Bagaoisan vs. National Tobacco Administration

The President, pursuant to existing laws and the Administrative Code of 1987, possesses continuing authority to reorganize the administrative structure of the Office of the President, including attached agencies, and such reorganization is valid provided it is pursued in good faith.

President Joseph Estrada issued Executive Order No. 29, mandating the streamlining of the National Tobacco Administration (NTA), followed by Executive Order No. 36, which increased the number of affected positions to a maximum of 750. The NTA subsequently prepared and adopted a new Organization Structure and Staffing Pattern (OSSP), which the Department of Budget and Management approved subject to revisions. A placement committee was created to evaluate applicants for the revised OSSP.

• Issuance of Executive Orders: On September 30, 1998, President Estrada issued Executive Order No. 29 to streamline the NTA. On October 27, 1998, Executive Order No. 36 was issued, amending E.O. No. 29 by increasing the affected positions to a maximum of 750.
• Adoption of New OSSP: The NTA prepared a new Organization Structure and Staffing Pattern (OSSP), submitted it to the Office of the President on October 29, 1998, and secured approval from the Department of Budget and Management on December 4, 1998. A placement committee was consequently created to assist in the selection and placement of permanent personnel.
• Termination of Petitioners: On June 10, 1996, petitioners, rank-and-file employees of the NTA Batac office, received individual notices of termination effective thirty days from receipt. Finding no immediate administrative relief, petitioners sought judicial intervention.
• Lower Court Proceedings: The RTC ordered the NTA to appoint petitioners to positions similar to their former assignments. On appeal, the Court of Appeals reversed the RTC, ruling that the reorganization was valid and executed in good faith, and that petitioners were not automatically entitled to reappointment.

• Lack of Presidential Authority: Petitioners argued that the President cannot reorganize the NTA through a mere executive order, asserting that reorganization requires legislative action.
• Invalidity of Executive Orders: Petitioners maintained that Executive Order No. 29, being unsigned by the Executive Secretary, cannot amend or supersede Executive Order No. 245, a law issued during the Freedom Constitution.
• Ultra Vires Act: Petitioners contended that the NTA Administrator implemented the reorganization without the authority of the NTA Board of Directors, rendering the act ultra vires.
• Bad Faith and Security of Tenure: Petitioners asserted that the reorganization was executed in bad faith, thereby defeating their right to security of tenure, and that the Court of Appeals erred in ignoring established jurisprudence on the abolition of offices.

• Validity of Reorganization: Respondent maintained that the reorganization was validly mandated by Executive Orders Nos. 29 and 36 and implemented in accordance with law.
• Good Faith: Respondent argued that there was no bad faith in the termination of petitioners, as the new staffing pattern decreased the number of positions and petitioners failed to prove that less qualified employees were appointed or that abolished offices were recreated.
• No Automatic Reappointment: Respondent countered that incumbent employees do not enjoy an automatic preferential right or right of first refusal to appointment in the new staffing pattern, as the law does not preclude the infusion of new talent for the public interest.

• Presidential Authority to Reorganize: Whether the President can validly carry out the reorganization of the NTA through the issuance of an executive order.
• Validity and Good Faith of Reorganization: Whether the reorganization of the NTA was valid and executed in good faith.

• Presidential Authority to Reorganize: The President validly carried out the reorganization. While the general rule vests the power to abolish public offices in the legislature, the exception allows the President to inactivate functions or carry out reorganization measures in the executive department pursuant to the power of control and existing laws. Statutes such as Presidential Decree No. 1772, Republic Act No. 7645, Republic Act No. 8745, Republic Act No. 8760, and Section 31 of Executive Order No. 292 expressly or impliedly grant the President continuing authority to reorganize the Office of the President and its attached agencies.
• Validity and Good Faith of Reorganization: The reorganization was valid and executed in good faith. The assailed executive orders did not abolish the NTA but merely mandated its streamlining. The Court of Appeals found no evidence of bad faith under the criteria of Republic Act No. 6656, noting the decrease in positions, the absence of recreated offices performing substantially the same functions, and the lack of proof that less qualified employees replaced the incumbents. Factual findings of the appellate court are binding and conclusive upon the Supreme Court.

• Presidential Power of Reorganization — The President possesses continuing authority to reorganize the administrative structure of the Office of the President, including attached agencies, to achieve simplicity, economy, and efficiency. This authority stems from statutory grants and the Administrative Code of 1987, in conjunction with the President's constitutional power of control over the executive department. The general rule that the power to abolish a public office is lodged with the legislature admits an exception where bureaus, agencies, or offices in the executive department are concerned.
• Good Faith in Reorganization — Reorganization is valid if pursued in good faith, which means it is for the purpose of economy or to make bureaucracy more efficient. Bad faith is evidenced by the following circumstances under Republic Act No. 6656: (a) significant increase in positions in the new staffing pattern; (b) abolition and creation of offices performing substantially the same functions; (c) replacement of incumbents by less qualified personnel; (d) reclassification of offices performing the same functions; and (e) violation of the order of separation.
• Preferential Right in Reorganization — Incumbent employees do not enjoy an automatic preferential right or right of first refusal to appointment in the new staffing pattern. Preference means they should be considered first, but the law does not preclude the infusion of new blood or necessary talents for the best interest of the public service.

• "The general rule has always been that the power to abolish a public office is lodged with the legislature. This proceeds from the legal precept that the power to create includes the power to destroy. x x x The exception, however, is that as far as bureaus, agencies or offices in the executive department are concerned, the President’s power of control may justify him to inactivate the functions of a particular office, or certain laws may grant him the broad authority to carry out reorganization measures."
• "In this jurisdiction, reorganizations have been regarded as valid provided they are pursued in good faith. Reorganization is carried out in ‘good faith’ if it is for the purpose of economy or to make bureaucracy more efficient."

• Buklod ng Kawaning EIIB vs. Zamora — Applied. The Court relied on this case to rule that the President has the authority to carry out reorganization in any branch or agency of the executive department based on existing laws.
• Larin v. Executive Secretary — Followed. Cited for the proposition that Republic Act No. 7645 and Presidential Decree No. 1772 authorize the President to effect organizational changes, including the scaling down, phasing out, or abolition of offices.
• Domingo vs. Zamora — Cited. Discussed the scope of the President's power to reorganize under Section 31 of Executive Order No. 292, distinguishing between the Office of the President Proper and offices outside it.
• Canonizado vs. Aguirre — Cited. Defined reorganization as involving the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions.

• Article VII, Section 17, 1987 Constitution — Grants the President control of all executive departments, bureaus, and offices, justifying executive action to inactivate functions or carry out reorganization measures.
• Section 31, Book III, Executive Order No. 292 (Administrative Code of 1987) — Grants the President continuing authority to reorganize the administrative structure of the Office of the President, including restructuring internal organization, transferring functions, and transferring agencies.
• Republic Act No. 6656 — Enumerates the circumstances evidencing bad faith in the removal of civil service employees resulting from reorganization.
• Section 48, Republic Act No. 7645 and Section 77, Republic Act No. 8745 (General Appropriations Acts) — Direct the heads of departments to identify activities to be scaled down, phased out, or abolished, to be effected pursuant to Circulars or Orders issued by the Office of the President.
• Presidential Decree No. 1772 — Amended Presidential Decree No. 1416, expressly granting the President continuing authority to reorganize the national government.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ.