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CIVIL SERVICE COMMISSION, Petitioner, v. GREGORIO MAGNAYE, JR., Respondent.

MENDOZA, J.:

FACTS:

In March 2001, Mayor Roman H. Rosales of Lemery, Batangas, appointed Magnaye as Utility Worker I at
the Office of Economic Enterprise Operation of Market (OEE). After a few days, Mayor Rosales detailed
him to the Municipal Planning and Development Office. In the May elections of that year, Mayor Rosales
was defeated by Raul L. Benda, who assumed office on June 30, 2001. Thereafter, Magnaye was
returned to his original assignment at the OEE.On July 11, 2001, Benda also placed him on detail at the
Municipal Planning and Development Office to assist in the implementation of a Survey on the
Integrated Rural Accessibility Planning Project. On August 13, 2001, the new mayor served him a notice
of termination from employment effective the following day for unsatisfactory conduct and want of
capacity. Magnaye questioned his termination before the CSC head office on the ground that Mayor
Benda was not in a position to effectively evaluate his performance because it was made less than one
and one-half months after his (Mayor Bendas) assumption to office.He added that his termination was
without basis and was politically motivated. The CSC head office dismissed, without prejudice,
Magnaye's complaint because he failed to attach a certificate of non-forum shopping. Thereafter,
Magnaye filed a complaint with the regional office of the Civil Service(CSCRO-IV).The CSCRO-IV
dismissed Magnayes complaint for lack of merit. Magnaye sought recourse through a petition for review
with the Court of Appeals. The CA ruled in Magnaye's favor, mainly on the ground that he was denied
due process since he was not informed of what constituted the alleged unsatisfactory conduct and want
of capacity that led to his termination.

ISSUE: Whether or not the termination of Magnaye was in accordance with the pertinent laws and the
rules.

HELD: Court of Appeals decision is affirmed.

POLITICAL LAW: termination of government employees

Under Civil Service rules, the first six months of service following a permanent appointment shall be
probationary in nature, and the probationer may be dropped from the service for unsatisfactory
conduct or want of capacity anytime before the expiration of the probationary period. The CSC is of the
position that a civil service employee does not enjoy security of tenure during his 6-month probationary
period. It submits that an employee's security of tenure starts only after the probationary period.
Specifically, it argued that an appointee under an original appointment cannot lawfully invoke right to
security of tenure until after the expiration of such period and provided that the appointee has not been
notified of the termination of service or found unsatisfactory conduct before the expiration of the same.
The CSC position is contrary to the Constitution and the Civil Service Law itself.Section 3 (2) Article 13 of
the Constitution guarantees the rights of all workers not just in terms of self-organization, collective
bargaining, peaceful concerted activities, the right to strike with qualifications, humane conditions of
work and a living wage but also to security of tenure, and Section 2(3), Article IX-B is emphatic in saying
that,"no officer or employee of the civil service shall be removed or suspended except for cause as
provided by law."

Consistently, Section 46 (a) of the Civil Service Law provides thatno officer or employee in the Civil
Service shall be suspended or dismissed except for cause as provided by law after due process. The
Constitution, in using the expressions all workers and no officer or employee, puts no distinction
between a probationary and a permanent or regular employee which means that both probationary and
permanent employees enjoy security of tenure. Probationary employees enjoy security of tenure in the
sense that during their probationary employment, they cannot be dismissed except for cause or for
failure to qualify as regular employees.

The constitutional and statutory guarantee of security of tenure is extended to both those in the career
and non-career service positions, and the cause under which an employee may be removed or
suspended must naturally have some relation to the character or fitness of the officer or employee, for
the discharge of the functions of his office, or expiration of the project for which the employment was
extended.Further,well-entrenched is the rule on security of tenure that such an appointment is issued
and the moment the appointee assumes a position in the civil service under a completed appointment,
he acquires a legal, not merely equitable right (to the position), which is protected not only by statute,
but also by the Constitution [Article IX-B, Section 2, paragraph (3)] and cannot be taken away from him
either by revocation of the appointment, or by removal, except for cause, and with previous notice and
hearing.

Mayor Benda dismissed Magnaye for lack of capacity and unsatisfactory conduct. While unsatisfactory
conduct and want of capacity are valid causes that may be invoked for dismissal from the service, the CA
observed that the Memorandum issued by Mayor Benda terminating Magnayes employment did not
specify the acts constituting his want of capacity and unsatisfactory conduct.It merely stated that the
character investigation conducted during his probationary period showed that his employment need not
be necessary to be permanent in status. Mayor Bendas own assessment of Magnaye's performance
could not have served as a sufficient basis to dismiss him because said mayor was not his immediate
superior and did not have daily contacts with him. Additionally, Mayor Benda terminated his
employment less than one and one-half months after his assumption to office.

Moreover, Magnaye was denied procedural due process when he received his notice of termination only
a day before he was dismissed from the service. Evidently, he was effectively deprived of the
opportunity to defend himself from the charge that he lacked the capacity to do his work and that his
conduct was unsatisfactory. As well, during his appeal to the CSCRO-IV, he was not furnished with the
submissions of Mayor Benda that he could have opposed.He was also denied substantive due process
because he was dismissed from the service without a valid cause for lack of any factual or legal basis for
his want of capacity and unsatisfactory conduct.

DENIED.
Tomas Besa vs. PNB : HON. ROBERTO S. BENEDICTO, President of the Philippine National Bank; THE
BOARD OF DIRECTORS, Philippine National Bank; HON. ANTONIO M. DIAZ, BIENVENIDO M. JUAT,
SIMEON G. MIRANDA, JUAN PONCE ENRILE, ISMAEL M. REINOSO, and JUAN TRIVINO, Members of the
Board of Directors of the Philippine National Bank; and HON. CONRADO E. MEDINA, Actg. Asst. Vice-
President, In-charge of the Loans Adjustment Dept

Facts: The constitutional safeguard against removal from office except for cause is invoked by petitioner
Tomas Besa in this proceeding for certiorari, prohibition and quo warranto. Petitioner was appointed on
July 12, 1962 as Chief Legal Counsel of respondent Bank with the rank of Vice-President. On October 20,
1966, a letter-directive was issued by the then President of the Bank, respondent Benedicto, that he was
transferred to his office as Consultant on Legal Matters. The justification for such a move was Resolution
No. 1053 of respondent Board of Directors of the Bank, wherein it was expressly stated "that Vice
President Tomas Besa be shifted to the Office of the President as Consultant on Legal Matters, without
change in salary and other privileges."

On October 24, 1966, petitioner, in a letter addressed to the respondent Board of Directors and
respondent President Benedicto, sought a reconsideration of the action above taken. Under date of
October 27, 1966, the Secretary of respondent Board of Directors advised petitioner of the denial of his
motion for reconsideration. In the aforesaid letter-directive of October 20, 1966, respondent Conrado E.
Medina was designated Vice-President and Chief Legal Counsel effective as of that day.

Medina far from usurping the position of petitioner "is Vice President and Chief Legal Counsel of the
respondent Bank who has assumed office and discharged the duties thereof starting October 20, 1966
by virtue of a valid appointment extended to him by the respondent Board of Directors and a letter-
directive issued pursuant thereto by respondent PNB President Roberto S. Benedicto."

The action taken in the case of petitioner was explained thus: "The transfer of petitioner from the Legal
Department is further justified by the following facts and circumstances: a) The position of Chief Legal
Counsel carries a special confidential relationship of lawyer and client. In this regard, the Bank has the
prerogative to designate or change its lawyer, that is, to choose the lawyer, in whom it

Ruling: As was made clear at the outset, the law is not on the side of petitioner. His plea cannot be
granted.

1. Petitioner's reliance on the constitutional provision against removal without cause is misplaced. It is
appropriate to invoke it when an officer or employee in the civil service enjoying a fixed term is made to
lose his position without warrant or justification. It certainly finds no application when the duration of
one's term depends on the will of the appointing power. That is so where the position held is highly
confidential in character. Such is the case of the Chief Legal Counsel of respondent Philippine National
Bank. That is our answer to the specific question before us. Our decision is limited to the validity of the
action taken by respondent Bank. We do not by any means intimate an opinion as to the legal
consequences attaching to an action similar in character taken by any other office or agency of the
government concerning a lawyer in its staff, especially one who was not employed precisely because of
the marked degree of confidence reposed in him, but rather because of his technical competence.
As far as the petitioner is concerned, however, it is our conclusion that he could not plausibly contend
that there was a removal in the constitutional sense as what did take place was a termination of official
relation. Accepting as he did the position of chief legal adviser, the essence of which is the utmost
degree of confidence involving such "close intimacy which insures freedom of intercourse without
embarrassment or freedom from misgivings of betrayals" whether of personal trust or official
matters,5 he could not have been unaware that his term could be cut short any time without giving rise
to any alleged infringement of the above constitutional safeguard. There was no removal which
according to such a mandate is only allowable for cause. Hence the lack of persuasive character of
petitioner's plea.

The matter was set forth with precision and clarity by the present Chief Justice in a recent decision.
Thus: "This should not be misunderstood as denying that the incumbent of a primarily confidential
position holds office at the pleasure only of the appointing power. It should be noted, however, that
when such pleasure turns into displeasure, the incumbent is not 'removed' or 'dismissed' from office
his 'term' merely 'expires,' in much the same way as an officer, whose right thereto ceases upon
expiration of the fixed term for which he had been appointed or elected, is not and cannot be deemed
'removed' or 'dismissed' therefrom, upon the expiration of said term. The main difference between the
former the primarily confidential officer and the latter is that the latter's term is fixed or definite,
whereas that of the former is not prefixed, but indefinite, at the time of his appointment or election,
and becomes fixed and determined when the appointing power expresses its decision to put an end to
the services of the incumbent. When this event takes place, the latter is not 'removed' or 'dismissed'
from office his term has merely 'expired'."

2. Petitioner in his memorandum apparently was encouraged by the long, unbroken, unquestioned
course of impressive adjudication of this Court that has given a well-nigh all-embracing scope to the
mantle of protection covering civil service personnel against removal without

There is a question raised by petitioner in his memorandum though, unfortunately not given the fullness
of attention devoted to the removal aspect, which deserves to be further looked into. While the mode
of inviting our attention to it could have benefited from a more precise delineation of its implications,
reference to our Corpus v. Cuaderno ruling would indicate that what petitioner had in mind was the
permanency of the terms of an official whose line of work is likewise of a technical character.

As was made clear by Justice J. B. L. Reyes, who penned the opinion: "The tenure of officials holding
primarily confidential positions (such as private secretaries of public functionaries) ends upon loss of
confidence, because their term of office lasts only as long as confidence in them endures; and thus their
cessation involves no removal. But the situation is different for those holding highly technical posts,
requiring special skills and qualifications. The Constitution clearly distinguished the primarily confidential
from the highly technical, and to apply the loss of confidence rule to the latter incumbents is to ignore
and erase the differentiation expressly made by our fundamental charter."

It cannot be denied of course that the work of the Chief Legal Counsel of respondent Bank, as of any
lawyer for that matter, is impressed with a highly technical aspect. As had been pointed out, however, it
does not mean that thereby a client is precluded from substituting in his stead another practitioner.
That is his right; his decision to terminate the relationship once made is impressed with the attribute of
finality. The lawyer cannot be heard to complain; it is enough that his right to compensation earned be
duly respected.
In that sense, it is equally clear that where the position partakes of the attributes of being both technical
and confidential, there can be no insistence of a fixed or a definite term if the latter aspect
predominates.

To paraphrase the language of the Chief Justice in the opinion previously cited, the incumbent of a
primarily confidential position, as was the case of petitioner, should realize that at any time the
appointing power may decide that his services are no longer needed. As thus correctly viewed, Corpus v.
Cuaderno cannot be read as lending support to petitioner's efforts to retain his position as Chief Legal
Counsel of respondent Bank, contrary to its wishes as so explicitly declared in its Resolution No. 1053.

For as above noted, the decisive issue is the confidential character of petitioner's position, which
negates reliance on the removal-for-cause guarantee of the Constitution.

We thus leave open for future determination, when and if such a litigation arises, case involving the
other vice-presidents of the respondent Bank, where it would appear the overriding factor in their
selection is not that degree of the utmost confidence reposed in a lawyer but their technical skills in the
performance of the duties entrusted to them.

WHEREFORE, this petition for certiorari, prohibition and quo warranto is dismissed. Without
pronouncement as to costs.

1. A & B Sections 1-8

Section 7. Each Commission shall decide by a majority vote of all its members any case brought before
itUnless otherwise provided by this Constitution or by law, any decision, order or ruling of each
commission may be brought to the SC on Certiorari by the aggrieved party within 30 days from receipt
thereof.

NOTE: Section 1, Rule 43 allows the Court of Appeals to have appellate jurisdiction over decisions of the
CSC in accordance with RA 7902)

Section 2, Article IX-B. The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government owned and controlled corporations WITH ORIGINAL
CHARTERS.

[2] Appointments in the CS shall be made only according to merit and fitness to be determined as far as
practicable, and except as to positions which are policy determining, primarily confidential or highly
technical, by competitive examination.

[5] The right to self-organization shall not be denied to government employees.

Policy determining is one charged with laying down of principal or fundamental guidelines or rules, such
as that head of a department.

Primarily confidential position is one denoting not only confidence in the aptitude of the appointee for
the duties of the office but primarily close intimacy which ensures freedom of intercourse without
embarrassment or freedom from misgivings or betrayals of the personal trust on confidential matters of
the state (Example: Chief Legal Counsel of the PNB, Besa vs. PNB, 33 SCRA 330).
Highly technical position requires the appointee thereto to possess technical skill or training in the
supreme or superior degree.

Section 6. No candidate who has lost in any election shall, within one year after such election, be
appointed to any office in the government or any government owned or controlled corporations or any
of their subsidiaries.

a. Government and controlled corporations

Read:

These cases were decided under the 1973 constitution where it was held that employees of government
owned and controlled corporations, with or without charters are within the jurisdiction of the Civil
Service Commission. Under the 1987 Constitution, there is now a distinction and only those with original
charters shall be under the CSC while those created under the Corporation Code are not.

National Housing Corp. v. Juco 134 SCRA 172 (1985)

Facts:
Juco was an employee of the NHA. He filed a complaint for illegal dismissal w/ MOLE but his case was
dismissed by the labor arbiter on the ground that the NHA is a govt-owned corp. and jurisdiction over its
employees is vested in the CSC. On appeal, the NLRC reversed the decision and remanded the case to
the labor arbiter for further proceedings. NHA in turn appealed to the SC.

Issue:

Are employees of the National Housing Corporation, a GOCC without original charter, covered by the
Labor Code or by laws and regulations governing the civil service.

Held:

Sec. 11, Art XII-B of the Constitution specifically provides: "The Civil Service embraces every branch,
agency, subdivision and instrumentality of the Government, including every government owned and
controlled corporation.The inclusion of GOCC within the embrace of the civil service shows a deliberate
effort at the framers to plug an earlier loophole which allowed GOCC to avoid the full consequences of
the civil service system. All offices and firms of the government are covered.

This consti provision has been implemented by statute PD 807 is unequivocal that personnel of GOCC
belong to the civil service and subject to civil service requirements."Every" means each one of a group,
without exception. This case refers to a GOCC. It does not cover cases involving private firms taken over
by the government in foreclosure or similar proceedings.

For purposes of coverage in the Civil Service, employees of govt- owned or controlled corps. whether
created by special law or formed as subsidiaries are covered by the Civil Service Law, not the Labor
Code, and the fact that pvt. corps. owned or controlled by the govt may be created by special charter
does not mean that such corps. not created by special law are not covered by the Civil Service.
The infirmity of the resp's position lies in its permitting the circumvention or emasculation of Sec. 1, Art.
XII-B [now Art IX, B, Sec. 2 (1)] of the Consti. It would be possible for a regular ministry of govt to create
a host of subsidiary corps. under the Corp. Code funded by a willing legislature. A govt-owned corp.
could create several subsidiary corps. These subsidiary corps. would enjoy the best of two worlds. Their
officials and employees would be privileged individuals, free from the strict accountability required by
the Civil Service Dec. and the regulations of the COA. Their incomes would not be subject to the
competitive restraint in the open market nor to the terms and conditions of civil service employment.

Conceivably, all govt-owned or controlled corps. could be created, no longer by special charters, but
through incorp. under the general law. The Constitutional amendment including such corps. in the
embrace of the civil service would cease to have application. Certainly, such a situation cannot be
allowed.

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS), petitioner,


vs.
HON. BIENVENIDO S. HERNANDEZ, Labor Arbiter, NATIONAL LABOR RELATIONS COMMISSION, LEMUEL
B. ALEGADO, DANILO S. LOPEZ, FORTUNATO L. MADRONA, ETC., ET AL., respondents.

Ariel F. Aguirre for petitioner.

Celso A. Fernandez for private respondents.

Petitioner Metropolitan Waterworks and Sewerage System (MWSS) was haled before the Arbitration
Branch, National Capital Region of the National Labor Relations Commission on charges of willfull failure
to pay wage differentials, allowances and other monetary benefits to its contractual employees
numbering 2,500 or so.1 In answer, MWSS assessed that:

(1) it "is a government-owned and controlled corporation and therefore ... (the NLRC) has no jurisdiction
over the ... case", and (2) assuming the contrary arguendo, "the terms and conditions of the
complainants who are all contractual employees are governed by their respective contracts. 2

On June 5, 1985, judgment was rendered by the labor Arbiter to whom the case was assigned, adverse
to MWSS. As regards the claim of MWSS of lack of jurisdiction in the NLRC over the case, the Arbiter
made the following observations:

... This Commission agree (sic) with the respondent that if the complainants are regular employees of
MWSS, it being a government owned and controlled corporation, said employees are within the mantle
of the civil service rules and regulations, their salaries are standardized by the National Assembly, then
this Commission has no jurisdiction in the case. 3 ... (But an examination of the records shows) ... that
complainants are not a regular employee of the respondent MWSS, but one of a hired workers or
employees for limited period, that is upon completion of the project for which they were hired, they can
be removed by the respondent, because there is no more work or the contract has already been
terminated (Sic). 4
The proferred deduction: while controversies respecting terms and conditions of employment between
MWSS and its regular employees are not within the jurisdiction of the NLRC, said controversies do fall
within the competence of the NLRC if they involve non-regular or contractual employees of the MWSS.

Anent the second argument of MWSS which the Arbiter understands to be "that the contract of
employment by the complainants ... is governed by their contract, (and) it is therefore incumbent for the
respondent 5 to be governed and to comply with their contract, 6 he has this to say:

Respondent (MWSS) is citing Article 277 of the Labor Code to vouchsafe (sic) its contention about the
lack of jurisdiction of the NLRC. The provision, however, refers to the governance of the Civil Service Law
vis-a-vis the terms and conditions of government employees, those of government corporations
included. The complaint is not such a case as it is for monetary claims about which the Civil Service
Decree, PD 807 does not provide. In fact, the last provision of Article 277 shows the ever protection (sic)
by the State through the Code of the workers' right to due wages and other benefits by enjoining not to
reduce the privileges being enjoyed by workers at the time of the adoption of the Code. 7

The propounded deduction: The Civil Service Decree applies to employees in government corporations
in all matters except "monetary claims"; as regards the latter, it is the Labor Code that governs.

It is to invalidate the decision of the Labor Arbiter as well as a subsequent order directing execution
thereof and all other proceedings in the case that MWSS has come to this Court on certiorari and
prohibition.

Evidently, the case turns upon the question: Are employees of the MWSS covered by the Labor Code or
by laws and regulations governing the civil service?

That question, framed in Identical terms save only that it had reference to another entity, the National
Housing Corporation, has already been answered by this Court. In National Housing Corporation vs.
Juco, this Court ruled that

1) "The NHC is a one hundred percent (100%) government-owned corporation ...; 11

2) "There should no longer be any question at this time that employees of goverment-owned or
controlled corporations are governed by the civil service law and civil service rules and regulation
"; 12and

3) "The decision of the Labor Arbiter dismissing the case (filed against the NHC by an employee) for lack
of jurisdiction" was correct. 13

Now, the character of the MWSS as a government-owned or controlled corporation is not contested; it
is, in any case, a proposition that cannot be gainsaid. Republic Act No. 6234 created it as a "government
corporation to be known as the Metropolitan Waterworks and Sewerage System." As in the case of the
National Housing Authority, therefore, employment in the MWSS is governed not by the Labor Code but
by the civil service law, rules and regulations; and controversies arising from or connected with that
employment are not cognizable by the National Labor Relations Commission.

The argument of the Labor Arbiter that it is only disputes between the MWSS and its regular employees
that are beyond the jurisdiction of the NLRC, not those between it and its "non-regular or contractual"
employees, is sophistical. There is no legal or logical justification for such a distinction. Indeed, it is ruled
out by the fact that positions in the civil service are classified into career and non-career service, 14 and
that the non-career service includes inter alia-

... Contractual personnel or those whose employment in the government is in accordance with a special
contract to undertake a specific work or job, requiring special or technical skin not available in the
employing agency, to be accomplished within a specific period, which in no case shall exceed one year,
and performs or accomplishes the specific work or job, under his own responsibility with a minimum of
direction and supervision from the hiring agency. 15

The Labor Arbiter's other postulation, that the Civil Service Law governs employment in the MWSS in all
aspect except "monetary claims," and that as to the latter, it is the Labor Code that applies, is even more
patently illogical and deserves no confutation.

But even more fallacious, almost unintelligible, is private respondents' contention that they "are not
employees of Metropolitan Waterworks and Sewerage System (MWSS)"; 16 and "not being employees
of the petitioner ... (MWSS) ... this case therefore lies within the National Labor Relations Commission
(NLRC) through Arbiter Bienvenido Hernandez." 17 Such a contention also does not merit refutation As
absurd and as undeserving of response, too, is the claim that "Existence of employer-employee
relationship (between the MWSS and an individual) is not per se equivalent to being a government
employee." 18

Arguments such as these, and the fractured syntax by which they are tendered, should really have no
place in a judicial record. They cannot persuade; they do but irritate. What is worse, they produce much
waste of valuable time. They are symptomatic of defects in the training and appointing processes which
must be remedied.

WHEREFORE, the Decision of the Labor Arbiter dated June 5, 1985 and his Order of July 8, 1985, having
been rendered without jurisdiction, are hereby declared void and set aside. Said Labor Arbiter is
enjoined to take no further action on Case No. NCR-9-3164-84 save to dismiss the same. Costs against
private respondents.

Quimpo vs Tanodbayan GR No. 72553 December 2, 1986 (CrimPro 2016)

Posted onJULY 15, 2016

GOCC under Sandiganbayan

Facts: Corporation X allege that they are a private corporation because they are covered by the Labor
Code and other labor laws and not by the civil service laws. Its operation is profit-oriented, but it is also
funded by the government.

Issue: Whether or not Corp. X is under the jurisdiction of the Sandiganbayan and Ombudsman?

Held: Employees of government-owned or controlled corporations are within the jurisdiction of the
Tanodbayan/Ombudsman and Sandiganbayan. While Corp. X was originally created as a private
corporation, it has since been acquired and funded by the Government to perform functions related to
government programs and policies.

It should make no substantial difference that it was not originally created as a government-owned or
controlled corporation. What is decisive is that it has since acquired by the Government to perform
functions related to government programs and policies on oil.

PHILIPPINE AIR LINES EMPLOYEES' ASSOCIATION, as assignee of the rights and causes of action of the
employees of the Philippine Air Lines, Inc., petitioner,
vs.
THE COURT OF FIRST INSTANCE OF RIZAL, BRANCH XI, PHILIPPINE AIR LINES, INC., GOVERNMENT
SERVICE INSURANCE SYSTEM and SOCIAL SECURITY SYSTEM, respondents.

PARAS, J.:

The principal issue in this petition (submitted for decision in Our Resolution dated February 7, 1977) is
whether or not the Philippine Air Lines (PAL) was a government controlled corporation from 1957 to
September 7, 1964. If so, the petitioner's assignors (employees of the corporation) would be given the
rights of government employees as members of the Government Service Insurance System (GSIS); if not,
the PAL would be regarded as a private corporation and its employees would be members of the Social
Security System (SSS).

The pertinent undisputed facts indicate that PAL was originally organized under the Corporation Law as
a private corporation formed for profit; that in 1949 the National Development Corporation (NDC), a
government owned and controlled corporation acquired 55% of PAL's capital stock; that on October 25,
1955, the then Department of Justice rendered an opinion declaring PAL NOT to be a government
controlled corporation 1 within the purview of Commonwealth Act No. 186; that PAL was then ordered
to be a member of the SSS; that PAL paid its contributions (as employer) to the SSS from September,
1957 to September 7, 1964; that its employees likewise paid their contributions for the same period to
the SSS, that all the while PAL and its employees entered into collective bargaining agreements with
each other; that during this period the PAL employees also enjoyed sickness, disability, retirement and
death benefits from the SSS, including salary, educational, and housing loans.

In 1968 PAL's employees demanded from PAL and the GSIS payment of sick and vacation leave benefits
pursuant to the provisions of Commonwealth Act No. 186, (benefits accruing from September 1957 to
September 7, 1964) on the ground that PAL was covered by CA No. 186; that both PAL and the GSIS
virtually refused to accede to the demand, prompting petitioner (as assignee of the PAL employees) to
sue in the Court of First Instance. In view of an adverse judgment against it, petitioner elevated the case
before this Court.

We find the petition devoid of merit. While it is true that in the case of Philippine Air Lines Employees
Association v.

MISSING PARAGRAPH!!!
Philippine Air Lines, Inc., (11 SCRA 387, 396-397), We ruled that PAL is/was a government controlled
corporation, this was only for the purpose indicated in R.A. 1880. For the instant case however, and
considering the circumstances attendant thereto, it is clear that PAL is not a government controlled
corporation within the contemplation of R.A. 186. Be it noted that PAL during the covered years was a
member of the SSS and its employees were recipients of SSS benefits. For petitioners to now claim
additional or similar benefits from the GSIS would be rather inequitable.

WHEREFORE, this petition is hereby DISMISSED for lack of merit, and the appealed decision is hereby
AFFIRMED.

Footnotes

1 The Opinion reads-

... the conclusion seems inescapable that the terms 'corporation controlled by the Government' used in
Republic Act. No. 660 refer only to such corporate bodies falling under the category of those mentioned
above over which the Government exercises directly or indirectly almost absolute control thru the
ownership of substantially all of their capital stock. Corporations like the PAL, in which the Government
owns a simple majority of their capital stock as an ordinary stockholder are not embraced by that term
and therefore beyond the purview of the Act.

It is pertinent to call attention to the fact that under the Corporation Law (Act No. 1459, as amended),
the affirmative vote of two-thirds of the voting stock or of the subscribed capital stock of a corporation
is necessary for the exercise of certain corporate acts, such as the investment of its funds in another
corporation or business (sec. 17-1/2), amendment of the articles of incorporation (Sec. 18), disposal of
all or removal of directors (Sec. 34), and dissolution of the corporation (Sec. 62).lwphl@it In all these
cases, the 53% interest of the Government in the PAL obviously falls short of that majority necessary to
control the said corporation." (Record on Appeal, pp. 224-226).