GSIS Family Bank Employees Union vs. Villanueva

Facts: Royal Savings Bank filed an application with the Central Bank of the Philippines for the appointment of a conservator. The application was denied, prohibited it from doing business, and placed it under receivership. Royal Savings Bank filed several complaints against the Central Bank for grave abuse of discretion. To amicably settle the cases, then Central Bank Governor Jose B. Fernandez, Jr. offered to reopen and rehabilitate Royal Savings Bank if it would drop all its complaints against the Central Bank and transfer all its shares of stock to Commercial Bank of Manila, a wholly-owned subsidiary of GSIS. Royal Savings Bank and Commercial Bank of Manila entered into a Memorandum of Agreement to rehabilitate and infuse capital into Royal Savings Bank. Royal Savings Bank was renamed Comsavings Bank.

GSIS transferred its holdings from Commercial Bank of Manila to Boston Bank. Comsavings Bank was not included in the transfer. Due to Boston Bank’s acquisition of Commercial Bank of Manila, GSIS took over the control and management of Comsavings Bank.

Comsavings Bank and GSIS executed a Memorandum of Agreement where the latter committed to infuse an additional capital of P2.5 billion into Comsavings Bank. After the infusion of funds, GSIS effectively owned 99.55% of Comsavings Bank’s outstanding shares of stock. Comsavings Bank changed its name to GSIS Family Bank.

President Benigno S. Aquino III issued Executive Order No. 7, which placed an indefinite moratorium on increases in salaries and benefits of employees in GOCCs and government financial institutions. President Aquino also signed into law RA No. 10149, or the GOCC Governance Act of 2011. The law created the Governance Commission for GOCCs.

The Governance Commission clarified that GSIS Family Bank was classified as a government financial institution. Moreover, as a government financial institution, GSIS Family Bank was unauthorized to enter into a collective bargaining agreement with its employees “based on the principle that the compensation and position classification system is provided for by law and not subject to private bargaining.” Also further clarified that the right to strike of GSIS Family Bank’s employees was not guaranteed by the Constitution, as they were government officers and employees. 

GSIS Union sent GSIS Family Bank a demand letter for the payment of Christmas bonus to its members, as stipulated in their CBA. GSIS Union accused GSIS Family Bank of evading its contractual obligation to its employees by invoking the Governance Commission’s opinion that it was no longer authorized to grant incentives and other benefits to its employees, unless authorized by the President of the Philippines. GSIS Union alleged that Republic Act No. 10149 does not apply to GSIS Family Bank, as it was a private bank created and established under the Corporation Code.

Issue: Whether or not GSIS Family Bank is a private bank, outside the coverage of the RA.

Held: No. A GOCC is: (1) established by original charter or through the general corporation law; (2) vested with functions relating to public need whether governmental or proprietary in nature; and (3) directly owned by the government or by its instrumentality, or where the government owns a majority of the outstanding capital stock. Possessing all 3 attributes is necessary to be classified as a GOCC. There is no doubt that GSIS Family Bank is a GOCC since 99.55% of its outstanding capital stock is owned and controlled by GSIS.