Larin vs. Executive Secretary

When an administrative charge is predicated entirely upon a criminal conviction that is subsequently reversed by the Supreme Court with a definitive ruling that the acts complained of were not unlawful or irregular, the administrative case must necessarily be dismissed for lack of basis; furthermore, a government reorganization is void if done in bad faith, as evidenced by circumstances such as abolishing an office and immediately creating another with substantially the same functions, significantly increasing the number of positions while removing qualified incumbents, or replacing career officers with less qualified outsiders.

The petitioner, a presidential appointee and Career Executive Service Officer (CESO) serving as Assistant Commissioner of the Excise Tax Service of the BIR, was convicted by the Sandiganbayan for his alleged role in facilitating fraudulent tax credits for Tanduay Distillery, Inc. This conviction triggered administrative proceedings leading to his dismissal. Concurrently, the President issued Executive Order No. 132 reorganizing the BIR, which abolished the Excise Tax Service and resulted in the non-reappointment of the petitioner.

• Petitioner Aquilino T. Larin was appointed by the President as Assistant Commissioner of the Excise Tax Service (also referred to as Specific Tax Service) of the Bureau of Internal Revenue (BIR), a position classified under the Career Executive Service.
• On September 18, 1992, the Sandiganbayan convicted petitioner and co-accused for violation of Section 268(4) of the National Internal Revenue Code and Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) in relation to the grant of tax credits to Tanduay Distillery, Inc.
• On June 4, 1993, the Acting Finance Secretary reported the conviction to the President, recommending administrative action on the ground of grave misconduct.
• On August 25, 1993, Memorandum Order No. 164 was issued creating a committee composed of Frumencio A. Lagustan, Jose B. Alejandrino, and Jaime M. Maza to investigate the administrative complaint against petitioner.
• On September 17, 1993, the Committee directed petitioner to file a position paper within seven days, warning that failure to do so would be deemed a waiver.
• On September 30, 1993, petitioner submitted his response, arguing that the case was sub-judice, barred by res judicata and double jeopardy, and that the Office of the Ombudsman had already taken cognizance of the matter.
• On October 26, 1993, President Ramos issued Executive Order No. 132 providing for the streamlining of the BIR, which abolished the Excise Tax Service and other offices, and decentralized or transferred various functions.
• On October 27, 1993, the President appointed ten new Assistant Commissioners, excluding petitioner.
• On December 2, 1993, Administrative Order No. 101 was issued finding petitioner guilty of grave misconduct and imposing the penalty of dismissal with forfeiture of leave credits and retirement benefits.
• On December 13, 1993, petitioner filed the instant petition directly with the Supreme Court.
• On April 17, 1996, while the petition was pending, the Supreme Court set aside the conviction of petitioner in the criminal cases, ruling that there was nothing illegal or irregular in his acts and that he could not be held negligent for relying on certifications from a co-equal unit.

• The President, as to presidential appointees who are Career Executive Service Officers, exercises only the power of control, not the power to remove.
• The administrative investigation conducted under Memorandum Order No. 164 violated due process because he was not properly informed of the specific administrative charges against him, and the exchange of letters was insufficient to constitute a valid hearing.
• Executive Order No. 132 and its implementing rules (Revenue Administrative Orders 4-93 and 5-93) are ultra vires because there is no law authorizing the President to reorganize the BIR.
• The reorganization is tainted with bad faith in violation of Section 2 of Republic Act No. 6656 (Security of Tenure in Government Reorganization).
• He was actually removed as a result of the reorganization, not because of the administrative charge.

• As a presidential appointee, petitioner falls under the direct disciplining authority of the President, and the power to remove is inherent in the power to appoint under Section 16, Article VII of the Constitution.
• Executive Order No. 132 was validly issued pursuant to Sections 48 and 62 of Republic Act No. 7645, Section 63 of Executive Order No. 127, and Section 20, Book III of Executive Order No. 292 (Administrative Code of 1987).
• Section 11 of Republic Act No. 6656 expressly contemplates future reorganizations and does not prohibit subsequent reorganization through executive order.
• The petitioner was dismissed because he was found guilty of grave misconduct in the administrative case, not by virtue of the reorganization under Executive Order No. 132.
• The proceedings complied with due process as petitioner was given the opportunity to submit his position paper and supporting documents.

• Procedural Issues: Whether the administrative investigation conducted pursuant to Memorandum Order No. 164 complied with the requirements of procedural due process.
• Substantive Issues:
  • Who has the power to discipline and remove the petitioner from office?
  • What is the effect of the petitioner's acquittal in the criminal case on the pending administrative charge?
  • Does the President have the power to reorganize the BIR and issue Executive Order No. 132?
  • Is the reorganization of the BIR pursuant to Executive Order No. 132 tainted with bad faith?

• Procedural: The Court ruled that the requirements of procedural due process were satisfied. The essence of due process in administrative proceedings is that a party be afforded a reasonable opportunity to be heard and to submit evidence in support of his defense. The records show that petitioner received notice of the charge through the Committee's letter dated September 17, 1993, and he was given the opportunity to submit his position paper dated September 30, 1993 together with various supporting documents.
• Substantive:
  • The President has the power to remove petitioner as a presidential appointee under Section 16, Article VII of the Constitution; however, since petitioner is a career service officer, he enjoys security of tenure and can only be removed for a valid cause and in accordance with procedural due process.
  • The administrative charge against petitioner must be dismissed because it was based entirely on his conviction in the criminal cases which was subsequently set aside by the Supreme Court with a categorical finding that the acts for which he was held liable were not unlawful or irregular. While administrative cases are generally independent of criminal actions, an exception applies where the administrative case is predicated solely on the criminal conviction which is later reversed.
  • The President has the power to reorganize the BIR under Section 48 and 62 of Republic Act No. 7645, Presidential Decree No. 1772 (as amended), and Section 20, Book III of Executive Order No. 292.
  • However, the reorganization under Executive Order No. 132 is void for being tainted with bad faith under Section 2 of Republic Act No. 6656, as evidenced by: (1) the abolition of the Intelligence and Investigation Office and Inspection Service and the creation of an Intelligence and Investigation Service performing substantially the same functions; (2) the significant increase in the number of positions in the new staffing pattern; and (3) the non-reappointment of qualified permanent incumbents like petitioner while appointing outsiders such as Antonio Pangilinan who was not an incumbent officer of the bureau.

• Power to Remove is Inherent in the Power to Appoint — Under Section 16, Article VII of the Constitution, the President's power to appoint carries with it the incidental power to remove; however, for career service officers who enjoy security of tenure, removal must be for a valid cause and with due process.
• Independence of Administrative and Criminal Proceedings — As a general rule, administrative cases are independent of criminal actions for the same act or omission, such that the dismissal or acquittal in the criminal case does not automatically terminate the administrative proceedings; however, an exception exists where the administrative charge is based solely on the criminal conviction which is subsequently reversed with a finding that the acts were lawful.
• Good Faith in Government Reorganization — A reorganization is valid if done in good faith for purposes of economy or efficiency; it is void ab initio if done for political reasons, to defeat security of tenure, or otherwise not in good faith, as evidenced by abolishing offices and creating new ones with substantially the same functions, significantly increasing positions, or replacing qualified incumbents with less qualified persons.

• "The power to remove is inherent in the power to appoint conferred to the President by Section 16, Article VII of the Constitution."
• "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... 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."
• "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 such a case, there is no basis nor justifiable reason to maintain the administrative suit."
• "The essence of due process in administrative proceedings is that a party be afforded a reasonable opportunity to be heard and to submit any evidence he may have in support of his defense."

• Dario v. Mison — Cited for the doctrine that reorganizations must be made in good faith; abolition done for political reasons or to defeat security of tenure is void ab initio.
• Floreza v. Ongpin — Cited to establish that the position of Assistant Commissioner of the BIR is part of the Career Executive Service and that such officers are appointed by the President.
• Police Commission v. Lood and Office of the Court Administrator v. Enriquez — Cited for the general rule that administrative cases are independent of criminal actions and that dismissal or acquittal in criminal cases does not automatically relieve administrative liability.
• Midas Touch Food Corp. v. NLRC — Cited for the definition of due process in administrative proceedings as the opportunity to be heard and submit evidence.
• Abbas v. COMELEC — Cited for the presumption of constitutionality of laws.

• Section 16, Article VII of the 1987 Constitution — Grants the President the power to appoint and, by implication, the power to remove officials.
• Section 3 and Section 16, Article XVIII of the 1987 Constitution — Section 3 provides that laws not inconsistent with the Constitution remain operative; Section 16 recognizes government reorganizations and provides for separation pay for employees separated as a result thereof.
• Section 36 of Presidential Decree No. 807 (Civil Service Decree) — Provides that career service officers may be removed only for causes enumerated in the law.
• Section 20, Book III of Executive Order No. 292 (Administrative Code of 1987) — Grants the President residual powers to reorganize.
• Section 268(4) of the National Internal Revenue Code — The provision violated in the criminal charge regarding tax credits.
• Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — The provision violated in the criminal charge regarding causing undue injury to the government.
• Republic Act No. 6656 — The Act Protecting the Security of Tenure of Civil Service Officers; specifically Sections 2 (evidence of bad faith), 4 (preference for permanent officers), and 11 (contemplation of future reorganizations).
• Republic Act No. 7645 — Specifically Sections 48 (scaling down, phasing out, abolition of activities) and 62 (unauthorized organizational changes), which authorize the President to effect organizational changes.
• Presidential Decree No. 1772 — Amending Presidential Decree No. 1416; grants the President continuing authority to reorganize the national government.