Exhibit EE

Case:17-03283-LTS Doc#:3961-32 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit EE to Declaration Page 1 of 17
Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

2000 JTS 104, 151 D.P.R. 383, 2000

WL 975618 (P.R.), 2000 TSPR 93

MARITZA RODRÍGUEZ ROMÁN 

et al, plaintiffs and appellants, 

v.

PUERTO RICO GOVERNMENT DEVELOPMENT 

BANK, PUERTO RICO HIGHER EDUCATION 

ASSISTANCE CORPORATION et al, defendants 

and appellees.

In the Supreme Court of Puerto Rico.

Number: AC-96-6

Synopsis

JUDGMENT issued by Judge Ángel F. Rossy García, Judge 

José M. Aponte Jiménez and Judge Antonio J. Negroni 

Cintrón, Judges of the Circuit Court of Appeals (Regional 

Circuit I), affirming a judgment issued by the Court of First 

Instance, Superior Court of San Juan, dismissing a torts and 

injunction action. The judgment of the Circuit Court of 

Appeals is modified for the sole purpose of ordering the file 

to be returned to the Court of First Instance in order for the 

latter to hold a hearing that is consistent with the decision 

issued by the Supreme Court. The judgment of the Circuit 

Court of Appeals is affirmed as to such employees who were 

not employees of the Government Development Bank prior 

to the moment they began to provide services as employees 

of the Puerto Rico Superior Education Assistance 

Corporation.

Ebenecer López Ruyol, attorney for appellants; Rafael J. 

Vázquez González, of Nieto, Vázquez & Rodríguez 

Marxuach, Radamés A. Torruella and José A. Nolla 

Mayoral, of McConnell Valdés attorneys for the Puerto Rico 

Superior Education Assistance Corporation and the Puerto 

Rico Government Development Bank. *391

CHIEF JUDGE ANDRÉU GARCÍA issued the opinion of 

the Court.

**1 We are tasked with considering whether there is a 

right to retain employment for employees of a public 

corporation which validly ceases its operations, while said 

corporation is a subsidiary of another public corporation but 

is independent and separate from

it. We believe that they do not have a right to retain 

employment, for the reasons set forth below.

Let us examine the facts that give rise to this appeal.

I

On May 8, 1981, the Board of Directors of the Government 

Development Bank by resolution created, in accordance 

with the Charter of “the Bank,” Art. 2 of Law No. 17 

enacted on September 23, 1948 (7 L.P.R.A. sec. 552), 1 as 

amended, a subsidiary corporation known as the Puerto Rico 

Higher Education Assistance Corporation (hereinafter

PRHEAC), the purpose of which was to guarantee loans 

issued to students by commercial banks. This corporation 

was made up of forty-seven (47) workers and was dissolved 

by a resolution of the Board. It ceased its operations on 

April 15, 1994, at which time all employees lost their jobs. 

It was stated that changes in federal regulations had made 

the operation of PRHEAC inefficient, and therefore they 

had been receiving fines for breach of said regulations. Due 

to this they were facing a financial crisis.

On February 22, 1994, twenty-two (22) union employees 

and five (5) managerial employees filed separate lawsuits, 

which were subsequently consolidated, in the Court of First 

Instance *392 against the Government Development Bank 

(hereinafter the Bank) and the Bank‟s employee Union, 

PRHEAC and Great Lakes Higher Education Corporation. 

They alleged that they were actually employees of the Bank 

assigned to a subsidiary, and that therefore they had the 

right to be reinstated in the bank‟s facilities and to compete 

with the other employees of said institution in accordance 

with the merit principle and the seniority principle, for any 

available positions and for positions held by employees of 

the Bank that had less seniority than them. They requested a

temporary restraining order and a preliminary and 

permanent injunction to halt the imminent layoff of the 

employees which had been announced by the corporation, 

and their reinstatement in their regular duties; notice to each 

employee of a general layoff plan that covered the Bank and 

all of its departments and that said plan be published and 

approved by the Department of State in accordance with

established rules. They also requested damages in the 

amount of one hundred thousand dollars ($100,000) for each 

of them.

EXHIBIT A

Case:17-03283-LTS Doc#:3961-32 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit EE to Declaration Page 2 of 17
Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

Two (2) days later, the Court of First Instance denied the 

temporary restraining order and preliminary injunction, 

ordering plaintiffs to serve defendants through the ordinary 

procedure. As a consequence, on March 30, 1994, 

codefendants the Bank and PRHEAC filed a motion in 

which they requested that summary judgment be issued 

dismissing the complaint, based on the fact that PRHEAC 

and the Bank were separate and independent entities, that 

PRHEAC was exempt from the provisions of the Puerto 

Rico Public Service Personnel Act, and therefore, the plans 

to layoff union employees had to be governed by the 

collective bargaining agreement entered into by PRHEAC 

and the Government Development Bank Employee Union, 

and with regards to managerial employees, by the PRHEAC

regulations. *393

**2 Codefendants, Employee Union of the Government 

Development Bank and Great Lakes Higher Education 

Corporation, also filed separate motions requesting 

dismissal of the complaint. The former argued lack of 

jurisdiction and of ripeness of the controversy and the latter

was based on the claim that the complaint failed to state a 

claim upon which relief could be granted.

The Court of First Instance, granting codefendants‟ motions, 

dismissed the actions filed for the reasons indicated. As to 

the Bank and PRHEAC it also held that plaintiffs did not 

exhaust available administrative relief.

Plaintiffs appealed before us from said decision, and 

therefore, after careful analysis, we issue judgment, partially 

revoking the judgment as to codefendants Bank and 

PRHEAC. On that occasion we stated the following:

We have repeatedly held that the doctrine that requires 

administrative remedies to be exhausted prior to turning 

to courts is a rule of judicial self-limitation intended to 

facilitate judicial review. It seeks to ensure that courts 

have the most accurate information as to the grounds of a 

governmental action, thus placing courts in a position to 

make the most informed decision possible as to the 

petition filed. It also seeks to free courts from matters that 

may be decided administratively. ... It is not a rigid

doctrine. Rather, it must be applied flexibly, enforcing it 

only when, in light of the circumstances of the case, it is 

clear that judicial intervention would be premature. ... 

This is why we have decided that the requirement of 

exhausting administrative remedies may be ignored when 

the litigious matter is essentially a legal question, or when 

exhausting said remedies constitutes a useless or 

ineffective measure. ...

In this case, requiring that administrative resources be 

exhausted, as the lower court decided, was not justified.

The essential question raised by appellants before the 

Court of First Instance, as to which we do not render 

judgment in this decision, *394 was essentially a legal 

question, and deciding it did not require waiting for the 

administrative agency to contribute specialized 

knowledge. According to the appellants, the layoffs that 

were contemplated and then ordered by appellees

[Government Development Bank and Puerto Rico Higher 

Education Assistance Corporation] were not due to the 

merit principle and the guiding principle of seniority and 

amount of time in service, as decided in Calzada 

Quiñones v. D.A.C.O., 114 D.P.R. 757 (1983). Appellees 

alleged that they were actually employees of the 

Government Development Bank, and that as such they 

were entitled to compete with the other employees of the 

Bank for the remaining positions, according to the merit 

principle and the criteria of seniority. Since this was the 

main question raised by appellants, it was not necessary 

to exhaust administrative remedies in order to consider 

and decide it.

**3 It should also be noted that when appellants filed 

their judicial action, it was clear that the decision of the 

Bank to cease the operation of the Puerto Rico Higher 

Education Assistance Corporation was final and not 

subject to delay. The steps and claims carried out by 

appellants before the Bank‟s upper management and other 

entities prior to filing the judicial action in question, and 

their response to said steps and claims clearly 

demonstrated that the possibility that the Bank cancel or 

modify its intention to layoff appellants immediately was 

remote. Under such circumstances, it made little sense 

and was pointless to require appellants to exhaust 

available administrative remedies prior to filing their 

judicial

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Exhibit EE to Declaration Page 3 of 17
Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

action against the Bank and PRHEAC. (Citations omitted) 

Appendix, Exhibit 4, pp. 13.

Thus we decided that the file should be returned to the Court 

of First Instance to continue proceedings in accordance with 

our decision. The lower court interpreted our order to mean 

that it only needed to decide the question of law, that is, 

whether plaintiff employees were entitled to compete with 

the other employees of the Government Development Bank

for the positions existing in accordance with the merit 

principle and seniority criteria. It gave the parties a period 

to submit memoranda in support of their positions, after 

which it *395 issued judgment, and summarily dismissed 

the actions filed. Petitioners filed an appeal before the 

Circuit Court of Appeals, which affirmed the Court of First 

Instance.

Petitioners appear before us through a so-called “appeal

petition”, 2 in which they argue that the Court of Appeals 

committed several errors; including that the Court erred in 

summarily dismissing the complaint, in deciding that 

plaintiffs were not employees of the bank, without allowing 

evidence to be submitted to decide the situation of each 

employee; intimately linked to this, whether the Bank can 

create public corporations that deprive employees who had 

already been hired by it prior to creating PRHEAC; whether 

it is appropriate to pierce the corporate veil between 

PRHEAC and the Bank; whether the Public Service 

Personnel Act and the retention right apply to employees of 

PRHEAC, and that the Court erred in not granting an equity 

remedy to avoid public policy violation and avoiding gross 

injustice.

In order to evaluate the petition, on February 23, 1996, we 

issued a decision in which we ordered the original files held 

by the Court of Appeals to be transferred to us. When said 

order was complied with on June 20, 1996, we mistakenly 

ordered petitioner to submit its appeal, as if it involved a 

writ that had already been issued. After said party complied 

with said order, appellee filed a brief opposing issuance of 

the writ.

**4 Having examined the file in its entirety as well as the 

positions of the parties, we proceed to issue our decision. 

*396

II

[1–3] The Government Development Bank, instrumentality 

of the Government of Puerto Rico, was created by Law No. 

17 enacted on September 23, 1948 (7 L.P.R.A. sec. 551 et 

seq.), in order to “help the State Government perform its 

fiscal duties and carry out its governmental duty to develop 

the economy of Puerto Rico and especially its 

industrialization more effectively.” 7 L.P.R.A. sec. 551. 

Through Law No. 97 enacted on June 26, 1974, the 

legislature added section Four of Art. 2 of Law No. 17 (7 

L.P.R.A. sec. 552), known as the Bank‟s Charter, sections 

(I) and (J). Section (J) granted the Bank the authority to 

create, through a resolution, subsidiary or affiliated 

companies that in turn would be government 

instrumentalities that were independent and separate from 

the Bank, with powers, rights, authority and duties granted 

to the Bank and delegated to them. 3

[4–5] In accordance with this section the Bank created, 

through Resolution No. 4530, the Puerto Rico Higher 

Education Assistance Corporation (PRHEAC), which in 

accordance with said section, came into legal *397 existence 

as a government instrumentality of the Commonwealth of 

Puerto Rico, that was independent and separate from the 

Bank. By provision of law, the Board of Directors of the 

Bank is the Board of Directors of each and every one of the 

subsidiaries so created. Art. 1(J) of Law No. 97, supra.

Appellants invoke the doctrine of alter ego, to argue that 

they are actually employees of the Bank and as such have 

the right to compete for the positions remaining in the Bank 

in accordance with the merit principle and the governing 

principle of seniority. In support of said argument they list a 

series of circumstances, that is, that both agencies share the 

same board of directors, that the employees of both public 

corporations have the same employment office, use the 

same form to verify employment, use the same 

identification card, use the same checks, have the same 

medical plan. They allege furthermore that the Association 

of Employees of the Commonwealth of Puerto Rico have 

them under the same employer identification number and 

the same account with the State Insurance Fund and they 

make transfers of personnel between both instrumentalities 

at their discretion.

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Exhibit EE to Declaration Page 4 of 17
Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

[6–7] In Puerto Rico we have adopted the doctrines of 

piercing the corporate veil (alter ego), successorship and the 

doctrine of “single employer,” developed as case law in 

federal courts and the Federal Labor Relations Board to 

protect the rights of workers. The single employer doctrine 

is generally used when there are companies that coexist. The 

doctrines of alter ego and successor employer are used when 

a company substitutes another company. J.R.T. v. Asoc. 

Playa Azul I, 117 D.P.R. 20, 29 (1986); See also, Fugazy

Continental Corp. v. N.L.R.B., 725 F.2d 1416, 1419 (D.C. 

Cir. 1984); Penntech Papers, Inc. v. N.L.R.B., 706 F.2d 18, 

24 (1st Cir. 1983). Specifically, the *398 alter ego doctrine, 

in the labor field, is used as a general rule when a 

corporation takes control of another entity, which usually 

disappears and that substitution is shown to have illegal 

purposes, to constitute a violation of public policy, to entail 

injustice or fraud, or to breach an obligation. The analysis 

under this doctrine requires proving purposes or intentions 

to commit illegal acts. J.R.T. v. Asoc. Playa Azul I, supra, p. 

29.

**5 Having examined the entirety of the file we see that in 

effect both agencies share centralized administration which, 

according to the file that we have before us is explained by 

the fact that PRHEAC hired the administrative services and 

other personnel administration services with the Bank, since 

being a small agency it was not worth having its own 

administrative and Human Resource office. PRHAEC paid 

the Bank for said services. As part of these services of 

personnel administration and contracted support, Bank 

personnel were frequently sent to PRHEAC‟s offices. 

However, they were always kept under the Bank‟s payroll.

Furthermore, both agencies had different employer‟s 

identification numbers, different accounts with the State 

Insurance Fund and were represented in the union by 

different appropriate units certified by the Puerto Rico 

Labor Relations Board.

[8] It is also pointless to extend the alter ego doctrine to 

these two (2) agencies, since it is by mandate of the law 

itself that these are “separate and independent government 

instrumentalities of the Commonwealth of Puerto Rico”. 

Art. 1(J) of 

Law No. 97, supra. The fundamental distinction for a public 

corporation to be considered a subsidiary of another public 

corporation consists of the statute by virtue of which the 

existence of the first arises to impart said characteristic upon 

it *399, in addition to its own legal personality. See Torres

Ponce v. Jiménez, 113 D.P.R. 58, 6365 (1982). The enabling 

statute by virtue of which PRHEAC was created made it a 

public corporation independent of the Bank.

[9] Appellants argue that PRHEAC has not been 

incorporated in the Department of State. Appellants forget 

that the General Corporations Act, 14 L.P.R.A. ant. sec. 

1101 et seq., does not apply to public corporations, as said 

statute was conceived to specifically regulate the creation 

and operation of private corporations and it is as to these 

that Registration in the State Department is required. The 

organic statute that enabled the creation of the PRHEAC 

constituted it as a public corporation without requiring any 

sort of registration.

III

The constitutional validity of the delegation of powers that 

the Legislative Assembly makes to the public corporation 

for it to have the capacity to create or constitute 

governmental instrumentalities that are independent and 

separate is questioned.

During the development of administrative law, especially at

its origin, the constitutional validity of the delegation to 

agencies of powers originally assigned to the three (3) 

governmental powers was challenged many times. The 

emphasis was at the moment of reconciliation of the 

constitutional tradition with that delegation of powers.

**6 Nowadays the validity of this type of delegation, which 

was the source of judicial decisions from the start of 

administrative law, is rarely doubted. From 1935, the year in 

which the Social Security Act was created, a great 

development began in the areas of social legislation through 

which administrative agencies became the *400 main 

purveyors of governmental services and the main emphasis 

of decisions that interpreted said legislation fell on the 

administrative procedure. B., Schwartz, Administrative 

Law, 3ra ed., Boston, Ed. Little, Brown & Co., 1991, Sec. 

1.14.

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Exhibit EE to Declaration Page 5 of 17
Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

[10] Currently, the validity of the delegation is upheld as 

long as the law that creates the agency establishes 

appropriate rules, guidelines, standards, criteria or 

intelligible principles or procedural and substantive

safeguards or guarantees that guide the delegation and limit 

their powers to prevent the actions from the agency to be 

arbitrary and capricious. Said criteria do not need to be 

express; they can arise, in fact, from he legislative history 

and may be broad and general. If it has a public interest or 

purpose, generally this is sufficient justification to uphold 

the delegation. See: Viajes Gallardo v. Clavell, 131 D.P.R. 

275 (1992); M. & B.S., Inc. v. Depto. de Agricultura, 118 

D.P.R. 319 (1987); Hernández Montero v. Montero Cuevas, 

Director, 88 D.P.R. 785 (1963); López v. Junta 

Planificación, 80 D.P.R. 646 (1958); Hilton Hotels v. Junta 

Salario Mínimo, 74 D.P.R. 670 (1953); Luce & Co. v. Junta 

de Salario Mínimo, 62 D.P.R. 452 (1943); D. Fernández, 

Derecho Administrativo y Ley de Procedimiento 

Administrativo Uniforme, Bogotá, Ed. Forum, 1993, Sec.

2.2.5; Schwartz, op. cit., Sec. 2.102.30; 2 Am. Jur. 2d 

Administrative Law Sec. 56.

[11] The definition of what a public corporation is can be 

found in Art. 27 of the Civil Code, 31 L.P.R.A. sec. 101, 

which regulates legal persons in Puerto Rico. In that regard, 

Art. 27 of the Civil Code states the following:

Sec. 101 Legal persons—Who shall be considered legal 

persons

The following shall be legal persons:

(1) Corporations and public interest associations with 

legally recognized legal personality. *401

Their personality starts from the very instant in which, 

under law, they would have been validly established.

**7 (2) Corporations, companies, associations of 

particular interest, be they civil, commercial, or industrial, 

to which the law grants legal personality. 31 L.P.R.A. sec. 

101.

[12–14] We have interpreted person, in the legal sense, to be 

any being capable of having rights and obligations and legal 

persons to be the community of people or collection of 

assets that are organized for carrying out a permanent goal 

and obtain the recognition of 

the state as a subject of law. A legal person receives its 

personality directly from the law, therefore the limits to its 

powers, rights and responsibilities are established by the 

creating law. Rivera Maldonado v. E.L.A., 119 D.P.R. 74, 

81 (1987).

It has been interpreted similarly in Federal administrative 

law. “The jurisdictional principle is the root principle of 

administrative power. The statute is the source of agency 

authority as well as of its limits. If an agency act is within 

the statutory limits (or vires), its action is valid; if it is 

outside them (or ultra vires), it is invalid....” (Notations

omitted.) Schwartz, op. cit., Sec. 4.4, p. 171.

[15] Art. 29 of the Civil Code, 31 L.P.R.A. sec. 103, 

provides that the civil capacity of corporations, companies, 

and associations shall be regulated by the laws that created 

or recognized them. Art. 80 (31 L.P.R.A. sec. 30) 

establishes, in turn, that legal persons can acquire and 

possess assets of all kinds, and enter into obligations and 

exercise civil or criminal actions, in accordance with the 

laws and rules that create them.

[16–17] Sec. 1.3 of the Uniform Administrative Procedure 

Act of the Commonwealth of Puerto Rico, 3 L.P.R.A. sec. 

2102, also characterizes the public corporation. “Agency”, 

for purposes of said law, means any board, body, examining 

court, public *402 corporation, commission, independent 

office, division, administration, bureau, department, 

authority, employee, person, entity or any instrumentality of 

the Commonwealth of Puerto Rico or administrative entity 

legally authorized to carry out regulatory or investigative 

duties and or which can issue a decision or has authority to 

issue licenses, certificates, permits, concessions, 

accreditations, privileges, franchises, acknowledge or 

adjudicate. An exception is made for those entities 

mentioned in said law, for example, municipalities, its 

entities or corporations, the Legislative Branch, Judicial 

Branch, the office of the governor, among others.

[18] The public corporation is a governmental creature, 

the creation of which is according to the needs of the State.

**8 ... On the other hand, a public corporation, being an 

instrument or means of government, is subject to creation 

or dissolution at the will of the legislative body or 

lawmaking power, and in total disregard of the wishes

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Exhibit EE to Declaration Page 6 of 17
Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

of the members who compose it. In the same manner its 

charter is subject to change or amendment.

While all corporations are public in the sense that they 

affect and are dependent upon the public to a greater or 

lesser extent, strictly speaking, a public corporation is one 

that is created for political purposes with political powers 

to be exercised for purposes connected with the public 

good in the administration of civil government. It is an 

instrument of the government subject to the control of the 

legislature, and its members are officers of the 

government appointed for the discharge of public duties; 

and where a corporation, exercises all of its franchises for 

public purposes, it is a public corporation.

Corporations in which the public is interested only in 

their objects and in which the whole interest is not in the 

government or the corporation is not created for 

administration of political power, are private. ...

Stated generally, a public corporation is a corporation 

created merely for purposes of government, as 

distinguished from a private corporation, which is one 

that is created for other purposes than those of 

government. Statutes may be found embodying the 

substance of this definition. (Emphasis added and 

notations *403 omitted.) I Fletcher, Cyclopedia 

Corporation Sec. 58, pp. 790792 (Perm ed. 1999).

Through Law No. 97, supra, 7 L.P.R.A. sec. 552, the 

legislature amended the law to add sections (I) and (J) to 

section Four of Art. 2, supra, known as the Bank‟s Charter, 

to authorize the Bank to create instrumentalities that are 

separate and independent from the Bank.

There is no doubt that the Bank was conferred the 

delegation of the legislative authority to create subsidiaries

which were independent and separate; that is, to establish 

public interest corporations that were recognized in our laws 

as subjects of law.

[19] The Government Development Bank was created in 

1942 and since then has had two (2) main duties.

First of all, it has been its responsibility and that of its 

subsidiaries to promote the development of the economy of 

Puerto Rico, providing sources of financing that were 

necessary to incentivize the development of the private, 

industrial, commercial and cooperative sector in such risks 

that private commercial banks

have not been willing to assume, given that the latter 

evaluates a request for loan based on its recoverability and 

the payment capacity of the entity that requests it. The 

persons who benefit are those who have not been given 

loans by private banks due to the high risks. On many 

occasions, providing this financing has as a consequence 

that the investment in the loan is not recovered.

**9 [20] It was the Government‟s intention, with the Bank, 

to provide a source of financing to natural or legal persons 

who work in manufacture, commerce, agriculture or tourism 

(with an emphasis on small and medium businesspeople), 

through direct *404 loans, loan guarantees, as well as capital 

investments. It was intended, among other things, to develop 

a Puerto Rican economy that was more solid, promote 

activities that lead to substitution of importation of goods 

and services, generation of employment without having to 

depend as much on federal funds. See Legislative Debate in 

the House of Representatives, H.B. as to Law No. 22 

enacted on July 24, 1985, p. 7; Joint report of the House of 

Representatives from July 20, 1985.

[21] Besides this role, the Government Development Bank 

provides financing to different governmental 

instrumentalities that need loans to comply with their public 

purposes, acts as a fiscal agent as well as a financial advisor 

to all of the government, both central and municipal and to

the different public corporations of Puerto Rico. That is, one 

single entity combined both public and private financing 

duties. Id.

[22] As a main provider of public sector financing, it is 

often required to enter different fund markets to borrow 

money in substantial amounts or serve as guarantor to debt 

issues in said sector. This requires that its financial 

statements not reflect high-risk activity, which may 

jeopardize its payment of its obligations. See Legislative 

debate as to S. B. 807 from May 2, 1974, pp. 101106.

Puerto Rico faced one of the most difficult economic 

periods between 1973 and 1984, when the global oil crisis 

occurred, and the second great recession of the eighties. The 

unemployment index in Puerto Rico reached an 

unprecedented rate of 24.4 percent, causing

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Exhibit EE to Declaration Page 7 of 17
Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

a halt in economic growth. The Bank, as a State tool, whose 

public policy it was to promote the country‟s economy, had 

to respond creatively to this historic moment. It was 

precisely in 1974 that the Bank Act *405 was amended in 

order to authorize it to create instrumentalities that were 

separate and independent from it.

These were years of intense and complex activity in the 

BGF (Government Development Bank). In 1974 the BGF 

for the first time entered the market with a sale in 

competitive auction of Tax and Revenue Anticipation 

Notes for the Government of the Commonwealth of 

Puerto Ricowhich allowed fast access to temporary 

financing sources [...]. In 1975, when the doors of the 

United States municipal bond market closed, and in light 

of the growing resistance of commercial banks to 

continue financing short-term public debt, the BGF 

negotiated the first Promissory Note Purchase Agreement 

which allowed Puerto Rico to have access to financing. 

Also in 1975, the BGF for the first time entered the 

European market to sell Puerto Rican obligations. [...] In 

1976 the BGF developed a completely new concept to 

gather funds for the government coffers: the concept of 

savings bonds.

**10 In 1977, the BGF established the Puerto Rico 

Development Fund, a subsidiary that could make capital 

stock investments and guarantee long term loans for 

private companies who could not obtain credit from other 

financial institutions. In 1978 the Development Fund 

issued obligations in an amount of $25 million to 

supplement its original capitalization of $5 million and to 

be able to make a greater contribution to the private 

sector. [...]

Also in 1977, the BGF actively promoted the creation of 

the Puerto Rico Housing Financing Corporation, the main 

duties of which were to finance construction, 

reconstruction, improvement, and rehabilitation of 

housing for low and moderate income families; to grant

mortgage loans to help limited income families acquire a 

residence; and temporary financing guarantees for 

construction projects under the Mortgage Trusts that were 

created after 1985. [...]

The creation, also in 1977, of the Authority for Financing 

Industrial and Environmental Control Facilities (AFICA)

was extremely important. AFICA would have the 

capacity to operate as an alternate mechanism for the 

public placement of limited obligation bonds of private 

issuers. [...]

In 1981 the Puerto Rico Higher Education Assistance 

Corporation was established to administer the Federal 

Guarantee Program for Loans to Students in Puerto Rico. 

Under this program, the subsidiary guaranteed the amount 

loaned by a commercial bank to a student and *406 also 

guaranteed the payment of the entirety of the debt in the 

event of the death of the borrower. During the past 12 

years after its creation the CAES [PRHEAC] has 

guaranteed loans for over $434 million for the benefit of 

over 171,000 students in every area of study and in all 

university levels, including post-graduate specializations

such as Law. The Government Development Bank also 

established the Puerto Rico Student Loan Association, 

created to offer loans at a low interest rate for students to 

undertake post-secondary studies. The intention of this 

subsidiary was to fill space that private banks had not yet 

filled. Through APE (SLA), the Bank issued loans in 

excess of $24 million and sold its portfolio in 1988, when 

the private banking sector had already learned the need 

for this type of loan and its profitability.

In general terms, these years were of great creativity and 

productivity for the Government Development Bank. 

They were years in which adversity, created as a 

reflection of the great oil crisis was, literally, the mother 

of invention. [...]. Innovación, experiencia y solidez para 

Puerto Rico, Publication of the Government Development 

Bank, pp. 109112 (1992).

**11 Clearly, a large part of these achievements would not 

have been possible if the Legislature had not given the Bank 

such broad powers and, on the contrary, had subjected it to 

its scrutiny, during the process of each creation of a 

subsidiary, in topics that the Legislature in full session 

would not have had either the expertise or elements of 

judgment, and would lack the dynamism, speed, and 

expertise that said activities required.

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Rodriguez Roman v. Puerto Rico Government Development Ban..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

[23] As we can see, the power that the Legislature delegated 

to the Bank through legislative action is limited to creating 

separate and independent subsidiaries in such cases in which 

it is advisable, desirable or necessary to comply with the 

duties, powers, purposes and that they shall have, within the 

universe of powers, rights, authorities and duties of the 

Bank, those delegated by it. The Bank may never delegate 

more powers than it itself has and the powers of the Bank 

are established in *407 detail in its enabling law which limit 

the scope of its authority.

[24] The instrumentality is created to carry out a specific 

task that is limited within the multiple tasks of the Bank. Its 

attention is focused on the assigned task. Its Board of 

Directors is the Bank‟s Board of Directors, appointed by the 

Governor, which ensures the continuity of the public policy 

of the Executive.

[25] The Legislature does not surrender its control before 

said subsidiaries, since it is a legislative action which 

establishes the authority to create them by resolution, limits 

its powers to the universe of powers granted to the Bank by 

a legislative act, and ultimately, the Legislature can strip the 

Bank of the delegated authority.

[26] Certainly, “[p]ublic corporations „[a]re an important 

part of the administrative organization of the Modern State‟ 

[and t]hey occupy broad sectors of modern economic life. 

The variety of forms and the enormous disparity of legal 

systems to which they can be subject, have given rise to 

much discussion.” (Emphasis added.) McCrillis v. Aut. 

Navieras de P.R., 123 D.P.R. 113, 126 (1989). See, also, 

A.R. Brewer Carías, Las empresas públicas en el derecho 

comparado, Caracas, Universidad Central de Venezuela, 

Pubs. Facultad de Derecho, 1967, Vol. XXXVII, p. 29. “In 

the great majority of cases, the various forms of public 

enterprise have developed as empirical responses to specific 

needs, without any preconceived theory, and without much 

uniformity.” (Emphasis added.) W. Friedmann, The Public 

Corporation: A comparative Symposium, Canada, Ed. The 

Carsell Co., 1954, p. 542.

[27] Given the variety of forms and functions that a public 

corporation can exercise, and that its creation, in the 

majority of cases, is a result of satisfying specific historic 

needs that constitute a *408 public purpose, the Legislature 

may, through law,

delegate the role of creating them in the manner it feels most 

efficiently serves these urgent needs that are sought to be 

met, as long as the legislation that empowers them has 

adequate rules or criteria and intelligible principles that shall 

govern both their creation and their operation, to prevent 

their actions from being arbitrary or capricious. No statute 

or constitutional clause prevents the Legislature from 

delegating this role.

**12 [28–29] The universal requirement for the creation 

of a public corporation, 4 both in constitutional governments 

and in other types of governments, is that it be created by a 

governmental procedure. “Creation of the Public 

corporation. It appears to be a universal practice that public 

corporations are created by a governmental procedure, 

either a special statute or a governmental ordinance. Unlike 

the commercial company they do not automatically come 

into existence by fulfilling certain statutory requirements.” 

(Emphasis added.) Fletcher, op. cit., page 558.

It should be noted that in general [public corporations] 

are created or regulated by a legislative act establishing 

their powers, duties and immunities, providing the 

manner in which they shall operate and shall be directed 

and, above all, regulating their relationship with the 

departments of the government. Brewer Carías, op. cit., 

page 84.

[30] We have already estimated that on many occasions 

these public corporations are created as a result of 

emergency situations, and so in order to be able to handle 

them they are imbued by lawmakers with the flexibility and 

autonomy that are necessary *409 for success in a 

competitive environment. McCrillis v. Aut. Navieras de 

P.R., supra, page 127.

In the common law countries, where

the government still enjoys 

considerable inmunities and 

privilegdes in the fields of legal 

responsabilities, taxation, or the 

binding force of statutes, other 

considerations played their part. It 

seemed necessary to create bodies 

which, if they where to compete on 

fair terms in the economic field, had 

to be separate and distinct from the 

government as regards inmunities

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Rodriguez Roman v. Banco Gubernamental de Fomento par..., 2000 JTS 104 (2000)

151 D.P.R. 383, 2000 TSPR 93

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

and privileges. Friedmann, op. cit., page

548.

We are talking about a fundamental change in the structure 

of the Puerto Rican government, having transcendental 

repercussions, whether to provide the Bank with the tools to 

compete under equal conditions with private banks, 

releasing it from restrictions and allowing for flexibility and

dynamism, whether to make these corporations recipients of 

federal aid that they would not be able to receive as 

affiliates, or to allow for access to tax-exempt aid, or in 

order to avoid committing and divest ELA and Bank credit 

to high-risk financing, or based on all of the aforementioned 

reasons, the Legislature decided, precisely in 1974 and 

under the circumstances at that time, to give to the Bank the 

power to create, by way of resolution, public corporations 

that were also independent and separate. See, also, PUBLIC 

HEARING PC 56 “Create the Development Bank of 

Puerto Rico. Committees on Finance, on Government and 

on Socioeconomic Development. 18 June 1985.” To 

question the soundness of said delegation of power, which 

promoted and continues to promote so much positive 

economic activity and on which an entire economic and 

social apparatus is still built, violates our constitutional 

power. Especially when the Legislature still has ultimate 

control over said corporations.

**13 It was within the power given by the Legislative 

Assembly that the Bank created and operated the PRHEAC, 

in accordance with the *410 end and purpose for which it 

was created. Its dissolution was also carried out in 

accordance with the law. Nothing in the record indicates 

that it was done for the purpose of committing or attempting 

to commit illegal acts. Therefore, appellants‟ arguments in 

relation to the discussed error are wrong.

IV

The plaintiffs allege that the retention right applied to the 

employees of the PRHEAC subsidiary, as an essential part 

of the merit principle under the Puerto Rico Public Service 

Personnel Act, as well as under the doctrine established in 

Calzada Quiñones v. D.A.C.O., 114 D.P.R. 757 (1983). 

They argue that by failing to accommodate the PRHEAC 

employees in the remaining positions or in positions 

currently occupied by temporary employees or employees 

with less seniority in the Bank, taking both the Bank and the 

PRHEAC

as a whole, the provisions of the Puerto Rico Public Service 

Personnel Act were violated.

[31–32] The public policy of the Puerto Rico Public Service 

Personnel Act, 3 L.P.R.A. sec. 1301 et seq., “[e]stablishes 

merit as the principle governing all public service, in order 

for the most competent people to serve the Government and 

for all employees to be selected, trained, promoted and 

retained in their jobs based on merit and capacity, without 

discriminating on the basis of race, color, sex, birth, age, 

social condition or origin, or political or religious ideas.” 3 

L.P.R.A. sec. 1311(1). A paradigm of this principle is the 

right of retention, namely, providing employment security to 

suitable career employees who meet the productivity and 

discipline requirements that must exist in public service. 3 

L.P.R.A. sec. 1336.

[33] However, the law specifically excludes 

*411 certain branches or agencies to which its provisions 

shall not apply. In this regard, it provides:

1338. Exclusions

The provisions of this Chapter shall not apply to the 

following branches, agencies and instrumentalities of the 

Government:

(1) Legislative Branch

(2) Judicial Branch

(3) The employees of agencies or instrumentalities of the 

Government which operate as private businesses or 

companies

(4) The employees of agencies or instrumentalities of the 

Government having the right to negotiate collectively 

under special laws

(5) The University of Puerto Rico

(6) The Governor‟s Office and

(7) The Puerto Rico State Elections Commission

As to the Judicial Branch and the Legislative Branch, 

they shall be governed as regards administration of 

personnel by the current provisions specifically 

applicable to each of these Branches of Government. 5

(Emphasis added.) 3 L.P.R.A. sec. 1338.

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Rodriguez Roman v. Banco Gubernamental de Fomento par..., 2000 JTS 104 (2000)

151 D.P.R. 383, 2000 TSPR 93

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

**14 [34–35] Notwithstanding the aforementioned 

exclusions, which were a result, in relation to the branches 

of Government, of observing the principle of separation of 

powers and, in relation to public agencies, to avoid any 

conflict which may arise between the provisions of the law 

and the collective bargaining agreements which in relation 

to most employees applied to said agencies, 6 the public 

policy of the Commonwealth has been to extend the merit 

principle to all public service, including the agencies and 

instrumentalities excluded by the aforementioned personnel 

act. 7 For said purpose, the Legislative Assembly, when it

*412 added Sec. 10.6 to the Puerto Rico Public Service 

Personnel Act, supra, specifically provided:

The agencies and instrumentalities herein excluded under 

paragraphs (3) and (4) must adopt, with the advice of the 

Office of Personnel, and within 120 days from approval 

of this law, personnel regulations including the merit 

principle which shall govern the personnel rules 

applicable to employees who are not covered by 

collective bargaining agreements. A copy of the

regulations so approved shall be sent to the Puerto Rico

Legislative Assembly. 8

[36] In accordance with said mandate, the PRHEAC 

promulgated Personnel Regulations including the merit 

principle applicable to all managerial employees and 

employees not covered by any collective bargaining 

agreement. It also provided a collective bargaining 

agreement governing the labor relations between union 

employees and the PRHEAC. The effective period of said 

agreement was extended to June 30, 1994. Therefore, since 

the Public Service Personnel Act did not apply, the 

collective bargaining agreement applied to union employees 

and the promulgated Regulations applied to managerial and 

non-union employees. The case record reveals that the 

layoffs followed the procedures established in the 

Regulations and in the collective bargaining agreement.

The doctrine stated in Calzada Quiñones v. D.A.C.O., supra, 

in which we decided that for a personnel reduction, based on 

lack of funds or elimination of programs in an agency, to 

comply with the provisions of the Personnel Act as to the 

merit principle, it must be done taking into consideration all 

of the divisions of the agency or instrumentality in question 

and using the seniority criterion as a retention element, does 

not apply to the present case. *413

In Calzada Quiñones v. D.A.C.O., supra, a career employee 

with twenty-six (26) years of service was laid off upon the 

elimination of an agency program based on economic 

reasons. The Consumer Affairs Department (D.A.CO., 

acronym in Spanish) is an agency of the Central 

Administration and, as a result, it is not excluded from the 

provisions of the Puerto Rico Public Service Personnel Act 

as to the merit principle and the retention right. The Board 

of Appeals of the Personnel System (J.A.S.A.P., acronym in 

Spanish) affirmed the validity of the layoffs, deciding that it 

was not necessary to submit employees to the competition 

based on seniority process since as a result of the 

elimination of the program all of the employees in it became 

unemployed. The J.A.S.A.P. considered each program 

within the agency as a separate and independent whole for 

purposes of the process to determine the order of priority in 

which said layoffs would be carried out and, therefore, 

[avoid] the competition based on seniority between 

employees under the same classification from other agency 

programs. After said decision was appealed, the then 

Superior Court denied the request for review of 

administrative decision. When revoking said decision, we 

then affirmed that, even though the Puerto Rico Public 

Service Personnel Act authorizes the separation of an 

employee from public service, without it implying a 

dismissal, among other reasons, based on lack of funds, 9 it 

was necessary for the agency to carry out the layoffs fully 

observing the law and the rules and regulatory procedures. 

Id., page 760.

**15 In the present case, it is clear that the PRHEAC 

cannot be taken as part of the Bank as a whole, because the 

PRHEAC enabling act provides otherwise. This case 

involves an instrumentality that is “independent and 

separate” from the Bank and, as a result, it would not be 

appropriate to relocate the employees from one independent 

*414 public corporation to another, with the serious 

consequence of laying off other employees validly hired by 

the Bank that would be displaced by employees with more 

seniority from another independent agency whose 

operations have ended. Given the fact that it was a total 

layoff, there was no possibility of relocating employees or 

retaining them in existing positions.

[37] In cases such as this one, in which all employees are 

laid off based on the closing of a subsidiary public 

corporation created by

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151 D.P.R. 383, 2000 TSPR 93

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

another public corporation whose enabling statute has 

assigned to it a legal personality that is separate and 

independent from the one which created it, it is not 

appropriate to request placing, in the surviving corporation, 

the employees hired by the subsidiary corporation, in 

accordance with the merit principle and seniority criterion. 

The closing of the subsidiary corporation of the Bank, 

namely the PRHEAC, results in the automatic layoff of all 

of the employees hired by the latter, since said closing 

implies the disappearance of all union or managerial 

positions of the closing corporation.

V

Furthermore, the appellants allege that the Court of First 

Instance erred when it summarily dismissed the complaint, 

by deciding that the plaintiffs were not employees of the 

bank without allowing them to present evidence to establish 

their allegations to the effect that they were so.

A careful analysis of the entire record in this case reveals 

allegations to the effect that some of the plaintiffs were 

hired by the Bank before the creation of the PRHEAC. If the 

process for transferring these *415 employees was not 

carried out through a valid resignation from employment in 

the Bank, there is a possibility that said employees retained 

their Bank employee condition, and therefore may have the 

right to some kind of remedy. The judgment issued 

summarily is completely void of any determination in this 

regard. Furthermore, we have not found in the case record 

any evidence supporting the summary disposal of said 

allegation. Therefore, the court of first instance should have 

received evidence in cases of employees that were hired 

before the creation of the subsidiary that would allow it to 

determine who their actual employer was. To do so, it was 

important to establish whether at any time they validly 

resigned from the Bank to become part of the PRHEAC, or 

whether they were simply transferred to the subsidiary 

retaining their job with the Bank.

Based on the aforementioned grounds and considering the 

motion to appeal filed in this case as a Petition for 

Certiorari, since that is the appropriate petition, 10 said writ 

shall be issued and the judgment of the Circuit Court of 

Appeals shall be modified for the sole purpose of ordering 

that it remand the case to the Court of First Instance for 

holding of hearing in accordance with this decision. 11

However, the judgment issued by said appellate court is 

affirmed in relation to the

employees who were not employees of the Government 

Development Bank before they began to provide services as 

employees of the PRHEAC. *416

--O--

Concurring and dissenting opinion issued by Associate 

Judge Fuster Berlingeri.

**16 I concur with the decision of the majority of the Court 

in the present case to remand it to the court of first instance 

in order for the latter to receive evidence in relation to the 

employees of the Puerto Rico Higher Education Assistance 

Corporation (hereinafter the PRHEAC) that were hired by 

the Government Development Bank (hereinafter the Bank) 

before the PRHEAC was created, in order to determine who 

was the actual employer of said employees.

However, I do not agree with the dismissal of the action of 

the other employees of the PRHEAC who have filed an 

appeal in this Court. These other employees have alleged 

that they were also “hired, appointed, certified, paid and 

evaluated by the Government Development Bank”. They 

have also alleged that in practice the PRHEAC was not an 

entity that was different and separate from the Bank since 

the latter actually closely directed and controlled the affairs 

of the PRHEAC. Lastly, the above-referenced employees 

have alleged that the Bank considered them as employees of 

the same, and so they had a reasonable expectation that they 

were in fact employees of the Bank. If said allegations are 

true, I think that it is evident that these other employees 

would have a right to some type of remedy against the 

Bank.

The majority of the Court dismisses the above-referenced 

employees‟ claim on grounds that said employees worked 

for a subsidiary of the Bank constituting an instrumentality 

that was independent and separate from the latter, and so 

they were automatically laid off upon the closing of said 

subsidiary. But the thing is that what the above-referenced 

employees are actually challenging is whether they were in 

fact employees of the aforementioned subsidiary of the *417 

Bank, and not of the Bank itself. Said controversy cannot be 

adjudicated without a previous discovery procedure and 

presentation of evidence in order to decide based on the 

evidence whether or not the allegations of the abovereferenced employees are valid and true.

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Rodriguez Roman v. Banco Gubernamental de Fomento par..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

The majority of the Court dedicates most of its opinion to 

affirming the novel theory of the Bank that it received a 

valid delegation of Legislative Power that in fact allows it to 

become a “mini-legislature” as regards the creation of 

public corporations to exercise any of the broad and 

substantial powers of the Bank. After deciding that said 

extraordinary delegation of power is valid, the majority 

proceeds ipso jure to also affirm the allegations of the Bank

to the effect that in this case a separate and independent 

corporation was created and that the above-referenced 

employees were employees of the same. All of it was 

affirmed based only on Bank resolutions whose validity is 

what is in fact being challenged.

The majority does not only give a dreadful “carte blanche” 

to the Bank to create the aforementioned public corporations 

at its discretion, but, for all practical purposes, assumes that

in this case said corporation was actually created and the 

above-referenced employees are not employees of the Bank

and cannot be considered as such. All of this is done without 

any evidence, even though said facts are precisely what is 

being challenged.

**17 In our jurisdiction it has been firmly established that a 

complaint cannot be summarily dismissed unless the 

petitioner does not have a right to any remedy under any 

factual situation that may be proven in support of its claim. 

The courts must consider a request for dismissal in the most 

favorable light for the plaintiff and must deny it if there is 

any doubt to the benefit of the petitioner. Reyes v. Sucn. 

Sánchez Soto, 98 D.P.R. 305 (1970); Colón v. San Patricio 

Corporation *418 , 81 D.P.R. 242 (1959). In this case, the 

meaning and purpose of said rule have not been observed. 

On the contrary, the allegations of the Bank have been 

considered as true without evidence to support them. The 

benefit of the doubt has been fully given to the powerful 

Bank, disregarding the claim of employees who were 

suddenly laid off. The fact that the PRHEAC is an entity 

that is different and separate from the Bank is accepted only 

based on the fact that the latter determined so, as if the 

reality of the PRHEAC only depended on the manner in 

which the Bank classifies it. It affirms the notion that even if 

the PRHEAC is actually a mere puppet of the Bank

administered by the same at its discretion, if the Bank

certifies that the PRHEAC is an entity that is different and 

separate from the same, said determination cannot be 

refuted. Since I cannot

agree with this other “carte blanche” which the majority 

gives to the Bank, I dissent.

--O--

Dissenting opinion issued by Associate Judge Negrón 

García.

In the end, the fair solution to this case introduces from the 

beginning a purely legal matter; namely, the constitutional 

validity of an exceptional delegation of powers by the 

Legislative Assembly, a matter that has not been adjudicated 

by the court of first instance, the Circuit Court and, now, by 

this Court, as explained below.

I

The Puerto Rico Higher Education Assistance Corporation 

(PRHEAC) is a subsidiary corporation of the Government 

Development Bank created on May 8, 1991, by Resolution 

No. 4530 of the Board of Directors of the Bank, in 

accordance with the powers given in Art. 2 of Law No. *419 

17 enacted on September 23, 1948, as amended, 7 L.P.R.A. 

sec. 552. It was dissolved on April 15, 1994 by resolution, 

the date on which the PRHEAC ceased operations and

terminated all of its employees.

After the terminations were carried out, Maritza Rodríguez 

Román, twenty-one (21) union employees and five (5) 

managerial employees filed a complaint in the Court of First 

Instance, Superior Court of San Juan, against the 

Government Development Bank, the PRHEAC, the Union 

of Employees of the Government Development Bank 

(hereinafter the Government Bank) and the Great Lakes 

Higher Education Corporation (Great Lakes). In short, they 

alleged that they were employees of the Government Bank 

with the right to compete with the other employees of said 

corporation for the remaining positions, in accordance with 

the merit principle and the seniority criterion. 1

**18 On the other hand, the Government Development 

Bank and the PRHEAC requested the summary dismissal of 

the complaint. They argued that the PRHEAC was a 

corporate entity that was different and independent from the 

Government Bank, and exempt from the provisions of the 

Puerto Rico Public Service Personnel Act. The codefendant, 

Union of Employees of the Government Bank, also 

requested dismissal based on lack of ripeness of the 

controversy and lack of jurisdiction. The other codefendant, 

Great Lakes, requested the same remedy arguing that the 

complaint failed to state a

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I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

claim that would justify granting a remedy. Upon 

considering said motions, *420 the court of first instance

(Hon. Arnaldo López Rodríguez, Judge) dismissed the 

complaint in relation to the Government Bank and the

PRHEAC, based on failure to exhaust the available 

administrative remedies. It dismissed it in relation to the 

Union and Great Lakes based on the stated grounds.

Said decision was appealed in this court. On November 2,

1994, we revoked it in relation to codefendants Government 

Development Bank and the PRHEAC because we believed 

that the controversy in question was essentially a legal 

controversy which did not justify requiring the exhaustion 

of administrative remedies. We remanded it for continuation 

of the proceedings.

In accordance with said order, the court of first instance 

ordered the parties to submit briefs to support their 

respective allegations. Maritza Rodríguez Román et al. 

argued that the PRHEAC was an alter ego of the Bank and 

invoked the application of the rule stated in Calzada 

Quiñones v. D.A.C.O., 114 D.P.R 757 (1983). On the other 

hand, the defendants argued that the doctrine established in 

said case did not apply because the labor relations between 

union members and the PRHEAC were governed by the 

collective bargaining agreement. They also insisted that the 

PRHEAC was a corporation that was different and 

independent from the Bank by provision of law and was not 

covered by the Puerto Rico Public Service Personnel Act 

because the collective bargaining agreement which 

governed the labor conditions of the unionized plaintiffs

“constitutes the exclusive regulations for purposes of 

layoffs”.

The court of first instance decided that the PRHEAC was 

not an alter ego of the Government Bank because Law No. 

17 enacted on September 23, 1948 (7 L.P.R.A. sec. 551 et 

seq.) describes it as an entity that is completely independent 

from the Bank. It decided that the closing of a subsidiary 

corporation results in the layoff of *421 all of the employees 

hired by the latter, and dismissed the complaint based on 

this.

Maritza Rodríguez Román et al. filed an appeal in the 

Circuit Court of Appeals, which affirmed it by concluding, 

among other things, that by “express legislative mandate the

PRHEAC is not part of the Government Development 

Bank”. Said decision was appealed in this Court. 2

II

**19 The Government Bank is a public corporation validly 

and directly created by the Legislative Assembly for the 

purpose of assisting the State in the performance of its fiscal 

duties and in promoting the economy, especially its 

industrialization. 7 L.P.R.A. sec. 551. Its organic charter 

includes the following power:

(J) To create subsidiary or affiliate 

companies by resolution of its Board 

of Directors when in the opinion of 

the latter said action is advisable, 

desirable or necessary for 

performance of the duties of the Bank 

or for compliance with its 

institutional purposes or for execution 

of its powers. The Bank may sell, 

lease, lend, donate or transfer any of 

its assets to the subsidiary companies 

so created. The subsidiaries created 

by the Bank by virtue of the power 

given to it on this paragraph shall

constitute government 

instrumentalities of the 

Commonwealth of Puerto Rico that 

are independent and separate from 

the Bank, and shall have all of the 

powers, rights, functions and duties 

that this law gives to the Bank and 

that are delegated by the Board of 

Directors of the same. The Board of 

Directors of the Bank shall be the 

Board of Directors of each and every 

one of said subsidiaries, except for 

the subsidiary that shall be known as 

the Puerto Rico Tourism 

Development Fund, which shall have 

a Board of Directors composed of the 

President of the Government 

Development Bank for Puerto Rico, 

the Executive Director of the Tourism 

*422 Company and the Secretary of 

the Treasury. ... (Emphasis added.) 7

L.P.R.A. sec. 552(Fourth)(J).

Said precept clearly introduces the following question: can 

the Legislative Assembly delegate to a public corporation 

the creation of subsidiary or affiliate entities,

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Exhibit EE to Declaration Page 14 of 17
Rodriguez Roman v. Banco Gubernamental de Fomento par..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

which are also independent and separate corporate 

government instrumentalities?

III

A brief historical background would be appropriate. Public 

corporations were created based on the need to promote and 

maximize the efficacy of public work and comply with the 

new and numerous tasks of the State after the Second World 

War. Torres Ponce v. Jiménez, 113 D.P.R. 58, 6263 (1982). 

In Puerto Rico, with the beginning of the socioeconomic 

development program, they were created to reduce costs, 

provide infrastructure and improve the services offered by 

the State. McCrillis v. Aut. Navieras de P.R., 123 D.P.R. 

113, 127 (1989).

As such, it offers public social or socioeconomic services on 

behalf of the Government, but as an independent legal 

entity. Said characteristic gives it the legal and commercial 

attributes of a commercial company, allowing it to compete 

and achieve its objectives efficiently. Commoloco of 

Caguas, Inc. v. Benítez Díaz, 126 D.P.R. 478, 490492 

(1990). The functions of public corporations are framed 

within the powers given by the Legislative Assembly in 

their enabling statutes, but we know that said powers and 

faculties delegated by legislation are limited by 

constitutional imperatives stemming from the separation of 

powers. 3 “The limitations stemming from the *423 

constitution are introduced in light of the broad question as 

to whether a legislature may, and under which 

circumstances, delegate powers to an agency.”

D. Fernández Quiñones, Derecho Administrativo y Ley 

Uniforme de Procedimientos Administrativos, Bogota, Ed. 

Forum, 1993, 1993, page 60.

**20 In the past, when adjudicating said questions, we have 

recognized the need to delegate taking into consideration 

our social and economic conditions. In Viajes Gallardo v. 

Clavell, 131 D.P.R. 275 (1992), we stated that given the 

complexity of the system of government, the Legislature 

cannot be required to directly detail and establish, and on a 

daily basis, its programs, and that its essential duty is to 

establish guidelines to direct the mandate and discretion of 

the administrative agencies. We also recognized, as grounds 

for it, the technical knowledge and specialized experience of 

the administrative bodies. See, also, López v. Junta 

Planificación, 80 D.P.R. 646, 661 (1958).

IV

Based on the foregoing, there is no question that the 

Legislative Assembly may delegate regulatory or 

adjudicative functions. To legally evaluate said delegations 

we have made their validity contingent on the provision of 

adequate and sufficient criteria to guide the actions of the 

agency. Luce & Co. v. Junta de Salario Mínimo, 62 D.P.R. 

452 (1943); Hilton Hotels v. Junta Salario Mínimo, 74 

D.P.R. 670 (1953); López Salas v. Junta de Planificación, 

supra; Consejo de Educación Superior v. U.I.A., 120 D.P.R. 

224 (1987).

The Uniform Administrative Procedure Act of the 

Commonwealth of Puerto Rico incorporates the classical 

meaning recognized for regulatory delegation. It defines it 

as the process by which an agency formulates, adopts, 

amends or repeals rules or regulations. *424 3 L.P.R.A. sec.

2102(m). A rule is any rule or group of rules of general 

application which implement or interpret public policy or 

the law or which regulate the requirements of the practices 

of an agency. 3 L.P.R.A. sec. 2102(l). Furthermore, an 

administrative adjudicative process determines facts and 

rights in particular cases or claims.

In the present case, the power given by the Legislative 

Assembly to the Government Bank is not contained within 

the traditional regulatory delegation vis-à-vis adjudicative 

delegation dichotomy. Clearly, the power via resolution to 

create a subsidiary, which is also a separate and independent 

instrumentality of the State, is not framed within the 

regulatory power or the adjudicative power.

Based on the foregoing, we must set aside the usual standard 

for court review regarding the adequacy of guidelines -

which only applies to regulatory or adjudicative delegationssince it would be inadequate for the evaluation of the 

present delegation.

In the present novel case the nature and scope of the 

delegated duty must be analyzed.

**21 We recognize the important economic, social and 

political reasons that have made it necessary, for a better 

operation of the system of government, for the Legislative 

Assembly to create administrative bodies to which it 

delegates quasi-legislative and

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I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

CERTIFIED TRANSLATION

151 D.P.R. 383, 2000 TSPR 93

quasi-judicial functions. But, no matter how laudable it may 

be, to also allow the creation of public corporations to be 

delegated —whether or not they are described as 

subsidiaries— could go beyond the limits of the doctrine of 

separation of powers. Creating an agency, establishing the 

scope of its functions, and stating the public policy that it 

shall implement, are inherent duties of the Legislative 

Branch that cannot be delegated. Under the governing 

principles limiting the Legislative Power, the latter may 

create public corporations, but “quaere” whether it may 

delegate said *425 prerogative. Based on said perspective, 

if negative, giving the Government Bank the power to create 

separate and independent public corporations, in this case 

PRHEAC, would be unconstitutional.

In short, the Legislature could give and actually gave to the 

Government Bank the power to create subsidiaries if in the 

opinion of its Board of Directors it was advisable or 

necessary to fully perform the duties of the Bank. There is 

still the constitutional question regarding whether it could 

delegate its prerogative to make them independent from the

Government Bank and create the PRHEAC as a separate 

and independent public corporation.

Said decision is vital for the right adjudication of the case. 

Of the life and death of a public corporation, subject only to 

the will of a Board of Directors, depends whether all or only 

some of the petitioners-employees are condemned to a 

purgatory, without the possibility of work or salary

redemption.

Based on the aforementioned grounds we cannot join the 

opinion of the majority which leaves plaintiffs Maritza 

Rodríguez Román et al. completely defenseless, without 

adjudicating the above-referenced constitutional question.

What should have been done, via resolution, was to give the 

Secretary of Justice a period to, through the Attorney 

General, state his arguments in relation to the potential 

unconstitutionality of the power delegated to the 

Government Bank to create subsidiaries, which are also 

separate and independent corporate entities. 4

*426

Footnotes

1 7 L.P.R.A. sec. 552(Fourth)(J).

2 The petition that would actually be appropriate is a certiorari petition since the motion does not state any circumstance 

that would allow filing an appeal in this case. Art. 3.002 of the Puerto Rico Judiciary Act of 1994 (4 L.P.R.A. sec. 22i).

3 “(J) To create subsidiary or affiliate companies by resolution of its Board of Directors when in the opinion of the latter 

said action is advisable, desirable or necessary for performance of the duties of the Bank or for compliance with its 

institutional purposes or for execution of its powers. The Bank may sell, lease, lend, donate or transfer any of its assets 

to subsidiary companies so created. The subsidiaries created by the Bank by virtue of the power given to it on this 

paragraph shall constitute government instrumentalities of the Commonwealth of Puerto Rico that are independent and 

separate from the Bank, and shall have all of the powers, rights, functions and duties which this law gives to the Bank 

and that are delegated by the Board of Directors of the same. The Board of Directors of the Bank shall be the Board of 

Directors of each and every one of said subsidiaries, except for the subsidiary that shall be known as the Puerto Rico 

Tourism Development Fund, which shall have a Board of Directors composed of the President of the Government 

Development Bank for Puerto Rico, the Executive Director of the Tourism Company, and the Secretary of the 

Treasury. ... The provisions of sec. 558 of this title shall apply to all subsidiary companies so organized and which are 

subject to control by the Bank....” (Emphasis added.) 7 L.P.R.A. sec. 552(Fourth) (J).

4 See, to compare the different forms in which a public corporation can be “born,” the experience in some countries with 

planned economy (or socialist) systems in which by way of a government action private companies were expropriated 

and nationalized. In other words, the public corporations were “born” from private law entities which already existed. A.R. 

Brewer Carías, Las empresas públicas en el derecho comparado, Caracas, Universidad Central de Venezuela, Pubs. 

Facultad de Derecho, 1967, Vol. XXXVII, page 59.

5 It is important to note that the aforementioned provision was amended in 1996 to ass an eighth exclusion, namely: “(8) 

The Human Resources and Occupational Development Council, attached to the Department of Labor and Human 

Resources”. 3 L.P.R.A. sec. 1338.

6 Reyes Coreano v. Director Ejecutivo, 110 D.P.R. 40, 47 (1980); Aut. de Puertos v. Mun. de San Juan, 123 D.P.R. 496,

502 (1989).

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Exhibit EE to Declaration Page 16 of 17
Rodriguez Roman v. Banco Gubernamental de Fomento par..., 2000 JTS 104 (2000)

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate

translation, to the best of my abilities, of the document in Spanish which I have seen.

151 D.P.R. 383, 2000 TSPR 93

7 McCrillis v. Aut. Navieras de P.R., 123 D.P.R. 113, 132 (1989); Reyes Coreano v. Director Ejecutivo, supra, page 47.

8 By way of Law No. 18 enacted on February 22, 1979 the aforementioned section was amended, eliminating the 

second to last paragraph, since said terms had been met in excess.

9 3 L.P.R.A. sec. 1336.

10 4 L.P.R.A. sec. 22j.

11 There is a possibility that the remedy to which those plaintiffs, who retained the Bank employee condition, may have a 

right, if so determined by the Court of First Instance after holding the above-referenced hearing, may be the right to be 

reinstated as employees of said entity. If said remedy implied the termination of other persons currently employed by 

the Bank due to having less seniority than the petitioners to be reinstated, said persons would have the right to 

intervene and be heard in the present litigation before the aforementioned remedy is issued. The Court of First 

Instance shall take the necessary measures to guarantee said right.

1 As a remedy they requested provisional, preliminary and permanent injunction orders to: stay a general layoff 

announced by the Puerto Rico Higher Education Assistance Corporation (PRHEAC) for all of its employees and create 

a relocation plan within all of the departments of the Government Development Bank (hereinafter the Government 

Bank); notify each employee of the existence of said plan; reinstate to their jobs all employees transferred, laid off or 

who resigned as a result of the imposition of the layoff process; and indemnify for alleged resulting harm, which was 

estimated at one hundred thousand dollars ($100,000) for each of them.

2 Several errors were alleged, including that the Circuit Court erred when it did not adjudicate whether the Bank may 

create government instrumentalities.

3 B. Schwartz, Administrative Law, 3rd ed., Boston, Ed. Little Brown & Co., 1991; 1 Davis, Administrative Law Treatise

(3rd ed. 1991).

4 Depending on the answer to the constitutional question the Circuit Court of Appeals would or would not be affirmed. If 

revoked, the case would be remanded to the court of first instance for the opportune adjudication of the suitability of 

the claims and defenses presented by the parties.

End of Document © 2018 Thomson Reuters. No claim to original U.S. Government Works.

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