G.R. No. 169328 October 27, 2006

JULIAN A. ALZAGA, MEINRADO ENRIQUE A. BELLO, and MANUEL S. SATUITO,petitioners,vs.HONORABLE SANDIGANBAYAN (2ndDivision) and PEOPLE OF THE PHILIPPINES,respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:This Petition forCertiorariassails the April 25, 2005 and August 10, 2005 Resolutions1of the Sandiganbayan in Criminal Case Nos. 25681-25684, which respectively reversed the May 27, 2004 Resolution2of the courta quoand denied petitioners Motion for Reconsideration.3On October 7, 1999,4four separate Informations for violation of Section 3(e) of Republic Act (R.A.) No. 3019 were filed against petitioners Julian A. Alzaga, Meinrado Enrique A. Bello and Manuel S. Satuito relative to alleged irregularities which attended the purchase of four lots in Tanauan, Batangas, by the Armed Forces of the Philippines Retirement and Separation Benefits System (AFP-RSBS). Alzaga was the Head of the Legal Department of AFP-RSBS when one of the lots was purchased. Bello was a Police Superintendent and he succeeded Alzaga as Head of the Legal Department. It was during his tenure when the other three lots were purchased. Both were Vice Presidents of AFP-RSBS. On the other hand, Satuito was the Chief of the Documentation and Assistant Vice President of the AFP-RSBS.5Petitioners filed their respective Motions to Quash and/or Dismiss the informations alleging that the Sandiganbayan has no jurisdiction over them and their alleged offenses because the AFP-RSBS is a private entity created for the benefit of its members and that their positions and salary grade levels do not fall within the jurisdiction of the Sandiganbayan pursuant to Section 4 of Presidential Decree (P.D.) No. 1606 (1978),6as amended by R.A. No. 8249 (1997).7On May 27, 2004, the Sandiganbayan granted petitioners motions to dismiss for lack of jurisdiction.However, in a Resolution dated April 25, 2005, the Sandiganbayan reversed its earlier resolution. It held that the AFP-RSBS is a government-owned or controlled corporation thus subject to its jurisdiction. It also found that the positions held by Alzaga and Bello, who were Vice Presidents, and Satuito who was an Assistant Vice President, are covered and embraced by, and in fact higher than the position of managers mentioned under Section 4 of P.D. No. 1606, as amended, thus under the jurisdiction of the Sandiganbayan.Petitioners Motion for Reconsideration8was denied, hence, this petition raising the following issues:

ITHE COURTA QUOCOMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DECIDING A QUESTION OF SUBSTANCE IN A MANNER NOT ACCORD WITH LAW AND APPLICABLE JURISPRUDENCE THAT IT HAS JURISDICTION OVER THE PERSON OF THE PETITIONERS

IITHE COURTA QUOCOMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DECIDING A QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR JURISPRUDENCE THAT THE ARMED FORCES RETIREMENT AND SEPARATION BENEFITS SYSTEM (AFP-RSBS) IS A GOVERNMENT-OWNED OR CONTROLLED CORPORATION

IIITHE COURTA QUOCOMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DECIDING A QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR JURISPRUDENCE THAT PETITIONERS ALZAGA AND BELLO[,] WHO WERE BOTH VICE-PRESIDENTS OF THE AFP-RSBS[,] AND PETITIONER SATUITO[,] WHO WAS ASSISTANT VICE-PRESIDENT OF THE AFP-RSBS[,] ARE COVERED AND EMBRACED BY THE POSITION "MANAGERS" MENTIONED UNDER SECTION 4 a (1) (g) OF PD NO. 1606, AS AMENDED.9The petition is without merit.The AFP-RSBS was established by virtue of P.D. No. 361 (1973)10in December 1973 to guarantee continuous financial support to the AFP military retirement system, as provided for in R.A. No. 340 (1948).11It is similar to the Government Service Insurance System (GSIS) and the Social Security System (SSS) since it serves as the system that manages the retirement and pension funds of those in the military service.12The AFP-RSBS is administered by the Chief of Staff of the AFP through a Board of Trustees and Management Group,13and funded from congressional appropriations and compulsory contributions from members of the AFP; donations, gifts, legacies, bequests and others to the system; and all earnings of the system which shall not be subject to any tax whatsoever.14Section 4 of P.D. No. 1606, as further amended by R.A. No. 8249, grants jurisdiction to the Sandiganbayan over:a. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government whether in a permanent, acting or interim capacity, at the time of the commission of the offense:(1) Officials of the executive branch occupying the positions of regional director and higher, otherwise classified as Grade 27 and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758), specifically including:x x x x(g) Presidents, directors or trustees, or managers of government-owned or controlled corporations, state universities or educational institutions or foundations;InPeople v. Sandiganbayan,15where herein petitioners Alzaga and Satuito were respondents, this Court has ruled that the character and operations of the AFP-RSBS are imbued with public interest thus the same is a government entity and its funds are in the nature of public funds. InRamiscal, Jr. v. Sandiganbayan,16we held that the AFP-RSBS is a government-owned and controlled corporation under R.A. No. 9182, otherwise known as The Special Purpose Vehicle Act of 2002. These rulings render unmeritorious petitioners assertion that the AFP-RSBS is a private entity.There is likewise no merit in petitioners claim that the Sandiganbayan has no jurisdiction over them since their positions as vice presidents and assistant vice president are not covered nor embraced by the term "managers" under section 4 of RA. No. 8249.We held in Geduspan v. People,17that while the first part of section 4 covers only officials of the executive branch with the salary grade 27 and higher, the second part "specifically includes" other executive officials whose positions may not be of grade 27 and higher but who are by express provision of law placed under the jurisdiction of the said court. In the latter category, it is the position held and not the salary grade which determines the jurisdiction of the Sandiganbayan. Thus, presidents, directors or trustees, or managers of government owned and controlled corporations, are under the jurisdiction of the Sandiganbayan.In the instant case, petitioners Alzaga and Bello were Head of the Legal Department while petitioner Satuito was Chief of the Documentation with corresponding ranks of Vice Presidents and Assistant Vice President. These positions are not specifically enumerated in RA. No. 8249; however, as correctly observed by the Sandiganbayan, their ranks as Vice Presidents and Assistant Vice President are even higher than that of "managers" mentioned in RA. No. 8249.In sum, the Sandiganbayan correctly ruled that the AFP-RSBS is a government-owned and controlled corporation and that it has jurisdiction over the persons of petitioners who were Vice Presidents and Assistant Vice President when the charges against them were allegedly committed.WHEREFORE,the instant Petition forCertiorariisDISMISSED. The assailed Resolution of the Sandiganbayan dated April 25, 2005 that the AFP-RSBS is a government-owned and controlled corporation and that it has jurisdiction over the persons of the petitioners and the Resolution dated August 10, 2005 denying petitioners motion for reconsideration, are AFFIRMED.SO ORDERED.

G.R. No. 81490 August 31, 1988

HAGONOY WATER DISTRICT represented by its General Manager CELESTINO S. VENGCO,petitioner,vs.THE HON. NATIONAL LABOR RELATIONS COMMISSION, EXECUTIVE LABOR ARBITER VLADIMIR P.L. SAMPANG, DEPUTY SHERIFF JOSE A. CRUZ and DANTE VILLANUEVA,respondents.

Mario S. Jugco for petitioner.Renato C. Guevara for private respondent Villanueva.FELICIANO,J.:The present petition forcertiorariseeks to annul and set aside: a) the decision of the Labor Arbiter dated 17 March 1987 in NLRC Case No. RAB-III-8-2354-85, entitled "Dante Villanueva versus LWA-Hagonoy Waterworks District/Miguel Santos;" and b) the Resolution of the National Labor Relations Commission dated 20 August 1987 affirming the mentioned decision.Private respondent Dante Villanueva was employed as service foreman by petitioner Hagonoy Water District ("Hagonoy") from 3 January 1977 until 16 May 1985, when he was indefinitely suspended and thereafter dismissed on 12 July 1985 for abandonment of work and conflict of interest.On 14 August 1985, private respondent filed a complaint for illegal dismissal, illegal suspension and underpayment of wages and emergency cost of living allowance against petitioner Hagonoy with the then Ministry of Labor and Employment, Regional Arbitration Branch III, San Fernando, Pampanga.Petitioner immediately moved for outright dismissal of the complaint on the ground of lack of jurisdiction. Being a government entity, petitioner claimed, its personnel are governed by the provisions of the Civil Service Law, not by the Labor Code, and protests concerning the lawfulness of dismissals from the service fall within the jurisdiction of the Civil Service Commission, not the Ministry of Labor and Employment. Petitioner cited Resolution No. 1540 of the Social Security Commission cancelling petitioner's compulsory coverage from the system effective 16 May 1979 "considering the rulings that local water districts are instrumentalities owned and controlled by the government and that their officers and employees are government employees." In opposing the motion, private respondent Villanueva contended that local water districts, like petitioner Hagonoy, though quasi-public corporations, are in the nature of private corporations since they perform proprietary functions for the government.The Labor Arbiter proceeded to hear and try the case and, on 17 March 1986, rendered a Decision in favor of the private respondent and against petitioner Hagonoy. The dispositive part of the decision read:WHEREFORE, premises considered, respondents are hereby ordered to reinstate petitioner immediately to his former position as Service Foreman, without loss of seniority rights and privileges, with full backwages, including all benefits provided by law, from the date he was terminated up to his actual date of reinstatement.In addition, respondents are hereby ordered to pay the petitioner the amount of P4,927.50 representing the underpayments of wages from July 1983 to May 16, 1985.SO ORDERED.On appeal, the National Labor Relations Commission affirmed the decision of the Labor Arbiter in a Resolution dated 20 August 1987.The petitioner moved for reconsideration, insisting that public respondents had no jurisdiction over the case. Meanwhile, a Writ of Execution was issued by the Labor Arbiter on 16 November 1987. The writ was enforced by garnishing petitioner Hagonoy's deposits with the Planters Development Bank of Hagonoy.Petitioner then filed a Motion to Quash the Writ of Execution with Application for Writ of Preliminary Injunction arguing that the writ was prematurely issued as its motion for reconsideration had not yet been resolved. By Resolution dated 10 December 1987, public respondent Commission denied the application for a preliminary injunction. The motion to quash was similarly denied by the Commission which directed petitioner to reinstate immediately private respondent and to pay him the amount of P63,577.75 out of petitioner's garnished deposits.Hence, the instant petition.The only question here in whether or not local water districts are government owned or controlled corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential Decree No. 198, known as the "Provincial Water Utilities Act of 1973" which went into effect on 25 May 1973, and which provides as follows:Exemption from Civil Service. The district and its employees, being engaged in a proprietary function, are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below supervisory levels:Provided, however,That the total of all salaries, wages, emoluments, benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthly revenue, said net revenue representing income from water sales and sewerage service charges, lease pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding fiscal year.The Labor Arbiter however failed to take into account the provisions of Presidential Decree No. 1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as Section 25 in the following manner:Section 26 of the same decree [P.D. 198] is hereby amended to read as Section 25 as follows:Section 25. Authorization. The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration.Thus, Section 25 of P.D. 198 exempting the employees of water districts from the application of the Civil Service Law was removed from the statute books.This is not the first time that officials of the Department of Labor and Employment have taken the position that the Labor Arbiter here adopted. InBaguio Water District vs. Cresenciano B. Trajano, etc. et al.,1the petitioner Water District sought review of a decision of the Bureau of Labor Relations which affirmed that of a Med-Arbiter calling for a certification election among the regular rank-and-file employees of the Baguio Water District (BWD). In granting the petition, the Court said:The Baguio Water District was formed pursuant to Title II-Local Water District Law of P.D. No. 198, as amended, The BWD is by Sec. 6 of that decree 'a quasi-public corporation performing public service and supplying public wants.A part of the public respondent's decision rendered in September, 1983, reads in part:We find the appeal [of the BWD] to be devoid of merit. The records show that the operation and administration of BWD is governed and regulated by special laws, that is, Presidential Decrees Nos. 198 and 1479 which created local water districts throughout the country. Section 25 of Presidential Decree (PD) 198 clearly provides that the district and its employees shall be exempt from the provisions of the Civil Service Law and that its personnel below supervisory level shall have the right to collectively bargain. Contrary to appellant's claim, said provision has not been amended much more abrogated expressly or impliedly by PD 1479 which does not make mention of any matter on Civil Service Law or collective bargaining. (Rollo, p. 590.)We grant the petition for the following reasons:1. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Sec. 26 of P.D. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory decree took effect on June 11, 1978.xxx xxx xxx3. The BWD is a corporation created pursuant to a special law P.D. No. 198, as amended. As such its officers and employees are part of the Civil Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 686.)The broader question of whether employees of government owned or controlled corporations are governed by the Civil Service Law and Civil Service Rules and Regulations was addressed by this Court in 1985 inNational Housing Corporation vs. Juco.2After a review of constitutional, statutory and case law on the matter, the Court, through Mr. Justice Gutierrez, held:There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by the civil service law and civil service rules and regulations.Section 1. Article XII-B of the [1973] Constitution specifically provides:The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government-owned or controlled corporation. ...The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:A Civil Service embracing all branches and subdivisions of the Government shall be provided by law.The inclusion of "government-owned or controlled corporations" within the embrace of the civil service shows a deliberate effort of the framers to plug an earlier loophole which allowed government-owned or controlled corporations to avoid the full consequences of the all encompassing coverage of the, civil service system. The same explicit intent is shown by the addition of "agency" and "instrumentality" to branches and subdivisions of the Government. All offices and firms of the government are covered.The amendments introduced in 1973 are not Idle exercises or meaningless gestures. They carry the strong message that civil service coverage is broad and all-embracing insofar as employment in the government in any of its governmental. or corporate arms is concerned.xxx xxx xxxSection I of Article XII-B, [1973] Constitution uses the word "every" to modify the phrase "government-owned or controlled corporation.""Every" means each one of a group,without exception.It means all possible and all, taken one by one. Of course, our decision in this case refers to a corporation created as a government-owned or controlled entity. It does not cover cases involving private firms taken over by the government in foreclosure or similar proceedings. We reserve judgment on these latter cases when the appropriate controversy is brought to this Court.3InJuco,the Court spelled out the law on the issue at bar as such law existed under the 1973 Constitution and the Provisional Constitution of 1984,4until just before the effectivity of the 1987 Constitution. Public respondent Commission, in confirming the Labor Arbiter's assumption of jurisdiction over this case, apparently relied upon Article IX (B), Section 2 (1) of the 1987 Constitution, which provides that:[T]he Civil Service embraces ... government owned or controlled corporationswith original charters.(Emphasis supplied)The NLRC took the position that although petitioner Hagonoy is a government owned or controlled corporation, it had no original charter having been created simply by resolution of a local legislative council. The NLRC concluded that therefore petitioner Hagonoy fell outside the scope of the civil service.At the time the dispute in the case at bar arose, and at the time the Labor Arbiter rendered his decision (i.e., 17 March 1986), there is no question that the applicable law was that spelled out inNational Housing Corporation vs. Juco (supra) and Baguio Water District vs. Cresenciano B. Trajano (supra)and that under such applicable law, the Labor Arbiter had no jurisdiction to render the decision that he in fact rendered. By the time the public respondent Commission rendered its decision of 20 August 1987 which is here assailed, the 1987 Constitution had already come into effect.5There is, nonetheless, no necessity for this Court at the present time and in the present case to pass upon the question of the effect of the provisions of Article DC (B), Section 2 (1) of the 1987 Constitution upon the pre-existing statutory and case law. For whatever that effect might be, and we will deal with that when an appropriate case comes before the Court we believe and so hold that the 1987 Constitution did not operate retrospectively so as to confer jurisdiction upon the Labor Arbiter to render a decision which, under the law applicable at the time of the rendition of such decision, was clearly outside the scope of competence of the Labor Arbiter. Thus, the respondent Commission had nothing before it which it could pass upon in the exercise of its appellate jurisdiction. For it is self-evident that a decision rendered by the Labor Arbiter without jurisdiction over the case is a complete nullity, vesting no rights and imposing no liabilities.ACCORDINGLY, the Petition for certiorari is GRANTED. The decision of the Labor Arbiter dated 17 March 1986, and public respondent Commission's Resolution dated 20 August 1987 and all other Resolutions and Orders issued by the Commission in this case subsequent thereto, are hereby SET ASIDE. This decision is, however, without prejudice to the right of private respondent Villanueva to refile, if he so wishes, this complaint in an appropriate forum. No pronouncement as to costs.SO ORDERED.

G.R. No. 95237-38 September 13, 1991

DAVAO CITY WATER DISTRICT, CAGAYAN DE ORO CITY WATER DISTRICT, METRO CEBU WATER DISTRICT, ZAMBOANGA CITY WATER DISTRICT, LEYTE METRO WATER DISTRICT, BUTUAN CITY WATER DISTRICT, CAMARINES NORTE WATER DISTRICT, LAGUNA WATER DISTRICT, DUMAGUETE CITY WATER DISTRICT, LA UNION WATER DISTRICT, BAYBAY WATER DISTRICT, METRO LINGAYEN WATER DISTRICT, URDANETA WATER DISTRICT, COTABATO CITY WATER DISTRICT, MARAWI WATER DISTRICT, TAGUM WATER DISTRICT, DIGOS WATER DISTRICT, BISLIG WATER DISTRICT, and MECAUAYAN WATER DISTRICT,petitioners,vs.CIVIL SERVICE COMMISSION, and COMMISSION ON AUDIT,respondents.

Rodolfo S. De Jesus for petitioners.Evalyn H. Itaas-Fetalino, Rogelio C. Limare and Daisy B. Garcia-Tingzon for CSC.MEDIALDEA,J.:pWhether or not the Local Water Districts formed and created pursuant to the provisions of Presidential Decree No. 198, as amended, are government-owned or controlled corporations with original charter falling under the Civil Service Law and/or covered by the visitorial power of the Commission on Audit is the issue which the petitioners entreat this Court,en banc, to shed light on.Petitioners are among the more than five hundred (500) water districts existing throughout the country formed pursuant to the provisions of Presidential Decree No. 198, as amended by Presidential Decrees Nos. 768 and 1479, otherwise known as the "Provincial Water Utilities Act of 1973."Presidential Decree No. 198 was issued by the then President Ferdinand E. Marcos by virtue of his legislative power under Proclamation No. 1081. It authorized the different local legislative bodies to form and create their respective water districts through a resolution they will pass subject to the guidelines, rules and regulations therein laid down. The decree further created and formed the "Local Water Utilities Administration" (LWUA), a national agency attached to the National Economic and Development Authority (NEDA), and granted with regulatory power necessary to optimize public service from water utilities operations.The respondents, on the other hand, are the Civil Service Commission (CSC) and the Commission on Audit (COA), both government agencies and represented in this case by the Solicitor General.On April 17, 1989, this Court ruled in the case ofTanjay Water District v. Gabaton, et al.(G.R. No. 63742, 172 SCRA 253):Significantly, Article IX (B), Section 2(1) of the 1987 Constitution provides that the Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned and controlled corporations with original charters. Inasmuch as PD No. 198, as amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country, they come under the coverage of the Civil Service Law, rules and regulations. (Sec. 35, Art. VIII and Sec. 37, Art. IX of PD No. 807).As an offshoot of the immediately cited ruling, the CSC. issued Resolution No. 90-575, the dispositive portion of which reads:NOW THEREFORE, in view of all the foregoing, the Commission resolved, as it hereby resolves to rule that Local Water Districts, being quasi-public corporations created by law to perform public services and supply public wants, the matter of hiring and firing of its officers and employees should be governed by the Civil Service Law, rules and regulations. Henceforth, all appointments of personnel of the different local water districts in the country shall be submitted to the Commission for appropriate action. (Rollo. p. 22).However, on May 16, 1990, in G.R. No. 85760, entitled"Metro Iloilo Water District v. National Labor Relations Commission, et al.,"the Third Division of this Court ruled in a minute resolution:xxx xxx xxxConsidering that PD 198 is a general legislation empowering and/or authorizing government agencies and entities to create water districts, said PD 198 cannot be considered as the charter itself creating the Water District. Public respondent NLRC did not commit any grave abuse of discretion in holding that the operative act, that created the Metro Iloilo Water District was the resolution of the Sangguniang Panglunsod of Iloilo City. Hence, the employees of Water Districts are not covered by Civil Service Laws as the latter do (sic) not have original charters.In adherence to the just cited ruling, the CSC suspended the implementation of Resolution No. 90-575 by issuing Resolution No. 90-770 which reads:xxx xxx xxxNOW, THEREFORE, in view of all the foregoing, the Commission resolved to rule, as it hereby rules, that the implementation of CSC. Resolution No. 575 dated June 27, 1990 be deferred in the meantime pending clarification from the Supreme Court are regards its conflicting decisions in the cases ofTanjay Water District v. GabatonandMetro Iloilo Water District v. National Labor Relations Commission.(p. 26,Rollo)In the meanwhile, there exists a divergence of opinions between COA on one hand, and the (LWUA), on the other hand, with respect to the authority of COA to audit the different water districts.COA opined that the audit of the water districts is simply an act of discharging the visitorial power vested in them by law (letter of COA to LWUA dated August 13, 1985, pp. 29-30,Rollo).On the other hand, LWUA maintained that only those water districts with subsidies from the government fall within the COA's jurisdiction and only to the extent of the amount of such subsidies, pursuant to the provision of the Government Auditing Code of the Phils.It is to be observed that just like the question of whether the employees of the water districts falls under the coverage of the Civil Service Law, the conflict between the water districts and the COA is also dependent on the final determination of whether or not water districts are government-owned or controlled corporations with original charter. The reason behind this is Sec. 2(1), Article IX-D of the 1987 constitution which reads:Sec. 2(1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to the Government, or any of its subdivisions, agencies or instrumentalities,including government-owned or controlled corporations with original charters, and on a post audit basis. (emphasis supplied)Petitioners' main argument is that they are private corporations without original charter, hence they are outside the jurisdiction of respondents CSC and COA. Reliance is made on the Metro Iloilo case which declared petitioners as quasi-public corporations created by virtue of PD 198, a general legislation which cannot be considered as the charter itself creating the water districts. Holding on to this ruling, petitioners contend that they are private corporations which are only regarded as quasi-public or semi-public because they serve public interest and convenience and that since PD 198 is a general legislation, the operative act which created a water district is not the said decree but the resolution of the sanggunian concerned.After a fair consideration of the parties' arguments coupled with a careful study of the applicable laws as well as the constitutional provisions involved, We rule against the petitioners and reiterate Our ruling in Tanjay case declaring water districts government-owned or controlled corporations with original charter.As early asBaguio Water District v. Trajano, et al.,(G.R. No. 65428, February 20, 1984, 127 SCRA 730), We already ruled that a water district is a corporation created pursuant to a special law P.D. No. 198, as amended, and as such its officers and employees are covered by the Civil Service Law.In another case (Hagonoy Water District v. NLRC, G.R. No. 81490, August 31, 1988, 165 SCRA 272), We ruled once again that local water districts are quasi-public corporations whose employees belong to the Civil Service. The Court's pronoucement in this case, as extensively quoted in theTanjaycase,supra,partly reads:"The only question here is whether or not local water districts are governmkent owned or controlled corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential decree No. 198, known as the Provincial Water Utilities Act of 1973" which went onto effect in 25 May 1973, and which provides as follows:Exemption from Civil Service. The district and its employees, being engaged in a proprietary function, are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below supervisory levels:Provided, however, That the total of all salaries, wages emoluments, benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthy revenue. Said net revenue representing income from water sales and sewerage service charges, less pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding fiscal year.The Labor Arbiter failed to take into accout the provisions of Presidential Decree No. 1479, which went into effect on 11 June 1978, P.D. No. 1479, wiped away Section 25 of PD 198 quoted above, and Section 26 of PD 198 was renumbered as Section 25 in the following manner:Section 26 of the same decree PD 198 is hereby amended to read as Section 25 as follows:Section 25. Authorization. The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration.Thus, Section 25 of PD 198 exempting the employees of water districts from the application of the Civil Service Law was removed from the statute books:xxx xxx xxxWe grant the petition for the following reasons:1. Section 25 of PD No. 198 was repealed by Section 3 of PD No. 1479; Section 26 of PD No. 198 was amended ro read as Sec. 25 by Sec. 4 of PD No. 1479. The amendatory decree took effect on June 11, 1978.xxx xxx xxx3. The BWD is a corporation created pursuant to a special law PD No. 198, as amended. As such its officers and employees are part of the Civil Service (Sec. 1, Art. XII-B, [1973] Constitution; PD No. 868).Ascertained from a consideration of the whole statute, PD 198 is a special law applicable only to the different water districts created pursuant thereto. In all its essential terms, it is obvious that it pertains to a special purpose which is intended to meet a particular set of conditions and cirmcumstances. The fact that said decree generally applies to all water districts throughout the country does not change the fact that PD 198 is a special law. Accordingly, this Court's resolution in Metro Iloilo case declaring PD 198 as a general legislation is hereby abandoned.By "government-owned or controlled corporation with original charter," We mean government owned or controlled corporation created by a special law and not under the Corporation Code of the Philippines. Thus, in the case ofLumanta v. NLRC(G.R. No. 82819, February 8, 1989, 170 SCRA 79, 82), We held:The Court, inNational Service Corporation (NASECO) v. National Labor Relations Commission, G.R. No 69870, promulgated on 29 November 1988, quoting extensively from the deliberations of 1986 Constitutional Commission in respect of the intent and meaning of the new phrase "with original character," in effect held thatgovernment-owned and controlled corporations with original charter refer to corporations chartered by special law as distinguished from corporations organized under our general incorporation statute the Corporations Code. In NASECO, the company involved had been organized under the general incorporation statute and was a sbusidiary of the National Investment Development Corporation (NIDC) which in turn was a subsidiary of the Philippine National Bank, a bank chartered by a special statute. Thus, government-owned or controlled corporations like NASECO are effectively, excluded from the scope of the Civil Service. (emphasis supplied)From the foregoing pronouncement, it is clear that what has been excluded from the coverage of the CSC are those corporations created pursuant to the Corporation Code. Significantly, petitioners are not created under the said code, but on the contrary, they were created pursuant to a special law and are governed primarily by its provision.No consideration may thus be given to petitioners' contention that the operative act which created the water districts are the resolutions of the respective local sanggunians and that consequently, PD 198, as amended, cannot be considered as their charter.It is to be noted that PD 198, as amended is the source of authorization and power to form and maintain a district. Section 6 of said decree provides:Sec. 6. Formation of District. This Act is the source of authorization and power to form and maintain a district. Once formed, a district is subject to the provisions of this Act and not under the jurisdiction of any political subdivision, . . . .Moreover, it must be observed that PD 198, contains all the essential terms necessary to constitute a charter creating a juridical person. For example, Section 6(a) provides for the name that will be used by a water district, thus:Sec. 6. . . . To form a district, the legislative body of any city, municipality or province shall enact a resolution containing the following:a) The name of the local water district, which shall include the name of the city, municipality, or province, or region thereof, served by said system, followed by the words "Water District."It also prescribes for the numbers and qualifications of the members of the Board of Directors:Sec. 8. Number and Qualification. The Board of Directors of a district shall be composed of five citizens of the Philippines who are of voting age and residents within the district. One member shall be a representative of civic-oriented service clubs, one member of representative of professional associations, one member a representative of business, commercial or financial organizations, one member a representative of educational institutions and one member a representative of women's organization. No public official shall serve as director.Provided, however, that if the district has availed of the financial assistance of the Administration, the Administration may appoint any of its personnel to sit in the board of directors with all the rights and privileges appertaining to a regular member for such period as the indebtedness remains unpaid in which case the board shall be composed of six members; (as amended by PDs Nos. 768 and 1479).the manner of their appointment and nominations;Sec. 9. Appointment. Board members shall be appointed by the appointing authority. Said appointments shall be made from a list of nominees, if any, submitted pursuant to Section 10. If no nominations are submitted, the appointing authority shall appoint any qualified person of the category to the vacant position;Sec.10. Nominations. On or before October 1 of each even numbered year, the secretary of the district shall contact each known organization, association, or institution being represented by the director whose term will expire on December 31 and solicit nominations from these organizations to fill the position for the ensuing term. One nomination may be submitted in writing by each such organization to the Secretary of the district on or before November 1 of such year: This list of nominees shall be transmitted by the Secretary of the district to the office of the appointing authority on or before November 15 of such year and he shall make his appointment from the list submitted on or before December 15. In the event the appointing authority fails to make his appointments on or before December 15, selection shall be made from said list of nominees by majority vote of the seated directors of the district constituting a quorum. Initial nominations for all five seats of the board shall be solicited by the legislative body or bodies at the time of adoption of the resolution forming the district. Thirty days thereafter, a list of nominees shall be submitted to the provincial governor in the event the resolution forming the district is by a provincial board, or the mayor of the city or municipality in the event the resolution forming the adoption of the district is by the city or municipal board of councilors, who shall select the initial directors therefrom within 15 days after receipt of such nominations;their terms of office:Sec. 11. Term of Office. Of the five initial directors of each newly formed district, two shall be appointed for a maximum term of two years, two for a maximum term of four years, and one for a maximum term of six years. Terms of office of all directors in a given district shall be such that the term of at least one director, but not more then two, shall expire on December 31 of each even-numbered year. Regular terms of office after the initial terms shall be for six years commencing on January 1 of odd-numbered years. Directors may be removed for cause only, subject to review and approval of the Administration; (as amended by PD 768).the manner of filling up vacancies:Sec. 12. Vacancies. In the event of a vacancy in the board of directors occurring more than six months before expiration of any director's term, the remaining directors shall within 30 days, serve notice to or request the secretary of the district for nominations and within 30 days, thereafter a list of nominees shall be submitted to the appointing authority for his appointment of a replacement director from the list of nominees. In the absence of such nominations, the appointing authority shall make such appointment. If within 30 days after submission to him of a list of nominees the appointing authority fails to make an appointment, the vacancy shall be filled from such list by a majority vote of the remaining members of the Board of Directors constituting a quorum. Vacancies occurring within the last six months of an unexpired term shall also be filled by the Board in the above manner. The director thus appointed shall serve the unexpired term only; (as amended by PD 768).and the compensation and personal liability of the members of the Board of Directors:Sec. 13. Compensation. Each director shall receive a per diem, to be determined by the board, for each meeting of the board actually attended by him, but no director shag receive per diems in any given month in excess of the equivalent of the total per diems of four meetings in any given month. No director shall receive other compensation for services to the district.Any per diem in excess of P50.00 shall be subject to approval of the Administration (as amended by PD 768).Sec. 14. Personal Liability. No director may be held to be personally liable for any action of the district.Noteworthy, the above quoted provisions of PD 198, as amended, are similar to those which are actually contained in other corporate charters. The conclusion is inescapable that the said decree is in truth and in fact the charter of the different water districts for it clearly defines the latter's primary purpose and its basic organizational set-up. In other words, PD 198, as amended, is the very law which gives a water district juridical personality. While it is true that a resolution of a local sanggunian is still necessary for the final creation of a district, this Court is of the opinion that said resolution cannot be considered as its charter, the same being intended only to implement the provisions of said decree. In passing a resolution forming a water district, the local sanggunian is entrusted with no authority or discretion to grant a charter for the creation of a private corporation. It is merely given the authority for the formation of a water district, on a local option basis, to be exercised under and in pursuance of PD 198.More than the aforequoted provisions, what is of important interest in the case at bar is Section 3, par. (b) of the same decree which reads:Sec. 3(b). Appointing authority. The person empowered to appoint the members of the Board of Directors of a local water district, depending upon the geographic coverage and population make-up of the particular district. In the event that more than seventy-five percent of the total active water service connections of a local water districts are within the boundary of any city or municipality, the appointing authority shall be the mayor of that city or municipality, as the case may be; otherwise, the appointing authority shall be the governor of the province within which the district is located:Provided, That if the existing waterworks system in the city or municipality established as a water district under this Decree is operated and managed by the province, initial appointment shall be extended by the governor of the province. Subsequent appointments shall be as specified herein.If portions of more than one province are included within the boundary of the district, and the appointing authority is to be the governors then the power to appoint shall rotate between the governors involved with the initial appointments made by the governor in whose province the greatest number of service connections exists (as amended by PD 768).The above-quoted section definitely sets to naught petitioners' contention that they are private corporations. It is clear therefrom that the power to appoint the members who will comprise the Board of Directors belongs to the local executives of the local subdivision units where such districts are located. In contrast, the members of the Board of Directors or trustees of a private corporation are elected from among the members and stockholders thereof. It would not be amiss to emphasize at this point that a private corporation is created for the private purpose, benefit, aim and end of its members or stockholders. Necessarily, said members or stockholders should be given a free hand to choose those who will compose the governing body of their corporation. But this is not the case here and this clearly indicates that petitioners are definitely not private corporations.The foregoing disquisition notwithstanding, We are, however, not unaware of the serious repercussion this may bring to the thousands of water districts' employees throughout the country who stand to be affected because they do not have the necessary civil service eligibilities. As these employees are equally protected by the constitutional guarantee to security of tenure, We find it necessary to rule for the protection of such right which cannot be impaired by a subsequent ruling of this Court. Thus, those employees who have already acquired their permanent employment status at the time of the promulgation of this decision cannot be removed by the mere reason that they lack the necessary civil service eligibilities.ACCORDINGLY, the petition is hereby DISMISSED. Petitioners are declared "government-owned or controlled corporations with original charter" which fall under the jurisdiction of the public respondents CSC and COA.SO ORDERED.Separate OpinionsBIDIN,J.,dissenting:I regret I have to register my dissent in this case. I agree with the main ponencia that P.D. 198, as amended, authorizes the different local legislative bodies (Sanggunian) to form and create their respective water districts through a Resolution which they will pass subject to the guidelines, rules and regulations therein laid down. The issue, therefore, to be resolved is whether the local water districts so created are government-owned or controlled corporations with original charters embraced by the Civil Service as contemplated by Art. IX-B, Sec. 2[1] of the 1987 Constitution.P.D. 198 is a general legislation which authorizes the formation of water districts. However, the operative act which creates a water district is not said decree but the resolution of the Sanggunian concerned forming and maintaining a local water district. Thus, Section 2 of P.D. 198, among others, provides:Sec. 2. Declaration of Policy . . . To encourage the formulation of such local water districts and the transfer thereto of existing water supply and waste water disposal facilities,this Decree provides by general act the authority for the formation thereof, on a local option basis. . . . (Emphasis supplied)

Implementing the above policy, Title II of P.D. 198 provides:TITLE II. LOCAL WATER DISTRICT LAWCHAPTER I. TitleSec. 4. Title. The provisions of this Title shall be known and referred to as the "Local Water District Law."CHAPTER II. Purpose and FormationSec. 5. Purpose. Local water districts may be formed pursuant to this Titlefor the purposes of (a) acquiring, installing, improving, maintaining and operating water supply and distribution systems for domestic, industrial, municipal and agricultural uses for residents and lands within the boundaries of such districts, (b) providing, maintaining and operating wastewater collection, treatment and disposal facilities, and (c) conducting such other functions and operations incidental to water resource development, utilization and disposal within such districts, as are necessary or incidental to said purpose.Sec. 6. Formation of District. This Act is the source of authorization and power to form and maintain a district. For purposes of this Act, a district shallbe considered as a quasi-public corporationperforming public service and supplying public wants.As such, a district shall exercise the powers, rights and privileges given to private corporations under existing laws, in addition to the powers granted in, and subject to such restrictions imposed, under this Act.xxx xxx xxxSec. 7. Filing of Resolution.A certifted copy of the resolution or resolutions forming a district shall be forwarded to the office of the Secretary of the Administration. If found by the Administration to conform to the requirements of Section 6 and the policy objectives in Section 2, the resolution shall be duly filed.The district shall be deemed duly formed and existing upon the date of such filing. A certified copy of said resolution showing the filing stamp of the Administration shall be maintained in the office of the district. Upon such filing, the local government or governments concerned shall lose ownership, supervision and control or any right whatsoever over the district except as provided herein. (Emphasis supplied)It is apparent that insofar as the formation of local water districts are concerned, P.D. 198 is not an original charter but a general act authorizing the formation of water districts on local option basis (Sec. 2, P.D. 198) similar to the Corporation Code. What is chartered, formed and created under P.D. 198 as a government corporation is the "Local Water Utilities Administration" attached to the Office of the President as follows:Sec. 49. Charter. There is hereby chartered, created and formed a government corporation to be known as the "Local Water Utilities Administration which is hereby attached to the Office of the President. The provisions of this title shall be and constitute the charter of the Administration.On the other hand, local water districts are formed by resolutions of the respective Provincial, City and Municipal councils (Sec. 7, P.D. 198) filed with the Local Water Utilities Administration, a government corporation chartered under Section 49, P.D. 198 and attached to the Office of the President. Consequently, without the requisite resolution of the Sanggunian concerned forming the water district having been filed with the Local Water Utility Administration, no water district is formed. What gives the water districts juridical personality is the resolution of the respective Sanggunian forming the district and filed with the Local Water Utilities Administration. Once formed, a water district is subject to the provisions of P.D. 198 and no longer under the jurisdiction of any political administration which shall thereafter lose ownership, supervision and control over the district (Sec. 7, PD 198).In view of the foregoing, I vote to Grant the petition and to declare petitioners as quasi-public corporations performing public service without original charters and therefore not embraced by the Civil Service.Separate OpinionsBIDIN,J.,dissenting:I regret I have to register my dissent in this case. I agree with the main ponencia that P.D. 198, as amended, authorizes the different local legislative bodies (Sanggunian) to form and create their respective water districts through a Resolution which they will pass subject to the guidelines, rules and regulations therein laid down. The issue, therefore, to be resolved is whether the local water districts so created are government-owned or controlled corporations with original charters embraced by the Civil Service as contemplated by Art. IX-B, Sec. 2[1] of the 1987 Constitution.P.D. 198 is a general legislation which authorizes the formation of water districts. However, the operative act which creates a water district is not said decree but the resolution of the Sanggunian concerned forming and maintaining a local water district. Thus, Section 2 of P.D. 198, among others, provides:Sec. 2. Declaration of Policy . . . To encourage the formulation of such local water districts and the transfer thereto of existing water supply and waste water disposal facilities,this Decree provides by general act the authority for the formation thereof, on a local option basis. . . . (Emphasis supplied)Implementing the above policy, Title II of P.D. 198 provides:TITLE II. LOCAL WATER DISTRICT LAWCHAPTER I. TitleSec. 4. Title. The provisions of this Title shall be known and referred to as the "Local Water District Law."CHAPTER II. Purpose and FormationSec. 5. Purpose. Local water districts may be formed pursuant to this Titlefor the purposes of (a) acquiring, installing, improving, maintaining and operating water supply and distribution systems for domestic, industrial, municipal and agricultural uses for residents and lands within the boundaries of such districts, (b) providing, maintaining and operating wastewater collection, treatment and disposal facilities, and (c) conducting such other functions and operations incidental to water resource development, utilization and disposal within such districts, as are necessary or incidental to said purpose.Sec. 6. Formation of District. This Act is the source of authorization and power to form and maintain a district. For purposes of this Act, a district shallbe considered as a quasi-public corporationperforming public service and supplying public wants.As such, a district shall exercise the powers, rights and privileges given to private corporations under existing laws, in addition to the powers granted in, and subject to such restrictions imposed, under this Act.xxx xxx xxxSec. 7. Filing of Resolution.A certifted copy of the resolution or resolutions forming a district shall be forwarded to the office of the Secretary of the Administration. If found by the Administration to conform to the requirements of Section 6 and the policy objectives in Section 2, the resolution shall be duly filed.The district shall be deemed duly formed and existing upon the date of such filing. A certified copy of said resolution showing the filing stamp of the Administration shall be maintained in the office of the district. Upon such filing, the local government or governments concerned shall lose ownership, supervision and control or any right whatsoever over the district except as provided herein. (Emphasis supplied)It is apparent that insofar as the formation of local water districts are concerned, P.D. 198 is not an original charter but a general act authorizing the formation of water districts on local option basis (Sec. 2, P.D. 198) similar to the Corporation Code. What is chartered, formed and created under P.D. 198 as a government corporation is the "Local Water Utilities Administration" attached to the Office of the President as follows:Sec. 49. Charter. There is hereby chartered, created and formed a government corporation to be known as the "Local Water Utilities Administration which is hereby attached to the Office of the President. The provisions of this title shall be and constitute the charter of the Administration.On the other hand, local water districts are formed by resolutions of the respective Provincial, City and Municipal councils (Sec. 7, P.D. 198) filed with the Local Water Utilities Administration, a government corporation chartered under Section 49, P.D. 198 and attached to the Office of the President. Consequently, without the requisite resolution of the Sanggunian concerned forming the water district having been filed with the Local Water Utility Administration, no water district is formed. What gives the water districts juridical personality is the resolution of the respective Sanggunian forming the district and filed with the Local Water Utilities Administration. Once formed, a water district is subject to the provisions of P.D. 198 and no longer under the jurisdiction of any political administration which shall thereafter lose ownership, supervision and control over the district (Sec. 7, PD 198).In view of the foregoing, I vote to Grant the petition and to declare petitioners as quasi-public corporations performing public service without original charters and therefore not embraced by the Civil Service.

[G.R. No. 149154.June 10, 2003]

RODOLFO S. DE JESUS, EDELWINA DG. PARUNGAO, HERMILO S. BALUCAN, AVELINO C. CASTILLO, DANILO B. DE LEON (Interim Board of Directors, Catbalogan Water District), and ALICE MARIE C. OSORIO (Board Secretary),petitioners, vs.COMMISSION ON AUDIT,respondent.

D E C I S I O N

CARPIO,J.:

The CaseThis is a petition forcertiorari[1]to annul the Decision dated 12 September 2000 of the Commission on Audit (COA) and its Resolution dated 5July 2001. The COA affirmed the disallowance of payment of allowances and bonuses to members of the interim Board of Directors of the Catbalogan Water District.The AntecedentsAn auditing team from the COA Regional Office No. VIII in Candahug, Palo, Leyte, audited the accounts of the Catbalogan Water District (CWD) in Catbalogan, Samar. The auditing team discovered that between May to December 1997 and April to June 1998, members of CWDs interim Board of Directors (Board) granted themselves the following benefits: Representation and Transportation Allowance (RATA), Rice Allowance, Productivity Incentive Bonus, Anniversary Bonus, Year-End Bonus and cash gifts. These allowances and bonuses were authorized under Resolution No. 313, series of 1995,of the Local Water Utilities Administration (LWUA).During the audit, the COA audit team issued two notices of disallowance dated 1 October 1998 disallowing payment of the allowances and bonuses received by petitioners, namely: Rodolfo S. De Jesus, Edelwina DG. Parungao, Hermilo S. Balucan, Avelino C. Castillo and Danilo B. De Leon as members of the CWD Board as well as Alice Marie C. Osorio as the Boards secretary (collectively petitioners). The audit team disallowed the allowances and bonuses on the ground that they run counter to Section 13 of Presidential Decree No. 198 (PD 198).Petitioners appealed to the COA Regional Office No. VIII but COA Regional Director Dominador T. Tersol denied the appeal. Aggrieved, petitioners filed a petition for review with the COA which in a decision dated 12 September 2000 denied the petition. The COA also denied on 5July 2001 petitioners motion for reconsideration.Hence, the instant petition.

The COAs RulingThe COA explained that members of the CWD Board cannot receive compensation and other benefits in addition to theper diemsallowed by Section 13 of PD 198. We quote the relevant portion of the COAs decision:Resolution No. 313, s. 1995, as amended, which grants compensation and other benefits to the members of the Board of Directors of CWD is not in harmony with the aforequoted provisions of Sec. 13, PD 198, which speaks only ofper diems,the amount of which is subject to approval by the administrator if more than P50.00 each for every meeting.It is a fundamental rule in statutory construction that if a statute is clear, plain and free from ambiguity, it must be given literal meaning and applied without attempted interpretation. Thus, any resolution granting allowances to directors of Water Districts other than that authorized in Sec. 13 of PD 198 is null and void. A statutorily proscribed benefit may not be amended by a mere administrative fiat.[2]The IssuesPetitioners contend that the COA committed grave abuse of discretion amounting to lack or excess of jurisdiction in -1.Motu proprioexercising jurisdiction to declare LWUA Board Resolution No. 313, Series of 1995, as amended, not in conformity with Section 13 of PD 198, as amended;2.Ruling that Section 13 of PD 198, as amended, prohibits payment to petitioners of RATA, extraordinary and miscellaneous expenses (EME), and other allowances and bonuses;3.Demanding the refund of the disallowed allowances and bonuses received by petitioners as interim members and secretary of the CWD Board.The Courts RulingThe petition is meritorious in part.The Catbalogan Water District was created pursuant to PD 198, as amended,[3]otherwise known as theProvincial Water Utilities Act of 1973.PD 198 authorized the local legislative bodies, through an enabling resolution, to create their respective water districts, subject to the guidelines and regulations under PD 198. PD 198 further created the Local Water Utilities Administration (LWUA), a national agency, and granted LWUA regulatory powers necessary to optimize public service from water districts.COA s Authority to Disallow Allowances and Benefits Granted under LWUA Board Resolution No. 313, Series 1995For authority to grant themselves additional allowances and bonuses, petitioners rely on LWUA Resolution No. 131, series of 1995, entitledPolicy Guidelines on Compensation and Other Benefits to WD Board of Directors.Petitioners assert that LWUA is the government agency tasked to regulate and control water districts created pursuant to PD 198 and that LWUA has the power to issue regulations to implement effectively PD 198. Petitioners claim that the COA has no jurisdiction to construe any provision of PD 198 on the compensation and other benefits granted to LWUA-designated members of the board of water districts. By exercisingmotu proprioplenary jurisdiction to construe and apply Section 13 of PD 198, the COA encroached on the powers of the LWUA. The COA also violated the presumption of legality and regularity generally accorded to policy circulars issued by the administrative agency entrusted to enforce the law.Petitioners further claim that it is the Department of Budget and Management (DBM), not the COA, that has the power to administer the compensation and classification system of the government service and to revise it as necessary. Finally, citingEslao v. COA,[4]petitioners contend that the COA can do no less than to faithfully observe and carry into effect the mandate of LWUA Board Resolution No. 313, until it is declared void in the proper forum.Petitioners contentions are untenable.Section 2, Subdivision D, Article IX of the 1987 Constitution expressly provides:Sec. 2(1).The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to the Government,or any of its subdivisions, agencies or instrumentalities,including government-owned and controlled corporations with original charters,and on a post audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this constitution; (b) autonomous state colleges and state universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the government, which are required by law or the granting institution to submit such audit as a condition of subsidy or equity. However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special preaudit, as are necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.(2)The Commission shall have exclusive authority, subject to the limitations in this article, to define the scope of its audit and examination, establish the techniques and methods required therefore, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties. (Emphasis supplied)The Constitution and existing laws[5]mandate the COA to audit all government agencies, including government-owned and controlled corporations with original charters. Indeed, the Constitution specifically vests in the COA the authority to determine whether government entities comply with laws and regulations in disbursing government funds, and to disallow illegal or irregular disbursements of government funds.[6]This independent constitutional body is tasked to be vigilant and conscientious in safeguarding the proper use of the governments, and ultimately, the peoples property.[7]The Court already ruled in several cases[8]that a water district is a government-owned and controlled corporation with a special charter since it is created pursuant to a special law, PD 198. The COA has the authority to investigate whether directors, officials or employees of government-owned and controlled corporations, receiving additional allowances and bonuses, are entitled to such benefits under applicable laws. Thus, water districts are subject to the jurisdiction of the COA.[9]We cannot sustain petitioners claim that the COA usurped the functions of the LWUA in construing PD 198 and disallowing payment of the additional allowances and bonuses. Such a theory leads to the absurd situation where the board of an administrative agency, by the mere act of issuing a resolution, can put to naught the broad and extensive powers granted to the COA by the Constitution. This will prevent the COA from discharging its constitutional duty as an effective, efficient and independent watchdog of the financial operations of the government.[10]Petitioners reliance onEslao[11]is misplaced.InEslao,the Department of Environment and Natural Resources and the Pangasinan State University entered into an agreement to evaluate government reforestation programs. The Asian Development Bank granted a loan to fund the implementation of the agreement. The personnel involved in the project were paid under the DBM-issued National Compensation Circular No.53,which dealt with foreign-assisted projects. The COA disallowed the payment on the ground that the compensation should fall under the DBM-issued Compensation Policy Guidelines No. 80-4, which governs all projects and provides for lower compensation rates. In reversing the COA, the Court held that National Compensation Circular No. 53 amended Compensation Policy Guidelines No. 80-4 by excepting from the latters scope foreign-assisted projects. The Court declared that the COA cannotsubstitute its own judgment for any applicable x x x administrative regulation with the wisdom or propriety of which, however, it does not agree, at least not before such x x x regulation is set aside by the x x x courts x x x.Clearly,Eslaois not in point. The difference is that inEslao,the COA accepted the wisdom of Compensation Policy Guidelines No. 80-4 but refused to accept the propriety of the exception to the circular embodied in National Compensation Circular No.53.The DBM issued both compensation regulations under its legislative authority to classify positions and determine appropriate salaries for specific position classes and. review appropriate salaries for specific position classes and review the compensation benefits programs of agencies x x x.[12]Clearly, the COA had ample legislative authority to issue both compensation regulations. In the instant case, the COA was simply exercising its constitutional duty toexamine and auditdisbursements of public funds that are patently beyond what the law allows.Petitioners confuse the COA which is an independent constitutional body with the DBM which is under the executive branch of the government. The DBM is responsible for formulating and implementing the national budget.[13]It is tasked to -assist the President in the preparation of a national resources and expenditures budget, preparation, execution and control of the National budget, preparation and maintenance of accounting systems essential to the budgetary process, achievement of more economy and efficiency in the management of government operations, administration of compensation and position classification systems, assessment of organization effectiveness and review and evaluation of legislative proposals having budgetary or organizational implications.[14]While the DBM is the government agency tasked to release government funds, the duty to examine and audit government accounts and expenditure properly pertains to the COA.[15]PD 198 Expressly Prohibits the Grant of RATA, EME, and Bonuses to Members of the Board of Water DistrictsSection 13 of PD 198, as amended, reads as follows:Compensation.- Each director shall receive aper diem,to be determined by the board, for each meeting of the board actually attended by him, but no director shall receiveper diemsin any given month in excess of the equivalent of the totalper diemsof four meetings in any given month.No director shall receive other compensation for services to the district.Anyper diemin excess ofP50shall be subject to approval of the Administration. (Emphasis supplied)Petitioners argue that the term compensation in Section 13 of PD 198 does not include RATA, EME, bonuses and other similar benefits disallowed in this case.This issue was already resolved in the similar caseofBaybay Water District v. Commission on Audit.[16]InBaybay Water District,the members of the board of Baybay Water District also questioned the disallowance by the COA of payment of RATA, rice allowance and excessiveper diems.The Court ruled that PD 198 governs the compensation of members of the board of water districts. Thus, members of the board of water districts cannot receive allowances and benefits more than those allowed by PD 198. Construing Section 13 of PD 198, the Court declared:xxxUnder S 13 of this Decree,per diemis precisely intended to be the compensation of members of board of directors of water districts. Indeed, words and phrases in a statute must be given their natural, ordinary, and commonly-accepted meaning, due regard being given to the context in which the words and phrases are used. By specifying the compensation which a director is entitled to receive and by limiting the amount he/she is allowed to receive in a month, and, in the same paragraph, providing No director shall receive other compensation than the amount provided forper diems,the law quite clearly indicates that directors of water districts are authorized to receive only theper diemauthorized by law and no other compensation or allowance in whatever form.Section 13 of PD 198 is clear enough that it needs no interpretation. It expressly prohibits the grant of compensation other than the payment ofper diems,thus preempting the exercise of any discretion by water districts in paying other allowances and bonuses.[17]Refund of the Allowances and Benefits Received in Good FaithRelying mainly onCivil Liberties Union v. Executive Secretary,[18]petitioners claim that the COA grossly erred in requiring them to refund the allowances and bonuses they received in good faith. InCivil Liberties Union,the Court declared Executive Order No. 284 unconstitutional as it allows Cabinet members, undersecretaries or assistant secretaries to hold multiple positions in violation of the express prohibition in Section 13, Article VII of the 1987 Constitution. However, the Court held that during their tenure in the questioned positions, respondents arede factoofficers and entitled to emoluments for actual services rendered. The Court explained that in cases were there is node jureofficer, ade factoofficer, who in good faith has had possession of the office and has discharged the duties pertaining thereto, is legally entitled to the emoluments of the office, and may in an appropriate action recover the salary, fees and other compensationsattached to the office.[19]The Court considered it unjust that the public should benefit from the services of ade factoofficer and then be freed from all liability to pay for such, services. Thus, the Court ruled that anyper diem,allowances or other emoluments received by the respondents inCivil Liberties Unionfor actual services rendered in the questioned positions may be retained by them.The scenario in petitioners case is different. The CWD Board appointed petitioners pursuant to PD 198. Petitioners received allowances and bonuses other than those granted to their office by PD 198. Petitioners cannot claim any compensation other than the perdiemprovided by PD 198 precisely becauseno other compensation is attached to their office.Nevertheless, our pronouncement inBlaquera v. Alcala[20]supportspetitionersposition on the refund of the benefits they received. InBlaquera,the officials and employees of several government departments and agencies were paid incentive benefits which the COA disallowed on the ground that Administrative Order No. 29 dated 19 January 1993 prohibited payment of these benefits. While the Court sustained the COA on the disallowance, it nevertheless declared that:Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, noindiciaof bad faith can be detected under the attendant facts and circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accepted the same with gratitude, confident that they richly deserve such benefits.This ruling inBlaqueraapplies to the instant case. Petitioners here received the additional allowances and bonuses in good faith under the honest belief that LWUA Board Resolution No. 313 authorized such payment. At the time petitioners received the additional allowances and bonuses, the Court had not yet decidedBaybay Water District.[21]Petitioners had no knowledge that such payment was without legal basis. Thus, being in good faith, petitioners need not refund the allowances and bonuses they received but disallowed by the COA.WHEREFORE, the Decision of the Commission on Audit dated 12 September 2000 as well as its Resolution dated5July 2001 are AFFIRMED with MODIFICATION. Petitioners need not refund the Representation and Transportation Allowance, Rice Allowance, Productivity Incentive Bonus, Anniversary Bonus, Year-End Bonus and cash gifts, received per Resolution No. 313, series of 1995, of the Local Water Utilities Administration, between May to December 1997 and April to June 1998.SO ORDERED.

BOY SCOUTS OF THE PHILIPPINES,Petitioner,-versus-COMMISSION ON AUDIT,Respondent.G.R. No.177131Present:CORONA,C.J.,CARPIO,CARPIO MORALES,VELASCO, JR.,NACHURA,LEONARDO-DE CASTRO,BRION,PERALTA,BERSAMIN,DEL CASTILLO,ABAD,VILLARAMA, JR.,PEREZ,MENDOZA, andSERENO,JJ.Promulgated:June 7, 2011

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xD E C I S I O NLEONARDO-DE CASTRO,J.:The jurisdiction of the Commission on Audit (COA) over the Boy Scouts of the Philippines (BSP) is the subject matter of this controversy that reached usviapetition for prohibition[1]filed by the BSP under Rule 65 of the 1997 Rules of Court.In this petition, the BSP seeks that the COA be prohibited from implementing its June 18, 2002Decision,[2]its February 21, 2007Resolution,[3]as well as all other issuances arising therefrom, and that all of the foregoing be rendered null and void.[4]Antecedent Facts and Background of the Case

This case arose when the COA issuedResolution No. 99-011[5]on August 19, 1999 (the COA Resolution), with the subject Defining the Commissions policy with respect to the audit of the Boy Scouts of the Philippines.In its whereas clauses, the COA Resolution stated that the BSP was created as a public corporation under Commonwealth Act No. 111, as amended by Presidential Decree No. 460 and Republic Act No. 7278; that inBoy Scouts of the Philippines v. National Labor Relations Commission,[6]the Supreme Court ruled that the BSP, as constituted under its charter, was a government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution; and that the BSP is appropriately regarded as a government instrumentality under the 1987 Administrative Code.[7]The COA Resolution also cited its constitutional mandate under Section 2(1), Article IX (D).Finally, the COA Resolution reads:NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS RESOLVED, AS IT DOES HEREBY RESOLVE,to conduct an annual financial audit of the Boy Scouts of the Philippines in accordance with generally accepted auditing standards, and express an opinion on whether the financial statements which include the Balance Sheet, the Income Statement and the Statement of Cash Flows present fairly its financial position and results of operations.x x x xBE IT RESOLVED FURTHERMORE, that for purposes of audit supervision,the Boy Scouts of the Philippines shall be classified among the government corporations belonging to the Educational, Social, Scientific, Civic and Research Sectorunder the Corporate Audit Office I, to be audited, similar to the subsidiary corporations, by employing the team audit approach.[8](Emphases supplied.)The BSP sought reconsideration of the COA Resolution in aletter[9]dated November 26, 1999 signed by the BSP National President Jejomar C. Binay, who is now the Vice President of the Republic, wherein he wrote:It is the position of the BSP, with all due respect, that it is not subject to the Commissions jurisdiction on the following grounds:1.We reckon that the ruling in the case of Boy Scouts of the Philippines vs. National Labor Relations Commission, et al. (G.R. No. 80767) classifying the BSP as a government-controlled corporation is anchored on the substantial Government participation in the National Executive Board of the BSP. It is to be noted that the case was decided when the BSP Charter is defined by Commonwealth Act No. 111 as amended by Presidential Decree 460.However, may we humbly refer you to Republic Act No. 7278 which amended the BSPs charter after the cited case was decided. The most salient of all amendments in RA No. 7278 is the alteration of the composition of the National Executive Board of the BSP.The said RA virtually eliminated the substantial government participation in the National Executive Board by removing: (i) the President of the Philippines and executive secretaries, with the exception of the Secretary of Education, as members thereof; and (ii) the appointment and confirmation power of the President of the Philippines, as Chief Scout, over the members of the said Board.The BSP believes that the cited case has been superseded by RA 7278. Thereby weakening the cases conclusion that the BSP is a government-controlled corporation (sic). The 1987 Administrative Code itself, of which the BSP vs. NLRC relied on for some terms, defines government-owned and controlled corporations as agencies organized as stock or non-stock corporations which the BSP, under its present charter, is not.Also, the Government, like in other GOCCs, does not have funds invested in the BSP. What RA 7278 only provides is that the Government or any of its subdivisions, branches, offices, agencies and instrumentalities can from time to time donate and contribute funds to the BSP.x x x xAlso the BSP respectfully believes that the BSP is not appropriately regarded as a government instrumentality under the 1987 Administrative Code as stated in the COA resolution. As defined by Section 2(10) of the said code, instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter.The BSP is not an entity administering special funds. It is not even included in the DECS National Budget. x x xIt may be argued also that the BSP is not an agency of the Government. The 1987 Administrative Code, merely referred the BSP as an attached agency of the DECS as distinguished from an actual line agency of departments that are included in the National Budget. The BSP believes that an attached agency is different from an agency. Agency, as defined in Section 2(4) of the Administrative Code, is defined as any of the various units of the Government including a department, bureau, office, instrumentality, government-owned or controlled corporation or local government or distinct unit therein.Under the above definition, the BSP is neither a unit of the Government; a department which refers to an executive department as created by law (Section 2[7] of the Administrative Code); nor a bureau which refers to any principal subdivision or unit of any department (Section 2[8], Administrative Code).[10]Subsequently, requests for reconsideration of the COA Resolution were also made separately by Robert P. Valdellon, Regional Scout Director, Western Visayas Region, Iloilo City and Eugenio F. Capreso, Council Scout Executive of Calbayog City.[11]In aletter[12]dated July 3, 2000, Director Crescencio S. Sunico, Corporate Audit Officer (CAO) I of the COA, furnished the BSP with a copy of theMemorandum[13]dated June 20, 2000 of Atty. Santos M. Alquizalas, the COA General Counsel.In said Memorandum, the COA General Counsel opined that Republic Act No. 7278 did not supersede the Courts ruling inBoy Scouts of the Philippines v. National Labor Relations Commission, even though said law eliminated the substantial government participation in the selection of members of the National Executive Board of the BSP.The Memorandum further provides:Analysis of the said case disclosed that the substantial government participation is only one (1) of the three (3) grounds relied upon by the Court in the resolution of the case. Other considerations includethe character of the BSPs purposes and functionswhich has a public aspect andthe statutory designation of the BSP as a public corporation. These grounds have not been deleted by R.A. No. 7278. On the contrary, these were strengthened as evidenced by the amendment made relative to BSPs purposes stated in Section 3 of R.A. No. 7278.On the argument that BSP is not appropriately regarded as a government instrumentality and agency of the government, such has already been answered and clarified. The Supreme Court has elucidated this matter in the BSP case when it declared that BSP is regarded as, both a government-controlled corporation with an original charter and as an instrumentality of the Government. Likewise, it is not disputed that the Administrative Code of 1987 designated the BSP as one of the attached agencies of DECS. Being an attached agency, however, it does not change its nature as a government-controlled corporation with original charter and, necessarily, subject to COA audit jurisdiction. Besides, Section 2(1), Article IX-D of the Constitution provides that COA shall have the power, authority, and duty to examine, audit and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies or instrumentalities, including government-owned or controlled corporations with original charters.[14]Based on the Memorandum of the COA General Counsel, Director Sunico wrote:In view of the points clarified by said Memorandum upholding COA Resolution No. 99-011, we have to comply with the provisions of the latter, among which is to conduct an annual financial audit of the Boy Scouts of the Philippines.[15]In a letter dated November 20, 2000 signed by Director Amorsonia B. Escarda, CAO I, the COA informed the BSP that a preliminary survey of its organizational structure, operations and accounting system/records shall be conducted on November 21 to 22, 2000.[16]Upon the BSPs request, the audit was deferred for thirty (30) days. The BSP then filed a Petition for Review with Prayer for Preliminary Injunction and/or Temporary Restraining Order before the COA.This wasdeniedby the COA in its questioned Decision, which held that the BSP is under its audit jurisdiction.The BSP moved for reconsideration but this was likewise denied under its questioned Resolution.[17]This led to the filing by the BSP of this petition for prohibition with preliminary injunction and temporary restraining order against the COA.The IssueAs stated earlier, the sole issue to be resolved in this case is whether the BSP falls under the COAs audit jurisdiction.

The Parties Respective ArgumentsThe BSP contends thatBoy Scouts of the Philippines v. National Labor Relations Commissionis inapplicable for purposes of determining the audit jurisdiction of the COA as the issue therein was the jurisdiction of the National Labor Relations Commission over a case for illegal dismissal and unfair labor practice filed by certain BSP employees.[18]While the BSP concedes that its functions do relate to those that the government might otherwise completely assume on its own, it avers that this alone was not determinative of the COAs audit jurisdiction over it.The BSP further avers that the Court inBoy Scouts of the Philippines v. National Labor Relations Commissionsimply stated x x x that in respect of functions, the BSP isakinto a public corporation but this was not synonymous to holding that the BSP is a government corporation or entity subject to audit by the COA.[19]The BSP contends that Republic Act No. 7278 introduced crucial amendments to its charter; hence, the findings of the Court inBoy Scouts of the Philippines v. National Labor Relations Commissionare no longer valid as the government has ceased to play a controlling influence in it.The BSP claims that the pronouncements of the Court therein must be taken only within the context of that case; that the Court had categorically found that its assets were acquired from the Boy Scouts of America and not from the Philippine government, and that its operations are financed chiefly from membership dues of the Boy Scouts themselves as well as from property rentals; and that the BSP may correctly be characterized as non-governmental, and hence, beyond the audit jurisdiction of the COA.It further claims that the designation by the Court of the BSP as a government agency or instrumentality is mereobiter dictum.[20]The BSP maintains that the provisions of Republic Act No. 7278 suggest that governance of BSP has come to be overwhelmingly a private affair or nature, with government participation restricted to the seat of the Secretary of Education, Culture and Sports.[21]It citesPhilippine Airlines Inc. v. Commission on Audit[22]wherein the Court declared that, PAL, having ceased to be a government-owned or controlled corporation is no longer under the audit jurisdiction of the COA.[23]Claiming that the amendments introduced by Republic Act No. 7278 constituted a supervening event that changed the BSPs corporate identity in the same way that the governments privatization program changed PALs, the BSP makes the case that the government no longer has control over it; thus, the COA cannot usethe Boy Scouts of the Philippines v. National Labor Relations Commissionas its basis for the exercise of its jurisdiction and the issuance of COA Resolution No. 99-011.[24]The BSP further claims as follows:It is not far-fetched, in fact, to concede that BSPs funds and assets are private in character. Unlike ordinary public corporations, such as provinces, cities, and municipalities, or government-owned and controlled corporations, such as Land Bank of the Philippines and the Development Bank of the Philippines, the assets and funds of BSP are not derived from any government grant. For its operations, BSP is not dependent in any way on any government appropriation; as a matter of fact, it has not even been included in any appropriations for the government. To be sure, COA has not alleged, in its Resolution No. 99-011 or in the Memorandum of its General Counsel, that BSP received, receives or continues to receive assets and funds from any agency of the government. The foregoing simply point to the private nature of the funds and assets of petitioner BSP.x x x xAs stated in petitioners third argument, BSPs assets and funds were never acquired from the government. Its operations are not in any way financed by the government, as BSP has never been included in any appropriations act for the government. Neither has the government invested funds with BSP. BSP, has not been, at any time, a user of government property or funds; nor have properties of the government been held in trust by BSP. This is precisely the reason why, until this time, the COA has not attempted to subject BSP to its audit jurisdiction. x x x.[25]To summarize its other arguments, the BSP contends that it is not a government-owned or controlled corporation; neither is it an instrumentality, agency, or subdivision of the government.In itsComment,[26]the COA argues as follows:1.The BSP is a public corporation created under Commonwealth Act No. 111 dated October 31, 1936, and whose functions relate to the fostering of public virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of the youth. The manner of creation and the purpose for which the BSP was created indubitably prove that it is a government agency.2.Being a government agency, the funds and property owned or held in trust by the BSP are subject to the audit authority of respondent Commission on Audit pursuant to Section 2 (1), Article IX-D of the 1987 Constitution.3.Republic Act No. 7278 did not change the character of the BSP as a government-owned or controlled corporation and government instrumentality.[27]The COA maintains that the functions of the BSP that include, among others, the teaching to the youth of patriotism, courage, self-reliance, and kindred virtues, are undeniably sovereign functions enshrined under the Constitution and discussed by the Court inBoy Scouts of the Philippines v. National Labor Relations Commission.The COA contends that any attempt to classify the BSP as a private corporation would be incomprehensible since no less than the law which created it had designated it as a public corporation and its statutory mandate embraces performance of sovereign functions.[28]The COA claims that the only reason why the BSP employees fell within the scope of the Civil Service Commission even before the 1987 Constitution was the fact that it was a government-owned or controlled corporation; that as an attached agency of the Department of Education, Culture and Sports (DECS), the BSP is an agency of the government; and that the BSP is a chartered institution under Section 1(12) of the Revised Administrative Code of 1987, embraced under the term government instrumentality.[29]The COA concludes that being a governme