VICTOR D. MENDOZA, PETITIONER AND APPELLEE, VS. SOCIAL SECURITY COMMISSION AND FLORENCIO N. ONGKINGCO, IN HIS CAPACITY AS OFFICER-IN-CHARGE, ADMINISTRATIVE DEPARTMENT, SOCIAL SE…

Mendoza versus Social Security Commission

The Case

This is the case of Mendoza versus Social Security Commission. Victor D. Mendoza, then Manager of the Commercial and Industrial Loans Department of the Social Security System, was demoted in rank and salary by the Social Security Commission. He went to the Court of First Instance of Rizal, sitting in Quezon City, seeking a writ of prohibition with preliminary injunction to stop the Commission from enforcing that demotion. The case matters because it fixes who holds the power to discipline civil service officers and employees before the amendments introduced by Republic Act Number 6040, and because it strikes down administrative circulars that tried to enlarge the exempt service beyond what the law allows.

Procedural History

Mendoza filed a petition for prohibition with preliminary injunction before the Court of First Instance of Rizal, Branch Four, in Quezon City. The trial court issued a preliminary injunction and, after trial, rendered judgment on 13 January 1968 in Mendoza's favor. It ruled that section 5 of the Social Security Act did not apply because the case did not involve the settlement of benefit claims. It held that the assailed resolution was void from the beginning, since the Commission had no power to discipline and penalize civil service officers to the exclusion of the Commissioner of Civil Service. It also held that the rule on exhaustion of administrative remedies did not apply because the question was one of law, namely, the jurisdiction of the Social Security Commission. The trial court ordered the respondents to desist from enforcing the penalties and made the preliminary injunction permanent, with costs against them. The Social Security Commission and Florencio N. Ongkingco appealed directly to the Supreme Court, and it is that appeal which the Court now resolves.

Facts

Victor D. Mendoza was Manager of the Commercial and Industrial Loans Department in the Social Security System. He was subjected to a formal investigation for various irregularities allegedly committed by him. Hearings were duly conducted by an Investigating Committee on the formal charges filed and on the explanations Mendoza offered.

The records and proceedings were reviewed by a Committee of Commissioners, which found Mendoza guilty on four charges and recommended his separation from the service. The Commission en banc decided otherwise. Instead of separation, it imposed demotion in rank and salary, from Manager of the Commercial and Industrial Loans Department to Division Chief. This was embodied in Resolution Number 198, dated 9 February 1967.

Mendoza then went to the trial court, contending that the Commission had no authority to impose those penalties because he was covered by the Civil Service Law of 1962, Republic Act Number 2260. The Commission answered that it was empowered by section 5 of the Social Security Act, Republic Act Number 1161, that Mendoza had failed to exhaust his administrative remedies, and that the Court of First Instance had no jurisdiction to review its resolutions.

Issues

• Whether or not the Social Security Commission had the power to impose the penalty of demotion in rank and salary on Mendoza, a civil service official, to the exclusion of the Commissioner of Civil Service.
• Whether or not Mendoza, as Manager of the Loans Department of the Social Security System, was covered by the Civil Service Law and Rules, or fell within the exempt service under the circulars of the Commissioner of Civil Service.
• Whether or not the rule on exhaustion of administrative remedies barred Mendoza's resort to the courts.
• Whether or not Republic Act Number 6040, which enlarged the disciplinary jurisdiction of heads of departments and agencies, could be applied retroactively to this case.

Applicable Provisions

Section 33 of the Civil Service Act of 1962, Republic Act Number 2260, as it stood before its amendment, provides:

Section 33. Administrative Jurisdiction for Disciplining Officers and Employees. The Commissioner may, for dishonesty, oppression, misconduct, neglect of duty, conviction of a crime involving moral turpitude, notoriously disgraceful or immoral conduct, improper or unauthorized solicitation of contributions from subordinate employees and by teachers or school officials from school children, violation of the existing Civil Service law and rules or of reasonable office regulations, or in the interest of the service, remove any subordinate officer or employee from the service, demote him in rank, suspend him for not more than one year without pay or fine him in an amount not exceeding six months' salary. In meting out punishment, like penalties shall be imposed for like offenses and only one penalty shall be imposed in each case.

This provision is decisive: before its amendment, the sole power to impose disciplinary sanctions on civil service employees was vested exclusively in the Commissioner of Civil Service.

Section 3 of the Civil Service Act of 1959 defines the scope of the civil service:

Section 3. Positions Embraced in the Civil Service. The Philippine Civil Service shall embrace all branches, subdivisions and instrumentalities of the Government, including government-owned or controlled corporations, and appointments therein 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. Positions included in the civil service fall into three categories; namely, competitive or classified service, non-competitive or unclassified service and exempt service. The exempt service does not fall within the scope of this law.

This provision brings the Social Security System, a government-owned or controlled corporation, within the civil service.

Section 3 of the Social Security Act of 1954, as amended by Republic Act Number 2658, provides:

The Commission, upon the recommendation of the Administrator, shall appoint an actuary, medical director, and such other personnel as may be deemed necessary, shall fix their compensation, prescribe their duties and establish such methods and procedures as may insure the efficient, honest and economical administration of the provisions and purpose of this Act: Provided, however, That the personnel of the System shall be selected only from civil service eligibles certified by the Commissioner of Civil Service and shall be subject to civil service rules and regulations.

This provision expressly subjects the personnel of the System to civil service rules and regulations.

Section 6 of the Civil Service Act of 1959 defines the exempt service:

shall consist of the following: (a) Elective officers (b) Members of the commissioned and enlisted service of the Army, Navy and Air Force of the Philippines. (c) Persons employed on a contract basis.

This provision shows that the circulars invoked by the Commission improperly broadened the exempt service beyond the three categories fixed by law.

Ruling

On the first issue, the Court held that the Commission had no power to impose the demotion. Under section 33 of the Civil Service Act, before its amendment, the sole power to impose disciplinary sanctions on civil service employees was vested exclusively in the Commissioner of Civil Service. Section 27 of the Civil Service Rules required the department head concerned, within fifteen days from receipt of the complete record of the case, to forward such record with his comment and recommendation to the Commissioner for decision. The department head's powers were therefore purely recommendatory; he had no power to decide nor impose any penalty, much less to implement the decision or carry it out into execution.

On the second issue, the Court held that Mendoza was a civil service official. This was plain from Article Two, section 3 of the Civil Service Act of 1959 and from section 3 of the Social Security Act of 1954, as amended. The Court entertained serious doubts on the validity of the circulars of the Commissioner of Civil Service, which declared that officers and employees of government-owned or controlled corporations performing proprietary functions who had entered into collective bargaining contracts through their labor unions fell in the exempt service, and that those who accepted benefits under such contracts became parties to them by implied acquiescence. The Court held that these circulars improperly attempted to broaden the scope of the exempt service under the law, which was not within the powers of the Civil Service Commissioner to do. To belong to the exempt service, a civilian non-elective officer must have obtained employment through a contract. There was not an iota of evidence that Mendoza's services were secured through contract, and as a Manager holding an executive and policy-determining position, he could not be a member of any employee's or supervisor's union.

On the fourth issue, the Court acknowledged that Republic Act Number 6040 extended the exempt service and amended section 33 by giving heads of departments and agencies original jurisdiction to investigate and decide disciplinary matters, with appeal to the Commission. Had the case arisen under that Act, the Social Security Commission would have had jurisdiction to impose demotion, subject to appeal. But Republic Act Number 6040 was enacted on 4 August 1969, while the case had been litigated, decided, appealed, and submitted for decision as of February 1969. The Court refused retroactive application, especially since the Act provides:

rights and privileges vested or acquired under the provisions of the Civil Service law, rules and regulations prior to the effectivity of this Act shall remain in force and effect.

On the third issue, the Court held that the principle of exhaustion of non-judicial remedies does not apply where the question is purely legal, or where the act complained of was done without or in excess of jurisdiction. The issue of the Commission's jurisdiction was one of law.

Doctrine

Before its amendment by Republic Act Number 6040, section 33 of the Civil Service Act vested the sole power to impose disciplinary sanctions on civil service employees exclusively in the Commissioner of Civil Service. Department heads could only recommend; their powers were purely recommendatory, and they could neither decide nor impose any penalty.

Personnel of the Social Security System are civil service eligibles subject to civil service rules and regulations, by the express terms of section 3 of the Social Security Act. The exempt service consists only of elective officers, members of the commissioned and enlisted service of the Army, Navy and Air Force, and persons employed on a contract basis. Administrative circulars cannot broaden the exempt service beyond these categories, for that is not within the powers of the Civil Service Commissioner.

The rule on exhaustion of administrative remedies does not apply where the question is purely legal or where the act complained of was done without or in excess of jurisdiction. And a statute enlarging disciplinary jurisdiction cannot be applied retroactively where it expressly preserves rights and privileges vested under the prior Civil Service law.

Disposition

The Supreme Court affirmed the decision of the trial court, with costs against the Social Security Commission, so that Mendoza won and the demotion was permanently enjoined.

Remember This

Memorize this line: before Republic Act Number 6040, only the Commissioner of Civil Service could discipline a civil service employee, and department heads could merely recommend. Examiners use this case on the exclusive disciplinary jurisdiction of the Commissioner of Civil Service, on the strict three-category definition of the exempt service, and on the exceptions to the exhaustion of administrative remedies.