Title
PEZA Board of Directors vs. Mercado
Case
G.R. No. 172144
Decision Date
Mar 9, 2010
Gloria Mercado, appointed as PEZA Deputy Director General, contested her termination, claiming CES eligibility via her MNSA degree. The Supreme Court ruled her termination lawful, as she lacked CES eligibility, denying reinstatement and damages.
termination
security of tenure
prohibition

Case Summary (G.R. No. 172144)

Parties, Setting, and Governing Law

Mercado’s first appointment as Group Manager for Policy and Planning began on September 16, 1998 and was temporary in nature. On May 16, 1999, she was promoted to Deputy Director General for Policy and Planning, with an annotation stating that she had “NO SECURITY OF TENURE UNLESS HE/SHE OBTAINS CESO OR CSEE ELIGIBILITY.” On June 1, 2000, Lilia B. de Lima issued a letter terminating Mercado’s appointment effective at the end of the day, while the PEZA Board simultaneously convened in executive session and passed a resolution appointing Ortaliz—who was a CESO eligible—to the same deputy director general position effective immediately. The legal framework involved the Civil Service Law on permanent status and the rules governing security of tenure in the career executive service, as well as the statutory and regulatory provisions relating to the PEZA charter and the career executive service eligibility system. In particular, the case turned on the continued application of CES eligibility requirements under R.A. 7916, as amended by R.A. 8748, and on the effect of Executive Orders No. 696 and 771 and CESB Resolution No. 204 on whether Mercado’s MNSA degree automatically conferred CES eligibility.

Factual Background

Mercado alleged that she was entitled to CES eligibility because she possessed a Master in National Security Administration (MNSA) degree and that the passage of R.A. 8748, which amended the PEZA charter (R.A. 7916), eliminated the need for CES eligibility for the position of Deputy Director General. She further claimed that the termination of her appointment was attended by bad faith, entitling her to moral and exemplary damages. Petitioners countered that Mercado’s MNSA degree, at most, granted her a CESO rank, but did not amount to CES eligibility. They maintained that Mercado had not acquired CES eligibility and therefore lacked security of tenure, allowing PEZA to replace her with Ortaliz, a CES eligible appointee.

Procedural History in the RTC

On June 7, 2000, Mercado filed with the RTC of Pasay City a petition for prohibition, quo warranto and damages, with preliminary prohibitory and/or mandatory injunction and/or temporary restraining order, docketed as Civil Case No. 00-0172, challenging the June 1, 2000 PEZA Board resolution appointing Ortaliz. On December 4, 2001, the trial court dismissed the petition. It held that despite the passage of R.A. 8748, the CES eligibility requirement for the Deputy Director General positions remained operative, supported by: (a) a certification from the CES Board that Mercado was not CES eligible; (b) R.A. 7916 itself, which provided that appointment to the Deputy Director General positions required CES eligibility; and (c) the legislative deliberations on the bill culminating in R.A. 8748. The RTC also rejected Mercado’s claim that her MNSA degree automatically conferred CES eligibility, ruling that under Executive Order No. 771, recommendation by the concerned ministry and evaluation by the Career Executive Service Board (CESB) were still required. It further found that under CESB Resolution No. 204 dated December 21, 1998, MNSA graduates were deemed to have passed only the Management Aptitude Test Battery as the first stage of a four-stage CES eligibility conferment process. Since Mercado lacked the required eligibility, the RTC treated her appointment as merely temporary and held that it expired upon the appointment of Ortaliz. It denied damages for lack of substantiation and found that petitioners acted in accordance with law.

Ruling of the Court of Appeals

On appeal, Mercado reiterated substantially the same arguments. On December 14, 2005, the Court of Appeals reversed the RTC and ordered Mercado’s reinstatement. It reasoned that Mercado had been promoted on a permanent status, and therefore she could not be summarily removed. The Court of Appeals also ruled that Mercado’s MNSA degree obtained on July 12, 1993 automatically conferred CES eligibility under Executive Order No. 696, as amended by Executive Order No. 771. It further held that even if she was not a CES eligible, the requirement in Section 11 of R.A. 7916 that appointees to Deputy Director General positions must have “career executive service eligibility” was no longer found under Section 11 of R.A. 8748, because the deletion of that requirement reflected legislative intent to do away with the eligibility requirement. It also noted that Mercado later became CES eligible after being conferred such eligibility by the Civil Service Commission in December 2000. Although the Court of Appeals declared Mercado illegally removed and ordered reinstatement, it found her not entitled to damages because there was no proof that termination was tainted with bad faith. In its initial dispositive portion, it declared PEZA Board Resolution No. 00-187 null and void, ordered Ortaliz ousted and excluded from the position, and reinstated Mercado with costs against appellees. Petitioners sought reconsideration, while Mercado sought partial reconsideration regarding damages and attorney’s fees. On March 31, 2006, as amended, the Court of Appeals denied Mercado’s claim for damages and attorney’s fees but granted back salaries computed from the time of removal until reinstatement.

Core Issues Raised on Review

In their petition, petitioners invoked the same defenses they had asserted before the lower courts. The dispute required resolution of whether Mercado had attained the CES eligibility necessary for security of tenure as a Deputy Director General, and whether the amendment introduced by R.A. 8748 in Section 11 of R.A. 7916 removed the CES eligibility qualification for Deputy Director General positions, such that termination could be done only for cause even absent CES eligibility.

Legal Basis and Reasoning on Security of Tenure in the Career Executive Service

The Supreme Court grounded its analysis on Section 27(1) of the Civil Service Law, which provides that a permanent appointment shall issue to a person who meets all requirements for the position, including the appropriate eligibility prescribed. It emphasized that within the CES classification, security of tenure presupposing a permanent appointment is governed by rules promulgated by the CESB. Drawing on Amores vs. Civil Service Commission (G.R. No. 170093, April 29, 2009), the Court explained that security of tenure in the career executive service takes place upon passing CES examinations administered by the CES Board, which confers CES eligibility through a formal board resolution after evaluation across four stages. Only after conferment of CES eligibility and compliance with other prescribed requirements can an incumbent qualify for appointment to a CES rank, and appointment to a CES rank is made by the President upon the Board’s recommendation. The Court held that for an incumbent to be a member of the CES and to be entitled to security of tenure, she must pass the four-stage CES eligibility examinations, be conferred CES eligibility, comply with other requirements of the CES Board, and be appointed to a CES rank by the President. The Court then found that Mercado had not completed the definitive CES eligibility process before her appointment was terminated on June 1, 2000.

Executive Orders and CESB Resolution No. 204: Effect of the MNSA Degree

The Court rejected the Court of Appeals’ view that Mercado’s MNSA degree automatically conferred CES eligibility. It examined the pertinent text of Executive Order No. 696 (issued May 27, 1981), which provided that holders of the degree of Master of National Security Administration were to be given preference in promotions and that NDCP graduates initially in the government service would be granted CESO III rank with corresponding compensation and privileges. It also examined Executive Order No. 771 (issued February 4, 1982), which amended Executive Order No. 696 by changing the automatic grant from an initial grant of CESO rank III to an initial grant of CESO Rank V, or higher, depending on recommendation and evaluation by the CESB, with the CESB to promulgate implementing rules. The Supreme Court further relied on the CESB’s issuance of Resolution No. 204 dated December 21, 1998, accrediting MNSA and MPSA degrees as equivalent to passing the Management Aptitude Test Battery, the first stage of the four-stage CES eligibility conferment process. The CESB resolution expressly stated that graduates could proceed to the second stage and other stages, in accordance with existing policies and regulations, and that only those who passed the remaining stages and were conferred CES eligibility could qualify for appointment to CES ranks, subject to other requirements of the CES Board and the Office of the President. Thus, the Court held that Mercado’s MNSA degree did not confer automatic CES eligibility; it merely accredited her as passing the first stage. Because she had not undergone the remaining stages prior to her appointment and up to termination, she was not CES eligible, as certified by the CES Board. The Court therefore concluded that Mercado lacked security of tenure and that PEZA’s termination of her appointment and the appointment of Ortaliz were not illegal.

Statutory Construction: R.A. 8748 Did Not Eliminate CES Eligibility for the Deputy Director General Position

The Court likewise rejected Mercado’s theory that R.A. 8748 removed CES eligibility as a qualification for the position of Deputy Director General. It quoted the amended version of Section 11 of R.A. 7916, as reflected in R.A. 8748, which listed the qualifications for the director general and the deputy directors general, focusing on age, probity and integrity, and having a degree in specified fields. The Court nevertheless held, as the RTC had, that removing CES eligibility was not the intention of the law’s framers. It stressed that the position w

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