SECOND DIVISION

G.R. No. 125296             July 20, 2006

ISMAEL G. KHAN, JR. and WENCESLAO L. MALABANAN, petitioners,

vs.
OFFICE OF THE OMBUDSMAN, DEPUTY OMBUDSMAN (VISAYAS), ROSAURO F.
TORRALBA* and CELESTINO BANDALA**, respondents.

DECISION

CORONA, J.:

This petition for certiorari under Rule 65 of the Rules of Court addresses the issue of whether public
respondents Deputy Ombudsman (Visayas) and the Ombudsman have jurisdiction over petitioners
Ismael G. Khan, Jr. and Wenceslao L. Malabanan, former officers of Philippine Airlines (PAL), for
violation of Republic Act No. (RA) 30191 (the Anti-Graft and Corrupt Practices Act).

In February 1989, private respondents Rosauro Torralba and Celestino Bandala charged petitioners
before the Deputy Ombudsman (Visayas) for violation of RA 3019. In their complaint, private
respondents accused petitioners of using their positions in PAL to secure a contract for Synergy
Services Corporation, a corporation engaged in hauling and janitorial services in which they were
shareholders.

Petitioners filed an omnibus motion to dismiss the complaint on the following grounds: (1) the
Ombudsman had no jurisdiction over them since PAL was a private entity and (2) they were not
public officers, hence, outside the application of RA 3019.

In a resolution dated July 13, 1989,2 the Deputy Ombudsman3 denied petitioners' omnibus motion to
dismiss.

On petitioners' first argument, he ruled that, although PAL was originally organized as a private
corporation, its controlling stock was later acquired by the government through the Government
Service Insurance System (GSIS).4 Therefore, it became a government-owned or controlled
corporation (GOCC) as enunciated in Quimpo v. Tanodbayan.5

On the second argument, the Deputy Ombudsman held that petitioners were public officers within
the definition of RA 3019, Section 2 (b). Under that provision, public officers included "elective,
appointive officials and employees, permanent or temporary, whether in the classified or unclassified
or exempt service receiving compensation, even nominal, from the Government."

The dispositive portion of the Deputy Ombudsman's order read:

 WHEREFORE, finding no merit to [petitioners'] OMNIBUS MOTION TO DISMISS, the same
is hereby DENIED and petitioners are hereby ordered to submit their answer within ten (10)
days from receipt hereof.6

xxx       xxx       xxx

Petitioners appealed the order to the Ombudsman. There, they raised the same issues. Treating the
appeal as a motion for reconsideration, the Ombudsman dismissed it on February 22, 1996. He held
that petitioners were officers of a GOCC, hence, he had jurisdiction over them. 7 He also affirmed the
Deputy Ombudsman's ruling that Quimpo was applicable to petitioners' case.

In this petition for certiorari, with prayer for issuance of a temporary restraining order, petitioners
assail the orders dated July 13, 1989 and February 22, 1996 of the Deputy Ombudsman (Visayas)
and the Ombudsman, respectively. They claim that public respondents acted without jurisdiction
and/or grave abuse of discretion in proceeding with the investigation of the case against them
although they were officers of a private corporation and not "public officers." 8

In support of their petition, petitioners argue that: (1) the Ombudsman's jurisdiction only covers
GOCCs with original charters and these do not include PAL, a private entity created under the
general corporation law; (2) Quimpo does not apply to the case at bar and (3) RA 3019 only
concerns "public officers," thus, they cannot be investigated or prosecuted under that law.

We find merit in petitioners' arguments and hold that public respondents do not have the authority to
prosecute them for violation of RA 3019.

JURISDICTION OF THE OMBUDSMAN OVER GOCCS

IS CONFINED ONLY TO THOSE WITH ORIGINAL
CHARTERS

The 1987 Constitution states the powers and functions of the Office of the Ombudsman. Specifically,
Article XI, Section 13(2) provides:

Sec. 13. The Office of the Ombudsman shall have the following powers, functions, and
duties:

xxx       xxx       xxx

(2) Direct, upon complaint or at its own instance, any public official or employee of
the Government, or any subdivision, agency or instrumentality thereof, as well as any
government-owned or controlled corporation with original charter, to perform and
expedite any act or duty required by law, or to stop, prevent, and correct any abuse
or impropriety in the performance of duties. (italics supplied)

xxx       xxx       xxx

Based on the foregoing provision, the Office of the Ombudsman exercises jurisdiction over public
officials/ employees of GOCCs with original charters. This being so, it can only investigate and
prosecute acts or omissions of the officials/employees of government corporations. Therefore,
although the government later on acquired the controlling interest in PAL, the fact remains that the
latter did not have an "original charter" and its officers/employees could not be investigated and/or
prosecuted by the Ombudsman.
In Juco v. National Labor Relations Commission,9 we ruled that the phrase "with original charter"
means "chartered by special law as distinguished from corporations organized under the Corporation
Code." PAL, being originally a private corporation seeded by private capital and created under the
general corporation law, does not fall within the jurisdictional powers of the Ombudsman under
Article XI, Section 13(2) of the Constitution. Consequently, the latter is devoid of authority to
investigate or prosecute petitioners.

Quimpo Not Applicable
to the Case at Bar

Quimpo10 is not applicable to the case at bar. In that case, Felicito Quimpo charged in 1984 two
officers of PETROPHIL in the Tanodbayan (now Ombudsman) for violation of RA 3019. These
officers sought the dismissal of the case on the ground that the Tanodbayan had no jurisdiction over
them as officers/employees of a private company. The Court declared that the Tanodbayan had
jurisdiction over them because PETROPHIL ceased to be a private entity when Philippine National
Oil Corporation (PNOC) acquired its shares.

In hindsight, although Quimpo appears, on first impression, relevant to this case (like PETROPHIL,

PAL's shares were also acquired by the government), closer scrutiny reveals that it is not actually on
all fours with the facts here.

In Quimpo, the government acquired PETROPHIL to "perform functions related to government

programs and policies on oil."11 The fact that the purpose in acquiring PETROPHIL was for it to
undertake governmental functions related to oil was decisive in sustaining the Tanodbayan's
jurisdiction over it. This was certainly not the case with PAL. The records indicate that the
government acquired the controlling interest in the airline as a result of the conversion into equity of
its unpaid loans in GSIS. No governmental functions at all were involved.

Furthermore, Quimpo was decided prior to the 1987 Constitution. In fact, it was the 1973
Constitution which the Court relied on in concluding that the Tanodbayan had jurisdiction over
PETROPHIL's accused officers. Particularly, the Court cited Article XIII, Section 6:

SEC. 6. The Batasang Pambansa shall create an office of the Ombudsman, to be known as
the Tanodbayan, which shall receive and investigate complaints relative to public
office, including those in government-owned or controlled corporations, make appropriate
recommendations, and in case of failure of justice as defined by law, file and prosecute the
corresponding criminal, civil, or administrative case before the proper court or body. (italics
supplied)

The term "government-owned or controlled corporations" in the 1973 Constitution was qualified by
the 1987 Constitution to refer only to those with original charters.12

Petitioners, as then Officers of

PAL, were not Public Officers

Neither the 1987 Constitution nor RA 6670 (The Ombudsman Act of 1989) defines who "public
officers" are. Instead, its varied definitions and concepts are found in different statutes 13 and
jurisprudence.14 Usually quoted in our decisions is Mechem, a recognized authority on the subject. In
the 2002 case of Laurel v. Desierto,15 the Court extensively quoted his exposition on the term "public
officers":
 A public office is the right, authority and duty, created and conferred by law, by which, for a
given period, either fixed by law or enduring at the pleasure of the creating power, an
individual is invested with some portion of the sovereign functions of the government, to be
exercised by him for the benefit of the public. The individual so invested is a public officer.

The characteristics of a public office, according to Mechem, include the delegation of

sovereign functions, its creation by law and not by contract, an oath, salary, continuance of
the position, scope of duties, and the designation of the position as an office.

xxx       xxx       xxx

Mechem describes the delegation to the individual of the sovereign functions of government
as "[t]he most important characteristic" in determining whether a position is a public office or
not.

The most important characteristic which distinguishes an office from an employment or

contract is that the creation and conferring of an office involves a delegation to the individual
of some of the sovereign functions of government to be exercised by him for the benefit of
the public; − that some portion of the sovereignty of the country, either legislative, executive,
or judicial, attaches, for the time being, to be exercised for the public benefit. Unless the
powers conferred are of this nature, the individual is not a public officer. 16 (italics supplied)

From the foregoing, it can be reasonably inferred that "public officers" are those endowed with the
exercise of sovereign executive, legislative or judicial functions. 17 The explication of the term is also
consistent with the Court's pronouncement in Quimpo that, in the case of officers/employees in
GOCCs, they are deemed "public officers" if their corporations are tasked to carry out governmental
functions.

In any event, PAL has since reverted to private ownership and we find it pointless to scrutinize the
implications of a legal issue that technically no longer exists.

WHEREFORE, the petition is hereby GRANTED. Public respondents Deputy Ombudsman (Visayas)

and Office of the Ombudsman are restrained from proceeding with the investigation or prosecution
of the complaint against petitioners for violation of RA 3019. Accordingly, their assailed orders of
July 13, 1989 and February 22, 1996, respectively, are SET ASIDE and ANNULLED.

SO ORDERED.

KHAN VS. OMBUDSMAN

G.R. No. 125296, July 20, 2006

FACTS:

Petitioners Ismael G. Khan, Jr. and Wenceslao L. Malabanan, former officers of Philippine
Airlines (PAL), were charged before the Deputy Ombudsman (Visayas) with violation of RA
3019 (the Anti-Graft and Corrupt Practices Act) for using their positions in PAL to secure a
contract for Synergy Services Corporation, a corporation engaged in hauling and janitorial
services in which they were shareholders.

Petitioners filed an omnibus motion to dismiss the complaint on the following grounds: (1)
the Ombudsman had no jurisdiction over them since PAL was a private entity and (2) they
were not public officers, hence, outside the application of RA 3019.
The Deputy Ombudsman denied petitioners' omnibus motion to dismiss, ruling that although
PAL was originally organized as a private corporation, its controlling stock was later acquired
by the government through the GSIS. Therefore, it became a government-owned or
controlled corporation (GOCC) as enunciated in Quimpo v. Tanodbayan. The Deputy
Ombudsman also held that petitioners were public officers within the definition of RA 3019,
Section 2 (b). Under that provision, public officers included "elective, appointive officials and
employees, permanent or temporary, whether in the classified or unclassified or exempt
service receiving compensation, even nominal, from the Government."

Petitioners appealed the order to the Ombudsman which affirmed the decision of the Deputy
Ombudsman.

Petitioners, thus, filed a petition for certiorari before the Supreme Court. Petitioners argue
that: (1) the Ombudsman's jurisdiction only covers GOCCs with original charters and these
do not include PAL, a private entity created under the general corporation law; (2) Quimpo
does not apply to the case at bar and (3) RA 3019 only concerns "public officers," thus, they
cannot be investigated or prosecuted under that law.

ISSUE:

1. Whether or not the Ombudsman has jurisdiction over GOCC without original charter

2. Whether or not the Quimpo case apply to the case at bar

3. Whether or not petitioners PAL officers are public officers

HELD:

1. Jurisdiction of the ombudsman over GOCCS is confined only to those with

original charters

Article XI, Section 13(2) of the 1987 Constitution provides:

Sec. 13. The Office of the Ombudsman shall have the following powers, functions, and
duties:

xxx       xxx       xxx

(2) Direct, upon complaint or at its own instance, any public official or employee of the
Government, or any subdivision, agency or instrumentality thereof, as well as any
government-owned or controlled corporation with original charter, to perform and expedite
any act or duty required by law, or to stop, prevent, and correct any abuse or impropriety in
the performance of duties. (italics supplied)

xxx       xxx       xxx

Based on the foregoing provision, the Office of the Ombudsman exercises jurisdiction over
public officials/ employees of GOCCs with original charters. This being so, it can only
investigate and prosecute acts or omissions of the officials/employees of government
corporations. Therefore, although the government later on acquired the controlling interest
in PAL, the fact remains that the latter did not have an "original charter" and its
officers/employees could not be investigated and/or prosecuted by the Ombudsman.
In Juco v. National Labor Relations Commission, we ruled that the phrase "with original
charter" means "chartered by special law as distinguished from corporations organized
under the Corporation Code." PAL, being originally a private corporation seeded by private
capital and created under the general corporation law, does not fall within the jurisdictional
powers of the Ombudsman under Article XI, Section 13(2) of the Constitution.
Consequently, the latter is devoid of authority to investigate or prosecute petitioners.

2. Quimpo Not Applicable to the Case at Bar

Quimpo is not applicable to the case at bar. In that case, Felicito Quimpo charged in 1984
two officers of PETROPHIL in the Tanodbayan (now Ombudsman) for violation of RA 3019.
These officers sought the dismissal of the case on the ground that the Tanodbayan had no
jurisdiction over them as officers/employees of a private company. The Court declared that
the Tanodbayan had jurisdiction over them because PETROPHIL ceased to be a private
entity when Philippine National Oil Corporation (PNOC) acquired its shares.

In hindsight, although Quimpo appears, on first impression, relevant to this case (like
PETROPHIL, PAL's shares were also acquired by the government), closer scrutiny reveals
that it is not actually on all fours with the facts here.

In Quimpo, the government acquired PETROPHIL to "perform functions related to

government programs and policies on oil." The fact that the purpose in acquiring PETROPHIL
was for it to undertake governmental functions related to oil was decisive in sustaining the
Tanodbayan's jurisdiction over it. This was certainly not the case with PAL. The records
indicate that the government acquired the controlling interest in the airline as a result of the
conversion into equity of its unpaid loans in GSIS. No governmental functions at all were
involved.

Furthermore, Quimpo was decided prior to the 1987 Constitution. In fact, it was the 1973
Constitution which the Court relied on in concluding that the Tanodbayan had jurisdiction
over PETROPHIL's accused officers, particularly Article XIII, Section 6. The term
"government-owned or controlled corporations" in the 1973 Constitution was qualified by
the 1987 Constitution to refer only to those with original charters.

3. Petitioners, as then Officers of PAL, were not Public Officers

Neither the 1987 Constitution nor RA 6670 (The Ombudsman Act of 1989) defines who
"public officers" are. Instead, its varied definitions and concepts are found in different
statutes and jurisprudence. Usually quoted in our decisions is Mechem, a recognized
authority on the subject. In the 2002 case of Laurel v. Desierto,15 the Court extensively
quoted his exposition on the term "public officers":

A public office is the right, authority and duty, created and conferred by law, by which, for a
given period, either fixed by law or enduring at the pleasure of the creating power, an
individual is invested with some portion of the sovereign functions of the government, to be
exercised by him for the benefit of the public. The individual so invested is a public officer.

The characteristics of a public office, according to Mechem, include the delegation of

sovereign functions, its creation by law and not by contract, an oath, salary, continuance of
the position, scope of duties, and the designation of the position as an office.
 xxx       xxx       xxx

Mechem describes the delegation to the individual of the sovereign functions of government
as "[t]he most important characteristic" in determining whether a position is a public office
or not.

The most important characteristic which distinguishes an office from an employment or

contract is that the creation and conferring of an office involves a delegation to the
individual of some of the sovereign functions of government to be exercised by him for the
benefit of the public; − that some portion of the sovereignty of the country, either
legislative, executive, or judicial, attaches, for the time being, to be exercised for the public
benefit. Unless the powers conferred are of this nature, the individual is not a public officer.

From the foregoing, it can be reasonably inferred that "public officers" are those endowed
with the exercise of sovereign executive, legislative or judicial functions. The explication of
the term is also consistent with the Court's pronouncement in Quimpo that, in the case of
officers/employees in GOCCs, they are deemed "public officers" if their corporations are
tasked to carry out governmental functions.

WHEREFORE, the petition is hereby GRANTED. Public respondents Deputy Ombudsman

(Visayas) and Office of the Ombudsman are restrained from proceeding with the
investigation or prosecution of the complaint against petitioners for violation of RA 3019.
Accordingly, their assailed orders of July 13, 1989 and February 22, 1996, respectively, are
SET ASIDE and ANNULLED.