April 28, 2000 and Entry of Judgment was issued on July 13, 2000.[7] GARCIA V. PAL INC.

CARPIO MORALES, J.: Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16, 2004 Resolution of the Court of Appeals[1] in CA-G.R. SP No. 69540 which granted the petition for certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners Motion for Reconsideration, respectively. The dispositive portion of the assailed Decision reads: WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE. SO ORDERED.[2] The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners[3] after they were allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers raided the PAL Technical Centers Toolroom Section on July 24, 1995. After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of Discipline,[4] prompting them to file a complaint for illegal dismissal and damages which was, by Decision of January 11, 1999,[5] resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect of the decision. Prior to the promulgation of the Labor Arbiters decision, the Securities and Exchange Commission (SEC) placed PAL (hereafter referred to as respondent), which was suffering from severe financial losses, under an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999. From the Labor Arbiters decision, respondent appealed to the NLRC which, by Resolution of January 31, 2000, reversed said decision and dismissed petitioners complaint for lack of merit.[6] Petitioners Motion for Reconsideration was denied by Resolution of Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting the reinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while petitioners moved to release the garnished amount. In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the Notice issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action. Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiters decision (the first ground), and (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation provides a reasonable justification for the failure to exercise the options under Article 223 of the Labor Code (the second ground). By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings, viz: Since petitioners claim against PAL is a money claim for their wages during the pendency of PALs appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners case for illegal dismissal and should instead have directed them to lodge their claim before PALs receiver. However, to still require petitioners at this time to refile their labor claim against PAL under peculiar circumstances of the case that their dismissal was eventually held valid with only the matter of reinstatement pending appeal being the issue this Court deems it legally expedient to suspend the proceedings in this case. WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the Court as to the

status of its ongoing rehabilitation. No costs. SO ORDERED.[8] (Italics in the original; underscoring supplied) By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC, by Order of September 28, 2007, granted its request to exit from rehabilitation proceedings.[9] In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining issue for consideration, which is whether petitioners may collect their wages during the period between the Labor Arbiters order of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings. Amplification of the First Ground

part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period.[12] (Emphasis in the original; italics and underscoring supplied) In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to comply therewith.[13] The opposite view is articulated in Genuino which states:

The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiters decision. On this score, the Courts attention is drawn to seemingly divergent decisions concerning reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora,[10] while on the other is the recent case of Genuino v. National Labor Relations Commission.[11] At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code which reads: In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. (Emphasis and underscoring supplied) The view as maintained in a number of cases is that: x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund. Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision.[14] (Emphasis, italics and underscoring supplied) It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found to be valid, and to do so would constitute unjust enrichment. Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was required to refund the salaries received

on payroll reinstatement. In fact, in a catena of cases,[15] the Court did not order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of the reinstatement order. The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale of reinstatement pending appeal. x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man. xxxx These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability. xxxx x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending appeal. xxxx x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family.[16]

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the refund doctrine easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency. Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon. Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiters decision ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond premiums. This circumvents, if not directly contradicts, the proscription that the posting of a bond [even a cash bond] by the employer shall not stay the execution for reinstatement.[17] In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis--vis the effect of a reversal on appeal. Respondent insists that with the reversal of the Labor Arbiters Decision, there is no more basis to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air Philippines and allied cases inapplicable because, unlike the present case, the writ of execution therein was secured prior to the reversal of the Labor Arbiters decision. The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion stopped there without considering the cause of the delay. Second, it requires the issuance of a writ of execution despite the immediately executory nature of the reinstatement aspect of the decision. In Pioneer Texturing Corp. v. NLRC,[18] which was cited in Panuncillo v. CAP Philippines, Inc.,[19] the Court observed: x x x The provision of Article 223 is clear that an award [by

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and statutory precepts portray the otherwise unjust situation as a condition affording full protection to labor.

the Labor Arbiter] for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic exercise. x x x[20] (Italics in the original; emphasis and underscoring supplied) The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court.[21] It settles the view that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employees salaries.[22] Amplification of the Second Ground The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied upon by the appellate court in the assailed issuances. The

Court sustains the appellate courts finding that the peculiar predicament of a corporate rehabilitation rendered it impossible for respondent to exercise its option under the circumstances. The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter issues the decision containing an order of reinstatement. The immediacy of its execution needs no further elaboration. Reinstatement pending appeal necessitates its immediate execution during the pendency of the appeal, if the law is to serve its noble purpose. At the same time, any attempt on the part of the employer to evade or delay its execution, as observed in Panuncillo and as what actually transpired in Kimberly,[23] Composite,[24] Air Philippines,[25] and Roquero,[26] should not be countenanced. After the labor arbiters decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer. The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employers unjustified act or omission. If the delay is due to the employers unjustified refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiters decision. In Genuino, there was no showing that the employer refused to reinstate the employee, who was the Treasury Sales Division Head, during the short span of four months or from the promulgation on May 2, 1994 of the Labor Arbiters Decision up to the promulgation on September 3, 1994 of the NLRC Decision. Notably, the former NLRC Rules of Procedure did not lay down a mechanism to promptly effectuate the self-executory order of reinstatement, making it difficult to establish that the employer actually refused to comply. In a situation like that in International Container Terminal Services, Inc. v. NLRC[27] where it was alleged that the employer was willing to comply with the order and that the employee opted not to pursue the execution of the order, the Court upheld the self-executory nature of the reinstatement order and ruled that the salary automatically accrued from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the NLRC. It was later discovered that the employee indeed moved for the issuance of a writ but was not acted upon by the Labor Arbiter. In that scenario where the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter who failed to act upon the employees motion for the issuance of a writ of execution may no longer adversely affect the cause of the dismissed employee in view of the self-executory nature of the order of reinstatement.[28] The new NLRC Rules of Procedure, which took effect on January 7, 2006,

now require the employer to submit a report of compliance within 10 calendar days from receipt of the Labor Arbiters decision,[29] disobedience to which clearly denotes a refusal to reinstate. The employee need not file a motion for the issuance of the writ of execution since the Labor Arbiter shall thereafter motu proprio issue the writ. With the new rules in place, there is hardly any difficulty in determining the employers intransigence in immediately complying with the order. In the case at bar, petitioners exerted efforts[30] to execute the Labor Arbiters order of reinstatement until they were able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by the NLRC of the Labor Arbiters decision. Technically, there was still actual delay which brings to the question of whether the delay was due to respondents unjustified act or omission. It is apparent that there was inaction on the part of respondent to reinstate them, but whether such omission was justified depends on the onset of the exigency of corporate rehabilitation. It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court, tribunal or board against the corporation shall ipso jure be suspended.[31] As stated early on, during the pendency of petitioners complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver. Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is ministerial and mandatory.[32] This injunction or suspension of claims by legislative fiat[33] partakes of the nature of a restraining order that constitutes a legal justification for respondents non-compliance with the reinstatement order. Respondents failure to exercise the alternative options of actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondents obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did not attach. While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of the dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is similarly in a judicially monitored state of being resuscitated in order to survive. The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground of substantial losses

contemplated in a retrenchment case, the state of corporate rehabilitation was judicially pre-determined by a competent court and not formulated for the first time in this case by respondent. More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation. Respondent was, during the period material to the case, effectively deprived of the alternative choices under Article 223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim relinquishment of management control to give way to the full exercise of the powers of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may have opted for actual physical reinstatement pending appeal to optimize the utilization of resources. Then again, though the management may think this wise, the rehabilitation receiver may decide otherwise, not to mention the subsistence of the injunction on claims. In sum, the obligation to pay the employees salaries upon the employers failure to exercise the alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the inherent constraints of corporate rehabilitation. WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5, 2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of Execution and the Notice of Garnishment are concerned, the Court finds no reversible error. SO ORDERED.

HEIRS OF SANTIAGO V. AGUILA ABAD, J.: This case is about the dismissal of a petition for review after it was filed within the 30-day extension that the petitioners originally asked since the appellate court later granted them only a 15-day extension. The Facts and the Case Petitioner heirs of Marilou K. Santiago owned a 25,309-square meter coconut land that respondent Alfonso Aguila (Aguila) tenanted. For allegedly cutting down five coconut trees in violation of the Coconut Preservation Act of 1995 and depriving the heirs of their share in the harvest, the latter filed an ejectment suit against him before the Provincial Agrarian Reform Adjudicator (PARAD). Aguila resisted the action. On May 31, 2000 the PARAD ruled that Aguila deliberately failed to pay his rents. Thus, it terminated the tenancy relationship and ordered him to vacate the property and pay petitioners their past shares in the harvest. Aguila appealed on June 16, 2005 to the Department of Agrarian Reform Adjudication Board (DARAB), which set aside the PARADs decision and ordered the execution of a new leasehold contract between the parties. On March 3, 2006 the DARAB denied petitioner heirs motion for reconsideration. Since petitioner heirs received a copy of the DARAB resolution denying their motion for reconsideration on March 6, 2006, they had until March 21 within which to file a petition for review with the Court of Appeals (CA). On March 15, 2006 they filed with the CA a motion for extension of 30 days or until April 20, 2006 within which to file their petition. The heirs filed their petition for review on April 20, 2006, the last day of the extension they sought. Eight days later or on April 28, 2006 the CA granted petitioner heirs an extension of only 15 days or up to April 5, 2006 within which to file their petition.1 The consequence of this was that the petition they earlier filed went beyond the allowed extension. Further, the CA also found the special power of attorney (SPA) attached to the petition defective in that it empowered petitioner Eufemia K. Santiago (Eufemia) as attorney-in-fact of a Dennis Matubis, who was not a petitioner, when Eufemia was supposed to stand as attorney-in-fact for petitioner Dennis K. Santiago. For these reasons, the CA dismissed the petition. Petitioner heirs moved for reconsideration but the CA denied their motion on August 7, 2006, prompting them to come to this Court on a petition for review. The Issue Presented The issue in this case is whether or not the CA erred in dismissing petitioner heirs petition for review under Rule 43 for having been filed out of time. The Courts Rulings 1. Regarding the defective SPA, petitioner heirs explained that it was an honest mistake because Dennis Matubis (who appeared not to be a party in the case) and petitioner Dennis K. Santiago are one and the same person. Since Aguila has offered no proof to counter the truth of this assertion and since the CA did not require the heirs to substantiate it, the Court may presume such assertion to be true. Besides, the CA cannot altogether throw out the entire petition for this reason since all the petitioners have a common interest in the success of the suit and since the petition was validly verified with respect to the rest of them.

2. Although it is within the CAs discretion to grant or not to grant a motion for extension, such discretion should be exercised wisely and prudently. The rules regulating the filing of motions for extension of time to file certain pleadings are intended to promote the speedy disposition of cases in the interest of justice, not throw out such pleadings on pure technicality. Here, on March 15, 2006 petitioner heirs filed their motion for extension of 30 days (counted from March 21 when the original period was to run out) within which to file their petition. If the CA would want to deny that extension or shorten it to only 15 days up to April 5, 2006, it had technically at least 20 days (from March 15 to April 4) within which to so warn petitioners that they might have a chance to finish up and file their petition. Yet, it did not. While the parties have no right to expect the CA to grant their motion for extension, they have a right to expect reasonableness from it. Technically the CA waited 44 days up to April 28, 2006 before acting on the motion that petitioners filed on March 15, 2006. The CA knew, when it reduced to only 15 days the extension asked of it, that such reduced extension had already come to pass 23 days earlier on April 5, 2006. Surely, the CA did not expect petitioners to still be able to cope with the reduced extension. Since the rules allow the CA to grant an extra 15-day extension "for the most compelling reason," the CA ought to have given petitioners reasonable notice that it did not regard its ground sufficiently compelling. The CA gave petitioner heirs absolutely no chance to file a timely petition. What is more, when the CA acted on the motion for extension on April 28, 2006 the petition was already at hand, having been filed earlier on April 20. The CA cannot pretend that it had been waiting with bated breath to have a look at the petition and that, consequently, it could only grant a shorter extension for its filing. Indeed, the CA did not dismiss the petition outright when it did not get the same by April 5, its desired deadline. The CA got the petition on April 20, 2006 but waited eight days more or until April 28, 2006 before looking at it. So what was the point in its denying the longer extension when it was not ready to act promptly on the petition? Procedural rules are intended to facilitate the administration of justice, not frustrate it. It is always better that a case is decided on the merits rather than disposed of because of procedural infirmities. Considering that the case involves tenancy relations and possession of agricultural landholding and that PARAD and DARAB have made conflicting findings, a review of the case by the CA was clearly in order. WHEREFORE, the Court GRANTS the petition, SETS ASIDE the Court of Appeals resolutions in CA-G.R. SP 93935 dated April 28, 2006 and August 7, 2006 and DIRECTS it to give due course to the petition of petitioner Heirs of Marilou K. Santiago and adjudicate it on its merits. SO ORDERED.

ASIA TRUST V. AKIKKA NACHURA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA) Decision1 dated June 28, 2007 and Resolution2 dated August 29, 2007 in CA-G.R. SP No. 97408. The Facts Respondents First Aikka Development, Inc. (FADI) and Univac Development, Inc. (UDI) are domestic corporations engaged in the construction and/or development of roads, bridges, infrastructure projects, subdivisions, housing, land, memorial parks, and other industrial and commercial projects for the government or any private entity or individual.3 In the course of their business, FADI and UDI availed of separate loan accommodations or credit lines with petitioner Asiatrust Development Bank.4 The aggregate amount of the loan obtained by respondents was P114,000,000.00. Respondents religiously and faithfully complied with their loan obligations, but during the Asian Financial Crisis, which directly and adversely affected mainly the construction and real estate industry, respondents could not pay their obligations in cash.5 This prompted respondents to negotiate with petitioner for different modes of payment that the former might avail of. Petitioner thus agreed that respondents assign the receivables of their various contracts to sell involving the lots in the residential subdivision projects they were developing, instead of paying in cash.6 Notwithstanding the above agreement, petitioner insisted on collecting the loan per the loan documents. Petitioner claimed that respondents were already in default and demanded the payment of P145,830,220.95. Respondents denied that they were in default because of the assignment of their receivables to petitioner. Respondents contested petitioners claim and demanded for an accounting to determine the correct and true amount of their obligations.7 On May 10, 2006, respondents filed a consolidated Petition for Corporate Rehabilitation with Prayer for Suspension of Payments8 with the Regional Trial Court (RTC) of Baguio City, Branch 59. The case was docketed as Civil Case No. 6267-R. Respondents alleged that they were unable to pay their loan based on the claim of petitioner. Though they have sufficient assets to pay their loan, respondents averred that they were not liquid. They also stated that they were threatened by petitioner with various cases aimed at disrupting the operations of respondents which might eventually lead to the cessation of their business.9 Respondents prayed that an order be issued staying the enforcement of any and all claims of their creditors, investors, and suppliers, whether for money or otherwise, against petitioner, their guarantors, and sureties.10 By way of rehabilitation, respondents also sought the determination of the true and correct amount of their loan obligation with petitioner.11 On May 16, 2006, the RTC issued an Order,12 the pertinent portions of which read: After an examination of the contents of the petition setting forth with sufficient particularity and material facts pursuant to Section 2 of Rule 4 of the Interim Rules of Procedures (sic) of Corporate Rehabilitation and the supporting documents attached thereto and finding the same to be sufficient in form and substance, the Court hereby:

1. ORDERS STAYING enforcement of all claims whether for money or otherwise and whether such enforcement is by court action or otherwise, against the debtors (herein petitioners)[, their] guarantors and [sureties] not solidarily liable with the debtors. In particular[,] ASIATRUST BANK BE STAYED from proceeding with the foreclosure and auction sale of the mortgaged properties; 2. APPOINTS PATRICK V. CAOILE as interim rehabilitation receiver with a bond of two million (P2,000,000.00) pesos; xxxx 7. FIXES the initial hearing on the petition on June 29, 2006 at 11:00 oclock (sic) in the morning.13 On June 2, 2006, Robert Cuchado, an officer of petitioner, went to Baguio City to secure a copy of the petition for rehabilitation but failed to do so because, at that time, the personnel of the rehabilitation court were attending the Judicial Service Training. Petitioner then tried to secure a copy of the petition through the sheriff of the RTC of La Trinidad, Benguet. The rehabilitation court, however, required petitioner to file a motion to that effect, together with a written document authorizing the sheriff to secure a copy thereof. On June 9, 2006, the rehabilitation court issued an Order granting the motion filed by petitioner and gave it a certified true copy of the petition.14 On the day of the initial hearing, petitioner, through its counsel Atty. Mario C. Lorenzo (Atty. Lorenzo), went to court with a Motion for Leave of Court to Admit Opposition to Rehabilitation Petition15 with the attached Opposition to Petition for Rehabilitation.16 In an Order17 dated July 17, 2006, the RTC denied the motion and explained: Under par. 9 of the Stay Order[,] all creditors, etc., were given ten (10) days before the initial hearing to file their comment or opposition to the petition and putting them on notice that failure to do so will bar them from participating in the proceedings. It is only on June 29, 2006, the date of the initial hearing that Asiatrust filed its Motion with Leave to Admit Opposition. The motion partakes of the nature of a motion for extension of time to file pleading which is a prohibited pleading under Rule 3(e) of the Interim Rules of Procedure on Corporate Rehabilitation.18 On July 31, 2006, when the case was called for hearing, Enrico J. Ong (Ong) appeared as representative of petitioner because the latters counsel could not go to court due to the cancellation of his flight as a result of bad weather. The rehabilitation court recognized the appearance of Ong only to inform the court that the counsel for petitioner could not attend the hearing. There being no other oppositors or creditors in court despite due notices, the rehabilitation court terminated the initial hearing and directed the rehabilitation receiver to evaluate respondents rehabilitation plan and then report the results thereof to the court.19 On October 13, 2006, the rehabilitation receiver called for a conference and presented the draft of the rehabilitation report to petitioner, represented by Atty. Lorenzo and Ong, and to respondents. Petitioner filed a manifestation and motion in court calling its attention to the alleged refusal of the receiver to hear its side. Petitioner thus asked for judicial assistance to enable it to actively participate in the rehabilitation proceedings and protect its interest. The receiver finalized and later on filed his evaluation report in court. He recommended the approval of the

rehabilitation plan.20 On December 5, 2006, the RTC issued an Order,21 the pertinent portions of which read: On the same ground under Rule 3 of the Interim Rules, the Motion of Oppositor Asiatrust to participate in the Rehabilitation Proceedings is DENIED. This pleading partakes of a [P]etition for Relief which is also a prohibited pleading under par. d of Rule 3 of the same rule. Moreover, the motion has also the purpose to reconsider the courts ruling in denying the admission of their opposition to the [P]etition for Rehabilitation. It must be stressed that under par. 9 of the Stay Order, "All creditors, etc., were given ten (10) days before the initial hearing to file their comment or opposition to the petition and putting them on notice that failure to do so will bar them from participating in the proceedings." As to the Rehabilitation Report and the Integrated Revised Rehabilitation Plan and Schedule of the petitioners, the court, after a careful and thorough examination and review of the report, it is its considered judgment that the rehabilitation of the debtor is feasible and hereby APPROVES the Rehabilitation Report and the REVISED REHABILITATION PLAN. xxxx WHEREFORE, premises all duly considered, the Motion of Asiatrust to participate in the Rehabilitation Proceedings is hereby DENIED, the Rehabilitation Report and the Integrated Revised Rehabilitation Plan of Receiver Patrick Caoile is APPROVED and the Notice of the Appearance of the Cabato Law Office as collaborating counsel for Oppositor Asiatrust is NOTED. The court appointed Receiver shall submit his report every three (3) months and a yearly report on the status of the progress of the rehabilitation and the implementation and monitoring of the same. SO ORDERED.22 Aggrieved, petitioner elevated the case to the CA via a Petition for Review23 under Rule 43 of the Rules of Court. On June 28, 2007, the appellate court affirmed the above RTC Orders. The appellate court emphasized that petitioners failure to participate in the rehabilitation proceedings was due to its own fault. First, petitioner failed to file on time its opposition to the petition for rehabilitation and still failed to present good reason for it to be belatedly admitted. Second, on the date of the second hearing, its counsel failed to go to court allegedly due to the cancellation of his flight, which, to the mind of the court, was inexcusable. Lastly, instead of filing a comment to the rehabilitation proceedings, petitioner filed a motion to participate in the rehabilitation proceedings, which is a prohibited pleading. The CA thus concluded that petitioner was given every opportunity to be heard in the rehabilitation proceedings, but it failed to avail of these remedies. On the propriety of the joint petition for rehabilitation, the CA opined that the Interim Rules of Procedure on Corporate Rehabilitation (the Rules) contains no prohibition. Finally, the CA stressed that rehabilitation proceedings are non-adversarial and summary in nature which, therefore, necessitate the proper observance of the period and procedures provided for by law and the Rules.24

The Issues Undaunted, petitioner comes before this Court, raising the following errors: A. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT FAILED TO RULE THAT PETITIONER WAS UNJUSTLY DEPRIVED OF ITS PROPERTY WITHOUT DUE PROCESS OF LAW WHEN IT WAS NOT ALLOWED TO PROVE THE TRUE AND CORRECT AMOUNT OF THE LOAN OBLIGATIONS OWING TO IT BY THE RESPONDENTS BASED ON A MERE TECHNICALITY, IN BLATANT DISREGARD OF THE APPLICABLE LAWS AND DECISIONS OF THIS HONORABLE COURT. B. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT AFFIRMED THE APPROVAL OF THE REHABILITATION PLAN DESPITE THE REHABILITATION COURTS FAILURE TO CONDUCT A CLARIFICATORY HEARING TO RESOLVE THE UNSETTLED ISSUE ON THE AMOUNT OF INDEBTEDNESS OF PRIVATE RESPONDENTS AND THE REHABILITATION RECEIVERS FAILURE TO MAKE A CREDIBLE AND INDEPENDENT INVESTIGATION ON THE AMOUNT OF INDEBTEDNESS OF RESPONDENT CORPORATIONS, THEREBY DEVIATING FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS. C. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT INEXPLICABLY AFFIRMED THE REHABILITATION COURTS APPROVAL OF THE CONSOLIDATED PETITION FOR REHABILITATION, DESPITE THE SUBSTANTIAL EVIDENCE SHOWING THAT THE PETITION WAS FILED IN THE WRONG VENUE INSOFAR AS RESPONDENT UNIVAC DEVELOPMENT IS CONCERNED AND WAS FATALLY DEFECTIVE ON ITS FACE. D. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN IT REFUSED TO RULE ON THE SUBSTANTIAL AND FORMAL DEFECTS OF THE REHABILITATION PLAN ON THE PRETEXT THAT THE REHABILITATION COURTS APPROVAL OF THE RESPONDENTS REHABILITATION IS BINDING ON IT, DESPITE THE ABSENCE OF SUBSTANTIAL EVIDENCE THAT WOULD SUPPORT THE DECISION OF THE REHABILITATION COURT. E. WHETHER OR NOT THE HONORABLE COURTS EXERCISE OF ITS DISCRETIONARY REVIEW POWERS IS WARRANTED UNDER THE CIRCUMSTANCES.25 Petitioners Arguments Petitioner avers that it was denied due process when the rehabilitation court refused to admit its opposition to the petition for rehabilitation and to comment on the rehabilitation plan.26 It explains that the late submission of the opposition was

brought about by the baseless and unfounded requirements imposed by the court.27 Considering that there are valid and substantial grounds for the dismissal of the petition for rehabilitation, petitioner insists that its comment and opposition should have been admitted by the rehabilitation court. Petitioner points out that while the court denied its motion for leave to admit its opposition, it (the court) allowed the Securities and Exchange Commission to submit its comment long after the prescribed period.28 Petitioner adds that the rehabilitation courts unwarranted refusal to recognize the appearance of its duly authorized representative constitutes a denial of its right to due process.29 Petitioner also insists that mere delay in the submission of the comment on the petition for rehabilitation does not warrant the denial of petitioners right to participate in the rehabilitation proceedings. It likewise assails the rehabilitation courts jurisdiction over UDI, whose principal place of business is in Pasig City, which is beyond the jurisdiction of the RTC of Baguio City. It, thus, challenges the consolidated petition for rehabilitation.30 Moreover, petitioner avers that respondents failed to show that they had adequate capital to sustain their operations during the interim period of corporate rehabilitation.31 Lastly, petitioner denies that it is estopped from assailing the rehabilitation plan as it already received payment from respondents based on the rehabilitation plan. It clarifies that it accepted the check payments subject to the outcome of this case.32 Respondents Arguments Respondents, on the other hand, aver that the petition is legally infirm as there are no special important reasons for the Court to exercise its sound judicial discretion to review the assailed CA Decision.33 They also argue that petitioners failure to participate in the rehabilitation proceedings could be attributed to its counsels own slackness and disregard for the rules.34 On the issue of the rehabilitation courts jurisdiction, respondents counter that petitioner could no longer assail it as petitioner actively participated and continues to participate in the rehabilitation proceedings, including the receipt of payments in accordance with the approved rehabilitation plan.35 They explain that in the Orders dated May 16, 2006, the rehabilitation court held that the petition is sufficient in form and substance; July 17, 2006, the rehabilitation court denied petitioners motion for leave to admit its comment on the petition for rehabilitation; and July 31, 2006, the court declared that there is merit in the petition which was given due course. Petitioners failure to assail the above orders rendered them final and immutable. Respondents thus opine that petitioner could no longer assail them in this petition for review.36 Respondents likewise insist that petitioner could no longer participate in the rehabilitation proceedings because of its failure to file its comment on the petition. In other words, respondents said, the filing of the comment on the petition is a condition precedent to the filing of the comment on the rehabilitation plan.37 On the amount of the loan obligation, respondents claim that there was a valid basis and there was a determination of the true and correct amount thereof.38 The Courts Ruling Though the rehabilitation proceedings had gone as far as the approval and the subsequent implementation of the rehabilitation plan, we must confront the issue of the rehabilitation courts jurisdiction to hear and decide the case insofar as

respondent UDI is concerned. A perusal of petitioners pleadings clearly shows that it had repeatedly raised the jurisdictional question. The courts below, however, ignored this issue as they did not recognize petitioners right to participate in the rehabilitation proceedings. While it is true that petitioner had been asking the rehabilitation and appellate courts that it be allowed to participate, contrary to respondents contention, the same did not amount to estoppel that would bar it from questioning the rehabilitation courts jurisdiction. It is well-settled that the courts jurisdiction may be assailed at any stage of the proceedings, even for the first time on appeal. The reason is that jurisdiction is conferred by law, and lack of it affects the very authority of the court to take cognizance of and to render judgment on the action.39 In its Opposition to the petition for rehabilitation, petitioner already questioned the courts jurisdiction over UDI. On appeal to the CA, it again raised the same issue, but it failed to obtain a favorable decision. We cannot, therefore, say that petitioner slept on its rights. It is not estopped from raising the jurisdictional issue even at this stage. In any event, even if petitioner had not raised the issue of jurisdiction, the reviewing court would still not be precluded from ruling on the matter of jurisdiction. Neither can estoppel be imputed to petitioner for its receipt of payments made by respondents in accordance with the rehabilitation plan. It has been established that in its letters to respondents, petitioner explained that it received payments subject to the results of its appeal. Besides, it is a basic rule that estoppel does not confer jurisdiction on a tribunal that has none over the cause of action or subject matter of the case.40 Records show that the Petition for Corporate Rehabilitation with Prayer for Suspension of Payments41 was filed by two corporations, namely, FADI and UDI. Respondent FADI is a real estate corporation duly organized and existing under and by virtue of Philippine laws, with principal place of business in Baguio City.42 Respondent UDI, on the other hand, is a real estate corporation with principal place of business in Pasig City.43 Respondents explain in their petition that they filed the consolidated petition because they availed of separate but intertwined loan obligations or credit lines, and that they have interlocking directors, owners, and officers. As such, a full and complete settlement of the loan obligations will involve the two corporations and, consequently, the rehabilitation of one will entail the rehabilitation of the other.44 We find that the consolidation of the petitions involving these two separate entities is not proper. Although FADI and UDI have interlocking directors, owners, and officers and intertwined loans, the two corporations are separate, each with a personality distinct from the other. To be sure, in determining the feasibility of rehabilitation, the court evaluates the assets and liabilities of each of these corporations separately and not jointly with other corporations. Moreover, Section 2, Rule 3 of the Rules, the rule applicable at the time of the filing of the petition, provides: Sec. 2. Venue. Petitions for rehabilitation pursuant to these Rules shall be filed in the Regional Trial Court having jurisdiction over the territory where the debtors principal office is located.

Considering that UDIs principal office is located in Pasig City, the petition should have been filed with the RTC in Pasig City and not in Baguio City. The latter court cannot, therefore, take cognizance of the rehabilitation petition insofar as UDI is concerned for lack of jurisdiction. This error, however, will not result in the dismissal of the entire petition since the RTC of Baguio City had jurisdiction over the petition of FADI in accordance with the above-quoted provision of the Rules. On the issue of whether the rehabilitation court, as affirmed by the CA, correctly denied petitioners prayer to participate in the rehabilitation proceedings because of the belated filing of its Comment/Opposition to respondents petition for rehabilitation, we answer in the negative. The Court promulgated the Rules in order to provide a remedy for summary and non-adversarial rehabilitation proceedings of distressed but viable corporations.45 These Rules are to be construed liberally to obtain for the parties a just, expeditious, and inexpensive disposition of the case.46 To be sure, strict compliance with the rules of procedure is essential to the administration of justice. Nonetheless, technical rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application should be relaxed when they hinder rather than promote substantial justice.47 Otherwise stated, strict application of technical rules of procedure should be shunned when they hinder rather than promote substantial justice.48 In this case, instead of filing its opposition to the petition for rehabilitation at least ten days before the date of the initial hearing as required by the Rules, petitioner filed a Motion for Leave of Court to Admit Opposition to Rehabilitation Petition49 with the attached Opposition to Petition for Rehabilitation50 on the date of the initial hearing. Because the pleading was not filed on time, the RTC denied the motion. While the court has the discretion whether or not to admit the opposition belatedly filed by petitioner, it is our considered opinion that the RTC gravely abused its discretion when it refused to grant the motion, even as the factual circumstances of the case require that the Rules be liberally construed in the interest of justice. Admittedly, petitioner is respondents major creditor. The parties even explained that the new payment scheme adopted in the approved rehabilitation plan maintained the same scheme as that stipulated in the contracts between respondents and their creditors except that of petitioner. In other words, respondents could pay the other creditors in the same manner as that stipulated in their contracts but could not abide by the terms of their contracts with petitioner. Moreover, petitioner and respondents differ in their assessment and computation of the latters obligations to the former. Petitioner claims that respondents owe it P145,830,220.95, while the latter only admit a total obligation of P24,202,015. This disparity in the parties claims makes it more important for the rehabilitation court to have given petitioner the opportunity to be heard. Besides, in their petition before the RTC, respondents sought the determination of the true and correct amount of their loan with petitioner.51 We consider this as a compelling reason for the liberal interpretation of the Rules, and the rehabilitation court should have admitted petitioners comment on the petition for rehabilitation and allowed petitioner to participate in the proceedings.

Time and again, we have held that cases should, as much as possible, be resolved on the merits, not on mere technicalities. In cases where we dispense with the technicalities, we do not mean to undermine the force and effectivity of the periods set by law. In those rare cases where we did not stringently apply the procedural rules, there always existed a clear need to prevent the commission of a grave injustice, as in the present case.52 Our judicial system and the courts have always tried to maintain a healthy balance between the strict enforcement of procedural laws and the guarantee that every litigant be given the full opportunity for the just and proper disposition of his cause.53 Corporate rehabilitation connotes the restoration of the debtor to a position of successful operation and solvency, if it is shown that its continued operation is economically feasible and its creditors can recover by way of the present value of payments projected in the rehabilitation plan, more if the corporation continues as a going concern than if it is immediately liquidated.541awvvphi1 Rehabilitation proceedings in our jurisdiction have equitable and rehabilitative purposes. On the one hand, they attempt to provide for the efficient and equitable distribution of an insolvent debtors remaining assets to its creditors; and on the other, to provide debtors with a "fresh start" by relieving them of the weight of their outstanding debts and permitting them to reorganize their affairs.55 The purpose of rehabilitation proceedings is to enable the company to gain a new Lease on life and thereby allow creditors to be paid their claims from its earnings.56 The determination of the true and correct amount due petitioner is important in assessing whether FADI may be successfully rehabilitated. It is thus necessary that petitioner be given the opportunity to be heard by the rehabilitation court. The court should admit petitioners comment on or opposition to FADIs petition for rehabilitation and allow petitioner to participate in the rehabilitation proceedings to determine if indeed FADI could maintain its corporate existence. A remand of the case to the rehabilitation court is, therefore, imperative. To be sure, the successful rehabilitation of a distressed corporation will benefit its debtors, creditors, employees, and the economy in general.57 As much as we would like to honor the rehabilitation plan approved by the rehabilitation court, particularly because it has already been partially implemented, we cannot sustain the decision of the court, as affirmed by the CA, if we are to ensure that rehabilitation is indeed feasible. It is especially important in this case to hear petitioner, as the major creditor of the distressed corporation, since it is a banking institution. Banks are entities engaged in the lending of funds obtained through deposits from the public. They borrow the publics excess money and lend out the same. Banks, therefore, redistribute wealth in the economy by channeling idle savings to profitable investments.58 Banks operate (and earn income) by extending credit facilities financed primarily by deposits from the public. They plough back the bulk of said deposits into the economy in the form of loans. Since banks deal with the publics money, their viability depends largely on their ability to return those deposits on demand. For this reason, banking is undeniably imbued with public interest. Consequently, much importance is given to sound lending practices and good corporate governance.59

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated June 28, 2007 and Resolution dated August 29, 2007 in CA-G.R. SP No. 97408 are SET ASIDE. Consequently, the Order of the RTC dated July 17, 2006 and those issued subsequent thereto are hereby NULLIFIED. We REMAND the records of the case pertaining to the petition for rehabilitation of First Aikka Development, Inc. to the Regional Trial Court of Baguio City, Branch 59, for further proceedings. The court is ORDERED to admit petitioner Asiatrust Development Banks Comment/Opposition to the petition for rehabilitation and to allow petitioner to participate in said proceedings. The Regional Trial Court of Baguio City, Branch 59, is likewise ORDERED to DISMISS the petition for rehabilitation of Univac Development, Inc. for lack of jurisdiction. SO ORDERED.

FABIAN V. DESIERTO REGALADO, J.: Petitioner has appealed to us by certiorari under Rule 45 of the Rules of Court from the "Joint Order" issued by public respondents on June 18, 1997 in OMB-Adm. Case No. 0-95-0411 which granted the motion for reconsideration of and absolved private respondent from administrative charges for inter alia grave misconduct committed by him as then Assistant Regional Director, Region IV-A, Department of Public Works and Highways (DPWH). I It appears from the statement and counter-statement of facts of the parties that petitioner Teresita G. Fabian was the major stockholder and president of PROMAT Construction Development Corporation (PROMAT) which was engaged in the construction business. Private respondent Nestor V. Agustin was the incumbent District Engineer of the First Metro Manila Engineering District (FMED) when he allegedly committed the offenses for which he was administratively charged in the Office of the Ombudsman. PROMAT participated in the bidding for government construction projects including those under the FMED, and private respondent, reportedly taking advantage of his official position, inveigled petitioner into an amorous relationship. Their affair lasted for some time, in the course of which private respondent gifted PROMAT with public works contracts and interceded for it in problems concerning the same in his office. Later, misunderstandings and unpleasant incidents developed between the parties and when petitioner tried to terminate their relationship, private respondent refused and resisted her attempts to do so to the extent of employing acts of harassment, intimidation and threats. She eventually filed the aforementioned administrative case against him in a letter-complaint dated July 24, 1995. The said complaint sought the dismissal of private respondent for violation of Section 19, Republic Act No. 6770 (Ombudsman Act of 1989) and Section 36 of Presidential Decree No. 807 (Civil Service Decree), with an ancillary prayer for his preventive suspension. For purposes of this case, the charges referred to may be subsumed under the category of oppression, misconduct, and disgraceful or immoral conduct. On January 31, 1996, Graft Investigator Eduardo R. Benitez issued a resolution finding private respondent guilty of grave misconduct and ordering his dismissal from the service with forfeiture of all benefits under the law. His resolution bore the approval of Director Napoleon Baldrias and Assistant Ombudsman Abelardo Aportadera of their office. Herein respondent Ombudsman, in an Order dated February 26, 1996, approved the aforesaid resolution with modifications, by finding private respondent guilty of misconduct and meting out the penalty of suspension without pay for one year. After private respondent moved for reconsideration, respondent Ombudsman discovered that the former's new counsel had been his "classmate and close associate" hence he inhibited himself. The case was transferred to respondent Deputy Ombudsman Jesus F. Guerrero who, in the now challenged Joint Order of June 18, 1997, set aside the February 26, 1997 Order of respondent Ombudsman and exonerated private

respondent from the administrative charges. II In the present appeal, petitioner argues that Section 27 of Republic Act No. 6770 (Ombudsman Act of 1989) 1 pertinently provides that In all administrative disciplinary cases, orders, directives or decisions of the Office of the Ombudsman may be appealed to the Supreme Court by filing a petition for certiorari within ten (10) days from receipt of the written notice of the order, directive or decision or denial of the motion for reconsideration in accordance with Rule 45 of the Rules of Court (Emphasis supplied) However, she points out that under Section 7, Rule III of Administrative Order No. 07 (Rules of Procedure of the Office of the Ombudsman), 2 when a respondent is absolved of the charges in an administrative proceeding the decision of the Ombudsman is final and unappealable. She accordingly submits that the Office of the Ombudsman has no authority under the law to restrict, in the manner provided in its aforesaid Rules, the right of appeal allowed by Republic Act No. 6770, nor to limit the power of review of this Court. Because of the aforecited provision in those Rules of Procedure, she claims that she found it "necessary to take an alternative recourse under Rule 65 of the Rules of Court, because of the doubt it creates on the availability of appeal under Rule 45 of the Rules of Court. Respondents filed their respective comments and rejoined that the Office of the Ombudsman is empowered by the Constitution and the law to promulgate its own rules of procedure. Section 13(8), Article XI of the 1987 Constitution provides, among others, that the Office of the Ombudsman can "(p)romulgate its rules of procedure and exercise such other powers or perform such functions or duties as may be provided by law." Republic Act No. 6770 duly implements the Constitutional mandate with these relevant provisions: Sec. 14. Restrictions. . . . No court shall hear any appeal or application for remedy against the decision or findings of the Ombudsman except the Supreme Court on pure questions of law. xxx xxx xxx Sec. 18. Rules of Procedure. (1) The Office of the Ombudsman shall promulgate its own rules of procedure for the effective exercise or performance of its powers, functions, and duties. xxx xxx xxx Sec. 23. Formal Investigation. (1) Administrative investigations by the Office of the Ombudsman shall be in accordance with its rules of procedure and consistent with due process. . . . . xxx xxx xxx Sec. 27. Effectivity and Finality of Decisions. All previsionary orders at the Office of the Ombudsman are immediately effective and executory. A motion for reconsideration of any order, directive or decision of the Office of the Ombudsman must be filed within five (5) days after receipt of written notice and shall be entertained only on any of the following grounds: xxx xxx xxx Findings of fact by the Office of the Ombudsman when supported by substantial

evidence are conclusive. Any order, directive or decision imposing the penalty of public censure or reprimand, suspension of not more than one month salary shall be final and unappealable. In all administrative disciplinary cases, orders, directives or decisions of the Office of the Ombudsman may be appealed to the Supreme Court by filing a petition for certiorari within ten (10) days from receipt of the written notice of the order, directive or decision or denial of the motion for reconsideration in accordance with Rule 45 of the Rules of Court. The above rules may be amended or modified by the Office of the Ombudsman as the interest of justice may require. Respondents consequently contend that, on the foregoing constitutional and statutory authority, petitioner cannot assail the validity of the rules of procedure formulated by the Office of the Ombudsman governing the conduct of proceedings before it, including those rules with respect to the availability or non-availability of appeal in administrative cases, such as Section 7, Rule III of Administrative Order No. 07. Respondents also question the propriety of petitioner's proposition that, although she definitely prefaced her petition by categorizing the same as "an appeal by certiorari under Rule 45 of the Rules of Court," she makes the aforequoted ambivalent statement which in effect asks that, should the remedy under Rule 45 be unavailable, her petition be treated in the alternative as an original action for certiorari under Rule 65. The parties thereafter engage in a discussion of the differences between a petition for review on certiorari under Rule 45 and a special civil action of certiorari under Rule 65. Ultimately, they also attempt to review and rationalize the decisions of this Court applying Section 27 of Republic Act. No. 6770 vis-a-vis Section 7, Rule III of Administrative Order No. 07. As correctly pointed out by public respondent, Ocampo IV vs. Ombudsman, et al. 3 and Young vs. Office of the Ombudsman, et al. 4 were original actions for certiorari under Rule 65. Yabut vs. Office of the Ombudsman, et al. 5 was commenced by a petition for review on certiorari under Rule 45. Then came Cruz, Jr. vs. People, et al., 6 Olivas vs. Office of the Ombudsman, et al., 7 Olivarez vs. Sandiganbayan, et al., 8 and Jao, et al. vs. Vasquez, 9 which were for certiorari, prohibition and/or mandamus under Rule 65. Alba vs. Nitorreda, et al. 10 was initiated by a pleading unlikely denominated as an "Appeal/Petition for Certiorari and/or Prohibition," with a prayer for ancillary remedies, and ultimately followed by Constantino vs. Hon. Ombudsman Aniano Desierto, et al. 11 which was a special civil action for certiorari. Considering, however, the view that this Court now takes of the case at bar and the issues therein which will shortly be explained, it refrains from preemptively resolving the controverted points raised by the parties on the nature and propriety of application of the writ of certiorari when used as a mode of appeal or as the basis of a special original action, and whether or not they may be resorted to concurrently or alternatively, obvious though the answers thereto appear to be. Besides, some seemingly obiter statements in Yabut and Alba could bear reexamination and clarification. Hence, we will merely observe and lay down the rule at this juncture that Section 27 of Republic Act No. 6770 is involved only whenever an appeal by certiorari under Rule 45 is taken from a decision in an administrative disciplinary

action. It cannot be taken into account where an original action for certiorari under Rule 65 is resorted to as a remedy for judicial review, such as from an incident in a criminal action. III After respondents' separate comments had been filed, the Court was intrigued by the fact, which does not appear to have been seriously considered before, that the administrative liability of a public official could fall under the jurisdiction of both the Civil Service Commission and the Office of the Ombudsman. Thus, the offenses imputed to herein private respondent were based on both Section 19 of Republic Act No. 6770 and Section 36 of Presidential Decree No. 807. Yet, pursuant to the amendment of Section 9, Batas Pambansa Blg. 129 by Republic Act No. 7902, all adjudications by the Civil Service Commission in administrative disciplinary cases were made appealable to the Court of Appeals effective March 18, 1995, while those of the Office of the Ombudsman are appealable to this Court. It could thus be possible that in the same administrative case involving two respondents, the proceedings against one could eventually have been elevated to the Court of Appeals, while the other may have found its way to the Ombudsman from which it is sought to be brought to this Court. Yet systematic and efficient case management would dictate the consolidation of those cases in the Court of Appeals, both for expediency and to avoid possible conflicting decisions. Then there is the consideration that Section 30, Article VI of the 1987 Constitution provides that "(n)o law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and consent," and that Republic Act No. 6770, with its challenged Section 27, took effect on November 17, 1989, obviously in spite of that constitutional prohibition. The conventional rule, however, is that a challenge on constitutional grounds must be raised by a party to the case, neither of whom did so in this case, but that is not an inflexible rule, as we shall explain. Since the constitution is intended for the observance of the judiciary and other departments of the government and the judges are sworn to support its provisions; the courts are not at liberty to overlook or disregard its commands or countenance evasions thereof. When it is clear that a statute transgresses the authority vested in a legislative body, it is the duty of the courts to declare that the constitution, and not the statute, governs in a case before them for judgment. 12 Thus, while courts will not ordinarily pass upon constitutional questions which are not raised in the pleadings, 13 the rule has been recognized to admit of certain exceptions. It does not preclude a court from inquiring into its own jurisdiction or compel it to enter a judgment that it lacks jurisdiction to enter. If a statute on which a court's jurisdiction in a proceeding depends is unconstitutional, the court has no jurisdiction in the proceeding, and since it may determine whether or not it has jurisdiction, it necessarily follows that it may inquire into the constitutionality of the statute. 14 Constitutional questions, not raised in the regular and orderly procedure in the trial are ordinarily rejected unless the jurisdiction of the court below or that of the appellate court is involved in which case it may be raised at any time or on the court's own motion. 15 The Court ex mero motu may take cognizance of lack of

jurisdiction at any point in the case where that fact is developed. 16 The court has a clearly recognized right to determine its own jurisdiction in any proceeding. 17 The foregoing authorities notwithstanding, the Court believed that the parties hereto should be further heard on this constitutional question. Correspondingly, the following resolution was issued on May 14, 1998, the material parts stating as follows: The Court observes that the present petition, from the very allegations thereof, is "an appeal by certiorari under Rule 45 of the Rules of Court from the "Joint Order (Re: Motion for Reconsideration)" issued in OMB-Adm. Case No. 0-95-0411, entitled "Teresita G. Fabian vs. Engr. Nestor V. Agustin, Asst. Regional Director, Region IV-A, EDSA, Quezon City," which absolved the latter from the administrative charges for grave misconduct, among others. It is further averred therein that the present appeal to this Court is allowed under Section 27 of the Ombudsman Act of 1987 (R.A. No. 6770) and, pursuant thereto, the Office of the Ombudsman issued its Rules of Procedure, Section 7 whereof is assailed by petitioner in this proceeding. It will be recalled that R.A. No. 6770 was enacted on November 17, 1989, with Section 27 thereof pertinently providing that all administrative disciplinary cases, orders, directives or decisions of the Office of the Ombudsman may be appealed to this Court in accordance with Rule 45 of the Rules of Court. The Court notes, however, that neither the petition nor the two comments thereon took into account or discussed the validity of the aforestated Section 27 of R.A. No. 8770 in light of the provisions of Section 30, Article VI of the 1987 Constitution that "(n)o law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and consent." The Court also invites the attention of the parties to its relevant ruling in First Lepanto Ceramics, Inc. vs. The Court of Appeals, et al. (G.R. No. 110571, October 7, 1994, 237 SCRA 519) and the provisions of its former Circular No. 1-91 and Revised Administrative Circular No. 1-95, as now substantially reproduced in Rule 43 of the 1997 revision of the Rules of Civil Procedure. In view of the fact that the appellate jurisdiction of the Court is invoked and involved in this case, and the foregoing legal considerations appear to impugn the constitutionality and validity of the grant of said appellate jurisdiction to it, the Court deems it necessary that the parties be heard thereon and the issue be first resolved before conducting further proceedings in this appellate review. ACCORDINGLY, the Court Resolved to require the parties to SUBMIT their position and arguments on the matter subject of this resolution by filing their corresponding pleadings within ten (10) days from notice hereof. IV The records do not show that the Office of the Solicitor General has complied with such requirement, hence the Court dispenses with any submission it should have presented. On the other hand, petitioner espouses the theory that the provision in Section 27 of Republic Act No. 6770 which authorizes an appeal by certiorari to this Court of the aforementioned adjudications of the Office of the Ombudsman is not violative of Section 30, Article VI of the Constitution. She claims that what is proscribed is the passage of a law "increasing" the appellate jurisdiction of this Court

"as provided in this Constitution," and such appellate jurisdiction includes "all cases in which only an error or question of law is involved." Since Section 5(2)(e), Article VIII of the Constitution authorizes this Court to review, revise, reverse, modify, or affirm on appeal or certiorari the aforesaid final judgment or orders "as the law or the Rules of Court may provide," said Section 27 does not increase this Court's appellate jurisdiction since, by providing that the mode of appeal shall be by petition for certiorari under Rule 45, then what may be raised therein are only questions of law of which this Court already has jurisdiction. We are not impressed by this discourse. It overlooks the fact that by jurisprudential developments over the years, this Court has allowed appeals by certiorari under Rule 45 in a substantial number of cases and instances even if questions of fact are directly involved and have to be resolved by the appellate court. 18 Also, the very provision cited by petitioner specifies that the appellate jurisdiction of this Court contemplated therein is to be exercised over "final judgments and orders of lower courts," that is, the courts composing the integrated judicial system. It does not include the quasi-judicial bodies or agencies, hence whenever the legislature intends that the decisions or resolutions of the quasi-judicial agency shall be reviewable by the Supreme Court or the Court of Appeals, a specific provision to that effect is included in the law creating that quasi-judicial agency and, for that matter, any special statutory court. No such provision on appellate procedure is required for the regular courts of the integrated judicial system because they are what are referred to and already provided for, in Section 5, Article VIII of the Constitution. Apropos to the foregoing, and as correctly observed by private respondent, the revised Rules of Civil Procedure 19 preclude appeals from quasi-judicial agencies to the Supreme Court via a petition for review on certiorari under Rule 45. In the 1997 Rules of Civil Procedure, Section 1 of Rule 45, on "Appeal by Certiorari to the Supreme Court," explicitly states: Sec. 1. Filing of petition with Supreme Court. A person desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth. (Emphasis ours). This differs from the former Rule 45 of the 1964 Rules of Court which made mention only of the Court of Appeals, and had to be adopted in statutes creating and providing for appeals from certain administrative or quasi-judicial agencies, whenever the purpose was to restrict the scope of the appeal to questions of law. That intended limitation on appellate review, as we have just discussed, was not fully subserved by recourse to the former Rule 45 but, then, at that time there was no uniform rule on appeals from quasi-judicial agencies. Under the present Rule 45, appeals may be brought through a petition for review on certiorari but only from judgments and final orders of the courts enumerated in Section 1 thereof. Appeals from judgments and final orders of quasi-judicial agencies 20 are now required to be brought to the Court of Appeals on a verified petition for review, under the requirements and conditions in Rule 43 which was precisely formulated and adopted to provide for a uniform rule of appellate

procedure for quasi-judicial agencies. 21 It is suggested, however, that the provisions of Rule 43 should apply only to "ordinary" quasi-judicial agencies, but not to the Office of the Ombudsman which is a "high constitutional body." We see no reason for this distinction for, if hierarchical rank should be a criterion, that proposition thereby disregards the fact that Rule 43 even includes the Office of the President and the Civil Service Commission, although the latter is even an independent constitutional commission, unlike the Office of the Ombudsman which is a constitutionally-mandated but statutorily created body. Regarding the misgiving that the review of the decision of the Office of the Ombudsman by the Court of Appeals would cover questions of law, of fact or of both, we do not perceive that as an objectionable feature. After all, factual controversies are usually involved in administrative disciplinary actions, just like those coming from the Civil Service Commission, and the Court of Appeals as a trier of fact is better prepared than this Court to resolve the same. On the other hand, we cannot have this situation covered by Rule 45 since it now applies only to appeals from the regular courts. Neither can we place it under Rule 65 since the review therein is limited to jurisdictional questions. * The submission that because this Court has taken cognizance of cases involving Section 27 of Republic Act No. 6770, that fact may be viewed as "acquiescence" or "acceptance" by it of the appellate jurisdiction contemplated in said Section 27, is unfortunately too tenuous. The jurisdiction of a court is not a question of acquiescence as a matter of fact but an issue of conferment as a matter of law. Besides, we have already discussed the cases referred to, including the inaccuracies of some statements therein, and we have pointed out the instances when Rule 45 is involved, hence covered by Section 27 of Republic Act No. 6770 now under discussion, and when that provision would not apply if it is a judicial review under Rule 65. Private respondent invokes the rule that courts generally avoid having to decide a constitutional question, especially when the case can be decided on other grounds. As a general proposition that is correct. Here, however, there is an actual case susceptible of judicial determination. Also, the constitutional question, at the instance of this Court, was raised by the proper parties, although there was even no need for that because the Court can rule on the matter sua sponte when its appellate jurisdiction is involved. The constitutional question was timely raised, although it could even be raised any time likewise by reason of the jurisdictional issue confronting the Court. Finally, the resolution of the constitutional issue here is obviously necessary for the resolution of the present case. 22 It is, however, suggested that this case could also be decided on other grounds, short of passing upon the constitutional question. We appreciate the ratiocination of private respondent but regret that we must reject the same. That private respondent could be absolved of the charge because the decision exonerating him is final and unappealable assumes that Section 7, Rule III of Administrative Order No. 07 is valid, but that is precisely one of the issues here. The prevailing rule that the Court should not interfere with the discretion of the Ombudsman in prosecuting or dismissing a complaint is not applicable in this administrative case, as earlier

explained. That two decisions rendered by this Court supposedly imply the validity of the aforementioned Section 7 of Rule III is precisely under review here because of some statements therein somewhat at odds with settled rules and the decisions of this Court on the same issues, hence to invoke the same would be to beg the question. V Taking all the foregoing circumstances in their true legal roles and effects, therefore, Section 27 of Republic Act No. 6770 cannot validly authorize an appeal to this Court from decisions of the Office of the Ombudsman in administrative disciplinary cases. It consequently violates the proscription in Section 30, Article VI of the Constitution against a law which increases the appellate jurisdiction of this Court. No countervailing argument has been cogently presented to justify such disregard of the constitutional prohibition which, as correctly explained in First Lepanto Ceramics, Inc. vs. The Court of Appeals, et al. 23 was intended to give this Court a measure of control over cases placed under its appellate jurisdiction. Otherwise, the indiscriminate enactment of legislation enlarging its appellate jurisdiction would unnecessarily burden the Court. 24 We perforce have to likewise reject the supposed inconsistency of the ruling in First Lepanto Ceramics and some statements in Yabut and Alba, not only because of the difference in the factual settings, but also because those isolated cryptic statements in Yabut and Alba should best be clarified in the adjudication on the merits of this case. By way of anticipation, that will have to be undertaken by the proper court of competent jurisdiction. Furthermore, in addition to our preceding discussion on whether Section 27 of Republic Act No. 6770 expanded the jurisdiction of this Court without its advice and consent, private respondent's position paper correctly yields the legislative background of Republic Act No. 6770. On September 26, 1989, the Conference Committee Report on S.B. No. 453 and H.B. No. 13646, setting forth the new version of what would later be Republic Act No. 6770, was approved on second reading by the House of Representatives. 25 The Senate was informed of the approval of the final version of the Act on October 2, 1989 26 and the same was thereafter enacted into law by President Aquino on November 17, 1989. Submitted with said position paper is an excerpt showing that the Senate, in the deliberations on the procedure for appeal from the Office of the Ombudsman to this Court, was aware of the provisions of Section 30, Article III of the Constitution. It also reveals that Senator Edgardo Angara, as a co-author and the principal sponsor of S.B. No. 543 admitted that the said provision will expand this Court's jurisdiction, and that the Committee on Justice and Human Rights had not consulted this Court on the matter, thus: INTERPELLATION OF SENATOR SHAHANI xxx xxx xxx Thereafter, with reference to Section 22(4) which provides that the decisions of the Office of the Ombudsman may be appealed to the Supreme Court, in reply to Senator Shahani's query whether the Supreme Court would agree to such provision in the light of Section 30, Article VI of the Constitution which requires its advice and concurrence in laws increasing its appellate jurisdiction, Senator Angara informed that the Committee has not yet consulted the Supreme Court regarding the matter. He

agreed that the provision will expand the Supreme Court's jurisdiction by allowing appeals through petitions for review, adding that they should be appeals on certiorari. 27 There is no showing that even up to its enactment, Republic Act No. 6770 was ever referred to this Court for its advice and consent. 28 VI As a consequence of our ratiocination that Section 27 of Republic Act No. 6770 should be struck down as unconstitutional, and in line with the regulatory philosophy adopted in appeals from quasi-judicial agencies in the 1997 Revised Rules of Civil Procedure, appeals from decisions of the Office of the Ombudsman in administrative disciplinary cases should be taken to the Court of Appeals under the provisions of Rule 43. There is an intimation in the pleadings, however, that said Section 27 refers to appellate jurisdiction which, being substantive in nature, cannot be disregarded by this Court under its rule-making power, especially if it results in a diminution, increase or modification of substantive rights. Obviously, however, where the law is procedural in essence and purpose, the foregoing consideration would not pose a proscriptive issue against the exercise of the rule-making power of this Court. This brings to fore the question of whether Section 27 of Republic Act No. 6770 is substantive or procedural. It will be noted that no definitive line can be drawn between those rules or statutes which are procedural, hence within the scope of this Court's rule-making power, and those which are substantive. In fact, a particular rule may be procedural in one context and substantive in another. 29 It is admitted that what is procedural and what is substantive is frequently a question of great difficulty. 30 It is not, however, an insurmountable problem if a rational and pragmatic approach is taken within the context of our own procedural and jurisdictional system. In determining whether a rule prescribed by the Supreme Court, for the practice and procedure of the lower courts, abridges, enlarges, or modifies any substantive right, the test is whether the rule really regulates procedure, that is, the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for a disregard or infraction of them. 31 If the rule takes away a vested right, it is no; procedural. If the rule creates a right such as the right to appeal, it may be classified as a substantive matter; but if it operates as a means of implementing an existing right then the rule deals merely with procedure. 32 In the situation under consideration, a transfer by the Supreme Court, in the exercise of its rule-making power, of pending cases involving a review of decisions of the Office of the Ombudsman in administrative disciplinary actions to the Court of Appeals which shall now be vested with exclusive appellate jurisdiction thereover, relates to procedure only. 33 This is so because it is not the right to appeal of an aggrieved party which is affected by the law. That right has been preserved. Only the procedure by which the appeal is to be made or decided has been changed. The rationale for this is that no litigant has a vested right in a particular remedy, which may be changed by substitution without impairing vested rights, hence he can have none in rules of procedure which relate to the remedy. 34 Furthermore, it cannot be said that the transfer of appellate jurisdiction to the Court

of Appeals in this case is an act of creating a new right of appeal because such power of the Supreme Court to transfer appeals to subordinate appellate courts is purely a procedural and not a substantive power. Neither can we consider such transfer as impairing a vested right because the parties have still a remedy and still a competent tribunal to administer that remedy. 35 Thus, it has been generally held that rules or statutes involving a transfer of cases from one court to another, are procedural and remedial merely and that, as such, they are applicable to actions pending at the time the statute went into effect 36 or, in the case at bar, when its invalidity was declared. Accordingly, even from the standpoint of jurisdiction ex hypothesi, the validity of the transfer of appeals in said cases to the Court of Appeals can be sustained. WHEREFORE, Section 27 of Republic Act No. 6770 (Ombudsman Act of 1989), together with Section 7, Rule III of Administrative Order No. 07 (Rules of Procedure of the Office of the Ombudsman), and any other provision of law or issuance implementing the aforesaid Act and insofar as they provide for appeals in administrative disciplinary cases from the Office of the Ombudsman to the Supreme Court, are hereby declared INVALID and of no further force and effect. The instant petition is hereby referred and transferred to the Court of Appeals for final disposition, with said petition to be considered by the Court of Appeals pro hoc vice as a petition for review under Rule 43, without prejudice to its requiring the parties to submit such amended or supplemental pleadings and additional documents or records as it may deem necessary and proper. SO ORDERED.

MANIAGO V. CA MENDOZA, J.: Petitioner Ruben Maniago was the owner of shuttle buses which were used in transporting employees of the Texas Instruments, (Phils.), Inc. from Baguio City pLoakan, Baguio City.roper to its plant site at the Export Processing Authority in On January 7, 1990, one of his buses figured in a vehicular accident with a passenger jeepney owned by private respondent Alfredo Boado along Loakan Road, Baguio City. As a result of the accident, a criminal case for reckless imprudence resulting in damage to property and multiple physical injuries was filed on March 2, 1990 against petitioner's driver, Herminio Andaya, with the Regional Trial Court of Baguio City, Branch III, where it was docketed as Criminal Case No. 7514-R. A month later, on April 19, 1990, a civil case for damages was filed by private respondent Boado against petitioner himself. The complaint, docketed as Civil Case No. 2050-R, was assigned to Branch IV of the same court. Petitioner moved for the suspension of the proceedings in the civil case against him, citing the pendency of the criminal case against his driver. But the trial court, in its order dated August 30, 1991, denied petitioner's motion on the ground that pursuant to the Civil Code, the action could proceed independently of the criminal action, in addition to the fact that the petitioner was not the accused in the criminal case. Petitioner took the matter on certiorari and prohibition to the Court of Appeals, maintaining that the civil action could not proceed independently of the criminal case because no reservation of the right to bring it separately had been made in the criminal case. On January 31, 1992, the Court of Appeals dismissed his petition on the authority of Garcia v. Florido,1 and Abellana v. Marave,2 which it held allowed a civil action for damages to be filed independently of the criminal action even though no reservation to file the same has been made. Therefore, it was held, the trial court correctly denied petitioner's motion to suspend the proceedings in the civil case.3 Hence this petition for review on certiorari. There is no dispute that private respondent, as offended party in the criminal case, did not reserve the right to bring a separate civil action, based on the same accident, either against the driver, Herminio Andaya, or against the latter's employer, herein petitioner Ruben Maniago. The question is whether despite the absence of such reservation, private respondent may nonetheless bring an action for damages against petitioner under the following provisions of the Civil Code: Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasidelict and is governed by the provisions of this Chapter. Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. .... Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. Art. 2177 states that responsibility for fault or negligence under the above-quoted

provisions is entirely separate and distinct from the civil liability arising from negligence under the Revised Penal Code. However, Rule III of the Revised Rules of Criminal Procedure, while reiterating that a civil action under these provisions of the Civil Code may be brought separately from the criminal action, provides that the right to bring it must be reserved. This Rule reads: Sec. I. Institution of criminal and civil actions. - When a criminal action is instituted, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his right to institute it separately, or institutes the civil action prior to the criminal action. Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused. .... The reservation of the right to institute the separate civil actions shall be made before the prosecution starts to present its evidence and under circumstances affording the offended party a reasonable opportunity to make such reservation. Sec. 3. When civil action may proceed independently. - In the cases provided for in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action which has been reserved may be brought by the offended party, shall proceed independently of the criminal action, and shall require only a preponderance of evidence. Based on these provisions, petitioner argues that the civil action against him was impliedly instituted in the criminal action previously filed against his employee because private respondent did not reserve his right to bring this action separately. (The records show that while this case was pending in the Court of Appeals, the criminal action was dismissed on July 10, 1992 for failure of the prosecution to file a formal offer of its evidence, with the consequence that the prosecution failed to prosecute its case. Accordingly, it seems to be petitioner's argument that since the civil action to recover damages was impliedly instituted with the criminal action, the dismissal of the criminal case brought with it the dismissal of the civil action.) Private respondent admits that he did not reserve the right to institute the present civil action against Andaya's employer. He contends, however, that the rights provided in Arts. 2176 and 2177 of the Civil Code are substantive rights and, as such, their enforcement cannot be conditioned on a reservation to bring the action to enforce them separately. Private respondent cites in support of his position statements made in Abellana v. Marave,4 Tayag v. Alcantara,5 Madeja v. Caro,6 and Jarantilla v. Court of Appeals,7 to the effect that the requirement to reserve the civil action is substantive in character and, therefore, is beyond the rule making power of this Court under the Constitution.8 After considering the arguments of the parties, we have reached the conclusion that the right to bring an action for damages under the Civil Code must be reserved as required by Rule III, 1, otherwise it should be dismissed. I. A. To begin with, 1 quite clearly requires that a reservation must be made to institute separately all civil actions for the recovery of civil liability, otherwise they

will be deemed to have been instituted with the criminal case. Such civil actions are not limited to those which arise "from the offense charged," as originally provided in Rule III before the amendment of the Rules of Court in 1988. In other words the right of the injured party to sue separately for the recovery of the civil liability whether arising from crimes (ex delicto) or from quasi delict under Art. 2176 of the Civil Code must be reserved otherwise they will be deemed instituted with the criminal action.9 Thus Rule III, 1 of the Revised Rules of Criminal Procedure expressly provides: Sec. 1. Institution of criminal and civil actions. - When a criminal action is instituted, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his right to institute it separately, or institutes the civil action prior to the criminal action. Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused. B. There are statements in some cases implying that Rule III, 1 and 3 are beyond the rule making power of the Supreme Court under the Constitution. A careful examination of the cases, however, will show that approval of the filing of separate civil action for damages even though no reservation of the right to institute such civil action had been reserved rests on considerations other than that no reservation is needed. In Garcia v. Florido10 the right of an injured person to bring an action for damages even if he did not make a reservation of his action in the criminal prosecution for physical injuries through reckless imprudence was upheld on the ground that by bringing the civil action the injured parties had "in effect abandoned their right to press for recovery of damages in the criminal case. . . . Undoubtedly an offended party loses his right to intervene in the prosecution of a criminal case, not only when he has waived the civil action or expressly reserved his right to institute, but also when he has actually instituted the civil action. For by either of such actions his interest in the criminal case has disappeared."11 The statement that Rule III, 1 of the 1964 Rules is "an unauthorized amendment of substantive law, Articles 32, 33, and 34 of the Civil Code, which do not provide for the reservation" is not the ruling of the Court but only an aside, quoted from an observation made in the footnote of a decision in another case.12 Another case cited by private respondent in support of his contention that the civil case need not be reserved in the criminal case is Abellana v. Marave13 in which the right of persons injured in a vehicular accident to bring a separate action for damages was sustained despite the fact that the right to bring it separately was not reserved. But the basis of the decision in that case was the fact that the filing of the civil case was equivalent to a reservation because it was made after the decision of the City Court convicting the accused had been appealed. Pursuant to Rule 123, 7 of the 1964 Rules, this had the effect of vacating the decision in the criminal case so that technically, the injured parties could still reserve their right to institute a civil action while the criminal case was pending in the Court of First Instance. The statement "the right of a party to sue for damages independently of the criminal action is a substantive right which cannot be frittered away by a construction that could render

it nugatory" without raising a "serious constitutional question"14 was thrown in only as additional support for the ruling of the Court. On the other hand, in Madeja v. Caro15 the Court held that a civil action for damages could proceed even while the criminal case for homicide through reckless imprudence was pending and did not have to await the termination of the criminal case precisely because the widow of the deceased had reserved her right to file a separate civil action for damages. We do not see how this case can lend support to the view of private respondent. In Jarantilla v. Court of Appeals16 the ruling is that the acquittal of the accused in the criminal case for physical injuries through reckless imprudence on the ground of reasonable doubt is not a bar to the filing of an action for damages even though the filing of the latter action was not reserved. This is because of Art. 29 of the Civil Code which provides that "when an accused is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted." This ruling obviously cannot apply to this case because the basis of the dismissal of the criminal case against the driver is the fact that the prosecution failed to prove its case as a result of its failure to make a formal offer of its evidence. Rule 132, 34 of the Revised Rules on Evidence provides that "The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified." To the same effect are the holdings in Tayag, Sr. v. Alcantara,17 Bonite v. Zosa18 and Diong Bi Chu v. Court of Appeals.19 Since Art. 29 of the Civil Code authorizes the bringing of a separate civil action in case of acquittal on reasonable doubt and under the Revised Rules of Criminal procedure such action is not required to be reserved, it is plain that the statement in these cases that to require a reservation to be made would be to sanction an unauthorized amendment of the Civil Code provisions is a mere dictum. As already noted in connection with the case of Garcia v. Florido, that statement was not the ruling of the Court but only an observation borrowed from another case.20 The short of it is that the rulings in these cases are consistent with the proposition herein made that, on the basis of Rule III, 1-3, a civil action for the recovery of civil liability is, as a general rule, impliedly instituted with the criminal action, except only (1) when such action arising from the same act or omission, which is the subject of the criminal action, is waived; (2) the right to bring it separately is reserved or (3) such action has been instituted prior to the criminal action. Even if an action has not been reserved or it was brought before the institution of the criminal case, the acquittal of the accused will not bar recovery of civil liability unless the acquittal is based on a finding that the act from which the civil liability might arise did not exist because of Art. 29 of the Civil Code. Indeed the question on whether the criminal action and the action for recovery of the civil liability must be tried in a single proceeding has always been regarded a matter of procedure and, since the rule making power has been conferred by the Constitution on this Court, it is in the keeping of this Court. Thus the subject was provided for by G.O. No. 58, the first Rules of Criminal Procedure under the American rule. Sec. 107 of these Orders provided: The privileges now secured by law to the person claiming to be injured by the

commission of an offense to take part in the prosecution of the offense and to recover damages for the injury sustained by reason of the same shall not be held to be abridged by the provisions of this order; but such person may appear and shall be heard either individually or by attorney at all stages of the case, and the court upon conviction of the accused may enter judgment against him for the damages occasioned by his wrongful act. It shall, however, be the duty of the promotor fiscal to direct the prosecution, subject to the right of the person injured to appeal from any decision of the court denying him a legal right. This was superseded by the 1940 Rules of Court, Rule 106 of which provided: Sec. 15. Intervention of the offended party in criminal action. - Unless the offended party has waived the civil action or expressly reserved the right to institute it after the termination of the criminal case, and subject to the provisions of section 4 hereof, he may intervene, personally or by attorney, in the prosecution of the offense. This Rule was amended thrice, in 1964, in 1985 and lastly in 1988. Through all the shifts or changes in policy as to the civil action arising from the same act or omission for which a criminal action is brought, one thing is clear: The change has been effected by this Court. Whatever contrary impression may have been created by Garcia v. Florido21 and its progeny22 must therefore be deemed to have been clarified and settled by the new rules which require reservation of the right to recover the civil liability, otherwise the action will be deemed to have been instituted with the criminal action. Contrary to private respondent's contention, the requirement that before a separate civil action may be brought it must be reserved does not impair, diminish or defeat substantive rights, but only regulates their exercise in the general interest of orderly procedure. The requirement is merely procedural in nature. For that matter the Revised Penal Code, by providing in Art. 100 that any person criminally liable is also civilly liable, gives the offended party the right to bring a separate civil action, yet no one has ever questioned the rule that such action must be reserved before it may be brought separately. Indeed, the requirement that the right to institute actions under the Civil Code separately must be reserved is not incompatible with the independent character of such actions. There is a difference between allowing the trial of civil actions to proceed independently of the criminal prosecution and requiring that, before they may be instituted at all, a reservation to bring them separately must be made. Put in another way, it is the conduct of the trial of the civil action - not its institution through the filing of a complaint - which is allowed to proceed independently of the outcome of the criminal case. C. There is a practical reason for requiring that the right to bring an independent civil action under the Civil Code separately must be reserved. It is to avoid the filing of more than one action for the same act or omission against the same party. Any award made against the employer, whether based on his subsidiary civil liability under Art. 103 of the Revised Penal Code or his primary liability under Art. 2180 of the Civil Code, is ultimately recoverable from the accused.23 In the present case, the criminal action was filed against the employee, bus driver. Had the driver been convicted and found insolvent, his employer would have been held subsidiarily liable for damages. But if the right to bring a separate civil action

(whether arising from the crime or from quasi delict) is reserved, there would be no possibility that the employer would be held liable because in such a case there would be no pronouncement as to the civil liability of the accused. In such a case the institution of a separate and independent civil action under the Civil Code would not result in the employee being held liable for the same act or omission. The rule requiring reservation in the end serves to implement the prohibition against double recovery for the same act or omission. 24 As held in Barredo v. Garcia,25 the injured party must choose which of the available causes of action for damages he will bring. If he fails to reserve the filing of a separate civil action he will be deemed to have elected to recover damages from the bus driver on the basis of the crime. In such a case his cause of action against the employer will be limited to the recovery of the latter's subsidiary liability under Art. 103 of the Revised Penal Code. II. Nor does it matter that the action is against the employer to enforce his vicarious liability under Art. 2180 of the Civil Code. Though not an accused in the criminal case, the employer is very much a party, as long as the right to bring or institute a separate action (whether arising from crime or from quasi delict) is not reserved.26 The ruling that a decision convicting the employee is binding and conclusive upon the employer "not only with regard to its civil liability but also with regard to its amount because the liability of an employer cannot be separated but follows that of his employee"27 is true not only with respect to the civil liability arising from crime but also with respect to the civil liability under the Civil Code. Since whatever is recoverable against the employer is ultimately recoverable by him from the employee, the policy against double recovery requires that only one action be maintained for the same act or omission whether the action is brought against the employee or against his employer. Thus in Dulay v. Court of Appeals28 this Court held that an employer may be sued under Art. 2180 of the Civil Code and that the right to bring the action did not have to be reserved because, having been instituted before the criminal case against the employee, the filing of the civil action against the employer constituted an express reservation of the right to institute it separately. WHEREFORE, the decision appealed from is REVERSED and the complaint against petitioner is DISMISSED. SO ORDERED.

MAGALLANES V. SUN YAT SEN SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari seeking to reverse the Resolution of the Court of Appeals (Seventh Division) dated October 29, 2001 in CA-G.R. SP No. 67068; its Resolution of May 8, 2003 denying the motion for reconsideration; and its Resolution of October 10, 2003, denying the motion for reconsideration of the Resolution of May 8, 2003. The facts of the case are: Azucena Magallanes, Evelyn Bacolod, Judith Cotecson (represented by her heirs), petitioners, Grace Gonzales, and Bella Gonzales were all employed as teachers in the Sun Yat Sen Elementary School in Surigao City. Paz Go and Elena Cubillan are principals of the said school. Willy Ang Gan Teng and Benito Ang are its directors, while Teotimo Tan is the school treasurer. They are all respondents herein. On May 22, 1994, respondents terminated the services of petitioners. Thus, on August 3, 1994, they filed with the Sub-Regional Arbitration Branch No. X, National Labor Relations Commission (NLRC), Butuan City, complaints against respondents for illegal dismissal, underpayment of wages, payment of backwages, 13th month pay, ECOLA, separation pay, moral damages, and attorneys fees. Likewise, on August 22, 1994, petitioner Cotecson filed a separate complaint praying for the same reliefs. On June 3, 1995, Labor Arbiter Rogelio P. Legaspi rendered a Decision declaring that petitioners were illegally dismissed from the service and ordering respondents to reinstate them to their former or equivalent positions without loss of seniority rights, and to pay them their backwages, salary differential, 13th month pay differential, and service incentive leave benefits "as of June 20, 1995." Respondents were likewise directed to pay petitioners moral and exemplary damages. On appeal by respondents, the NLRC, in its Decision dated February 20, 1996, reversed the Arbiters judgment, holding that petitioners are contractual employees and that respondents merely allowed their contracts to lapse. Petitioners timely filed a motion for reconsideration, but it was denied by the NLRC in its Resolution dated April 17, 1996. Petitioners then filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 50531. On October 28, 1999, the Court of Appeals (Special Sixteenth Division) rendered its Decision,1 the dispositive portion of which reads: WHEREFORE, the instant petition is GRANTED with respect to petitioners Cotecson, Bacolod, and Magallanes, the questioned Resolutions of the NLRC dated February 20 and April 1996 are hereby REVERSED and SET ASIDE as to them. The Decision dated July 3, 1995 of the Labor Arbiter is hereby REINSTATED as to the said petitioners except as to the award of moral and exemplary damages which is hereby DELETED. SO ORDERED. The Court of Appeals (Special Sixteenth Division) ruled that in lieu of reinstatement, petitioners Cotecson, Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one month salary and backwages computed from the time of their

illegal dismissal up to the time of the promulgation of its Decision." With respect to Bella Gonzales and Grace Gonzales, the Court of Appeals found that that they have not acquired the status of regular employees having rendered only two years of service. Consequently, their dismissal from the service is valid. Under the Manual of Regulations for Private Schools, only full-time teachers who have rendered three (3) years of consecutive service shall be considered permanent. Respondents filed a motion for reconsideration but it was denied by the appellate court in its Resolution dated January 13, 2000. Respondents then filed with this Court a petition for certiorari, docketed as G.R. No. 142270. However, it was dismissed for lack of merit in a Minute Resolution dated April 12, 2000. Their motion for reconsideration was denied with finality by this Court on July 19, 2000. Meanwhile, on October 4, 2000, petitioners filed with the Labor Arbiter a motion for execution of his Decision as modified by the Court of Appeals. In an Order dated January 8, 2001, the Labor Arbiter computed the petitioners monetary awards reckoned from the time of their illegal dismissal in June 1994 up to October 29, 1999, pursuant to the Decision of the Court of Appeals (Special Sixteenth Division) in CA-G.R. SP No. 50531. Respondents interposed an appeal to the NLRC (docketed as NLRC Case No. M-006176-2001), contending that the computation should only be up to June 20, 1995 (the date indicated in the Labor Arbiters Decision). In an Order dated March 30, 2001, the NLRC modified the Labor Arbiters computation and ruled that the monetary awards due to petitioners should be computed from June 1994 up to June 20, 1995. Petitioners then filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 67068, raffled off to the Seventh Division. However, in its Resolution of October 29, 2001, the petition was dismissed outright for their failure to attach to their petition copies of the pleadings filed with the Labor Arbiter, thus: No copies of the pleadings filed before the Labor Arbiter appear to have been attached to the petition in violation of the provisions of Section 1, Rule 65 and Section 3, Rule 46 of the 1997 Rules of Civil Procedure, as amended, which requires that the petition: x x x shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution or ruling subject thereof, such material portions of the record as are referred to therein and other documents relevant or pertinent thereto x x x WHEREFORE, the instant petition is DISMISSED OUTRIGHT pursuant to Section 3, Rule 46 of the 1997 Rules of Civil Procedure. SO ORDERED. Petitioners filed a motion for reconsideration, but they erroneously indicated therein the case number as CA-G.R. SP No. 50531, instead of CA-G.R. SP No. 67068. Their error was compounded by stating that the petition was with the Special Sixteenth Division, instead of the Seventh Division. As a result, the Special Sixteenth Division issued a Minute Resolution dated April 22, 2002 which merely noted the motion, thus: The petitioners motion for reconsideration dated November 22, 2001 and filed by

registered mail on November 26, 2001 is merely noted since there was no October 29, 2001 resolution that was issued in this case which the motion for reconsideration seeks to be reconsidered. On realizing their mistake, petitioners then filed with the Seventh Division a Motion to Transfer The Case to it. In a Resolution promulgated on May 8, 2003, the Seventh Division denied petitioners Motion To Transfer The Case on the ground, among others, that the motion is "non-existent" since it does not bear the correct case number, hence, could not be attached to the records of CA-G.R. SP No. 67068. Unfazed, petitioners filed a motion for reconsideration, but it was denied by the Seventh Division in its Resolution of October 10, 2003. At first glance, the petition before us appears to be a futile attempt to revive an extinct motion denied by the appellate court (Seventh Division) by reason of technicality. But in the interest of speedy administration of justice, we should not only delve in technicalities. We shall then address these two issues: (1) whether the Court of Appeals (Seventh Division) erred in holding that affixing a wrong docket number on a motion renders it "non-existent;" and (2) whether the issuance by the NLRC of the Order dated March 30, 2001, amending the amounts of separation pay and backwages, awarded by the Court of Appeals (Sixteenth Division) to petitioners and computed by the Labor Arbiter, is tantamount to grave abuse of discretion amounting to lack or excess of jurisdiction. On the first issue, the Court of Appeals (Seventh Division) is correct when it ruled that petitioners motion for reconsideration of its Resolution dated October 29, 2001 in CA-G.R. SP No. 67068 is "non-existent." Petitioners counsel placed a wrong case number in their motion, indicating CA-G.R. SP No. 50531 (Special Sixteenth Division) instead of CA-G.R. SP No. 50531 (Seventh Division), the correct case number. In Llantero v. Court of Appeals,2 we ruled that where a pleading bears an erroneous docket number and thus "could not be attached to the correct case," the said pleading is, for all intents and purposes, "non-existent." As aptly stated by the Special Sixteenth Division, it has neither the duty nor the obligation to correct the error or to transfer the case to the Seventh Division. In Mega Land Resources and Development Corporation v. C-E Construction Corporation,3 which likewise involves a wrong docket number in a motion, we ruled that the duty to correct the mistake falls solely on the party litigant whose fault caused the anomaly. To hold otherwise would be to impose upon appellate courts the burden of being nannies to appellants, ensuring the absence of pitfalls that hinder the perfection of petitions and appeals. Strictly speaking, it is a dogma that the mistake or negligence of counsel binds the clients4 and appellate courts have no share in that burden. However, we opt for liberality in the application of the rules to the instant case in light of the following considerations. First, the rule that negligence of counsel binds the client may be relaxed where adherence thereto would result in outright deprivation of the clients liberty or property or where the interests of justice so require.5 Second, this Court is not a slave of technical rules, shorn of judicial discretion in rendering justice, it is guided by the norm that on the balance, technicalities take a backseat against substantive rights. Thus, if the application of the rules would tend to frustrate rather than promote justice, it is always within this

Courts power to suspend the rules or except a particular case from its application.6 This case involving a labor dispute has dragged on for over a decade now. Petitioners have waited too long for what is due them under the law. One of the original petitioners, Judith Cotecson, died last September 28, 2003 and has been substituted by her heirs. It is time to write finis to this controversy. The Labor Code was promulgated to promote the welfare and well-being of the working man. Its spirit and intent mandate the speedy administration of justice, with least attention to technicalities but without sacrificing the fundamental requisites of due process.7 We recall that in CA-G.R. SP No. 50531, the Court of Appeals (Special Sixteenth Division) held that petitioners Cotecson, Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one month salary and backwages computed from the time of their illegal dismissal up to the time of the promulgation of this decision." This Decision was promulgated on October 28, 1999. The respondents motion for reconsideration was denied by the Court of Appeals (Former Special Sixteenth Division) on January 13, 2000. On April 12, 2000, this Court dismissed respondents petition for certiorari, docketed as G.R. No. 142270, and denied their motion for reconsideration with finality as early as July 19, 2000. Clearly, the Decision in CA-G.R. SP No. 50531 had long become final and executory. The Labor Arbiter computed the monetary awards due to petitioners corresponding to the period from June 1994 to October 28, 1999, in accordance with the Decision of the Court of Appeals (Special Sixteenth Division). The award for backwages and money claims is in the total sum of P912,086.15. It does not escape our attention that upon respondents appeal from the Labor Arbiters Order computing the benefits due to petitioners, the NLRC modified the final and executory Decision of the Court of Appeals (Special Sixteenth Division) when it decreed that the monetary award due to petitioners should be computed up to June 20, 1995 only (not October 28, 1999), thus, amounting to a lesser amount of P147,673.16. We sustain petitioners contention that the NLRC, in modifying the award of the Court of Appeals, committed grave abuse of discretion amounting to lack or excess of jurisdiction. Quasi-judicial agencies have neither business nor power to modify or amend the final and executory Decisions of the appellate courts. Under the principle of immutability of judgments, any alteration or amendment which substantially affects a final and executory judgment is void for lack of jurisdiction.8 We thus rule that the Order dated March 30, 2001 of the NLRC directing that the monetary award should be computed from June 1994, the date petitioners were dismissed from the service, up to June 20, 1995 only, is void. WHEREFORE, we GRANT the petition. The challenged Resolutions dated October 29, 2001, May 8, 2003, and October 10, 2003 in CA-G.R. SP No. 67068 are REVERSED. The Order of the NLRC dated March 30, 2001 in NLRC Case No. M006176-2001 is SET ASIDE. The Order of the Labor Arbiter dated January 8, 2001 is REINSTATED. SO ORDERED.