National Marketing Corporation vs. Arca

The President of the Philippines possesses constitutional authority to review and reverse the decision of the Board of Directors of a government-owned or controlled corporation dismissing a subordinate employee, as such corporations partake of the nature of government bureaus or offices under the President's power of control.

Juan T. Arive was the Manager of the Traffic-Storage Department of the National Marketing Corporation (NAMARCO), receiving an annual compensation of P7,200.00. On February 1, 1960, a Management Memorandum Order directed that the allocation and deliveries of merchandise imported under the Trade Assistance Program to its designated beneficiaries be stopped. Arive was subsequently investigated for causing the improper release of shipments intended for delivery upon full payment by the Federation of United NAMARCO Distributors (FUND), which were covered by domestic letters of credit totaling P361,053.85. The investigating committee found him guilty, and the General Manager issued Administrative Order No. 137 dismissing him from the service. On November 4, 1960, the Board of Directors adopted Resolution No. 584-60 dismissing Arive with prejudice to reinstatement and benefits. Arive's motion for reconsideration was denied.

Arive appealed to the President of the Philippines on March 2, 1961. On January 26, 1965, Executive Secretary Ramon A. Diaz, acting for the President, set aside Resolution No. 584-60 and ordered Arive's reinstatement. The decision noted that the NAMARCO order stopping deliveries had been declared illegal by the Supreme Court in Federation of United NAMARCO Distributors vs. NAMARCO, and that the Pasig River Bodegas where the commodities were stored were private warehouses outside Arive's control. NAMARCO sought reconsideration, arguing the President lacked jurisdiction, but the Office of the President denied the motion and directed immediate compliance. NAMARCO failed to comply.

On December 23, 1965, Arive filed a complaint for reinstatement and damages with the Court of First Instance of Manila, seeking a writ of preliminary mandatory injunction. Respondent Judge Arca issued an order on January 12, 1966, granting the writ and directing NAMARCO to reinstate Arive upon filing a P5,000 bond. NAMARCO's motion for reconsideration was denied, prompting them to file the present petition for certiorari and prohibition with the Supreme Court, which issued a writ of preliminary injunction on March 15, 1966.

• Constitutional Scope of Presidential Control: Petitioners contended that the word "offices" in Section 10(1), Article VII of the Constitution refers only to offices performing governmental functions without juridical personality, thereby excluding government-owned and controlled corporations like NAMARCO.
• Applicability of the NAMARCO Charter: Petitioners argued that Section 13(d) of Republic Act No. 1345 (NAMARCO Charter) exclusively vests the power to remove, suspend, or discipline subordinate employees in the General Manager and Board of Directors, with no provision for appeal to any superior body.
• Lack of Presidential Authority: Petitioners maintained that the President's reversal of the NAMARCO Board's decision and order of reinstatement arrogated a power not authorized by the Constitution or the law, rendering his actuations legally ineffective and an improper basis for the issuance of a writ of preliminary mandatory injunction.

• Presidential Control over GOCCs: Respondents maintained that the President exercises not only supervision but also control over all government-owned and controlled corporations, including NAMARCO, allowing him to review, revise, alter, modify, or nullify the decisions of their Boards of Directors.
• Validity of Reinstatement: Respondents argued that Arive's right to reinstatement was clear, as the President's decision found he was not lawfully dismissed for cause, and his temporary cessation from work was not of his own doing.

• Presidential Authority over GOCCs: Whether the President of the Philippines had the authority to reverse the decision of the Board of Directors of NAMARCO and order the reinstatement of Juan T. Arive.

• Presidential Authority over GOCCs: Yes. The President's authority falls within his constitutional power of control over all executive departments, bureaus, and offices, as government-owned or controlled corporations partake of the nature of government bureaus or offices.

• Presidential Authority over GOCCs: Under the governmental set-up, corporations owned or controlled by the government, such as NAMARCO, partake of the nature of government bureaus or offices, which are administratively supervised by the Administrator of the Office of Economic Coordination, who is responsible to the President. The fact that the NAMARCO Charter does not provide for an appeal from the General Manager's decision of removal does not mean no appeal lies to the President. The right to appeal to the President reposes upon the President's power of control over executive departments. Control means the power to alter, modify, nullify, or set aside what a subordinate officer has done and substitute the former's judgment. Furthermore, the President's action was an act of justice, as Arive was found not lawfully dismissed for cause, given that the NAMARCO order he allegedly violated was declared illegal by the Supreme Court, and the commodities were stored in a private warehouse outside his control.

• Presidential Power of Control — 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 the latter. This power extends to government-owned and controlled corporations, which partake of the nature of government bureaus or offices. The absence of an express statutory provision for appeal to the President does not negate this constitutional power.

• "We hold that the President of the Philippines' authority to review and reverse the decision of the NAMARCO Board of Directors dismissing Juan T. Arive from his position in the NAMARCO and to order his re-instatement falls within the constitutional power of the President over all executive departments, bureaus and offices." — This passage states the ratio decidendi, affirming the President's constitutional control over decisions of government-owned and controlled corporations.
• "And control simply means '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 the latter.'" — This defines the canonical formulation of the President's power of control under the Constitution.

• Federation of United NAMARCO Distributors vs. NAMARCO, G. R. No. L-17819 — Cited to show that the NAMARCO order stopping deliveries to designated beneficiaries was declared illegal by the Supreme Court, forming the basis for the President's reversal of Arive's dismissal.
• Lacson-Magallanes Co., Inc. vs. Patio, 21 SCRA 895 — Followed to support the proposition that the right to appeal to the President reposes upon the President's power of control over executive departments, even when a statute provides that certain decisions are "conclusive."
• Planas vs. Gil, 69 Phil. 52 — Cited for the principle that all executive and administrative organizations are adjuncts of the Executive Department, and the heads of executive departments are assistants and agents of the Chief Executive.
• Batungbakal vs. National Development Company, et al., 49 O.G. 2290 — Cited in the Executive Secretary's decision to support the proposition that an illegally dismissed employee's position never became vacant, making a replacement's tenure temporary.

• Section 10(1), Article VII, Constitution — Provides that the President shall have control of all executive departments, bureaus, or offices. The Court applied this provision to include government-owned and controlled corporations.
• Section 13(d), Republic Act No. 1345 (NAMARCO Charter) — Vests in the General Manager, with the approval of the Board of Directors, the power to remove, suspend, or discipline subordinate employees. The Court held that the absence of an appeal provision herein does not preclude an appeal to the President.
• Section 11(d), Executive Order No. 399 (Uniform Charter for Government Owned or Controlled Corporations) — Similar to the NAMARCO Charter, authorizes the general manager to remove employees. The Court noted the absence of an appeal provision does not negate the President's power of control.
• Executive Order No. 386 — Placed government corporations under the administrative supervision of the Administrator of the Office of Economic Coordination, responsible to the President, demonstrating that GOCCs are subject to presidential control.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee and Barredo, JJ., concur. Reyes, J.B.L., J., is on leave.