G.R. No. L-49835 - Twin Peaks Mining Association vs. Navarro

Case Summary (G.R. No. L-49835)

Antecedents: Statutory Reorganization and Appointments

Republic Act No. 8494 (Feb. 12, 1998) reorganized and renamed the Philippine Export and Foreign Loan Guarantee Corporation as TIDCORP and expressly vested the TIDCORP Board of Directors with power to provide organizational structure and staffing and, upon recommendation of the President, to appoint and fix remuneration, with the Board having exclusive and final authority to appoint, promote, transfer, assign and reassign personnel. Following RA 8494, appointments were issued; Demigillo was appointed Senior Vice President (PG 15) with permanent status and assigned to the Legal and Corporate Services Department (LCSD).

OGCC Opinion, Board Resolution, and Implementation of 2002 Reorganization

In 2002, TIDCORP sought the OGCC’s view on the Board’s continuing authority to reorganize. OGCC Opinion No. 221 concluded the Board had authority under Section 7 of RA 8494 and that the one-year implementation period in Section 8 applied only to the initial transition from Philguarantee to TIDCORP, not to subsequent reorganizations. Acting on this, the Board adopted Resolution No. 1365 (Oct. 22, 2002) approving an Organizational Refinement/Restructuring Plan that abolished the LCSD, adopted a new staffing pattern and classification, and reappointed Demigillo as Senior Vice President to head the smaller Remedial and Credit Management Support Sector (RCMSS).

Administrative Challenges, Performance Ratings, and Separation

Demigillo challenged the Board’s resolution and her reassignment in letters to the Board and appealed to the CSC. Concurrently, President Valdes gave Demigillo a “Poor” performance rating for 2002 (letter dated April 14, 2003), denied her appeal of that rating, and later informed her of a “Needs Improvement” rating for the first half of 2003. The Board of Directors issued Decision No. 03-003 (Aug. 15, 2003) dropping Demigillo from the rolls; she received a copy on Aug. 25, 2003. TIDCORP later reinstated her to the Senior Vice President post in RCMSS pending appeal rights.

CSC Ruling: Validity of Reorganization but Demotion and Procedural Defects Found

The CSC (Resolution No. 041092, Oct. 14, 2004) held the 2002 reorganization was authorized by RA 8494 and by RA 6656, and that Section 7 of RA 8494 granted continuing power to the Board. However, the CSC found the implementation violated Section 6 of RA 6656 and concluded that Demigillo suffered a demotion in functions and authority despite no diminution in rank, salary, or status, because her authority was reduced from head of all legal and corporate affairs to head of a small sector reporting to an Executive Vice President. The CSC also held that the dropping from the rolls did not comply with procedural requirements under the Revised Omnibus Rules (Memorandum Circular No. 40).

Court of Appeals Decisions: Divergent Panels and Rationales

Two separate CA panels issued rulings on the appeals. In CA-G.R. SP No. 87285 (June 27, 2005) the Fourth Division affirmed the CSC but grounded its decision differently, analogizing the Board’s power to the President’s continuing authority to reorganize under the Administrative Code and presuming good faith unless shown otherwise. That panel found Demigillo had not shown the reorganization lacked economy or efficiency. In CA-G.R. SP No. 87295 (Nov. 28, 2008) another CA division held Demigillo had been demoted and illegally dropped from the rolls for failing to observe due process and for not giving her proper opportunity to contest the assessments.

Issues Presented to the Supreme Court

Demigillo’s petition (G.R. No. 168613) challenged the CA’s affirmation in CA-G.R. SP No. 87285, arguing (1) the Board of Directors is not the President’s alter ego and thus lacked continuing reorganizational authority, and (2) the 2002 reorganization was invalid and not shown to evidence economy and efficiency. TIDCORP’s petition (G.R. No. 185571) challenged CA-G.R. SP No. 87295, arguing (1) Demigillo was not demoted because her rank, salary, and status remained intact, and (2) her dropping from the rolls complied with due process and Civil Service rules.

Supreme Court Ruling: Doctrine of Qualified Political Agency Not Extended to TIDCORP Board

The Court rejected TIDCORP’s contention that the doctrine of qualified political agency (alter ego doctrine) converted Board acts into acts of the President. The Court analyzed Villena and related jurisprudence but distinguished TIDCORP’s Board because several members sat ex officio by statutory mandate rather than by presidential appointment to the Board itself; their presence on the Board derived from law (PD 1080 as amended and RA 8494), not as presidential alter egos acting in the President’s stead. The Court therefore declined to extend the doctrine to the Board of a government-owned or -controlled corporation constituted by statute.

Supreme Court Ruling: Validation of the 2002 Reorganization under RA 8494

While declining to apply the alter ego doctrine, the Court nonetheless upheld the 2002 reorganization as validly undertaken pursuant to the Board’s express and exclusive authority under Section 7 of RA 8494 to determine organizational structure, staffing, and personnel actions. The Court emphasized deference to the CSC’s findings in its technical sphere absent proof of grave abuse of discretion, and noted that the reorganization was the product of lengthy consultations, included a comprehensive plan (structure, classifications, qualification standards, separation incentives, timetable), and pursued legitimate objectives of economy, efficiency, financial strengthening, and operational rationalization.

Supreme Court Ruling: Reassignment Did Not Constitute Demotion or Violate Security of Tenure

The Court found no demotion because Demigillo sustained no diminution in rank, salary, or status; her permanent appointment was to the office of Senior Vice President generally, not to the LCSD specifically. Under the reorganization her position was reclassified and upgraded to Pay Grade 16, Step 4, Level II; she continued to hold the rank of Senior Vice President and did not lose tenure protection. The Court reaffirmed that valid reorganizations may lawfully change work assignments and that reassignment within the agency pursuant to statutory authority does not, per se, violate security of tenure under RA 6656.

Supreme Court Ruling: Dropping from the Rolls Was Procedurally Valid

Addressing TIDCORP’s petition, th

Case Syllabus (G.R. No. L-49835)

Decision in one line

The Court held that a reorganization undertaken pursuant to a specific statutory authority by the Board of Directors of a government-owned and government-controlled corporation is valid.

Antecedents and statutory background

On February 12, 1998, the Philippine Export and Foreign Loan Guarantee Corporation was renamed Trade and Investment Development Corporation of the Philippines (TIDCORP) pursuant to Republic Act No. 8494, which reorganized and expanded the corporation’s primary purpose and reorganized its structure.
Republic Act No. 8494 contains express provisions concerning the Board’s power over organization and personnel, notably Section 7 and Section 8 as set out in the records:
- Section 7 vests in the Board of Directors the power to provide an organizational structure and staffing pattern for officers and employees and, upon recommendation of its President, to appoint and fix remuneration, with the Board having “exclusive and final authority to appoint, promote, transfer, assign and re-assign personnel of the TIDCORP, any provision of existing law to the contrary notwithstanding.”
- Section 8 provides that incumbent personnel of the predecessor corporation shall continue to exercise duties until reorganization is fully implemented but not to exceed one year, authorizes separation benefits for those who cannot be accommodated, and grants incentives in addition to statutory gratuities for those separated by reorganization.

Initial appointments and assignment of petitioner

Petitioner Ma. Rosario Manalang-Demigillo (Demigillo) was appointed Senior Vice President (PG 15) with permanent status and was assigned to the Legal and Corporate Services Department (LCSD) of TIDCORP following the initial reorganization.
During the 2002 implementation of a new organizational plan, the LCSD was abolished; Demigillo retained the title Senior Vice President but was assigned to head the Remedial and Credit Management Support Sector (RCMSS).
Demigillo’s appointment to head RCMSS on November 1, 2002, was issued by President Joel C. Valdes and was characterized in the records as a reappointment under the reorganization plan.

OGCC Opinion No. 221 (September 13, 2002)

TIDCORP’s President sought the opinion of the Office of the Government Corporate Counsel (OGCC) on the corporation’s authority to undertake reorganization under RA 8494.
OGCC Opinion No. 221, authored by Government Corporate Counsel Amado D. Valdez, stated:
- The Board of Directors has power to undertake reorganization as part of the express powers granted under the statute.
- The one-year implementation period in Section 8 was interpreted as referring to the initial transition reorganization (Philguarantee to TIDCORP) and not as limiting subsequent reorganizations under Section 7; subsequent changes pursuant to Section 7 are not confined to the one-year period.

Board Resolution No. 1365 (October 22, 2002) and the 2002 Organizational Refinement/Restructuring Plan

Relying on OGCC Opinion No. 221, TIDCORP’s Board adopted Resolution No. 1365 on October 22, 2002 to approve an “Organizational Refinement/Restructuring Plan.”
The plan included a new organizational structure and staffing pattern, a position classification system, new qualification standards, and related implementing rules and timetables.
The LCSD was abolished in the course of implementing the plan; a List of Appointed Employees under the new structure (as of November 1, 2002) reflected Demigillo’s reassignment to head RCMSS.
On December 13, 2002, President Valdes informed officers and employees that the Board had approved appointments issued pursuant to the new plan (Board approval dated December 11, 2002).

Demigillo’s internal challenge and appeal to the CSC

By letter dated December 23, 2002 to TIDCORP Chairman Jose Isidro Camacho, Demigillo challenged the validity of Resolution No. 1365 and her assignment to RCMSS, asserting illegal removal from the LCSD and contending the Board lacked authority to reorganize contrary to OGCC Opinion No. 221.
Pending Board determination, Demigillo appealed to the Civil Service Commission (CSC) on January 31, 2003, raising the same issues.
TIDCORP initially alleged forum-shopping because the Board had not decisively ruled prior to the CSC appeal; later TIDCORP furnished the CSC a copy of Board Decision No. 03-002 dismissing Demigillo’s internal appeal for lack of merit.
Board Decision No. 03-002 stated, among other things, that Demigillo “failed to show to the Board that she was prejudiced in the implementation” of the reorganization, that she was reappointed to the same position she held before, not demoted in salary, rank and status, and that there was substantial compliance with RA 6656 transparency requirements, leading to dismissal of her appeal.

Performance ratings, grievances, preventive suspension, and dropping from rolls

On April 14, 2003, President Valdes informed Demigillo of an overall performance rating of “Poor” for the period January 1 to December 31, 2002, with a memorandum giving detailed criticisms (cited in the records) — e.g., characterization as an “obstructionist,” failure to cooperate, failure to adapt to changes, resentment to new approaches, and failure to promote subordinates’ morale and growth.
Demigillo appealed the rating (April 28); Atty. Florencio P. Gabriel Jr. indicated on May 6 he could not act because Demigillo failed to state sufficient facts and submit evidence; President Valdes on May 6 found no justification to change the rating.
On August 12, 2003, Valdes issued a memorandum rating Demigillo “needs improvement” for January 1–June 2003 and attached a Performance Evaluation Report Form, instructing return within 24 hours; Demigillo scribbled on the memorandum that she did not agree and called it “pure harassment,” then formally appealed on August 14, 2003.
Demigillo reported for work on August 19, 2003 after expiration of a 90-day preventive suspension imposed by the Board in a separate administrative case for grave misconduct and related charges; she requested to reproduce documents and for the grievance process to commence.
The Board, by Decision No. 03-003 dated August 15, 2003 (copy received by Demigillo on August 25, 2003), dropped Demigillo from the rolls.

CSC Decision (Resolution No. 041092, October 14, 2004)

The CSC ruled that the 2002 Organizational Refinements or Restructuring Plan of TIDCORP had been valid as authorized by law and that Section 7 of Republic Act No. 8498 (as reflected in the CSC decision) granted a continuing power to TIDCORP’s Board to prescribe organizational structure, staffing and compensation which continued until invalidated by a court or revoked by Congress.
However, the CSC found TIDCORP’s implementation did not comply with Section 6 of Republic Act No. 6656 and:
- Although Demigillo suffered no diminution in rank, salary and status, she was demoted in functions and authority because the reorganization reduced her role from the highest-ranking legal officer in charge of all legal and corporate affairs to head of RCMSS reporting to an Executive Vice President and supervising only two departments; the LCSD functions had been transferred to the Operations Group.
- The dropping from the rolls did not comply with mandatory requirements under Section 2 (particularly 2.2 Rule XII) of the Revised Omnibus Rules on Appointments and Other Personnel Actions (Memorandum Circular No. 40, Series of 1998).
Following the CSC ruling, TIDCORP reinstated Demigillo to the position of Senior Vice President in RCMSS; she accepted reinstatement without prejudice to her right to appeal the CSC decision.

Appeals to the Court of Appeals (two docketed cases)

Demigillo appealed the CSC decision to the Court of Appeals as CA-G.R. SP No. 87285 (corresponds to G.R. No. 168613).
- Demigillo contended CSC erred in holding Section 7 of RA 8494 granted the Board continuing reorganizational power; CSC erred in holding the 2002 reorganization authorized by law; and CSC erred in not declaring the 2002 reorganization void ab initio for noncompliance with RA 6656.
TIDCORP likewise appealed as CA-G.R. SP No. 87295 (corresponds to G.R. No. 185571), arguing CSC erred in finding Demigillo demoted and in ruling her dropping from the rolls violated due process and Section 2.2 Rule XII of Memorandum Circular No. 40, Seri