Administrative Agencies and Reorganization

on8:16 AM inCase Digests, Notes, Political Law

Administrative Agencies
Definition
(See Definition of Terms under E.O. 292)
***Q: Is Cebu City Government an agency?
A: Yes, under sec. 2(4), E.O. 292, Agency of the Government refers to any of the various units of the
Government, including a department, bureau, office, instrumentality, or government-owned or
controlled corporation, or a local government or a distinct unit therein.
***Q: Differentiate department from instrumentality.
A: Both are agencies of government but occupy different places under the administrative structure.
While a department refers to an executive department created by law, an instrumentality is any agency
of the National Government that is not integrated within the departmental framework. Thus, a
department includes bureaus and the offices under it, while instrumentality covers all other
administrative bodies, including regulatory agencies, chartered institutions and government-owned or
controlled corporations. An instrumentality is vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter.
(NOTA BENE: It is legally significant to distinguish between the two for purposes of ascertaining
who has power of control over a particular administrative body and in order to determine whether
the creation, reorganization or abolition of the same is validly done.)

Creation, Reorganization and Abolition

HOW AN AGENCY IS CREATED:
1
by the Constitution
2
by statute
3
by authority of law
Sec. of DOTC vs. Mabalot, 378 SCRA 129 (2000)

FACTS:
The Sec. of DOTC issued to LTFRB Chairman MO 96-735, transferring the regional functions of
that office to DOTCCAR Regional Office, pending creation of a Regional LTFRO. Later, the new
Sec. of DOTC issued DO 97-1025, establishing the DOTCCAR Regional Office as the Regional
Office of the LTFRB to exercise regional functions of the LTFRB in the CAR subject to the direct
supervision and control of the LTFRB Central Office. Mabalot protested.
ISSUE:

W/N the MO and DO are violative of the provision of the Constitution against encroachment on
the powers of the legislative department
HELD:
SC upheld the validity of the issuance of the challenged orders.
In the absence of any patent or latent constitutional or statutory infirmity attending the issuance
of the challenged orders, Court upholds. The President, through his duly constituted political
agent and alter ego, may legally and validly decree the reorganization of the Department,
particularly the establishment of the DOTCCAR as the LTFRB Regional Office of CAR with the
concomitant transfer and performance of public functions and responsibilities appurtenant to a
regional office of the LTFRB.
There are three modes of establishing an administrative body: (1) Constitution; (2) Statute; and
(3) by authority of law. This case falls under the third category.
The DOTC Secretary, as alter ego of the President, is authorized by law to create and establish the
LTFRB-CAR Regional Office. This is anchored on the Presidents power of control under sec. 17,
Art. VII, 1987 Constitution.
By definition, control is 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 that of the latter. It includes the authority to order the doing of an act by a
subordinate or to undo such act or to assume a power directly vested in him by law.
Under sec. 20, Bk. III, E.O. 292, the Chief Executive is granted residual powers, stating that unless
Congress provides otherwise, the President shall exercise such other powers and functions vested
in the President which are provided for under the laws xxx
What law then gives him the power to reorganize? It is PD 1772 which amended PD 1416.
These decrees expressly grant the President of the Philippines the continuing authority to
reorganize the national government, which includes the power to group, consolidate bureaus and
agencies, to abolish offices, to transfer functions, to create and classify functions, services and
activities and to standardize salaries and materials.
Granted that the President has the power to reorganize, was the reorganization of DOTCCAR
valid?
In this jurisdiction, reorganization is regarded as valid provided it is pursued in good faith. As a
general rule, a reorganization is carried out in good faith if it is for the purpose of economy or to
make bureaucracy more efficient. The reorganization in the instant case was decreed in the
interest of service and for purposes of economy and more effective coOrdination of the DOTC
functions in the Cordillera Administrative Region. It thus bear the earmarks of good faith.

Eugenio vs. CSC, 243 SCRA 196 (1995)

FACTS:

Eugenio, the Deputy Director of Philippine Nuclear Research Institute, applied for a Career
Executive Service (CES) Eligibility and a CESO rank. But before she got the rank, the CSC passed
Resolution No. 93-459, reorganizing itself and changing the CES Board (CESB) to Office for Career
Executive Service of the Civil Service Commission (OCES).
ISSUE:
W/N CSC usurped legislative function of Congress by abolishing the CESB and transferring its
budget to OCES
HELD:
CESB was created by PD 1. It cannot be disputed, therefore, that as CESB was created by law, it can
only be abolished by the legislature. While CSC has the power to reorganize under Sec. 17, Chap. 3,
Subtitle A, Title I, Bk. V. of the Administrative Code of 1987, this must be read with sec. 16, which
enumerates the offices under the control of the CSC. CESB is not one of such offices.
CESB was intended to be an autonomous entity, albeit administratively attached to CSC. This
essential autonomous character of the CESB is not negated by its attachment to respondent
Commission. By said attachment, CESB was not made to fall within the control of respondent
Commission. Under the Administrative Code of 1987, the purpose of attaching one functionally
inter-related government agency to another is to attain policy and program coordination.

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De la Llana vs. Alba, 112 SCRA 294 (1982)

The issue in this case is whether or not B.P. 129, An Act Reorganizing the Judiciary, is
unconstitutional, considering that in the time-honored principle protected and safeguarded by the
constitution the judiciary is supposed to be independent from legislative will. Does the
reorganization violate the security of tenure of justices and judges as provided for under the
Constitution?
HELD:
Nothing is better settled in our law than that the abolition of an office within the competence of a
legitimate body if done in good faith suffers from no infirmity. What is really involved in this case
is not the removal or separation of the judges and justices from their services. What is important is
the validity of the abolition of their offices.
It is a well-known rule that valid abolition of offices is neither removal nor separation of the
incumbents. Of course, if the abolition is void, the incumbent is deemed never to have ceased to
hold office. As well-settled as the rule that the abolition of an office does not amount to an illegal
removal of its incumbent is the principle that, in order to be valid, the abolition must be made in
good faith.
Removal is to be distinguished from termination by virtue of valid abolition of the office. There
can be no tenure to a non-existent office. After the abolition, there is in law no occupant. In case
of removal, there is an office with an occupant who would thereby lose his position. It is in that
sense that from the standpoint of strict law, the question of any impairment of security of tenure
does not arise.

Larin vs. Executive Secretary, 280 SCRA 713 (1997)

FACTS:
Larin, a Revenue Specific Tax Officer under the Assistant Commissioner of the BIR, is convicted of
crimes of violation of sec. 268 (4) NIRC and sec. 3 (e) RA 3019 (grave misconduct). Acting by
authority of the president, Sr. Deputy Executive Secretary Quisumbing issued a memorandum
order, creating an Executive Committee to investigate Larins administrative charge. While the
investigation was going on, the President issued E.O. 132, streamlining the BIR and abolishing the
office of the Specific Tax Service. Afterwards, Larin was found guilty and was subsequently
dismissed. However, in the appealed case, SC set aside the conviction of Larin
ISSUE:
W/N Larin was unlawfully removed from office
(1) Does the President have the power to dismiss him? Reorganize the BIR?
(2) Was reorganization valid, considering that there was no law enacted by Congress authorizing
reorganization by the Executive
HELD:
SC held that removal as a result of reorganization was done in bad faith.
Does the President have the power to dismiss him?
Larin is a presidential appointee. As such, he comes under the direct disciplining authority of the
President for the power to remove is inherent in the power to appoint. However, Larin is a career
service officer, therefore, he enjoys security of tenure. Under the Civil Service Decree, career
service officers and employees who enjoy security of tenure may be removed only for any of the
causes enumerated in said law. In other words, the fact that the petitioner is a presidential
appointee does not give the appointing authority the license to remove him at will or at his
pleasure for it is an admitted fact that he is likewise a career service officer who under the law is
the recipient of tenurial protection, thus, may only be removed for a cause and in accordance with
procedural due process.
Was the removal for a legal cause under a valid proceeding?
SC held that the removal complied with the requirements for procedural due process but that the
dismissal was not for a valid cause. The basis used in Larins removal is the criminal conviction
against him, but this conviction was later set aside by the Supreme Court upon appeal. Where the
very basis of the administrative case against petitioner is his conviction in the criminal action
which was later on set aside by this court upon a categorical and clear findings that the acts for
which he was administratively held liable are not unlawful and irregular, the acquittal of the
petitioner in the criminal case necessarily entails the dismissal of the administrative action
against him, because in sch a case, there is no basis nor justifiable reason to maintain the
administrative suit.
Does the President have the power to reorganize the BIR?

Yes, under sec. 48 and 62 of RA 7645, sec. 20, Bk. III of EO 292 (Residual Powers), and PD 1772
which amended PD 1416. But while the Presidents power to reorganize can not be denied, this
does not mean however that the reorganization itself is properly made in accordance with law.
Well-settled is the rule that reorganization is regarded as valid provided it is pursued in good faith.
When is there reorganization made in good faith?
The general rule is that a reorganization is carried out in good faith if it is for the purpose of
economy or to make bureaucracy more efficient. In that event no dismissal or separation actually
occurs because the position itself ceases to exist. And in that case the security of tenure would not
be a Chinese Wall. Be that as it may, if the abolition which is nothing else but a separation or
removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in
good faith, no valid abolition takes place and whatever abolition is done is void ab initio.
What are the marks of bad faith in removal as a result of reorganization?
Sec. 2, RA 6656 enumerates the circumstances evidencing bad faith in the removal of employees as
a result of reorganization:
(1) Where there is a significant increase in the number of positions in the new staffing pattern of
the department or agency concerned;
(2) Where an office is abolished and another performing substantially the same functions is
created;
(3) Where incumbents are replaced by those less qualified in terms of status of appointment,
performance and merit;
(4) Where there is a reclassification of offices in the department or agency concerned and the
reclassified offices perform substantially the same functions as the original offices;
(5) Where the removal violates the order of separation provided in sec. 3 hereof.

Cebu United Enterprises v. Gallofin, 106 Phil 491 (1959)

FACTS:
Cebu United Enterprises has import license to purchase over issue newspaper from the US.
However, this license expired on Dec. 16, or one day before the date of the importation of the
items. Gallofin, the collector of customs, refused to deliver the imported items on the ground that
Cebu United Enterprises was importing goods without a valid license.
ISSUE:
W/N duly executed acts of a governmental agency can have valid effects even beyond the life span
of said agency
HELD:
Although RA 650 creating the Import Control Commission (ICC) expired on July 31, it is to be
conceded that its duly executed acts can have valid effects even beyond the life span of said
government agency. The ICC who issued the license was abolished yet, the LICENSE was extended,
the latter has still its valid effects.

Crisostomo vs. CA, 258 SCRA 134 (1996)

FACTS:
Crisostomo was appointed the President of the Philippine College of Commerce (PCC) by the
President of the Philippines. During his incumbency, two administrative charges were filed against
him for illegal use of government vehicles, misappropriation of construction materials, oppression
and harassment, grave misconduct, nepotism and dishonesty before the Office of the President.
Likewise, he was also charged with violation of Anti-Grant and Corrupt Practices Act with the
Tanodbayan. As such, he was preventively suspended and Dr. Mateo was designated as the officerin-charge in his place. Meanwhile, Pres. Marcos passed PD 1341 converting PCC into PUP with
Mateo as President. Crisostomo was later acquitted and his administrative charges were dismissed.
ISSUE:
Did PD 1314 abolish PCC?
HELD:
PD 1314 did not abolish, but only changed the PCC into what is now PUP. What took place was a
change in the academic status of the educational institution, not in its corporate life. Hence, the
change in its name, the expansion of its curriculum offerings and changes in its structure and
organization.
As a general rule, when the purpose of the lawmaking authority is to abolish the office and create
a new one, he says so. In the instant case, PD 1314 merely states that PCC is converted into the
PUP. In addition, the law does not state that the lands, buildings and equipment owned by the PCC
were being transferred to the PUP but only that they stand transferred to it. Stand
transferred simply means, for example, that lands transferred to the PCC were to be understood
as transferred to the PUP as the new name of the institution.

***Q: Who has the power to reorganize?

A: It depends. In order to determine who has the power to reorganize, it is essential to characterize
whether the body to be reorganized is a department or an instrumentality of government. Under EO
292, the President is given the power of control over all departments, bureaus and offices under the
executive branch. Since the power of control includes the power to reorganize, then the power to
reorganize a department, a bureau or an office can be said to be lodged in the President. On the other
hand, an instrumentality is, as a general rule, created by statute or made pursuant to a law. So unless
the law creating such instrumentality delegates the authority to reorganize to a separate body, the
power to reorganize such is with Congress.
***Q: When is reorganization of administrative agencies valid?
A: First, determine whether the agency is a department or an instrumentality in order to determine who
has the authority to reorganize. Then, determine whether the reorganization is done in good faith, not
in good faith, or in bad faith. Reorganization is in good faith if done for the purpose of economy and
efficiency.
***Q: May a public officer validly claim violation of security of tenure as a result of
abolition of office?

A: It depends on the validity of the abolition. Was the abolition done by someone who has authority? To
determine who has authority to abolish, bear in mind the three modes of creating an office: (1)
Constitution; (2) Statute; and (3) authority by law. An office created by the Constitution may only be
abolished by Constitutional amendment or revision, unless the Constitution itself provides for another
mode of abolition. Likewise, an office created by Statute, may, as a general rule, be only abolished by
Congress, unless this power is delegated. And the President may abolish an office if such office is under
his power of control and Congress has not provided for a different mode of abolition.
So if the abolition is made by someone with authority, then was it done in good faith? Abolition is in
good faith if the purpose is for economy and efficiency, or if it not done in bad faith, bearing in mind the
circumstances evidencing bad faith.
If done in good faith, then the abolition is valid. When there is valid abolition, there can be no
separation or removal from office and the affected public officer cannot claim violation of security of
tenure for there can be no tenure to a non-existent office.
***Q: May an official of an abolished office claim vested right to that office?
A: There is no such thing as a vested right to an office. The only exceptions are those offices established
by the Constitution, such as the Constitutional Commissions, etc.
***Q: In case of abolition and a new office is thereby created, may the incumbent of the
abolished office claim preference to that new office?
A: The concept of preference is illustrated in the next-in-rank rule. Under that rule, anyone who is
employed on a permanent basis in a position that has been previously determined to be next-in-rank to
the vacated office and who is qualified is given preference to said office. This presupposes that there is
an old office which is vacated. Thus, the rule does not apply to a newly created office, which necessarily
entails new positions. Besides, preference only means that the old employee should be considered first
but it does not automatically follow that they should then be automatically reappointed.