NATIONAL MARKETING CORPORATION, CORNELIO BALMACEDA, JOSE CAL­DERON, ANTONIO ARAMBULO, PEDRO BALINGIT, CIPRIANO MALONZO AND ROSENDO TOMAS, PETITIONERS, VS. HON. FRANCISCO ARCA, P…

National Marketing Corporation versus Arca

The Case

This is a petition for certiorari and prohibition brought by the National Marketing Corporation, known as NAMARCO, together with its General Manager and members of its Board of Directors, against Judge Francisco Arca of the Court of First Instance of Manila and against Juan T. Arive, a dismissed NAMARCO official. The petitioners ask the Supreme Court to stop the respondent judge from enforcing his order reinstating Arive to his former position. The case matters because it fixes the constitutional boundary between the President's power of control and the disciplinary authority that a corporate charter lodges in a government corporation's own General Manager and Board of Directors.

Procedural History

The dispute began inside NAMARCO. Arive was investigated, found guilty, and dismissed by the General Manager, and the Board of Directors adopted a resolution dismissing him from the service. Arive appealed to the President of the Philippines. The Office of the President, through the Executive Secretary, set aside the Board's resolution and ordered Arive reinstated. NAMARCO twice sought reconsideration, and twice the President, through his Executive Secretaries, refused and directed immediate compliance.

Arive then filed a complaint for reinstatement and damages with the Court of First Instance of Manila, with a prayer for a writ of preliminary mandatory injunction. Respondent Judge Arca granted the writ, holding that the President exercises control over government owned and controlled corporations and may substitute his judgment for that of the Board. NAMARCO's motion for reconsideration was denied, so it came to the Supreme Court by an original action for certiorari and prohibition. The Supreme Court issued a preliminary injunction against enforcement of the judge's orders, and later decided the case on the merits.

Facts

Juan T. Arive was Manager of the Traffic and Storage Department of NAMARCO, receiving an annual compensation of 7,200 pesos. A Management Memorandum Order of February 1960 directed that deliveries of merchandise imported under the Trade Assistance Program be stopped. Arive was investigated for violating that order and for causing the improper release of shipments intended for the Federation of United NAMARCO Distributors, covered by domestic letters of credit totaling 361,053 pesos and 85 centavos. The investigating committee found him guilty but left the penalty to the General Manager and the Board.

The General Manager then issued an administrative order holding Arive guilty and dismissing him, and the Board of Directors adopted a resolution dismissing him effective as of the date of his suspension, with prejudice to reinstatement and to all benefits. Arive's motion for reconsideration was denied.

Arive appealed to the President. In January 1965 the Executive Secretary set aside the Board's resolution and ordered Arive reinstated. The decision noted that the very order Arive was accused of disobeying had been declared illegal by the Supreme Court in a prior case, because it violated a contract of sale, and that the warehouse involved was private and not under Arive's supervision or control. Meanwhile, another person had been appointed to Arive's former position. NAMARCO twice moved for reconsideration, arguing that the Office of the President had no jurisdiction because the NAMARCO Charter grants disciplinary power to the General Manager and the Board and provides no appeal. Both motions were denied, and the President directed implementation. When NAMARCO still did not comply, Arive sued, and the trial court issued the challenged writ of preliminary mandatory injunction.

Issues

• Whether or not the President of the Philippines had authority to reverse the decision of the NAMARCO Board of Directors dismissing Juan T. Arive and to order his reinstatement.
• Whether or not the absence in the NAMARCO Charter of any provision for appeal from the General Manager's decision of removal means that no appeal lies to the President.
• Whether or not the respondent judge acted without jurisdiction or with grave abuse of discretion in issuing the writ of preliminary mandatory injunction for Arive's immediate reinstatement.

Applicable Provisions

Section 10, paragraph 1, of Article Seven of the Constitution provides:

The President shall have control of all executive departments, bureaus, or offices, exercise general supervision over all local governments as may be provided by law, and take care that the laws be faithfully executed.

This is the provision the Court construes as the source of the President's power to review and reverse the Board's action.

Section 13, paragraph d, of Republic Act Number 1345, the NAMARCO Charter, vests in the General Manager, with the approval of the Board of Directors, the power to remove, suspend, or otherwise discipline for cause any subordinate employee of NAMARCO. The Court holds that this grant does not exclude an appeal to the President.

Ruling

On the first issue, the Court held that the President's authority to review and reverse the Board's decision, and to order Arive's reinstatement, falls within his constitutional power of control over all executive departments, bureaus, and offices. Corporations owned or controlled by the government, such as NAMARCO, partake of the nature of government bureaus or offices, which are administratively supervised by the Administrator of the Office of Economic Coordination, who is responsible to the President and under whose control his functions are exercised.

On the second issue, the Court held that the silence of the charter does not bar an appeal to the President. The Court defined control in these words:

And control simply means the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for the latter.

The Court added that the right to appeal to the President reposes upon the President's power of control over the executive departments, and that all executive and administrative organizations are adjuncts of the Executive Department, whose heads are assistants and agents of the Chief Executive.

On the third issue, the Court found the President's action to be an act of justice due Arive. The order Arive was charged with disobeying had itself been declared illegal by the Supreme Court, and the warehouse involved was private and outside his supervision and control. The Court also noted that a co-employee similarly dismissed had been promptly reinstated by the Board in implementation of a presidential decision. Arive's right to reinstatement was therefore clearly established and binding, and the respondent judge did not act without jurisdiction or with grave abuse of discretion.

Doctrine

The President's power of control over all executive departments, bureaus, and offices extends to government owned and controlled corporations, which partake of the nature of government bureaus or offices. Control means the power to alter, modify, nullify, or set aside what a subordinate officer has done, and to substitute the judgment of the President for that of the subordinate. The absence of a statutory provision for appeal from a corporate board's disciplinary decision does not preclude an appeal to the President, because the right to appeal reposes upon the constitutional power of control. A bar candidate should tie this rule directly to Section 10, paragraph 1, of Article Seven of the Constitution, and should distinguish control from mere supervision, which the Constitution grants over local governments.

Disposition

The petition was dismissed, with costs against the petitioners, and the preliminary injunction issued by the Supreme Court was dissolved, leaving the trial court's orders of reinstatement in force.

Remember This

The one line to memorize: control is the power to alter, modify, nullify, or set aside what a subordinate has done and to substitute the President's judgment for his own, and it reaches government owned and controlled corporations. Examiners use this case to test the scope of the President's power of control, the distinction between control and supervision, and whether a corporate charter's silence on appeal bars presidential review.