the 40% basic salaries of (SG 25) 4,700 4,900 5,234
LORICO-GONZALES, LEONARDO C. DARANTINAO, all officials holding positions below the
JR., HENRY C. FAUSTO, LEE P. VICERAL, ROMAN T. Assistant Postmaster Generals up to Division (SG 24) 4,200 4,400 4,734
COBRADO, JESSIE R. REOTUTAR, ROMUALDO L. Managers.
RANAN, and ELEN I. NAGTALON, petitioners,
vs. Meanwhile, Republic Act No. 8174, otherwise known as "The
RESOLVED STILL FURTHER that an General Appropriations Act of 1996" was approved, Section 35 of
THE COMMISSION ON AUDIT and the CORPORATE
additional fifty percent (50%) increase of the which fixes the monthly RATA rates of government officials, to wit:
AUDITOR FOR PHILIPPINE POSTAL CORPORATION,
remaining balance thereof be implemented in
respondents.
1996;
Sec. 35. Representation and Transportation
ROMERO, J Allowances. The following officials and those
RESOLVED STILL FURTHER that the of equivalent rank as may be determined by
increase of the aforesaid benefit equivalent to the Department of Budget and Management
In this special civil action under Rule 64 of the New Rules of Court, 40% of the basic salary of all concerned while in the actual performance of their
in relation to Rule 65 thereof, petitioner seek the reversal of the officials be fully implemented in 1997. respective functions are hereby granted
Decision 1 dated November 4, 1997 of public respondent monthly commutable representation amd
Commission on Audit (COA) which affirmed the disallowances transportation allowance payable from the
xxx xxx xxx
made by respondent Corporate Auditor for Philippine Postal programmed appropriation provided for by
Corporation (PPC) of the Representation and Transportation their respective offices not exceeding the rates
Allowance (RATA) of certain officials of PPC. The dispositive On April 26, 1995, to implement the foregoing board resolution, indicated below, which shall apply to each
portion of said decision reads: then Postmaster General Eduardo P. Pilapil issued Circular No. 95- type of allowance:
22, 3 entitled "Guidelines Implementing Board Resolution No. 95-
50 prescribing new rates of RATA of PPC officials. To reproduce
Upon all the foregoing considerations, this xxx xxx xxx
the relevant parts of the circular:
Commission affirms the disallowances made
by the Auditor as concurred in by the Director,
Corporate Audit Office II, this Commission. CIRCULAR NO. 95-22 e. At P1,750 for assistant Bureau Regional
Accordingly, the instant appeal has to be, as it directors or equivalent;
is hereby denied for lack of merit.
1 The following Officials and employees are
entitled to RATA: f. At P1,625 for Chief of Division, identified as
The facts are as follows: such in the Personal Service Itemization . . .

xxx xxx xxx

On April 7, 1992, Republic Act No. 7354, otherwise known as "The On October 23, 1996, respondent Corporate Auditor for Philippine
Postal Service Act of 1992," was enacted and approved creating the Postal Corporation (PPC) served the following Notices of
Philippine Postal Corporation and defining its powers, functions, 1.6 Regional Operation Disallowance (ND) on PPC:
and responsibilities. Managers
(a) ND No. 96-0002-101(96) dated
Pursuant to the powers granted to It by the said charter, the PPC 1.7 Division Managers September 23, 1996, covering the RATA of
Board of Directors issued and approved Board Resolution No 9- Chiefs of equivalent petitioner for the month of April 1996 in the
50, 2 entitled "Approving the three-year progressive increase of total amount of P65,650.00.
Representation and Travel Allowance (RATA) benefits equivalent 2. Payment of RATA, whether commutable or
to 40% of the basic salary of the officials of the Philippine Postal reimbursable, shall be in accordance with the
 (b) ND No. 96-0004-101(96) dated 4. Paragraph 1 of the special provisions in R.A requisite review and
September 23, 1996 covering the RATA of No. 8174 admits that corporations exempted approval by the
petitioner for May 1996 amounting to from the provisions of R.A. No. 6738 like PPC President of the
P65,350.00. shall pay the salaries and allowances not in Philippines upon
accordance with the Salary Standardization recommendation of the
Law. DBM is believed to be an
On December 12, 1996, the Auditor served another notice, ND No.
ultra vires act of the
96-0007-101(96) dated November 27, 1996, covering the RATA of
corporation which
petitioners for June 1996 in the amount of P64,525.00. 5. RATA is included in the term
cannot be given legal
"emoluments," the payment of which PPC is
effect and recognition.
authorized to make under R.A. No. 7354.
Subsequently, respondent Auditor served other Notices of Additional benefits or
Disallowance covering the RATA allegedly paid in excess of that compensation that may
authorized under Section 35, R.A. 8174. On November 4, 1997, respondent Commission rendered the be granted to
decision now subject of the instant petition. The assailed decision government
is reproduced in part: officials/employees
On February 7, 1997, the new Postmaster General, Ireneo V. Intia, require a law and may
Jr. requested respondent Auditor to hold in abeyance the not be done by a mere
settlement of the above disallowances pending receipt of the legal After a careful and judicious evaluation of the expedient of a resolution
opinion they had sought from the Office of the Government facts and pertinent laws, rules and regulations or a circular of a GOCC,
Corporate Counsel (OGCC). To this, respondent Auditor replied herein obtaining, this Commission finds the as in the case of the PPC.
that the proper remedy of petitioners is appeal under Section 37, appeal devoid of merit. It must be noted that
Title VII of COA Manual on Certificate of Settlement and Balances Sections 21, 22 and 25 of R.A. 7354 never
(CSB). intended to exempt the PPC from the ambit of The above legal opinion according to the DBM
R.A 6758 What these specific sections is based on the following reasons:
provide, especially Section 25, is the
Accordingly, petitioners filed their Memorandum of Appeal with
exemption of the PPC from the coverage of the
respondent Commission for the reversal of the Auditor's decision 1. While there may be a semblance of
rules and regulations of the Compensation
and the allowance of the implementation of PPC Circular No. 95- exemption for the PPC from the rules and
and Position Classification Office which
22 as authorized by Board Resolution No. 96-50. They relied on the regulations of the Compensation and Position
relates only to the qualification, position and
following grounds: Classification Bureau, such exemption is
salary grade of the employees concerned and
subject to the qualification that PPC's own
not to the payment of additional benefits
system of compensation and classification
1. Sections 21, 22, and 25 of R A No 7354 (The including the increase in the Representation
conforms as closely as possible with that
Postal Service Act of 1992), expressly and Transportation Allowance (RATA)
provided for under R.A. No. 6758.
empower the PPC to established its own Section 22 when provides for a progressive
progressive compensation; structure and fix corporation (sic) structure for PPC personnel
the salaries and emoluments of personnel — authorizes the Corporation to grant salary 2. Such PPC exemption should be appreciated
including the grant of additional benefits like increases subject to either of two conditions in correlation with the provision of Section 6
RATA — without being subjected to the rules stated therein. As to the constitutionality of of P.D. 1597 . . .
and regulations of the Compensation and Section 6 of P.D. No. 1587, the matter is
Position Classification Office or the Salary beyond the competence of this Commission to
While it is true that Section 13 of R.A. No. 7354
Standardization Law (R.A. No. 6758). rule upon. Thus, in the absence of contrary
exempts the PPC from submitting to Congress
ruling by competent authority, this
its annual budget unless it seeks
Commission finds no cogent reason to hold
2. The legal opinion of the Department of subsidy/guaranty of its liability from the
the same as being unconstitutional as alleged
Budget and Management (DBM) dated March National Treasury, it is also true that Section
by herein appellants.
14, 1996 on which the COA based its decision 18 of the same Act provides that the PPC thru
and which states that pursuant to Section 6 of its board shall submit to both Houses of
P.D. No. 1527, the compensation structure of Insofar as the validity of resolution fixing the Congress, together with the Auditor's Report
PPC is subjected to review and approval by the allowances (e.g. RATA) of its employees by on the relevant accounts, an annual report
DBM, is not correct because Section 6 of P. D. PPC's Board the Directors is concerned, this generally dealing with the activities and
1597 is unconstitutional as it violates the rule Commission fully adopts the stand taken by operations of the Corporation during the
against the passage of irrepealable laws. the DBM in its legal opinion, dated March 14, preceding year . . . The exemption under
1996, which states that: Section 13 of R.A. No. 7354 does not in any
way intend or show that the Corporation is
3. Section 13 of R.A. No 7354 categorically exempt from R.A. 6758. 4
exempts PPC from submitting to Congress its Accordingly, the
annual budget unless the PPC requires Resolutions or Circulars,
subsidy guaranty of its liability from the of the PPC granting Aggrieved by the aforequoted decision, petitioner filed this petition
National Treasury. additional benefits or before this Court, assigning the following errors:
compensation to its
employees without the
 I. THE COMMISSION ERRED IN HOLDING approval, shall be instituted as an integral governing position classification, salary rates,
THAT PPC IS NOT EXEMPT FROM THE component of the Corporation's human levels of allowances, project and other
SALARY STANDARDIZATION LAW (R.A. resources development program. The honoria, overtime rates, and other forms of
NO. 3758). Corporation, however, may grant across the compensation and fringe
board salary increase or modify its benefits. Exemptions notwithstanding
compensation structure as to result in higher agencies shall report to the President,
II. THE COMMISSION ERRED IN
salaries, subject to either of the following through the Budget Commission, on their
CONFORMING WITH THE DBM THAT THE
conditions. position classification and compensation
RESOLUTION AND CIRCULAR OF THE PPC
plans, policies, rates and other related details
GRANTING ADDITIONAL BENEFITS TO
following such specifications as may be
ITS EMPLOYEES WITHOUT THE a) there are evidences of prior improvement in
prescribed by the President. (emphasis
REQUISITE REVIEW AND APPROVAL BY employee productivity, measured by such
supplied)
THE PRESIDENT OF THE PHILIPPINES quantitative indicators as mail volume per
THROUGH THE DBM IS AN ULTRA VIRES employee and delivery times.
ACT OF THE CORPORATION. Petitioners, however, argued that Section 6, P.D. No. 1597 has
already been repealed by Section 35 of R.A. No. 7354 which reads:
b) a law raising the minimum wage has been
III. THE COMMISSION ERRED WHEN IT enacted with application to all government
RULED THAT THE MONTHLY RATA OF employees or has the effect of classifying some Sec. 35. All acts, decrees, orders, executive
PPC OFFICIALS MUST CONFORM TO THE positions in the postal service as below the orders, instructions, rules and regulations,
AMOUNTS PRESCRIBED IN SECTION 35 floor wage. inconsistent with the provisions of this Act are
OF REPUBLIC ACT NO. 8174. repealed or modified accordingly.
Sec. 25. Exemption from Rules and
As to the first issue, petitioners argued that Sections 21, 22, and 25 Regulations of the Compensation and They pointed out further that R.A. No. 7354 (The Postal Service Act
of the PPC charter (R.A. No. 7354) exempt it from the Salary Position Classification Office. — All personnel of 1992) P.D. No. 1597, a general law which refers to all government
Standardization Law or the Compensation and Position and positions of the Corporation shall be agencies and GOCCs covered by and those exempted from the rules
Classification Office rules. The said provisions read: governed by Section 22 hereof, and as such of the CPCO. For these reasons, petitioners claimed that the power
shall be exempt from the coverage of the rules of the DBM to review and approve PPC's resolution and circulars
and regulations of the Compensation and implementing the latter's compensation plans its no longer in
Sec. 21. Powers and Function of the
Position Classification Office. The force.
Postmaster General. — As the Chief Executive
Corporation, however, shall see to it that its
Officer, the Postmaster General shall have the
own system conforms as closely as possible
following powers and functions: Petitioner likewise posited that Section 6, P.D. No. 1597 has no
with that provided for under Republic Act No.
legal effect, it being in the nature of an irrepealable provision of
6758.
law. They pointed to the phrase "agencies . . . of the national
xxx xxx xxx
government, including government-owned and controlled
Petitioners averred that since the PPC has the power under corporations, who are hereafter exempted by law from coverage . .
c) subject to the approval of the Board to Sections 21 and of R.A. No. 7354 to fix its own compensation .," as violative of the Constitutional provision that legislative power
determine the staffing pattern and the scheme and Section 25 of said charter expressly exempts it from shall be vested in the legislature and the prohibition against the
number of personnel, define their duties and the rules of the Compensation and Position Classification Office, it passage of irrepealable laws. In effect, petitioner maintained.
responsibilities, and fix their salaries and is clear that PPC Board Resolution No. 95-50 and PPC Circular 95- Section 6 limits the lawmaking powers of Congress by providing
emoluments in accordance with the approved 22 are valid corporate acts that can be the basis of the payment of for conditions to be applied to agencies or GOCCs that are yet to be
compensations structure of the Corporation. RATA to PPC officials without prior approval from the DBM. created.

xxx xxx xxx As for the DBM legal opinion which was the basis for the Even assuming arguendo that Section 6, P.D. No. 1597 has legal
disallowance of the payments of the RATA, petitioner assailed the effects, petitioners theorized, it cannot be considered as requiring
same for being erroneous. According to the DBM, notwithstanding prior approval of the DBM since provision only requires the PPC to
Sec. 22. Merit System — The Corporation shall the exemption of PPC from the rules of CPCO granted under observe the guidelines on compensation schemes and to report to
establish a human resources management Section 25 of R.A 7354, the DBM has the power to review and the President about its position classification and compensation
system which shall govern the selection, approve the compensation structure of PPC because of Section 6 of system.
hiring, appointment, transfer, promotion, or P.D. No. 1597.
dismissal of all personal. Such system shall
aim to establish professionalism and Furthermore, petitioners asserted that scrutinizing the Senate
excellence at all levels of the postal Sec. 6. Exemption from OCPC Rules and deliberations, it is clear that the management and budgetary
organization in accordance with sound Regulations. Agencies, position or groups of system of the PPC was being taken out of the control of the DBM.
principles of management. officials and employees of the national
government, including government-owned
As to the applicability of Section 35 of R.A. No. 8174 limiting the
and controlled corporations, who are
A progressive compensation structure, which amounts of RATA granted to certain employees, petitioners argued
hereafter exempted by law from OCPC
shall be based on job evaluation studies and that said provision does not apply to the monthly RATA rates of
coverage, shall observe such guidelines and
wage surveys and subject to the Board's PPC corporate officials, as PPC's budget is not covered by the
policies as may be issued by the President
Appropriations Act or R.A No. 8174. This, they said, is clear from Schedule, (b) a Wage Schedule; (c) policies Presidents, through the Budget Commission,
Section 13 of the PPC Charter (R.A. No 7354): relating to allowances, bonuses, pension on their position classification and
plans, and other benefits accruing to compensation plans, policies, rates and other
employees covered . . . (emphasis supplied). related details following such specifications
Sec. 13. Annual Budget — . . . Unless the
as may be prescribed by the President.
Corporation shall require a subsidy and/or a
(emphasis supplied).
guarantee of its liability from the National Sec. 11. Powers and Functions. — The Budget
Treasury, its budget for the year need not be Commission principally through the OCPC
submitted to Congress for approval and shall, in addition to those provided under Contrary to petitioners' position, provision still applies and has not
inclusion in the General Appropriations Act. other sections of this Decree, have the been repealed either expressly or impliedly. Their reliance on the
following powers and functions: general repealing clause in Section 35 5 of R.A. No. 7354 is
erroneous. The holding of this Court in Mecano vs. COA 6 is
On the other hand, in its comment, the Office of the Solicitor
instructive: "The question that should be asked is: What is the
General argued Section 6 of P.D. 1597 is valid and subsisting, there xxx xxx xxx
nature of this repealing clause? It is certainly not an express
having been no express or implied repeal of the assailed provision.
repealing clause because it fails to identify or designate the act or
Moreover, the Solicitor General explained that although Section 25
(g) Provide the required criteria and acts that are intended to be repealed. Rather, it is an example of a
of the PPC charter exempts the corporation from the CPCO rules
guidelines, in consultation with agency heads general repealing provision, as stated in Opinion No. 73, s. 1991. It
and regulations, under Section 6 of P.D. No. 1597, however, it is
as may be deemed necessary and subject to is a clause which predicates the intended repeal under the
still required to report the details of its compensation system to the
the approval of the Commissioner of Budget, condition that a substantial conflict must be found in existing and
President through the DBM. The two provisions in question are
for the grant of all types of allowances and prior acts. The failure to add a specific repealing clause indicates
thus compatible and reconcilable.
additional forms of compensation to that the intent was not to repeal any existing law, unless an
employees in all agencies of the government. irreconcilable inconsistency and repugnancy exist in the terms of
With respect to the argument that the PPC is exempted from the the new and old laws. This latter situation falls under the category
coverage of CPCO rules and regulations, the Solicitor General of an implied repeal."
Besides, allowances such as RATA are included in the term
observed that the said exemption is not absolute as it refers only to
"emoluments" which, under Section 21 of RA 7354, the Postmaster
exemption from the application of rules and regulations relating to
General is authorized to grant to PPC personnel with the approval As the Solicitor General correctly observed, there is no express
position and compensation classification. Moreover, the Solicitor
of the Board of Directors. Black's Law Dictionary defines repeal of Section 6 P.D. No. 1597 by R.A. No. 7354. Neither is there
General added, the term "compensation" in said law refers to the
"emolument" as that which is received as a compensation for an implied repeal thereof because there is no irreconcilable conflict
salary structure of government personnel and not to allowances.
services, or which is annexed to the possession of office as salary, between the two laws. On the one hand. Section 25 of R.A. No. 7354
fees and perquisites. provides for the exemption of PPC from the rules and regulations
From the foregoing, the issues of the present controversy may of the CPCO On the other hand, Section 6 of P.D. 1597 requires PPC
therefore be summed up as follows: (1) whether the PPC Board of to report to the President, through the DBM, the details of its salary
The Commission on Audit was, therefore, in error when it held in and compensation system. Thus, while the PPC is allowed to fix its
Directors can, by itself, grant through a resolution an increase in
its decision that "the exemption of the PPC from the coverage of own personnel compensation structure through its Board of
allowances to its officials without said resolution going to the DBM
the rules and regulations of the Compensation and Position Directors, the latter is required to follow certain standards in
for review and approval and (2) whether the RATA granted to PPC
Classification Office . . . relates only to the qualification, position formulating said compensation system. One such standard is
officials falls within the amounts provided in the General
and salary grade of the employees concerned and not to the specifically stated in Section 25 of R.A. No. 7354:
Appropriations Act.
payment of additional benefits including the increase in the
Representation and Transportation Allowance (RATA).
This Court rules in the negative on both issues. Sec. 25. Exemption from Rules and
Regulations of the Compensation and
While the PPC Board of Directors admittedly acted within its Position Classification Office. — All personnel
First, it is conceded that the PPC, by virtue of its charter, R.A. No. powers when it granted the RATA increases in question, the same and positions of the Corporation shall be
7354, has the power to fix the salaries and emoluments of its should have first been reviewed by the DBM before they were governed by Section 22 hereof, and as such
employees. This function, being lodged in the Postmaster General, implemented Sections 21, 22, and 25 of the PPC charter should be shall exempt from the coverage of the rules
the same must be exercised with the approval of the Board of read in conjunction with Section 6 of P.D. No. 1597: and regulations of the Compensation and
Directors. This is clear from Sections 21 and 22 of said charter. Position Classification Office. The
Sec 6. Exemption from OCPC Rules and Corporation, however, shall see it that its
Petitioners correctly noted that since the PPC Board of Directors Regulations. Agencies, position or groups of own system conforms as closely as possible
are authorized to approve the Corporation's compensation officials and employees of the national with that provided for under Republic Act
structure, it is also within the Board's power to grant or increase government, including government-owned No. 6758. (emphasis supplied)
the allowances of PPC officials or employees. As can be gleaned and controlled corporations, who are
from Sections 10 and 17 of P.D. No. 985 (A Decree Revising the hereafter exempted by law from OCPC To sustain petitioners' claim that it is the PPC and PPC alone that
Position Classification and Compensation System in the National coverage, shall observed such guidelines and should ensure that its compensation system conforms as closely as
Government, and Integrating the Same), the term "compensation" policies as may be issued by the President possible with that of R.A. No. 6758 will result in an invalid
includes salaries, wages, allowances, and other benefits. governing position classification, salary rates, delegation of legislative power. If such interpretation is adopted,
levels of allowances, project and other the law would, in effect, be granting PPC unfettered discretion to
honoraria, overtime rates, and other forms of fix its compensation structure, something the legislature could not
Sec. 10. The Compensation System — The
compensation and fringe benefits. Exemption have intended.
Compensation System consists of (a) a Salary
notwithstanding, agencies shall report to the
As the Solicitor General put it, Section 6 of P.D. No. 1597 is the incentives for its personnel to render better services. Specifically, SO ORDERED.
"detail" intended to fill the gap in such laws as R.A. No. 7354 in fiscal autonomy allows the PPC to attract and keep professional
order to ensure that delegation of legislative authority will be and competent people within its ranks.
G.R. No. 143784 February 5, 2003
"canalized within banks to keep it from overflowing."
To sum up, the PPC being a government-owned and controlled
PHILIPPINE RETIREMENT AUTHORITY
It should be emphasized that the review by the DBM of any PPC corporation with an original charter, it falls within the scope of the
(PRA), petitioner,
resolution affecting the compensation structure of as personnel Civil
vs.
should not be interpreted to mean that the DBM can dictate upon Service. 9 Thus, as regards personnel matters, the Civil Service Law
JESUSITO L. BUÑAG and ERLINA P.
the PPC Board of Directors and deprive the latter of its discretion applies to the PPC. Its Board of Directors is authorized under its
LOZADA, respondents.
on the matter. Rather, the DBM's function is merely to ensure that charter to formulate and implement its own system of
the action taken by the Board of Directors complies with the compensation for its personnel, including the payment of RATA.
requirements of the law, specifically, that PPC's compensation In the exercise of such power, it is not required to observe the rules DECISION
system "conforms as closely as possible with that provided for and regulations of the Compensation and Position Classification
under R.A. No. 6758." Office. Neither is it required to follow strictly the amounts provided
for in the General Appropriations Act as its annual budget is not PUNO, J.:
covered thereby. However, since the PPC charter expressly
Sec. 25 of R.A. No. 7353 and Section 6 of P.D. No. 1597 can thus be
exempts it from the rules and regulations of the CPCO, said Board Before the Court is a Petition for Review on Certiorari involving
read together and harmonized to give effect to both provisions.
is not required to follow the CPCO's guidelines in formulating a alleged overpayment by the petitioner Philippine Retirement
This Court has held that statutes should be construed in light of the
compensation system for the PPC employees. 10 Authority (PRA) of certain benefits and allowances to its
objective to be achieved and the evil or mischief to be suppressed,
and they should be given such construction as will advance the employees, particularly respondents herein. Petitioner PRA asks
object, suppress the mischief, and secure the benefits intended. 7 In other words, the general rule is that the PPC is covered by the the Court to resolve the legal question of whether disbursements
Civil Service Law as regards all personnel matters except those made by PRA of compensation, allowances and other benefits to its
affecting the compensation structure and position classification in employees prior to the effectivity of R.A. No. 6758 or the
Clearly, therefore, no implied repeal can be deduced in this case. Compensation and Position Classification Act of 19891 is subject to
the corporation which are left to the PPC Board of Directors to
Worth reiterating is the rule in statutory construction that repeals the review of the Department of Budget and Management.
formulate in accordance with law. It must be stressed that the
by implication are not favored. When statutes are in pari materia,
Board's discretion on the matter of personnel compensation is not
they should be construed together. A law cannot be deemed
absolute as the same must be exercised in accordance with the Petitioner PRA is a government-owned and controlled corporation
repealed unless it is clearly manifest that the legislature so
standard laid down by law, that is, its compensation system, created on July 4, 1985 under Executive Order No. 1037.2 PRA
intended it.
including the allowances granted by the Board to PPC employees, became operational on September 8, 1986.3 Private respondent
must strictly conform with that provided for other government Jesusito L. Buñag is the former deputy general manager of
As regards petitioners' argument that P.D. No. 1597 cannot be agencies under R.A. No. 6758 (Salary Standardization Law) in petitioner PRA while private respondent Erlina P. Lozada is the
given any legal effect as it is unconstitutional because it is in the relation to the General Appropriations Act. To ensure such incumbent department manager of petitioner PRA.
nature of an irrepealable law, suffice it to say that this Court will compliance, the resolutions of the Board affecting such matters
refrain from striking down a law if the case can be decided on other should first be reviewed and approved by the Department of
grounds. The Court will not touch the issue of unconstitutionality Budget and Management pursuant to Section 6 of P.D. No. 1597. As of July 1, 1989, in addition to their basic salaries, private
unless it is the very lis mota of the case. Thus, the Supreme Court respondents were each receiving from PRA the following
held. "It is a well-established rule that a court should not pass upon allowances and benefits: a) Cost of Living Allowance (COLA), 40%
WHEREFORE, premises considered, the petition is hereby of the basic salary; b) Amelioration Allowance, 10% of the basic
a constitutional question and decide a law to be unconstitutional
DISMISSED and the assailed decision dated November 4, 1997 is salary; c) additional COLA, ₱300.00 a month; d) rice subsidy,
or invalid, unless such question is raised by the parties and that
AFFIRMED with the following MODIFICATIONS: ₱400.00 per month; e) meal subsidy, ₱525.00 a month; f) children
when it is raised, if the record also present some other ground upon
which the court may raise its judgment, that course will be adopted allowance, ₱30.00 a month; and g) Representation and
and the constitutional question will be left for consideration until (a) The exemption of the Philippine Postal Corporation from the Transportation Allowance (RATA) in various amounts.4
such question will be unavoidable. 8 coverage of the rules and regulations of the Compensation and
Position Classification Office includes, not only the fixing of the In a letter dated December 29, 1992, the Office of the President,
qualification, position, and salary grade of the Corporation's through then Executive Secretary Edelmiro A. Amante, Sr.
With respect to the second issue of whether the RATA granted to
employees but also the payment of additional benefits, including approved the Corporate Operating Budget of petitioner PRA for
PPC officials must fall within the amounts provided for the in the
increases in their Representation and Transportation Allowance; calendar year 1992 in the amount of ₱25,288,091.00. In the same
General Appropriations Act as stated we rule in the negative.
letter, the amount of ₱9,129,833.00 representing
(b) The Representation and Transportation Allowance granted to unjustified/unauthorized allowances, fringe benefits and other
Sec. 13 of the PPC charter expressly provides for PPC's fiscal items was disallowed.5
the concerned employees of the Corporation need not be limited to
autonomy. Thus, unless PPC requires a subsidy and/or a guarantee
the amounts provided for in the General Appropriations Act; and
of its liability from the National Treasury, its annual budget need
not be submitted to Congress for approval and included in the In a letter dated February 1, 1993, PRA sought reconsideration
General Appropriations Act. (c) However, the compensation system set up must conforms as from the Office of the President on the disallowances, in particular,
closely as possible with that provided for other government the amount of ₱1,324,822.00 out of the ₱9,129,833.00 disallowed
agencies under R.A. No. 6758 in relation to the General disbursements representing supposed over-provision and
The intention of the lawmakers here is to promote the efficiency of payment of benefits and allowances to PRA employees. The
Appropriations Act and must, moreover, be reviewed and
the postal service by allowing the PPC to use its profits from its amount of ₱1,324,822.00 is itemized as follows:6
approved by the Department of Budget and Management pursuant
operations to upgrade its facilities and equipment and provide
to Section 6 of P.D. No. 1597.1âwphi1.nêt
 a) Over-provision of RATA "[I]t is worthy to note that the salaries actually received by the Further, PRA manifests that while E.O. No. 1037 grants the PRA
₱193,200.00 concerned personnel as of June 30, 1989 which were used as a Board the power to provide a compensation scheme for its
…..……………………..
basis in computing the allowances to be integrated and in employees and fix reasonable allowances and benefits, PRA has not
b) Transition Allowance determining the transition allowance to be granted were not the approved or acted on any matter in this respect.
611,454.00 basic salaries as certified and authorized by the DBM. Hence, there
………………..…………...
appears to be over computation of allowances to the integrated and
Private respondents, on the other hand, argue that PRA has the
c) Provision for Hospitalization transition allowances granted." (emphasis supplied)
100,000.00 requisite power and authority to impose and implement a
….…………………
compensation scheme for its employees without need of prior
d) Provision for Provident Fund Private respondents then elevated the matter to the Office of the approval or authority from the Department of Budget and
420,168.00 President. The case was docketed as O.P. Case No. 95-L-6336. Management. They cite as basis Section 6 (f) of E.O. No. 1037
Contribution
which grants the PRA Board the power to "establish and fix, review,
revise and adjust the appropriate compensation scheme of the
On December 18, 1995, the Office of the President reversed the
TOTAL ₱1,324,822.00 officers and employees of [PRA] with reasonable allowances,
ruling of the Department of Budget and Management and awarded
bonuses and other incentives." They allege that by virtue of this
to the private respondents the allowances and benefits claimed. It
provision, prior to R.A. No. 6758, PRA was exempt from the
ruled that "the exemption of PRA from the jurisdiction of [the
The Office of the President denied the request for reconsideration regulatory authority of the Office of Compensation and Position
Department of Budget and Management], as provided under the
in a letter dated September 23, 1993.7 On October 12, 1993, PRA Classification, notwithstanding the provisions of P.D. No. 985 and
PRA charter, remained effective and legally impervious to the
filed a request for clarification of the order denying the request for P.D. No. 1597. Moreover, private respondents argue that the
assertions by [the Department of Budget and Management] of its
reconsideration.8 In reply thereto, the Office of the President disallowances in question were based on Department of Budget
authority."11 As no prior approval or authority is required from the
explained in a letter dated November 11, 1993 that the approved and Management Corporate Compensation Circular No. 10 (DBM-
Department of Budget and Management with respect to the
Corporate Operating Budget of PRA for calendar year 1992 is CCC No. 10), an issuance which was subsequently rendered
compensation scheme of PRA and the grant of allowances by it to
subject to the following restrictions:9 ineffective by this Court due to its non-publication in the Official
its employees, the Office of the President held that disbursements
Gazette.14
made by PRA representing compensation and allowances of PRA
"1. The approval refers to expenditures/ceilings for each officials and employees prior to the effectivity of July 1, 1989 were
expenditure class and shall not be construed as approval valid. It applied the principle of "non-diminution of benefits" The proper resolution of the case at bar involves a determination
of specific items of expenditure; embodied in the transitory provisions of R.A No. 6758 and of the applicable law, rules and regulations governing the
concluded that private respondents are entitled to continue imposition of allowable compensation, allowances and monetary
receiving the compensation and benefits previously enjoyed by incentives to the employees of the PRA prior to the effectivity of
2. Salaries, wages, allowances and benefits shall be in them. Thus, the Office of the President directed the Department of R.A. No. 6758 and the legal effects of the subsequent passage of
accordance with the approved Position Allocation List, Budget and Management to provide enough funds to cover the R.A. No. 6758.
pursuant to the Compensation and Position salaries and allowances of the PRA officials and employees. The
Classification Act of 1989 (R.A. 6758); subsequent Motions for Reconsideration filed by the Department
This issue is not without precedent.
of Budget and Management and by petitioner PRA were denied by
3. Payment of other benefits, such as bonuses, clothing, the Office of the President.
representation, transportation allowances, and such In the case of Intia, Jr. v. Commission on Audit,15 the Philippine
other allowances shall be in accordance with Sections Postal Corporation (PPC) argued that by virtue of the provisions of
Consequently, petitioner PRA filed a Petition for Review with the
5.4, 5.5, and 5.6 of Corporate Compensation Circular No. its charter, 16 PPC may unilaterally grant and/or increase the
Court of Appeals in accordance with Rule 43 of the Rules of Court,
10, National Compensation Circular (NCC) No. 66, Representation and Transportation Allowance of its officials
as amended. On December 14, 1999, the Court of Appeals rendered
dated September 12 1991, and NCC No. 67, dated without the prior approval of the Department of Budget and
a decision affirming the ruling of the Office of the President. On
January 1, 1992; and Management. The PPC cited Section 21 (c) of its charter which
June 19, 2000, it denied petitioner’s Motion for Reconsideration.
grants the PPC the power and authority to "fix salaries and
emoluments [of its employees] in accordance with the approved
4. All expenditures shall be made within the limits of In the instant petition, PRA, through the Office of the Government compensation structure of [PPC]." Further, the PPC argued that
available funds realized by PRA from corporate Corporate Counsel, argues that the Court of Appeals erred in Section 25 of its charter exempts the PPC "from the coverage of the
revenues." applying the transitory provisions of R.A. No. 6758 in upholding rules and regulations of the Compensation and Position
the continued grant of compensation and allowances received by Classification Office."
Hence, petitioner PRA reduced the compensation of private private respondents prior to the effectivity of said law. PRA
respondents and stopped the payment of RATA and other maintained that these allowances and benefits were not authorized
In ruling against PPC, this Court declared that the provisions of the
allowances to private respondents. or approved by the Department of Budget and Management,
PPC charter should be read in conjunction with Section 6 of P.D.
contrary to E.O. No. 1037 (PRA Charter) in relation to P.D No.
No. 1597.17 The said section reads:
98512 and P.D. No. 159713 . PRA explains that prior to R.A. No. 6758,
Feeling aggrieved, private respondents sought the legal opinion of disbursements of compensation, allowances and other benefits to
the Department of Budget and Management on the disallowance PRA employees are subject to the review of the Department of "Sec. 6. Exemption from OCPC Rules and Regulations.—Agencies,
and reduction of amount of fringe benefits and other allowances Budget and Management in accordance with P.D. No. 985 and P.D. positions or groups of officials and employees of the national
previously received by them. On January 11, 1995, the Department No. 1597. PRA reasoned that the transitory provisions of R.A. No. government, including government-owned and controlled
of Budget and Management opined that "the total monthly 6758 which authorize the continued grant of allowances and corporations, who are hereafter exempted by law from OCPC
compensation and allowances sought have no legal basis."10 The benefits received by incumbents as of the effectivity of the said law coverage, shall observe such guidelines and policies as may be
Department of Budget and Management explained: is not applicable as the law could not have contemplated the issued by the President governing position classification, salary
continued disbursement of unauthorized allowances and benefits. rates, levels of allowances, project and other honoraria, overtime
rates, and other forms of compensation and fringe benefits. Despite the power granted to the Board of Directors of PRA to "Section 12. Consolidation of Allowances and Compensation.—All
Exemptions notwithstanding, agencies shall report to the establish and fix a compensation and benefits scheme for its allowances, except for representation and transportation
President, through the Budget Commission, on their position employees, the same is subject to the review of the Department of allowances, clothing and laundry allowances; subsistence
classification and compensation plans, policies, rates and other Budget and Management. However, in view of the express powers allowance of marine officers and crew on board government
related details following such specifications as may be prescribed granted to PRA under its charter, the extent of the review authority vessels and hospital personnel; hazard pay; allowances of foreign
by the President." of the Department of Budget and Management is limited. As stated service personnel stationed abroad; and such other additional
in Intia, the task of the Department of Budget and Management is compensation not otherwise specified herein as may determined
simply to review the compensation and benefits plan of the by the [Department of Budget and Management], shall be deemed
This Court ruled in Intia that contrary to PPC’s assertion, Section
government agency or entity concerned and determine if the same included in the standardized salary rates herein prescribed. Such
6 of P.D. No. 1597 still applies and has not been repealed expressly
complies with the prescribed policies and guidelines issued in this other additional compensation, whether in cash or in kind, being
or impliedly. Although its charter grants PPC the power to fix the
regard. The role of the Department of Budget and Management is received by incumbents only as of July 1, 1989 not integrated into
compensation and benefits of its employees and exempts PPC from
supervisorial in nature, its main duty being to ascertain that the the standardized salary rates shall continue to be authorized.
the coverage of the rules and regulations of the Compensation and
proposed compensation, benefits and other incentives to be given
Position Classification Office, by virtue of Section 6 of P.D. No.
to PRA officials and employees adhere to the policies and
1597, the compensation system established by the PPC is subject to ….
guidelines issued in accordance with applicable laws.
the review of the Department of Budget and Management. In this
respect, the function of the Department of Budget and
Section 17. Salaries of Incumbents.—Incumbents of positions
Management is to ensure that the proposed compensation scheme The rationale for the review authority of the Department of Budget
presently receiving salaries and additional compensation/fringe
is consistent with applicable laws and regulations. In reconciling and Management is obvious. Even prior to R.A. No. 6758, the
benefits including those absorbed from local government units and
the provisions of the PPC Charter and the provisions of P.D. No. declared policy of the national government is to provide "equal pay
other emoluments, the aggregate of which exceeds the
1597, this Court explained: for substantially equal work and to base differences in pay upon
standardized salary rate as herein prescribed, shall continue to
substantive differences in duties and responsibilities, and
receive such excess compensation, which shall be referred to as
qualification requirements of the positions."22 To implement this
18 transition allowance. The transition allowance shall be reduced by
policy, P.D. No. 985 provided for the standardized compensation
the amount of salary adjustment that the incumbent shall receive
of government employees and officials, including those in
in the future.
"It should be emphasized that the review by the DBM of any PPC government-owned and controlled corporations. Subsequently,
resolution affecting the compensation structure of its personnel P.D. No. 1597 was enacted prescribing the duties to be followed by
should not be interpreted to mean that the DBM can dictate upon agencies and offices exempt from coverage of the rules and …."
the PPC Board of Directors and deprive the latter of its discretion regulations of the Office of Compensation and Position
on the matter. Rather, the DBM’s function is merely to ensure that Classification. The intention, therefore, was to provide a
compensation standardization scheme such that notwithstanding The transitory provisions embody the legislative intent to protect
the action taken by the Board of Directors complies with the
any exemptions from the coverage of the Office of Compensation incumbents who are receiving salaries and allowances in excess of
requirements of the law, specifically that PPC’s compensation
and Position Classification, the exempt government entity or office those granted under R.A. No. 6758 under the principle of non-
system "conforms as closely as possible with that provided for
is still required to observe the policies and guidelines issued by the diminution of pay and consistent with the rule that laws should
under R.A. No. 6758." (emphasis supplied)
President and to submit a report to the Budget Commission on only be applied prospectively in the spirit of justice and fair
matters concerning position classification and compensation play.23 However, we subscribe to petitioner’s view that the
Similarly, under P.D. No. 1037, PRA was granted the power and plans, policies, rates and other related details. This ought to be the foregoing transitory provisions do not contemplate a situation
authority to "establish and fix, review, revise and adjust the interpretation if the avowed policy of compensation where the grant of unauthorized or irregular compensation and
appropriate compensation scheme of the officers and employees of standardization in government is to be given full effect. The policy benefits would be continued or subsequently authorized by the
[PRA] with reasonable allowances, bonuses and other incentives as of "equal pay for substantially equal work" will be an empty passage of the law. It is a settled principle that in construing
may be recommended by the Chief Executive Officer/General directive if government entities exempt from the coverage of the legislative enactments, it is presumed that the legislature never
Manager of the [PRA]."19 Further, Section 13 of P.D. No. 1037 also Office of Compensation and Position Classification may freely intended undesirable consequences or absurd results.24 Statutes
exempts officers and employees of PRA from the rules and impose any type of salary scheme, benefit or monetary incentive to must receive a sensible construction that will give effect to the
regulations of the Office of Compensation and Position its employees in any amount, without regard to the compensation legislative intention and avoid an unjust or absurd conclusion.25
Classification.20 plan implemented in the other government agencies or entities.
Thus, even prior to the passage of R.A No. 6758, consistent with Consequently, despite the passage of R.A. No. 6758 providing for
In accordance with the ruling of this Court in Intia, we agree with the salary standardization laws in effect, the compensation and the continued grant of salaries and benefits to incumbents as of
petitioner PRA that these provisions should be read together with benefits scheme of PRA is subject to the review of the Department July 1, 1989, private respondents are not entitled to receive
P.D. No. 985 and P.D. No. 1597, particularly Section 6 of P.D. No. of Budget and Management. salaries, benefits and allowances that were granted without the
1597.21 Thus, notwithstanding exemptions from the authority of the prior review and approval of the Department of Budget and
Office of Compensation and Position Classification granted to PRA Private respondents argue, however, that by virtue of the effectivity Management.
under its charter, PRA is still required to 1) observe the policies and of R.A. No. 6758, they are entitled to receive the compensation and
guidelines issued by the President with respect to position allowances previously granted to them as the transitory provisions Upon the effectivity of R.A. No. 6758, it is not disputed that
classification, salary rates, levels of allowances, project and other in the said law allow the continued payment of compensation and government-owned and controlled corporations are included in
honoraria, overtime rates, and other forms of compensation and allowances to incumbents as of July 1, 1989. They allege that by the Compensation and Position Classification System provided in
fringe benefits and 2) report to the President, through the Budget being incumbents as of said date, the transitory provisions of R.A. R.A. No. 6758. Section 16 thereof repeals "[a]ll laws, decrees,
Commission, on their position classification and compensation No. 6758 should apply. The pertinent provisions are Sections 12 executive orders, corporate charters, and other issuances or parts
plans, policies, rates and other related details following such and 17 of R.A. No. 6758, viz: thereof that exempt agencies from the coverage of the
specifications as may be prescribed by the President.
[Compensation and Position Classification] System, or that
authorize and fix position classification, salaries, pay rates or
allowances of specified positions, or groups of officials and Management are unauthorized and irregular and this defect Section 2. Declaration of Policy. - The State recognizes the
employees or of agencies."26 Although the applicable legal regime cannot be cured by the transitory provisions in R.A No. 6758. potential of government-owned or -controlled corporations
with respect to salary standardization for government–owned and However, the function of the Department of Budget and (GOCCs) as significant tools for economic development. It is thus
controlled corporations is clear, the resolution of the instant Management in this regard is simply to ensure that the proposed the policy of the State to actively exercise its ownership rights in
controversy would not be complete without a discussion on the compensation and benefits scheme complies with the GOCCs and to promote growth by ensuring that operations are
application of DBM-CCC No. 10 implementing the provisions of requirements of applicable laws, rules and regulations. With consistent with national development policies and programs.
R.A No. 6758, initially issued by the Department of Budget and respect to particular items of allowances and benefits that have
Management and made effective on November 1, 1989. been disallowed in the Corporate Operating Budget of PRA for
Towards this end, the State shall ensure that:
Calendar Year 1992, which disallowance is based solely on
particular provisions of DBM-CCC No. 10, the said disallowances
It appears that one of the grounds for the disallowance of particular
cannot be given legal effect in view of the nullity of DBM-CCC No. (a) The corporate form of organization through which
items in PRA’s Corporate Operating Budget for calendar year 1992
10 prior to its re-issuance and publication. government carries out activities is utilized judiciously;
relied upon by the Office of the President in its letters dated
December 29, 1992 and November 11, 1993, which triggered the
present controversy, are the provisions of DBM-CCC No. 10.27 WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP (b) The operations of GOCCs are rationalized and
No. 47818 is MODIFIED as follows: monitored centrally in order that government assets and
resources are used efficiently and the government
In the case of De Jesus v. Commission on Audit,28 this Court held
exposure to all forms of liabilities including subsidies is
that DBM-CCC No. 10 is without legal force and effect due to the (a) Compensation and allowances granted to private
warranted and incurred through prudent means;
absence of prior publication in the Official Gazette or in a respondents prior to the effectivity of R.A. No. 6758
newspaper of general circulation. The Court further ruled that such without the authority or approval of the Department of
prior publication is a condition sine qua non to the effectiveness Budget and Management are unauthorized and (c) The governance of GOCCs is carried out in a
and enforceability of DBM-CCC No. 10.29 As a result of its disallowed; and transparent, responsible and accountable manner and
nullification, DBM-CCC No. 10 was subsequently re-issued in its with the utmost degree of professionalism and
entirety on February 15, 1999 and was published in the Official effectiveness;
(b) Particular items of disallowance of the Corporate
Gazette on March 1, 1999.30
Operating Budget of PRA for Calendar Year 1992
representing various allowances and benefits in the (d) A reporting and evaluation system, which will
As to the legal effect of the nullification of DBM-CCC No. 10 and its amount of ₱1,324,822.00 based solely on particular require the periodic disclosure and examination of the
subsequent re-issuance and publication, this Court, in Philippine provisions of DBM-CCC No. 10, in view of the nullity of operations and management of the GOCCs, their assets
International Trading Corporation v. Commission on Audit,31 ruled DBM-CCC No. 10, are void. and finances, revenues and expenditures, is enforced;
that the re-issuance and publication of DBM-CCC No. 10 does not
cure its previous defect and hence, cannot have retroactive effect.
The Court cited precisely the reason that publication is a condition The Department of Budget and Management is directed to effect (e) The governing boards of every GOCC and its
the necessary adjustments in the compensation, allowances and subsidiaries are competent to carry out its functions,
precedent to the effectivity of the law to inform the public of its
other benefits of private respondents in accordance with the fully accountable to the State as its fiduciary, and acts in
contents before their rights are affected by the
foregoing pronouncements. the best interest of the State;
same.32 Consequently, disallowances made by the Commission on
Audit in the said case that were based on DBM-CCC No. 10, prior
to its re-issuance and publication, were nullified by this Court. SO ORDERED. (f) Reasonable, justifiable and appropriate
remuneration schemes are adopted for the
Although cited as basis for the disallowance of particular benefits directors/trustees, officers and employees of GOCCs and
REPUBLIC ACT No. 10149
granted to private respondents, the records of the case at bar do their subsidiaries to prevent or deter the granting of
not clearly show what particular items contested by private unconscionable and excessive remuneration packages;
respondents are disallowed on the basis of DBM-CCC No. 10. At AN ACT TO PROMOTE FINANCIAL VIABILITY AND and
any rate, for a complete resolution of the present controversy and FISCAL DISCIPLINE IN GOVERNMENT-OWNED OR -
to prevent any confusion or misapplication, in accordance with this CONTROLLED CORPORATIONS AND TO STRENGTHEN
(g) There is a clear separation between the regulatory
Court’s ruling in Philippine International Trading Corporation v. THE ROLE OF THE STATE IN ITS GOVERNANCE AND
and proprietary activities of GOCCs, in order to achieve
Commission on Audit,33 with respect to particular items of MANAGEMENT TO MAKE THEM MORE RESPONSIVE
a level playing field with corporations in the private
allowances or benefits that have been disallowed by the Office of TO THE NEEDS OF PUBLIC INTEREST AND FOR
sector performing similar commercial activities for the
the President based on the provisions of DBM-CCC No. 10 prior to OTHER PURPOSES
public.
its re-issuance and publication, the said items of disallowance
cannot be given legal effect in view of the nullity of DBM-CCC No. Be it enacted by the Senate and House of Representatives of the
10. Section 3. Definition of Terms. –
Philippines in Congress assembled:

In sum, this Court rules that prior to R.A. No. 6758, the (a) Affiliate refers to a corporation fifty percent (50%) or
CHAPTER I
compensation and benefits scheme of petitioner PRA is subject to less of the outstanding capital stock of which is owned or
GENERAL PROVISIONS
the review authority of the Department of Budget and controlled, directly or indirectly, by the GOCC.
Management. Hence, compensation, allowances and other benefits
received by PRA officials and employees without the requisite Section 1. Short Title. - This Act shall be known as the "GOCC
(b) Appointive Director refers to:
approval or authority of the Department of Budget and Governance Act of 2011l".
 (1) In the case of chartered GOCCs, all (k) Government Agency refers to any of the various units outstanding capital stock: Provided, however, That for
members of its Board of Directors/Trustees of the Government of the Republic of the Philippines, purposes of this Act, the term "GOCC" shall include
who are not ex officio members thereof; including a department, bureau, office, instrumentality GlCP/GCE and GFI as defined herein.
or GOCC, or a local government or a distinct unit
therein.
(2) In the case of nonchartered GOCCs, (p) Nonchartered GOCC refers to a GOCC organized and
members of its Board of Directors/Trustees operating under Batas Pambansa Bilang 68, or "The
whom the State is entitled to nominate, to the (l) Government Corporate Governance Standards refer Corporation Code of the Philippines".
extent of its percentage shareholdings in such to a set of principles derived from law and practices,
GOCC; and rules and standards prescribed by the Governance
(q) Officers refer to the corporate officers of the GOCC
Commission for Government-Owned or -Controlled
as provided in its charter or bylaws, such as the CEO,
Corporations (GCG) that generate long-term and
(3) In the case of subsidiaries and affiliates, Chief Financial Officer, Chief Investment Officer,
desirable economic value for the State. It shall also refer
members of its Board of Directors/Trustees President, Vice President, General Manager, Treasurer
to a system whereby shareholders, creditors, and other
whom the GOCC is entitled to nominate to the and Corporate Secretary.
stakeholders of a corporation ensure that management
extent of its percentage shareholdings in such
enhances the value of the corporation as it competes in
subsidiary or affiliate.
an increasingly global market place. (r) Ownership Manuals refer to guidelines and rules
pertaining to the ownership by the State or corporations
(c) Board of Directors/Trustees or Board refers to the and enterprises or the exercise of such ownership
(m) Government Financial Institutions (GFls) refer to
governing body that exercises the corporate powers of a governing the GOCCs or any classification thereof.
financial institutions or corporations in which the
GOCC.
government directly or indirectly owns majority of the
capital stock and which are either: (1) registered with or (s) Per Diems refer to the compensation granted to
(d) Breakthrough Results refer to the achievement of directly supervised by the Bangko Sentral ng Pilipinas; members of the Board of Directors or Trustees of a
corporate goals or other performance indicators as or (2) collecting or transacting funds or contributions GOCC for actual attendance in meetings.
determined by the GOCC or its supervising department. from the public and places them in financial instruments
or assets such as deposits, loans, bonds and equity
including, but not limited to, the Government Service (t) Performance Evaluation System refers to the process
(e) Charter Statement refers to a statement of the Insurance System and the Social Security System. of appraising the accomplishments of GOCCs in a given
GOCC's vision, mission and core values. fiscal year based on set performance criteria, targets and
weights,
(n) Government Instrumentalities with Corporate
(f) Chartered GGCC refers to a GOCC, including Powers (GICP)/Government Corporate Entities (GCE)
Government Financial Institutions, created and vested refer to instrumentalities or agencies of the government, (u) Performance Scorecard refers to a governance and
with functions by a special law. which are neither corporations nor agencies integrated management tool forming part of the performance
within the departmental framework, but vested by law evaluation system which consists of a set of measures,
with special functions or jurisdiction, endowed with targets and initiatives that facilitate the achievement of
(g) Chief Executive Officer (CEO) refers to the highest
some if not all corporate powers, administering special breakthrough results and performance through the
ranking corporate executive, who could be the President
funds, and enjoying operational autonomy usually effective and efficient monitoring and coordination of
or the General Manager, Chairman or the Administrator
through a charter including, but not limited to, the the strategic objectives of the GOCC.
of a GOCC.
following: the Manila International Airport Authority
(MIAA), the Philippine Ports Authority (PPA), the (v) President refers to the President of the Republic of
(h) Department refers to an executive department Philippine Deposit Insurance Corporation (PDIC), the the Philippines.
created by law. This shall include any instrumentality Metropolitan Waterworks and Sewerage System
having or assigned the rank of a department, regardless (MWSS), the Laguna Lake Development Authority
of its name or designation. (LLDA), the Philippine Fisheries Development (w) Related Corporation refers to a subsidiary or affiliate
Authority (PFDA), the Bases Conversion and of a GOCC.
(i) Ex Officio Board Member refers to any individual who Development Authority (DCDA), the Cebu Port
sits or acts as a member of the Board of Directors/ Authority (CPA), the Cagayan de Oro Port Authority, the (x) Secretary refers to the person vested with the
Trustees by virtue of one's title to another office, and San Fernando Port Authority, the Local Water Utilities authority and responsibility for the exercise of the
without further warrant or appointment. Administration (LWUA) and the Asian Productivity mandate of the Department, for the discharge of its
Organization (APO). powers and functions, and who shall have supervision
and control of the Department.
(j) Fit and Proper Rule refers to the standard for
determining whether a member of the Board of (o) Government-Owned or -Controlled Corporation
Directors/ Trustees or CEO is fit and proper to hold a (GOCC) refers to any agency organized as a stock or (y) Strategy Map refers to an integrated set of strategic
position in a GOCC which shall include, but not be nonstock corporation, vested with functions relating to choices or objectives drawn by the governing body, the
limited to, standards on integrity, experience, education, public needs whether governmental or proprietary in successful execution of which results in the achievement
training and competence. nature, and owned by the Government of the Republic of of the GOCC's vision in relation to its mission or purpose
the Philippines directly or through its instrumentalities for having been created.
either wholly or, where applicable as in the case of stock
corporations, to the extent of at least a majority of its
 (z) Subsidiary refers to a corporation where at least a (4) The GOCC is in fact dormant or National Economic and Development Authority (NEDA)
majority of the outstanding capital stock is owned or nonoperational; and shall include:
controlled, directly or indirectly, through one or more
intermediaries, by the GOCC.
(5) The GOCC is involved in an activity best (1) Objectives of State ownership;
carried out by the private sector; and
Section 4. Coverage. - This Act shall be applicable to all GOCCs,
(2) Role of national government in the
GICPs/GCEs, and government financial institutions, including
(6) The functions, purpose or nature of governance of GOCCs;
their subsidiaries, but excluding the Bangko Sentral ng Pilipinas,
operations of any group of GOCCs require
state universities and colleges, cooperatives, local water districts,
consolidation under a holding company.
economic zone authorities and research institutions: Provided, (3) Modes of implementation of the
That in economic zone authorities and research institutions, the ownership policy;
President shall appoint one-third (1/3) of the board members from Upon determination by the GCG that it is to
the list submitted by the GCG. the best interest of the State that a GOCC
(4) Guidelines on the monitoring of the
should be reorganized, merged, streamlined,
operations of all GOCCs including their
abolished or privatized, it shall:
CHAPTER II Related Corporations. These shall include
THE GOVERNANCE COMMISSION FOR Strategy Maps, Charter Statements,
GOVERNMENT-OWNED OR -CONTROLLED (i) Implement the reorganization, Performance Commitments and such other
CORPORATIONS (GCG) merger or streamlining of the mechanisms;
GOCC, unless otherwise directed by
the President; or
Section 5. Creation of the Governance Commission for (5) The roles, relationships and
Government-Owned or -Controlled Corporations. - There is hereby responsibilities of the State, the Government
created a central advisory, monitoring, and oversight body with (ii) Recommend to the President Agencies to which the GOCC is attached, and
authority to formulate, implement and coordinate policies to be the abolition or privatization of the the GOCC;
known as the Governance Commission for Government-Owned or GOCC, and upon the approval of the
-Controlled Corporations, hereinafter referred to as the GCG, President, implement such
which shall be attached to the Office of the President. The GCG (6) Disclosure and transparency
abolition or privatization, unless
shall have the following powers and functions: requirements;
the President designates another
agency to implement such abolition
or privatization. (7) Code of Ethics of Directors and Officers;
(a) Evaluate the performance and determine the
relevance of the GOCC, to ascertain whether such GOCC
should be reorganized, merged, streamlined, abolished (b) Classify GOCCs into: (1) Developmental/Social (8) Creation of board committees and similar
or privatized, in consultation with the department or Corporations; (2) Proprietary Commercial oversight bodies;
agency to which a GOCC is attached. For this purpose, Corporations; (3) Government Financial, Investment
the GCG shall be guided by any of the following and Trust Institutions; (4) Corporations with Regulatory
standards: Functions; and (5) Others as may be classified by the (9) Integrated corporate reporting system;
GCG, without prejudice to further subclassifications in
each category and/or any other classification based on (10) Statement of the social responsibilities of
(1) The functions or purposes for which the
parameters as it may find relevant or material such as, the GOCC; and
GOCC was created are no longer relevant to
but not limited to, industry type. The classification shall
the State or no longer consistent with the
guide the GCG in exercising its powers and functions as
national development policy of the State; (11) Such other matters as the GCG may deem
provided herein;
proper to include in the ownership policy.
(2) The GOCC's functions or purposes
(c) In consultation with the relevant government
duplicate or unnecessarily overlap with (d) Without prejudice to the filing of administrative and
agencies and stakeholders, adopt within one hundred
functions, programs, activities or projects criminal charges, recommend to the Board of Directors
eighty (180) days from its constitution, an ownership
already provided by a Government Agency; or Trustees the suspension of any member of the Board
and operations manual and the government corporate
standards governing GOCCs: Provided, That the of Directors or Trustees who participated by commission
(3) The GOCC is not producing the desired government corporate governance. Standards or omission in the approval of the act giving rise to the
outcomes, or no longer achieving the applicable to GOCCs shall be no less rigorous than those violation or noncompliance with the ownership manual
objectives and purposes for which it was required by the Philippine Stock Exchange or the, for a period depending on the nature and extent of
originally designed and implemented, and/or Securities and Exchange Commission of listed damage caused, during which period the director or
not cost efficient and does not generate the companies, or those required by the Bangko Sentral ng trustee shall not be entitled to any emolument;
level of social, physical and economic returns Pilipinas or the Insurance Commission for banking
vis-a-vis the resource inputs; institutions and insurance companies, as the case may (e) In addition to the qualifications required under the
be. The manual shall be consistent with the Medium- individual charter of the GOCCs and in the bylaws of
Term Philippine Development Plan issued by the GOCCs without original charters, the GCG shall identify
necessary skills and qualifications required for
Appointive Directors and recommend to the President a (1) Review the functions of each of the GOCC and, upon therefrom and shall consist of classes of positions grouped into
shortlist of suitable and qualified candidates for determination that there is a conflict between the such categories as the GCG may determine, subject to the approval
Appointive Directors; regulatory and commercial functions of a GOCC, of the President.
recommend to the President m consultation with the
Government Agency to which such GOOC is attached,
(f) Establish the performance evaluation systems Section 9. Position Titles and Salary Grades. - All positions in the
the privatization of the GOCCs commercial operations,
including performance score cards which shall apply to Position Classification System, as determined by the GCG and as
or the transfer of the regulatory functions to the
all GOCCs in general and to the various GOCC approved by the President, shall be, allocated to their proper
appropriate government agency, or such other plan of
classification; position titles and salary grades in accordance with an Index of
action to ensure that the commercial functions of the
Occupational Services, Position Titles and Salary Grades of the
GOCC do not conflict with such regulatory functions.
Compensation and Position Classification System, which shall be
(g) Conduct periodic study, examination, evaluation and
prepared by the GCG and approved by the President.
assessment of the performance of the GOCCs, receive,
In the performance of its functions under subsections
and in appropriate cases, require reports on the
(a), (c), (e), (f), (g), (h) and (1) herein and in any other
operations and management of the GOCCs including, The following principles shall govern the Compensation and
review or evaluation of a GOCC that the GCG may
but not limited to, the management of the assets and Position Classification System:
conduct, the GCG shall engage the participation of the
finances of the GOCCs;
Secretary or highest ranking official of the relevant
agency or department, as the case may be. (a) All GOCC personnel shall be paid just and equitable
(h) Conduct compensation studies, develop and wages in accordance with the principle of equal pay for
recommend to the President a competitive work of equal value. Differences in pay shall be based on
Section 6. Composition of the GCG. - The GCG shall be composed
compensation and remuneration system which shall verifiable Compensation and Position Classification
of five (5) members. The Chairman with the rank of Cabinet
attract and retain talent, at the same time allowing the factors in due regard to the financial capability of the
Secretary and two (2) members with the rank of Undersecretary
GOCC to be financially sound and sustainable; GOCC;
shall be appointed by the President. The Secretaries of the
Department of Budget and Management and the Department of
(i) Provide technical advice and assistance to the Finance shall sit as ex officio members. (b) Basic compensation for all personnel in the GOCC
government agencies to which the GOCCs are attached shall generally be comparable with those in the private
in setting performance objectives and targets for the sector doing comparable work, and must be in
Section 7. Powers and Functions of the Chairman. – The
GOCCs and in monitoring GOCCs performance vis-a-vis accordance with prevailing laws on minimum wages.
management of the GCG shall be vested in the Chairman who shall
established objectives and targets; The total compensation provided for GOCC personnel
have the following powers and duties;
shall be maintained at a reasonable level with due regard
to the provisions of existing compensation and position
(j) Coordinate and monitor the operations of GOCCs,
(a) Preside over the meetings of the GCG; classification laws including Joint Resolution No.4,
ensuring alignment and consistency with the national
Series of 2009, and the GOCCs operating budget; and
development policies and programs. It shall meet at
least quarterly to: (b) Direct and manage the day -to-day affairs and
business of the GCG; (c) A review of the GOCC compensation rates, taking
into account the performance of the GOCC, its overall
(1) Review Strategy Maps and Performance
contribution to the national economy and the possible
Scorecards of all GOCCs; (c) With the approval of the GCG, determine the staffing
erosion in purchasing power due to inflation and other
pattern and the number of personnel of the GOG and
factors, shall be conducted periodically.
define their duties and responsibilities;
(2) Review and assess existing performance-
related policies including the
Any law to the contrary notwithstanding, no GOCC shall
compensation/remuneration of Board of (d) With the approval of the GCG, to appoint, remove,
be exempt from the coverage of the Compensation and
Directors/ Trustees and Officers and suspend, or otherwise discipline for cause, any employee
Position Classification System developed by the GCG
recommend appropriate revisions and of the GCG; and
under this Act.
actions; and
(e) Perform such other duties as may he delegated or
Section 10. Additional Incentives. - The GCG may recommend to
(3) Prepare performance reports of the assigned to him by the GCG from time to time.
the President, incentives for certain position titles in consideration
GOCCs for submission to the President.
of the good performance of the GOCC; Provided, That no incentives
CHAPTER III shall be granted unless the GOCC has fully paid all taxes for which
(k) Prepare a semi-annual progress report to be COMPENSATION AND POSITION CLASSIFICATION it is liable, and the GOCC has declared and paid all the dividends
submitted to the President and the Congress. In its SYSTEM FOR GOCCs required to be paid under its charter or any other laws.
report, the GCG will provide its performance assessment
of the GOCCs and recommend clear and specific actions.
Section 8. Coverage of the Compensation and Position Section 11. Non-diminution of Salaries. – The Compensation and
Within one hundred twenty (120) days from the close of
Classification System. - The GCG, after conducting a compensation Position Classification System to be developed and recommended
the year, the GCG shall prepare an annual report on the
study, shall develop a Compensation and Position Classification by the GCG and as approved by the President shall apply to all
performance of the GOCCs and submit it to the
System which shall apply to all officers and employees of the positions, on full or part-time basis, now existing or hereafter
President and the Congress; and
GOCCs whether under the Salary Standardization Law or exempt created in the GOCC; Provided, That in no case shall there be any
diminution in the authorized salaries as of December 31, 2010 of to the approval of the President, prescribe, pass upon and review (c) Avoid conflicts of interest and declare any interest
incumbent employees of GOCCs, including those exempt under the qualifications and disqualifications of individuals appointed as they may have in any particular matter before the Board;
Republic Act No. 6758, as amended, upon the implementation of officers, directors or elected CEO of the GOCC and shall disqualify
the Compensation and Position Classification System for GOCCs. those found unfit.
(d) Apply sound business principles to ensure the
financial soundness of the GOCC; and
CHAPTER IV In determining whether an individual is fit and proper to hold the
BOARD OF DIRECTORS/TRUSTEES/OFFICERS OF position of an officer, director or CEO of the GOCC, due regard
(e) Elect and/or employ only Officers who are fit and
GOVERNMENT OWNED OR CONTROLLED shall be given to one's integrity, experience, education, training
proper to hold such office with due regard to the
CORPORATIONS and competence.
qualifications, competence, experience and integrity.

Section 12. Coverage. - The duties, obligations, responsibilities Section 17. Term of Office. - Any provision in the charters of each
Where a member of the Board or an Officer, by virtue of the office,
and standards of care provided under this Chapter shall be GOCC to the contrary notwithstanding, the term of office of each
acquires or receives for oneself a benefit or profit, of whatever kind
applicable to all members of the Board of Directors/Trustees and Appointive Director shall be for one (1) year, unless sooner
or nature including, but not limited to, the acquisition of shares in
Officers of GOCCs and subsidiaries now existing or hereafter removed for cause: Provided, however, That the Appointive
corporations where the: GOCC has an interest, using the properties
created including government appointed directors in affiliate Director shall continue to hold office until the successor is
of the GOCC for their own benefit, receiving commission on
corporations. These duties, obligations and responsibilities shall appointed. An Appointive Director may he nominated by the GCG
contracts from the GOCC's assets, or taking advantage of corporate
be in addition to the powers and functions provided in the for reappointment by the President only if one obtains a
opportunities of the GOCC, all such profits or benefits shall be
individual charters or articles of incorporation and bylaws of the performance score of above average or its equivalent or higher in
subject to restitution under Section 24 of this Act, without
respective GOCCs. the immediately preceding year of tenure as Appointive Director
prejudice to any administrative, civil or criminal action against
based on the performance criteria for Appointive Directors for the
members of the Board of Directors/Trustees or Officers. This
GOCC.
Section 13. Number of Directors/Trustees. - The present number provision shall be applicable notwithstanding the fact that such
of Directors/Trustees provided in the charter of the GOCCs shall member of the Board or Officer risked one's own funds in the
be maintained. Appointment to any vacancy shall be only for the unexpired term venture.
of the predecessor. The appointment of a director to fill such
vacancy shall be in accordance with the manner provided in
Section 14. Ex Officio Alternates. - The ex officio members of the Section 20. Trustee Relation to the Properties, Interests and
Section 15 of this Act.
GOCC may designate their respective alternates who shall be the Monies of the GOCC. - Except for the per diem received for actual
officials next-in-rank to them, and whose acts shall be considered attendance in board meetings and the reimbursement for actual
the acts of their principals. Any provision of law to the contrary notwithstanding, all and reasonable expenses and incentives as authorized by the GCG,
incumbent CEOs and appointive members of the Board of GOCCs any and all realized and unrealized profits and/or benefits
shall, upon approval of this Act, have a term of office until June 30, including, but not limited to, the share In the profits, incentives of
Section 15. Appointment of the Board of Directors/Trustees of
2011, unless sooner replaced by the President: Provided, however, members of the Board or Officers in excess of that authorized by
GOCCs. - An Appointive Director shall be appointed by the
That the incumbent CEOs and appointive members of the Board the GCG, stock options, dividends and other similar offers or
President of the Philippines from a shortlist prepared by the GCG.
shall continue in office until the successors have been appointed by grants from corporations where the GOCC is a stockholder or
the President. investor, and any benefit from the performance of members of the
The GCG shall formulate its rules and criteria in the selection and Board or Officers of the Corporation acting for and in behalf of the
nomination of prospective appointees and shall cause the creation GOCC in dealing with its properties, investments in other
Section 18. The Chief Executive Officer of the GOCC. - The CEO
of search committees to achieve the same. All nominees included corporations, management of subsidiaries and other interest, are
or the highest-ranking officer provided in the charters of the
in the list submitted by the GCG to the President shall meet the Fit to be held in trust by such member of the Board or Officer for the
GOCCs, shall be elected annually by the members of the Board
and Proper Rule as defined under this Act and such other exclusive benefit of the GOCC represented.
from among its ranks. The CEO shall be subject to the disciplinary
qualifications which: the GCG may determine taking into
powers of the Board and may be removed by the Board for cause.
consideration the unique requirements of each GOCC. The GCG
Section 21. Care, Diligence and Skill in the Conduct of the
shall ensure that the shortlist shall exceed by at least fifty percent
Business of the GOCC. - The members of the Board and the Officers
(50%) of the number of directors/trustees to be appointed. In the Section 19. Fiduciary Duties of the Board and Officers. As
must exercise extraordinary diligence In the conduct of the
event that the President does not see fit to appoint any of the fiduciaries of the State, members of the Board of
business and in dealing with the properties of the GOCC. Such
nominees included in the shortlist, the President shall ask the GCG Directors/Trustees and the Officers of GOCCs have the legal
degree of diligence requires using the utmost diligence of very
to submit additional nominees. obligation and duty to always act in the best interest of the GOCC,
cautious person with due regard for all the circumstances.
with utmost good faith in all its dealings with the property and
monies of the GOCC.
Section 16. Fit and Proper. - All members of the Board, the CEO
Section 22. Power of the Board of Directors/Trustees to
and other officers of the GOCCs including appointive directors in
Discipline, Remove Officers of GOCC. - Subject to existing civil
subsidiaries and affiliate corporations shall be qualified by the Fit The members of the Board and Officers of GOCCs shall:
service laws, rules and regulations, the Board shall have the
and Proper Rule to be determined by the GCG in consultation and
authority to discipline the CEO, or order the removal from office,
coordination with the relevant government agencies to which the
(a) Act with utmost and undivided loyalty to the GOCC; upon a majority vote of the members of the Board who actually
GOCC is attached and approved by the President.
took part in the investigation and deliberation.
(b) Act with due care, extraordinary diligence, skill and
To maintain the quality of management of the GOCCs, the GCG, in
good faith in the conduct of the business of the GOCC; Section 23. Limits to Compensation, Per Diems, Allowances and
coordination with the relevant government agencies shall, subject
Incentives. - The charters of each of the GOCCs to the contrary
notwithstanding, the compensation, per diems, allowances and (f) Local and foreign borrowings; purchase a corporation or acquire controlling interest therein shall
incentives of the members of the Board of Directors/Trustees of submit its proposal to the GCG for review and approval of the
the GOCCs shall be determined by the GCG using as a reference, President.
(g) Performance scorecards and strategy maps;
among others, Executive Order No. 24 dated February 10, 2011:
Provided, however, That Directors/Trustees shall not be entitled to
CHAPTER VII
retirement benefits as such directors/trustees. (h) Government subsides and net lending;
MISCELLANEOUS PROVISIONS

In case of GOCCs organized solely for the promotion of social (i) All borrowings guaranteed by the government; and
Section 29. Appropriations. - The amount of Ten million pesos
welfare and the common good Without regard to profit, the total
(P10,000,000.00) for the initial operation of the GOG shall be
yearly per diems and incentives in the aggregate which the
(j) Such other information or report the GCG may sourced from the Contingent Fund of the President.
members of the Board of such GOCCs may receive shall be
determined by the President upon the recommendation of the GCG require.
based on the achievement by such GOCC of its performance Subsequent funding requirements shall be included in the annual
targets. Section 26. Special Audit. – General Appropriations Act.

Section 24. Restitution. - Upon the determination and report of (a) The thirty (30) GOCCs with the highest total assets Section 30. Suppletory Application of The Corporation Code and
the Commission on Audit (COA) that properties or monies shall be subject to periodic special audit by the COA. The Charters of the GOCCs. - The provisions of "The Corporation Code
belonging to the GOGG are in the possession of a member of the periodic audit shall. at the minimum make a of the Philippines" and the provisions of the charters of the relevant
Board or Officer without authority, or that profits are earned by the determination whether: GOCC, insofar as they are not inconsistent with the provisions of
member of the Board or Officer in violation of the fiduciary duty, this Act, shall apply suppletorily to GOCCs.
or the aggregate per diems, allowances and incentives received in
a particular year are in excess of the limits provided under this Act, (1) The accounting records of the GOCCs are
the member of the Board or Officer receiving such properties or complete and in accordance with generally Section 31. Transitory Provision. - The Privatization Council and
monies shall return the same to the GOCC. accepted accounting practices and standards; the Privatization and Management Office created under Executive
and Order No. 323, Series of 2000, shall continue to implement and
finish the privatization of GOCCs that have been identified by the
Failure to make the restitution within thirty (30) days after a said Privatization Council arid approved for privatization by the
written demand has been served shall, after trial and final (2) The statements prepared from the President prior to the effectivity of this Act: Provided, however,
judgment, be punished by an imprisonment of one (1) year and a accounts present fairly and comprehensively That the privatization of said GOCCs that remain unfinished at the
fine equivalent to twice the amount to be restituted, and in the their GOCCs financial position and the results end of two (2) years after the effectivity of this Act shall be
discretion of the court of competent jurisdiction, disqualification of its financial operations. automatically transferred to the GCG which shall continue the
to hold public office. privatization of the GOCCs.
(b) As may be necessary or convenient in the
GHAPTER V performance by the GCG of its functions, the Chairman Section 32. Repealing Clause. - The charters of the GOCCs under
DISCLOSURE REQUIREMENTS of the GCG may direct at any time a special COA audit of existing laws and all other laws, executive orders including
any other GOCC for any specific purpose or when Executive Order No. 323, Series of 2000, administrative orders,
authorized by law, direct an audit by independent rules, regulations, decrees and other issuances or parts thereof
Section 25. Full Disclosure. - All GOCCs shall maintain a website auditors. which are inconsistent with the provisions of this Act are hereby
and post therein for unrestricted public access:
revoked, repealed or modified accordingly.
CHAPTER VI
(a) Their latest annual audited financial and CREATION AND ACQUISITION OF A GOCC OR Section 33. Separability Clause. - Should any provision of this Act
performance report within thirty (30) days from receipt RELATED CORPORATION be declared unconstitutional, the same shall not affect the validity
of such report;
of the other provisions of this Act.
Section 27. Requisites for the Creation of a New GOCC or Related
(b) Audited financial statements in the immediate past Corporation under the Corporation Code. – A government agency Section 34. Effectivity. - This Act shall take effect after fifteen (15)
five (5) years; seeking to establish a GOCC or Related Corporation under "The days following its publication in the Official Gazette or in two (2)
Corporation Code of the Philippines" shall submit its proposal to newspapers of general circulation.
(c) Quarterly, annual reports and trial balance; the GCG for review and recommendation to the President for
approval before registering the same with the Securities and
Exchange Commission (SEC). The SEC shall not register the
(d) Current corporate operating budget; articles of incorporation and bylaws of a proposed GOCC or
Related Corporation, unless the application for registration is
accompanied by an endorsement from the GCG stating that the
(e) Complete compensation package of all the board
President has approved the same.
members and officers, including travel, representation,
transportation and any other form of expenses or
allowances; Section 28. Requisites for the Acquisition of Controlling Interest
in Another Corporation. - Any government agency seeking to