Philippine National Bank vs. Tejano

The privatization of a government-owned and controlled corporation under Executive Order No. 80 does not divest the Civil Service Commission of jurisdiction over an administrative disciplinary appeal that was already pending before it at the time of privatization, the provision removing the corporation from CSC coverage being prospective in operation and containing no express retroactive intent.

Philippine National Bank (PNB) was, at the time relevant to the dispute, a government-owned and controlled corporation subject to the disciplinary jurisdiction of the Civil Service Commission (CSC). Respondent Cayetano A. Tejano, Jr. served as Vice-President and Manager of PNB's Cebu City branch. On May 27, 1996, by virtue of Executive Order No. 80 (the Revised Charter of PNB), PNB ceased to be a government-owned and controlled corporation and was converted into a private banking institution, thereby removing it from the coverage of the CSC and the Commission on Audit. The legal controversy centers on whether this supervening privatization affected the CSC's jurisdiction over an administrative appeal that had already been filed before the conversion took effect.

Respondent Cayetano A. Tejano, Jr. was the Vice-President and Manager of the Philippine National Bank (PNB) branch in Cebu City. Together with eight other bank employees — Ma. Teresa Chan, Marcelino Magdadaro, Douglasia Canuel, Novel Fortich, Jacinto Ouano, Quirubin Blanco, Manuel Manzanares, and Pedrito Ranile — respondent was administratively charged before the PNB Management Hearing Committee on February 24 and March 17, 1994, for alleged irregular and fraudulent transactions involving the corporate accounts of several entities, including Pat International Trading Corporation (PITC), Khun Tong International Trading Corporation (KITC), Pat Garments International Corporation (PGIC), Aqua Solar Trading Corporation, Dacebu Traders and Exporters, Mancao Mercantile Co., Inc., and V&G Better Homes Subdivision. The charges comprised grave misconduct, gross neglect of duty, conduct grossly prejudicial to the best interest of the service, and acts violative of Republic Act No. 3019. All of these transactions had transpired while PNB was still a government-owned and controlled corporation.

At the close of the hearing, the Committee found respondent guilty of grave misconduct in misappropriating the funds of V&G and of gross neglect in extending unwarranted credit accommodations to PITC, PGIC, and KITC, the latter serving as an aggravating circumstance. The Committee recommended forced resignation without forfeiture of benefits. The PNB Board of Directors, however, differed in its Resolution No. 88 dated June 21, 1995, finding that the gross neglect should serve as an aggravating circumstance to the grave misconduct and imposing the penalty of forced resignation with forfeiture of benefits. Respondent alone sought reconsideration, which the Board denied in Resolution No. 107 dated August 24, 1995.

On September 21, 1995, respondent appealed to the Civil Service Commission (CSC), submitting his Memorandum on Appeal on October 19, 1995. In the meantime, on May 27, 1996, PNB ceased to be a government-owned and controlled corporation by virtue of Executive Order No. 80, which converted it into a private banking institution. Despite this development, the CSC, on April 14, 1998, issued Resolution No. 980716 dismissing respondent's appeal for being filed out of time. Respondent filed a motion for reconsideration, and the CSC required PNB to comment. PNB argued that even if the appeal were timely, it should be dismissed because PNB's privatization removed the case from CSC jurisdiction. The CSC found this argument meritorious and, in Resolution No. 983099 dated December 7, 1998, denied respondent's reconsideration on that ground.

Respondent elevated the matter to the Court of Appeals via petition for review under Rule 43, docketed as CA-G.R. SP No. 50084. The appellate court found merit in the appeal, holding that respondent's appeal before the CSC had been filed on time and that the CSC had not lost jurisdiction despite PNB's supervening privatization. Because the CSC resolutions had not addressed the merits of respondent's appeal, the Court of Appeals remanded the case to the CSC for further proceedings. PNB's motion for reconsideration was denied, prompting the instant petition for review before the Supreme Court.

• Effect of E.O. No. 80 on CSC Jurisdiction: Petitioner argued that Section 6 of E.O. No. 80, which states that PNB would cease to be a government-owned and controlled corporation and would no longer be subject to CSC coverage, necessarily divested the CSC of jurisdiction over respondent's pending appeal.
• Exception to the General Rule on Continued Jurisdiction: Petitioner maintained that while jurisdiction ordinarily continues until termination of the case, the rule does not apply where the law provides otherwise or where the law is intended to operate on cases pending at the time of its enactment, asserting that E.O. No. 80 falls within this exception.
• Retroactive Application of Section 6: Petitioner alternatively posited that the portion of Section 6 removing PNB from CSC and COA coverage must be understood as applicable to cases already pending with the CSC at the time of the bank's conversion into a private entity.

• No Transfer of Jurisdiction: Respondent submitted that Section 6 of E.O. No. 80 does not provide for the transfer of jurisdiction over his pending appeal from the CSC to another administrative authority, nor does it authorize retroactive application that would deprive the CSC of jurisdiction over cases already pending before it prior to the law's effectivity.
• Jurisdiction Once Acquired Continues: Respondent argued that the CSC had already acquired jurisdiction over his appeal upon its filing and submission of the memorandum on appeal, before PNB's privatization, and that jurisdiction once acquired generally continues until final disposition of the case.
• Estoppel and Delay: Respondent invoked estoppel against petitioner, noting that PNB had actively participated in the proceedings before the CSC and was therefore barred from raising the issue of jurisdiction, and alleged that petitioner's recourse was taken merely to cause delay.

• CSC Jurisdiction After Privatization: Whether Section 6 of Executive Order No. 80, which removed PNB from the coverage of the Civil Service Commission upon its privatization, divested the CSC of jurisdiction over respondent's administrative appeal that was already pending before it at the time of the bank's conversion.

• CSC Jurisdiction After Privatization: No. Section 6 of E.O. No. 80 is prospective in operation and contains no express provision divesting the CSC of jurisdiction over pending appeals; jurisdiction once acquired continues until final termination of the case.

• CSC Jurisdiction After Privatization: The Court applied the principle of statutory construction that where the law is clear, plain, and free from ambiguity, it must be given its literal meaning without interpretation or construction. Section 6 of E.O. No. 80, entitled "Change in Ownership of the Majority of the Voting Equity of the Bank," merely states the natural and logical consequences of privatization — that PNB would cease to be a government depository, would come under laws applicable to private corporations, and would no longer be subject to service-wide agencies such as the CSC and COA. Nothing in the provision's language indicates an intent to divest the CSC of jurisdiction over disciplinary cases already pending before it involving acts committed while PNB was still a government-owned and controlled corporation. The Court reinforced this conclusion with the general rule of prospectivity under Article 4 of the Civil Code and the maxim lex prospicit, non respicit — laws look forward, not backward. Retroactive application is disfavored because it usually divests vested rights or impairs obligations; while exceptions exist (e.g., remedial laws, penal statutes favorable to the accused, curative laws), none obtains here. The provision removing PNB from CSC coverage must be taken to govern acts committed by the bank's employees after privatization, not those already pending on appeal. Furthermore, jurisdiction is conferred by law and, once acquired, continues until the case is finally terminated. The CSC acquired appellate jurisdiction over respondent's appeal upon its filing and submission of the memorandum on appeal, before PNB's privatization became effective. The Court distinguished the exception cited by petitioner — where a statute expressly provides or is construed to operate on actions pending before its enactment — by noting that Section 6 contains no such express provision. Relying on Latchme Motoomull vs. Dela Paz and Bengzon vs. Inciong, the Court reaffirmed that where a court or tribunal has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to proceed to final determination is not affected by new legislation placing jurisdiction in another tribunal, unless the statute expressly provides for retroactive application. No such express provision exists in E.O. No. 80.

• Principle of Prospectivity (Lex prospicit, non respicit) — Laws generally have only prospective effect and must not be applied retroactively to pending disputes and cases, pursuant to Article 4 of the Civil Code. Retroactive application is disfavored because it usually divests vested rights or impairs the obligation of contracts. Well-defined exceptions exist, such as where the law itself expressly provides for retroactivity, remedial laws, penal statutes favorable to the accused, emergency laws, and curative laws. The Court applied this doctrine to hold that Section 6 of E.O. No. 80, removing PNB from CSC coverage upon privatization, governs only acts committed after privatization and cannot be applied to respondent's pending appeal.
• Jurisdiction Once Acquired Continues — Jurisdiction is conferred by no other source than law, and once a tribunal acquires jurisdiction over a case, that jurisdiction continues until the case is finally terminated. A supervening change in the law does not divest a tribunal of jurisdiction over a case already pending before it, unless the new statute expressly provides for retroactive application or is construed to operate on actions pending before its enactment. The Court applied this doctrine to hold that the CSC's appellate jurisdiction over respondent's appeal, acquired upon filing and submission of the memorandum on appeal before PNB's privatization, was not lost by virtue of E.O. No. 80.
• Literal Interpretation of Clear Statutes — Where the law is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without interpretation or construction, based on the presumption that the words employed correctly express legislative intent. The Court applied this to Section 6 of E.O. No. 80, finding its language too plain to be construed as divesting the CSC of jurisdiction over pending appeals.

• "By no stretch of intelligent and reasonable construction can the provisions in Section 6 of E.O. No. 80 be interpreted in such a way as to divest the CSC of jurisdiction over pending disciplinary cases involving acts committed by an employee of the PNB at the time that the bank was still a government-owned and controlled corporation." — This passage articulates the ratio decidendi, directly resolving the core issue by holding that the privatization provision cannot be construed to divest the CSC of jurisdiction over pending disciplinary cases predating privatization.
• "The rule is that where a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to proceed to the final determination of the cause is not affected by new legislation placing jurisdiction over such proceedings in another tribunal. The exception to the rule is where the statute expressly provides, or is construed to the effect that it is intended to operate as to actions pending before its enactment." — This quotation, drawn from Bengzon vs. Inciong as cited in Latchme Motoomull vs. Dela Paz, states the canonical formulation of the doctrine on continued jurisdiction despite supervening legislation, which the Court applied to reject petitioner's argument.
• "It is binding rule, conformably with Article 4 of the Civil Code, that, generally, laws shall have only a prospective effect and must not be applied retroactively in such a way as to apply to pending disputes and cases. This is expressed in the familiar legal maxim lex prospicit, non respicit (the law looks forward and not backward.)" — This passage defines the controlling principle of prospectivity and its constitutional rationale, central to the Court's conclusion that E.O. No. 80 cannot operate on respondent's pending appeal.

• Latchme Motoomull vs. Dela Paz, G.R. No. 45302, July 24, 1990, 187 SCRA 743 — Controlling precedent on continued jurisdiction despite supervening legislation. The Court cited it for the rule that a tribunal exercising jurisdiction over a controversy is not divested by new legislation transferring jurisdiction to another tribunal, unless the statute expressly provides for retroactive application.
• Bengzon vs. Inciong, G.R. Nos. L-48706-07, June 29, 1979, 91 SCRA 248 — Cited within Latchme Motoomull as the source of the rule on continued jurisdiction, providing the canonical formulation quoted by the Court.
• Estolas vs. Mabalot, 431 Phil. 462 (2002) — Cited for the principle that where the law is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without interpretation or construction.
• Land Bank of the Philippines vs. De Leon, 447 Phil. 495 (2003) — Cited for the maxim lex prospicit, non respicit and the rationale against retroactivity.

• Section 6, Executive Order No. 80 (Revised Charter of PNB) — Provides that upon the transfer of majority voting equity to private investors and issuance of the certificate of incorporation, PNB shall cease to be a government-owned or controlled corporation and shall no longer be subject to the coverage of the CSC and COA. The Court held this provision to be prospective in operation, governing acts committed after privatization, and not divesting the CSC of jurisdiction over appeals already pending before it.
• Article 4, Civil Code of the Philippines — Provides that laws shall have prospective effect. The Court invoked this provision to support the ruling that E.O. No. 80 cannot be applied retroactively to respondent's pending appeal.
• Section 37, Presidential Decree No. 807 (Civil Service Decree of the Philippines) — Defines the disciplinary jurisdiction of the CSC, providing that the Commission shall decide upon appeal all administrative disciplinary cases involving the imposition of penalties exceeding thirty days' suspension, demotion, removal, or dismissal. The Court relied on this provision to confirm that the CSC had properly acquired appellate jurisdiction over respondent's appeal upon its filing.

Chief Justice Reynato S. Puno (on official leave), Associate Justice Leonardo A. Quisumbing (Acting Chief Justice), Associate Justice Antonio T. Carpio, Associate Justice Renato C. Corona, Associate Justice Conchita Carpio Morales, Associate Justice Minita V. Chico-Nazario, Associate Justice Presbitero J. Velasco, Jr. (on official leave), Associate Justice Antonio Eduardo B. Nachura, Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Arturo D. Brion, Associate Justice Lucas P. Bersamin, Associate Justice Mariano C. Del Castillo (on leave), and Associate Justice Roberto A. Abad.