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SUPREME COURT REPORTS ANNOTATED

Philippine National CompanyEnergy Development
Corporation vs. Leogardo
*

G.R. No. 58494. July 5, 1989.

PHILIPPINE NATIONAL OIL COMPANYENERGY

DEVELOPMENT CORPORATION, petitioner, vs. HON.
VICENTE T. LEOGARDO, DEPUTY MINISTER OF
LABOR AND VICENTE D. ELLELINA, respondents.
Labor Laws; Constitutional Law; Civil Service Commission;
Test of determining whether a governmentowned or controlled
corporation is subject to the Civil Service Law.In National
Housing Corporation vs. Juco (L64313, January 17, 1985, 134
SCRA 172), we laid down the doctrine that employees of
governmentowned and/or controlled corporations, whether
created by special law or formed as subsidiaries
_______________
*

SECOND DIVISION.

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VOL. 175, JULY 5, 1989

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Philippine National CompanyEnergy Development

Corporation vs. Leogardo

under the general Corporation Law, are governed by the Civil

Service Law and not by the Labor Code. However, the above
doctrine has been supplanted by the present Constitution, which
provides: The Civil Service embraces all branches, subdivisions,
instrumentalities and agencies of the Government, including
governmentowned or controlled corporations with original
charters. (Article IXB, Section 2 [1]) Thus, under the present
state of the law, the test in determining whether a government
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owned or controlled corporation is subject to the Civil Service Law

is the manner of its creation such that government corporations
created by special charter are subject to its provisions while those
incorporated under the general Corporation Law are not within
its coverage.
Same; Same; Same; Same; PNOCEDC, being incorporated
under the general Corporation Law, is a government owned or
controlled corporation whose employees are subject to the
provisions of the Labor Code.We hold, therefore, that the
PNOCEDC, having been incorporated under the general
Corporation Law, is a governmentowned or controlled
corporation whose employees are subject to the provisions of the
Labor Code. This is apparently the intendment in the NASECO
case notwithstanding the fact that the NASECO therein was a
subsidiary of the PNB, a governmentowned corporation.
Same; Same; Same; Same; Reinstatement; Backwages should
be limited to 3 years; Dismissal, too harsh; Reasons; Case at bar.
In so far as Ellelina is concerned, we hold that the
reinstatement ordered by public respondent, without loss of
seniority rights, is proper. However, consistent with the rulings of
this Court, backwages should be limited to three years from 1
February 1978. The dismissal ordered by petitioner was a bit too
harsh considering the nature of the act which he had committed
and that it was his first offense.

PETITION for certiorari to review the decision of the

Department of Labor and Employment.
The facts are stated in the opinion of the Court.
MELENCIOHERRERA, J.:
Through this Petition for Certiorari, Philippine National
Oil CompanyEnergy Development Corporation (PNOC
EDC) seeks to declare null and void, for lack of jurisdiction,
the Order of
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SUPREME COURT REPORTS ANNOTATED

Philippine National CompanyEnergy Development
Corporation vs. Leogardo

public respondent, the Deputy Minister of Labor,

sustaining his jurisdiction over the instant controversy.
Petitioner PNOCEDC is a subsidiary of the Philippine
National Oil Company (PNOC). On 20 January 1978, it
filed with the Ministry of Labor and Employment, Regional
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Office No. VII, Cebu City (MOLE), a clearance application

to dismiss/ terminate the services of private respondent,
Vicente D. Ellelina, a contractual employee.
The application for clearance was premised on Ellelinas
alleged commission of a crime (Alarm or Public Scandal)
during a Christmas party on 19 December 1977 at
petitioners camp in Uling, Cebu, when, because of the
refusal of the raffle committee to give him the prize
corresponding to his lost winning ticket, he tried to grab
the armalite rifle of the PC Officer outside the building
despite the warning shots fired by the latter.
Clearance to dismiss was initially granted by MOLE but
was subsequently revoked and petitioner was ordered to
reinstate Ellelina to his former position, without loss of
seniority rights, and with backwages from 1 February 1978
up to his actual reinstatement.
Petitioner appealed to the Minister of Labor who, acting
through public respondent, affirmed, on 14 August 1981,
the appealed Order. Hence, this Petition predicated
substantially on the following grounds:
1. Under Article 277 of the Labor Code, the Ministry
of Labor and Employment has no jurisdiction over
petitioner because it is a governmentowned or
controlled corporation;
2. Ellelinas dismissal is valid and just because it is
based upon the commission of a crime.
On the other hand, public respondent contends:
(a) While the petitioner is a subsidiary of the PNOC, it
is still covered by the Labor Code and, therefore,
within the jurisdiction of the Ministry of Labor
inasmuch as petitioner was organized as a private
corporation under the Corporation Law and
registered with the Securities and Exchange
Commission;
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Philippine National CompanyEnergy Development

Corporation vs. Leogardo

(b) Petitioner is estopped from assailing the Labor

Departments jurisdiction, having subjected itself to
the latter when it filed the application for clearance
to terminate Ellelinas services; and
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SUPREME COURT REPORTS ANNOTATED VOLUME 175

(c) Dismissal is too harsh a penalty.

The issues that confront us, therefore, are (1) whether or
not public respondent committed grave abuse of discretion
in holding that petitioner is governed by the Labor Code;
and (2) whether or not Ellelinas dismissal was justified.
Under the laws then in force, employees of government
owned and/or controlled corporations were governed by the
Civil Service Law and not by the Labor Code. Thus,
Article 277 of the Labor Code (PD 442) then provided:
The terms and conditions of employment of all government
employees, including employees of governmentowned and
controlled corporations shall be governed by the Civil Service
Law, rules and regulations x x x.

In turn, the 1973 Constitution provided:

The Civil Service embraces every branch, agency, subdivision
and instrumentality of the government, including government
owned or controlled corporations.

In National Housing Corporation vs. Juco (L64313,

January 17, 1985, 134 SCRA 172), we laid down the
doctrine that employees of governmentowned and/or
controlled corporations, whether created by special law or
formed as subsidiaries under the general Corporation Law,
are governed by the Civil Service Law and not by the Labor
Code.
However, the above doctrine has been supplanted by the
present Constitution, which provides:
The Civil Service embraces all branches, subdivisions,
instrumentalities and agencies of the Government, including
governmentowned or controlled corporations with original
charters. (Article IXB, Section 2 [1])
30

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SUPREME COURT REPORTS ANNOTATED

Philippine National CompanyEnergy Development
Corporation vs. Leogardo

Thus, under the present state of the law, the test in

determining whether a governmentowned or controlled
corporation is subject to the Civil Service Law is the
manner of its creation such that government corporations
created by special charter are subject to its provisions while

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SUPREME COURT REPORTS ANNOTATED VOLUME 175

those incorporated under the general Corporation Law are

not within its coverage.
In NASECO vs. NLRC (G.R. No. 69870, November 29,
1988), we had occasion to apply the present Constitution in
deciding whether or not the employees of NASECO (a
subsidiary of the NIDC, which is in turn a subsidiary
whollyowned by the PNB, a governmentowned
corporation) are covered by the Civil Service Law or the
Labor Code notwithstanding that the case arose at the time
when the 1973 Constitution was still in effect. We held that
the NLRC has jurisdiction over the employees of NASECO
on the premise that it is the 1987 Constitution that
governs because it is the Constitution in place at the time
of decision; and that being a corporation without an
original charter, the employees of NASECO are subject to
the provisions of the Labor Code.
We see no reason to depart from the ruling in the
aforesaid case.
We hold, therefore, that the PNOCEDC, having been
incorporated under the general Corporation Law, is a
governmentowned or controlled corporation whose
employees are subject to the provisions of the Labor Code.
This is apparently the intendment in the NASECO case
notwithstanding the fact that the NASECO therein was a
subsidiary of the PNB, a governmentowned corporation.
In so far as Ellelina is concerned, we hold that the
reinstatement ordered by public respondent, without loss of
seniority rights, is proper. However, consistent with the
rulings of the Court, backwages should be limited to three
years from 1 February 1978. The dismissal ordered by
petitioner was a bit too harsh considering the nature of the
act which he had committed and that it was his first
offense.
WHEREFORE, the Petition is DISMISSED, and the
judgment of respondent public official is hereby
AFFIRMED. No costs.
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Guasch vs. Court of Appeals

SO ORDERED.
Paras, Padilla, Sarmiento and Regalado, JJ.,
concur.
Petition dismissed. Decision affirmed.
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Notes.Threeyear basis for backwages award is

reasonable. (Manila Hotel Corp. vs. NLRC, 141 SCRA 169.)
Employees already reinstated long before the date of
judgment ordering reinstatement of dismissed employees,
not entitled to reinstatement and payment of three years
backwages. (Insular Life Assurance Company, Ltd. vs.
NLRC, 141 SCRA 258.)
o0o

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