DOJ Opinion No. 094, s. 1981

DOJ OPINION NO. 094 , s. 1981 July 3, 1981 Administrator Teodoro C. Rey, Jr. Farm Systems Development Corporation Rudgen Bldg. I and II 17 Shaw Blvd., Pasig Metro Manila Sir : This refers to your request for opinion concerning the character of the Gasifier and Equipment Manufacturing Corporation (GEMCOR) and the status of its employees. You state that pursuant to Executive Order No. 655, dated February 14, 1981, the Board of Administrators of the Farm Systems Development Corporation (FSDC), a government corporation duly organized under PD 681 approved the creation of the GEMCOR, which was registered with the Securities and Exchange Commission, and the capital of which has been subscribed by the following government entities: the Human Settlements Development Corporation, the National Electrification Administration, the National Irrigation Administration, the National Food Authority, the Development Academy of the Philippines and the Farm Systems Development Corporation. Particularly, you seek opinion on the following questions: 1. "Is the said subsidiary [GEMCOR] a private or government-controlled Corporation?" 2. "Are the employees of GEMCOR covered by the GSIS and Civil Service Law or the SSS and Labor Laws?" Subject to the extended discussion hereunder, we are of the opinion that GEMCOR is a government controlled corporation. As above-stated, the organization of GEMCOR under the Corporation Law was approved by Resolution of the Board of Administrators of the FSDC pursuant to Executive Order No. 655. It was not created by special law. prcd The pertinent prohibition is found in Article XIV, Section 4 of the Constitution, which provides: "The National Assembly shall not, except by general law, provide for the formation, organization or regulation of private corporations are owned or controlled by the government or a subdivision or instrumentality thereof. The prohibition contained in the above-quoted provision is directed at the National Assembly, "against the creation of private corporations by special law", But not those owned or controlled by the government or a subdivision or instrumentality thereof." However, the said provision does not "preclude other methods of organizing a government-owned or controlled entity, such, as for instance, by the acquisition of all or a majority of the shares of an existing private corporation to be owned or controlled by the Government or its subdivision or instrumentality." (Opinion, Secretary of Justice, dated August 2, 1968 , construing Sec. 7, Art. XIV of the 1935 Constitution, of which the above-quoted provision is a restatement). In fact, there are several government-owned or controlled corporation which were not created by special law, among them being the Philippine Air Lines, the Manila Gas Corporation, the Insular Sugar Refining Corporation and the Manila Hotel Co. (Op., Sec. of Justice, Ibid .) In Philippine Air Lines Employees Association vs. Philippine Air Lines, Inc. (11 SAKA 387), It was held that the Philippine Air Lines, Inc. is a government-controlled corporation because over 545 of its shares of stock is owned by the National Development Co. (an entity created by Commonwealth Act No. 182, as amended) which is "wholly owned and controlled by the Government." Upon the basis of the foregoing precedents, and considering that the capital stock of GEMCOR has been subscribed by the above-named government entities which were all crated by special law, the GEMCOR may be deemed a government-controlled corporation. I Subject to the extended discussion hereunder, we are of the opinion that the employees of GEMCOR are covered, not "by the GSIS and the Civil Service Law", but "by the SSS and Labor Laws". It may be recalled that in this Ministry Opinion No. 62, series of 1976, it was ruled that Section 1(1), Article 12 (b) of the 1973 Constitution (defining the coverage of the Civil Service) and the decrees implementing it (P.D. 807, the Civil Service Decree, and P.D. 807, the Civil Service Decree, and P.D. 868) do not apply to corporations organized and incorporated under the general corporation law by government-owned or controlled corporations, directly established by law. In said opinion, it was stated. "I think that when section 1(1), Article XII-B of the new Constitution declares that, 'The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government-owned or controlled corporations', it contemplates only those government-owned or controlled corporations created by special law . Firstly, it must be borne in mind that be express provision of both the 1935 Constitution and the new Constitution, the formation, organization or regulation of private corporations can be provided for only 'by general law', i, e., the general Corporation Law (Act No. 1459, as amended), expressly excluding from such rule government-owned or controlled corporations (Sec. 7, Art. XIV, 1935 Constitution; Sec. 4, Art. XIV, new Constitution). Therefore, it may logically be concluded that whenever the Constitution mentions government-owned or controlled corporations, the intent is to refer to those created by special law . "This conclusion is bolstered by a consideration of the language of the opening clause of P.D. No. 868, implementing subject constitutional provision, to wit: "'. . . President of the Philippines, . . . do hereby decree and order the repeal of all charters , laws , decree or rules and all provisions or provision of any character , law, decree or rules exempting any branch, agency, subdivision or instrumentality or the government, including government-owned or controlled corporations , from the Civil Service Law and Rules. . . ."' Emphasis supplied.) Since what P.D. No. 868 tends to repeal are the charters or the special laws or decree exempting government-owned or controlled corporations from the Civil Service Law, it stands to reason that what are intended to be brought into the fold of the Civil Service are those government-owned or controlled corporations created by charter or special laws or decrees ." (Emphasis supplied:) The above-quoted ruling applies to the GEMCOR. Therefor, its employees are not covered by the civil service law, rules and regulations. prcd The foregoing conclusion would not be changed by the fact that GEMCOR has been organized and incorporated under the Corporation Law by FSDC, which is a government owned corporation created by special law and pursuant to presidential directive contained in an Executive Order. As stated in Opinion No. 67, supra , "private enterprises incorporated and organized under the Corporation Law are organized wholly for profit with the promotion of private interest as their direct object." Accordingly, the facts that GEMCOR was incorporated and organized by a government corporation created by special law and that GEMCOR's shares of stock are subscribed by government entities with separate charters do not rid such private entity of its essentially private character since it would still be operating with the same business and private motivation. III The next question to be resolved is whether GEMCOR employees are covered by the GSIS law. Section 2(c) of P.D. No. 1146 (the "Revised Government Service Insurance Act of 1977") defines the term "Employer" as used in said decree as follows: "(c) Employer . The National Government, its political subdivisions, branches, agencies or instrumentalities, corporations owned and/or controlled by the Government, the Philippine Tuberculosis Society, the Philippine National Red Cross and the Philippine Veterans Bank," Under the abovequoted provision "corporations owned and/or controlled by the Government", without qualification fall within the purview of the term, "employer" as used in the GSIS Act. At first blush, it would seem that all government owned or controlled corporations are to be deemed employers under GSIS coverage. However, it is noted that the phrase "government-owned or controlled corporations" is also used without qualification in other provisions dealing with similar subjects e.g., Section 1 (1), Article XII-B of the 1975 Constitution, supra , R.A. No. 2260 (the Civil Service Act of 1959) and P.D. No. 807, also supra , all of which include "government-owned or controlled corporations" in the civil service; and P.D. No. 985, which places "government-owned or controlled corporations" within the systems of compensation and position classification in the national government. The interpretation of the phrase government owned or controlled corporations as used in all of these provisions is that it applies only to those created by special law (Ops., Sec. of Justice No. 62, s. 1976, supra ; No. 153, s. 1977; and No. 25, s. 1978, respectively). Since P.D. No. 1146 does not indicate otherwise, the phrase "government-owned or controlled corporations as used therein should be given the same meaning as this phrase is employed in the above-mentioned provisions (i.e., Art. XII-B, 1(1), Constitution, P.D. No. 807 and P.D. 985) and thus be understood to refer only to those created by special laws, applying the doctrine that statutes in pari materia are to be construed together, even if they have not been enacted simultaneously, and do not refer to each other expressly (Crawford, Statutory Construction, pp. 431-435). As the GEMCOR was not created by special law but was organized and incorporated under the general corporation law, it may not be deemed to be one of those government owned or controlled corporations which are to be considered " employers " as defined in section 3 of the GSIS law (P.D. 1146). Furthermore, the employees of the GEMCOR, not being, as aforestated, covered by the Civil Service Law, may not be deemed government employees . There are indications that P.D. No. 1146, is intended to apply principally and primarily to the government employees. This is self-evident from the title of decree which reads: "Amending, expanding, increasing and integrating the social security and insurance benefits of government employees . . . "and from its 6th whereas Clause providing as follows: ". . . in the light of existing economic conditions affecting the welfare of government employees , there is a need to expand and improve the social Security and insurance programs administered by the Government Service Insurance System . . ." prcd In view of the foregoing, we conclude that employees of the GEMCOR are not entitled to membership in the GSIS. Please be guided accordingly. Very truly yours, (SGD.) RICARDO C. PUNO Minister of Justice