BENJAMIN A. GRAY, PLAINTIFF-APPELLANT, VS. JACOBO S. DE VERA, ENRIQUE J.L. RUIZ, MANUEL T. LEELIN, SERGIO ORTIZ LUIZ, SALUD V. PARREÑO, PEDRO FERNANDEZ AND TEOFILO DEL CASTILLO,…

On September 23, 1954,
Benjamin A. Gray was appointed Secretary to the Board of Directors of the
People’s Homesite and Housing Corporation,
hereinafter referred to as the PHHC.  On October 1,1956,
he was given a promotional ap­pointment, effective November 1, 1956,
as Board Secretary with compensation raised from P7,200.00 to P7,800.00 per
annum.

On January 12, 1959,
Board Secretary Gray sent a te­legram
to President Carlos P. Garcia, which reads:

“AYE SUGGEST COMPLETE REVAMP PHHC BOARD STOP MEMBERS SHOULD
NOT USURP MANAGEMENT FUNC­TIONS COMMA SHOULD WILLINGLY ATTEND MEETINGS COMMA
SHOULD NOT GRAB AS QUOTAS DWELLING AWARDS DESPITE APPLICANTS OF LONG STANDING
COMMA SHOULD NOT DIVIDE AMONG THEMSELVES EMERGENCY POSITIONS COMMA SHOULD
CREATE POSITIONS ONLY IN CASE OF NECESSITY AND NOT BECAUSE THEY WANT TO
ACCOMMODATE THEIR USELESS MEN COMMA AND SHOULD RESPECT CIVIL SERVICE LAW.”

On the following day the Board of
Directors of the PHHC passed Resolution No.
331 terminating the services of Gray “on account of loss of
confidence” due to treachery or dis­loyalty to the Board, and Resolution
No. 332 designating Jacobo de Vera as Acting Board
Secretary effective immediately.

On January 15, 1959,
Gray filed in the Court of First Instance of Rizal an
action (Civil Case No. Q-3804) for quo warranto against Jacobo S.
de Vera.  The complaint was amend­ed
on February 12, 1959 by
including the members of the Board of Directors of the PHHC as defendants.  On March
4, 1959, a supplemental complaint was filed by Gray including, as
party defendant, Teofilo del
Castillo, who had been appointed Secretary to the Board on February 19, 1959.  In his complaint the plaintiff alleged, among
others, that he was illegally and arbitrarily removed from office without
lawful cause and without hearing and replaced by De Vera and, subsequently, by
Del Castillo.  He prayed that the
resolution of the Board of Directors terminating his services be declared null
and void; that he be restored to the position of Secretary to the Board; that
his salary from January 14, 1959 until the date of his reinstatement be ordered
paid; and that the defendants be or­dered to pay him, jointly and severally,
P50,000.00 as actual and moral damages, exemplary damages in the amount to be
fixed by the court, P2,000.00 attorney’s fees, and the costs of the suit.  In their answer the defendants-directors
admitted hav­ing terminated without hearing the services of the plaintiff, but
alleged that such termination was justified because it was based on loss of
confidence.  According to said
defendants, loss of confidence was a valid ground for plaintiff’s removal
because the position of Board Secretary in the PHHC had been declared “primarily
confidential in nature” by Section 14 of Executive Order No. 399, dated
January 5, 1951, otherwise known as the Uniform Charter for Government
Corporations, and for this reason the said position was excluded from the
operation and protection of the Civil Service Law, rules and regulations.  The defendants prayed that the complaint be
dismissed.

After trial, the court a quo rendered its decision
upholding the validity of Resolution No. 331 on the ground that Board Secretary
Gray’s telegram to President Carlos P. Garcia was an act of treachery or
disloyalty to the Board of Directors and constituted cause for his removal from
of­fice at any time considering that the position of Board Sec­retary was
primarily confidential in nature. 
Judgment was rendered dismissing the complaint.

The plaintiff appealed from the judgment to the Court of
Appeals.  Said court, however, certified
the case to this Court on the ground that it involved only questions of
law.  This Court accepted the certification.

The errors assigned by
the appellant boil down to the following:

1.  The lower court erred in not finding that the
Board of Directors that passed Resolution No. 331 was illegally constituted.

2.  The lower court erred in not finding that
appellant’s removal from office was without cause and without due process of
law.

3.  The lower court erred in not holding that
appellant has legal title to the office in question superior to that of
defendants-appellees De Vera and Del Castillo.

4.  The lower court erred in not awarding in favor of appellant the damages claimed in the
complaint.

The record shows that when, on January 13, 1959, the five directors of the PHHC Board
convened and passed Re­solution No. 331 terminating Gray’s services, the
position of Chairman of the Board was vacant. 
The directors desig­nated Director Enrique J.L. Ruiz as Acting
Chairman.  With the Acting Chairman
presiding over the meeting, the Board passed Resolution No. 331 terminating
Board Secretary Gray’s services effective at once.  Appellant contends that the designation by
the Board of Directors of Director Ruiz as Act­ing Chairman was illegal and
void on the following grounds:  (1)
Section 7 of Executive Order No. 399 vests the authority to appoint the
Chairman in the President of the Philippines with the consent of the Commission
on Appointments; and (2) Section 10 of said Executive Order provides that
“[n]o chairman or member of the Board of Directors of a corpora­tion shall
at the same time serve in the corporation in any capacity whatsoever other than
as chairman or member there­of unless otherwise authorized by the President.”

The contention is untenable. 
The prohibition in Sec­tion 10 of Executive Order No. 399 can only refer
to the holding by the Chairman or the Directors of other positions in the
corporation.  Sections 7 and 10 cannot be
interpreted as precluding the Board of Directors from designating one of the
directors as Acting Chairman when the position of Chair­man is vacant.  Otherwise, in case the position of Chairman
has not yet been filled by the President, the Board of Di­rectors will not be
able to transact business.  This will
result in paralyzation of corporate activities.

In the absence of evidence to the contrary, it is to be presumed
that the act of the Board in designating Director Ruiz as Acting Chairman in
view of the fact that the position of Chairman was vacant, was in accordance
with the charter of the PHHC or the practice of the Board.

Benjamin A. Gray’s appointment to the position of Sec­retary to
the Board effective November 1, 1956,
was a perma­nent appointment.  Although
the President, in Executive Order No. 399,
declared the position of secretary to the board of a government corporation
“primarily confidential in nature,” it does not follow that a board secretary whose appointment
was permanent may be removed from office without a formal charge specifying the
ground for removal and without giving him an opportunity of being heard.  A position declared primarily confidential
comes within the purview of Section 4,
Article XII of the Constitution with respect to removal of the permanent
incumbent thereof.  In
the case of Cariño, et al. vs. ACCFA, et al., G.R.
No. L-19808, September 29, 1966,
Mr. Justice Sanchez, speaking for the Court, said:

“Section 1, Article XII of the Constitution, on this point
reads:

‘Section 1.  A
Civil Service embracing all branches and subdivisions of the Government shall be provided by law.  Appointments in the Civil Service, except
as to those which are policy-determining, primarily confiden­tial or
highly technical in nature, shall be made only according to merit and fitness,
to be determined as far as practicable by competitive examination.’

“This Court recently ruled that the foregoing constitutional
precept merely excepts primarily confidential positions from the coverage of
‘the rule requiring appointments to the Civil Service to be made on the
basis of merit and fitness as
determined from competitive examinations’ (citing Jover vs.
Bora, 49
O.G. [No. 7] 2755), but
that ‘the Constitution does not exempt such positions from the operation of the
principle emphatically and categorically enun­ciated in Section 4 of Article
XII, that ?

“No officer or employee in the Civil Service shall be removed
or suspended ex­cept for cause as provided by law.”

and which
recognizes no exception.‘”

In the later case of Ingles, et al. vs. Mutuc,
et al., G.R. No. L-20390, November
29, 1968, the Court, speaking thru Mr. Chief Justice Concepcion, said:

“Defendants-appellees thus assume
that an of­ficer holding a position which is primarily confi­dential in nature
is ‘subject to removal at the pleasure of the appointing power.’ This assump­tion is inaccurate.  It is evidently based upon a statement in De los
Santos vs. Mallare (87 Phil., 289), to the effect
that ‘three specified cases of positions – policy-determining, primarily
confiden­tial and highly technical – are excluded from the merit system and
dismissal at pleasure of officers and employees appointed therein is allowed by
the Constitution.’ This was, however, a mere obiter, because the office
involved in said case – that of City Engineer of Baguio
– did not belong to any of the excepted classes, and, hence, it was not
necessary to determine whether its incumbents were removable or not at the
pleasure of the appointing power.  What
is more, said obiter, if detached from the context of the decision of which it
forms part, would be inconsistent with the constitutional command to the effect
that ‘no officer or employee in the Civil Serv­ice shall be removed or suspended
except for cause as provided by law,’ (Section 4 of Arti­cle XII of the
Constitution), and it is conced­ed that one holding in the Government a prima­rily
confidential position is ‘in the Civil ‘Service.’ In fact, in the De los Santos case, this Court cited with approval the view,
ex­pressed in Lacson vs. Romero (84 Phil., 740), to
the effect ‘that officers or employees in
the unclassified’ – to which plaintiffs herein admittedly belong – ‘as
well as those in the classified service are protected by the above cited
provision of the organic law.'”

The removal of Board Secretary Gray from the prima­rily
confidential position to which he had been permanently appointed was illegal in
view of the following considera­tions:

(1)  There was no lawful cause for removal.  The send­ing of the telegram of January 12,
1959 to President Car­los P.
Garcia suggesting a complete revamp of the Board of Directors of the PHHC due
to the Board’s acts of mis­management and misconduct, the most serious of which
was that the directors were grabbing as “quotas dwelling awards despite
applicants of long standing,” was an act of civic duty.  The telegram was a privileged communica­tion
presumably made in good faith and capable of being substantiated by evidence.

According to the testimony of Director Manuel T. Leelin, the act of Board Secretary Gray in sending the
telegram of January 12, 1959
to the President of the Philippines
was an act of treachery or disloyalty to the Board.  The testimony reads:

“Sometime on January 12, one day before we passed this
resolution, Mr. Gray sent a telegram to the President of the Philippines,
filing charges against the members of the board and suggesting a revamp of the
board.  We feel that as board secretary,
he should not have done that [action] because a board secretary should be loyal
to the board and we consider as a treacherous act on the part of the board
secretary to have done that.  That is the
rea­son why we lost confidence in him.”

We cannot agree, for the following reasons:

First.  As pointed out, the sending of the telegram
to the President of the Philippines
was an act of civic duty.  The telegram
was a privileged communication presumably sent in good faith and capable of
being proved by evidence.

Second.  The position
of secretary to the board of a government corporation was declared by the
President in Executive Order No. 399 primarily confidential in nature with the
obvious intent that the position be filled by an appointee of unquestioned
honesty and integrity.  Hence, the act of
Board Secretary Gray in reporting
to the President the Board’s acts of mismanagement and misconduct was in
consonance with the honesty and integrity required for the po­sition.

Assuming that Gray owed loyalty to the Board, that loyalty was in
the interest of good government and not in the personal interest of the
directors to the extent of concealing the shenanigans of the Board.  About forty (40) years ago, when then Senate
President Quezon broke with then Speak­er Osmeña and the Nacionalista
Party, he justified his act in these famous words:  “My loyalty to my party ends where my loyalty to my country begins.” In
similar vein, Board Secretary Gray, in breaking with the Board, could have well
said, “My loyalty to the Board ends where my loyalty to the cause of good
government begins.”

If the charges of mismanagement and misconduct contain­ed in the
telegram were false, the Board of Directors should have required Board
Secretary Gray to show cause why he should not be
removed from office for making such false charges.  The Board Secretary would have been given an
opportunity of being heard.  If unable to
substantiate his charges, the Board could have made a finding to that effect
and remove Board Secretary Gray from office for serious misconduct (not for
treachery or disloyalty to the Board).

(2)  Assuming, arguendo,
that appellant’s telegram to President Garcia constituted awful cause for his
removal from office, the fact remains that he was summarily removed one day
after he had sent the telegram, and that no formal charge was filed against him
stating the ground for removal and giving him an opportunity of being
heard.  He was, thus, removed from office
without due process of law, in view of which his removal was illegal.

With regard to the amount of P50,000.00
sought by appel­lant principally as moral damages, the same cannot be granted
considering that, in our opinion, the action was really against the defendants
in their official capacity.  In the case
of Cariño vs.
ACCFA, et al., supra (citing Diaz, et al. vs. Amante,
December 26, 1958, 55 Off.
Gaz., No. 41, p. 8643), the Court said:

“Petitioners seek moral damages in the sum of P15,000 for each of them. 
Respondents who composed the ACCFA board were sued in their official
capacities as government officials.  They
cannot be held personally liable because, as private indivi­duals – as
contradistinguished from their being ACCFA officials – they are not parties
to this suit.  Besides as we have
observed a few years back, moral damages are ‘already included in, if not
absorbed by, the back salaries’ to which petitioners are entitled.  Equitable considera­tions stop us from
breaking away from this rule.  Award for
moral damages is not proper.”

Appellant’s claim for attorney’s fees is tenable.  Con­sidering the legal questions involved and
the services ren­dered by appellant’s counsel in this Court and in the court
below, an award to appellant of P2,000.00 as and for attor­ney’s fees as prayed for by him, is reasonable.

PREMISES CONSIDERED, the judgment of the lower court is
reversed and another judgment is hereby rendered as fol­lows:

(a)  Ordering appellee Teofilo del Castillo, or whoever
is occupying the position of Secretary to the Board of Di­rectors of the PHHC,
to vacate the same, and enjoining him from exercising the functions of said
office;

(b)  Ordering the Board of Directors of the PHHC to
reinstate as of January 14, 1959, appellant Benjamin A. Gray to the position of
Secretary to the Board, and to cause his total salaries at P7,800.00
per annum to be paid in lump sum from said date up to the date of his
reinstatement, and thereafter his monthly salary of P650.00; and

(c)  Ordering said Board to cause to be paid to ap­pellant
or his counsel the sum of P2,000.00 for and as
attorney’s fees, and the costs in both instances.

SO ORDERED.

Reyes, J.B.L. (Acting C.J.), Dizon, Makalintal, Zaldivar, Sanchez, and Fernando, JJ., concur.

Teehankee and Barredo, JJ.,
took no part.

Concepcion, C.J., and Castro, J., on
official leave.