CASE BrieF NO. 2019-0039


“Non-chartered government-owned or controlled corporations are limited by law in negotiating economic terms with their employees. 


CASE: GSIS Family Bank Employees Union, represented by its president Ms. Judith Jocelyn Martinez vs.  Sec. Cesar L. Villanueva (in his capacity as the chairman of the Governance Commission for Government-Owned or Controlled Corporations under the Office of the President), et al. [G.R. No. 210773, January 23, 2019]

PONENTE: Associate Justice Mario Victor F. Leonen

SUBJECT:

  1. LABOR LAW:
    i.        Right to self-organization
    ii.       Collective Bargaining
  2. CONSTITUTIONAL LAW:
    i.        Judicial Power
    – Traditional judicial power from expanded judicial power
    ii.       Moot and academic principle – exceptions
  3. REMIDIAL LAW:
    i.        Rule 65
    ii.       Indispensable Parties -Effect of failure to implead indispensable parties.
  4. SPECIAL LAW – R.A. No. 10149, or the GOCC Governance Act of 2011:
    i.        GOCC – defined; attributes

FACTS:        On July 22, 1969, Royal Savings Bank was organized and incorporated as a thrift bank.

In 1984, Royal Savings Bank filed an application with the Central Bank of the Philippines (Central Bank) for the appointment of a conservator. The Central Bank denied the same so Royal Savings Bank filed several complaints against the Central Bank for grave abuse of discretion. To amicably settle the cases, then Central Bank Governor Jose B. Fernandez, Jr. offered to reopen and rehabilitate Royal Savings Bank if it would drop all its complaints against the Central Bank and transfer all its shares of stock to Commercial Bank of Manila, a wholly-owned subsidiary of the Government Service Insurance System (GSIS).

Not long thereafter, Royal Savings Bank and Commercial Bank of Manila entered into a Memorandum of Agreement to rehabilitate and infuse capital into Royal Savings Bank.

Royal Savings Bank was renamed Comsavings Bank.

In 1987, the GSIS transferred its holdings from Commercial Bank of Manila to Boston Bank. Comsavings Bank was not included in the transfer. Due to Boston Bank’s acquisition of Commercial Bank of Manila, the GSIS took over the control and management of Comsavings Bank.

In 1993, Comsavings Bank and the GSIS executed a Memorandum of Agreement where the latter committed to infuse an additional capital of P2.5 billion into Comsavings Bank. After the infusion of funds, the GSIS effectively owned 99.55% of Comsavings Bank’s outstanding shares of stock.

Sometime in 2001, Comsavings Bank changed its name to GSIS Family Bank.

On June 6, 2011, President Aquino signed into law Republic Act No. 10149, or the GOCC Governance Act of 2011.  The law created the Governance Commission for Government-Owned or Controlled Corporations (Governance Commission), defined as “a central advisory, monitoring, and oversight body with authority to formulate, implement, and coordinate policies” in its governed sector.

In 2012, Emmanuel L. Benitez (Benitez), GSIS Family Bank’s president, sought opinion from the Governance Commission as to whether GSIS Family Bank may be considered as a government-owned or controlled corporation or government bank under Republic Act No. 10149.

Also, on February 11, 2013, Benitez, sought clarification from the Governance Commission on whether it has the authority to enter into a collective bargaining agreement with the GSIS Union and whether its employees has the right to strike.

The Governance Commission replied that as a government financial institution, GSIS Family Bank was unauthorized to enter into a collective bargaining agreement with its employees “based on the principle that the compensation and position classification system is provided for by law and not subject to private bargaining.” It further clarified that the right to strike of GSIS Family Bank’s employees was not guaranteed by the Constitution, as they were government officers and employees.

On December 20, 2013, counsel for the GSIS Union sent GSIS Family Bank a demand letterfor the payment of Christmas bonus to its members, as stipulated in their Collective Bargaining Agreement (CBA). GSIS Union accused GSIS Family Bank of evading its contractual obligation to its employees by invoking Republic Act No. 10149.

GSIS Union alleged that Republic Act No. 10149 does not apply to GSIS Family Bank, as it was a private bank created and established under the Corporation Code. It asserted that even if the GSIS owned a majority of GSIS Family Bank’s outstanding capital stock, the change in ownership of shares did not automatically place the bank under the operation of Republic Act No. 10149.

On January 30, 2014, GSIS Union filed before the Supreme Court a Petition for Certiorari, asserting that GSIS Family Bank is a private bank; thus, it is not covered by the provisions of Republic Act No. 10149.

GSIS Union cites Phil. National Oil Company-Energy Dev’t. Corp. v. Hon. Leogardo [256 Phil. 475 (1989)], which stated that the employees of the Philippine National Oil Company-Energy Development Corporation, a government-owned or controlled corporation incorporated under the Corporation Code, remained subject to the provisions of the Labor Code.

Finally, GSIS Union stresses that as a private corporation established under the Corporation Code, GSIS Family Bank and its employees are covered by the applicable provisions of the Labor Code, not the Civil Service Law. Thus, the Collective Bargaining Agreement between GSIS Union  and GSIS Family Bank cannot be impaired by Republic Act No. 10149.

On April 28, 2014, respondents Benitez and Atty. Geraldine Marie Berberabe-Martinez (Atty. Berberabe-Martinez) filed their Comment. They argued that with the enactment of Republic Act No. 10149, GSIS Family Bank’s authority to enter into negotiations with its employees was revoked, as confirmed by the Governance Commission. They insist that as a government-acquired bank, GSIS Family Bank is a government­ owned or controlled corporation under Republic Act No. 10149 hence, it is not at liberty to negotiate economic terms with its employees and cannot set its own salary or compensation scheme as it is covered by the Compensation and Position Classification System.

They also point out that the Petition for Certiorari was fatally defective since respondents do not exercise judicial or quasi-judicial functions. Further, they maintain that the Collective Bargaining Agreement provided remedies for the enforcement of rights, of which GSIS Union supposedly did not avail. Thus, there was a plain, speedy, and adequate remedy available to it, without need to directly resort to this Court with a Rule 65 petition.

Respondent Secretary Cesar L. Villanueva (Villanueva) likewise filed his Comment, where he brings up GSIS Union ‘s failure to implead several indispensable parties. He states that despite the Governance Commission being a collegial body with five (5) members, only he was impleaded in the Petition as the Governance Commission’s chair.

In 2016, the Bangko Sentral ng Pilipinas Monetary Board, through MB Resolution 826.A, prohibited GSIS Family Bank from doing business, ordered its closure, and designated the Philippine Deposit and Insurance Corporation as its receiver.

ISSUES:

A.       Whether Rule 65 is the correct remedy.

          a.       Define “judicial power.”

          b.       Distinguish traditional judicial power from expanded judicial power.

          c.       What must be alleged and proven in a petition for a writ of certiorari under Rule 65?

B.       Whether all members of the Governance Commission should be impleaded as indispensable parties.

          a.       What is indispensable party?

C.       Whether or not the closure of GSIS Family Bank has rendered the Petition moot.

          a.       When will a case deem moot?

          b.       Should a case be dismissed on the ground of mootness?

D.      Whether or not GSIS Family Bank is a GOCC?

          a.       What is a Government-owned and Controlled Corporation?

          b.       What are the three (3) attributes necessary to be classified as a GOCC?

E.       Whether GSIS Family Bank can enter into a collective bargaining agreement with its employees.

          a. Define Collective bargaining.

RULING:
A.       Judicial power is the court’s authority to settle justiciable controversies or disputes involving rights that are enforceable and demandable before the courts of justice or the redress of wrongs for violations of such rights.

This Court’s judicial power is anchored on Article VIII, Section 1 of the 1987 Constitution, which provides:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

Traditional judicial power is the court’s authority to review and settle actual controversies or conflicting rights between dueling parties and enforce legally demandable rights. An actual case or controversy exists “when the case presents conflicting or opposite legal rights that may be resolved by the court in a judicial proceeding.”

On the other hand, the framers of the 1987 Constitution deliberately expanded this Court’s power of judicial review to prevent courts from seeking refuge behind the political question doctrine and turning a blind eye to abuses committed by the other branches of government.

This expanded power of judicial review requires a prima facie showing of grave abuse of discretion by any government branch or instrumentality. This broad grant of power contrasts with the remedy of certiorari under Rule 65, which is limited to the review of judicial and quasi-judicial acts.Nonetheless, this Court, by its own power to relax its rules, allowed Rule 65 to be used for petitions invoking the courts’ expanded jurisdiction.

Here, GSIS Union asserts that the Governance Commission committed grave abuse of discretion amounting to lack or excess of jurisdiction when it prevented respondents Benitez and Atty. Berberabe-Martinez, as the bank’s President and Chairperson of the Board of Directors, respectively, from negotiating the economic provisions of the Collective Bargaining Agreement between GSIS Union and the bank.

GSIS Union claims that in filing its Petition for Certiorari under Rule 65, it has “no plain, speedy, and adequate remedy in the ordinary course of law which will promptly and immediately relieve them from the injurious effects of the unconstitutional and patently unwarranted and illegal acts of the Respondents.”

GSIS Union is mistaken.

Rule 65, Section 1 of the Rules of Civil Procedure reads:

SECTION 1. Petition for Certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non­ forum shopping as provided in the third paragraph of Section 3, Rule 46.

Thus, a writ of certiorari may only be issued when the following are alleged in the petition and proven:

(1) the writ is directed against a tribunal, a board, or any officer exercising judicial or quasi[-]judicial functions; (2) such tribunal, board, or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law [LBP v. Court of Appeals, 456 Phil. 755 (2003)] 

The Governance Commission was created under Republic Act No. 10149. It is attached to the Office of the President and is the “central advisory, monitoring, and oversight body with authority to formulate, implement, and coordinate policies” relative to government-owned and controlled corporations. It has no judicial or quasi-judicial authority, as evidenced by its powers and functions under the law.

The Governance Commission possesses neither judicial nor quasi­ judicial powers; thus, it cannot review or settle actual controversies or conflicting rights between dueling parties and enforce legally demandable rights. It is not a tribunal or board exercising judicial or quasi-judicial functions that may properly be the subject of a petition for certiorari.

Further, GSIS Union failed to prove that it had no other “plain, speedy, and adequate remedy in the ordinary course of law” aside from its present Petition. The Governance Commission is an attached agency of the Office of the President; hence, GSIS Union  could have elevated the advisories to the Office of the President to question the Governance Commission’s legal opinion.

B.       Whether all members of the Governance Commission should be impleaded as indispensable parties.

Here, GSIS Union only impleaded respondent Villanueva in his capacity as chairperson of the Governance Commission, and not the four (4) other members of the Governance Commission.

The Governance Commission is composed of five (5) members. The chairperson, with a rank of Cabinet Secretary, and two (2) other members, with the rank of Undersecretary, are appointed by the President. The Department of Budget and Management and the Department of Finance Secretaries sit as ex-officio members.

As a collegial body, all members of the Governance Commission should have been impleaded as indispensable parties in the Petition, since no final determination of the action can be reached without them (Rule 3, sec. 7, Rules of Court).  As it is, GSIS Union’s failure to implead all members of the Governance Commission should lead to the outright dismissal of this Petition as their non-inclusion is debilitating since this Court cannot exercise its juridical power when an indispensable party is not impleaded [Caravan Travel and Tours International, Inc. v. Abejar, 780 Phil. 509, 542 (2016) citing Lucman v. Malawi, 540 Phil. 289, 302 (2006)].

C.       Nonetheless, even if all the requirements for the issuance of a writ of certiorari were alleged and proven, and even if all the indispensable parties were impleaded, the closure of GSIS Family Bank has rendered the Petition moot.

A case is deemed moot when it ceases to present a justiciable controversy due to a supervening event. The lack of an actual or justiciable controversy means that the court has nothing to resolve, and will, in effect, only render an advisory opinion [Rep. of the Phils. v. Moldex Realty, Inc., 780 Phil. 553, 560 (2016)].

Courts generally dismiss cases on the ground of mootness unless any of the following instances are present: (1) grave constitutional violations; (2) exceptional character of the case; (3) paramount public interest; (4) the case presents an opportunity to guide the bench, the bar, and the public; or (5) the case is capable of repetition yet evading review.

Despite GSIS Family Bank’s closure, which has effectively rendered the case moot, this Court believes that there is a need to discuss the substantive issues of the case, as it presents an opportunity to guide the bench and bar on how to resolve similar issues arising from similarly situated parties.

D.      In 1987, then President Corazon C. Aquino issued EO No. 292 or the Administrative Code of 1987. Section 2(13) thereof defined a government-owned or controlled corporation:

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

Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) per cent of its capital stock: Provided, That government-owned or controlled corporations may be further categorized by the Department of the Budget, the Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.”

This definition was echoed in Section 3(o) of Republic Act No. 10149:

SECTION 3. Definition of Terms. —

(o) Government-Owned or -Controlled Corporation (GOCC) refers to any agency organized as a stock or nonstock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government of the Republic of the Philippines directly or through its instrumentalities either wholly or, where applicable as in the case of stock corporations, to the extent of at least a majority of its outstanding capital stock: Provided, however, That for purposes of this Act, the term “GOCC” shall include GICP/GCE and GFI as defined herein.

Thus, a government-owned or controlled corporation is: (1) established by original charter or through the general corporation law; (2) vested with functions relating to public need whether governmental or proprietary in nature; and (3) directly owned by the government or by its instrumentality, or where the government owns a majority of the outstanding capital stock. Possessing all three (3) attributes is necessary to be classified as a government-owned or controlled corporation [Funa v. Manila Economic and Cultural Office, et al., 726 Phil. 63 (2014)].

There is no doubt that GSIS Family Bank is a government-owned or controlled corporation since 99.55% of its outstanding capital stock is owned and controlled by the GSIS.

However, GSIS Union cites this Court’s ruling in Phil. National Oil Company-Energy Dev’t. Corp. to substantiate its claim that GOCCs without original charters, or those incorporated under the Corporation Code, are subject to the provisions of the Labor Code, and are thus free to negotiate economic terms with their employers.

GSIS Union  is again mistaken.

What was in issue in Phil. National Oil Company-Energy Dev’t. Corp. was jurisdiction in relation to dismissal of employees. It had nothing to do with the obligation of the government-owned or controlled corporation to collectively bargain in good faith.

E.       Officers and employees of government-owned or controlled corporations without original charters are covered by the Labor Code, not the Civil Service Law. However, non-chartered government-owned or controlled corporations are limited by law in negotiating economic terms with their employees. This is because the law has provided the Compensation and Position Classification System, which applies to all government-owned or controlled corporations, chartered or non-chartered.

The right to self-organization is not limited to private employees and encompasses all workers in both the public and private sectors, as shown by the clear declaration in Article IX(B), Section 2(5) that “the right to self­ organization shall not be denied to government employees.” Article III, Section 8 of the Bill of Rights likewise states, “the right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged.”

While the right to self-organization is absolute, the right of government employees to collective bargaining and negotiation is subject to limitations.

Collective bargaining is a series of negotiations between an employer and a representative of the employees to regulate the various aspects of the employer-employee relationship such as working hours, working conditions, benefits, economic provisions, and others.

The terms and conditions of employment of government workers are fixed by the legislature; thus, the negotiable matters in the public sector are limited to terms and conditions of employment that are not fixed by law.

Social Security System Employees Association v. Court of Appeals [256 Phil. 1079 (1989)] explains that instead of a collective bargaining agreement or negotiation, government employees must course their petitions for a change in the terms and conditions of their employment through the Congress for the issuance of new laws, rules, or regulations to that effect.

Republic Act No. 10149 defines a non-chartered government-owned or controlled corporation as a government-owned or controlled corporation that was organized and is operating under the Corporation Code. It does not differentiate between chartered and non-chartered government-owned or controlled corporations; hence, its provisions apply equally to both:

SECTION 4. Coverage. — This Act shall be applicable to all GOCCs, GICPs/GCEs, and government financial institutions, including their subsidiaries, but excluding the Bangko Sentral ng Pilipinas, state universities and colleges, cooperatives, local water districts, economic zone authorities and research institutions: Provided, That in economic zone authorities and research institutions, the President shall appoint one-third (1/3) of the board members from the list submitted by the GCG.

Section 9 of Republic Act No. 10149 also categorically states, “Any law to the contrary notwithstanding, no government-owned or controlled corporation shall be exempt from the coverage of the Compensation and Position Classification System developed by the Governance Commission under this Act.”

On March 22, 2016, President Aquino issued Executive Order No. 203, which approved the compensation and classification standards submitted by the Governance Commission.

When it comes to collective bargaining agreements and collective negotiation agreements in government-owned or controlled corporations, Executive Order No. 203 unequivocally stated that while it recognized the right of workers to organize, bargain, and negotiate with their employers, “the Governing Boards of all covered government-owned or controlled corporations, whether Chartered or Non-chartered, may not negotiate with their officers and employees the economic terms of their collective bargaining agreements.”

Thus, considering the existing law at the time, GSIS Family Bank could not be faulted for refusing to enter into a new collective bargaining agreement with GSIS Union.

Related CASE BrieFs:

          a)       Galicto v. H.E. President Aquino III, et al. [683 Phil. 141 (2012)]

         b)       PCSO v. Chairperson Pulido-Tan, et al. [785 Phil. 266 (2016)]

          c)       LBP v. Court of Appeals, 456 Phil. (2003)

          d)       Caravan Travel and Tours International, Inc. v. Abejar, 780 Phil. 509 (2016) citing Lucman v. Malawi, 540 Phil. 289 (2006)]

          e)       Rep. of the Phils. v. Moldex Realty, Inc., 780 Phil. 553 (2016)

          f)       Funa v. Manila Economic and Cultural Office, et al., 726 Phil. 63 (2014)

————————————————-

THINGS DECIDED:

A.       Judicial power is the court’s authority to “settle justiciable controversies or disputes involving rights that are enforceable and demandable before the courts of justice or the redress of wrongs for violations of such rights.

B.       Traditional judicial power is the court’s authority to review and settle actual controversies or conflicting rights between dueling parties and enforce legally demandable rights.

C.       The expanded power of judicial review requires a prima facie showing of grave abuse of discretion by any government branch or instrumentality. This broad grant of power contrasts with the remedy of certiorari under Rule 65, which is limited to the review of judicial and quasi-judicial acts.

D.       A writ of certiorari may only be issued when the following are alleged in the petition and proven: (1) the writ is directed against a tribunal, a board, or any officer exercising judicial or quasi[-]judicial functions; (2) such tribunal, board, or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law [LBP v. Court of Appeals, 456 Phil. 755 (2003)].

E.       The Governance Commission possesses neither judicial nor quasi­ judicial powers; thus, it cannot review or settle actual controversies or conflicting rights between dueling parties and enforce legally demandable rights. It is not a tribunal or board exercising judicial or quasi-judicial functions that may properly be the subject of a petition for certiorari.

F.       As a collegial body, all members of the Governance Commission should have been impleaded as indispensable parties in the Petition, since no final determination of the action can be reached without them (Rule 3, sec. 7, Rules of Court). 

G.      A case is deemed moot when it ceases to present a justiciable controversy due to a supervening event.

H.      A government-owned or controlled corporation is: (1) established by original charter or through the general corporation law; (2) vested with functions relating to public need whether governmental or proprietary in nature; and (3) directly owned by the government or by its instrumentality, or where the government owns a majority of the outstanding capital stock. Possessing all three (3) attributes is necessary to be classified as a government-owned or controlled corporation [Funa v. Manila Economic and Cultural Office, et al., 726 Phil. 63 (2014)].

I.       Officers and employees of government-owned or controlled corporations without original charters are covered by the Labor Code, not the Civil Service Law. However, non-chartered government-owned or controlled corporations are limited by law in negotiating economic terms with their employees. This is because the law has provided the Compensation and Position Classification System, which applies to all government-owned or controlled corporations, chartered or non-chartered.

J.       While the right to self-organization is absolute, the right of government employees to collective bargaining and negotiation is subject to limitations.

K.       Collective bargaining is a series of negotiations between an employer and a representative of the employees to regulate the various aspects of the employer-employee relationship such as working hours, working conditions, benefits, economic provisions, and others.

L.       The terms and conditions of employment of government workers are fixed by the legislature; thus, the negotiable matters in the public sector are limited to terms and conditions of employment that are not fixed by law.

‘Stand by things decided’ ~ Stare Decisis


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