NATIONAL HOUSING CORPORATION, PETITIONER, VS. BENJAMIN JUCO AND THE NATIONAL LABOR RELATIONS COMMISSION, RESPONDENTS.

National Housing Corporation versus Juco

The Case

This is a petition for review brought by the National Housing Corporation against its former project engineer, Benjamin Juco, and the National Labor Relations Commission. The question at the heart of the case is deceptively simple but far-reaching: are the employees of the National Housing Corporation governed by the Labor Code, or by the civil service law and rules? The case matters because it settles, for a generation of bar candidates, the constitutional breadth of the civil service — that the phrase "every government-owned or controlled corporation" means exactly what it says, without exception, and that a government corporation cannot escape civil service coverage merely because it was organized under the general corporation law rather than by a special charter.

Procedural History

Benjamin Juco filed a complaint for illegal dismissal against the National Housing Corporation with the Regional Office of the Department of Labor. The complaint was certified for compulsory arbitration and assigned to a Labor Arbiter, who conducted hearings and received the parties' position papers. The National Housing Corporation raised the threshold objection that the Labor Arbiter had no jurisdiction, because it is a government-owned and controlled corporation. The Labor Arbiter agreed and dismissed the case for lack of jurisdiction. Juco appealed to the National Labor Relations Commission. The Commission set aside the Labor Arbiter's decision, holding that it was not bound by its earlier ruling that the National Housing Corporation was a government-owned corporation, and remanded the case to the Labor Arbiter to resolve the issue of illegal dismissal. The National Housing Corporation then elevated the matter to the Supreme Court by petition for review.

Facts

Benjamin Juco served as a project engineer of the National Housing Corporation from November 1970 until May 1975. He was implicated in the alleged theft or malversation of two hundred fourteen pieces of scrap galvanized iron pipes owned by the corporation, said to have been committed in March 1975. His services were terminated effective at the close of working hours on May 14, 1975.

In March 1977, Juco filed a complaint for illegal dismissal. He professed innocence, contending that the charges were fabricated to harass him because he had stood as a witness in a theft case filed against certain high officials of the corporation. He prayed for reinstatement without loss of seniority rights, with full back wages and benefits. The corporation countered that the Labor Arbiter had no jurisdiction, and that in any event Juco was separated for valid and justified reasons — for having sold the scrap pipes at a junk shop and appropriating the proceeds to himself.

The National Housing Corporation is a one hundred percent government-owned corporation. Its shares are held by the Government Service Insurance System, the Social Security System, the Development Bank of the Philippines, the National Investment and Development Corporation, and the People's Homesite and Housing Corporation. It has never had any private stockholder. It was organized to carry out the coordinated massive housing program of the government, principally low-cost housing.

Issues

• Whether or not the employees of the National Housing Corporation are covered by the civil service law and rules rather than by the Labor Code.
• Whether or not the fact that the National Housing Corporation was organized under the general corporation law, and not by special charter, excludes it from the civil service.

Applicable Provisions

Section 1 of Article Twelve-B of the Constitution provides:

The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government-owned or controlled corporation.

This is the core provision: it expressly includes every government-owned or controlled corporation within the civil service, and the word "every" admits of no exception.

Section 56 of Presidential Decree No. 807, the Civil Service Decree, provides:

Government-owned or Controlled Corporations Personnel. - All permanent personnel of government-owned or controlled corporations whose positions are now embraced in the civil service shall continue in the service until they have been given a chance to qualify in an appropriate examination, but in the meantime, those who do not possess the appropriate civil service eligibility shall not be promoted until they qualify in an appropriate civil service examination. Services of temporary personnel may be terminated any time.

This statute implements the constitutional command and confirms that the personnel of government-owned or controlled corporations belong to the civil service.

Article 277 of the Labor Code, Presidential Decree No. 442, as amended, provides:

Government employees. - The terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations shall be governed by the Civil Service Law, rules and regulations. Their salaries shall be standardized by the National Assembly as provided for in the New Constitution. However, there shall be no reduction of existing wages, benefits and other terms and conditions of employment being enjoyed by them at the time of the adoption of the Code.

This is decisive: even the very Labor Code that the Commission sought to apply expressly relegates government employees, including those of government-owned or controlled corporations, to the civil service law.

Ruling

On the first issue, the Court held that there should no longer be any question that employees of government-owned or controlled corporations are governed by the civil service law and rules. The inclusion of government-owned or controlled corporations within the embrace of the civil service shows a deliberate effort of the framers to plug an earlier loophole. The amendments of 1973 are not idle exercises; they carry the strong message that civil service coverage is broad and all-embracing insofar as employment in the government in any of its governmental or corporate arms is concerned. The Court noted that the National Housing Corporation performs governmental functions and not proprietary ones, and that if government corporations discharging proprietary functions belong to the civil service, with more reason should those performing governmental functions be governed by civil service law.

On the second issue, the Court rejected the argument, drawn from a 1976 opinion of the Secretary of Justice, that the constitutional phrase contemplates only corporations created by special law. The Court reasoned that the fact that private corporations owned or controlled by the government may be created by special charter does not mean that such corporations not created by special law are outside the civil service. Nor does the decree repealing exempting charters imply that corporations not created by special law are exempt, for those charters were the only laws granting exemption and thus the only ones that could be repealed. The Court stressed the word "every," explaining that it means each one of a group, without exception. It warned that the contrary position would allow a ministry to create a host of subsidiary corporations under the general law, enjoying the best of two worlds, free from civil service accountability, and would render the constitutional amendment inapplicable. The Court reserved judgment on private firms taken over by the government in foreclosure or similar proceedings.

Doctrine

The civil service embraces every government-owned or controlled corporation, without regard to whether it was created by special charter or organized under the general corporation law. The test is not the manner of creation but the character of the entity as a government-owned or controlled corporation. Article 277 of the Labor Code itself confirms that the terms and conditions of employment of all government employees, including employees of government-owned or controlled corporations, are governed by the Civil Service Law, rules and regulations. Jurisdiction over their employment disputes therefore lies with the civil service authorities, not with the labor arbiters and the National Labor Relations Commission.

Disposition

The petition was granted; the decision of the National Labor Relations Commission was set aside, and the decision of the Labor Arbiter dismissing the case for lack of jurisdiction was reinstated.

Remember This

Memorize the line: the civil service embraces every government-owned or controlled corporation, and "every" means each one, without exception. Examiners use this case to test jurisdiction over employment disputes in government corporations and the interplay between the civil service law and Article 277 of the Labor Code.