Chapter 14

[1]
NPC Drivers and Mechanics Association v. NPC:
Corporate Acts of the NPC Done by Duly Authorized Board
Members

The Facts

On June 8, 2001, Republic Act 9136, otherwise known as the “Electric Power

Industry Reform Act of 2001” (EPIRA Law), was approved and signed into law by

President Gloria Macapagal-Arroyo. It took effect on 26 June 2001.

[2]
Under Section 48 of the EPIRA Law, a new National Power Board (NPB) of

Directors was formed. An energy restructuring committee (Restructuring Committee)

Power Corporation (NPC), the National Transmission Corporation (TRANSCO), and

the Power Sector Assets and Liabilities Corporation (PSALC).

[3]
On November 18 , 2002, pursuant to Section 63 of the EPIRA Law and Rule
[4]
33 of the Implementing Rules and Regulations (IRR), the NPB passed NPB

Resolution No. 2002-124, which provided for “Guidelines on the Separation Program
of the NPC and the Selection and Placement of Personnel.” Under this Resolution,
the services of all NPC personnel shall be legally terminated on January 31, 2003, and

shall be entitled to separation benefits provided therein. On the same day, the NPB

approved NPB Resolution 2002-125, constituting a Transition Team to manage and

Contending that the assailed NPB Resolutions were void, petitioners filed, in

their individual and representative capacities, the present Petition for Injunction to

restrain respondents from implementing NPB Resolution Nos. 2002-124 and 2002-
125.

The Issue

The issue was whether or not NPB Resolution Nos. 2002-124 and 2002-125
were properly enacted.

The Court’s Ruling

[5]
The Court’s Decision, written by Justice Minita V. Chico-Nazario, held that the
Resolutions were invalid, because they lacked the necessary number of votes for their
adoption.
 Under Section 48, the power to exercise judgment and discretion in running the
affairs of the NPC was vested by the legislature upon the persons composing the
National Power Board of Directors. When applied to public functionaries, discretion

refers to a power or right conferred upon them by law, consisting of acting officially in
certain circumstances, according to the dictates of their own judgment and

conscience, and uncontrolled by the judgment or conscience of others.

Presumably, in naming the respective department heads as members of the

board of directors, the legislature chose these secretaries of the various executive
departments on the basis of their personal qualifications and acumen that had made

them eligible to occupy their present positions as department heads. Thus, the
department secretaries cannot delegate their duties as members of the NPB, much less
their power to vote and approve board resolutions. Their personal judgments are

what they must exercise in the fulfillment of their responsibilities.

There was no question that the enactment of the assailed Resolutions involved
the exercise of discretion, not merely a ministerial act that could be validly performed
by a delegate.

[6]
Respondents’ reliance on American Tobacco Company v. Director of Patents was

misplaced. The Court explicitly stated in that case that, in exercising their own
judgment and discretion, administrative officers were not prevented from using the
help of subordinates as a matter of practical administrative procedure. Officers could
seek such aid, as long as the legally authorized official was the one who would make

the final decision through the use of personal judgment.

In the present case, it is not difficult to comprehend that in approving NPB

different executive departments and not the secretaries themselves who exercised
judgment in passing the assailed Resolution. This action violates the duty imposed
upon the specifically enumerated department heads to employ their own sound
discretion in exercising the corporate powers of the NPC.

[1]
GR No. 156208, September 26, 2006, per Nazario, J.
[2]
Section 48. National Power Board of Directors. – Upon the passage of this Act, Section 6 of
Republic Act No. 6395, as amended, and Section 13 of Republic Act No. 7638, as amended,
referring to the composition of the National Power Board of Directors, are hereby repealed and a
new Board shall be immediately organized. The new Board shall be composed of the Secretary of
Finance as Chairman, with the following as members: the Secretary of Energy, the Secretary of
Budget and Management, the Secretary of Agriculture, the Director-General of the National
Economic and Development Authority, the Secretary of Environment and Natural Resources, the
Secretary of the Interior and Local Government, the Secretary of the Department of Trade and
Industry, and the President of the National Power Corporation.
[3]
Section 63. Separation Benefits of Officials and Employees of Affected Agencies. - National Government
employees displaced or separated from the service as a result of the restructuring of the electricity
industry and privatization of NPC assets pursuant to this Act, shall be entitled to either a
separation pay and other benefits in accordance with existing laws, rules or regulations or be
 entitled to avail of the privileges provided under a separation plan which shall be one and one-half
month salary for every year of service in the government: Provided, however, That those who avail of
such privileges shall start their government service anew if absorbed by any government-owned
successor company. In no case shall there be any diminution of benefits under the separation plan
until the full implementation of the restructuring and privatization.
Displaced or separated personnel as a result of the privatization, if qualified, shall be given
preference in the hiring of the manpower requirements of the privatized companies.
The salaries of employees of NPC shall continue to be exempt from the coverage of
Republic Act No. 6758, otherwise known as "The Salary Standardization Act."
With respect to employees who are not retained by NPC, the Government, through the
Department of Labor and Employment, shall endeavor to implement re-training, job counseling,
and job placement programs.
[4]
RULE 33. SEPARATION BENEFITS
Section 1. General Statement on Coverage.
This Rule shall apply to all employees in the National Government service as of 26 June
2001 regardless of position, designation or status, who are displaced or separated from the service
as a result of the Restructuring of the electricity industry and Privatization of NPC assets: Provided,
however, That the coverage for casual or contractual employees shall be limited to those whose
appointments were approved or attested by the Civil Service Commission (CSC).
Section 2. Scope of Application. This Rule shall apply to affected personnel of DOE,
ERB, NEA and NPC.
Section 3. Separation and Other Benefits.
(a) The separation benefit shall consist of either a separation pay and other benefits granted
in accordance with existing laws, rules and regulations or a separation plan equivalent to one and
one half (1-½) months’ salary for every year of service in the government, whichever is higher:
Provided, That the separated or displaced employee has rendered at least one (1) year of service at
the time of effectivity of the Act.
(b) The following shall govern the application of Section 3(a) of this Rule:
(i) With respect to NPC officials and employees, they shall be considered
legally terminated and shall be entitled to the benefits or separation pay provided in
Section 3(a) herein when the restructuring plan as approved by the NPC Board shall
have been implemented.
(ii) With respect to NEA officials and employees, they shall be considered
legally terminated and shall be entitled to the benefits or separation pay provided in
Section 3(a) herein when a restructuring of NEA is implemented pursuant to a law
enacted by Congress or pursuant to Section 5(a)(5) of Presidential Decree No. 269.
(iii) With respect to the affected Bureaus of the DOE, their officials and
employees shall be considered legally terminated and shall be entitled to the benefits
or separation pay provided in Section 3(a) herein when the re-organizational plan
shall have been implemented as a result of the Restructuring of the electric power
industry.
(c) The governing board or authority of the entities enumerated in Section 3(b) hereof shall
have the sole prerogative to hire the separated employees as new employees who start their service
anew for such positions and for such compensation as may be determined by such board or
authority pursuant to its restructuring program. Those who avail of the foregoing privileges shall
start their government service anew if absorbed by any government agency or any government-
owned successor company.
 (d) In no case shall there be any diminution of benefits under the separation plan until the
full implementation of the Restructuring of the electric power industry and the Privatization of
NPC assets in accordance with the approved Restructuring and Privatization schedule.
(e) For this purpose, “Salary,” as a rule, refers to the basic pay including the thirteenth
(13th) month pay received by an employee pursuant to his appointment, excluding per diems,
bonuses, overtime pay, honoraria, allowances and any other emoluments received in addition to the
basic pay under existing laws.
(f) Likewise, “Separation” or “Displacement” refers to the severance of employment of any
official or employee, who is neither qualified under existing laws, rules and regulations nor has
opted to retire under existing laws, as a result of the Restructuring of the electric power industry or
Privatization of NPC assets pursuant to the Act.
Section 4. Funding.
Funds necessary to cover the separation pay under this Rule shall be provided either by the
Government Service Insurance System (GSIS) or from the corporate funds of the NEA or the
NPC, as the case may be; and in the case of the DOE and the ERB, by the GSIS or from the
general fund, as the case may be. The Buyer or Concessionaire or the successor company shall not
be liable for the payment of the separation pay.
Section 5. Preferential Rights of Employees.
Displaced or separated personnel as a result of the Restructuring of the electric power
industry and Privatization of NPC assets shall be given preference in the hiring of manpower
requirements of the newly-created offices or the privatized companies: Provided, That the displaced
or separated personnel meet the prescribed qualifications. With respect to employees who are not
retained by NPC, the government, through the Department of Labor and Employment (DOLE),
shall endeavor to implement re-training, job counseling, and job placement programs.
Section 6. Implementation.
The DOE, NEA, and NPC, shall issue guidelines applicable to their respective employees
to implement this Rule within ninety (90) days from effectivity of these Rules: Provided, That in the
case of ERC, the independent quasi-judicial body created under the Act, the manner of, and
timetable for, implementation of its organization shall be governed by Section 38 and Section 39
of the Act.

[5]
Concurred in by Chief Justice Artemio V. Panganiban; and Justices Consuelo Ynares-Santiago,
Ma. Alicia Austria-Martinez, and Romeo J. Callejo Sr.
[6]
G.R. No. L-26803, 14 October 1975, 67 SCRA 287, 295.