Tanjay Water District vs. Quinit, Jr.

A general manager of a local water district whose appointment is governed by Section 23 of P.D. No. 198, as amended, serves at the pleasure of the Board, and the Board's withdrawal of trust and confidence results in expiration of term—not removal—requiring no prior notice or hearing; accordingly, back salaries are not recoverable where the termination was valid. The due process requirement for primarily confidential or co-terminous employees is satisfied by informing the incumbent of the termination resolution, and amendatory laws that would alter the grounds for termination apply prospectively absent an express retroactivity clause.

The Tanjay Water District (TWD) is a local water district organized under P.D. No. 198, otherwise known as the Provincial Water Utilities Act of 1973, as amended. Its Board of Directors is vested with the power to appoint the General Manager, whose tenure was originally governed by Section 23 of P.D. No. 198, as amended by P.D. No. 768, which provided that said officer "shall serve at the pleasure of the board." Local water districts are government-owned or controlled corporations (GOCCs), and their employees are generally covered by the Civil Service Law, subject to the specific provisions of their enabling charter. The interplay between the general Civil Service regime and the special charter provision for water district general managers gave rise to the dispute over the security of tenure of respondent, who held a CSC-attested permanent appointment as General Manager.

Sometime in 1987, the Board of Directors of Tanjay Water District (TWD Board), composed of Carmelito A. Limbaga, Nenita R. Pilas, Adelina Q. Limbaga, Godofredo R. Borromeo, and Richard Regalado, appointed respondent Engineer Cesar A. Quinit, Jr. as General Manager of the water district effective November 18, 1987, subject to the terms of an Appointment Proposal. On October 1, 1993, the TWD Board issued a new appointment for respondent as General Manager, which the Civil Service Commission (CSC) attested as permanent. At the time, Section 23 of P.D. No. 198, as amended by Section 9 of P.D. No. 768, provided that the General Manager of a local water district "shall serve at the pleasure of the Board of Directors."

Sometime in 1996, disagreements arose between respondent and the members of the TWD Board over the management of the water district. Respondent wrote a letter dated August 13, 1996 to the Administrator of the Local Water Utilities Administration (LWUA), requesting that all members of the TWD Board be replaced. He complained of several irregularities committed by the Board, including the appropriation of district funds for the Board members' personal benefit, the creation of a Prequalification, Bidding and Awards Committee that interfered with day-to-day management, violations of CSC memorandum circulars, non-implementation of employee salary adjustments, and the slashing of the General Manager's salary and benefits. Respondent warned that the district's resources would be "eaten by the dogs."

On August 31, 1996, the TWD Board approved Board Resolution No. 49, Series of 1996, terminating respondent's services as General Manager effective September 1, 1996. The Resolution cited respondent's total disrespect for the Board members, his humiliation of the Board by remarking that their concern was personal interest, his implementation of a salary increase without Board authority and without proper appropriation, and the irreparable corrosion of the relationship between him and the Board. Respondent forthwith filed a complaint for illegal termination before the CSC Regional Office No. VII, alleging that the Board failed to justify his termination and observe due process, and that his permanent CSC-attested appointment meant he could only be removed for cause.

The TWD Board countered that regardless of any "permanent" annotation by the CSC, respondent's position remained primarily confidential under Section 23 of P.D. No. 198, and that the withdrawal of trust and confidence operated as an automatic termination of his term. The CSC, in Resolution No. 97-3853 dated September 18, 1997, affirmed the validity of the Board's Resolution, ruling that respondent's position was primarily confidential in nature and terminable at the pleasure of the Board, that no due process violation occurred because there was no removal but merely expiration of term, and that the CSC's attestation of permanency did not preclude the Board from removing the General Manager on the ground of loss of confidence. Respondent appealed to the Court of Appeals via a petition for review under Rule 43.

• Inapplicability of Labor Jurisprudence: Petitioners maintained that the rulings in ordinary labor cases on loss of confidence cannot be applied to a case involving a GOCC employee holding a primarily confidential position, as the nature of the employment relationship and the governing legal framework differ.
• Sufficiency of Due Process for Confidential Employees: Petitioners insisted that in cases involving confidential positions, the due process requirement under the Constitution is satisfied by the mere act of informing the confidential employee that his or her term has expired, and that they complied accordingly when they issued Board Resolution No. 49, Series of 1996.
• Impropriety of Back Salary Award: Petitioners argued that the Court of Appeals took an inconsistent position in upholding the validity of the termination while simultaneously awarding back salaries for denial of due process, and that the award of five-year back salaries was therefore unwarranted.

• Denial of Due Process: Respondent contended that he was denied due process because his termination was made effective on September 1, 1996, the day following the passage of the Board Resolution, without prior notice or opportunity to be heard. While an employee might be terminated for loss of confidence, the manner and procedure for termination must comply with basic due process requirements; otherwise the termination would be illegal and invalid.
• Entitlement to Back Salaries: Respondent argued that since he was not afforded due process, petitioners were required to pay back salaries for a period of five years from the time he was terminated from service.
• Illegality of Termination and Right to Reinstatement: Respondent further argued in his Memorandum that his termination was illegal and invalid, entitling him to reinstatement. He claimed that petitioners acted with arbitrariness, malice, or bad faith, and that the employer's prerogative to dismiss a managerial employee must not be exercised arbitrarily so as not to render nugatory the employee's constitutional right to security of tenure. He relied on the ruling in Gray vs. De Vera as being on all fours with the instant case.

• Entitlement to Back Salaries: Whether respondent is entitled to back salaries when his termination was valid as an expiration of term but was effected without prior notice and hearing.
• Due Process for Confidential Employees: Whether the due process requirement is satisfied by mere notification of the termination resolution for an employee serving at the pleasure of the appointing authority.
• Applicability of RA No. 9286: Whether Republic Act No. 9286, which amended Section 23 of P.D. No. 198 to require cause and due process for removal of a General Manager, applies retroactively to pending cases.

• Entitlement to Back Salaries: No. Back salaries may be awarded to civil servants only if they have been illegally dismissed and thereafter ordered reinstated, or if acquitted of the charge against them. Respondent's termination was valid as an expiration of term, not an illegal dismissal.

• Due Process for Confidential Employees: Yes, due process was satisfied. For employees serving at the pleasure of the appointing authority, there is no need of prior notice or due hearing before the incumbent can be separated from office; it is enough that the incumbent was informed of the Board Resolution terminating his services.

• Applicability of RA No. 9286: No. Republic Act No. 9286 is silent as to retroactivity and must therefore be taken as prospective in application. Applying it retroactively would divest the Board of rights vested under the prevailing law at the time of termination.

• Entitlement to Back Salaries: The Court found that respondent's position as General Manager of TWD was primarily confidential and co-terminous under Section 23 of P.D. No. 198, as amended, which provided that the General Manager "shall serve at the pleasure of the board." This provision falls under Section 14 of the Omnibus Rules Implementing Book V of E.O. No. 292, classifying appointments whose continuity in service is based on the trust and confidence of the appointing authority or subject to his pleasure as co-terminous. When the Board withdrew its trust and confidence, respondent's term expired; there was no removal. Because the termination was valid, respondent could not be considered illegally dismissed. The established rule, as articulated in Jacinto vs. Court of Appeals and related cases, is that back salaries may be awarded only to civil servants who have been illegally dismissed and ordered reinstated, or to those acquitted of the charge against them. Respondent's case fell within neither category. The Court of Appeals erred in taking an inconsistent position—upholding the validity of the termination while awarding back salaries for procedural deficiency—because no procedural deficiency exists when the mode of separation is expiration of term rather than removal.

• Due Process for Confidential Employees: The Court relied on Paloma vs. Mora, which involved a general manager of a water district under the same statutory framework, holding that the Board of Directors may abridge the term of the General Manager the moment the latter's services cease to be convivial to the Board, and that there is no need of prior notice or due hearing before the incumbent can be separated from office. The Court distinguished Gray vs. De Vera, where the employee's separation was treated as a removal requiring formal charges and opportunity to be heard, by citing Pangilinan vs. Maglaya, which clarified that Gray represented a "loose interpretation" of the term "dismissal" and that subsequent decisions established that where a person holds his position at the pleasure of a superior, separation from office is not removal but expiration of term. The Court also cited Mita Pardo de Tavera vs. Philippine Tuberculosis Society, Inc., which delineated that an appointment held at the pleasure of the appointing power is temporary in nature and co-extensive with the desire of the Board, so that when the Board opts to replace the incumbent, technically there is no removal but only expiration of term, requiring no prior notice, due hearing, or sufficient grounds. In the instant case, the Board afforded respondent due process when it notified him of the approval of Board Resolution No. 49, Series of 1996.

• Applicability of RA No. 9286: The Court noted that Republic Act No. 9286, approved on April 2, 2004, amended Section 23 of P.D. No. 198 to provide that the General Manager "shall not be removed from office, except for cause and after due process." However, the law is silent as to retroactivity. The general rule in statutory construction is that amendatory acts are construed as having only prospective operation unless the legislative intent to give retrospective effect is expressly declared or necessarily implied. The Court found neither express declaration nor necessary implication of retroactivity. Furthermore, RA No. 9286 is a substantive amendment because it changed the grounds for termination from service at the pleasure of the Board to removal only for cause and after due process. Applying it retroactively would divest the Board members of the right vested in them by P.D. No. 198 to terminate the General Manager at their pleasure or discretion, and would make them accountable for actions that were valid under the law prevailing at the time the questioned act was committed. Accordingly, the prevailing law at the time of respondent's termination was Section 23 of P.D. No. 198 prior to its amendment.

• Expiration of Term vs. Removal — Where a person holds his position at the pleasure of a superior or subject to some supervening event, his separation from office is not removal but expiration of the term. Removal is defined as the ouster of the incumbent before the expiration of his term; expiration of term is effected by the will of the superior or by the happening of the contingency. The distinction is critical because expiration of term requires no prior notice, due hearing, or sufficient grounds, whereas removal requires cause and due process. The Court applied this doctrine to hold that respondent's termination as General Manager of TWD was an expiration of term, not a removal, because his appointment was governed by Section 23 of P.D. No. 198, which provided that the General Manager "shall serve at the pleasure of the board."

• Primarily Confidential and Co-terminous Appointments — Under Section 14 of the Omnibus Rules Implementing Book V of E.O. No. 292, an appointment is co-terminous when the entrance and continuity in the service is based on the trust and confidence of the appointing authority or subject to his pleasure. The tenure of those holding primarily confidential positions ends upon loss of confidence, because their term of office lasts only as long as confidence in them endures. Their cessation from office involves no removal but the expiration of their term. The Court classified the General Manager's position under this category pursuant to Section 23 of P.D. No. 198.

• Prospective Application of Amendatory Laws — In an amendatory act, every case of doubt must be resolved against retroactive effect. Since retroactive application usually divests rights that have already become vested, all statutes are construed as having only prospective operation unless the purpose and intention of the legislature to give retrospective effect is expressly declared or necessarily implied from the language used. The Court applied this principle to hold that RA No. 9286, which substantively changed the grounds for termination of a water district General Manager, could not be applied retroactively to pending cases.

• Back Salaries Limited to Illegal Dismissal with Reinstatement or Acquittal — Back salaries may be awarded to civil servants only if they have been illegally dismissed and thereafter ordered reinstated, or if they have been acquitted of the charge against them. A validly terminated employee whose separation constitutes expiration of term does not fall within either category and is therefore not entitled to back salaries.

• "An appointment held at the pleasure of the appointing power is in essence temporary in nature. It is co-extensive with the desire of the Board of Directors. Hence, when the Board opts to replace the incumbent, technically there is no removal but only an expiration of term and in an expiration of term, there is no need of prior notice, due hearing or sufficient grounds before the incumbent can be separated from office." — This passage, quoted from Mita Pardo de Tavera vs. Philippine Tuberculosis Society, Inc., articulates the canonical formulation of the distinction between expiration of term and removal for primarily confidential employees, and forms the doctrinal basis for the Court's holding that no due process hearing was required.

• "The Board of Directors of a Water District may abridge the term of the General Manager thereof the moment the latter's services cease to be convivial to the former." — Quoted from Paloma vs. Mora, this passage defines the scope of the Board's discretionary power over the General Manager's tenure under Section 23 of P.D. No. 198 and is the operative rule applied to the facts of the case.

• "Since the retroactive application of a law usually divests rights that have already become vested, the rule in statutory construction is that all statutes are to be construed as having only a prospective operation unless the purpose and intention of the legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language used." — This states the general rule on prospective application of amendatory statutes, which the Court applied to hold that RA No. 9286 could not govern respondent's termination, which occurred under the prior version of Section 23 of P.D. No. 198.

• Paloma vs. Mora, G.R. No. 157783, September 23, 2005, 470 SCRA 711 — Controlling precedent. The Court relied heavily on this case, which involved a general manager of a water district under the same statutory framework (Section 23, P.D. No. 198, as amended), to hold that the Board may abridge the General Manager's term at any time and that no prior notice or due hearing is required before separation from office.

• Pangilinan vs. Maglaya, G.R. No. 104216, August 20, 1993, 225 SCRA 511 — Followed to clarify and limit the doctrine in Gray vs. De Vera. The Court cited this case for the proposition that Gray represented a "loose interpretation" of "dismissal" and that subsequent decisions established the distinction between removal and expiration of term for employees serving at the pleasure of the appointing authority.

• Gray vs. De Vera, No. L-23966, May 22, 1969, 28 SCRA 268 — Distinguished. Respondent cited this case as on all fours, but the Court held it inapplicable because Gray treated the separation of a confidential employee as a removal requiring formal charges and hearing—a interpretation later clarified in Pangilinan as overly loose and inconsistent with the doctrine of expiration of term.

• Orcullo, Jr. vs. Civil Service Commission — Followed. The Court cited this case for the proposition that employees serving at the pleasure of the appointing authority under Section 14 of the Omnibus Rules Implementing Book V of E.O. No. 292 may be validly terminated without prior notice or hearing.

• Mita Pardo de Tavera vs. Philippine Tuberculosis Society, Inc. — Followed. Cited for the canonical definition of an appointment held at the pleasure of the appointing power as temporary in nature and co-extensive with the desire of the Board, requiring no prior notice, due hearing, or sufficient grounds for separation.

• Jacinto vs. Court of Appeals, G.R. No. 124540, November 14, 1997, 281 SCRA 657 — Followed. Cited for the rule that back salaries may be awarded to civil servants only if they have been illegally dismissed and ordered reinstated, or if acquitted of the charge against them.

• Serrano vs. National Labor Relations Commission, 380 Phil. 416 (2000) — Cited by the Court of Appeals but effectively distinguished. The CA relied on this case to award back salaries where termination had legal basis but was procedurally deficient. The Supreme Court implicitly rejected this approach for confidential employees whose separation constitutes expiration of term rather than removal.

• Section 23, P.D. No. 198 (Provincial Water Utilities Act of 1973), as amended by P.D. No. 768 — Provided that the General Manager of a local water district "shall serve at the pleasure of the board." This was the prevailing law at the time of respondent's termination and was the basis for classifying his position as primarily confidential and co-terminous, rendering his separation an expiration of term rather than a removal.

• Section 2(3), Article IX-B, 1987 Constitution — Provides that no officer or employee of the civil service shall be removed or suspended except for cause provided by law. The Court acknowledged this as the general rule but recognized Section 23 of P.D. No. 198 as an exception, noting that "cause provided by law" includes loss of confidence for primarily confidential positions.

• Section 14, Omnibus Rules Implementing Book V of E.O. No. 292 (Administrative Code of 1987) — Classifies appointments whose continuity in service is based on the trust and confidence of the appointing authority or subject to his pleasure as co-terminous. The Court correlated this provision with Section 23 of P.D. No. 198 to confirm the co-terminous nature of the General Manager's appointment.

• Republic Act No. 9286 (approved April 2, 2004) — Amended Section 23 of P.D. No. 198 to provide that the General Manager "shall not be removed from office, except for cause and after due process." The Court held this amendment to be prospective only, as it is a substantive change that is silent on retroactivity, and applied the prior version of Section 23 to the case.

Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Minita V. Chico-Nazario, and Antonio Eduardo B. Nachura concurred in the decision. No separate concurring opinions were written.