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May 20, 2008

Administrative Agencies


(See Definition of Terms under E.O. 292)

***Q: Is Cebu City Government an agency?
A: Yes, under sec. 2(4), E.O. 292, “Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein.

***Q: Differentiate department from instrumentality.
A: Both are agencies of government but occupy different places under the administrative structure. While a department refers to an executive department created by law, an instrumentality is any agency of the National Government that is not integrated within the departmental framework. Thus, a department includes bureaus and the offices under it, while instrumentality covers all other administrative bodies, including regulatory agencies, chartered institutions and government-owned or controlled corporations. An instrumentality is 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.

(NOTA BENE: It is legally significant to distinguish between the two for purposes of ascertaining who has power of control over a particular administrative body and in order to determine whether the creation, reorganization or abolition of the same is validly done.)

Creation, Reorganization and Abolition

  1. by the Constitution
  2. by statute
  3. by authority of law

Sec. of DOTC vs. Mabalot, 378 SCRA 129 (2000)


The Sec. of DOTC issued to LTFRB Chairman MO 96-735, transferring the regional functions of that office to DOTCCAR Regional Office, pending creation of a Regional LTFRO. Later, the new Sec. of DOTC issued DO 97-1025, establishing the DOTCCAR Regional Office as the Regional Office of the LTFRB to exercise regional functions of the LTFRB in the CAR subject to the direct supervision and control of the LTFRB Central Office. Mabalot protested.


W/N the MO and DO are violative of the provision of the Constitution against encroachment on the powers of the legislative department


SC upheld the validity of the issuance of the challenged orders.

In the absence of any patent or latent constitutional or statutory infirmity attending the issuance of the challenged orders, Court upholds. The President, through his duly constituted political agent and alter ego, may legally and validly decree the reorganization of the Department, particularly the establishment of the DOTCCAR as the LTFRB Regional Office of CAR with the concomitant transfer and performance of public functions and responsibilities appurtenant to a regional office of the LTFRB.

There are three modes of establishing an administrative body: (1) Constitution; (2) Statute; and (3) by authority of law. This case falls under the third category.

The DOTC Secretary, as alter ego of the President, is authorized by law to create and establish the LTFRB-CAR Regional Office. This is anchored on the President’s “power of control” under sec. 17, Art. VII, 1987 Constitution.

By definition, control is “the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter.” It includes the authority to order the doing of an act by a subordinate or to undo such act or to assume a power directly vested in him by law.

Under sec. 20, Bk. III, E.O. 292, the Chief Executive is granted residual powers, stating that “unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws xxx”

What law then gives him the power to reorganize? It is PD 1772 which amended PD 1416. These decrees expressly grant the President of the Philippines the continuing authority to reorganize the national government, which includes the power to group, consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities and to standardize salaries and materials.

Granted that the President has the power to reorganize, was the reorganization of DOTCCAR valid?

In this jurisdiction, reorganization is regarded as valid provided it is pursued in good faith. As a general rule, a reorganization is carried out in good faith if it is for the purpose of economy or to make bureaucracy more efficient. The reorganization in the instant case was decreed “in the interest of service” and “for purposes of economy and more effective coOrdination of the DOTC functions in the Cordillera Administrative Region.” It thus bear the earmarks of good faith.

Eugenio vs. CSC, 243 SCRA 196 (1995)


Eugenio, the Deputy Director of Philippine Nuclear Research Institute, applied for a Career Executive Service (CES) Eligibility and a CESO rank. But before she got the rank, the CSC passed Resolution No. 93-459, reorganizing itself and changing the CES Board (CESB) to Office for Career Executive Service of the Civil Service Commission (OCES).


W/N CSC usurped legislative function of Congress by abolishing the CESB and transferring its budget to OCES


CESB was created by PD 1. It cannot be disputed, therefore, that as CESB was created by law, it can only be abolished by the legislature. While CSC has the power to reorganize under Sec. 17, Chap. 3, Subtitle A, Title I, Bk. V. of the Administrative Code of 1987, this must be read with sec. 16, which enumerates the offices under the control of the CSC. CESB is not one of such offices.

CESB was intended to be an autonomous entity, albeit administratively attached to CSC. This essential autonomous character of the CESB is not negated by its attachment to respondent Commission. By said attachment, CESB was not made to fall within the control of respondent Commission. Under the Administrative Code of 1987, the purpose of attaching one functionally inter-related government agency to another is to attain “policy and program coordination.”

De la Llana vs. Alba, 112 SCRA 294 (1982)

The issue in this case is whether or not B.P. 129, An Act Reorganizing the Judiciary, is unconstitutional, considering that in the time-honored principle protected and safeguarded by the constitution the judiciary is supposed to be independent from legislative will. Does the reorganization violate the security of tenure of justices and judges as provided for under the Constitution?


Nothing is better settled in our law than that the abolition of an office within the competence of a legitimate body if done in good faith suffers from no infirmity. What is really involved in this case is not the removal or separation of the judges and justices from their services. What is important is the validity of the abolition of their offices.

It is a well-known rule that valid abolition of offices is neither removal nor separation of the incumbents. Of course, if the abolition is void, the incumbent is deemed never to have ceased to hold office. As well-settled as the rule that the abolition of an office does not amount to an illegal removal of its incumbent is the principle that, in order to be valid, the abolition must be made in good faith.

Removal is to be distinguished from termination by virtue of valid abolition of the office. There can be no tenure to a non-existent office. After the abolition, there is in law no occupant. In case of removal, there is an office with an occupant who would thereby lose his position. It is in that sense that from the standpoint of strict law, the question of any impairment of security of tenure does not arise.

Larin vs. Executive Secretary, 280 SCRA 713 (1997)


Larin, a Revenue Specific Tax Officer under the Assistant Commissioner of the BIR, is convicted of crimes of violation of sec. 268 (4) NIRC and sec. 3 (e) RA 3019 (grave misconduct). Acting by authority of the president, Sr. Deputy Executive Secretary Quisumbing issued a memorandum order, creating an Executive Committee to investigate Larin’s administrative charge. While the investigation was going on, the President issued E.O. 132, streamlining the BIR and abolishing the office of the Specific Tax Service. Afterwards, Larin was found guilty and was subsequently dismissed. However, in the appealed case, SC set aside the conviction of Larin


W/N Larin was unlawfully removed from office

(1) Does the President have the power to dismiss him? Reorganize the BIR?
(2) Was reorganization valid, considering that there was no law enacted by Congress authorizing reorganization by the Executive


SC held that removal as a result of reorganization was done in bad faith.

Does the President have the power to dismiss him?

Larin is a presidential appointee. As such, he comes under the direct disciplining authority of the President for “the power to remove is inherent in the power to appoint.” However, Larin is a career service officer, therefore, he enjoys security of tenure. Under the Civil Service Decree, career service officers and employees who enjoy security of tenure may be removed only for any of the causes enumerated in said law. In other words, the fact that the petitioner is a presidential appointee does not give the appointing authority the license to remove him at will or at his pleasure for it is an admitted fact that he is likewise a career service officer who under the law is the recipient of tenurial protection, thus, may only be removed for a cause and in accordance with procedural due process.

Was the removal for a legal cause under a valid proceeding?

SC held that the removal complied with the requirements for procedural due process but that the dismissal was not for a valid cause. The basis used in Larin’s removal is the criminal conviction against him, but this conviction was later set aside by the Supreme Court upon appeal. Where the very basis of the administrative case against petitioner is his conviction in the criminal action which was later on set aside by this court upon a categorical and clear findings that the acts for which he was administratively held liable are not unlawful and irregular, the acquittal of the petitioner in the criminal case necessarily entails the dismissal of the administrative action against him, because in sch a case, there is no basis nor justifiable reason to maintain the administrative suit.

Does the President have the power to reorganize the BIR?

Yes, under sec. 48 and 62 of RA 7645, sec. 20, Bk. III of EO 292 (Residual Powers), and PD 1772 which amended PD 1416. But while the President’s power to reorganize can not be denied, this does not mean however that the reorganization itself is properly made in accordance with law. Well-settled is the rule that reorganization is regarded as valid provided it is pursued in good faith.

When is there reorganization made in good faith?

The general rule is that a reorganization is carried out in good faith if it is for the purpose of economy or to make bureaucracy more efficient. In that event no dismissal or separation actually occurs because the position itself ceases to exist. And in that case the security of tenure would not be a Chinese Wall. Be that as it may, if the abolition which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good faith, no valid abolition takes place and whatever abolition is done is void ab initio.

What are the marks of bad faith in removal as a result of reorganization?

Sec. 2, RA 6656 enumerates the circumstances evidencing bad faith in the removal of employees as a result of reorganization:

(1) Where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned;
(2) Where an office is abolished and another performing substantially the same functions is created;
(3) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit;
(4) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices;
(5) Where the removal violates the order of separation provided in sec. 3 hereof.

Cebu United Enterprises v. Gallofin, 106 Phil 491 (1959)


Cebu United Enterprises has import license to purchase over issue newspaper from the US. However, this license expired on Dec. 16, or one day before the date of the importation of the items. Gallofin, the collector of customs, refused to deliver the imported items on the ground that Cebu United Enterprises was importing goods without a valid license.


W/N duly executed acts of a governmental agency can have valid effects even beyond the life span of said agency


Although RA 650 creating the Import Control Commission (ICC) expired on July 31, it is to be conceded that its duly executed acts can have valid effects even beyond the life span of said government agency. The ICC who issued the license was abolished yet, the LICENSE was extended, the latter has still its valid effects.

Crisostomo vs. CA, 258 SCRA 134 (1996)


Crisostomo was appointed the President of the Philippine College of Commerce (PCC) by the President of the Philippines. During his incumbency, two administrative charges were filed against him for illegal use of government vehicles, misappropriation of construction materials, oppression and harassment, grave misconduct, nepotism and dishonesty before the Office of the President. Likewise, he was also charged with violation of Anti-Grant and Corrupt Practices Act with the Tanodbayan. As such, he was preventively suspended and Dr. Mateo was designated as the officer-in-charge in his place. Meanwhile, Pres. Marcos passed PD 1341 converting PCC into PUP with Mateo as President. Crisostomo was later acquitted and his administrative charges were dismissed.


Did PD 1314 abolish PCC?


PD 1314 did not abolish, but only changed the PCC into what is now PUP. What took place was a change in the academic status of the educational institution, not in its corporate life. Hence, the change in its name, the expansion of its curriculum offerings and changes in its structure and organization.

As a general rule, when the purpose of the lawmaking authority is to abolish the office and create a new one, he says so. In the instant case, PD 1314 merely states that PCC is converted into the PUP. In addition, the law does not state that the lands, buildings and equipment owned by the PCC were being “transferred” to the PUP but only that they “stand transferred” to it. “Stand transferred” simply means, for example, that lands transferred to the PCC were to be understood as transferred to the PUP as the new name of the institution.

***Q: Who has the power to reorganize?
A: It depends. In order to determine who has the power to reorganize, it is essential to characterize whether the body to be reorganized is a department or an instrumentality of government. Under EO 292, the President is given the power of control over all departments, bureaus and offices under the executive branch. Since the power of control includes the power to reorganize, then the power to reorganize a department, a bureau or an office can be said to be lodged in the President. On the other hand, an instrumentality is, as a general rule, created by statute or made pursuant to a law. So unless the law creating such instrumentality delegates the authority to reorganize to a separate body, the power to reorganize such is with Congress.

***Q: When is reorganization of administrative agencies valid?
A: First, determine whether the agency is a department or an instrumentality in order to determine who has the authority to reorganize. Then, determine whether the reorganization is done in good faith, not in good faith, or in bad faith. Reorganization is in good faith if done for the purpose of economy and efficiency.

***Q: May a public officer validly claim violation of security of tenure as a result of abolition of office?
A: It depends on the validity of the abolition. Was the abolition done by someone who has authority? To determine who has authority to abolish, bear in mind the three modes of creating an office: (1) Constitution; (2) Statute; and (3) authority by law. An office created by the Constitution may only be abolished by Constitutional amendment or revision, unless the Constitution itself provides for another mode of abolition. Likewise, an office created by Statute, may, as a general rule, be only abolished by Congress, unless this power is delegated. And the President may abolish an office if such office is under his power of control and Congress has not provided for a different mode of abolition.

So if the abolition is made by someone with authority, then was it done in good faith? Abolition is in good faith if the purpose is for economy and efficiency, or if it not done in bad faith, bearing in mind the circumstances evidencing bad faith.

If done in good faith, then the abolition is valid. When there is valid abolition, there can be no separation or removal from office and the affected public officer cannot claim violation of security of tenure for there can be no tenure to a non-existent office.

***Q: May an official of an abolished office claim vested right to that office?
A: There is no such thing as a vested right to an office. The only exceptions are those offices established by the Constitution, such as the Constitutional Commissions, etc.

***Q: In case of abolition and a new office is thereby created, may the incumbent of the abolished office claim preference to that new office?
A: The concept of preference is illustrated in the next-in-rank rule. Under that rule, anyone who is employed on a permanent basis in a position that has been previously determined to be next-in-rank to the vacated office and who is qualified is given preference to said office. This presupposes that there is an old office which is vacated. Thus, the rule does not apply to a newly created office, which necessarily entails new positions. Besides, preference only means that the old employee should be considered first but it does not automatically follow that they should then be automatically reappointed.


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