PHILIPPINE NATIONAL BANK, Petitioner, v. CAYETANO A.

TEJANO, JR

In this Petition for Review, 1 the Philippine National Bank assails the January 3, 2006 Decision2 of the Court of
Appeals in CA-G.R. SP No. 50084, which reversed Resolution Nos. 980716 and 983099 issued by the Civil Service
Commission, respectively dated April 14, 1998 and December 7, 1998, and referred the case back to said office for
further proceedings. The assailed Resolutions, in turn, dismissed respondent Cayetano A. Tejano's appeal from the
resolution of the Board of Directors of the Philippine National Bank which found him guilty of grave misconduct in
connection with a number of transactions with certain corporate entities.

The case stems from a number of alleged irregular and fraudulent transactions made by respondent Cayetano A.
Tejano, Jr. supposedly with the participation of eight (8) other employees of petitioner Philippine National Bank
(PNB) in its branch in Cebu City - namely Ma. Teresa Chan, Marcelino Magdadaro, Douglasia Canuel, Novel Fortich,
Jacinto Ouano, Quirubin Blanco, Manuel Manzanares and Pedrito Ranile. Respondent, together with the other
employees, allegedly committed grave misconduct, gross neglect of duty, conduct grossly prejudicial to the best
interest of the service and acts violative of Republic Act No. 3019, relative to the corporate accounts of and
transactions with Pat International Trading Corporation (PITC), Khun Tong International Trading Corporation
(KITC), Pat Garments International Corporation (PGIC), Aqua Solar Trading Corporation, Dacebu Traders and
Exporters, Mancao Mercantile Co., Inc. and V&G Better Homes Subdivision. All of these transactions transpired at
the time that PNB was still a government-owned and controlled corporation.

Respondent, who was then the Vice-President and Manager of the bank, and the eight other employees were
administratively charged before the PNB Management Hearing Committee on February 24 and March 17, 1994.3 At
the close of the hearing on the merits, the Committee found that with respect to respondent, he was guilty of gross
misconduct in misappropriating the funds of V&G and of gross neglect in extending unwarranted credit
accommodations to PITC, PGIC and KITC which must serve as an aggravating circumstance. The Committee then
recommended that respondent be meted the penalty of forced resignation without forfeiture of benefits. 4

The PNB Board of Directors differed. In its Resolution No. 885 dated June 21, 1995, it found that respondent's gross
neglect in giving unwarranted credit to PITC, PGIC and KITC must serve as an aggravating circumstance in relation
to the offense of grave misconduct consisting of misappropriation of V&G funds and must serve the penalty of
forced resignation with forfeiture of benefits.6

It appears that only herein respondent sought reconsideration but the Board of Directors, in its Resolution No.
107,7 denied the same. Thereafter, on September 21, 1995, respondent appealed to the Civil Service Commission
(CSC)8 and, on October 19, 1995, he submitted his Memorandum on Appeal.9

In the meantime, on May 27, 1996, the PNB had ceased to be a government-owned and controlled corporation,
and in view of its conversion into a private banking institution by virtue of Executive Order (E.O.) No. 80.10 Despite
this development, the CSC, on April 14 1998, issued Resolution No. 980716 11dismissing respondent's appeal for
being filed out of time.

Respondent filed a motion for reconsideration12 on which the CSC required petitioner to comment. In its Comment,
petitioner theorized that even granting respondent's appeal was filed on time, the same must, nevertheless, be
dismissed on account of the privatization of PNB which thereby removed the case from the jurisdiction of the CSC.
The CSC found this argument meritorious and, subsequently, in its Resolution No. 98309913 dated December 7,
1998, it denied respondent's reconsideration on that ground.

Respondent elevated the matter to the Court of Appeals on Petition for Review, 14
docketed as CA-G.R. SP No.
50084.

Before the appellate court, respondent, on the one hand, ascribed error to the CSC in denying due course to his
appeal on the basis of the privatization of PNB inasmuch as the incident subject of the case had transpired way
back in 1992, when the bank was still a government-owned and controlled corporation. He particularly noted that
the CSC, before the privatization of the bank, had already acquired jurisdiction over the appeal upon the filing
thereof and subsequent submission of the memorandum on appeal. This, according to respondent, negated
petitioner's theory that the CSC could no longer assume jurisdiction and dispose of the appeal on the merits,
especially considering that jurisdiction once acquired generally continues until the final disposition of the case.15 On
the other hand, petitioner argued in essence that although the jurisdiction to act on the appeal must continue until
the final disposition of the case, this rule admits of exceptions as where, in the present case, the law must be
construed in a way as to operate on actions pending before its enactment.16
The Court of Appeals found merit in respondent's appeal. On January 3, 2006, it issued the assailed Decision
reversing the twin resolutions of the CSC. The appellate court pointed out that respondent's appeal before the CSC
had been filed on time and that the said commission had not lost jurisdiction over it despite the supervening
privatization of PNB. But inasmuch as the assailed Resolutions did not permeate the merits of respondent's appeal,
the appellate court found it wise to remand the case to the CSC for further proceedings. It disposed of the appeal
as follows:

WHEREFORE, premises considered, the instant Petition for Review under Rule 43 of the Rules of Court is hereby
GRANTED. ACCORDINGLY, Resolution No. 980716 dated April 14, 1998 and Resolution No. 983099 dated
December 7, 1998 of the Civil Service Commission are hereby REVERSED and the case is remanded to the Civil
Service Commission for further proceedings.

so ordered.17

Petitioner's motion for reconsideration was denied.18 Hence, it filed the instant Petition for Review bearing the same
issue as that raised previously.

At the core of the controversy is the question of whether E.O. No. 80 has the effect of removing from the
jurisdiction of the CSC the appeal of respondent which was already pending before the CSC at the time the said law
converted PNB into a private banking institution. Petitioner is insistent that, indeed, the law does have that effect,
and this argument is perched on Section 6 of E.O. No. 80, which materially provides that the bank would cease to
be a government-owned and controlled corporation upon the issuance of its articles of incorporation by the
Securities and Exchange Commission and would no longer be subject to the coverage of both the CSC and the
Commission on Audit.19 Petitioner believes that while indeed jurisdiction ordinarily continues until the termination
of the case, it advances the opinion that the rule does not apply where the law provides otherwise or where the
said law intends to operate on cases pending at the time of its enactment.20

For his part, respondent submits that Section 6 of E.O. No. 80 does not provide for the transfer of jurisdiction over
his pending appeal from the CSC to another administrative authority, and that neither does the provision authorize
its retroactive application in a way that would deprive the CSC of jurisdiction over cases already pending before it
prior to its effectivity.21 Additionally, he invokes estoppel against petitioner inasmuch as the latter has actively
participated in the proceedings before the CSC and, hence, was already barred from raising the issue of
jurisdiction, and alleges that petitioner's present recourse was taken merely to cause delay in the final resolution of
the controversy.22

We draw no merit in the petition.

In essence, Section 6 of E.O. No. 80, also known as the Revised Charter of PNB, treats of the effects of converting
the bank into a private financial and banking institution. It states:

Section 6. Change in Ownership of the Majority of the Voting Equity of the Bank. - When the ownership of the
majority of the issued common voting shares passes to private investors, the stockholders shall cause the adoption
and registration with the Securities and Exchange Commission of the appropriate Articles of Incorporation and
revised by-laws within three (3) months from such transfer of ownership. Upon the issuance of the certificate of
incorporation under the provisions of the Corporation Code, this Charter shall cease to have force and effect, and
shall be deemed repealed. Any special privileges granted to the Bank such as the authority to act as official
government depositary, or restrictions imposed upon the Bank, shall be withdrawn, and the Bank shall thereafter
be considered a privately organized bank subject to the laws and regulations generally applicable to private banks.
The Bank shall likewise cease to be a government-owned or controlled corporation subject to the coverage of
service-wide agencies such as the Commission on Audit and the Civil Service Commission.

The fact of the change of the nature of the Bank from a government-owned and controlled financial institution to a
privately-owned entity shall be given publicity.23

In a language too plain to be mistaken, the quoted portion of the law only states no more than the natural, logical
and legal consequences of opening to private ownership the majority of the bank's voting equity. This is very
evident in the title of the section called Change in Ownership of the Majority of the Voting Equity of the Bank.
Certainly, the transfer of the majority of the bank's voting equity from public to private hands is an inevitable effect
of privatization or, conversely, the privatization of the bank would necessitate the opening of the voting equity
thereof to private ownership. And as the bank ceases to be government depository, it would, accordingly be
coming under the operation of the definite set of laws and rules applicable to all other private corporations
incorporated under the general incorporation law. Perhaps the aspect of more importance in the present case is
that the bank, upon its privatization, would no longer be subject to the coverage of government service-wide
agencies such as the CSC and the Commission on Audit (COA).

By no stretch of intelligent and reasonable construction can the provisions in Section 6 of E.O. No. 80 be
interpreted in such a way as to divest the CSC of jurisdiction over pending disciplinary cases involving acts
committed by an employee of the PNB at the time that the bank was still a government-owned and controlled
corporation. Stated otherwise, no amount of reasonable inference may be derived from the terms of the said
Section to the effect that it intends to modify the jurisdiction of the CSC in disciplinary cases involving employees
of the government.

Sound indeed is the rule that where the law is clear, plain and free from ambiguity, it must be given its literal
meaning and applied without any interpretation or even
construction.24http://sc.judiciary.gov.ph/jurisprudence/2002/may2002/133706.htm - _edn13 This is based on the
presumption that the words employed therein correctly express its intent and preclude even the courts from giving
it a different construction.25 Section 6 of E.O. No. 80 is explicit in terms. It speaks for itself. It does not invite an
interpretation that reads into its clear and plain language petitioner's adamant assertion that it divested the CSC of
jurisdiction to finally dispose of respondent's pending appeal despite the privatization of PNB.

In the alternative, petitioner likewise posits that the portion of Section 6 of the E.O. No. 80, which states that the
PNB would no longer be subject to the coverage of both the COA and the CSC, must be understood to be applicable
to cases already pending with the CSC at the time of the bank's conversion into a private entity. We are not
swayed.

While there is no denying that upon its privatization, the bank would consequently be subject to laws, rules and
regulations applicable to private corporations - which is to say that disciplinary cases involving its employees would
then be placed under the operation of the Labor Code of the Philippines - still, we cannot validate petitioner's own
interpretation of Section 6 of E.O. No. 80 that the same must be applied to respondent's pending appeal with the
CSC and that, resultantly, the CSC must abdicate its appellate jurisdiction without having to resolve the case to
finality.

It is binding rule, conformably with Article 4 of the Civil Code, that, generally, laws shall have only a prospective
effect and must not be applied retroactively in such a way as to apply to pending disputes and cases. This is
expressed in the familiar legal maxim lex prospicit, non respicit (the law looks forward and not backward.)26 The
rationale against retroactivity is easy to perceive: the retroactive application of a law usually divests rights that
have already become vested or impairs the obligations of contract and, hence, is unconstitutional. 27 Although the
rule admits of certain well-defined exceptions28 such as, for instance, where the law itself expressly provides for
retroactivity,29 we find that not one of such exceptions that would otherwise lend credence to petitioner's argument
obtains in this case. Hence, in other words, the fact that Section 6 of E.O. No. 80 states that PNB would be
removed from the coverage of the CSC must be taken to govern acts committed by the bank's employees after
privatization.???ñr?bl?š