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SOCIAL LEGISLATION

Constitutional Provisions on Social Justice

Article II : Declaration of Policies and State Principles


Section 9: Promotion of just and dynamic social order
The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty
through policies that provide adequate social services, promote full
employment, a rising standard of living, and an improved quality of life for
all.
Section 18: Labor as a primary social economic force
The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.

Article III : Bill of Rights


Section 8: Right to form labor unions, associations or societies
The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary
to law shall not be abridged.
Section 18(2): Prohibition of involuntary servitude
(2) No involuntary servitude in any form shall exist except as a punishment
for a crime whereof the party shall have been duly convicted.

Article VI : The Legislative Department


Section 5(1): Congressional representation of marginalized sectors
(1) The House of Representatives shall be composed of not more than two
hundred and fifty members, unless otherwise fixed by law, who shall be
elected from legislative districts apportioned among the provinces, cities,
and the Metropolitan Manila area in accordance with the number of their
respective inhabitants, and on the basis of a uniform and progressive ratio,
and those who, as provided by law, shall be elected through a party-list
system of registered national, regional, and sectoral parties or organizations.

Article IX(B) : Constitutional Commissions Civil Service Commission


Section 2(3): Removal for just cause
No officer or employee of the civil service shall be removed or suspended
except for cause provided by law.
Section 2(5): Right to self-organization
The right to self-organization shall not be denied to government employees.
Section 2(6): Protection to government temporary employees
Temporary employees of the Government shall be given such protection as
may be provided by law.

Section 5: Salary/Compensation standardization


The Congress shall provide for the standardization of compensation of
government officials and employees, including those in government-owned
or controlled corporations with original charters, taking into account the
nature of the responsibilities pertaining to, and the qualifications required
for, their positions.

Article XII : National Economy and Patrimony


Section 1: Equitable distribution of opportunities, income and wealth
The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of
goods and services produced by the nation for the benefit of the people; and
an expanding productivity as the key to raising the quality of life for all,
especially the underprivileged.
Section 14: Promotion of talents, skills, craftsmanship and profession
The sustained development of a reservoir of national talents consisting of
Filipino scientists, entrepreneurs, professionals, managers, high-level
technical manpower and skilled workers and craftsmen in all fields shall be
promoted by the State. The State shall encourage appropriate technology
and regulate its transfer for the national benefit.

Article XIII : Social Justice and Human Rights


Section 1: Protection of human dignity, reduction and removal of inequities
The Congress shall give highest priority to the enactment of measures that
protect and enhance the right of all the people to human dignity, reduce
social, economic, and political inequalities, and remove cultural inequities by
equitably diffusing wealth and political power for the common good.
Section 2: Promotion of social justice
The promotion of social justice shall include the commitment to create
economic opportunities based on freedom of initiative and self-reliance.
To this end, the State shall regulate the acquisition, ownership, use, and
disposition of property and its increments.
Section 3: Full protection to labor, equal employment opportunities
The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility between
workers and employers and the preferential use of voluntary modes in
settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns to investments, and to
expansion and growth.
Section 4: Undertaking of agrarian reform
The State shall, by law, undertake an agrarian reform program founded on
the right of farmers and regular farmworkers who are landless, to own
directly or collectively the lands they till or, in the case of other farmworkers,
to receive a just share of the fruits thereof. To this end, the State shall
encourage and undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as the Congress
may prescribe, taking into account ecological, developmental, or equity
considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary landsharing.
Section 5: Right of farmers, farmworkers and landowners
The State shall recognize the right of farmers, farmworkers, and landowners,
as well as cooperatives, and other independent farmers organizations to
participate in the planning, organization, and management of the program,
and shall provide support to agriculture through appropriate technology and
research, and adequate financial, production, marketing, and other support
services.
Section 6: Disposition and utilization of other natural resources
The State shall apply the principles of agrarian reform or stewardship,
whenever applicable in accordance with law, in the disposition or utilization
of other natural resources, including lands of the public domain under lease
or concession suitable to agriculture, subject to prior rights, homestead
rights of small settlers, and the rights of indigenous communities to their
ancestral lands.
The State may resettle landless farmers and farmworkers in its own
agricultural estates which shall be distributed to them in the manner
provided by law.
Section 7: Right of subsistence fisherfolk
The State shall protect the rights of subsistence fishermen, especially of local
communities, to the preferential use of the communal marine and fishing
resources, both inland and offshore. It shall provide support to such
fishermen through appropriate technology and research, adequate financial,
production, and marketing assistance, and other services. The State shall
also protect, develop, and conserve such resources. The protection shall
extend to offshore fishing grounds of subsistence fishermen against foreign
intrusion. Fishworkers shall receive a just share from their labor in the
utilization of marine and fishing resources.
Section 8: Industrialization, incentives to investment in CARP
The State shall provide incentives to landowners to invest the proceeds of
the agrarian reform program to promote industrialization, employment
creation, and privatization of public sector enterprises. Financial instruments
used as payment for their lands shall be honored as equity in enterprises of
their choice.

Section 9: Urban land reform and housing


The State shall, by law, and for the common good, undertake, in cooperation
with the private sector, a continuing program of urban land reform and
housing which will make available at affordable cost, decent housing and
basic services to underprivileged and homeless citizens in urban centers and
resettlement areas. It shall also promote adequate employment opportunities
to such citizens. In the implementation of such program the State shall
respect the rights of small property owners.
Section 14: Welfare of working women
The State shall protect working women by providing safe and healthful
working conditions, taking into account their maternal functions, and such
facilities and opportunities that will enhance their welfare and enable them
to realize their full potential in the service of the nation.

Cases for Study on Social Justice

Social justice is neither communism, nor despotism, nor atomism,


nor anarchy, but the humanization of laws and the equalization of
social and economic forces by the State, Maximo Calalang versus
A.D. Williams, G.R. No. 47800, 02 Dec. 1940).
[G.R. No. 47800. December 2, 1940.]
MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.
Maximo Calalang in his own behalf.
Solicitor General Ozaeta and Assistant Solicitor General Amparo for
respondents Williams, Fragante and Bayan
City Fiscal Mabanag for the other respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No.
648; DELEGATION OF LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF
PUBLIC WORKS AND SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS
TO PROMULGATE RULES AND REGULATIONS. The provisions of section 1 of
Commonwealth Act No. 648 do not confer legislative power upon the Director
of Public Works and the Secretary of Public Works and Communications. The
authority therein conferred upon them and under which they promulgated
the rules and regulations now complained of is not to determine what public
policy demands but merely to carry out the legislative policy laid down by
the National Assembly in said Act, to wit, "to promote safe transit upon, and
avoid obstructions on, roads and streets designated as national roads by acts
of the National Assembly or by executive orders of the President of the
Philippines" and to close them temporarily to any or all classes of traffic
"whenever the condition of the road or the traffic thereon makes such action
necessary or advisable in the public convenience and interest." The
delegated power, if at all, therefore, is not the determination of what the law
shall be, but merely the ascertainment of the facts and circumstances upon
which the application of said law is to be predicated. To promulgate rules and
regulations on the use of national roads and to determine when and how long
a national road should be closed to traffic, in view of the condition of the road
or the traffic thereon and the requirements of public convenience and
interest, is an administrative function which cannot be directly discharged by

the National Assembly. It must depend on the discretion of some other


government official to whom is confided the duty of determining whether the
proper occasion exists for executing the law. But it cannot be said that the
exercise
of
such
discretion
is
the
making
of
the
law.
2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY.
Commonwealth Act No. 548 was passed by the National Assembly in the
exercise of the paramount police power of the state. Said Act, by virtue of
which the rules and regulations complained of were promulgated, aims to
promote safe transit upon and avoid obstructions on national roads, in the
interest and convenience of the public. In enacting said law, therefore, the
National Assembly was prompted by considerations of public convenience
and welfare. It was inspired by a desire to relieve congestion of traffic, which
is, to say the least, a menace to public safety. Public welfare, then, lies at the
bottom of the enactment of said law, and the state in order to promote the
general welfare may interfere with personal liberty, with property, and with
business and occupations. Persons and property may be subjected to all
kinds of restraints and burdens, in order to secure the general comfort,
health, and prosperity of the state (U.S. v. Gomer Jesus, 31 Phil., 218). To this
fundamental aim of our Government the rights of the individual are
subordinated. Liberty is a blessing without which life is a misery, but liberty
should not be made to prevail over authority because then society will fall
into anarchy. Neither should authority be made to prevail over liberty
because then the individual will fall into slavery. The citizen should achieve
the required balance of liberty and authority in his mind through education
and, personal discipline, so that there may be established the resultant
equilibrium, which means peace and order and happiness for all. The
moment greater authority is conferred upon the government, logically so
much is withdrawn from the residuum of liberty which resides in the people.
The paradox lies in the fact that the apparent curtailment of liberty is
precisely
the
very
means
of
insuring
its
preservation.
3. ID.; ID.; SOCIAL JUSTICE. Social justice is "neither communism, nor
despotism, nor atomism, nor anarchy," but the humanization of laws and the
equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated.
Social justice means the promotion of the welfare of all the people, the
adoption by the Government of measures calculated to insure economic
stability of all the competent elements of society, through the maintenance
of a proper economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the adoption of
measures legally justifiable, or extra-constitutionally, through the exercise of
powers underlying the existence of all governments on the time-honored
principle of salus populi est suprema lex. Social justice, therefore, must be
founded on the recognition of the necessity of interdependence among
divers and diverse units of a society and of the protection that should be
equally and evenly extended to all groups as a combined force in our social
and economic life, consistent with the fundamental and paramount objective
of the state of promoting the health, comfort, and quiet of all persons, and of
bringing about "the greatest good to the greatest number."

DECISION

LAUREL, J.:

Maximo Calalang, in his capacity as a private citizen and as a taxpayer of


Manila, brought before this court this petition for a writ of prohibition against
the respondents, A. D. Williams, as Chairman of the National Traffic
Commission; Vicente Fragante, as Director of Public Works; Sergio Bayan, as
Acting Secretary of Public Works and Communications; Eulogio Rodriguez, as
Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of Police of
Manila.
It is alleged in the petition that the National Traffic Commission, in its
resolution of July 17, 1940, resolved to recommend to the Director of Public
Works and to the Secretary of Public Works and Communications that animaldrawn vehicles be prohibited from passing along Rosario Street extending
from Plaza Calderon de la Barca to Dasmarias Street, from 7:30 a.m. to
12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue
extending from the railroad crossing at Antipolo Street to Echague Street,
from 7 a.m. to 11 p.m., from a period of one year from the date of the
opening of the Colgante Bridge to traffic; that the Chairman of the National
Traffic Commission, on July 18, 1940 recommended to the Director of Public
Works the adoption of the measure proposed in the resolution
aforementioned, in pursuance of the provisions of Commonwealth Act No.
548 which authorizes said Director of Public Works, with the approval of the
Secretary of Public Works and Communications, to promulgate rules and
regulations to regulate and control the use of and traffic on national roads;
that on August 2, 1940, the Director of Public Works, in his first indorsement
to the Secretary of Public Works and Communications, recommended to the
latter the approval of the recommendation made by the Chairman of the
National Traffic Commission as aforesaid, with the modification that the
closing of Rizal Avenue to traffic to animal-drawn vehicles be limited to the
portion thereof extending from the railroad crossing at Antipolo Street to
Azcarraga Street; that on August 10, 1940, the Secretary of Public Works and
Communications, in his second indorsement addressed to the Director of
Public Works, approved the recommendation of the latter that Rosario Street
and Rizal Avenue be closed to traffic of animal-drawn vehicles, between the
points and during the hours as above indicated, for a period of one year from
the date of the opening of the Colgante Bridge to traffic; that the Mayor of
Manila and the Acting Chief of Police of Manila have enforced and caused to
be enforced the rules and regulations thus adopted; that as a consequence
of such enforcement, all animal-drawn vehicles are not allowed to pass and
pick up passengers in the places above-mentioned to the detriment not only
of
their
owners
but
of
the
riding
public
as
well.
It is contended by the petitioner that Commonwealth Act No. 548 by which
the Director of Public Works, with the approval of the Secretary of Public
Works and Communications, is authorized to promulgate rules and
regulations for the regulation and control of the use of and traffic on national
roads and streets is unconstitutional because it constitutes an undue
delegation of legislative power. This contention is untenable. As was
observed by this court in Rubi v. Provincial Board of Mindoro (39 Phil, 660,
700), "The rule has nowhere been better stated than in the early Ohio case
decided by Judge Ranney, and since followed in a multitude of cases, namely:
The true distinction therefore is between the delegation of power to make
the law, which necessarily involves a discretion as to what it shall be, and
conferring an authority or discretion as to its execution, to be exercised
under and in pursuance of the law. The first cannot be done; to the latter no
valid objection can be made. (Cincinnati, W. & Z. R. Co. v. Commrs. Clinton
County, 1 Ohio St., 88.) Discretion, as held by Chief Justice Marshall in
Wayman v. Southard (10 Wheat., 1) may be committed by the Legislature to
an executive department or official. The Legislature may make decisions of
executive departments or subordinate officials thereof, to whom it has

committed the execution of certain acts, final on questions of fact. (U.S. v.


Kinkead, 248 Fed., 141.) The growing tendency in the decisions is to give
prominence to the necessity of the case."cralaw virtua1aw library
Section
1
of
Commonwealth
follows:jgc:chanrobles.com.ph

Act

No.

548

reads

as

"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads
and streets designated as national roads by acts of the National Assembly or
by executive orders of the President of the Philippines, the Director of Public
Works, with the approval of the Secretary of Public Works and
Communications, shall promulgate the necessary rules and regulations to
regulate and control the use of and traffic on such roads and streets. Such
rules and regulations, with the approval of the President, may contain
provisions controlling or regulating the construction of buildings or other
structures within a reasonable distance from along the national roads. Such
roads may be temporarily closed to any or all classes of traffic by the
Director of Public Works and his duly authorized representatives whenever
the condition of the road or the traffic thereon makes such action necessary
or advisable in the public convenience and interest, or for a specified period,
with
the
approval
of
the
Secretary
of
Public
Works
and
Communications."cralaw
virtua1aw
library
The above provisions of law do not confer legislative power upon the Director
of Public Works and the Secretary of Public Works and Communications. The
authority therein conferred upon them and under which they promulgated
the rules and regulations now complained of is not to determine what public
policy demands but merely to carry out the legislative policy laid down by
the National Assembly in said Act, to wit, "to promote safe transit upon and
avoid obstructions on, roads and streets designated as national roads by acts
of the National Assembly or by executive orders of the President of the
Philippines" and to close them temporarily to any or all classes of traffic
"whenever the condition of the road or the traffic makes such action
necessary or advisable in the public convenience and interest." The
delegated power, if at all, therefore, is not the determination of what the law
shall be, but merely the ascertainment of the facts and circumstances upon
which the application of said law is to be predicated. To promulgate rules and
regulations on the use of national roads and to determine when and how long
a national road should be closed to traffic, in view of the condition of the road
or the traffic thereon and the requirements of public convenience and
interest, is an administrative function which cannot be directly discharged by
the National Assembly. It must depend on the discretion of some other
government official to whom is confided the duty of determining whether the
proper occasion exists for executing the law. But it cannot be said that the
exercise of such discretion is the making of the law. As was said in Lockes
Appeal (72 Pa. 491): "To assert that a law is less than a law, because it is
made to depend on a future event or act, is to rob the Legislature of the
power to act wisely for the public welfare whenever a law is passed relating
to a state of affairs not yet developed, or to things future and impossible to
fully know." The proper distinction the court said was this: "The Legislature
cannot delegate its power to make the law; but it can make a law to delegate
a power to determine some fact or state of things upon which the law makes,
or intends to make, its own action depend. To deny this would be to stop the
wheels of government. There are many things upon which wise and useful
legislation must depend which cannot be known to the law-making power,
and, must, therefore, be a subject of inquiry and determination outside of the
halls of legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmea, G.R. Nos. 46076 and 46077,

promulgated June 12, 1939, and in Pangasinan Transportation v. The Public


Service Commission, G.R. No. 47065, promulgated June 26, 1940, this Court
had occasion to observe that the principle of separation of powers has been
made to adapt itself to the complexities of modern governments, giving rise
to the adoption, within certain limits, of the principle of "subordinate
legislation," not only in the United States and England but in practically all
modern governments. Accordingly, with the growing complexity of modern
life, the multiplication of the subjects of governmental regulations, and the
increased difficulty of administering the laws, the rigidity of the theory of
separation of governmental powers has, to a large extent, been relaxed by
permitting the delegation of greater powers by the legislative and vesting a
larger amount of discretion in administrative and executive officials, not only
in the execution of the laws, but also in the promulgation of certain rules and
regulations
calculated
to
promote
public
interest.
The petitioner further contends that the rules and regulations promulgated
by the respondents pursuant to the provisions of Commonwealth Act No. 548
constitute an unlawful interference with legitimate business or trade and
abridge the right to personal liberty and freedom of locomotion.
Commonwealth Act No. 548 was passed by the National Assembly in the
exercise
of
the
paramount
police
power
of
the
state.
Said Act, by virtue of which the rules and regulations complained of were
promulgated, aims to promote safe transit upon and avoid obstructions on
national roads, in the interest and convenience of the public. In enacting said
law, therefore, the National Assembly was prompted by considerations of
public convenience and welfare. It was inspired by a desire to relieve
congestion of traffic. which is, to say the least, a menace to public safety.
Public welfare, then, lies at the bottom of the enactment of said law, and the
state in order to promote the general welfare may interfere with personal
liberty, with property, and with business and occupations. Persons and
property may be subjected to all kinds of restraints and burdens, in order to
secure the general comfort, health, and prosperity of the state (U.S. v.
Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the
rights of the individual are subordinated. Liberty is a blessing without which
life is a misery, but liberty should not be made to prevail over authority
because then society will fall into anarchy. Neither should authority be made
to prevail over liberty because then the individual will fall into slavery. The
citizen should achieve the required balance of liberty and authority in his
mind through education and personal discipline, so that there may be
established the resultant equilibrium, which means peace and order and
happiness for all. The moment greater authority is conferred upon the
government, logically so much is withdrawn from the residuum of liberty
which resides in the people. The paradox lies in the fact that the apparent
curtailment of liberty is precisely the very means of insuring its preservation.
The scope of police power keeps expanding as civilization advances. As was
said in the case of Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169),
"the right to exercise the police power is a continuing one, and a business
lawful today may in the future, because of the changed situation, the growth
of population or other causes, become a menace to the public health and
welfare, and be required to yield to the public good." And in People v. Pomar
(46 Phil., 440), it was observed that "advancing civilization is bringing within
the police power of the state today things which were not thought of as
being within such power yesterday. The development of civilization, the
rapidly increasing population, the growth of public opinion, with an increasing
desire on the part of the masses and of the government to look after and
care for the interests of the individuals of the state, have brought within the

police power many questions for regulation which formerly were not so
considered."cralaw
virtua1aw
library
The petitioner finally avers that the rules and regulations complained of
infringe upon the constitutional precept regarding the promotion of social
justice to insure the well-being and economic security of all the people. The
promotion of social justice, however, is to be achieved not through a
mistaken sympathy towards any given group. Social justice is "neither
communism, nor despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social and economic forces by
the State so that justice in its rational and objectively secular conception
may at least be approximated. Social justice means the promotion of the
welfare of all the people, the adoption by the Government of measures
calculated to insure economic stability of all the competent elements of
society, through the maintenance of a proper economic and social
equilibrium in the interrelations of the members of the community,
constitutionally, through the adoption of measures legally justifiable, or
extra-constitutionally, through the exercise of powers underlying the
existence of all governments on the time-honored principle of salus populi
est
suprema
lex.
Social justice, therefore, must be founded on the recognition of the necessity
of interdependence among divers and diverse units of a society and of the
protection that should be equally and evenly extended to all groups as a
combined force in our social and economic life, consistent with the
fundamental and paramount objective of the state of promoting the health,
comfort, and quiet of all persons, and of bringing about "the greatest good to
the
greatest
number."cralaw
virtua1aw
library
In view of the foregoing, the writ of prohibition prayed for is hereby denied,
with
costs
against
the
petitioner.
So
ordered.
Avancea, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.

Those who have less in life should have more in law. (PPA Employees
versus COA, G.R. No. 160396, 06 Sept. 2005), and the dole-outs
under the Burial Assistance Program of Makati as paragon of
pauperism (Hon. Jejomar Binay versus Eufemio Domingo and COA,
G.R. No. 92389, 11 September 1991).
PHILIPPINE PORTS AUTHORITY G.R. No. 160396
(PPA) EMPLOYEES HIRED AFTER
JULY 1, 1989, Present:
Petitioners,
Davide Jr., CJ,*
Puno,*
Panganiban,
Quisumbing,*
- versus - Ynares-Santiago,*
Sandoval-Gutierrez,
Carpio,
Austria-Martinez,
Corona,
COMMISSION ON AUDIT (COA); Carpio Morales,*
ARTHUR H. HINAL, in His Capacity Callejo Sr.,
as the Philippine Ports Authority Azcuna,*
Corporate Auditor; RAQUEL R. Tinga,

HABITAN, in Her Capacity as Director Nazario, and


of Corporate Audit Office II, COA; Garcia, JJ.
and SANTOS M. ALQUIZALAS,
in His Capacity as General Counsel, Promulgated:
COA,
Respondents. September 6, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
PANGANIBAN, Acting CJ:
Those that have less in life should have more in law to give them a
better chance at competing with those that have more in
______________________
* On official business.
life.[1] Accordingly, in case of doubt, laws should be interpreted to favor the
working class -- whether in the government or in the private sector -- in order
to give flesh and vigor to the pro-poor and pro-labor provisions of our
Constitution.
The Case
Before us is a Petition for Certiorari[2] under Rule 65 of the Rules of
Court, assailing the May 27, 2003 Decision[3] and the October 16, 2003
Resolution[4] of the Commission on Audit (COA). The dispositive part of the
Decision reads as follows:
Wherefore, premises considered the instant petitions are hereby
denied for lack of merit.[5]

The assailed COA Resolution denied reconsideration.

The Facts
The COA narrates the factual antecedents in this wise:
Records will bear that the PPA has been paying its officials and
employees COLA and amelioration allowance equivalent to 40% and 10%,
respectively, of their basic salary pursuant to various legislative and
administrative issuances. During the last quarter of 1989, the PPA discontinued
the payment thereof in view of Corporate Compensation Circular (CCC) No. 10
prescribing the implementing rules and regulations of R.A. No. 6758 otherwise
known as the Salary Standardization Law which integrated said allowances
into the basic salary effective July 1, 1989. However, the Supreme Court in the
case of Rodolfo de Jesus, et al. vs. COA, G.R. No. 109023 dated August 12,
1998, declared CCC No. 10 as ineffective and unenforceable due to nonpublication. Consequently, the PPA Board of Directors passed Resolution No.
1856 directing the payment of COLA and amelioration backpay to PPA
personnel in the service during the period July 1, 1989 to March 16, 1999, the
date of publication of CCC No. 10.

Doubting the validity of said Resolution, the PPA Auditor requested the
opinion of the General Counsel on the propriety of the payment of the backpay.
In fully concurring with the recommendation of the then Director, CAO II, the
General Counsel ruled that in order for a PPA employee to be entitled to
backpay representing COLA and amelioration pay equivalent to 40% and 10%
respectively, of their basic salary, the following conditions must concur:
1) he has to be an incumbent as of July 1, 1989; and
2) has been receiving the COLA and amelioration pay as of July 1, 1989.
Aggrieved, PPA sought reconsideration of the said advisory opinion which was
denied by the General Counsel in a 1 st Indorsement dated September 13,
2001, since she found no cogent reason to set aside the earlier opinion. The
PPA Auditor accordingly ruled against the grant of the subject backpay. Hence,
the instant petitions for review anchored on the following arguments:
1)

The unenforceability of CCC No. 10 did not alter the nature of COLA
and amelioration allowance into a not integrated benefit within the purview of
the second sentence of Section 12, R.A. No. 6758 but merely rendered them
unidentified as integrated allowances;

2)

The jurisprudence laid in PPA vs. COA, 214 SCRA 653 is not
applicable in the determination of who are entitled to the payment of
backpay for COLA and amelioration allowance;

3)

There is no valid reason not to treat non-incumbents at par with


incumbents during the period of ineffectivity of CCC No. 10; and

4)

PPA employees hired after July 1, 1989 are entitled to the payment
of backpay representing COLA and amelioration allowance.[6]
Ruling of the Commission on Audit
The COA ruled that in the absence of effective integration of the COLA and
amelioration allowance into the basic salary in 1989, the inevitable
conclusion is that they are deemed not integrated from the time RA 6758
was promulgated until DBM-CCC No. 10 was published in March 1999. During
that period, it thus disallowed the disputed allowances on the ground that
these fell under the second sentence of Section 12 of RA 6758. It held that
only officials hired on or before July 1, 1989 were entitled to receive back pay
equivalent to the additional compensation (COLA and amelioration
allowance) mentioned.
Hence, this Petition.[7]
The Issue
Petitioner raised this sole issue for our consideration:
Whether or not herein petitioners -- who were hired by the Philippine
Ports Authority on various dates after July 1, 1989 -- are entitled to the
payment of back pay for cost of living allowance (COLA) and
amelioration allowance.[8]

The Courts Ruling

The Petition is meritorious.


Sole Issue:
Entitlement to COLA
and Amelioration Allowance
In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor
General (OSG) disagreed with the COA and argued that petitioners [were]
legally entitled to their accrued COLA and amelioration allowance as a
matter of right. Thus, this Court required respondents to defend themselves.
Accordingly, the Office of the COA General Counsel prepared and filed the
Comment and Memorandum on behalf of respondents.
Petitioners assail the COA for allowing only incumbents as of July 1,
1989 to receive COLA and amelioration allowance during the ineffectivity of
DBM-CCC No. 10; that is, from July 1, 1989 to March 16, 1999. They contend
that the COLA and the amelioration allowance did not automatically become
not integrated benefits, within the purview of the second sentence of Section
12 of RA No. 6758, which reads as follows:
SEC. 12. Consolidation of Allowances and Compensation. -- All
allowances, except for representation and transportation allowances;
clothing and laundry allowances; subsistence allowances of marine
officers and crew on board government vessels and hospital personnel;
hazard pay; allowances of foreign service personnel stationed abroad;
and such other additional compensation not otherwise specified herein
as may be determined by the DBM, shall be deemed included in the
standardized salary rates herein prescribed. Such other additional
compensation, whether in cash or in kind, being received by
incumbents only as of July 1, 1989 not integrated into the standardized
salary rates shall continue to be authorized.
A reading of the first sentence of this provision readily reveals that all
allowances are deemed included or integrated into the prescribed
standardized salary rates, except the following: (a) representation and
transportation allowances, (b) clothing and laundry allowances, (c)
subsistence allowances of marine officers and crew on board government
vessels, (d) subsistence allowances of hospital personnel, (e) hazard pay, (f)
allowances of foreign service personnel stationed abroad, and (g) such other
additional compensation not otherwise specified in Section 12. These
additional non-integrated benefits (item g) were to be determined by the
Department of Budget and Management (DBM) in an appropriate issuance.
Clearly, the last clause of the first sentence of Section 12, which is a
catch-all proviso, necessarily entails the DBMs promulgation of pertinent
implementing rules and regulations. These will identify the additional
compensation that may be given over and above the standardized salary
rates.
Pursuant to its authority under Section 23 of RA 6758, the DBM thus
issued on October 2, 1989, DBM-CCC No. 10, Section 4.0 of which
enumerated the various allowances that were deemed integrated into the
standardized basic salary. Admittedly, among these allowances were the
COLA and the amelioration allowance.
However, because of its lack of publication in either the Official
Gazette or in a newspaper of general circulation, DBM-CCC No. 10 was
declared ineffective on August 12, 1998, in De Jesus v. COA,[9] which we
quote:

In the present case under scrutiny, its is decisively clear that


DDM-CCC No. 10, which completely disallows payment of allowances
and other additional compensation to government officials and
employees, starting November 1, 1989, is not a mere interpretative
or internal regulation. It is something more than that. And why
not, when it tends to deprive government workers of their allowances
and additional compensation sorely needed to keep body and soul
together. At the very least, before the said circular under attack may
be permitted to substantially reduce their income, the government
officials and employees concerned should be apprised and alerted by
the publication of the subject circular in the Official Gazette or in a
newspaper of general circulation in the Philippines to the end that they
be given amplest opportunity to voice out whatever opposition they
may have, and to ventilate their stance on the subject matter. This
approach is more in keeping with democratic precepts and rudiments
of fairness and transparency.[10]
In other words, during the period that DBM-CCC No. 10 was in legal limbo,
[11] the COLA and the amelioration allowance were not effectively integrated
into the standardized salaries.
Hence, it would be incorrect to contend that because those allowances were
not effectively integrated under the first sentence, then they were nonintegrated benefits falling under the second sentence of Section 12 of RA
6758. Their characterization must be deemed to have also been in legal
limbo, pending the effectivity of DBM-CCC No. 10. Consequently, contrary to
the ruling of the COA, the second sentence does not apply to the present
case. By the same token, the policy embodied in the provision -- the nondiminution of benefits in favor of incumbents as of July 1, 1989 -- is also
inapplicable.
The parties fail to cite any law barring the continuation of the grant of the
COLA and the amelioration allowance during the period when DBM-CCC No.
10 was in legal limbo.
The present case should be distinguished from PNB v. Palma,[12] in which
the respondents sought by mandamus to compel the petitioner therein to
grant them certain fringe benefits and allowances that continued to be given
to Philippine National Bank (PNB) employees hired prior to July 1, 1989. This
Court held that PNB could not be compelled to do so, because the
respondents had been hired after that date. Under Section 12 of RA 6758,
only incumbent government employees (as of July 1, 1989) already receiving
those benefits may continue to receive them, apart from their standardized
pay.
In the present case, the PPA already granted herein petitioners the COLA and
the amelioration allowances, even if they were hired after July 1, 1989. The
only issue is whether they should have continued to receive the benefits
during the period of the ineffectivity of DBC-CCC No. 10; that is, from July 1,
1989 to March 16, 1999, the period during which those allowances were not
deemed integrated into their standard salary rates. Furthermore, in the PNB
Decision, the employees claimed a right to receive the allowances from July
1, 1989 to January 1, 1997. PNB was able to grant the benefits post facto,
because on that date (January 1, 1997) it had already been privatized and
was thus no longer subject to the restrictions imposed by RA 6758 (the
Salary Standardization Law).
Tellingly, the subject matter of the PNB case involved benefits that had not
been deemed integrated into, but in fact exempted from, the standardized

salary rates. In the present case, the subject matter refers to those deemed
included, but were placed in limbo as a result of this Courts ruling in De Jesus
v. COA.
To stress, the failure to publish DBM-CCC No. 10 meant that the COLA and
the amelioration allowance were not effectively integrated into the
standardized salaries of the PPA employees as of July 1, 1989. The
integration became effective only on March 16, 1999. Thus, in between those
two dates, they were still entitled to receive the two allowances.
Be it remembered that the other additional compensations not expressly
specified in Section 12 of RA 6758 had to be determined by the DBM before
they could be deemed included or not included in the standardized salary
rates. True, Section 12 could be considered self-executing in regard to items (a)
to (f) above, but it was not so in regard to item (g). It was only upon the issuance
and effectivity of the corresponding DBM Implementing Rules and Regulations
that the enumeration found in item (g) could be deemed legally completed.
As pointed out by the OSG, until and unless the DBM issued those
Implementing Rules categorically excluding the COLA and the amelioration
allowance, there could not have been any valid notice to the government
employees concerned that indeed those allowances were deemed included in
the standardized salary rates.[13] Consequently, there was no reason or
basis to distinguish or classify PPA employees into two categories for
purposes of determining their entitlement to the back payment of those
unpaid allowances during the period in dispute.
Hence, in consonance with the equal-protection clause of the Constitution,
and considering that the employees were all similarly situated as to the
matter of the COLA and the amelioration allowance, they should all be
treated similarly. All -- not only incumbents as of July 1, 1989 -- should be
allowed to receive back pay corresponding to the said benefits, from July 1,
1989 to the new effectivity date of DBM-CCC No. 10 -- March 16, 1999.
The principle of equal protection is not a barren concept that may be casually
swept aside. While it does not demand absolute equality, it requires that all
persons similarly situated be treated alike, both as to privileges conferred
and liabilities enforced. Verily, equal protection and security shall be
accorded every person under identical or analogous circumstances.[14]
WHEREFORE, the Petition is GRANTED and the assailed Decision and
Resolution of the Commission on Audit ANNULLED and SET ASIDE. No
costs.
SO ORDERED.

The party-list system is a social justice tool designed not only to


give more law to the great masses of our people who have less in
life, but also to enable them to become veritable lawmakers
themselves. Those who have less in life should have more in law.
(Ang Bagong Bayani OFW Labor Party versus Ang Bagong Bayani
OFW Labor Party Go! Go! Philippines, G.R. No. 147589, 26 June
2001).
[G.R. No. 147589. June 26, 2001]
ANG BAGONG BAYANI-OFW LABOR PARTY (under the acronym OFW),
represented herein by its secretary-general, MOHAMMAD OMAR FAJARDO,
petitioner, vs. COMMISSION ON ELECTIONS; CITIZENS DRUG WATCH;

MAMAMAYAN AYAW SA DROGA; GO! GO! PHILIPPINES; THE TRUE MARCOS


LOYALIST ASSOCIATION OF THE PHILIPPINES; PHILIPPINE LOCAL AUTONOMY;
CITIZENS MOVEMENT FOR JUSTICE, ECONOMY, ENVIRONMENT AND PEACE;
CHAMBER OF REAL ESTATE BUILDERS ASSOCIATION; SPORTS & HEALTH
ADVANCEMENT FOUNDATION, INC.; ANG LAKAS NG OVERSEAS CONTRACT
WORKERS (OCW); BAGONG BAYANI ORGANIZATION and others under
Organizations/Coalitions of Omnibus Resolution No. 3785; PARTIDO NG
MASANG PILIPINO; LAKAS NUCD-UMDP; NATIONALIST PEOPLES COALITION;
LABAN NG DEMOKRATIKONG PILIPINO; AKSYON DEMOKRATIKO; PDP-LABAN;
LIBERAL PARTY; NACIONALISTA PARTY; ANG BUHAY HAYAANG YUMABONG;
and others under Political Parties of Omnibus Resolution No. 3785.
respondents.
[G.R. No. 147613. June 26, 2001]
BAYAN MUNA, petitioner, vs. COMMISSION ON ELECTIONS; NATIONALIST
PEOPLES COALITION (NPC); LABAN NG DEMOKRATIKONG PILIPINO (LDP);
PARTIDO NG MASANG PILIPINO (PMP); LAKAS-NUCD-UMDP; LIBERAL PARTY;
MAMAMAYANG AYAW SA DROGA; CREBA; NATIONAL FEDERATION OF
SUGARCANE PLANTERS; JEEP; and BAGONG BAYANI ORGANIZATION,
respondents.
DECISION
PANGANIBAN, J.:
The party-list system is a social justice tool designed not only to give more
law to the great masses of our people who have less in life, but also to
enable them to become veritable lawmakers themselves, empowered to
participate directly in the enactment of laws designed to benefit them. It
intends to make the marginalized and the underrepresented not merely
passive recipients of the States benevolence, but active participants in the
mainstream of representative democracy. Thus, allowing all individuals and
groups, including those which now dominate district elections, to have the
same opportunity to participate in party-list elections would desecrate this
lofty objective and mongrelize the social justice mechanism into an atrocious
veneer for traditional politics.
The Case

Before us are two Petitions under Rule 65 of the Rules of Court, challenging
Omnibus Resolution No. 3785i[1] issued by the Commission on Elections
(Comelec) on March 26, 2001. This Resolution approved the participation of
154 organizations and parties, including those herein impleaded, in the 2001
party-list elections. Petitioners seek the disqualification of private
respondents, arguing mainly that the party-list system was intended to
benefit the marginalized and underrepresented; not the mainstream political
parties, the non-marginalized or overrepresented.
The Factual Antecedents

With the onset of the 2001 elections, the Comelec received several Petitions
for registration filed by sectoral parties, organizations and political parties.
According to the Comelec, [v]erifications were made as to the status and
capacity of these parties and organizations and hearings were scheduled day
and night until the last party w[as] heard. With the number of these petitions
and the observance of the legal and procedural requirements, review of
these petitions as well as deliberations takes a longer process in order to
arrive at a decision and as a result the two (2) divisions promulgated a
separate Omnibus Resolution and individual resolution on political parties.
These numerous petitions and processes observed in the disposition of these
petition[s] hinder the early release of the Omnibus Resolutions of the
Divisions which were promulgated only on 10 February 2001.ii[2]
Thereafter, before the February 12, 2001 deadline prescribed under Comelec
Resolution No. 3426 dated December 22, 2000, the registered parties and
organizations filed their respective Manifestations, stating their intention to
participate in the party-list elections. Other sectoral and political parties and
organizations whose registrations were denied also filed Motions for

Reconsideration, together with Manifestations of their intent to participate in


the party-list elections. Still other registered parties filed their Manifestations
beyond the deadline.
The Comelec gave due course or approved the Manifestations (or
accreditations) of 154 parties and organizations, but denied those of several
others in its assailed March 26, 2001 Omnibus Resolution No. 3785, which we
quote:
We carefully deliberated the foregoing matters, having in mind that this
system of proportional representation scheme will encourage multi-partisan
[sic] and enhance the inability of small, new or sectoral parties or
organization to directly participate in this electoral window.
It will be noted that as defined, the party-list system is a mechanism of
proportional representation in the election of representatives to the House of
Representatives from national, regional, and sectoral parties or organizations
or coalitions thereof registered with the Commission on Elections.
However, in the course of our review of the matters at bar, we must
recognize the fact that there is a need to keep the number of sectoral
parties, organizations and coalitions, down to a manageable level, keeping
only those who substantially comply with the rules and regulations and more
importantly the sufficiency of the Manifestations or evidence on the Motions
for Reconsiderations or Oppositions.iii[3]
On April 10, 2001, Akbayan Citizens Action Party filed before the Comelec a
Petition praying that the names of [some of herein respondents] be deleted
from
the
Certified
List
of
Political
Parties/Sectoral
Parties/Organizations/Coalitions Participating in the Party List System for the
May 14, 2001 Elections and that said certified list be accordingly amended. It
also asked, as an alternative, that the votes cast for the said respondents not
be counted or canvassed, and that the latters nominees not be proclaimed. iv
[4] On April 11, 2001, Bayan Muna and Bayan Muna-Youth also filed a Petition
for Cancellation of Registration and Nomination against some of herein
respondents.v[5]
On April 18, 2001, the Comelec required the respondents in the two
disqualification cases to file Comments within three days from notice. It also
set the date for hearing on April 26, 2001, vi[6] but subsequently reset it to
May 3, 2001.vii[7] During the hearing, however, Commissioner Ralph C.
Lantion merely directed the parties to submit their respective memoranda. viii
[8]
Meanwhile, dissatisfied with the pace of the Comelec, Ang Bagong BayaniOFW Labor Party filed a Petitionix[9] before this Court on April 16, 2001. This
Petition, docketed as GR No. 147589, assailed Comelec Omnibus Resolution
No. 3785. In its Resolution dated April 17, 2001, x[10] the Court directed
respondents to comment on the Petition within a non-extendible period of
five days from notice.xi[11]
On April 17, 2001, Petitioner Bayan Muna also filed before this Court a
Petition,xii[12] docketed as GR No. 147613, also challenging Comelec
Omnibus Resolution No. 3785. In its Resolution dated May 9, 2001, xiii[13] the
Court ordered the consolidation of the two Petitions before it; directed
respondents named in the second Petition to file their respective Comments
on or before noon of May 15, 2001; and called the parties to an Oral
Argument on May 17, 2001. It added that the Comelec may proceed with the
counting and canvassing of votes cast for the party-list elections, but barred
the proclamation of any winner therein, until further orders of the Court.
Thereafter, Commentsxiv[14] on the second Petition were received by the
Court and, on May 17, 2001, the Oral Argument was conducted as scheduled.
In an Order given in open court, the parties were directed to submit their
respective Memoranda simultaneously within a non-extendible period of five
days.xv[15]
Issues:

During the hearing on May 17, 2001, the Court directed the parties to
address the following issues:
1. Whether or not recourse under Rule 65 is proper under the premises. More
specifically, is there no other plain, speedy or adequate remedy in the
ordinary course of law?
2.Whether or not political parties may participate in the party-list elections.
3. Whether or not the party-list system is exclusive to marginalized and
underrepresented sectors and organizations.
4. Whether or not the Comelec committed grave abuse of discretion in
promulgating Omnibus Resolution No. 3785.xvi[16]
The Courts Ruling

The Petitions are partly meritorious. These cases should be remanded to the
Comelec which will determine, after summary evidentiary hearings, whether
the 154 parties and organizations enumerated in the assailed Omnibus
Resolution satisfy the requirements of the Constitution and RA 7941, as
specified in this Decision.
First Issue:
Recourse Under Rule 65

Respondents contend that the recourse of both petitioners under Rule 65 is


improper because there are other plain, speedy and adequate remedies in
the ordinary course of law. xvii[17] The Office of the Solicitor General argues
that petitioners should have filed before the Comelec a petition either for
disqualification or for cancellation of registration, pursuant to Sections 19,
20, 21 and 22 of Comelec Resolution No. 3307-A xviii[18]dated November 9,
2000.xix[19]
We disagree. At bottom, petitioners attack the validity of Comelec Omnibus
Resolution 3785 for having been issued with grave abuse of discretion,
insofar as it allowed respondents to participate in the party-list elections of
2001. Indeed, under both the Constitution xx[20] and the Rules of Court, such
challenge may be brought before this Court in a verified petition for certiorari
under Rule 65.
Moreover, the assailed Omnibus Resolution was promulgated by Respondent
Commission en banc; hence, no motion for reconsideration was possible, it
being a prohibited pleading under Section 1 (d), Rule 13 of the Comelec
Rules of Procedure.xxi[21]
The Court also notes that Petitioner Bayan Muna had filed before the
Comelec a Petition for Cancellation of Registration and Nomination against
some of herein respondents.xxii[22] The Comelec, however, did not act on
that Petition. In view of the pendency of the elections, Petitioner Bayan Muna
sought succor from this Court, for there was no other adequate recourse at
the time. Subsequent events have proven the urgency of petitioners action;
to this date, the Comelec has not yet formally resolved the Petition before it.
But a resolution may just be a formality because the Comelec, through the
Office of the Solicitor General, has made its position on the matter quite
clear.
In any event, this case presents an exception to the rule that certiorari shall
lie only in the absence of any other plain, speedy and adequate remedy. xxiii
[23] It has been held that certiorari is available, notwithstanding the
presence of other remedies, where the issue raised is one purely of law,
where public interest is involved, and in case of urgency. xxiv[24] Indeed, the
instant case is indubitably imbued with public interest and with extreme
urgency, for it potentially involves the composition of 20 percent of the
House of Representatives.
Moreover, this case raises transcendental constitutional issues on the partylist system, which this Court must urgently resolve, consistent with its duty
to formulate guiding and controlling constitutional principles, precepts,
doctrines, or rules.xxv[25]
Finally, procedural requirements may be glossed over to prevent a
miscarriage of justice, when the issue involves the principle of social justice x

x x when the decision sought to be set aside is a nullity, or when the need for
relief is extremely urgent and certiorari is the only adequate and speedy
remedy available.xxvi[26]
Second Issue:
Participation of Political Parties

In its Petition, Ang Bagong Bayani-OFW Labor Party contends that the
inclusion of political parties in the party-list system is the most objectionable
portion of the questioned Resolution.xxvii[27] For its part, Petitioner Bayan
Muna objects to the participation of major political parties. xxviii[28] On the
other hand, the Office of the Solicitor General, like the impleaded political
parties, submits that the Constitution and RA No. 7941 allow political parties
to participate in the party-list elections. It argues that the party-list system is,
in fact, open to all registered national, regional and sectoral parties or
organizations.xxix[29]
We now rule on this issue. Under the Constitution and RA 7941, private
respondents cannot be disqualified from the party-list elections, merely on
the ground that they are political parties. Section 5, Article VI of the
Constitution provides that members of the House of Representatives may be
elected through a party-list system of registered national, regional, and
sectoral parties or organizations.
Furthermore, under Sections 7 and 8, Article IX (C) of the Constitution,
political parties may be registered under the party-list system.
Sec. 7. No votes cast in favor of a political party, organization, or coalition
shall be valid, except for those registered under the party-list system as
provided in this Constitution.
Sec. 8. Political parties, or organizations or coalitions registered under the
party-list system, shall not be represented in the voters' registration boards,
boards of election inspectors, boards of canvassers, or other similar bodies.
However, they shall be entitled to appoint poll watchers in accordance with
law.xxx[30]
During the deliberations in the Constitutional Commission, Comm. Christian
S. Monsod pointed out that the participants in the party-list system may be a
regional party, a sectoral party, a national party, UNIDO, xxxi[31] Magsasaka,
or a regional party in Mindanao." xxxii[32] This was also clear from the
following exchange between Comms. Jaime Tadeo and Blas Ople:xxxiii[33]
MR. TADEO. Naniniwala ba kayo na ang party list ay pwedeng paghati-hatian
ng UNIDO, PDP-Laban, PNP, Liberal at Nacionalista?
MR. OPLE. Maaari yan sapagkat bukas ang party list system sa lahat ng mga
partido.
Indeed, Commissioner Monsod stated that the purpose of the party-list
provision was to open up the system, in order to give a chance to parties that
consistently place third or fourth in congressional district elections to win a
seat in Congress.xxxiv[34] He explained: The purpose of this is to open the
system. In the past elections, we found out that there were certain groups or
parties that, if we count their votes nationwide, have about 1,000,000 or
1,500,000 votes. But they were always third or fourth place in each of the
districts. So, they have no voice in the Assembly. But this way, they would
have five or six representatives in the Assembly even if they would not win
individually in legislative districts. So, that is essentially the mechanics, the
purpose and objectives of the party-list system.
For its part, Section 2 of RA 7941 also provides for a party-list system of
registered national, regional and sectoral parties or organizations or
coalitions thereof, x x x. Section 3 expressly states that a party is either a
political party or a sectoral party or a coalition of parties. More to the point,
the law defines political party as an organized group of citizens advocating
an ideology or platform, principles and policies for the general conduct of
government and which, as the most immediate means of securing their
adoption, regularly nominates and supports certain of its leaders and
members as candidates for public office.

Furthermore, Section 11 of RA 7941 leaves no doubt as to the participation of


political parties in the party-list system. We quote the pertinent provision
below:
x x xx x x x x x
For purposes of the May 1998 elections, the first five (5) major political
parties on the basis of party representation in the House of Representatives
at the start of the Tenth Congress of the Philippines shall not be entitled to
participate in the party-list system.
x x xx x x x x x
Indubitably, therefore, political parties even the major ones -- may
participate in the party-list elections.
Third Issue:
Marginalized and Underrepresented

That political parties may participate in the party-list elections does not
mean, however, that any political party -- or any organization or group for
that matter -- may do so. The requisite character of these parties or
organizations must be consistent with the purpose of the party-list system,
as laid down in the Constitution and RA 7941. Section 5, Article VI of the
Constitution, provides as follows:
(1) The House of Representatives shall be composed of not more than two
hundred and fifty members, unless otherwise fixed by law, who shall be
elected from legislative districts apportioned among the provinces, cities,
and the Metropolitan Manila area in accordance with the number of their
respective inhabitants, and on the basis of a uniform and progressive ratio,
and those who, as provided by law, shall be elected through a party-list
system of registered national, regional, and sectoral parties or organizations.
(2) The party-list representatives shall constitute twenty per centum of the
total number of representatives including those under the party list. For three
consecutive terms after the ratification of this Constitution, one-half of the
seats allocated to party-list representatives shall be filled, as provided by
law, by selection or election from the labor, peasant, urban poor, indigenous
cultural communities, women, youth, and such other sectors as may be
provided by law, except the religious sector. (Emphasis supplied.)
Notwithstanding the sparse language of the provision, a distinguished
member of the Constitutional Commission declared that the purpose of the
party-list provision was to give genuine power to our people in Congress.
Hence, when the provision was discussed, he exultantly announced: On this
first day of August 1986, we shall, hopefully, usher in a new chapter to our
national history, by giving genuine power to our people in the legislature. xxxv
[35]
The foregoing provision on the party-list system is not self-executory. It is, in
fact, interspersed with phrases like in accordance with law or as may be
provided by law; it was thus up to Congress to sculpt in granite the lofty
objective of the Constitution. Hence, RA 7941 was enacted. It laid out the
statutory policy in this wise:
SEC. 2. Declaration of Policy. -- The State shall promote proportional
representation in the election of representatives to the House of
Representatives through a party-list system of registered national, regional
and sectoral parties or organizations or coalitions thereof, which will enable
Filipino citizens belonging to marginalized and underrepresented sectors,
organizations and parties, and who lack well-defined political constituencies
but who could contribute to the formulation and enactment of appropriate
legislation that will benefit the nation as a whole, to become members of the
House of Representatives. Towards this end, the State shall develop and
guarantee a full, free and open party system in order to attain the broadest
possible representation of party, sectoral or group interests in the House of
Representatives by enhancing their chances to compete for and win seats in
the legislature, and shall provide the simplest scheme possible.
The Marginalized and Underrepresented to Become Lawmakers Themselves

The foregoing provision mandates a state policy of promoting proportional


representation by means of the Filipino-style party-list system, which will
enable the election to the House of Representatives of Filipino citizens,
1.who belong to marginalized and underrepresented sectors, organizations
and parties; and
2. who lack well-defined constituencies; but
3. who could contribute to the formulation and enactment of appropriate
legislation that will benefit the nation as a whole.
The key words in this policy are proportional representation, marginalized
and underrepresented, and lack [of] well-defined constituencies.
Proportional representation here does not refer to the number of people in a
particular district, because the party-list election is national in scope. Neither
does it allude to numerical strength in a distressed or oppressed group.
Rather, it refers to the representation of the marginalized and
underrepresented as exemplified by the enumeration in Section 5 of the law;
namely, labor, peasant, fisherfolk, urban poor, indigenous cultural
communities, elderly, handicapped, women, youth, veterans, overseas
workers, and professionals.
However, it is not enough for the candidate to claim representation of the
marginalized and underrepresented, because representation is easy to claim
and to feign. The party-list organization or party must factually and truly
represent the marginalized and underrepresented constituencies mentioned
in Section 5.xxxvi[36] Concurrently, the persons nominated by the party-list
candidate-organization must be Filipino citizens belonging to marginalized
and underrepresented sectors, organizations and parties.
Finally, lack of well-defined constituenc[y] refers to the absence of a
traditionally identifiable electoral group, like voters of a congressional district
or territorial unit of government. Rather, it points again to those with
disparate interests identified with the marginalized or underrepresented.
In the end, the role of the Comelec is to see to it that only those Filipinos who
are marginalized and underrepresented become members of Congress under
the party-list system, Filipino-style.
The intent of the Constitution is clear: to give genuine power to the people,
not only by giving more law to those who have less in life, but more so by
enabling them to become veritable lawmakers themselves. Consistent with
this intent, the policy of the implementing law, we repeat, is likewise clear: to
enable Filipino citizens belonging to marginalized and underrepresented
sectors, organizations and parties, x x x, to become members of the House of
Representatives. Where the language of the law is clear, it must be applied
according to its express terms.xxxvii[37]
The marginalized and underrepresented sectors to be represented under the
party-list system are enumerated in Section 5 of RA 7941, which states:
SEC. 5. Registration. -- Any organized group of persons may register as a
party, organization or coalition for purposes of the party-list system by filing
with the COMELEC not later than ninety (90) days before the election a
petition verified by its president or secretary stating its desire to participate
in the party-list system as a national, regional or sectoral party or
organization or a coalition of such parties or organizations, attaching thereto
its constitution, by-laws, platform or program of government, list of officers,
coalition agreement and other relevant information as the COMELEC may
require: Provided, that the sector shall include labor, peasant, fisherfolk,
urban poor, indigenous cultural communities, elderly, handicapped, women,
youth, veterans, overseas workers, and professionals.
While the enumeration of marginalized and underrepresented sectors is not
exclusive, it demonstrates the clear intent of the law that not all sectors can
be represented under the party-list system. It is a fundamental principle of
statutory construction that words employed in a statute are interpreted in
connection with, and their meaning is ascertained by reference to, the words
and the phrases with which they are associated or related. Thus, the

meaning of a term in a statute may be limited, qualified or specialized by


those in immediate association.xxxviii[38]
The Party-List System Desecrated by the OSG Contentions

Notwithstanding the unmistakable statutory policy, the Office of the Solicitor


General submits that RA No. 7941 does not limit the participation in the
party-list system to the marginalized and underrepresented sectors of
society.xxxix[39] In fact, it contends that any party or group that is not
disqualified under Section 6xl[40]of RA 7941 may participate in the elections.
Hence, it admitted during the Oral Argument that even an organization
representing the super rich of Forbes Park or Dasmarias Village could
participate in the party-list elections.xli[41]
The declared policy of RA 7941 contravenes the position of the Office of the
Solicitor General (OSG). We stress that the party-list system seeks to enable
certain Filipino citizens specifically those belonging to marginalized and
underrepresented sectors, organizations and parties to be elected to the
House of Representatives. The assertion of the OSG that the party-list system
is not exclusive to the marginalized and underrepresented disregards the
clear statutory policy. Its claim that even the super-rich and overrepresented
can participate desecrates the spirit of the party-list system.
Indeed, the law crafted to address the peculiar disadvantages of Payatas
hovel dwellers cannot be appropriated by the mansion owners of Forbes
Park. The interests of these two sectors are manifestly disparate; hence, the
OSGs position to treat them similarly defies reason and common sense. In
contrast, and with admirable candor, Atty. Lorna Patajo-Kapunan xlii[42]
admitted during the Oral Argument that a group of bankers, industrialists and
sugar planters could not join the party-list system as representatives of their
respective sectors.xliii[43]
While the business moguls and the mega-rich are, numerically speaking, a
tiny minority, they are neither marginalized nor underrepresented, for the
stark reality is that their economic clout engenders political power more
awesome than their numerical limitation. Traditionally, political power does
not necessarily emanate from the size of ones constituency; indeed, it is
likely to arise more directly from the number and amount of ones bank
accounts.
It is ironic, therefore, that the marginalized and underrepresented in our
midst are the majority who wallow in poverty, destitution and infirmity. It was
for them that the party-list system was enacted -- to give them not only
genuine hope, but genuine power; to give them the opportunity to be elected
and to represent the specific concerns of their constituencies; and simply to
give them a direct voice in Congress and in the larger affairs of the State. In
its noblest sense, the party-list system truly empowers the masses and
ushers a new hope for genuine change. Verily, it invites those marginalized
and underrepresented in the past the farm hands, the fisher folk, the urban
poor, even those in the underground movement to come out and participate,
as indeed many of them came out and participated during the last elections.
The State cannot now disappoint and frustrate them by disabling and
desecrating this social justice vehicle.
Because the marginalized and underrepresented had not been able to win in
the congressional district elections normally dominated by traditional
politicians and vested groups, 20 percent of the seats in the House of
Representatives were set aside for the party-list system. In arguing that even
those sectors who normally controlled 80 percent of the seats in the House
could participate in the party-list elections for the remaining 20 percent, the
OSG and the Comelec disregard the fundamental difference between the
congressional district elections and the party-list elections.
As earlier noted, the purpose of the party-list provision was to open up the
system,xliv[44] in order to enhance the chance of sectoral groups and
organizations to gain representation in the House of Representatives through
the simplest scheme possible.xlv[45] Logic shows that the system has been

opened to those who have never gotten a foothold within it -- those who
cannot otherwise win in regular elections and who therefore need the
simplest scheme possible to do so. Conversely, it would be illogical to open
the system to those who have long been within it -- those privileged sectors
that have long dominated the congressional district elections.
The import of the open party-list system may be more vividly understood
when compared to a student dormitory open house, which by its nature
allows outsiders to enter the facilities. Obviously, the open house is for the
benefit of outsiders only, not the dormers themselves who can enter the
dormitory even without such special privilege. In the same vein, the open
party-list system is only for the outsiders who cannot get elected through
regular elections otherwise; it is not for the non-marginalized or
overrepresented who already fill the ranks of Congress.
Verily, allowing the non-marginalized and overrepresented to vie for the
remaining seats under the party-list system would not only dilute, but also
prejudice the chance of the marginalized and underrepresented, contrary to
the intention of the law to enhance it. The party-list system is a tool for the
benefit of the underprivileged; the law could not have given the same tool to
others, to the prejudice of the intended beneficiaries.
This Court, therefore, cannot allow the party-list system to be sullied and
prostituted by those who are neither marginalized nor underrepresented. It
cannot let that flicker of hope be snuffed out. The clear state policy must
permeate every discussion of the qualification of political parties and other
organizations under the party-list system.
Refutation of the Separate Opinions

The Separate Opinions of our distinguished colleagues, Justices Jose C. Vitug


and Vicente V. Mendoza, are anchored mainly on the supposed intent of the
framers of the Constitution as culled from their deliberations.
The fundamental principle in constitutional construction, however, is that the
primary source from which to ascertain constitutional intent or purpose is the
language of the provision itself. The presumption is that the words in which
the constitutional provisions are couched express the objective sought to be
attained.xlvi[46] In other words, verba legis still prevails. Only when the
meaning of the words used is unclear and equivocal should resort be made
to extraneous aids of construction and interpretation, such as the
proceedings of the Constitutional Commission or Convention, in order to shed
light on and ascertain the true intent or purpose of the provision being
construed.xlvii[47]
Indeed, as cited in the Separate Opinion of Justice Mendoza, this Court stated
in Civil Liberties Union v. Executive Secretary xlviii[48] that the debates and
proceedings of the constitutional convention [may be consulted] in order to
arrive at the reason and purpose of the resulting Constitution x x x only when
other guides fail as said proceedings are powerless to vary the terms of the
Constitution when the meaning is clear. Debates in the constitutional
convention are of value as showing the views of the individual members, and
as indicating the reason for their votes, but they give us no light as to the
views of the large majority who did not talk, much less of the mass or our
fellow citizens whose votes at the polls gave that instrument the force of
fundamental law. We think it safer to construe the constitution from what
appears upon its face. The proper interpretation therefore depends more on
how it was understood by the people adopting it than in the framers
understanding thereof.
Section 5, Article VI of the Constitution, relative to the party-list system, is
couched in clear terms: the mechanics of the system shall be provided by
law. Pursuant thereto, Congress enacted RA 7941. In understanding and
implementing party-list representation, we should therefore look at the law
first. Only when we find its provisions ambiguous should the use of
extraneous aids of construction be resorted to.

But, as discussed earlier, the intent of the law is obvious and clear from its
plain words. Section 2 thereof unequivocally states that the party-list system
of electing congressional representatives was designed to enable
underrepresented sectors, organizations and parties, and who lack welldefined political constituencies but who could contribute to the formulation
and enactment of appropriate legislation that will benefit the nation as a
whole x x x. The criteria for participation is well defined. Thus, there is no
need for recourse to constitutional deliberations, not even to the proceedings
of Congress. In any event, the framers deliberations merely express their
individual opinions and are, at best, only persuasive in construing the
meaning and purpose of the constitution or statute.
Be it remembered that the constitutionality or validity of Sections 2 and 5 of
RA 7941 is not an issue here. Hence, they remain parts of the law, which
must be applied plainly and simply.
Fourth Issue:
Grave Abuse of Discretion

From its assailed Omnibus Resolution, it is manifest that the Comelec failed
to appreciate fully the clear policy of the law and the Constitution. On the
contrary, it seems to have ignored the facet of the party-list system
discussed above. The OSG as its counsel admitted before the Court that any
group, even the non-marginalized and overrepresented, could field
candidates in the party-list elections.
When a lower court, or a quasi-judicial agency like the Commission on
Elections, violates or ignores the Constitution or the law, its action can be
struck down by this Court on the ground of grave abuse of discretion. xlix[49]
Indeed, the function of all judicial and quasi-judicial instrumentalities is to
apply the law as they find it, not to reinvent or second-guess it.l[50]
In its Memorandum, Petitioner Bayan Muna passionately pleads for the
outright disqualification of the major political parties Respondents LakasNUCD, LDP, NPC, LP and PMP on the ground that under Comelec Resolution
No. 4073, they have been accredited as the five (six, including PDP-Laban)
major political parties in the May 14, 2001 elections. It argues that because
of this, they have the advantage of getting official Comelec Election Returns,
Certificates of Canvass, preferred poll watchers x x x. We note, however, that
this accreditation does not refer to the party-list election, but, inter alia, to
the election of district representatives for the purpose of determining which
parties would be entitled to watchers under Section 26 of Republic Act No.
7166.
What is needed under the present circumstances, however, is a factual
determination of whether respondents herein and, for that matter, all the
154 previously approved groups, have the necessary qualifications to
participate in the party-list elections, pursuant to the Constitution and the
law.
Bayan Muna also urges us to immediately rule out Respondent Mamamayan
Ayaw sa Droga (MAD), because it is a government entity using government
resources and privileges. This Court, however, is not a trier of facts. li[51] It is
not equipped to receive evidence and determine the truth of such factual
allegations.
Basic rudiments of due process require that respondents should first be given
an opportunity to show that they qualify under the guidelines promulgated in
this Decision, before they can be deprived of their right to participate in and
be elected under the party-list system.
Guidelines for Screening Party-List Participants

The Court, therefore, deems it proper to remand the case to the Comelec for
the latter to determine, after summary evidentiary hearings, whether the
154 parties and organizations allowed to participate in the party-list elections
comply with the requirements of the law. In this light, the Court finds it
appropriate to lay down the following guidelines, culled from the law and the
Constitution, to assist the Comelec in its work.

First, the political party, sector, organization or coalition must represent the
marginalized and underrepresented groups identified in Section 5 of RA
7941. In other words, it must show -- through its constitution, articles of
incorporation, bylaws, history, platform of government and track record -that it represents and seeks to uplift marginalized and underrepresented
sectors. Verily, majority of its membership should belong to the marginalized
and underrepresented. And it must demonstrate that in a conflict of
interests, it has chosen or is likely to choose the interest of such sectors.
Second, while even major political parties are expressly allowed by RA 7941
and the Constitution to participate in the party-list system, they must comply
with the declared statutory policy of enabling Filipino citizens belonging to
marginalized and underrepresented sectors x x x to be elected to the House
of Representatives. In other words, while they are not disqualified merely on
the ground that they are political parties, they must show, however, that
they represent the interests of the marginalized and underrepresented. The
counsel of Aksyon Demokratiko and other similarly situated political parties
admitted as much during the Oral Argument, as the following quote shows:
JUSTICE PANGANIBAN: I am not disputing that in my question. All I am saying
is, the political party must claim to represent the marginalized and
underrepresented sectors?
ATTY. KAPUNAN: Yes, Your Honor, the answer is yes.lii[52]
Third, in view of the objectionsliii[53] directed against the registration of Ang
Buhay Hayaang Yumabong, which is allegedly a religious group, the Court
notes the express constitutional provision that the religious sector may not
be represented in the party-list system. The extent of the constitutional
proscription is demonstrated by the following discussion during the
deliberations of the Constitutional Commission:
MR. OPLE. x x x
In the event that a certain religious sect with nationwide and even
international networks of members and supporters, in order to circumvent
this prohibition, decides to form its own political party in emulation of those
parties I had mentioned earlier as deriving their inspiration and philosophies
from well-established religious faiths, will that also not fall within this
prohibition?
MR. MONSOD. If the evidence shows that the intention is to go around the
prohibition, then certainly the Comelec can pierce through the legal fiction. liv
[54]
The following discussion is also pertinent:
MR. VILLACORTA. When the Commissioner proposed EXCEPT RELIGIOUS
GROUPS, he is not, of course, prohibiting priests, imams or pastors who may
be elected by, say, the indigenous community sector to represent their
group.
REV. RIGOS. Not at all, but I am objecting to anybody who represents the
Iglesia ni Kristo, the Catholic Church, the Protestant Church et cetera.lv[55]
Furthermore, the Constitution provides that religious denominations and
sects shall not be registered.lvi[56] The prohibition was explained by a
memberlvii[57] of the Constitutional Commission in this wise: [T]he prohibition
is on any religious organization registering as a political party. I do not see
any prohibition here against a priest running as a candidate. That is not
prohibited here; it is the registration of a religious sect as a political party. lviii
[58]
Fourth, a party or an organization must not be disqualified under Section 6 of
RA 7941, which enumerates the grounds for disqualification as follows:
(1) It is a religious sect or denomination, organization or association
organized for religious purposes;
(2)It advocates violence or unlawful means to seek its goal;
(3) It is a foreign party or organization;

(4) It is receiving support from any foreign government, foreign political


party, foundation, organization, whether directly or through any of its officers
or members or indirectly through third parties for partisan election purposes;
(5) It violates or fails to comply with laws, rules or regulations relating to
elections;
(6) It declares untruthful statements in its petition;
(7) It has ceased to exist for at least one (1) year; or
(8) It fails to participate in the last two (2) preceding elections or fails to
obtain at least two per centum (2%) of the votes cast under the party-list
system in the two (2) preceding elections for the constituency in which it has
registered.lix[59]
Note should be taken of paragraph 5, which disqualifies a party or group for
violation of or failure to comply with election laws and regulations. These
laws include Section 2 of RA 7941, which states that the party-list system
seeks to enable Filipino citizens belonging to marginalized and
underrepresented sectors, organizations and parties x x x to become
members of the House of Representatives. A party or an organization,
therefore, that does not comply with this policy must be disqualified.
Fifth, the party or organization must not be an adjunct of, or a project
organized or an entity funded or assisted by, the government. By the very
nature of the party-list system, the party or organization must be a group of
citizens, organized by citizens and operated by citizens. It must be
independent of the government. The participation of the government or its
officials in the affairs of a party-list candidate is not only illegal lx[60] and
unfair to other parties, but also deleterious to the objective of the law: to
enable citizens belonging to marginalized and underrepresented sectors and
organizations to be elected to the House of Representatives.
Sixth, the party must not only comply with the requirements of the law; its
nominees must likewise do so. Section 9 of RA 7941 reads as follows:
SEC. 9. Qualifications of Party-List Nominees. No person shall be nominated
as party-list representative unless he is a natural-born citizen of the
Philippines, a registered voter, a resident of the Philippines for a period of not
less than one (1) year immediately preceding the day of the election, able to
read and write, a bona fide member of the party or organization which he
seeks to represent for at least ninety (90) days preceding the day of the
election, and is at least twenty-five (25) years of age on the day of the
election.
In case of a nominee of the youth sector, he must at least be twenty-five (25)
but not more than thirty (30) years of age on the day of the election. Any
youth sectoral representative who attains the age of thirty (30) during his
term shall be allowed to continue in office until the expiration of his term.
Seventh, not only the candidate party or organization must represent
marginalized and underrepresented sectors; so also must its nominees. To
repeat, under Section 2 of RA 7941, the nominees must be Filipino citizens
who belong to marginalized and underrepresented sectors, organizations and
parties. Surely, the interests of the youth cannot be fully represented by a
retiree; neither can those of the urban poor or the working class, by an
industrialist. To allow otherwise is to betray the State policy to give genuine
representation to the marginalized and underrepresented.
Eighth, as previously discussed, while lacking a well-defined political
constituency, the nominee must likewise be able to contribute to the
formulation and enactment of appropriate legislation that will benefit the
nation as a whole. Senator Jose Lina explained during the bicameral
committee proceedings that the nominee of a party, national or regional, is
not going to represent a particular district x x x.lxi[61]
Epilogue

The linchpin of this case is the clear and plain policy of the law: to enable
Filipino citizens belonging to marginalized and underrepresented sectors,
organizations and parties, and who lack well-defined political constituencies

but who could contribute to the formulation and enactment of appropriate


legislation that will benefit the nation as a whole, to become members of the
House of Representatives.
Crucial to the resolution of this case is the fundamental social justice
principle that those who have less in life should have more in law. The partylist system is one such tool intended to benefit those who have less in life. It
gives the great masses of our people genuine hope and genuine power. It is
a message to the destitute and the prejudiced, and even to those in the
underground, that change is possible. It is an invitation for them to come out
of their limbo and seize the opportunity.
Clearly, therefore, the Court cannot accept the submissions of the Comelec
and the other respondents that the party-list system is, without any
qualification, open to all. Such position does not only weaken the electoral
chances of the marginalized and underrepresented; it also prejudices them. It
would gut the substance of the party-list system. Instead of generating hope,
it would create a mirage. Instead of enabling the marginalized, it would
further weaken them and aggravate their marginalization.
In effect, the Comelec would have us believe that the party-list provisions of
the Constitution and RA 7941 are nothing more than a play on dubious
words, a mockery of noble intentions, and an empty offering on the altar of
people empowerment. Surely, this could not have been the intention of the
framers of the Constitution and the makers of RA 7941.
WHEREFORE, this case is REMANDED to the Comelec, which is hereby
DIRECTED to immediately conduct summary evidentiary hearings on the
qualifications of the party-list participants in the light of the guidelines
enunciated in this Decision. Considering the extreme urgency of determining
the winners in the last party-list elections, the Comelec is directed to begin
its hearings for the parties and organizations that appear to have garnered
such number of votes as to qualify for seats in the House of Representatives.
The Comelec is further DIRECTED to submit to this Court its compliance
report within 30 days from notice hereof.
The Resolution of this Court dated May 9, 2001, directing the Comelec to
refrain from proclaiming any winner during the last party-list election, shall
remain in force until after the Comelec itself will have complied and reported
its compliance with the foregoing disposition.
This Decision is immediately executory upon the Commission on Elections
receipt thereof. No pronouncement as to costs.
SO ORDERED.

"...[F]reedom to differ is not limited to things that do not matter


much. That would be a mere shadow of freedom. The test of its
substance is the right to differ as to things that touch the heart of
the existing order." "We cannot help but observe that the social
issues presented by this case are emotionally charged, societal
attitudes are in flux, even the psychiatric and religious communities
are divided in opinion. This Courts role is not to impose its own
view of acceptable behavior. Rather, it is to apply the Constitution
and laws as best as it can, uninfluenced by public opinion, and
confident in the knowledge that our democracy is resilient enough
to withstand vigorous debate. [Ang Ladlad LGBT Party versus
Comelec, G.R. No. 190582, 08 Apr. 2010].
ANG LADLAD LGBT PARTY
represented herein by its
Chair,
DANTON REMOTO,
Petitioner,

G.R. No. 190582

Present:

- versus -

PUNO, C. J.,
CARPIO,
CORONA,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE
CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ, and
MENDOZA, JJ.

COMMISSION
ON
Promulgated:
ELECTIONS,
Respondent.
April 8, 2010
x--------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
... [F]reedom to differ is not limited to things that do not matter much. That
would be a mere shadow of freedom. The test of its substance is the right to
differ as to things that touch the heart of the existing order.
Justice Robert A. Jackson
West Virginia State Board of Education v. Barnette1[1]
One unavoidable consequence of everyone having the freedom to choose is that
others may make different choices choices we would not make for ourselves,
choices we may disapprove of, even choices that may shock or offend or anger us.
However, choices are not to be legally prohibited merely because they are
different, and the right to disagree and debate about important questions of public
policy is a core value protected by our Bill of Rights. Indeed, our democracy is built
on genuine recognition of, and respect for, diversity and difference in opinion.
Since ancient times, society has grappled with deep disagreements about
the definitions and demands of morality. In many cases, where moral convictions
are concerned, harmony among those theoretically opposed is an insurmountable
goal. Yet herein lies the paradox philosophical justifications about what is moral are
indispensable and yet at the same time powerless to create agreement. This Court
recognizes, however, that practical solutions are preferable to ideological
stalemates; accommodation is better than intransigence; reason more worthy
than rhetoric. This will allow persons of diverse viewpoints to live together, if not
harmoniously, then, at least, civilly.
Factual Background
This is a Petition for Certiorari under Rule 65 of the Rules of Court, with an
application for a writ of preliminary mandatory injunction, filed by Ang Ladlad
1

LGBT Party (Ang Ladlad) against the Resolutions of the Commission on Elections
(COMELEC) dated November 11, 20092[2] (the First Assailed Resolution) and
December 16, 20093[3] (the Second Assailed Resolution) in SPP No. 09-228 (PL)
(collectively, the Assailed Resolutions). The case has its roots in the COMELECs
refusal to accredit Ang Ladlad as a party-list organization under Republic Act (RA)
No. 7941, otherwise known as the Party-List System Act.4[4]
Ang Ladlad is an organization composed of men and women who identify
themselves as lesbians, gays, bisexuals, or trans-gendered individuals (LGBTs).
Incorporated in 2003, Ang Ladlad first applied for registration with the COMELEC in
2006. The application for accreditation was denied on the ground that the
organization had no substantial membership base. On August 17, 2009, Ang
Ladlad again filed a Petition5[5] for registration with the COMELEC.
Before the COMELEC, petitioner argued that the LGBT community is a
marginalized and under-represented sector that is particularly disadvantaged
because of their sexual orientation and gender identity; that LGBTs are victims of
exclusion, discrimination, and violence; that because of negative societal
attitudes, LGBTs are constrained to hide their sexual orientation; and that Ang
Ladlad complied with the 8-point guidelines enunciated by this Court in Ang
Bagong Bayani-OFW Labor Party v. Commission on Elections.6[6] Ang Ladlad laid
out its national membership base consisting of individual members and
organizational supporters, and outlined its platform of governance.7[7]
On November 11, 2009, after admitting the petitioners evidence, the
COMELEC (Second Division) dismissed the Petition on moral grounds, stating that:
x x x This Petition is dismissible on moral grounds. Petitioner defines the Filipino
Lesbian, Gay, Bisexual and Transgender (LGBT) Community, thus:
x x x a marginalized and under-represented sector that is particularly
disadvantaged because of their sexual orientation and gender
identity.
and proceeded to define sexual orientation as that which:
x x x refers to a persons capacity for profound emotional, affectional
and sexual attraction to, and intimate and sexual relations with,
2

individuals of a different gender, of the same gender, or more than


one gender.
This definition of the LGBT sector makes it crystal clear that petitioner
tolerates immorality which offends religious beliefs. In Romans 1:26, 27,
Paul wrote:
For this cause God gave them up into vile affections, for even
their women did change the natural use into that which is against
nature: And likewise also the men, leaving the natural use of the
woman, burned in their lust one toward another; men with men
working that which is unseemly, and receiving in themselves that
recompense of their error which was meet.
In the Koran, the hereunder verses are pertinent:
For ye practice your lusts on men in preference to women ye are
indeed a people transgressing beyond bounds. (7.81) And we rained
down on them a shower (of brimstone): Then see what was the end
of those who indulged in sin and crime! (7:84) He said: O my Lord!
Help Thou me against people who do mischief (29:30).
As correctly pointed out by the Law Department in its Comment dated
October 2, 2008:
The ANG LADLAD apparently advocates sexual immorality as indicated in
the Petitions par. 6F: Consensual partnerships or relationships by gays and
lesbians who are already of age. It is further indicated in par. 24 of the
Petition which waves for the record: In 2007, Men Having Sex with Men or
MSMs in the Philippines were estimated as 670,000 (Genesis 19 is the
history of Sodom and Gomorrah).
Laws are deemed incorporated in every contract, permit,
license, relationship, or accreditation. Hence, pertinent provisions of
the Civil Code and the Revised Penal Code are deemed part of the
requirement to be complied with for accreditation.
ANG LADLAD collides with Article 695 of the Civil Code which
defines nuisance as Any act, omission, establishment, business,
condition of property, or anything else which x x x (3) shocks, defies;
or disregards decency or morality x x x
It also collides with Article 1306 of the Civil Code: The
contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy.
Art 1409 of the Civil Code provides that Contracts whose cause,
object or purpose is contrary to law, morals, good customs, public
order or public policy are inexistent and void from the beginning.
Finally to safeguard the morality of the Filipino community, the Revised
Penal Code, as amended, penalizes Immoral doctrines, obscene publications
and exhibitions and indecent shows as follows:
Art. 201. Immoral doctrines, obscene publications and
exhibitions, and indecent shows. The penalty of prision mayor or a
fine ranging from six thousand to twelve thousand pesos, or both
such imprisonment and fine, shall be imposed upon:

1. Those who shall publicly expound or proclaim doctrines


openly contrary to public morals;
2. (a) The authors of obscene literature, published with their
knowledge in any form; the editors publishing such literature; and the
owners/operators of the establishment selling the same;
(b) Those who, in theaters, fairs, cinematographs or any other
place, exhibit indecent or immoral plays, scenes, acts or shows, it
being understood that the obscene literature or indecent or immoral
plays, scenes, acts or shows, whether live or in film, which are
prescribed by virtue hereof, shall include those which: (1) glorify
criminals or condone crimes; (2) serve no other purpose but to satisfy
the market for violence, lust or pornography; (3) offend any race or
religion; (4) tend to abet traffic in and use of prohibited drugs; and (5)
are contrary to law, public order, morals, good customs, established
policies, lawful orders, decrees and edicts.
3. Those who shall sell, give away or exhibit films, prints,
engravings, sculpture or literature which are offensive to morals.
Petitioner should likewise be denied accreditation not only for
advocating immoral doctrines but likewise for not being truthful when it said
that it or any of its nominees/party-list representatives have not violated or
failed to comply with laws, rules, or regulations relating to the elections.
Furthermore, should this Commission grant the petition, we will be
exposing our youth to an environment that does not conform to the
teachings of our faith. Lehman Strauss, a famous bible teacher and writer in
the U.S.A. said in one article that older practicing homosexuals are a threat
to the youth. As an agency of the government, ours too is the States
avowed duty under Section 13, Article II of the Constitution to protect our
youth from moral and spiritual degradation.8[8]
When Ang Ladlad sought reconsideration,9[9] three commissioners voted to
overturn the First Assailed Resolution (Commissioners Gregorio Y. Larrazabal, Rene
V. Sarmiento, and Armando Velasco), while three commissioners voted to deny
Ang Ladlads Motion for Reconsideration (Commissioners Nicodemo T. Ferrer,
Lucenito N. Tagle, and Elias R. Yusoph). The COMELEC Chairman, breaking the tie
and speaking for the majority in his Separate Opinion, upheld the First Assailed
Resolution, stating that:
I.

The Spirit of Republic Act No. 7941

Ladlad is applying for accreditation as a sectoral party in the party-list


system. Even assuming that it has properly proven its under-representation
and marginalization, it cannot be said that Ladlads expressed sexual
orientations per se would benefit the nation as a whole.
Section 2 of the party-list law unequivocally states that the purpose of
the party-list system of electing congressional representatives is to enable
8

Filipino citizens belonging to marginalized and under-represented sectors,


organizations and parties, and who lack well-defined political constituencies
but who could contribute to the formulation and enactment of appropriate
legislation that will benefit the nation as a whole, to become members of
the House of Representatives.
If entry into the party-list system would depend only on the ability of
an organization to represent its constituencies, then all representative
organizations would have found themselves into the party-list race. But that
is not the intention of the framers of the law. The party-list system is not a
tool to advocate tolerance and acceptance of misunderstood persons or
groups of persons. Rather, the party-list system is a tool for the
realization of aspirations of marginalized individuals whose
interests are also the nations only that their interests have not been
brought to the attention of the nation because of their under representation.
Until the time comes when Ladlad is able to justify that having
mixed sexual orientations and transgender identities is beneficial
to the nation, its application for accreditation under the party-list
system will remain just that.
II.

No substantial differentiation
In the United States, whose equal protection doctrine pervades
Philippine jurisprudence, courts do not recognize lesbians, gays,
homosexuals, and bisexuals (LGBT) as a special class of individuals. x x x
Significantly, it has also been held that homosexuality is not a
constitutionally protected fundamental right, and that nothing in the U.S.
Constitution discloses a comparable intent to protect or promote the social
or legal equality of homosexual relations, as in the case of race or religion or
belief.
xxxx
Thus, even if societys understanding, tolerance, and acceptance of
LGBTs is elevated, there can be no denying that Ladlad constituencies are
still males and females, and they will remain either male or female
protected by the same Bill of Rights that applies to all citizens
alike.
xxxx
IV.

Public Morals

x x x There is no question about not imposing on Ladlad Christian or


Muslim religious practices. Neither is there any attempt to any particular
religious groups moral rules on Ladlad. Rather, what are being adopted as
moral parameters and precepts are generally accepted public morals. They
are possibly religious-based, but as a society, the Philippines cannot
ignore its more than 500 years of Muslim and Christian upbringing,
such that some moral precepts espoused by said religions have
sipped [sic] into society and these are not publicly accepted moral
norms.
V.

Legal Provisions
But above morality and social norms, they have become part of the
law of the land. Article 201 of the Revised Penal Code imposes the penalty
of prision mayor upon Those who shall publicly expound or proclaim
doctrines openly contrary to public morals. It penalizes immoral doctrines,

obscene publications and exhibition and indecent shows. Ang Ladlad


apparently falls under these legal provisions. This is clear from its Petitions
paragraph 6F: Consensual partnerships or relationships by gays and
lesbians who are already of age It is further indicated in par. 24 of the
Petition which waves for the record: In 2007, Men Having Sex with Men or
MSMs in the Philippines were estimated as 670,000. Moreoever, Article 694
of the Civil Code defines nuisance as any act, omission x x x or anything
else x x x which shocks, defies or disregards decency or morality x x x.
These are all unlawful.10[10]
On January 4, 2010, Ang Ladlad filed this Petition, praying that the Court
annul the Assailed Resolutions and direct the COMELEC to grant Ang Ladlads
application for accreditation. Ang Ladlad also sought the issuance ex parte of a
preliminary mandatory injunction against the COMELEC, which had previously
announced that it would begin printing the final ballots for the May 2010 elections
by January 25, 2010.
On January 6, 2010, we ordered the Office of the Solicitor General (OSG) to
file its Comment on behalf of COMELEC not later than 12:00 noon of January 11,
2010.11[11] Instead of filing a Comment, however, the OSG filed a Motion for
Extension, requesting that it be given until January 16, 2010 to Comment.12[12]
Somewhat surprisingly, the OSG later filed a Comment in support of petitioners
application.13[13] Thus, in order to give COMELEC the opportunity to fully ventilate
its position, we required it to file its own comment. 14[14] The COMELEC, through
its Law Department, filed its Comment on February 2, 2010.15[15]
In the meantime, due to the urgency of the petition, we issued a temporary
restraining order on January 12, 2010, effective immediately and continuing until
further orders from this Court, directing the COMELEC to cease and desist from
implementing the Assailed Resolutions.16[16]
Also, on January 13, 2010, the Commission on Human Rights (CHR) filed a
Motion to Intervene or to Appear as Amicus Curiae, attaching thereto its
10

11

12

13

14

15

16

Comment-in-Intervention.17[17] The CHR opined that the denial of Ang Ladlads


petition on moral grounds violated the standards and principles of the
Constitution, the Universal Declaration of Human Rights (UDHR), and the
International Covenant on Civil and Political Rights (ICCPR). On January 19, 2010,
we granted the CHRs motion to intervene.
On January 26, 2010, Epifanio D. Salonga, Jr. filed his Motion to
Intervene18[18] which motion was granted on February 2, 2010.19[19]
The Parties Arguments
Ang Ladlad argued that the denial of accreditation, insofar as it justified the
exclusion by using religious dogma, violated the constitutional guarantees against
the establishment of religion. Petitioner also claimed that the Assailed Resolutions
contravened its constitutional rights to privacy, freedom of speech and assembly,
and equal protection of laws, as well as constituted violations of the Philippines
international obligations against discrimination based on sexual orientation.
The OSG concurred with Ang Ladlads petition and argued that the COMELEC erred
in denying petitioners application for registration since there was no basis for
COMELECs allegations of immorality. It also opined that LGBTs have their own
special interests and concerns which should have been recognized by the
COMELEC as a separate classification. However, insofar as the purported violations
of petitioners freedom of speech, expression, and assembly were concerned, the
OSG maintained that there had been no restrictions on these rights.
In its Comment, the COMELEC reiterated that petitioner does not have a
concrete and genuine national political agenda to benefit the nation and that the
petition was validly dismissed on moral grounds. It also argued for the first time
that the LGBT sector is not among the sectors enumerated by the Constitution
and RA 7941, and that petitioner made untruthful statements in its petition when
it alleged its national existence contrary to actual verification reports by
COMELECs field personnel.
Our Ruling
We grant the petition.
Compliance with the Requirements of
the Constitution and Republic Act No.
7941
The COMELEC denied Ang Ladlads application for registration on the ground
that the LGBT sector is neither enumerated in the Constitution and RA 7941, nor is
it associated with or related to any of the sectors in the enumeration.

17

18

19

Respondent mistakenly opines that our ruling in Ang Bagong Bayani stands
for the proposition that only those sectors specifically enumerated in the law or
related to said sectors (labor, peasant, fisherfolk, urban poor, indigenous cultural
communities, elderly, handicapped, women, youth, veterans, overseas workers,
and professionals) may be registered under the party-list system. As we explicitly
ruled in Ang Bagong Bayani-OFW Labor Party v. Commission on Elections,20[20]
the enumeration of marginalized and under-represented sectors is not exclusive.
The crucial element is not whether a sector is specifically enumerated, but
whether a particular organization complies with the requirements of the
Constitution and RA 7941.
Respondent also argues that Ang Ladlad made untruthful statements in its
petition when it alleged that it had nationwide existence through its members and
affiliate organizations. The COMELEC claims that upon verification by its field
personnel, it was shown that save for a few isolated places in the country,
petitioner does not exist in almost all provinces in the country.21[21]
This argument that petitioner made untruthful statements in its petition
when it alleged its national existence is a new one; previously, the COMELEC
claimed that petitioner was not being truthful when it said that it or any of its
nominees/party-list representatives have not violated or failed to comply with
laws, rules, or regulations relating to the elections. Nowhere was this ground for
denial of petitioners accreditation mentioned or even alluded to in the Assailed
Resolutions. This, in itself, is quite curious, considering that the reports of
petitioners alleged non-existence were already available to the COMELEC prior to
the issuance of the First Assailed Resolution. At best, this is irregular procedure; at
worst, a belated afterthought, a change in respondents theory, and a serious
violation of petitioners right to procedural due process.
Nonetheless, we find that there has been no misrepresentation. A cursory
perusal of Ang Ladlads initial petition shows that it never claimed to exist in each
province of the Philippines. Rather, petitioner alleged that the LGBT community in
the Philippines was estimated to constitute at least 670,000 persons; that it had
16,100 affiliates and members around the country, and 4,044 members in its
electronic discussion group.22[22] Ang Ladlad also represented itself to be a
national LGBT umbrella organization with affiliates around the Philippines
composed of the following LGBT networks:
Abra Gay Association
Aklan Butterfly Brigade (ABB) Aklan
Albay Gay Association
Arts Center of Cabanatuan City Nueva Ecija
Boys Legion Metro Manila
Cagayan de Oro People Like Us (CDO PLUS)
Cant Live in the Closet, Inc. (CLIC) Metro Manila
Cebu Pride Cebu City
Circle of Friends
Dipolog Gay Association Zamboanga del Norte
Gay, Bisexual, & Transgender Youth Association (GABAY)
Gay and Lesbian Activists Network for Gender Equality (GALANG)
Metro Manila
20

21
22

Gay Mens Support Group (GMSG) Metro Manila


Gay United for Peace and Solidarity (GUPS) Lanao del Norte
Iloilo City Gay Association Iloilo City
Kabulig Writers Group Camarines Sur
Lesbian Advocates Philippines, Inc. (LEAP)
LUMINA Baguio City
Marikina Gay Association Metro Manila
Metropolitan Community Church (MCC) Metro Manila
Naga City Gay Association Naga City
ONE BACARDI
Order of St. Aelred (OSAe) Metro Manila
PUP LAKAN
RADAR PRIDEWEAR
Rainbow Rights Project (R-Rights), Inc. Metro Manila
San Jose del Monte Gay Association Bulacan
Sining Kayumanggi Royal Family Rizal
Society of Transexual Women of the Philippines (STRAP) Metro
Manila
Soul Jive Antipolo, Rizal
The Link Davao City
Tayabas Gay Association Quezon
Womens Bisexual Network Metro Manila
Zamboanga Gay Association Zamboanga City23[23]
Since the COMELEC only searched for the names ANG LADLAD LGBT or
LADLAD LGBT, it is no surprise that they found that petitioner had no presence in
any of these regions. In fact, if COMELECs findings are to be believed, petitioner
does not even exist in Quezon City, which is registered as Ang Ladlads principal
place of business.
Against this backdrop, we find that Ang Ladlad has sufficiently
demonstrated its compliance with the legal requirements for accreditation. Indeed,
aside from COMELECs moral objection and the belated allegation of non-existence,
nowhere in the records has the respondent ever found/ruled that Ang Ladlad is not
qualified to register as a party-list organization under any of the requisites under
RA 7941 or the guidelines in Ang Bagong Bayani. The difference, COMELEC claims,
lies in Ang Ladlads morality, or lack thereof.
Religion as the Basis for Refusal to
Accept Ang Ladlads Petition for
Registration
Our Constitution provides in Article III, Section 5 that [n]o law shall be made
respecting an establishment of religion, or prohibiting the free exercise thereof. At
bottom, what our non-establishment clause calls for is government neutrality in
religious matters.24[24] Clearly, governmental reliance on religious justification is
inconsistent with this policy of neutrality.25[25] We thus find that it was grave

23

24

25

violation of the non-establishment clause for the COMELEC to utilize the Bible and
the Koran to justify the exclusion of Ang Ladlad.
Rather than relying on religious belief, the legitimacy of the Assailed
Resolutions should depend, instead, on whether the COMELEC is able to advance
some justification for its rulings beyond mere conformity to religious doctrine.
Otherwise stated, government must act for secular purposes and in ways that
have primarily secular effects. As we held in Estrada v. Escritor:26[26]
x x x The morality referred to in the law is public and necessarily secular,
not religious as the dissent of Mr. Justice Carpio holds. "Religious teachings
as expressed in public debate may influence the civil public order but public
moral disputes may be resolved only on grounds articulable in secular
terms." Otherwise, if government relies upon religious beliefs in formulating
public policies and morals, the resulting policies and morals would require
conformity to what some might regard as religious programs or agenda. The
non-believers would therefore be compelled to conform to a standard of
conduct buttressed by a religious belief, i.e., to a "compelled religion,"
anathema to religious freedom. Likewise, if government based its actions
upon religious beliefs, it would tacitly approve or endorse that belief and
thereby also tacitly disapprove contrary religious or non-religious views that
would not support the policy. As a result, government will not provide full
religious freedom for all its citizens, or even make it appear that those
whose beliefs are disapproved are second-class citizens.
In other words, government action, including its proscription of
immorality as expressed in criminal law like concubinage, must have a
secular purpose. That is, the government proscribes this conduct because it
is "detrimental (or dangerous) to those conditions upon which depend the
existence and progress of human society" and not because the conduct is
proscribed by the beliefs of one religion or the other. Although admittedly,
moral judgments based on religion might have a compelling influence on
those engaged in public deliberations over what actions would be
considered a moral disapprobation punishable by law. After all, they might
also be adherents of a religion and thus have religious opinions and moral
codes with a compelling influence on them; the human mind endeavors to
regulate the temporal and spiritual institutions of society in a uniform
manner, harmonizing earth with heaven. Succinctly put, a law could be
religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must
have an articulable and discernible secular purpose and justification to pass
scrutiny of the religion clauses. x x x Recognizing the religious nature of the
Filipinos and the elevating influence of religion in society, however, the
Philippine constitution's religion clauses prescribe not a strict but a
benevolent neutrality. Benevolent neutrality recognizes that government
must pursue its secular goals and interests but at the same time strive to
uphold religious liberty to the greatest extent possible within flexible
constitutional limits. Thus, although the morality contemplated by laws is
secular, benevolent neutrality could allow for accommodation of morality
based on religion, provided it does not offend compelling state interests.27
[27]

26

27

Public Morals as a Ground to Deny Ang


Ladlads Petition for Registration
Respondent suggests that although the moral condemnation of
homosexuality and homosexual conduct may be religion-based, it has long been
transplanted into generally accepted public morals. The COMELEC argues:
Petitioners accreditation was denied not necessarily because their group
consists of LGBTs but because of the danger it poses to the people
especially the youth. Once it is recognized by the government, a sector
which believes that there is nothing wrong in having sexual relations with
individuals of the same gender is a bad example. It will bring down the
standard of morals we cherish in our civilized society. Any society without a
set of moral precepts is in danger of losing its own existence.28[28]
We are not blind to the fact that, through the years, homosexual conduct,
and perhaps homosexuals themselves, have borne the brunt of societal
disapproval. It is not difficult to imagine the reasons behind this censure religious
beliefs, convictions about the preservation of marriage, family, and procreation,
even dislike or distrust of homosexuals themselves and their perceived lifestyle.
Nonetheless, we recall that the Philippines has not seen fit to criminalize
homosexual conduct. Evidently, therefore, these generally accepted public morals
have not been convincingly transplanted into the realm of law.29[29]
The Assailed Resolutions have not identified any specific overt immoral act
performed by Ang Ladlad. Even the OSG agrees that there should have been a
finding by the COMELEC that the groups members have committed or are
committing immoral acts.30[30] The OSG argues:
x x x A person may be sexually attracted to a person of the same gender, of
a different gender, or more than one gender, but mere attraction does not
translate to immoral acts. There is a great divide between thought and
action. Reduction ad absurdum. If immoral thoughts could be penalized,
COMELEC would have its hands full of disqualification cases against both the
straights and the gays. Certainly this is not the intendment of the law.31[31]
Respondent has failed to explain what societal ills are sought to be
prevented, or why special protection is required for the youth. Neither has the
COMELEC condescended to justify its position that petitioners admission into the
party-list system would be so harmful as to irreparably damage the moral fabric of
28

29

30

31

society. We, of course, do not suggest that the state is wholly without authority to
regulate matters concerning morality, sexuality, and sexual relations, and we
recognize that the government will and should continue to restrict behavior
considered detrimental to society. Nonetheless, we cannot countenance advocates
who, undoubtedly with the loftiest of intentions, situate morality on one end of an
argument or another, without bothering to go through the rigors of legal reasoning
and explanation. In this, the notion of morality is robbed of all value. Clearly then,
the bare invocation of morality will not remove an issue from our scrutiny.
We also find the COMELECs reference to purported violations of our penal
and civil laws flimsy, at best; disingenuous, at worst. Article 694 of the Civil Code
defines a nuisance as any act, omission, establishment, condition of property, or
anything else which shocks, defies, or disregards decency or morality, the
remedies for which are a prosecution under the Revised Penal Code or any local
ordinance, a civil action, or abatement without judicial proceedings. 32[32] A
violation of Article 201 of the Revised Penal Code, on the other hand, requires
proof beyond reasonable doubt to support a criminal conviction. It hardly needs to
be emphasized that mere allegation of violation of laws is not proof, and a mere
blanket invocation of public morals cannot replace the institution of civil or criminal
proceedings and a judicial determination of liability or culpability.
As such, we hold that moral disapproval, without more, is not a sufficient
governmental interest to justify exclusion of homosexuals from participation in the
party-list system. The denial of Ang Ladlads registration on purely moral grounds
amounts more to a statement of dislike and disapproval of homosexuals, rather
than a tool to further any substantial public interest. Respondents blanket
justifications give rise to the inevitable conclusion that the COMELEC targets
homosexuals themselves as a class, not because of any particular morally
reprehensible act. It is this selective targeting that implicates our equal protection
clause.
Equal Protection
Despite the absolutism of Article III, Section 1 of our Constitution, which
provides nor shall any person be denied equal protection of the laws, courts have
never interpreted the provision as an absolute prohibition on classification.
Equality, said Aristotle, consists in the same treatment of similar persons.33[33]
The equal protection clause guarantees that no person or class of persons shall be
deprived of the same protection of laws which is enjoyed by other persons or other
classes in the same place and in like circumstances.34[34]
Recent jurisprudence has affirmed that if a law neither burdens a fundamental
right nor targets a suspect class, we will uphold the classification as long as it
bears a rational relationship to some legitimate government end.35[35] In Central
Bank Employees Association, Inc. v. Banko Sentral ng Pilipinas,36[36] we declared
that [i]n our jurisdiction, the standard of analysis of equal protection challenges x x
32
33

34

35

x have followed the rational basis test, coupled with a deferential attitude to
legislative classifications and a reluctance to invalidate a law unless there is a
showing of a clear and unequivocal breach of the Constitution.37[37]
The COMELEC posits that the majority of the Philippine population considers
homosexual conduct as immoral and unacceptable, and this constitutes sufficient
reason to disqualify the petitioner. Unfortunately for the respondent, the Philippine
electorate has expressed no such belief. No law exists to criminalize homosexual
behavior or expressions or parties about homosexual behavior. Indeed, even if we
were to assume that public opinion is as the COMELEC describes it, the asserted
state interest here that is, moral disapproval of an unpopular minority is not a
legitimate state interest that is sufficient to satisfy rational basis review under the
equal protection clause. The COMELECs differentiation, and its unsubstantiated
claim that Ang Ladlad cannot contribute to the formulation of legislation that
would benefit the nation, furthers no legitimate state interest other than
disapproval of or dislike for a disfavored group.
From the standpoint of the political process, the lesbian, gay, bisexual, and
transgender have the same interest in participating in the party-list system on the
same basis as other political parties similarly situated. State intrusion in this case
is equally burdensome. Hence, laws of general application should apply with equal
force to LGBTs, and they deserve to participate in the party-list system on the
same basis as other marginalized and under-represented sectors.
It bears stressing that our finding that COMELECs act of differentiating
LGBTs from heterosexuals insofar as the party-list system is concerned does not
imply that any other law distinguishing between heterosexuals and homosexuals
under different circumstances would similarly fail. We disagree with the OSGs
position that homosexuals are a class in themselves for the purposes of the equal
protection clause.38[38] We are not prepared to single out homosexuals as a
separate class meriting special or differentiated treatment. We have not received
sufficient evidence to this effect, and it is simply unnecessary to make such a
ruling today. Petitioner itself has merely demanded that it be recognized under the
same basis as all other groups similarly situated, and that the COMELEC made an
unwarranted and impermissible classification not justified by the circumstances of
the case.
Freedom of Expression and Association
Under our system of laws, every group has the right to promote its agenda
and attempt to persuade society of the validity of its position through normal
democratic means.39[39] It is in the public square that deeply held convictions and
differing opinions should be distilled and deliberated upon. As we held in Estrada
v. Escritor:40[40]
36

37

38

39

In a democracy, this common agreement on political and moral ideas is


distilled in the public square. Where citizens are free, every opinion, every
prejudice, every aspiration, and every moral discernment has access to the
public square where people deliberate the order of their life together.
Citizens are the bearers of opinion, including opinion shaped by, or
espousing religious belief, and these citizens have equal access to the
public square. In this representative democracy, the state is prohibited from
determining which convictions and moral judgments may be proposed for
public deliberation. Through a constitutionally designed process, the people
deliberate and decide. Majority rule is a necessary principle in this
democratic governance. Thus, when public deliberation on moral judgments
is finally crystallized into law, the laws will largely reflect the beliefs and
preferences of the majority, i.e., the mainstream or median groups.
Nevertheless, in the very act of adopting and accepting a constitution and
the limits it specifies including protection of religious freedom "not only for a
minority, however small not only for a majority, however large but for each
of us" the majority imposes upon itself a self-denying ordinance. It promises
not to do what it otherwise could do: to ride roughshod over the dissenting
minorities.
Freedom of expression constitutes one of the essential foundations of a
democratic society, and this freedom applies not only to those that are favorably
received but also to those that offend, shock, or disturb. Any restriction imposed in
this sphere must be proportionate to the legitimate aim pursued. Absent any
compelling state interest, it is not for the COMELEC or this Court to impose its
views on the populace. Otherwise stated, the COMELEC is certainly not free to
interfere with speech for no better reason than promoting an approved message
or discouraging a disfavored one.
This position gains even more force if one considers that homosexual
conduct is not illegal in this country. It follows that both expressions concerning
ones homosexuality and the activity of forming a political association that supports
LGBT individuals are protected as well.
Other jurisdictions have gone so far as to categorically rule that even
overwhelming public perception that homosexual conduct violates public morality
does not justify criminalizing same-sex conduct.41[41] European and United
Nations judicial decisions have ruled in favor of gay rights claimants on both
privacy and equality grounds, citing general privacy and equal protection
provisions in foreign and international texts.42[42] To the extent that there is much
to learn from other jurisdictions that have reflected on the issues we face here,
such jurisprudence is certainly illuminating. These foreign authorities, while not
formally binding on Philippine courts, may nevertheless have persuasive influence
on the Courts analysis.
In the area of freedom of expression, for instance, United States courts have
ruled that existing free speech doctrines protect gay and lesbian rights to
expressive conduct. In order to justify the prohibition of a particular expression of
40

41

42

opinion, public institutions must show that their actions were caused by something
more than a mere desire to avoid the discomfort and unpleasantness that always
accompany an unpopular viewpoint.43[43]
With respect to freedom of association for the advancement of ideas and
beliefs, in Europe, with its vibrant human rights tradition, the European Court of
Human Rights (ECHR) has repeatedly stated that a political party may campaign
for a change in the law or the constitutional structures of a state if it uses legal and
democratic means and the changes it proposes are consistent with democratic
principles. The ECHR has emphasized that political ideas that challenge the
existing order and whose realization is advocated by peaceful means must be
afforded a proper opportunity of expression through the exercise of the right of
association, even if such ideas may seem shocking or unacceptable to the
authorities or the majority of the population.44[44] A political group should not be
hindered solely because it seeks to publicly debate controversial political issues in
order to find solutions capable of satisfying everyone concerned.45[45] Only if a
political party incites violence or puts forward policies that are incompatible with
democracy does it fall outside the protection of the freedom of association
guarantee.46[46]
We do not doubt that a number of our citizens may believe that homosexual
conduct is distasteful, offensive, or even defiant. They are entitled to hold and
express that view. On the other hand, LGBTs and their supporters, in all likelihood,
believe with equal fervor that relationships between individuals of the same sex
are morally equivalent to heterosexual relationships. They, too, are entitled to hold
and express that view. However, as far as this Court is concerned, our democracy
precludes using the religious or moral views of one part of the community to
exclude from consideration the values of other members of the community.
Of course, none of this suggests the impending arrival of a golden age for gay
rights litigants. It well may be that this Decision will only serve to highlight the
discrepancy between the rigid constitutional analysis of this Court and the more
complex moral sentiments of Filipinos. We do not suggest that public opinion, even
at its most liberal, reflect a clear-cut strong consensus favorable to gay rights
claims and we neither attempt nor expect to affect individual perceptions of
homosexuality through this Decision.
The OSG argues that since there has been neither prior restraint nor
subsequent punishment imposed on Ang Ladlad, and its members have not been
deprived of their right to voluntarily associate, then there has been no restriction
on their freedom of expression or association. The OSG argues that:
There was no utterance restricted, no publication censored, or any
assembly denied. [COMELEC] simply exercised its authority to review and
verify the qualifications of petitioner as a sectoral party applying to
participate in the party-list system. This lawful exercise of duty cannot be
said to be a transgression of Section 4, Article III of the Constitution.
43

44

45
46

xxxx
A denial of the petition for registration x x x does not deprive the
members of the petitioner to freely take part in the conduct of elections.
Their right to vote will not be hampered by said denial. In fact, the right to
vote is a constitutionally-guaranteed right which cannot be limited.
As to its right to be elected in a genuine periodic election, petitioner
contends that the denial of Ang Ladlads petition has the clear and
immediate effect of limiting, if not outrightly nullifying the capacity of its
members to fully and equally participate in public life through engagement
in the party list elections.
This argument is puerile. The holding of a public office is not a right
but a privilege subject to limitations imposed by law. x x x47[47]
The OSG fails to recall that petitioner has, in fact, established its
qualifications to participate in the party-list system, and as advanced by the OSG
itself the moral objection offered by the COMELEC was not a limitation imposed by
law. To the extent, therefore, that the petitioner has been precluded, because of
COMELECs action, from publicly expressing its views as a political party and
participating on an equal basis in the political process with other equally-qualified
party-list candidates, we find that there has, indeed, been a transgression of
petitioners fundamental rights.
Non-Discrimination and International
Law
In an age that has seen international law evolve geometrically in scope and
promise, international human rights law, in particular, has grown dynamically in its
attempt to bring about a more just and humane world order. For individuals and
groups struggling with inadequate structural and governmental support,
international human rights norms are particularly significant, and should be
effectively enforced in domestic legal systems so that such norms may become
actual, rather than ideal, standards of conduct.
Our Decision today is fully in accord with our international obligations to
protect and promote human rights. In particular, we explicitly recognize the
principle of non-discrimination as it relates to the right to electoral participation,
enunciated in the UDHR and the ICCPR.
The principle of non-discrimination is laid out in Article 26 of the ICCPR, as follows:
Article 26
All persons are equal before the law and are entitled without any
discrimination to the equal protection of the law. In this respect, the law
shall prohibit any discrimination and guarantee to all persons equal and
effective protection against discrimination on any ground such as race,
colour, sex, language, religion, political or other opinion, national or social
origin, property, birth or other status.
In this context, the principle of non-discrimination requires that laws of
general application relating to elections be applied equally to all persons,
47

regardless of sexual orientation. Although sexual orientation is not specifically


enumerated as a status or ratio for discrimination in Article 26 of the ICCPR, the
ICCPR Human Rights Committee has opined that the reference to sex in Article 26
should be construed to include sexual orientation. 48[48] Additionally, a variety of
United Nations bodies have declared discrimination on the basis of sexual
orientation to be prohibited under various international agreements.49[49]
The UDHR provides:
Article 21.
(1)Everyone has the right to take part in the government of his
country, directly or through freely chosen representatives.
Likewise, the ICCPR states:
Article 25
Every citizen shall have the right and the opportunity, without any of
the distinctions mentioned in article 2 and without unreasonable
restrictions:
(a) To take part in the conduct of public affairs, directly or through
freely chosen representatives;
(b) To vote and to be elected at genuine periodic elections which
shall be by universal and equal suffrage and shall be held by secret ballot,
guaranteeing the free expression of the will of the electors;
(c) To have access, on general terms of equality, to public service in
his country.
As stated by the CHR in its Comment-in-Intervention, the scope of the right
to electoral participation is elaborated by the Human Rights Committee in its
General Comment No. 25 (Participation in Public Affairs and the Right to Vote) as
follows:
1.Article 25 of the Covenant recognizes and protects the right of
every citizen to take part in the conduct of public affairs, the right to vote
and to be elected and the right to have access to public service. Whatever
form of constitution or government is in force, the Covenant requires States
to adopt such legislative and other measures as may be necessary to
ensure that citizens have an effective opportunity to enjoy the rights it
protects. Article 25 lies at the core of democratic government based on the
consent of the people and in conformity with the principles of the Covenant.
xxxx
15. The effective implementation of the right and the opportunity to
stand for elective office ensures that persons entitled to vote have a free
choice of candidates. Any restrictions on the right to stand for election, such
as minimum age, must be justifiable on objective and reasonable criteria.
48

49

Persons who are otherwise eligible to stand for election should not be
excluded by unreasonable or discriminatory requirements such as
education, residence or descent, or by reason of political affiliation. No
person should suffer discrimination or disadvantage of any kind because of
that person's candidacy. States parties should indicate and explain the
legislative provisions which exclude any group or category of persons from
elective office.50[50]
We stress, however, that although this Court stands willing to assume the
responsibility of giving effect to the Philippines international law obligations, the
blanket invocation of international law is not the panacea for all social ills. We refer
now to the petitioners invocation of the Yogyakarta Principles (the Application of
International Human Rights Law In Relation to Sexual Orientation and Gender
Identity),51[51] which petitioner declares to reflect binding principles of
international law.
At this time, we are not prepared to declare that these Yogyakarta Principles
contain norms that are obligatory on the Philippines. There are declarations and
obligations outlined in said Principles which are not reflective of the current state
of international law, and do not find basis in any of the sources of international law
enumerated under Article 38(1) of the Statute of the International Court of
Justice.52[52] Petitioner has not undertaken any objective and rigorous analysis of
these alleged principles of international law to ascertain their true status.
We also hasten to add that not everything that society or a certain segment
of society wants or demands is automatically a human right. This is not an
arbitrary human intervention that may be added to or subtracted from at will. It is
unfortunate that much of what passes for human rights today is a much broader
context of needs that identifies many social desires as rights in order to further
claims that international law obliges states to sanction these innovations. This has
the effect of diluting real human rights, and is a result of the notion that if wants
are couched in rights language, then they are no longer controversial.
Using even the most liberal of lenses, these Yogyakarta Principles,
consisting of a declaration formulated by various international law professors, are
at best de lege ferenda and do not constitute binding obligations on the
Philippines. Indeed, so much of contemporary international law is characterized by
the soft law nomenclature, i.e., international law is full of principles that promote
international cooperation, harmony, and respect for human rights, most of which
amount to no more than well-meaning desires, without the support of either State
practice or opinio juris.53[53]
As a final note, we cannot help but observe that the social issues presented
by this case are emotionally charged, societal attitudes are in flux, even the
psychiatric and religious communities are divided in opinion. This Courts role is not
50

51

52

53

to impose its own view of acceptable behavior. Rather, it is to apply the


Constitution and laws as best as it can, uninfluenced by public opinion, and
confident in the knowledge that our democracy is resilient enough to withstand
vigorous debate.
WHEREFORE, the Petition is hereby GRANTED. The Resolutions of the
Commission on Elections dated November 11, 2009 and December 16, 2009 in
SPP No. 09-228 (PL) are hereby SET ASIDE. The Commission on Elections is
directed to GRANT petitioners application for party-list accreditation.
SO ORDERED.

Art. II:10, Art. XII:15, XIII:2, RA 9520. Cooperatives are instruments


for social justice and economic development. (Dumaguete Cathedral
Credit Coop. versus BIR Commissioner, G.R. No. 182722, 22 Jan.
2010)
DUMAGUETE CATHEDRAL
CREDIT COOPERATIVE
[DCCCO], Represented by
Felicidad L. Ruiz, its
General
Manager,
Petitioner,
-versus-

G.R. No. 182722


Present:
CARPIO,
Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

J.,

COMMISSIONER OF
INTERNAL REVENUE,
Promulgated:
Respondent.
January 22, 2010
x------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
The clashing interests of the State and the taxpayers are again pitted
against each other. Two basic principles, the States inherent power of taxation and
its declared policy of fostering the creation and growth of cooperatives come into
play. However, the one that embodies the spirit of the law and the true intent of
the legislature prevails.
This Petition for Review on Certiorari under Section 11 of Republic Act (RA)
No. 9282,54[1] in relation to Rule 45 of the Rules of Court, seeks to set aside the
December 18, 2007 Decision55[2] of the Court of Tax Appeals (CTA), ordering
petitioner to pay deficiency withholding taxes on interest from savings and time
54

55

deposits of its members for taxable years 1999 and 2000, pursuant to Section
24(B)(1) of the National Internal Revenue Code of 1997 (NIRC), as well as the
delinquency interest of 20% per annum under Section 249(C) of the same Code. It
also assails the April 11, 2008 Resolution56[3] denying petitioners Motion for
Reconsideration.
Factual Antecedents
Petitioner Dumaguete Cathedral Credit Cooperative (DCCCO) is a credit
cooperative duly registered with and regulated by the Cooperative Development
Authority (CDA).57[4] It was established on February 17, 196858[5] with the
following objectives and purposes: (1) to increase the income and purchasing
power of the members; (2) to pool the resources of the members by encouraging
savings and promoting thrift to mobilize capital formation for development
activities; and (3) to extend loans to members for provident and productive
purposes.59[6] It has the power (1) to draw, make, accept, endorse, guarantee,
execute, and issue promissory notes, mortgages, bills of exchange, drafts,
warrants, certificates and all kinds of obligations and instruments in connection
with and in furtherance of its business operations; and (2) to issue bonds,
debentures, and other obligations; to contract indebtedness; and to secure the
same with a mortgage or deed of trust, or pledge or lien on any or all of its real
and personal properties.60[7]
On November 27, 2001, the Bureau of Internal Revenue (BIR) Operations
Group Deputy Commissioner, Lilian B. Hefti, issued Letters of Authority Nos. 63222
and 63223, authorizing BIR Officers Tomas Rambuyon and Tarcisio Cubillan of
Revenue Region No. 12, Bacolod City, to examine petitioners books of accounts
and other accounting records for all internal revenue taxes for the taxable years
1999 and 2000.61[8]
Proceedings before the BIR Regional Office
On June 26, 2002, petitioner received two Pre-Assessment Notices for
deficiency withholding taxes for taxable years 1999 and 2000 which were
protested by petitioner on July 23, 2002.62[9] Thereafter, on October 16, 2002,
56

57

58

59

60

61

62

petitioner received two other Pre-Assessment Notices for deficiency withholding


taxes also for taxable years 1999 and 2000.63[10] The deficiency withholding
taxes cover the payments of the honorarium of the Board of Directors, security
and janitorial services, legal and professional fees, and interest on savings and
time deposits of its members.
On October 22, 2002, petitioner informed BIR Regional Director Sonia L.
Flores that it would only pay the deficiency withholding taxes corresponding to the
honorarium of the Board of Directors, security and janitorial services, legal and
professional fees for the year 1999 in the amount of P87,977.86, excluding
penalties and interest.64[11]
In another letter dated November 8, 2002, petitioner also informed the BIR
Assistant Regional Director, Rogelio B. Zambarrano, that it would pay the
withholding taxes due on the honorarium and per diems of the Board of Directors,
security and janitorial services, commissions and legal & professional fees for the
year 2000 in the amount of P119,889.37, excluding penalties and interest, and
that it would avail of the Voluntary Assessment and Abatement Program (VAAP) of
the BIR under Revenue Regulations No. 17-2002.65[12]
On November 29, 2002, petitioner availed of the VAAP and paid the
amounts of P105,574.62 and P143,867.2466[13] corresponding to the withholding
taxes on the payments for the compensation, honorarium of the Board of
Directors, security and janitorial services, and legal and professional services, for
the years 1999 and 2000, respectively.
On April 24, 2003, petitioner received from the BIR Regional Director, Sonia
L. Flores, Letters of Demand Nos. 00027-2003 and 00026-2003, with attached
Transcripts of Assessment and Audit Results/Assessment Notices, ordering
petitioner to pay the deficiency withholding taxes, inclusive of penalties, for the
years 1999 and 2000 in the amounts of P1,489,065.30 and P1,462,644.90,
respectively.67[14]
Proceedings before the Commissioner of Internal Revenue
On May 9, 2003, petitioner protested the Letters of Demand and
Assessment Notices with the Commissioner of Internal Revenue (CIR).68[15]

63

64

65

66

67

68

However, the latter failed to act on the protest within the prescribed 180-day
period. Hence, on December 3, 2003, petitioner filed a Petition for Review before
the CTA, docketed as C.T.A. Case No. 6827.69[16]
Proceedings before the CTA First Division
The case was raffled to the First Division of the CTA which rendered its
Decision on February 6, 2007, disposing of the case in this wise:
IN VIEW OF ALL THE FOREGOING, the Petition for Review is hereby
PARTIALLY GRANTED. Assessment Notice Nos. 00026-2003 and 00027-2003
are hereby MODIFIED and the assessment for deficiency withholding taxes
on the honorarium and per diems of petitioners Board of Directors, security
and janitorial services, commissions and legal and professional fees are
hereby CANCELLED. However, the assessments for deficiency withholding
taxes on interests are hereby AFFIRMED.
Accordingly, petitioner is ORDERED TO PAY the respondent the
respective amounts of P1,280,145.89 and P1,357,881.14 representing
deficiency withholding taxes on interests from savings and time deposits of
its members for the taxable years 1999 and 2000. In addition, petitioner is
ordered to pay the 20% delinquency interest from May 26, 2003 until the
amount of deficiency withholding taxes are fully paid pursuant to Section
249 (C) of the Tax Code.
SO ORDERED.70[17]
Dissatisfied, petitioner moved for a partial reconsideration, but it was denied
by the First Division in its Resolution dated May 29, 2007.71[18]
Proceedings before the CTA En Banc
On July 3, 2007, petitioner filed a Petition for Review with the CTA En Banc,72
[19] interposing the lone issue of whether or not petitioner is liable to pay the
deficiency withholding taxes on interest from savings and time deposits of its
members for taxable years 1999 and 2000, and the consequent delinquency
interest of 20% per annum.73[20]
Finding no reversible error in the Decision dated February 6, 2007 and the
Resolution dated May 29, 2007 of the CTA First Division, the CTA En Banc denied
the Petition for Review74[21] as well as petitioners Motion for Reconsideration. 75
[22]
69

70

71

72

73

The CTA En Banc held that Section 57 of the NIRC requires the withholding
of tax at source. Pursuant thereto, Revenue Regulations No. 2-98 was issued
enumerating the income payments subject to final withholding tax, among which
is interest from any peso bank deposit and yield, or any other monetary benefit
from deposit substitutes and from trust funds and similar arrangements x x x.
According to the CTA En Banc, petitioners business falls under the phrase similar
arrangements; as such, it should have withheld the corresponding 20% final tax
on the interest from the deposits of its members.
Issue
Hence, the present recourse, where petitioner raises the issue of whether or
not it is liable to pay the deficiency withholding taxes on interest from savings and
time deposits of its members for the taxable years 1999 and 2000, as well as the
delinquency interest of 20% per annum.
Petitioners Arguments
Petitioner argues that Section 24(B)(1) of the NIRC which reads in part, to
wit:
SECTION 24.Income Tax Rates.
xxxx
(B) Rate of Tax on Certain Passive Income:
(1)
Interests, Royalties, Prizes, and Other Winnings. A final
tax at the rate of twenty percent (20%) is hereby imposed upon the amount
of interest from any currency bank deposit and yield or any other monetary
benefit from deposit substitutes and from trust funds and similar
arrangements; x x x
applies only to banks and not to cooperatives, since the phrase similar
arrangements is preceded by terms referring to banking transactions that have
deposit peculiarities. Petitioner thus posits that the savings and time deposits of
members of cooperatives are not included in the enumeration, and thus not
subject to the 20% final tax. To bolster its position, petitioner cites BIR Ruling No.
551-88876[23] and BIR Ruling [DA-591-2006]77[24] where the BIR ruled that
interests from deposits maintained by members of cooperative are not subject to
withholding tax under Section 24(B)(1) of the NIRC. Petitioner further contends
that pursuant to Article XII, Section 15 of the Constitution 78[25] and Article 2 of
Republic Act No. 6938 (RA 6938) or the Cooperative Code of the Philippines, 79[26]
74

75

76

77

cooperatives enjoy a preferential tax treatment which exempts their members


from the application of Section 24(B)(1) of the NIRC.
Respondents Arguments
As a counter-argument, respondent invokes the legal maxim Ubi lex non
distinguit nec nos distinguere debemos (where the law does not distinguish, the
courts should not distinguish). Respondent maintains that Section 24(B)(1) of the
NIRC applies to cooperatives as the phrase similar arrangements is not limited to
banks, but includes cooperatives that are depositaries of their members.
Regarding the exemption relied upon by petitioner, respondent adverts to the
jurisprudential rule that tax exemptions are highly disfavored and construed
strictissimi juris against the taxpayer and liberally in favor of the taxing power. In
this connection, respondent likewise points out that the deficiency tax
assessments were issued against petitioner not as a taxpayer but as a withholding
agent.
Our Ruling
The petition has merit.
Petitioners invocation of BIR Ruling
No. 551-888, reiterated in BIR Ruling
[DA-591-2006], is proper.
On November 16, 1988, the BIR declared in BIR Ruling No. 551-888 that
cooperatives are not required to withhold taxes on interest from savings and time
deposits of their members. The pertinent BIR Ruling reads:
November 16, 1988
BIR RULING NO. 551-888
24 369-88 551-888
Gentlemen:
This refers to your letter dated September 5, 1988 stating that you are a
corporation established under P.D. No. 175 and duly registered with the
Bureau of Cooperatives Development as full fledged cooperative of good
standing with Certificate of Registration No. FF 563-RR dated August 8,
1985; and that one of your objectives is to provide and strengthen
cooperative endeavor and extend assistance to members and nonmembers through credit scheme both in cash and in kind.
Based on the foregoing representations, you now request in effect a ruling
as to whether or not you are exempt from the following:
1.
2.
3.

Payment of sales tax


Filing and payment of income tax
Withholding taxes from compensation of employees and savings
account and time deposits of members. (Underscoring ours)
In reply, please be informed that Executive Order No. 93 which took effect
on March 10, 1987 withdrew all tax exemptions and preferential privileges

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79

e.g., income tax and sales tax, granted to cooperatives under P.D. No. 175
which were previously withdrawn by P.D. No. 1955 effective October 15,
1984 and restored by P.D. No. 2008 effective January 8, 1986. However,
implementation of said Executive Order insofar as electric, agricultural,
irrigation and waterworks cooperatives are concerned was suspended until
June 30, 1987. (Memorandum Order No. 65 dated January 21, 1987 of the
President) Accordingly, your tax exemption privilege expired as of June 30,
1987. Such being the case, you are now subject to income and sales taxes.
Moreover, under Section 72(a) of the Tax Code, as amended, every
employer making payment of wages shall deduct and withhold upon such
wages a tax at the rates prescribed by Section 21(a) in relation to section
71, Chapter X, Title II, of the same Code as amended by Batas Pambansa
Blg. 135 and implemented by Revenue Regulations No. 6-82 as amended.
Accordingly, as an employer you are required to withhold the corresponding
tax due from the compensation of your employees.
Furthermore, under Section 50(a) of the Tax Code, as amended, the tax
imposed or prescribed by Section 21(c) of the same Code on specified items
of income shall be withheld by payor-corporation and/or person and paid in
the same manner and subject to the same conditions as provided in Section
51 of the Tax Code, as amended. Such being the case, and since interest
from any Philippine currency bank deposit and yield or any other monetary
benefit from deposit substitutes are paid by banks, you are not the party
required to withhold the corresponding tax on the aforesaid savings account
and time deposits of your members. (Underscoring ours)
Very truly yours,
(SGD.) BIENVENIDO A. TAN, JR.
Commissioner
The CTA First Division, however, disregarded the above quoted ruling in
determining whether petitioner is liable to pay the deficiency withholding taxes on
interest from the deposits of its members. It ratiocinated in this wise:
This Court does not agree. As correctly pointed out by respondent in
his Memorandum, nothing in the above quoted resolution will give the
conclusion that savings account and time deposits of members of a
cooperative are tax-exempt. What is entirely clear is the opinion of the
Commissioner that the proper party to withhold the corresponding taxes on
certain specified items of income is the payor-corporation and/or person. In
the same way, in the case of interests earned from Philippine currency
deposits made in a bank, then it is the bank which is liable to withhold the
corresponding taxes considering that the bank is the payor-corporation.
Thus, the ruling that a cooperative is not the proper party to withhold the
corresponding taxes on the aforementioned accounts is correct. However,
this ruling does not hold true if the savings and time deposits are being
maintained in the cooperative, for in this case, it is the cooperative which
becomes the payor-corporation, a separate entity acting no more than an
agent of the government for the collection of taxes, liable to withhold the
corresponding taxes on the interests earned. 80[27] (Underscoring ours)
The CTA En Banc affirmed the above-quoted Decision and found petitioners
invocation of BIR Ruling No. 551-88 misplaced. According to the CTA En Banc, the
BIR Ruling was based on the premise that the savings and time deposits were
placed by the members of the cooperative in the bank. 81[28] Consequently, it
80

ruled that the BIR Ruling does not apply when the deposits are maintained in the
cooperative such as the instant case.
We disagree.
There is nothing in the ruling to suggest that it applies only when deposits
are maintained in a bank. Rather, the ruling clearly states, without any
qualification, that since interest from any Philippine currency bank deposit and
yield or any other monetary benefit from deposit substitutes are paid by banks,
cooperatives are not required to withhold the corresponding tax on the interest
from savings and time deposits of their members. This interpretation was
reiterated in BIR Ruling [DA-591-2006] dated October 5, 2006, which was issued
by Assistant Commissioner James H. Roldan upon the request of the cooperatives
for a confirmatory ruling on several issues, among which is the alleged exemption
of interest income on members deposit (over and above the share capital
holdings) from the 20% final withholding tax. In the said ruling, the BIR opined
that:
xxxx
3.Exemption of interest income on members deposit (over and above the share
capital holdings) from the 20% Final Withholding Tax.
The National Internal Revenue Code states that a final tax at the rate
of twenty percent (20%) is hereby imposed upon the amount of interest on
currency bank deposit and yield or any other monetary benefit from the
deposit substitutes and from trust funds and similar arrangement x x x for
individuals under Section 24(B)(1) and for domestic corporations under
Section 27(D)(1). Considering the members deposits with the cooperatives
are not currency bank deposits nor deposit substitutes, Section 24(B)(1)
and Section 27(D)(1), therefore, do not apply to members of cooperatives
and to deposits of primaries with federations, respectively.
It bears stressing that interpretations of administrative agencies in charge of
enforcing a law are entitled to great weight and consideration by the courts,
unless such interpretations are in a sharp conflict with the governing statute or the
Constitution and other laws.82[29] In this case, BIR Ruling No. 551-888 and BIR
Ruling [DA-591-2006] are in perfect harmony with the Constitution and the laws
they seek to implement. Accordingly, the interpretation in BIR Ruling No. 551-888
that cooperatives are not required to withhold the corresponding tax on the
interest from savings and time deposits of their members, which was reiterated in
BIR Ruling [DA-591-2006], applies to the instant case.
Members of cooperatives deserve a
preferential tax treatment pursuant
to RA 6938, as amended by RA 9520.
Given that petitioner is a credit cooperative duly registered with the
Cooperative Development Authority (CDA), Section 24(B)(1) of the NIRC must be
read together with RA 6938, as amended by RA 9520.
Under Article 2 of RA 6938, as amended by RA 9520, it is a declared policy
of the State to foster the creation and growth of cooperatives as a practical vehicle
81

82

for promoting self-reliance and harnessing people power towards the attainment
of economic development and social justice. Thus, to encourage the formation of
cooperatives and to create an atmosphere conducive to their growth and
development, the State extends all forms of assistance to them, one of which is
providing cooperatives a preferential tax treatment.
The legislative intent to give cooperatives a preferential tax treatment is
apparent in Articles 61 and 62 of RA 6938, which read:
ART. 61. Tax Treatment of Cooperatives. Duly registered cooperatives under
this Code which do not transact any business with non-members or the
general public shall not be subject to any government taxes and fees
imposed under the Internal Revenue Laws and other tax laws. Cooperatives
not falling under this article shall be governed by the succeeding section.
ART. 62. Tax and Other Exemptions. Cooperatives transacting business
with both members and nonmembers shall not be subject to tax on their
transactions to members. Notwithstanding the provision of any law or
regulation to the contrary, such cooperatives dealing with nonmembers
shall enjoy the following tax exemptions; x x x.
This exemption extends to members of cooperatives. It must be
emphasized that cooperatives exist for the benefit of their members. In fact, the
primary objective of every cooperative is to provide goods and services to its
members to enable them to attain increased income, savings, investments, and
productivity.83[30] Therefore, limiting the application of the tax exemption to
cooperatives would go against the very purpose of a credit cooperative. Extending
the exemption to members of cooperatives, on the other hand, would be
consistent with the intent of the legislature. Thus, although the tax exemption only
mentions cooperatives, this should be construed to include the members,
pursuant to Article 126 of RA 6938, which provides:
ART. 126. Interpretation and Construction. In case of doubt as to the
meaning of any provision of this Code or the regulations issued in pursuance
thereof, the same shall be resolved liberally in favor of the cooperatives and
their members.
We need not belabor that what is within the spirit is within the law even if it
is not within the letter of the law because the spirit prevails over the letter. 84[31]
Apropos is the ruling in the case of Alonzo v. Intermediate Appellate Court,85[32] to
wit:
But as has also been aptly observed, we test a law by its results; and
likewise, we may add, by its purposes. It is a cardinal rule that, in seeking
the meaning of the law, the first concern of the judge should be to discover
in its provisions the intent of the lawmaker. Unquestionably, the law should
never be interpreted in such a way as to cause injustice as this is never

83

84

85

within the legislative intent. An indispensable part of that intent, in fact, for
we presume the good motives of the legislature, is to render justice.
Thus, we interpret and apply the law not independently of but in
consonance with justice. Law and justice are inseparable, and we must keep
them so. To be sure, there are some laws that, while generally valid, may
seem arbitrary when applied in a particular case because of its peculiar
circumstances. In such a situation, we are not bound, because only of our
nature and functions, to apply them just the same, [is] slavish obedience to
their language. What we do instead is find a balance between the word and
the will, that justice may be done even as the law is obeyed.
As judges, we are not automatons. We do not and must not
unfeelingly apply the law as it is worded, yielding like robots to the literal
command without regard to its cause and consequence. Courts are apt to
err by sticking too closely to the words of a law, so we are warned, by Justice
Holmes again, where these words import a policy that goes beyond them.
While we admittedly may not legislate, we nevertheless have the power to
interpret the law in such a way as to reflect the will of the legislature. While
we may not read into the law a purpose that is not there, we nevertheless
have the right to read out of it the reason for its enactment. In doing so, we
defer not to the letter that killeth but to the spirit that vivifieth, to give effect
to the lawmakers will.
The spirit, rather than the letter of a statute determines its
construction, hence, a statute must be read according to its spirit or
intent. For what is within the spirit is within the statute although it is
not within the letter thereof, and that which is within the letter but not
within the spirit is not within the statute. Stated differently, a thing
which is within the intent of the lawmaker is as much within the
statute as if within the letter; and a thing which is within the letter of
the statute is not within the statute unless within the intent of the
lawmakers. (Underscoring ours)
It is also worthy to note that the tax exemption in RA 6938 was retained in
RA 9520. The only difference is that Article 61 of RA 9520 (formerly Section 62 of
RA 6938) now expressly states that transactions of members with the
cooperatives are not subject to any taxes and fees. Thus:
ART. 61. Tax and Other Exemptions. Cooperatives transacting business with
both members and non-members shall not be subjected to tax on their
transactions with members. In relation to this, the transactions of members
with the cooperative shall not be subject to any taxes and fees, including
but not limited to final taxes on members deposits and documentary tax.
Notwithstanding the provisions of any law or regulation to the contrary, such
cooperatives dealing with nonmembers shall enjoy the following tax
exemptions: (Underscoring ours)
xxxx
This amendment in Article 61 of RA 9520, specifically providing that members of
cooperatives are not subject to final taxes on their deposits, affirms the
interpretation of the BIR that Section 24(B)(1) of the NIRC does not apply to
cooperatives and confirms that such ruling carries out the legislative intent. Under
the principle of legislative approval of administrative interpretation by
reenactment, the reenactment of a statute substantially unchanged is persuasive
indication of the adoption by Congress of a prior executive construction.86[33]
86

Moreover, no less than our Constitution guarantees the protection of cooperatives.


Section 15, Article XII of the Constitution considers cooperatives as instruments for
social justice and economic development. At the same time, Section 10 of Article II
of the Constitution declares that it is a policy of the State to promote social justice
in all phases of national development. In relation thereto, Section 2 of Article XIII of
the Constitution states that the promotion of social justice shall include the
commitment to create economic opportunities based on freedom of initiative and
self-reliance. Bearing in mind the foregoing provisions, we find that an
interpretation exempting the members of cooperatives from the imposition of the
final tax under Section 24(B)(1) of the NIRC is more in keeping with the letter and
spirit of our Constitution.
All told, we hold that petitioner is not liable to pay the assessed deficiency
withholding taxes on interest from the savings and time deposits of its members,
as well as the delinquency interest of 20% per annum.
In closing, cooperatives, including their members, deserve a preferential tax
treatment because of the vital role they play in the attainment of economic
development and social justice. Thus, although taxes are the lifeblood of the
government, the States power to tax must give way to foster the creation and
growth of cooperatives. To borrow the words of Justice Isagani A. Cruz: The power
of taxation, while indispensable, is not absolute and may be subordinated to the
demands of social justice.87[34]
WHEREFORE, the Petition is hereby GRANTED. The assailed December
18, 2007 Decision of the Court of Tax Appeals and the April 11, 2008 Resolution
are REVERSED and SET ASIDE. Accordingly, the assessments for deficiency
withholding taxes on interest from the savings and time deposits of petitioners
members for the taxable years 1999 and 2000 as well as the delinquency interest
of 20% per annum are hereby CANCELLED.
SO ORDERED.

Policy of social justice is to strike a balance between an avowed


predilection for labor, on the one hand, and the maintenance of the
legal rights of capital. (PNOC-EDC versus Frederick Abella, G.R. No.
153904 , 17 Jan. 2005)
[G.R. No. 153904. January 17, 2005]
PNOC-EDC, NAZARIO VASQUEZ, President; MARCELINO TONGCO, Acting
Manager Project Operations & Manager, Project Development; JESUS
QUEVENCO, JR., Resident Manager, SNGP/PIPE; and REMEGIO B. CORNELIO,
Human Resource Officer, SNGP-PIPE, petitioners, vs. FREDERICK V. ABELLA,
respondent.
DECISION
CHICO-NAZARIO, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, with a prayer for the issuance of a writ of
preliminary injunction and/or temporary restraining order, seeking to set
aside the Decision[1] of the Court of Appeals dated 30 January 2002 in CAG.R. SP No. 54484, which affirmed, with modification, the Decision[2] of the
National Labor Relations Commission (NLRC), Fourth Division, Cebu City,
dated 08 May 1998, reversing the Decision[3] of the Labor Arbiter dated 25

87

April 1997 in the consolidated cases RAB VII-07-0082-94-D and RAB VII-080082-95-D.
Petitioner Philippine National Oil Company - Energy Development Corporation
(PNOC-EDC) is a government-owned and controlled corporation organized
under the Corporation Code of the Philippines, with Nazario Vasquez as its
president; Marcelino M. Tongco, Acting Manager, Project Development; Jesus
Quevenco, Jr., Resident Manager, Southern Negros Geothermal Plant
(SNGP)/PIPE; and Remegio Cornelio, Human Resource Officer, SNGP/PIPE.
Private respondent Frederick V. Abella is an employee of the petitioner
company, assigned as a Security Assistant.
The Facts of the Case
On 01 June 1989, herein private respondent Frederick V. Abella started
working with herein petitioner PNOC-EDC as a probationary Security
Assistant at its SNGP in Ticala, Valencia, Negros Oriental. Subsequently, he
became a regular employee.
Less than one year later, or on 20 April 1990, Abella was informed that his
employment with PNOC-EDC would be terminated effective 21 May 1990,
allegedly due to a company-wide reorganization pursuant to its Manpower
Reduction Program, wherein the position of Security Assistant at PNOC-EDC
SNGP had been abolished.
Aggrieved, Abella filed a case of illegal dismissal, and for actual, moral, and
exemplary damages with the NLRC, Regional Arbitration Branch No. VII at
Dumaguete City, docketed as NLRC RAB VII-05-364-90-D, against the PNOCEDC and its officers.
After hearing the parties, Labor Arbiter Geoffrey P. Villahermosa rendered a
Decision[4] dated 27 August 1991, holding that Abella was illegally dismissed
as the company and its officers failed to show a clear scheme and convincing
proof of reorganization, to wit:
WHEREFORE, premises considered judgment is hereby rendered ordering
respondents to reinstate complainant to his former position without loss of
seniority rights and privileges; his backwages from the time he was
terminated on 21 May 1990 up to his actual reinstatement; his withheld
second half salary for the month of May 1990 in the amount of P4,291.17;
moral damages amounting to P30,000.00; exemplary damages for public
good amounting to P20,000.00 and 10% attorneys fees from the total
adjudicated claims.
The computation of the award of the complainant is hereto attached and
forms as [an] integral part hereof.
All other claims are dismissed.
An appeal was timely filed with the NLRC.
Meanwhile, with said appeal still pending in the NLRC, the labor arbiter
issued an order[5] dated 20 November 1991, directing the company to admit
back to work or reinstate the complainant 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.
Pursuant to the above order, Abella was reinstated in the payroll as a
General Services Assistant (PAL II), his original position of Security Assistant
having been abolished by virtue of the company-wide reorganization.
According to the company, the position is of the same level as Assistant
Security and had the same salary rate and benefits.[6]
On 11 February 1992, Abella, through counsel, wrote Quevenco, Resident
Manager at the SNGP, to protest his assignment in the payroll as General
Services Assistant (PAL II). Subsequently, he was again re-slotted in the
payroll as a Pipeline Maintenance Foreman, which, according to the
petitioners, is another position with the same salary and benefits[7] as
another Security Assistant. This change of position was classified as a lateral
transfer.[8]

On 24 August 1992, Abella wrote[9] petitioner Quevenco,[10] to request that


he (Abella) be physically reinstated and allowed to perform security
functions. He wrote:
Engr. Jesus M. Quevenco, Jr.
Resident Manager
PNOC Energy Development Corporation
Southern Negros Geothermal Project
Ticala, Valencia
Negros Oriental
Sir:
This is to officially inform you that despite my lawyers letter[11] dated
February 11, 1992, I am willing to perform security functions at PNOC-Energy
Development Corporation, Southern Negros Geothermal Project.
In view of this, may I request adjustments/arrangements with our Head Office
so I can immediately assume duty at your convenience.
Very respectfully yours,
(Sgd.) FREDERICK V. ABELLA[12]
Said request was granted on 27 October 1992 when Abella was
temporarily[13] detailed as Security Assistant at SNGPs PAL II Development
Project, Northern Cotabato. But on even date, he was also concomitantly
designated as Acting Security Officer for the entire SNGP due to the
reassignment of the incumbent Security Officer to the Northern Negros
Geothermal Project of the company.[14]
On 03 November 1992, Abella wrote a letter, this time addressed to Vasquez,
then Vice-President of the company, to confirm that he had assumed his
security functions; that he was open for negotiations regarding his case; and,
that he hoped that his appointment/work status would be normalized.
On 15 December 1992, in a telegraphic message, Tongco informed Abella to
immediately report to Mindanao I Geothermal Plant (MIGP), Kidapawan, North
Cotabato. In the same correspondence, Tongco defined private respondents
duties and functions and delimited the duration of his stay at MIGP as
temporary, or for about 3 months only.
Shortly thereafter, or on 28 January 1993, Abella and the company agreed to
settle NLRC RAB Case No. VII-05-364-90-D. Abella consequently received the
amount of One Hundred Twenty-Four Thousand Eight Hundred Twenty-Four
Pesos and Thirty-One Centavos (P124,824.31) as settlement of the said case
and by virtue of the said agreement, both parties filed a Joint Motion to
Dismiss[15] before the NLRC, viz:
JOINT MOTION TO DISMISS
COMES NOW herein parties to the entitled case, to this Honorable
Commission respectfully state that
1. Complainant has offered and Respondent has accepted a proposal to
settle the instant case amicably;
2. The parties have agreed to shoulder their respective costs;
3. All other claims, damages, and causes of action arising out of the instant
case are waived;
4. Consequently, the parties are no longer interested in pursuing and desire
to dismiss the case.
WHEREFORE, PREMISES CONSIDERED, it is hereby prayed that the instant
case be dismissed.[16] (Emphasis supplied)
Acting on the Joint Motion to Dismiss, the NLRC issued a Resolution dated 22
February 1993, granting the above motion dismissing the appeal earlier filed
before it, the pertinent portions of which read:
Submitted before Us is a joint motion to dismiss the instant case dated
February 1, 1993, filed by both parties duly assisted by their respective
counsel.
In view of the manifest intention of the parties to effect a settlement of the
dispute between them and it appearing that the terms of the instant motion
is not contrary to law, morals, public order, and public policy, the same is

hereby granted. After all Compromise being the essence of labor justice
should be honored.
WHEREFORE, in view of the foregoing, the instant joint motion to dismiss is
hereby granted. The appeal is hereby dismissed as prayed for by the parties.
Let the records of this case be forwarded to the Regional Arbitration Branch
of origin for proper disposition.[17]
An Entry of Finality of Judgment was subsequently entered in the books on 29
March 1993.
At this time, while carrying out security functions at MIGP, Kidapawan, North
Cotabato, Abellas official item or position in the payroll was Maintenance
Foreman, SNGP, Valencia, Negros Oriental. Said state of affairs prompted the
late Jerry T. Susas[18] to write Tongco about it and to recommend that proper
action be made in order to harmonize security-related support services at
MIGP.[19]
On 10 December 1993, Abella filed a motion for the issuance of a writ of
execution of the decision dated 27 August 1991, of the labor arbiter.
Corollary to the said motion, he informed Quevenco of his intention to report
back to SNGP, Ticala, Valencia, Negros Oriental, his original assignment prior
to the filing of the 1991 case[20] for illegal dismissal.
On 31 January 1994, Abella received a show cause memorandum dated 28
January 1994 for his alleged absence without official leave (AWOL) and
insubordination.
Responding to the above, Abella explained in a letter dated 02 February
1994 that his position as SGS Maintenance is in complete contravention of
the decision of the labor arbiter.[21]
On 01 March 1994, despite the above response, Abella was nevertheless
transferred to PNOC-EDC Leyte-A Geothermal Project, as a Security Assistant,
[22] a position that was vacant at that time. Said transfer was accompanied
by a Transfer or Change of Position Form[23] showing Abellas change of
official position from Pipeline Maintenance Foreman to Security Assistant to
be a lateral transfer.
On 24 May 1994, Tongco sent Abella a radiogram message instructing him to
present himself, this time at the Mt. Labo Geothermal Project, Camarines
Norte, as a Security Assistant. A second message followed emphasizing the
need for Abella to report at the said site not later than 25 May 1994. On 01
June 1994, Abella was once more instructed to report to the petitioner
companys Mt. Labo Geothermal Project. Said order was again accompanied
by a Transfer or Change of Position Form[24] stating the transfer of Abella as
a Security Assistant from Leyte to Mt. Labo to be a lateral transfer.
All the above-mentioned directives were disregarded or ignored.
In the intervening time, on 16 June 1994, the labor arbiter ruled on the
motion for execution filed by the complainant by issuing a Writ of Execution
directing the Sheriff, NLRC, Cebu City, to proceed to the premises of the
company at Ticala, Valencia, Negros Oriental, to effect and to cause the
reinstatement of Abella either by physical or by payroll reinstatement. On 17
June 1994, Sheriff Remegio B. Cornelio issued a certification that per
attached pay slip, private respondent had been reinstated in the payroll with
PNOC-EDC.
In the meantime, for failing to heed the directives of his supervisors, Abella
received another show cause memorandum dated 14 July 1994, from Tongco,
ordering him to explain in writing why no disciplinary action should be taken
against him for insubordination and for being AWOL.
Abella, in his reply[25] dated 16 July 1994, countered that he is not guilty of
insubordination since he was not reinstated to his former position as Security
Assistant at Ticala, Valencia, Negros Oriental, per Writ of Execution issued by
the labor arbiter.
On 18 July 1994, claiming unfair and prejudicial treatment, Abella filed a
complaint before the NLRC, Sub-Regional Arbitration Branch No. VII,
Dumaguete City, for unfair labor practice, illegal suspension, nonpayment of

mid-year bonus and 13th month pay for 1990 and 1991, claim for hazard pay,
and annual salary increase against the company and its officers, docketed as
NLRC Sub-RAB Case No. 07-0082-94-D.
Several months later, or on 06 October 1994, Abella received a notice[26] of
disciplinary action of Grave Suspension with Final Warning, dated 28
September 1994, against him.
In response, on 17 October 1994, Abella filed another complaint with the
NLRC, against the company and its officers, for unfair labor practice, illegal
suspension, and nonpayment of wages with damages, docketed as NLRC
Sub-RAB Case No. 010-0123-94-D.
Nevertheless, Abella continued working at SNGP, Ticala, Valencia, Negros
Oriental, until he was accordingly notified of his termination for cause.
Thereafter, he filed a third complaint with the NLRC against the company and
its officers, this time for unfair labor practice, illegal dismissal, and
nonpayment of wages, with prayer for reinstatement and payment of moral
and exemplary damages as well as attorneys fees docketed as NLRC SubRAB Case No. 08-0082-95-D.
After hearing the parties, Labor Arbiter Geoffrey Villahermosa[27] rendered a
consolidated Decision[28] dated 25 April 1997, the dispositive portion of
which states:
WEREFORE, in the light of the foregoing, judgment is hereby rendered
declaring the respondents not guilty of unfair labor practice and illegally
dismissing the complainant, but however, as a measure of social justice and
due to the afore-cited Supreme Court Ruling, the respondents are directed to
pay the complainant his separation pay computed from June 1, 1989 to April
30, 1997 at one (1) month pay for every year of service, . . .
In maintaining that Abella was not illegally dismissed, the labor arbiter
opined that the records of the case show that Abella was reassigned from his
position in Ticala, Valencia, Negros Oriental, to that in Cotabato province by
virtue of a memorandum issued by Tongco which Abella readily accepted and
agreed to said transfer, therefore there is no valid basis for the claim that he
was not validly reinstated. Thus, the charges of insubordination and AWOL
committed by Abella fall squarely within the provision of Rule 26 of the
petitioner companys rules and regulations as contained in the PNOC Rules
and Regulations on Discipline. Said rules provide for a penalty ranging up to
dismissal even for the first offense.
On appeal, the NLRC reversed and set aside the Decision[29] of the labor
arbiter and entered a new one, viz:
WHEREFORE, as above-disquisitioned the decision appealed from is
REVERSED and SET ASIDE and a new one ENTERED finding the dismissal
illegal, hence complainant should be ordered reinstated to his former position
as Security Assistant SNGP pursuant to the Decision of August 27, 1991 with
full backwages from December 1, 1991 when he was illegally declared as
AWOL up to his actual reinstatement.
The NLRC found that Abella was illegally dismissed considering that at bar,
the parties had reached a settlement without vacating the decision (of the
labor arbiter dated 27 August 1991), then the decision should be given its
full force and effect, and as the [r]ecords show that he was never reinstated
to his former position as admitted by the correspondence of J.T. Susas dated
25 March 1993, memorandum of complainant dated 17 September 1993 and
letter of complainants counsel to Engr. Quevenco, dated 03 January 1994.
The tribunal further held that a review of the facts and circumstances of the
case, we find that while the monetary consideration of the decision of 27
August 1991 has been satisfied the reinstatement aspect of the decision
remained unsatisfied which prompted counsel to file a motion for the
issuance of [a] writ of execution. The assignments of the complainants (sic)
to the various positions could not equate to full enforcement of the decision
of 27 August 1991 considering that these positions were not his former
position and his assumption to these positions were under protest.

There being a timely motion for reconsideration, the Honorable Commission,


in a Resolution[30] dated 14 June 1999, reversed itself insofar as the order
for reinstatement and computation of backwages were concerned. Instead,
the Commission held that since Abella had already reached the retirement
age of sixty (60) years, reinstatement would no longer be possible.
Necessarily, the computation of backwages should only be from 01
December 1994 up to 15 January 1998. After 15 January 1998, Abella should
be given all the benefits due him under the retirement provision of the
collective bargaining agreement of the company.
With the denial of their motion for reconsideration, the company and its
officers came to the Court of Appeals via a petition for certiorari under Rule
65 of the Revised Rules of Court and sought to nullify the abovestated NLRC
Decision dated 08 May 1998 and Resolution dated 14 June 1999.
On 27 February 2002, the appellate court promulgated the impugned
Decision[31] dismissing the petition for lack of merit, the dispositive portion
of which states:
WHEREFORE, premises considered, the petition is DISMISSED for lack of
merit. Accordingly, the assailed decision and resolution of the NLRC, Fourth
Division, Cebu City, are hereby AFFIRMED. No pronouncement as to cost.
The company and its officers motion for reconsideration having been denied,
the instant petition was filed with the following assignment of errors:
I.
CONTRARY TO THE OPINION OF THE COURT OF APPEALS, IT IS NOT TRUE
THAT THE REINSTATEMENT OF RESPONDENT WAS NOT A FAITHFUL
COMPLIANCE OF THE PROVISIONS OF PARAGRAPH 3, ARTICLE 223 OF THE
LABOR CODE.
II.
CONTRARY TO THE OPINION OF THE COURT OF APPEALS, THE JOINT MOTION
TO DISMISS SUBMITTED BY PETITIONERS AND RESPONDENT BEFORE THE
FOURTH DIVISION OF THE NATIONAL LABOR RELATIONS COMMISSION, CEBU
CITY, SHOULD OPERATE TO DISMISS THIS CASE IN ITS TOTALITY, AND NOT
JUST THE APPEAL PENDING BEFORE THE SAID DIVISION.
III.
CONTRARY TO THE OPINION OF THE COURT OF APPEALS, THERE IS CLEAR
LEGAL AND FACTUAL BASIS TO HOLD RESPONDENT GUILTY OF THE
OFFENSES OF INSUBORDINATION AND OF INFRACTION OF COMPANY RULES
ON UNAUTHORIZED ABSENCES; HENCE, THE TERMINATION OF RESPONDENT
FROM EMPLOYMENT AFTER OBSERVANCE OF DUE PROCESS WAS LEGAL.[32]
The Ruling of the Court
The first and second issues question the validity of the actual reinstatement
of the private respondent following the order of the Labor Arbiter Geoffrey P.
Villahermosa in NLRC RAB VII-05-364-90-D.
The issue of reinstatement is addressed by paragraph three of Article 223 of
the Labor Code, to wit:
ART. 223. Appeal . . . .
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, even 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.
The above-stated provision of the Labor Code, however, must be read in
conjunction with the implementing rules and regulations of the said law. Sec.
4(a) of Rule 1, Book VI of the Rules and Regulations Implementing the Labor
Code, provides that:
SEC. 4. Reinstatement to former position. (a) An employee who is separated
from work without just cause shall be reinstated to his former position,
unless such position no longer exists at the time of his reinstatement, in

which case he shall be given a substantially equivalent position in the same


establishment without loss of seniority rights. [Emphasis supplied.]
Reinstatement presupposes that the previous position from which one had
been removed still exists, or that there is an unfilled position more or less of
a similar nature as this previously occupied by the employee.[33]
Accordingly, an employee who is separated from his employment on a false
or nonexistent cause is entitled to be reinstated to his former position
because the separation is illegal. If the position is no longer available for any
other valid and justifiable reason, however, the reinstatement of the illegally
dismissed employee to his former position would neither be fair nor just. The
law itself can not exact compliance with what is impossible. Ad imposible
tenetur.[34] The employers remedy is to reinstate the employee to a
substantially equivalent position without loss of seniority rights as provided
for above.
In the case at bar, strictly applying the rules provided above, private
respondent Abella should have been reinstated back to his old position as a
Security Assistant at the SNGP, Ticala, Valencia, Negros Oriental. Or, at the
very least, since the position of Security Assistant at Ticala, Valencia, Negros
Oriental, had been abolished as claimed by the petitioners, he should have
been reinstated to another position that is substantially equivalent to his
former one. In reality, private respondent Abella was first reinstated in the
payroll, as a General Services Assistant and subsequently, as a Pipeline
Foreman, while he was actually discharging the functions of a Security
Assistant. As insisted by the petitioners, this situation was due to the fact
that the original position of the private respondent had already been
abolished in the previous company-wide reorganization[35] in 1991.
But then, the private respondent was reslotted as Security Assistant when he
was transferred to the Leyte Geothermal Project. He was, thus, performing
the functions of a Security Assistant and at the same time occupying the
official position of a Security Assistant though in a geographically different
location, when said position became vacant.
Be that as it may, notwithstanding the above disquisitions, the atypical
circumstances in this case capitulate against the outright application of the
said rules. Whether or not the private respondent was validly reinstated per
Order of the Labor Arbiter dated 27 August 1991, in NLRC RAB VII-05-364-90D, is beside the point in view of the fact that the Joint Motion to Dismiss filed
by the parties in the earlier case contained a clause whereby the parties
agreed that [a]ll other claims, damages and causes of action arising out of
the instant case are waived.
Regrettably, the Court of Appeals and the NLRC have overlooked this very
important fact.
The clause agreed to by the parties in the Joint Motion to Dismiss filed before
the NLRC was in the nature of a compromise agreement, i.e., an agreement
between two or more persons, who for preventing or putting an end to a
lawsuit, adjust their difficulties by mutual consent in the manner which they
agree on, and which everyone of them prefers to the hope of gaining,
balanced by the danger of losing.[36] Settlement of disputes by way of
compromise, is an accepted, nay desirable and encouraged practice in courts
of law and administrative tribunals.[37] Generally favored in law, such
agreement is a bilateral act or transaction that is binding on the contracting
parties and is expressly acknowledged by the Civil Code as a juridical
agreement between them.
Prevailing case law provides that a compromise once approved by final
orders of the court has the force of res judicata between the parties and
should not be disturbed except for vices of consent or forgery. Hence, a
decision on a compromise agreement is final and executory. Such agreement
has the force of law and is conclusive on the parties. It transcends its identity
as a mere contract binding only upon the parties thereto, as it becomes a
judgment that is subject to execution in accordance with the Rules. Judges

therefore have the ministerial and mandatory duty to implement and enforce
it.[38] (Underlining supplied.) Hence, compromise agreements duly approved
by the courts are considered the decisions in the particular cases they
involve.[39]
In the case at bar, when both parties agreed to waive all other claims,
damages and causes of action arising out of NLRC RAB VII-05-364-90-D, a
compromise they entered into in good faith absent any allegation otherwise,
they did not only agree to dismiss the appeal pending before the NLRC.
Particularly, the private respondent also agreed to receive One Hundred
Twenty-Four Thousand Eight Hundred Twenty-Four Pesos and Thirty-One
Centavos (P124,824.31), thus, relinquishing his claim to the Decision[40]
dated 27 August 1991, rendered by the labor arbiter in his favor. In return,
the petitioner company, to put an end to the labor dispute, acquiesced to
have its appeal before the NLRC dismissed.
The waiver, executed by the private respondent and the petitioner company
in which mutual concessions were given and mutual benefits were derived,
was approved and considered by the NLRC when it promulgated its Order
dated 22 February 1993, dismissing the appeal of the petitioners.
Conformably, to cite jurisprudence, the Compromise Agreement approved by
the proper authority became the decision in this particular case.
Settlements of this kind not only are recognized to be proper agreements but
so encouraged as well.[41]
Undoubtedly, the allegations of invalid reinstatement on the part of the
petitioners are a mere afterthought on private respondents part in a
fascinating attempt to extricate himself from an assignment that brought him
to a far away place and caused him to be separated from his family.
It is well to note that even if each party agreed to something that neither
might have actually wanted, except for the peace that would be brought by
the avoidance of a protracted litigation, still, the agreement must govern
their relations. If the agreement was voluntarily entered into and represents
a reasonable settlement, it is binding on the parties and may not later be
disowned or conveniently forgotten, simply because of a change of mind. It is
only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are
unconscionable on its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the transaction
must be recognized as a valid and binding undertaking.[42] In the case at
bar, the Joint Motion to Dismiss was not only signed by the private
respondent, but by his counsel as well.
The resolution of the third issue hinges upon a determination of the validity
of the orders directing the transfer of the private respondent from one site to
another.
In this jurisdiction, we recognize that management has wide latitude to
regulate, according to his own discretion and judgment, all aspects of
employment, to the requirements of its business.[43] The scope and limits of
the exercise of management prerogative, however, should attain a state of
equilibrium when pitted against the constitutional right of labor to security of
tenure.
Of relevant significance in the case at bar is the right of the employer to
transfer employees in their work station. We have previously held that it is
the employers prerogative, based on its assessment and perception of its
employees qualifications, aptitudes and competence, to move them around
in the various areas of its business operations in order to ascertain where
they will function with maximum benefit of the company.[44] This right flows
from ownership and from the established rule that labor (laws) do not
authorize the substitution of judgment of the employer in the conduct of his

business, unless it is shown to be contrary to law, morals, or public policy.


[45]
The rationale behind this rule is that an employees right to security of tenure
does not give him such a vested right in his position as would deprive the
company of its prerogative to change his assignment or transfer him where
he will be most useful.[46] Especially so in this case where the respondent
was not appointed for a security assistant for a specified place but was only
designated therein. But of course, the managerial prerogative to transfer
personnel must be exercised without grave abuse of discretion --- not
unnecessary, inconvenient nor prejudicial to the displaced employee,
meaning there is no demotion in rank or diminution of salary, benefits and
other privileges.
In this case, the private respondent was charged with insubordination for
failing to heed the directives of his superior transferring him from one site to
another. The Court of Appeals negated said charge and declared that when
private respondent Abella failed to obey the orders of the petitioners
reinstating him to Leyte and Mt. Labo sites, said failure cannot give rise to
insubordination as private respondent Abella had the right to be reinstated
under the same terms as and conditions prevailing prior to his dismissal on
21 May 1990, especially so when the latters refusal was premised on the fact
that the labor arbiter had earlier issued a Writ of Execution ordering the
reinstatement of the private respondent to his former position at PNOC-EDC
SNGP, Ticala, Valencia, Negros Oriental.
We do not agree.
First and foremost, as discussed earlier, the order of the labor arbiter
reinstating the private respondent to his former position in SNGP had already
been superseded by the agreement of both parties to waive [a]ll other
claims, damages and causes of action arising out of the instant case . . . .
Consequently, the writ issued by the labor arbiter executing the order of
reinstatement had no leg to stand on. Secondly, the law does not preclude
the reinstatement of an employee, who has been separated from work
without just cause, to a substantially equivalent position in the same
establishment without loss of seniority rights, and with the same rank, salary
and privileges,[47] if the former position is no longer available. Therefore,
the claim of lack of insubordination due to lack of valid reinstatement must
fail.
Insubordination or willful disobedience by an employee, to constitute a just
cause for terminating his employment, the orders, regulations, or instructions
of the employer or representative must be:
1. reasonable and lawful;
2. sufficiently known to the employee; and
3. in connection with the duties which the employee has been engaged to
discharge.
There is no doubt in this case that the assailed transfer orders fulfill the
second and third elements above-stated. Private respondent Abella was well
informed of the orders of transfer and said orders were well in connection
with the security functions of the private respondent. It is only the issue of
reasonableness and lawfulness of said orders that have to be elucidated on.
The reasonableness and lawfulness of an order, regulation, or instruction
depend on the circumstances availing in each case. Reasonableness pertains
to the kind or character of directives and commands and to the manner in
which they are made.[48]
The petitioners aver that the orders were well within their managerial
prerogative to make and that there was never any agreement that private
respondent Abella had to be posted in a fixed place.
The appellate court, on the other hand, stated that its finding that the private
respondent was not guilty of insubordination and abandonment was based
on the fact that the dismissal of private respondent Abella was effected with

bad faith, as it was intended to punish him for refusal to heed his employers
unreasonable orders.
The records of the present case fail to show any hint of truth to the
declaration of the appellate court.
A thorough review of the records of the case shows that there is a valid
reason behind the transfer of the private respondent to MIGP in Kidapawan,
North Cotabato. As stated in the telegraphic message received by the private
respondent,
DMD-15
DMK-22
DEC 15/92
TO: ABC / SEP CC EBP / JLA / FVA / MBP / BMO
FR: MMT
IN VIEW OF APOS CRITICAL SECURITY SITUATION, AS DISCUSSED WITH
EBP, FVABELLA WILL BE ASSIGNED TO MIGP IMMEDIATELY TO STRENGTHEN
OUR APO SECURITY COVERAGE. FVA, WILL HANDLE OVERALL STRATEGIC
PLANNING. PLS ADVISE FVAS EARLIEST TRAVEL TO MIGP.
EMC[49]
Nothing in the above message alludes to any bad faith on the part of the
petitioners. In truth, it is quite apparent that the order of transfer of the
private respondent from Negros Oriental to Northern Cotabato was due to
the exigencies of the state of affairs in the geothermal plants of the
petitioner company. Other internal messages[50] between the petitioner
companys officers and employees also sustain the validity of the necessity
and lack of bad faith in ordering the transfer of the private respondent, to
wit:
DMK-35
JAN. 06, 1993
TO: JLA CC: FVA/MBP
FM: MMT CC: EBP
WITH FVAS PRESENCE IN M1GP, I EXPECT THAT WE WILL ATTAIN FF.
OBJECTIVES:
COMPLETE, FINALIZE AND PUT INTO EFFECT OUR CONTINGENCY PLANS,
SECUTIRY SOPS, ACCESS PROCEDURES AND CONDUCT QEKVTYXELI/NJETTQ.
2. EFFECTIVE COORDINATION BOTH WITH HIGHER KETEXYJM YVXBLJEXERQ
AND SITE LPPEARJQ.
3. EFFECTIVE MONITORING AND CONTROL OF OUR SECURITY PROVISIONS I.E.
DTVR ZVYJNQ, KETEXYJM.
4. IMPROVE RELATIONS WITH KETEXYJM.
5. ADDRESS CONCERNS OF OUR STAFF REGARDING QRAVJEXM ALCRJYZR. . . .
PLS. USE DAY 6 CODE.
2210H[51]
TO: JLA (KIDAP) FVA (DGTE) FR: MMT
CC: FCC (LABO) MBP (KIDAP)
AA. DUE TO THE ACCELERATED DRILLING AT LABO REQUIRING IMMEDIATE
SECURITY COORDINATION AND SETTING-UP, EFFECTIVE IMMEDIATELY
FVABELLA IS TRANSFERRED TO MT. LABO GEOTHERMAL PROJECT AS
SECURITY ASSISTANT. . .
BB. TO RDO. OPERATOR SNGP PLS ENSURE MESSAGE IS SENT TO FVA.
CC. TO FVA, ADVISE ME TRAVEL DETAILS.[52]
TO: FVA (DGTE) FR: MMT
CC: FCC (LABO)
THE SITUATION AT LABO IS CRITICAL AND YOU HAVE TO BE THERE
IMMEDIATELY. IT IS IMPERATIVE THAT YOU TRAVEL IMMEDIATELY, NOT LATER
THEN (sic) 25 MAY. ADVISE TRAVEL DETAILS.[53]
By virtue of the characteristic or nature of the functions of security
personnel, rotation and reassignment from one place to another, depending
on the security needs of the company, are well within the job description of
the private respondent.

As explained, the orders to the private respondent to report to the Leyte


Geothermal Plant and, later on, to the Mt. Labo site in Camarines Norte
undeniably met the standards aforestated. What is more, the private
respondent, when he accepted the offer of employment with the petitioner
company, was aware that there was a possibility of a provincial assignment.
When he accomplished his application for employment,[54] in answering the
question: Are you Willing To Accept A Provincial Assignment? the private
respondent answered in the affirmative. Another irrefutable fact is that the
records of the case bear out that even before the first controversy[55] arose
between the parties, the private respondent had been reassigned to at least
three (3) different locations. His first assignment with the petitioner company
was in Negros Oriental. A few months later, he was transferred to Camarines
Norte; then again to Negros Oriental in 1990. In fact, in a memorandum[56]
dated 24 January 1990, the private respondent was one of the three security
personnel directed to transfer from one assignment to another.
Finally, it cannot be gainsaid that though the private respondent was
assigned to perform security functions at other different sites, he had been
receiving the same salary and benefits due a security personnel. Records
even show that he was even accorded hazard pay for the duties and
functions he was currently executing.[57]
The Philippine Constitution, while inexorably committed towards the
protection of the working class from exploitation and unfair treatment,
nevertheless mandates the policy of social justice so as to strike a balance
between an avowed predilection for labor, on the one hand, and the
maintenance of the legal rights of capital, the proverbial hen that lays the
golden egg, on the other. Indeed, we should not be unmindful of the legal
norm that justice is in every case for the deserving, to be dispensed with in
the light of established facts, the applicable law, and existing jurisprudence.
[58]
WHEREFORE, premises considered, the petition is hereby GRANTED. The
Decision dated 30 January 2002, of the Court of Appeals and its Resolution
dated 29 May 2002, denying the petitioners Motion for Reconsideration, are
REVERSED and SET ASIDE. No costs.
SO ORDERED.
The Constitution characterizes labor as a primary social economic
force. (Spic N Span versus Gloria Paje, G.R. No. 174084, 25 Aug.
2010), and as such, the State is bound to protect the rights of
workers and promote their welfare (PNB versus Dan Padao, G.R.
Nos. 180849 and 187143, 16 Nov. 2011).
THIRD DIVISION

SPIC N SPAN
CORPORATION,
Petitioner,
-

versus -

SERVICES

G.R. No. 174084


Present:
CARPIO MORALES, J., Chairperson,
BRION,
BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.

GLORIA
PAJE,
LOLITA
GOMEZ,
MIRIAM
CATACUTAN,
ESTRELLA
Promulgated:
ZAPATA, GLORIA SUMANG,
August 25, 2010
JULIET
DINGAL,
MYRA
AMANTE,
and
FE
S.
BERNANDO,
Respondents.
x---------------------------------------------------------------------------------------x
DECISION
BRION, J.:

Before the Court is the petition for review on certiorari88[1] filed by Spic
N Span Services Corporation (SNS) to seek the reversal of the October 25,
2004 Decision89[2] and the August 2, 2006 Resolution 90[3] of the Court of
Appeals (CA) in CA-G.R. SP No. 83215, entitled "Gloria Paje, Lolita Gomez,
Miriam Catacutan, Estrella Zapata, Gloria Sumang, Juliet Dingal, Myra
Amante and Fe S. Bernardo v. National Labor Relations Commission, Spic N
Span Service Corporation and Swift Foods, Inc.
BACKGROUND FACTS
Swift Foods, Inc. (Swift) is a subsidiary of RFM Corporation that
manufactures and processes meat products and other food products. SNSs

88

89

90

business is to supply manpower services to its clients for a fee. Swift and SNS
have a contract to promote Swift products.
Inocencio Fernandez, Edelisa F. David, Thelma Guardian, Juliet C.
Dingal, Fe S. Bernardo, Lolita Gomez, Myra Amante, Miriam S. Catacutan,
Gloria O. Sumang, Gloria O. Paje, and Estrella Zapata (complainants) worked
as Deli/Promo Girls of Swift products in various supermarkets in Tarlac and
Pampanga. They were all dismissed from their employment on February 28,
1998. They filed two complaints for illegal dismissal against SNS and Swift
before the National Labor Relations Commission (NLRC) Regional Arbitration
Branch III, San Fernando, Pampanga, docketed as Case Nos. 03-9131-98 and
07-9295-98. These cases were subsequently consolidated.
After two unsuccessful conciliation hearings, the Labor Arbiter ordered
the parties to submit their position papers. Swift filed its position paper; SNS
did not.91[4] The complainants position papers were signed by Florencio P.
Peralta who was not a lawyer and who claimed to be the complainants
representative, although he never showed any proof of his authority to
represent them.
In their position papers, the complainants alleged that they were
employees of Swift and SNS, and their services were terminated without
cause and without due process. The termination came on the day they
received their notices; thus, they were denied the procedural due process
requirements of notice and hearing prior to their termination of
employment.92[5] Swift, in its position paper, moved to dismiss the
complaints on the ground that it entered into an independent labor contract
with SNS for the promotion of its products; it alleged that the complainants
were the employees of SNS, not of Swift.93[6]
The Labor Arbiter94[7] found SNS to be the agent of Swift, and ordered
SNS and Swift to jointly and severally pay Edelisa David P115,637.50 and
Inocencio Fernandez P192,197.50, representing their retirement pay and
service incentive leave pay. He dismissed, without prejudice, the claims of
the other complainants because they failed to verify their position paper. He
also denied all other claims for lack of factual basis.95[8]
Both Swift and the complainants appealed to the NLRC. Swift filed a
memorandum of appeal, while the complainants filed a partial memorandum
of appeal.96[9]
91

92

93

94

95

The NLRC denied the complainants appeal for lack of merit. 97[10] It
dismissed the complaint against Swift, and ordered SNS to pay Edelisa David
a total of P256,620.13, and Inocencio Fernandez a total of P280,912.63,
representing backwages, separation pay, and service incentive leave pay. It
dismissed all other claims for lack of merit. Thereafter, Edelisa David and
Inocencio Fernandez agreed to a settlement, and their cases were thus
closed.98[11]
The complainants whose claims were dismissed, namely, Gloria Paje,
Lolita Gomez, Miriam Catacutan, Estrella Zapata, Gloria Sumang, Juliet
Dingal, Myra Amante, and Fe S. Bernardo (respondents), moved for the
reconsideration of the NLRCs ruling. This time, they were represented by the
Public Attorneys Office. The NLRC denied their motion.99[12]
The respondents then sought relief with the CA through a petition for
certiorari, based on the alleged grave abuse of discretion committed by the
NLRC. The CA found the petition meritorious, in its assailed decision of
October 25, 2004, and ruled that the respondents failure to sign the
verification in their position paper was a formal defect that was not fatal to
their case. It concluded that SNS was merely an agent of Swift; thus, the
latter should not be exempt from liability. It ordered the remand of the case
to the Labor Arbiter for the computation of the respondents backwages,
separation pay, and service incentive leave pay. SNS and Swift filed their
motions for reconsideration which the CA denied.
SNS is now before us on a petition for review on certiorari, and submits
the following
I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR WHEN IT RULED THAT THE NLRC COMMITTED GRAVE
ABUSE OF DISCRETION IN DISMISSING THE CLAIMS OF HEREIN
RESPONDENTS ON THE GROUND OF NON-SIGNING OF THE POSITION
PAPER.
II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS ERROR IN HOLDING THAT ALTHOUGH THE
RESPONDENTS WERE NOT REPRESENTED BY A LAWYER BUT BY ONE
WHO IS NOT A MEMBER OF THE BAR, SAID FACT IS SUFFICIENT
JUSTIFICATION FOR THE PETITIONERS FAILURE TO COMPLY WITH THE
REQUIREMENTS OF LAW.
III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS ERROR IN REMANDING THE CASE TO THE LABOR
ARBITER FOR THE COMPUTATION OF THE MONEY CLAIMS OF THE
RESPONDENTS, TO WIT: 1) BACKWAGES, 2) SEPARATION PAY, AND 3)
96

97

98

99

SERVICE INCENTIVE LEAVE, DESPITE THE FACT THAT NOWHERE IN THE


DECISIONS OF THE LABOR ARBITER, THE NATIONAL LABOR RELATIONS
COMMISSION, AND COURT OF APPEALS IS IT STATED THAT HEREIN
RESPONDENTS WERE ILLEGALLY DISMISSED.100[13]
THE COURTS RULING
We find the petition unmeritorious.
SNS submits that since respondents did not sign the verification in
their position paper, the CA erred when it ruled that the NLRC committed
grave abuse of discretion in dismissing the respondents complaints. SNS
stressed the importance of a signature in a pleading, and harped on the
respondents failure to sign their position paper. 101[14] This, to SNS, is fatal to
the respondents case.
We do not agree with SNS.
As we previously explained in Torres v. Specialized Packaging
Development Corporation,102[15] where only two of the 25 real parties-ininterest signed the verification, the verification by the two could be sufficient
assurance that the allegations in the petition were made in good faith, are
true and correct, and are not speculative. The lack of a verification in a
pleading is only a formal defect, not a jurisdictional defect, and is not
necessarily fatal to a case.103[16] The primary reason for requiring a
verification is simply to ensure that the allegations in the pleading are done
in good faith, are true and correct, and are not mere speculations.104[17]
The CA, in its assailed decision, cited Philippine Telegraph and
Telephone Corporation v. NLRC105[18] to emphasize that in labor cases, the
deciding authority should use every reasonable means to speedily and
objectively ascertain the facts, without regard to technicalities of law and
procedure. Technical rules of evidence are not strictly binding in labor
cases.106[19]
100

101

102

103

104

105

106

In the hierarchy observed in the dispensation of justice, rules of


procedure can be disregarded in order to serve the ends of justice. This was
explained by Justice Bernando P. Pardo, in Aguam v. Court of Appeals,107[20]
when he said
Litigations must be decided on their merits and not on technicality.
Every party litigant must be afforded the amplest opportunity for the
proper and just determination of his cause, free from the unacceptable
plea of technicalities. Thus, dismissal of appeals purely on technical
grounds is frowned upon where the policy of the court is to encourage
hearings of appeals on their merits and the rules of procedure ought
not to be applied in a very rigid, technical sense; rules of procedure are
used only to help secure, not override substantial justice. It is a far
better and more prudent course of action for the court to excuse a
technical lapse and afford the parties a review of the case on appeal to
attain the ends of justice rather than dispose of the case on
technicality and cause a grave injustice to the parties, giving a false
impression of speedy disposal of cases while actually resulting in more
delay, if not a miscarriage of justice.108[21]
We should remember, too, that certain labor rights assume preferred
positions in our legal hierarchy. Under the Constitution and the Labor Code,
the State is bound to protect labor and assure the rights of workers to
security of tenure.109[22] Article 4 of the Labor Code provides that all doubts
in the implementation and interpretation of its provisions (including its
implementing rules and regulations) shall be resolved in favor of labor. The
Constitution, on the other hand, characterizes labor as a primary social
economic force. The State is bound to protect the rights of workers and
promote their welfare,110[23] and the workers are entitled to security of
tenure, humane conditions of work, and a living wage. 111[24] Under these
fundamental guidelines, respondents right to security of tenure is a preferred
constitutional right that technical infirmities in labor pleadings cannot defeat.
1.SNS submits that the CA committed a serious error in ruling that the
respondents representatives non-membership in the bar is sufficient
justification for their failure to comply with the requirements of the law. SNS
argues that this ruling excuses the employment of a non-lawyer and places

107

108

109

110

111

the acts of the latter on the same level as those of a member of the Bar. 112
[25] Our Labor Code allows a non-lawyer to represent a party before the
Labor Arbiter and the Commission, 113[26] but provides limitations: Nonlawyers may appear before the Commission or any Labor Arbiter only: (1) If
they represent themselves; or (2) If they represent their organization or
members thereof.114[27] Thus, SNS concludes that the respondents
representative had no personality to appear before the Labor Arbiter or the
NLRC, and his representation for the respondents should produce no legal
effect.
Our approach to these arguments is simple as the problem boils down
to a balance between a technical rule and protected constitutional interests.
The cited technical infirmity cannot defeat the respondents preferred right to
security of tenure which has primacy over technical requirements. Thus, we
affirm the CAs ruling on this point, without prejudice to whatever action may
be taken against the representative, if he had indeed been engaged in the
unauthorized practice of law.
2.SNS also claims serious error on the part of the CA in remanding the
case to the Labor Arbiter, for computation of the respondents backwages,
separation pay and service incentive leave pay despite the fact that nowhere
in the decisions of the Labor Arbiter, the NLRC, and CA was there any finding
that respondents had been illegally dismissed.
We find this to be the first argument of its kind from SNS, and, in fact,
is the first ever submission from SNS before it filed a motion for
reconsideration with the CA. To recall, SNS did not file its position paper
before the labor arbiter, nor did it file its appeal before the NLRC; only Swift
and the complainants did.115[28] It was only Swift, too, that filed its comment
to the herein respondents petition for certiorari.116[29]
The records do not show if SNS filed its memorandum before the CA,
although SNS filed a motion for reconsideration of the CA decision. It then
claimed that the CA erred in ruling that the NLRC committed grave abuse of
discretion when it dismissed respondents claim; that a petition for certiorari
under Rule 65 of the Rules of Court is not the proper remedy to correct the
NLRCs alleged grave abuse of discretion; and that the respondents were
bound by the mistakes of their non-lawyer representative. 117[30]
Significantly, SNS did not raise the question of the CAs failure to state that
112

113

114

115

116

117

the respondents had been illegally dismissed. At this point, it is too late for
SNS to raise the issue.
Nothing on record indicates the reason for the respondents termination
from employment, although the fact of termination was never
disputed. Swift denied liability on the basis of its contract with SNS. The
contract was not presented before the Labor Arbiter, although Swift averred
that under the contract, SNS would supply promo girls, merchandisers and
other promotional personnel to handle all promotional aspects and
merchandising strategy of Swift.118[31] We can assume, for lack of proof to
the contrary, that the respondents termination from employment was illegal
since neither SNS nor Swift, as employers, presented any proof that their
termination from employment was legal. Upon proof of termination of
employment, the employer has the burden of proof that the dismissal was
valid; absent this proof, the termination from employment is deemed illegal,
as alleged by the dismissed employees.
3.In order that a labor relationship can be categorized as
legitimate/permissible job contracting or as prohibited labor-only contracting,
the totality of the facts and the surrounding circumstances of the relationship
ought to be considered.119[32] Every case is unique and has to be assessed
on the basis of its facts and of the features of the relationship in question. In
permissible job contracting, the principal agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or
outside the premises of the principal. The test is whether the independent
contractor has contracted to do the work according to his own methods and
without being subject to the principals control except only as to the results,
he has substantial capital, and he has assured the contractual employees
entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social and
welfare benefits.120[33]
The CA found SNS to be Swifts agent, and explained its ruling as
follows121[34]
To be legitimate, contracting or subcontracting must satisfy the
following requirements: 1) The contractor or subcontractor carries on a
distinct and independent business and undertakes to perform the job,
work or service on its own account and under its own responsibility,
according to its own manners and methods, and free from the control
and direction of the principal in all matters connected with the

118

119

120

121

performance of the work except as to the results thereof; 2) the


contractor or subcontractor has substantial capital or investment; and
3) the agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all
labor and occupational safety and health standards, free exercise of
right to self-organization, security of tenure, and social and welfare
benefit (Vinoya v. NLRC, 324 SCRA 469).
The parties failed to attach a copy of the agreement entered into
between SNS and Swift. Neither did they attach a copy of the financial
statement of SNS. Thus, we are constrained to rule on the issue
involved on the basis of the findings of both the Labor Arbiter and the
NLRC.
The Labor Arbiter, in finding that SNS was merely a labor-only
contractor, cited the following reasons: First, the agreement between
SNS and Swift shows that the latter exercised control over the promo
girls and/or merchandisers through the services of coordinators.
Second, it cannot be said that SNS has substantial capital. Third, the
duties of the petitioners were directly related, necessary and vital to
the day-to-day operations of Swift. Lastly, the uniform and
identification cards used by the petitioners were subject to the
approval of Swift.
The NLRC, on the other hand, in finding that SNS is an
independent contractor gave the following reasons: First, there is no
evidence that Swift exercised the power of control over the petitioners.
Rather, it is SNS who exercised direct control and supervision over the
nature and performance of the works of herein petitioners. Second, by
law, Swift and SNS have distinct and separate juridical personality from
each other.
The decision of the NLRC is bereft of explanation as to the
existence of circumstances that would make SNS an independent
contractor as would exempt the principal from liabilities to the
employees.
Nowhere in the decision of both the Labor Arbiter and the NLRC
shows that SNS had full control of the means and methods of the
performance of their work. Moreover, as found by the Labor Arbiter,
there was no evidence that SNS has substantial capital or investment.
Lastly, there was no finding by the Labor Arbiter nor the NLRC that the
agreement between the principal (Swift) and contractor (SNS) assures
the contractual employees entitlement to all labor and occupational
safety and health standards, free exercise of right to self-organization,
security of tenure, and social and welfare benefit.
In view of the foregoing, we conclude that the requisites abovementioned are not obtaining in the present case. Hence, SNS is
considered merely an agent of Swift which does not exempt the latter
from liability.
We note that the present decision does not affect the settlement
entered into between Edeliza David and Inocencio Fernandez, on the
one hand and SNS, on the other. As held by the NLRC, their complaints
are considered closed and terminated.
WHEREFORE, premises considered, the instant petition is hereby
GRANTED. The Resolutions of the NLRC dated January 11, 2002 and

December 23, 2003 are SET ASIDE in so far as the dismissal of the
petitioners case is concerned and in so far as Swift is found not liable
for the payment of the petitioners money claims.
The present case is hereby REMANDED to the Labor Arbiter for
the computation of the money claims of the petitioners, to wit: 1)
Backwages; 2) Separation Pay; and 3) Service Incentive Leave Pay.
The settlement of the claims of David and Fernandez is not
affected by this decision.
We fully agree with this ruling. What we have before us, therefore, is a
case of illegal dismissal perpetrated by a principal and its illegal contractoragent. Thus, we affirm the ruling of the CA with the modification that the
respondents are also entitled to nominal damages, for violation of their due
process rights to notice and hearing, pursuant to our ruling in Agabon v.
NLRC.122[35] We peg this amount at P30,000.00 for each of the respondents.
WHEREFORE, premises considered, we hereby AFFIRM the Court of
Appeals October 25, 2004 Decision and August 2, 2006 Resolution in CA-G.R.
SP No. 83215, with the modification that nominal damages in the amount of
P30,000.00 should additionally be paid to each of the respondents, for
violation of their procedural due process rights. Costs against the petitioner.
SO ORDERED.

PHILIPPINE
NATIONAL BANK,
Petitioner,

G.R. Nos. 180849


and 187143
Present:

- versus -

122

VELASCO,
JR.,
Chairperson,
PERALTA,
ABAD,
PEREZ, and
MENDOZA, JJ.

J.,

DAN PADAO,
Respondent.

Promulgated:
November 16, 2011

X -------------------------------------------------------------------------------------X
DECISION
MENDOZA, J.:
These are two consolidated petitions for review on certiorari under Rule
45 of the Rules of Court.
In G.R. No. 180849, petitioner Philippine National Bank (PNB) seeks the
reversal of the December 14, 2006 Decision 123[1] and October 2, 2007
Resolution124[2] of the Court of Appeals (CA) in CA-G.R. SP No. 76584, which
upheld the ruling of the National Labor Relations Commission, Cagayan de
Oro City (NLRC) in its October 30, 2002 Resolution, 125[3] reversing the June
21, 2001 Decision126[4] of the Executive Labor Arbiter (ELA) which found the
dismissal of respondent Dan Padao (Padao) valid.
In G.R. No. 187143, PNB seeks the reversal of the December 9, 2008
Decision127[5] and February 24, 2009 Resolution128[6] of the CA in CA-G.R. SP
No. 00945, which allowed the execution of the October 30, 2002 NLRC
Resolution.
THE FACTS
A.

G.R. No. 180849

On August 21, 1981, Padao was hired by PNB as a clerk at its Dipolog City
Branch. He was later designated as a credit investigator in an acting capacity
on November 9, 1993. On March 23, 1995, he was appointed regular Credit
Investigator III, and was ultimately promoted to the position of Loan and
Credit Officer IV.
Sometime in 1994, PNB became embroiled in a scandal involving behest
loans. A certain Sih Wat Kai complained to the Provincial Office of the
123

124

125

126

127

128

Commission on Audit (COA) of Zamboanga del Norte that anomalous loans


were being granted by its officers: Assistant Vice President (AVP) and Branch
Manager Aurelio De Guzman (AVP de Guzman), Assistant Department
Manager and Cashier Olson Sala (Sala), and Loans and Senior Credit
Investigator Primitivo Virtudazo (Virtudazo).
The questionable loans were reportedly being extended to select bank
clients, among them Joseph Liong, Danilo Dangcalan, Jacinto Salac, Catherine
Opulentisima, and Virgie Pango. The expos triggered the conduct of separate
investigations by the COA and PNBs Internal Audit Department (IAD) from
January to August 1995. Both investigations confirmed that the collateral
provided in numerous loan accommodations were grossly over-appraised.
The credit standing of the loan applicants was also fabricated, allowing them
to obtain larger loan portfolios from PNB. These borrowers eventually
defaulted on the payment of their loans, causing PNB to suffer millions in
losses.
In August 1995, Credit Investigators Rolando Palomares (Palomares) and
Cayo Dagpin (Dagpin) were administratively charged with Dishonesty, Grave
Misconduct, Gross Neglect of Duty, Conduct Prejudicial to the Best Interest of
the Service, and violation of Republic Act (R.A.) No. 3019 (Anti-Graft and
Corrupt Practices Act), in connection with an anomalous loan granted to the
spouses, Jaime and Allyn Lim (the Lims). These charges, however, were later
ordered dropped by PNB, citing its findings that Dagpin and Palomares signed
the Inspection and Appraisal Report (IAR) and the Credit Inspection Report
(CIR) in support of the Lims loan application in good faith, and upon the
instruction of their superior officers. PNB also considered using Dagpin and
Palomares as prosecution witnesses against AVP de Guzman, Loan Division
Chief Melindo Bidad (Bidad) and Sala.
The following month, September 1995, administrative charges for Grave
Misconduct, Gross Neglect of Duty and Gross Violations of Bank Rules and
Regulations and criminal cases for violation of R.A. No. 3019 were filed
against AVP de Guzman, Sala, Virtudazo, and Bidad. Consequently, they were
all dismissed from the service by PNB in November 1996. Later, Virtudazo
was ordered reinstated.
On June 14, 1996, Padao and Division Chief Wilma Velasco (Velasco)
were similarly administratively charged with Dishonesty, Grave Misconduct,
Gross Neglect of Duty, Conduct Prejudicial to the Best Interest of the Service,
and violation of R.A. No. 3019.
The case against Padao was grounded on his having allegedly presented
a deceptively positive status of the business, credit standing/rating and
financial capability of loan applicants Reynaldo and Luzvilla Baluma and
eleven (11) others. It was later found that either said borrowers businesses
were inadequate to meet their loan obligations, or that the projects they
sought to be financed did not exist.
Padao was also accused of having over-appraised the collateral of the
spouses Gardito and Alma Ajero, the spouses Ibaba, and Rolly Pango.
On January 10, 1997, after due investigation, PNB found Padao guilty of
gross and habitual neglect of duty and ordered him dismissed from the bank.
Padao appealed to the banks Board of Directors. On January 20, 1997,
Velasco was also held guilty of the offenses charged against her, and was
similarly meted the penalty of dismissal. Her motion for reconsideration,
however, was later granted by the bank, and she was reinstated.

On October 11, 1999, after almost three (3) years of inaction on the
part of the Board, Padao instituted a complaint 129[7] against PNB and its then
AVP, Napoleon Matienzo (Matienzo), with the Labor Arbitration Branch of the
NLRC Regional Arbitration Branch (RAB) No. IX in Zamboanga City for 1]
Reinstatement; 2] Backwages; 3] Illegal Dismissal; and 4] Treachery/Bad
Faith and Palpable Discrimination in the Treatment of Employees with
administrative cases. The case was docketed as RAB 09-04-00098-01.
In a Decision dated June 21, 2001, the ELA found Padaos dismissal
valid. Despite the finding of legality, the ELA still awarded separation pay of
one-half (1/2) months pay for every year of service, citing PLDT v. NLRC &
Abucay.130[8] The ELA held that in view of the peculiar conditions attendant
to Padaos dismissal, there being no clear conclusive showing of moral
turpitude, Padao should not be left without any remedy.
Padao appealed to the NLRC, which, in its Resolution 131[9] dated
October 30, 2002, reversed and set aside the ELA Decision and declared
Padaos dismissal to be illegal. He was thereby ordered reinstated to his
previous position without loss of seniority rights and PNB was ordered to pay
him full backwages and attorneys fees equivalent to ten percent (10%) of the
total monetary award.
PNBs Motion for Reconsideration132[10] was denied by the NLRC in its
Resolution133[11] dated December 27, 2002.
Aggrieved, PNB filed a petition for certiorari 134[12] with the CA but it
was dismissed in a Decision135[13] dated December 14, 2006. PNB moved for
reconsideration136[14] but the motion was denied in the CA Resolution 137[15]
dated October 2, 2007.
129

130

131

132

133

134

135

136

B.

G.R. No. 187143

During the pendency of G.R. No. 180849 before the Court, the NLRC
issued an entry of judgment on September 22, 2003, certifying that on
February 28, 2003, its October 30, 2002 Resolution had become final and
executory.138[16]
On December 5, 2003, Padao filed a Motion for Execution of the NLRC
Resolution dated October 30, 2002. This was granted by the ELA on April 22,
2004.
On May 4, 2004, PNB and AVP Matienzo sought reconsideration of the
ELAs Order based on the following grounds: (1) the October 30, 2003
Resolution was inexistent and, thus, could not become final and executory;
and (2) Padaos motion for execution was granted without hearing.
Acting thereon, the ELA denied PNBs motion for reconsideration on the
ground that motions for reconsideration of an order are prohibited under
Section 19, Rule V of the NLRC Rules of Procedure.
Thus, Padao filed his Motion to Admit Computation 139[17] dated July 14,
2004. In its Comment,140[18] PNB alleged that the computation was grossly
exaggerated and without basis, and prayed for a period of thirty (30) days
within which to submit its counter-computation since the same would come
from its head office in Pasay City.

On September 22, 2004, the ELA issued the Order141[19] granting


Padaos Motion to Admit Computation. The order cited PNBs failure to submit
its counter-computation within the two extended periods (totaling forty
days), which the ELA construed as a waiver to submit the same. Thus, the
ELA ordered the issuance of a writ of execution for the payment of
backwages due to Padao in the amount of 2,589,236.21.
In a motion142[20] dated September 29, 2004, PNB sought
reconsideration of the order with an attached counter-computation. The ELA
137

138

139

140

141

denied the same in its Order143[21] dated October 20, 2004 on the ground
that the motions for reconsideration of orders and decisions of the Labor
Arbiter are prohibited under Section 19, Rule V of the NLRC Rules of
Procedure. The ELA further stated that PNB had been given more than ample
opportunity to submit its own computation in this case, and the belatedly
submitted counter-computation of claims could not be considered. Thus, a
writ of execution144[22] was issued on October 21, 2004.
On November 11, 2004 and January 19, 2005, PNB filed its Motion to
Quash Writ of Execution and its Motion to Dissolve Alias Writ of Execution,
respectively. Both were denied by the ELA in an Order 145[23] dated February
8, 2005.
On February 18, 2005, PNB filed a Notice of Appeal with Memorandum
on Appeal146[24] with the NLRC. On September 20, 2005, however, the NLRC
issued a Resolution147[25] dismissing the banks appeal. PNBs Motion for
Reconsideration148[26] was also denied in the December 21, 2005
Resolution.149[27]
Thus, on March 7, 2006, PNB filed a Petition for Certiorari 150[28] with
the CA, assailing the findings of ELA Plagata and the NLRC.

142

143

144

145

146

147

148

149

150

In a Decision151[29] dated December 9, 2008, the CA dismissed the


petition, and later denied PNBs motion for reconsideration on February 24,
2009.
ISSUES
In G.R. No. 180849, PNB presents the following Assignment of Errors:152[30]
A.

THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT


THE POSITION OF A CREDIT INVESTIGATOR IS ONE IMBUED
WITH [THE] TRUST AND CONFIDENCE OF THE EMPLOYER.

B.

THE COURT OF APPEALS ERRED IN TREATING THE ACT OF


FALSIFYING THE CREDIT AND APPRAISAL REPORTS AND THAT
OF MERELY AFFIXING ONES SIGNATURE IN A FALSE REPORT
PREPARED BY ANOTHER AS ONE AND THE SAME DEGREE OF
MISCONDUCT WHICH WARRANTS THE SAME PENALTY.
In G.R. No. 187143, PNB presents the following Assignment of Errors: 153
[31]
THE LABOR COURTS AND THE APPELLATE COURT ERRED WHEN
THEY INVARIABLY IGNORED PNBS COUNTER-COMPUTATION AND
MERELY RELIED ON RESPONDENT DAN PADAOS SELF-SERVING
COMPUTATION OF HIS MONEY AWARD.
THE LABOR COURTS AND THE APPELLATE COURT ERRED WHEN
THEY ACCEPTED THE COMPUTATION OF RESPONDENT PADAO
WITHOUT REQUIRING PROOF TO SUPPORT THE SAME.
In G.R. No. 180849, PNB argues that the position of a credit
investigator is one reposed with trust and confidence, such that its holder
may be validly dismissed based on loss of trust and confidence. In
disciplining employees, the employer has the right to exercise discretion in
determining the individual liability of each erring employee and in imposing a
penalty commensurate with the degree of participation of each. PNB further
contends that the findings of the CA are not in accordance with the evidence
on record, thus, necessitating a review of the facts of the present case by
this Court.154[32]
On the other hand, Padao counters that local bank policies
implemented by the highest-ranking branch officials such as the assistant
vice-president/branch manager, assistant manager/cashier, chief of the loans
division and legal counsel, are presumed to be sanctioned and approved by

151

152

153

154

the bank, and a subordinate employee should not be faulted for his reliance
thereon. He argues that a person who acts in obedience to an order issued
by a superior for some lawful purpose cannot be held liable. PNB is bound by
the acts of its senior officers and he, like his fellow credit investigators,
having acted in good faith in affixing his signature on the reports based on
the instruction, order and directive of senior local bank officials, should not
be held liable.155[33]
Padao also claims that PNB cruelly betrayed him by charging and
dismissing him after using him as a prosecution witness to secure the
conviction of the senior bank officials, that he was never part of the
conspiracy, and that he did not derive any benefit from the scheme.156[34]
The Courts Ruling
In the 1987 Constitution, provisions on social justice and the protection
of labor underscore the importance and economic significance of labor.
Article II, Section 18 characterizes labor as a primary social economic force,
and as such, the State is bound to protect the rights of workers and promote
their welfare. Moreover, workers are entitled to security of tenure, humane
conditions of work, and a living wage.157[35]
The Labor Code declares as policy that the State shall afford protection
to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers
and employers. The State shall assure the rights of workers to selforganization, collective bargaining, security of tenure, and just and humane
conditions of work.158[36]
While it is an employers basic right to freely select or discharge its
employees, if only as a measure of self-protection against acts inimical to its
interest,159[37] the law sets the valid grounds for termination as well as the
proper procedure to be followed when terminating the services of an
employee.160[38]
Thus, in cases of regular employment, the employer is prohibited from
terminating the services of an employee except for a just or authorized
155

156

157

158

159

160

cause.161[39] Such just causes for which an employer may terminate an


employee are enumerated in Article 282 of the Labor Code:
(a)
Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in
connection with his work;
(b)
duties;

Gross and habitual neglect by the employee of his

(c)
Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized representative;
(d)
Commission of a crime or offense by the employee
against the person of his employer or any immediate family member of
his family or his duly authorized representative; and
(e)

Other causes analogous to the foregoing.

Further, due process requires that employers follow the procedure set
by the Labor Code:
Art. 277. Miscellaneous provisions.
xxx
b.
Subject to the constitutional right of workers to
security of tenure and their right to be protected against dismissal
except for a just and authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought to be terminated
a written notice containing a statement of the causes for termination
and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires in
accordance with company rules and regulations promulgated pursuant
to guidelines set by the Department of Labor and Employment. Any
decision taken by the employer shall be without prejudice to the right
of the worker to contest the validity or legality of his dismissal by filing
a complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a valid
or authorized cause shall rest on the employer. The Secretary of the
Department of Labor and Employment may suspend the effects of the
termination pending resolution of the dispute in the event of a prima
facie finding by the appropriate official of the Department of Labor and
Employment before whom such dispute is pending that the termination
may cause a serious labor dispute or is in implementation of a mass
lay-off. (As amended by Section 33, Republic Act No. 6715, March 21,
1989)
xxx
In this case, Padao was dismissed by PNB for gross and habitual
neglect of duties under Article 282 (b) of the Labor Code.
Gross negligence connotes want of care in the performance of ones
duties, while habitual neglect implies repeated failure to perform ones duties
for a period of time, depending on the circumstances. 162[40] Gross
negligence has been defined as the want or absence of or failure to exercise
slight care or diligence, or the entire absence of care. It evinces a
161

thoughtless disregard of consequences without exerting any effort to avoid


them.163[41]
In the case at bench, Padao was accused of having presented a
fraudulently positive evaluation of the business, credit standing/rating and
financial capability of Reynaldo and Luzvilla Baluma and eleven other loan
applicants.164[42] Some businesses were eventually found not to exist at all,
while in other transactions, the financial status of the borrowers simply could
not support the grant of loans in the approved amounts. 165[43] Moreover,
Padao over-appraised the collateral of spouses Gardito and Alma Ajero, and
that of spouses Ihaba and Rolly Pango.166[44]
The role that a credit investigator plays in the conduct of a banks
business cannot be overestimated. The amount of loans to be extended by a
bank depends upon the report of the credit investigator on the collateral
being offered. If a loan is not fairly secured, the bank is at the mercy of the
borrower who may just opt to have the collateral foreclosed. If the scheme is
repeated a hundredfold, it may lead to the collapse of the bank. In the case
of Sawadjaan v. Court of Appeals,167[45] the Court stressed the crucial role
that a credit investigator or an appraiser plays. Thus:
Petitioner himself admits that the position of appraiser/inspector
is "one of the most serious [and] sensitive job[s] in the banking
operations." He should have been aware that accepting such a
designation, he is obliged to perform the task at hand by the
exercise
of
more
than
ordinary
prudence.
As
appraiser/investigator, the petitioner was expected to conduct
an ocular inspection of the properties offered by CAMEC as
collaterals and check the copies of the certificates of title
against those on file with the Registry of Deeds. Not only did he
fail to conduct these routine checks, but he also deliberately
misrepresented in his appraisal report that after reviewing the
documents and conducting a site inspection, he found the CAMEC loan
application to be in order. Despite the number of pleadings he has
filed, he has failed to offer an alternative explanation for his actions.
[Emphasis supplied]

162

163

164

165

166

167

In fact, banks are mandated to exercise more care and prudence in


dealing with registered lands:
[B]anks are cautioned to exercise more care and prudence in
dealing even with registered lands, than private individuals, "for their
business is one affected with public interest, keeping in trust money
belonging to their depositors, which they should guard against loss by
not committing any act of negligence which amounts to lack of good
faith by which they would be denied the protective mantle of the land
registration statute Act 496, extended only to purchasers for value and
in good faith, as well as to mortgagees of the same character and
description. It is for this reason that banks before approving a loan
send representatives to the premises of the land offered as collateral
and investigate who are the true owners thereof.168[46]
Padaos repeated failure to discharge his duties as a credit investigator
of the bank amounted to gross and habitual neglect of duties under Article
282 (b) of the Labor Code. He not only failed to perform what he was
employed to do, but also did so repetitively and habitually, causing millions
of pesos in damage to PNB. Thus, PNB acted within the bounds of the law by
meting out the penalty of dismissal, which it deemed appropriate given the
circumstances.
The CA was correct in stating that when the violation of company
policy or breach of company rules and regulations is tolerated by
management, it cannot serve as a basis for termination. 169[47] Such ruling,
however, does not apply here. The principle only applies when the breach or
violation is one which neither amounts to nor involves fraud or illegal
activities. In such a case, one cannot evade liability or culpability based on
obedience to the corporate chain of command.
Padao cited Llosa-Tan v. Silahis International Hotel,170[48] where the
violation of corporate policy was held not per se fraudulent or illegal.
Moreover, the said violation was done in compliance with the apparent lawful
orders of the concerned employees superiors. Management-sanctioned
deviations in the said case did not amount to fraud or illegal activities. If
anything, it merely represented flawed policy implementation.
In sharp contrast, Padao, in affixing his signature on the fraudulent
reports, attested to the falsehoods contained therein. Moreover, by doing so,
he repeatedly failed to perform his duties as a credit investigator.
Further, even Article 11(6) of the Revised Penal Code requires that any
person, who acts in obedience to an order issued by a superior does so for
some lawful purpose in order for such person not to incur criminal liability.
The succeeding article exempts from criminal liability any person who acts
under the compulsion of an irresistible force (Article 12, paragraph 6) or

168

169

170

under the impulse of an uncontrollable fear of an equal or greater injury


(Article 12, paragraph 7).
Assuming solely for the sake of argument that these principles apply
by analogy, even an extremely liberal interpretation of these justifying or
exempting circumstances will not allow Padao to escape liability.
Also, had Padao wanted immunity in exchange for his testimony as a
prosecution witness, he should have demanded that there be a written
agreement. Without it, his claim is self-serving and unreliable.
That there is no proof that Padao derived any benefit from the scheme
is immaterial.171[49] What is crucial is that his gross and habitual negligence
caused great damage to his employer. Padao was aware that there was
something irregular about the practices being implemented by his superiors,
but he went along with, became part of, and participated in the scheme.
It does not speak well for a person to apparently blindly follow his
superiors, particularly when, with the exercise of ordinary diligence, one
would be able to determine that what he or she was being ordered to do was
highly irregular, if not illegal, and would, and did, work to the great
disadvantage of his or her employer.
PNB, as an employer, has the basic right to freely select and discharge
employees (subject to the Labor Code requirements on substantive and
procedural due process), if only as a measure of self-protection against acts
inimical to its interests.172[50] It has the authority to impose what penalty it
deems sufficient or commensurate to an employees offense. Having satisfied
the requirements of procedural and substantive due process, it is thus left to
the discretion of the employer to impose such sanction as it sees befitting
based on the circumstances.
Finally, Padao claims that he should be accorded the same treatment
as his co-employees.173[51] As the ELA, however, correctly observed:
[A]s pointed out by the respondents, the case of the complainant
was different, and his culpability, much more than his aforementioned
co-employees. In the case of Palomares and Dagpin, they were
involved in only one case of over-appraisal of collateral in the loan
account of the spouses Jaime Lim and Allyn Tan (Respondents
Comments, p. 1), but in the case of complainant, his over-appraisals
involved three (3) loan accounts and amounting to
9,537,759.00 (Ibid.), not to mention that he also submitted
falsified Credit Investigation Reports for the loan accounts of
seven (7) other borrowers of PNB (Ibid., pp. 1-2).
xxx

171

172

173

The number of over-appraisals (3) and falsified credit


investigation reports (7) or countersigned by the complainant
indicates habituality, or the propensity to do the same. The best
that can be said of his acts is the lack of moral strength to resist the
repeated commission of illegal or prohibited acts in loan transactions.
He thus cannot interpose undue pressure or coercion exerted upon
[him] by his superiors, to absolve himself of liability for his signing or
countersigning the aforementioned falsified reports. It may have been
allowable or justifiable for him to give in to one anomalous loan
transaction report, but definitely not for ten (10) loan accounts. It is
axiomatic that obedience to ones superiors extends only to lawful
orders, not to unlawful orders calling for unauthorized, prohibited or
immoral acts to be done.
In the case of Wilma Velasco, PNB did not pursue legal action and
even discontinued the administrative case filed against her because,
according to PNB, she appeared to have been the victim of the
misrepresentations and falsifications of the credit investigation and
appraisal reports of the complainant upon which she had to reply in
acting on loan applications filed with the PNB and for which such
reports were made. She was not obliged to conduct a separate or
personal appraisal of the properties offered as collaterals, or separate
credit investigations of the borrowers of PNB. These functions
pertained to PNB inspectors/credit investigators, like the complainant.
Unfortunately, the latter was derelict in the performance of those
duties, if he did not deliberately misuse or abuse such duties.
As can be seen, therefore, the complainant and Wilma Velasco
did not stand on the same footing relative to their involvement or
participation in the anomalous loan transactions earlier mentioned.
Therefore, PNB cannot be faulted for freeing her from liability and
punishment, while dismissing the complainant from service. [Emphases
supplied]
Given the above ruling of the Court in G.R. No. 180849, the ruling of
the CA in CA-G.R. SP No. 00945, an action stemming from the execution of
the decision in said case, must perforce be reversed.
However, Padao is not entitled to financial assistance. In Toyota Motor Phils.
Corp. Workers Association v. NLRC, 174[52] the Court reaffirmed the general
rule that separation pay shall be allowed as a measure of social justice only
in those instances where the employee is validly dismissed for causes other
than serious misconduct, willful disobedience, gross and habitual
neglect of duty, fraud or willful breach of trust, commission of a
crime against the employer or his family, or those reflecting on his
moral character. These five grounds are just causes for dismissal as
provided in Article 282 of the Labor Code.
In Central Philippine Bandag Retreaders, Inc. v. Diasnes,175[53] cited in
Quiambao v. Manila Electric Company,176[54] we discussed the parameters of
174

175

176

awarding separation pay to dismissed employees as a measure of financial


assistance:
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA
must demur the award of separation pay based on social justice when
an employees dismissal is based on serious misconduct or willful
disobedience; gross and habitual neglect of duty; fraud or willfull
breach of trust; or commission of a crime against the person of the
employer or his immediate family grounds under Art. 282 of the Labor
Code that sanction dismissal of employees. They must be judicious and
circumspect in awarding separation pay or financial assistance as the
constitutional policy to provide full protection to labor is not meant to
be an instrument to oppress the employers. The commitment of the
Court to the cause of labor should not embarrass us from sustaining
the employers when they are right, as here. In fine, we should be more
cautions in awarding financial assistance to the undeserving and those
who are unworthy of the liberality of the law. 177[55] [Emphasis original.
Underscoring supplied]
Clearly, given the Courts findings, Padao is not entitled to financial
assistance.
WHEREFORE, the petitions in G.R. No. 180849 and G.R. No. 187143
are GRANTED. In G.R. No. 180849, the December 14, 2006 Decision and the
October 2, 2007 Resolution of the Court of Appeals in CA-G.R. SP No. 76584
are REVERSED and SET ASIDE.
In G.R. No. 187143, the December 9, 2008 Decision and the February
24, 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 00945 are
REVERSED and SET ASIDE.
The June 21, 2001 Decision of the Executive Labor Arbiter is hereby
ordered REINSTATED, with the MODIFICATION that the award of financial
assistance is DELETED.
SO ORDERED.

Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane
justification that those with less privilege in life should have more in
law. (Antonio Serrano versus Vallant Maritime Services, G.R. No.
167614, 24 Mar. 2009)
ANTONIO M. SERRANO,
Petitioner,

G.R. No. 167614


Present:
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,

177

- versus -

CORONA,
CARPIO MORALES,
TINGA,
CHICO-NAZARIO,
VELASCO, Jr.,
NACHURA,
LEONARDO-DE
CASTRO,
BRION, and
PERALTA, JJ.

GALLANT
MARITIME
SERVICES,
INC.
and
MARLOW
NAVIGATION
CO., INC.,
Promulgated:
Respondents.
March 24, 2009
x----------------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families
and communities out of poverty. Their earnings have built houses, provided
health care, equipped schools and planted the seeds of businesses. They
have woven together the world by transmitting ideas and knowledge from
country to country. They have provided the dynamic human link between
cultures, societies and economies. Yet, only recently have we begun to
understand not only how much international migration impacts
development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 2007178[1]
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5 th
paragraph of Section 10, Republic Act (R.A.) No. 8042,179[2] to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by law or
contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three
(3) months for every year of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
178

179

does not magnify the contributions of overseas Filipino workers (OFWs) to national
development, but exacerbates the hardships borne by them by unduly limiting their
entitlement in case of illegal dismissal to their lump-sum salary either for the
unexpired portion of their employment contract or for three months for every year
of the unexpired term, whichever is less (subject clause). Petitioner claims that the
last clause violates the OFWs' constitutional rights in that it impairs the terms of
their contract, deprives them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner
assails the December 8, 2004 Decision180[3] and April 1, 2005 Resolution181[4] of
the Court of Appeals (CA), which applied the subject clause, entreating this Court to
declare the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation
Co., Ltd. (respondents) under a Philippine Overseas Employment Administration
(POEA)-approved Contract of Employment with the following terms and conditions:
Duration of contract
12 months
Position
Chief Officer
Basic monthly salary
US$1,400.00
Hours of work
48.0 hours per week
Overtime
US$700.00 per month
Vacation leave with pay
7.00 days per month182[5]
On March 19, 1998, the date of his departure, petitioner was constrained to
accept a downgraded employment contract for the position of Second Officer with a
monthly salary of US$1,000.00, upon the assurance and representation of
respondents that he would be made Chief Officer by the end of April 1998.183[6]
Respondents did not deliver on their promise to make petitioner Chief
Officer.184[7] Hence, petitioner refused to stay on as Second Officer and was
repatriated to the Philippines on May 26, 1998.185[8]
Petitioner's employment contract was for a period of 12 months or from
March 19, 1998 up to March 19, 1999, but at the time of his repatriation on May 26,
1998, he had served only two (2) months and seven (7) days of his contract, leaving
an unexpired portion of nine (9) months and twenty-three (23) days.
180

181

182

183

184

185

Petitioner filed with the Labor Arbiter (LA) a Complaint 186[9] against
respondents for constructive dismissal and for payment of his money claims in the
total amount of US$26,442.73, broken down as follows:
May 27/31, 1998 (5 days)
incl. Leave pay
June 01/30, 1998
July 01/31, 1998

US$
413.90
2,590.00
2,590.00

August 01/31, 1998

2,590.00

Sept. 01/30, 1998

2,590.00

Oct. 01/31, 1998


Nov. 01/30, 1998
Dec. 01/31, 1998
Jan. 01/31, 1999
Feb. 01/28, 1999
Mar. 1/19, 1999 (19 days)
incl. leave pay

2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
1,640.00
---------------------------------------------------------------------------25,382.23

Amount adjusted to chief


mate's salary
(March 19/31, 1998 to April
1/30, 1998)+

TOTAL CLAIM

1,060.50187
[10]
----------------------------------------------------------------------------------------US$
26,442.7
3188[11]

as well as moral and exemplary damages and attorney's fees.


The LA rendered a Decision dated July 15, 1999, declaring the dismissal of
petitioner illegal and awarding him monetary benefits, to wit:

186

187

188

WHEREFORE, premises considered, judgment is hereby rendered declaring


that the dismissal of the complainant (petitioner) by the respondents in the
above-entitled case was illegal and the respondents are hereby ordered to
pay the complainant [petitioner], jointly and severally, in Philippine Currency,
based on the rate of exchange prevailing at the time of payment, the amount
of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US
$8,770.00), representing the complainants salary for three (3)
months of the unexpired portion of the aforesaid contract of
employment.

The respondents are likewise ordered to pay the complainant


[petitioner], jointly and severally, in Philippine Currency, based on the rate of
exchange prevailing at the time of payment, the amount of FORTY FIVE U.S.
DOLLARS (US$ 45.00),189[12] representing the complainants claim for a
salary differential. In addition, the respondents are hereby ordered to pay the
complainant, jointly and severally, in Philippine Currency, at the exchange
rate prevailing at the time of payment, the complainants (petitioner's) claim
for attorneys fees equivalent to ten percent (10%) of the total amount
awarded to the aforesaid employee under this Decision.

The claims of the complainant for moral and exemplary damages are hereby
DISMISSED for lack of merit.

All other claims are hereby DISMISSED.


SO ORDERED.190[13] (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his


computation on the salary period of three months only -- rather than the entire
unexpired portion of nine months and 23 days of petitioner's employment contract applying the subject clause. However, the LA applied the salary rate of
US$2,590.00, consisting of petitioner's [b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month.191[14]
Respondents appealed192[15] to the National Labor Relations Commission
(NLRC) to question the finding of the LA that petitioner was illegally dismissed.
189

190

191

192

Petitioner also appealed193[16] to the NLRC on the sole issue that the LA erred
in not applying the ruling of the Court in Triple Integrated Services, Inc. v. National
Labor Relations Commission194[17] that in case of illegal dismissal, OFWs are
entitled to their salaries for the unexpired portion of their contracts.195[18]

In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED.


Respondents are hereby ordered to pay complainant, jointly and severally, in
Philippine currency, at the prevailing rate of exchange at the time of payment
the following:

1.Three (3) months salary


$1,400 x 3
2.Salary differential

US$4,200.00
45.00

US$4,245.00
3.10% Attorneys fees
TOTAL

424.50
US$4,669.50

The other findings are affirmed.


SO ORDERED.196[19]

The NLRC corrected the LA's computation of the lump-sum salary awarded to
petitioner by reducing the applicable salary rate from US$2,590.00 to US$1,400.00
because R.A. No. 8042 does not provide for the award of overtime pay, which
should be proven to have been actually performed, and for vacation leave pay.197
[20]

193

194

195

196

197

Petitioner filed a Motion for Partial Reconsideration, but this time he


questioned the constitutionality of the subject clause. 198[21] The NLRC denied the
motion.199[22]
Petitioner filed a Petition for Certiorari200[23] with the CA, reiterating the
constitutional challenge against the subject clause.201[24] After initially dismissing
the petition on a technicality, the CA eventually gave due course to it, as directed
by this Court in its Resolution dated August 7, 2003 which granted the petition for
certiorari, docketed as G.R. No. 151833, filed by petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on


the reduction of the applicable salary rate; however, the CA skirted the
constitutional issue raised by petitioner.202[25]
His Motion for Reconsideration203[26] having been denied by the CA,204[27]
petitioner brings his cause to this Court on the following grounds:

I
The Court of Appeals and the labor tribunals have decided the case in
a way not in accord with applicable decision of the Supreme Court involving
similar issue of granting unto the migrant worker back wages equal to the
unexpired portion of his contract of employment instead of limiting it to three
(3) months

II
In the alternative that the Court of Appeals and the Labor Tribunals
were merely applying their interpretation of Section 10 of Republic Act No.
198

199

200

201

202

203

204

8042, it is submitted that the Court of Appeals gravely erred in law when it
failed to discharge its judicial duty to decide questions of substance not
theretofore determined by the Honorable Supreme Court, particularly, the
constitutional issues raised by the petitioner on the constitutionality of said
law, which unreasonably, unfairly and arbitrarily limits payment of the award
for back wages of overseas workers to three (3) months.

III
Even without considering the constitutional limitations [of] Sec. 10 of
Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding
from petitioners award the overtime pay and vacation pay provided in his
contract since under the contract they form part of his salary.205[28]

On February 26, 2008, petitioner wrote the Court to withdraw his petition as
he is already old and sickly, and he intends to make use of the monetary award for
his medical treatment and medication.206[29] Required to comment, counsel for
petitioner filed a motion, urging the court to allow partial execution of the
undisputed monetary award and, at the same time, praying that the constitutional
question be resolved.207[30]
Considering that the parties have filed their respective memoranda, the Court
now takes up the full merit of the petition mindful of the extreme importance of the
constitutional question raised therein.
On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner
was illegal is not disputed. Likewise not disputed is the salary differential of
US$45.00 awarded to petitioner in all three fora. What remains disputed is only the
computation of the lump-sum salary to be awarded to petitioner by reason of his
illegal dismissal.

Applying the subject clause, the NLRC and the CA computed the lump-sum
salary of petitioner at the monthly rate of US$1,400.00 covering the period of three
months out of the unexpired portion of nine months and 23 days of his employment
contract or a total of US$4,200.00.

Impugning the constitutionality of the subject clause, petitioner contends


that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he is entitled
to US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries for the
205

206

207

entire nine months and 23 days left of his employment contract, computed at the
monthly rate of US$2,590.00.208[31]

The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it


unduly impairs the freedom of OFWs to negotiate for and stipulate in their overseas
employment contracts a determinate employment period and a fixed salary
package.209[32] It also impinges on the equal protection clause, for it treats OFWs
differently from local Filipino workers (local workers) by putting a cap on the amount
of lump-sum salary to which OFWs are entitled in case of illegal dismissal, while
setting no limit to the same monetary award for local workers when their dismissal
is declared illegal; that the disparate treatment is not reasonable as there is no
substantial distinction between the two groups;210[33] and that it defeats Section
18,211[34] Article II of the Constitution which guarantees the protection of the rights
and welfare of all Filipino workers, whether deployed locally or overseas.212[35]

Moreover, petitioner argues that the decisions of the CA and the labor
tribunals are not in line with existing jurisprudence on the issue of money claims of
illegally dismissed OFWs. Though there are conflicting rulings on this, petitioner
urges the Court to sort them out for the guidance of affected OFWs.213[36]
Petitioner further underscores that the insertion of the subject clause into R.A.
No. 8042 serves no other purpose but to benefit local placement agencies. He
marks the statement made by the Solicitor General in his Memorandum, viz.:

Often, placement agencies, their liability being solidary, shoulder the


payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges on
its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for
208

209

210

211

212

213

money claims was reduced under Section 10 of R.A. No. 8042.


(Emphasis supplied)

214

[37]

Petitioner argues that in mitigating the solidary liability of placement


agencies, the subject clause sacrifices the well-being of OFWs. Not only that, the
provision makes foreign employers better off than local employers because in cases
involving the illegal dismissal of employees, foreign employers are liable for salaries
covering a maximum of only three months of the unexpired employment contract
while local employers are liable for the full lump-sum salaries of their employees. As
petitioner puts it:

In terms of practical application, the local employers are not limited to


the amount of backwages they have to give their employees they have
illegally dismissed, following well-entrenched and unequivocal jurisprudence
on the matter. On the other hand, foreign employers will only be limited to
giving the illegally dismissed migrant workers the maximum of three (3)
months unpaid salaries notwithstanding the unexpired term of the contract
that can be more than three (3) months.215[38]

Lastly, petitioner claims that the subject clause violates the due process
clause, for it deprives him of the salaries and other emoluments he is entitled to
under his fixed-period employment contract.216[39]

The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the


constitutional issue should not be entertained, for this was belatedly interposed by
petitioner in his appeal before the CA, and not at the earliest opportunity, which was
when he filed an appeal before the NLRC.217[40]

The Arguments of the Solicitor General

214

215

216

217

The Solicitor General (OSG)218[41] points out that as R.A. No. 8042 took effect
on July 15, 1995, its provisions could not have impaired petitioner's 1998
employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract,
the provisions thereof are deemed part of the minimum terms of petitioner's
employment, especially on the matter of money claims, as this was not stipulated
upon by the parties.219[42]

Moreover, the OSG emphasizes that OFWs and local workers differ in terms of
the nature of their employment, such that their rights to monetary benefits must
necessarily be treated differently. The OSG enumerates the essential elements that
distinguish OFWs from local workers: first, while local workers perform their jobs
within Philippine territory, OFWs perform their jobs for foreign employers, over
whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost
impossible to enforce judgment; and second, as held in Coyoca v. National Labor
Relations Commission220[43] and Millares v. National Labor Relations Commission,221
[44] OFWs are contractual employees who can never acquire regular employment
status, unlike local workers who are or can become regular employees. Hence, the
OSG posits that there are rights and privileges exclusive to local workers, but not
available to OFWs; that these peculiarities make for a reasonable and valid basis for
the differentiated treatment under the subject clause of the money claims of OFWs
who are illegally dismissed. Thus, the provision does not violate the equal protection
clause nor Section 18, Article II of the Constitution.222[45]

Lastly, the OSG defends the rationale behind the subject clause as a police
power measure adopted to mitigate the solidary liability of placement agencies for
this redounds to the benefit of the migrant workers whose welfare the government
seeks to promote. The survival of legitimate placement agencies helps [assure] the
government that migrant workers are properly deployed and are employed under
decent and humane conditions.223[46]

The Court's Ruling

The Court sustains petitioner on the first and second issues.


218

219

220

221

222

223

When the Court is called upon to exercise its power of judicial review of the
acts of its co-equals, such as the Congress, it does so only when these conditions
obtain: (1) that there is an actual case or controversy involving a conflict of rights
susceptible of judicial determination;224[47] (2) that the constitutional question is
raised by a proper party225[48] and at the earliest opportunity;226[49] and (3) that
the constitutional question is the very lis mota of the case,227[50] otherwise the
Court will dismiss the case or decide the same on some other ground.228[51]

Without a doubt, there exists in this case an actual controversy directly


involving petitioner who is personally aggrieved that the labor tribunals and the CA
computed his monetary award based on the salary period of three months only as
provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the
requirement that a constitutional issue be raised at the earliest opportunity entails
the interposition of the issue in the pleadings before a competent court, such
that, if the issue is not raised in the pleadings before that competent court, it cannot
be considered at the trial and, if not considered in the trial, it cannot be considered
on appeal.229[52] Records disclose that the issue on the constitutionality of the
subject clause was first raised, not in petitioner's appeal with the NLRC, but in his
Motion for Partial Reconsideration with said labor tribunal, 230[53] and reiterated in
his Petition for Certiorari before the CA.231[54] Nonetheless, the issue is deemed
seasonably raised because it is not the NLRC but the CA which has the competence
to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs
a quasi-judicial function its function in the present case is limited to determining
questions of fact to which the legislative policy of R.A. No. 8042 is to be applied and
to resolving such questions in accordance with the standards laid down by the law
224

225

226

227

228

229

230

231

itself;232[55] thus, its foremost function is to administer and enforce R.A. No. 8042,
and not to inquire into the validity of its provisions. The CA, on the other hand, is
vested with the power of judicial review or the power to declare unconstitutional a
law or a provision thereof, such as the subject clause. 233[56] Petitioner's
interposition of the constitutional issue before the CA was undoubtedly seasonable.
The CA was therefore remiss in failing to take up the issue in its decision.

The third condition that the constitutional issue be critical to the resolution of
the case likewise obtains because the monetary claim of petitioner to his lump-sum
salary for the entire unexpired portion of his 12-month employment contract, and
not just for a period of three months, strikes at the very core of the subject clause.

Thus, the stage is all set for the determination of the constitutionality of the
subject clause.

Does the subject clause violate Section 10,


Article III of the Constitution on non-impairment
of contracts?

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the
stipulations in his contract on the term of his employment and the fixed salary
package he will receive234[57] is not tenable.

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted
have only a prospective operation,235[58] and cannot affect acts or contracts
already perfected;236[59] however, as to laws already in existence, their provisions
232

233

234

235

are read into contracts and deemed a part thereof.237[60] Thus, the non-impairment
clause under Section 10, Article II is limited in application to laws about to be
enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995
preceded the execution of the employment contract between petitioner and
respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the
subject clause, impaired the employment contract of the parties. Rather, when the
parties executed their 1998 employment contract, they were deemed to have
incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may
not be declared unconstitutional on the ground that it impinges on the impairment
clause, for the law was enacted in the exercise of the police power of the State to
regulate a business, profession or calling, particularly the recruitment and
deployment of OFWs, with the noble end in view of ensuring respect for the dignity
and well-being of OFWs wherever they may be employed.238[61] Police power
legislations adopted by the State to promote the health, morals, peace, education,
good order, safety, and general welfare of the people are generally applicable not
only to future contracts but even to those already in existence, for all private
contracts must yield to the superior and legitimate measures taken by the State to
promote public welfare.239[62]

Does the subject clause violate Section 1,


Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due


process of law nor shall any person be denied the equal protection of the law.
236

237

238

239

Section 18,240[63] Article II and Section 3,241[64] Article XIII accord all
members of the labor sector, without distinction as to place of deployment, full
protection of their rights and welfare.

To Filipino workers, the rights guaranteed under the foregoing constitutional


provisions translate to economic security and parity: all monetary benefits should
be equally enjoyed by workers of similar category, while all monetary obligations
should be borne by them in equal degree; none should be denied the protection of
the laws which is enjoyed by, or spared the burden imposed on, others in like
circumstances.242[65]

Such rights are not absolute but subject to the inherent power of Congress to
incorporate, when it sees fit, a system of classification into its legislation; however,
to be valid, the classification must comply with these requirements: 1) it is based on
substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not
limited to existing conditions only; and 4) it applies equally to all members of the
class.243[66]
There are three levels of scrutiny at which the Court reviews the
constitutionality of a classification embodied in a law: a) the deferential or rational
basis scrutiny in which the challenged classification needs only be shown to be
rationally related to serving a legitimate state interest; 244[67] b) the middle-tier or
intermediate scrutiny in which the government must show that the challenged
classification serves an important state interest and that the classification is at
least substantially related to serving that interest;245[68] and c) strict judicial
scrutiny246[69] in which a legislative classification which impermissibly interferes
with the exercise of a fundamental right247[70] or operates to the peculiar
240

241

242

243

244

245

246

247

disadvantage of a suspect class248[71] is presumed unconstitutional, and the


burden is upon the government to prove that the classification is necessary to
achieve a compelling state interest and that it is the least restrictive means
to protect such interest.249[72]
Under American jurisprudence, strict judicial scrutiny is triggered by suspect
classifications250[73] based on race251[74] or gender252[75] but not when the
classification is drawn along income categories.253[76]
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng
Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, 254[77] the
constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas
(BSP), a government financial institution (GFI), was challenged for maintaining its
rank-and-file employees under the Salary Standardization Law (SSL), even when the
rank-and-file employees of other GFIs had been exempted from the SSL by their
respective charters. Finding that the disputed provision contained a suspect
classification based on salary grade, the Court deliberately employed the standard
of strict judicial scrutiny in its review of the constitutionality of said provision. More
significantly, it was in this case that the Court revealed the broad outlines of its
judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid


classification, and its policies should be accorded recognition and respect by
the courts of justice except when they run afoul of the Constitution. The
deference stops where the classification violates a fundamental right, or
prejudices persons accorded special protection by the Constitution.
When these violations arise, this Court must discharge its primary role as the
vanguard of constitutional guaranties, and require a stricter and more
exacting adherence to constitutional limitations. Rational basis should not
suffice.

248

249

250

251

252

253

254

Admittedly, the view that prejudice to persons accorded


special protection by the Constitution requires a stricter judicial
scrutiny finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per se
controlling in this jurisdiction. At best, they are persuasive and have
been used to support many of our decisions. We should not place undue and
fawning reliance upon them and regard them as indispensable mental
crutches without which we cannot come to our own decisions through the
employment of our own endowments. We live in a different ambience and
must decide our own problems in the light of our own interests and needs,
and of our qualities and even idiosyncrasies as a people, and always with our
own concept of law and justice. Our laws must be construed in accordance
with the intention of our own lawmakers and such intent may be deduced
from the language of each law and the context of other local legislation
related thereto. More importantly, they must be construed to serve our own
public interest which is the be-all and the end-all of all our laws. And it need
not be stressed that our public interest is distinct and different from others.
xxxx
Further, the quest for a better and more equal world calls for the use of
equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the
Constitution. The Preamble proclaims equality as an ideal precisely in protest
against crushing inequities in Philippine society. The command to promote
social justice in Article II, Section 10, in all phases of national development,
further explicitated in Article XIII, are clear commands to the State to take
affirmative action in the direction of greater equality. x x x [T]here is thus in
the Philippine Constitution no lack of doctrinal support for a more vigorous
state effort towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing
vital social and economic rights to marginalized groups of society,
including labor. Under the policy of social justice, the law bends
over backward to accommodate the interests of the working class
on the humane justification that those with less privilege in life
should have more in law. And the obligation to afford protection to
labor is incumbent not only on the legislative and executive
branches but also on the judiciary to translate this pledge into a
living reality. Social justice calls for the humanization of laws and
the equalization of social and economic forces by the State so that
justice in its rational and objectively secular conception may at
least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in
deciding questions of constitutionality, recognizing the broad discretion given
to Congress in exercising its legislative power. Judicial scrutiny would be
based on the rational basis test, and the legislative discretion would be given
deferential treatment.
But if the challenge to the statute is premised on the denial of a
fundamental right, or the perpetuation of prejudice against persons
favored by the Constitution with special protection, judicial scrutiny
ought to be more strict. A weak and watered down view would call for
the abdication of this Courts solemn duty to strike down any law repugnant to

the Constitution and the rights it enshrines. This is true whether the actor
committing the unconstitutional act is a private person or the government
itself or one of its instrumentalities. Oppressive acts will be struck down
regardless of the character or nature of the actor.

xxxx

In the case at bar, the challenged proviso operates on the basis of the
salary grade or officer-employee status. It is akin to a distinction based
on economic class and status, with the higher grades as recipients
of a benefit specifically withheld from the lower grades. Officers of
the BSP now receive higher compensation packages that are competitive
with the industry, while the poorer, low-salaried employees are limited to the
rates prescribed by the SSL. The implications are quite disturbing: BSP rankand-file employees are paid the strictly regimented rates of the SSL while
employees higher in rank - possessing higher and better education and
opportunities for career advancement - are given higher compensation
packages to entice them to stay. Considering that majority, if not all,
the rank-and-file employees consist of people whose status and
rank in life are less and limited, especially in terms of job
marketability, it is they - and not the officers - who have the real
economic and financial need for the adjustment . This is in accord with
the policy of the Constitution "to free the people from poverty, provide
adequate social services, extend to them a decent standard of living, and
improve the quality of life for all. Any act of Congress that runs counter
to this constitutional desideratum deserves strict scrutiny by this
Court before it can pass muster. (Emphasis supplied)

Imbued with the same sense of obligation to afford protection to labor, the
Court in the present case also employs the standard of strict judicial scrutiny, for it
perceives in the subject clause a suspect classification prejudicial to OFWs.

Upon cursory reading, the subject clause appears facially neutral, for it
applies to all OFWs. However, a closer examination reveals that the subject clause
has a discriminatory intent against, and an invidious impact on, OFWs at two levels:

First, OFWs with employment contracts of less than one year vis--vis
OFWs with employment contracts of one year or more;

Second, among OFWs with employment contracts of more than one


year; and

Third, OFWs vis--vis local workers with fixed-period employment;

OFWs with employment contracts of less


than
one
year
vis--vis
OFWs
with
employment contracts of one year or more

As pointed out by petitioner,255[78] it was in Marsaman Manning Agency, Inc.


v. National Labor Relations Commission256[79] (Second Division, 1999) that the
Court laid down the following rules on the application of the periods prescribed
under Section 10(5) of R.A. No. 804, to wit:

A plain reading of Sec. 10 clearly reveals that the choice of


which amount to award an illegally dismissed overseas contract
worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of
the unexpired term, whichever is less, comes into play only when
the employment contract concerned has a term of at least one (1)
year or more. This is evident from the words for every year of the
unexpired term which follows the words salaries x x x for three
months. To follow petitioners thinking that private respondent is entitled to
three (3) months salary only simply because it is the lesser amount is to
completely disregard and overlook some words used in the statute while
giving effect to some. This is contrary to the well-established rule in legal
hermeneutics that in interpreting a statute, care should be taken that every
part or word thereof be given effect since the law-making body is presumed
to know the meaning of the words employed in the statue and to have used
them advisedly. Ut res magis valeat quam pereat.257[80] (Emphasis supplied)

In Marsaman, the OFW involved was illegally dismissed two months into his 10month contract, but was awarded his salaries for the remaining 8 months and 6
days of his contract.

Prior to Marsaman, however, there were two cases in which the Court made
conflicting rulings on Section 10(5). One was Asian Center for Career and
Employment System and Services v. National Labor Relations Commission (Second
Division, October 1998),258[81] which involved an OFW who was awarded a twoyear employment contract, but was dismissed after working for one year and two
months. The LA declared his dismissal illegal and awarded him SR13,600.00 as
lump-sum salary covering eight months, the unexpired portion of his contract. On
appeal, the Court reduced the award to SR3,600.00 equivalent to his three months
salary, this being the lesser value, to wit:

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas


employment without just, valid or authorized cause is entitled to his salary for
the unexpired portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less.
255

256

257

258

In the case at bar, the unexpired portion of private respondents


employment contract is eight (8) months. Private respondent should
therefore be paid his basic salary corresponding to three (3) months or a total
of SR3,600.259[82]
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations
Commission (Third Division, December 1998),260[83] which involved an OFW
(therein respondent Erlinda Osdana) who was originally granted a 12-month
contract, which was deemed renewed for another 12 months. After serving for one
year and seven-and-a-half months, respondent Osdana was illegally dismissed, and
the Court awarded her salaries for the entire unexpired portion of four and one-half
months of her contract.

The Marsaman interpretation of Section 10(5) has since been adopted in the
following cases:

259

260

261

Peri
od
App
lied
in
the
Co
mp
utat
ion
of
the
Mon
etar
y
Awa
rd

Case
Title

Co
ntr
act
Pe
rio
d

P
er
io
d
of
S
er
vi
c
e

Une
xpir
ed
Peri
od

Skippe
rs
v.
Magua
d261[84
]

6
mo
nth
s

2
m
o
nt
h
s

4
mon
ths

4
mon
ths

Bahia

Shippi
ng v.
Reynal
do
Chua
262
[85]

mo
nth
s

m
o
nt
h
s

mon
ths

mon
ths

Cente
nnial
Trans
marine
v. dela
Cruz
l263[86]

9
mo
nth
s

4
m
o
nt
h
s

5
mon
ths

5
mon
ths

Talidan
o
v.
Falco
n264[87
]

12
mo
nth
s

3
m
o
nt
h
s

9
mon
ths

3
mon
ths

Univan
v.

12
mo
nth
s

3
m
o
nt
h
s

9
mon
ths

3
mon
ths

12
mo
nth
s

m
or
e
th
a
n
2
m
o
nt
h

10
mon
ths

3
mon
ths

CA

265[88]

Orient
al v.
CA
266
[89]

262

263

264

265

266

s
PCL v.
NLR
C267[90
]

12
mo
nth
s

m
or
e
th
a
n
2
m
o
nt
h
s

mor
e or
less
9
mon
ths

3
mon
ths

Olarte
v.
Nayon
a268[91
]

12
mo
nth
s

2
1
d
a
y
s

11
mon
ths
and
9
days

3
mon
ths

JSS v.

12
mo
nth
s

1
6
d
a
y
s

11
mon
ths
and
24
days

3
mon
ths

12
mo
nth
s

9
m
o
nt
h
s
a
n
d
7
d
a
y
s

2
mon
ths
and
23
days

2
mon
ths
and
23
day
s

Ferre
r269[92]

Pentag
on v.
Adelan
tar270[9
3]

267

268

269

270

Phil.
Emplo
y
v.
Parami
o,

12
mo
nth
s

1
0
m
o
nt
h
s

2
mon
ths

Une
xpir
ed
port
ion

Flouris
h
Mariti
me v.
Alman
zor
272
[95]

2
yea
rs

2
6
d
a
y
s

23
mon
ths
and
4
days

6
mon
ths
or 3
mon
ths
for
eac
h
yea
r of
cont
ract

Athenn
a
Manpo
wer v.
Villano
s 273[96]

1
yea
r,
10
mo
nth
s
an
d
28
day
s

1
m
o
nt
h

1
year
, 9
mon
ths
and
28
days

6
mon
ths
or 3
mon
ths
for
eac
h
yea
r of
cont
ract

et al.271
[94]

As the foregoing matrix readily shows, the subject clause classifies OFWs into
two categories. The first category includes OFWs with fixed-period employment
contracts of less than one year; in case of illegal dismissal, they are entitled to their
salaries for the entire unexpired portion of their contract. The second category
consists of OFWs with fixed-period employment contracts of one year or more; in
case of illegal dismissal, they are entitled to monetary award equivalent to only 3
months of the unexpired portion of their contracts.

The disparity in the treatment of these two groups cannot be discounted. In


Skippers, the respondent OFW worked for only 2 months out of his 6-month
contract, but was awarded his salaries for the remaining 4 months. In contrast, the
271

272

273

respondent OFWs in Oriental and PCL who had also worked for about 2 months out
of their 12-month contracts were awarded their salaries for only 3 months of the
unexpired portion of their contracts. Even the OFWs involved in Talidano and
Univan who had worked for a longer period of 3 months out of their 12-month
contracts before being illegally dismissed were awarded their salaries for only 3
months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical
OFW-A with an employment contract of 10 months at a monthly salary rate of
US$1,000.00 and a hypothetical OFW-B with an employment contract of 15 months
with the same monthly salary rate of US$1,000.00. Both commenced work on the
same day and under the same employer, and were illegally dismissed after one
month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00,
equivalent to his salaries for the remaining 9 months of his contract, whereas OFWB will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the
unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion
of 14 months of his contract, as the US$3,000.00 is the lesser amount.

The disparity becomes more aggravating when the Court takes into account
jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14,
1995,274[97] illegally dismissed OFWs, no matter how long the period of their
employment contracts, were entitled to their salaries for the entire unexpired
portions of their contracts. The matrix below speaks for itself:

Cas
e
Title

Con
trac
t
Peri
od

Pe
rio
d
of
Se
rvi
ce

Unex
pire
d
Peri
od

Period
Applie
d
in
the
Comp
utatio
n
of
the
Monet
ary
Award

ATCI
v.
CA,

2
year
s

2
m
on
th
s

22
mont
hs

22
month
s

2
year
s

7
da
ys

23
mont
hs
and
23

23
month
s and
23

et
al.275
[98]
Phil.
Integ
rate
d v.
NLR
274

275

C276[
99]

276

277

278

279

280

281

days

days

JGB
v.
NL
C277[
100]

2
year
s

9
m
on
th
s

15
mont
hs

15
month
s

Agoy
v.
NLR
C278[
101]

2
year
s

2
m
on
th
s

22
mont
hs

22
month
s

EDI
v.
NLR
C, et
al.279
[102
]

2
year
s

5
m
on
th
s

19
mont
hs

19
month
s

Barr
os v.
NLR
C, et
al.280
[103
]

12
mon
ths

4
m
on
th
s

8
mont
hs

8
month
s

Phili
ppin
e
Tran
smar
ine v.
Carill
a281[

12
mon
ths

6
m
on
th
s
an
d
22

5
mont
hs
and
18
days

5
month
s and
18
days

104]

da
ys

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods
or the unexpired portions thereof, were treated alike in terms of the computation of
their monetary benefits in case of illegal dismissal. Their claims were subjected to a
uniform rule of computation: their basic salaries multiplied by the entire unexpired
portion of their employment contracts.

The enactment of the subject clause in R.A. No. 8042 introduced a


differentiated rule of computation of the money claims of illegally dismissed OFWs
based on their employment periods, in the process singling out one category
whose contracts have an unexpired portion of one year or more and subjecting
them to the peculiar disadvantage of having their monetary awards limited to their
salaries for 3 months or for the unexpired portion thereof, whichever is less, but all
the while sparing the other category from such prejudice, simply because the
latter's unexpired contracts fall short of one year.

Among OFWs With Employment


Contracts of More Than One Year

Upon closer examination of the terminology employed in the subject clause,


the Court now has misgivings on the accuracy of the Marsaman interpretation.

The Court notes that the subject clause or for three (3) months for every year
of the unexpired term, whichever is less contains the qualifying phrases every year
and unexpired term. By its ordinary meaning, the word term means a limited or
definite extent of time.282[105] Corollarily, that every year is but part of an
unexpired term is significant in many ways: first, the unexpired term must be at
least one year, for if it were any shorter, there would be no occasion for such
unexpired term to be measured by every year; and second, the original term must
be more than one year, for otherwise, whatever would be the unexpired term
thereof will not reach even a year. Consequently, the more decisive factor in the
determination of when the subject clause for three (3) months for every year of the
unexpired term, whichever is less shall apply is not the length of the original
contract period as held in Marsaman,283[106] but the length of the unexpired
portion of the contract period -- the subject clause applies in cases when the
unexpired portion of the contract period is at least one year, which arithmetically
requires that the original contract period be more than one year.

282

283

Viewed in that light, the subject clause creates a sub-layer of discrimination


among OFWs whose contract periods are for more than one year: those who are
illegally dismissed with less than one year left in their contracts shall be entitled to
their salaries for the entire unexpired portion thereof, while those who are illegally
dismissed with one year or more remaining in their contracts shall be covered by
the subject clause, and their monetary benefits limited to their salaries for three
months only.

To concretely illustrate the application of the foregoing interpretation of the


subject clause, the Court assumes hypothetical OFW-C and OFW-D, who each have
a 24-month contract at a salary rate of US$1,000.00 per month. OFW-C is illegally
dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there
is at least 12 months remaining in the contract period of OFW-C, the subject clause
applies to the computation of the latter's monetary benefits. Thus, OFW-C will be
entitled, not to US$12,000,00 or the latter's total salaries for the 12 months
unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the
latter's salaries for 3 months out of the 12-month unexpired term of the contract.
On the other hand, OFW-D is spared from the effects of the subject clause, for there
are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled
to US$11,000.00, which is equivalent to his/her total salaries for the entire 11month unexpired portion.

OFWs vis--vis Local Workers


With Fixed-Period Employment

As discussed earlier, prior to R.A. No. 8042, a uniform system of computation


of the monetary awards of illegally dismissed OFWs was in place. This uniform
system was applicable even to local workers with fixed-term employment.284[107]

The earliest rule prescribing a uniform system of computation was actually


Article 299 of the Code of Commerce (1888),285[108] to wit:

Article 299. If the contracts between the merchants and their


shop clerks and employees should have been made of a fixed
period, none of the contracting parties, without the consent of the
other, may withdraw from the fulfillment of said contract until the
termination of the period agreed upon.

Persons violating this clause shall be subject to indemnify the loss and
damage suffered, with the exception of the provisions contained in the
following articles.

284

285

In Reyes v. The Compaia Maritima,286[109] the Court applied the foregoing


provision to determine the liability of a shipping company for the illegal discharge of
its managers prior to the expiration of their fixed-term employment. The Court
therein held the shipping company liable for the salaries of its managers for the
remainder of their fixed-term employment.

There is a more specific rule as far as seafarers are concerned: Article 605 of
the Code of Commerce which provides:

Article 605. If the contracts of the captain and members of the crew
with the agent should be for a definite period or voyage, they cannot be
discharged until the fulfillment of their contracts, except for reasons of
insubordination in serious matters, robbery, theft, habitual drunkenness, and
damage caused to the vessel or to its cargo by malice or manifest or proven
negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,287[110]
in
which the Court held the shipping company liable for the salaries and subsistence
allowance of its illegally dismissed employees for the entire unexpired portion of
their employment contracts.

While Article 605 has remained good law up to the present,288[111] Article
299 of the Code of Commerce was replaced by Art. 1586 of the Civil Code of 1889,
to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers
hired for a certain time and for a certain work cannot leave or be
dismissed without sufficient cause, before the fulfillment of the contract.
(Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan289[112] read the disjunctive "or" in
Article 1586 as a conjunctive "and" so as to apply the provision to local workers who
are employed for a time certain although for no particular skill. This interpretation of
Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company.290[113]
286

287

288

289

290

And in both Lemoine and Palomar, the Court adopted the general principle that in
actions for wrongful discharge founded on Article 1586, local workers are entitled to
recover damages to the extent of the amount stipulated to be paid to them by the
terms of their contract. On the computation of the amount of such damages, the
Court in Aldaz v. Gay291[114] held:
The doctrine is well-established in American jurisprudence, and
nothing has been brought to our attention to the contrary under Spanish
jurisprudence, that when an employee is wrongfully discharged it is his duty
to seek other employment of the same kind in the same community, for the
purpose of reducing the damages resulting from such wrongful discharge.
However, while this is the general rule, the burden of showing that he failed
to make an effort to secure other employment of a like nature, and that other
employment of a like nature was obtainable, is upon the defendant. When
an employee is wrongfully discharged under a contract of
employment his prima facie damage is the amount which he would
be entitled to had he continued in such employment until the
termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs.
Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.) 292[115]
(Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on
fixed-term employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and
Sections 2 (Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title
VIII, Book IV.293[116] Much like Article 1586 of the Civil Code of 1889, the new
provisions of the Civil Code do not expressly provide for the remedies available to a
fixed-term worker who is illegally discharged. However, it is noted that in Mackay
Radio & Telegraph Co., Inc. v. Rich,294[117] the Court carried over the principles on
the payment of damages underlying Article 1586 of the Civil Code of 1889 and
applied the same to a case involving the illegal discharge of a local worker whose
fixed-period employment contract was entered into in 1952, when the new Civil
Code was already in effect.295[118]
More significantly, the same principles were applied to cases involving
overseas Filipino workers whose fixed-term employment contracts were illegally
terminated, such as in First Asian Trans & Shipping Agency, Inc. v. Ople,296[119]
involving seafarers who were illegally discharged. In Teknika Skills and Trade
291

292

293

294

295

296

Services, Inc. v. National Labor Relations Commission,297[120] an OFW who was


illegally dismissed prior to the expiration of her fixed-period employment contract as
a baby sitter, was awarded salaries corresponding to the unexpired portion of her
contract. The Court arrived at the same ruling in Anderson v. National Labor
Relations Commission,298[121] which involved a foreman hired in 1988 in Saudi
Arabia for a fixed term of two years, but who was illegally dismissed after only nine
months on the job -- the Court awarded him salaries corresponding to 15 months,
the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National
Labor Relations Commission,299[122] a Filipino working as a security officer in 1989
in Angola was awarded his salaries for the remaining period of his 12-month
contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v.
National Labor Relations Commission,300[123] an OFW whose 12-month contract
was illegally cut short in the second month was declared entitled to his salaries for
the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term
employment who were illegally discharged were treated alike in terms of the
computation of their money claims: they were uniformly entitled to their salaries for
the entire unexpired portions of their contracts. But with the enactment of R.A. No.
8042, specifically the adoption of the subject clause, illegally dismissed OFWs with
an unexpired portion of one year or more in their employment contract have since
been differently treated in that their money claims are subject to a 3-month cap,
whereas no such limitation is imposed on local workers with fixed-term
employment.
The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits of
fixed-term employees who are illegally discharged, it imposes a 3-month
cap on the claim of OFWs with an unexpired portion of one year or more
in their contracts, but none on the claims of other OFWs or local workers
with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected
by the Constitution, the Court now subjects the classification to a strict judicial
scrutiny, and determines whether it serves a compelling state interest through the
least restrictive means.

What constitutes compelling state interest is measured by the scale of rights


and powers arrayed in the Constitution and calibrated by history.301[124] It is akin to
297

298

299

300

301

the paramount interest of the state302[125] for which some individual liberties must
give way, such as the public interest in safeguarding health or maintaining medical
standards,303[126] or in maintaining access to information on matters of public
concern.304[127]

In the present case, the Court dug deep into the records but found no
compelling state interest that the subject clause may possibly serve.

The OSG defends the subject clause as a police power measure designed to
protect the employment of Filipino seafarers overseas x x x. By limiting the liability
to three months [sic], Filipino seafarers have better chance of getting hired by
foreign employers. The limitation also protects the interest of local placement
agencies, which otherwise may be made to shoulder millions of pesos in
termination pay.305[128]

The OSG explained further:

Often, placement agencies, their liability being solidary, shoulder the


payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges on
its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for
money are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose


welfare the government seeks to promote. The survival of legitimate
placement agencies helps [assure] the government that migrant workers are
properly deployed and are employed under decent and humane
conditions.306[129] (Emphasis supplied)

302

303

304

305

306

However, nowhere in the Comment or Memorandum does the OSG cite the
source of its perception of the state interest sought to be served by the subject
clause.

The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio
Gallego in sponsorship of House Bill No. 14314 (HB 14314), from which the law
originated;307[130] but the speech makes no reference to the underlying reason for
the adoption of the subject clause. That is only natural for none of the 29 provisions
in HB 14314 resembles the subject clause.

On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on
money claims, to wit:

Sec. 10. Money Claims. - Notwithstanding any provision of law to the


contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of the
complaint, the claim arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for overseas
employment including claims for actual, moral, exemplary and other forms of
damages.

The liability of the principal and the recruitment/placement agency or


any and all claims under this Section shall be joint and several.

Any compromise/amicable settlement or voluntary agreement on any


money claims exclusive of damages under this Section shall not be less than
fifty percent (50%) of such money claims: Provided, That any installment
payments, if applicable, to satisfy any such compromise or voluntary
settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this paragraph shall be null
and void.

Non-compliance with the mandatory period for resolutions of cases


provided under this Section shall subject the responsible officials to any or all
of the following penalties:

307

(1) The salary of any such official who fails to render his decision or
resolution within the prescribed period shall be, or caused to be,
withheld until the said official complies therewith;

(2) Suspension for not more than ninety (90) days; or

(3) Dismissal from the service with disqualification to hold any


appointive public office for five (5) years.

Provided, however, That the penalties herein provided shall be without


prejudice to any liability which any such official may have incurred under
other existing laws or rules and regulations as a consequence of violating the
provisions of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the
computation of money claims.

A rule on the computation of money claims containing the subject clause was
inserted and eventually adopted as the 5th paragraph of Section 10 of R.A. No.
8042. The Court examined the rationale of the subject clause in the transcripts of
the Bicameral Conference Committee (Conference Committee) Meetings on the
Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House
Bill No. 14314). However, the Court finds no discernible state interest, let alone a
compelling one, that is sought to be protected or advanced by the adoption of the
subject clause.

In fine, the Government has failed to discharge its burden of proving the
existence of a compelling state interest that would justify the perpetuation of the
discrimination against OFWs under the subject clause.

Assuming that, as advanced by the OSG, the purpose of the subject clause is
to protect the employment of OFWs by mitigating the solidary liability of placement
agencies, such callous and cavalier rationale will have to be rejected. There can
never be a justification for any form of government action that alleviates the burden
of one sector, but imposes the same burden on another sector, especially when the
favored sector is composed of private businesses such as placement agencies,
while the disadvantaged sector is composed of OFWs whose protection no less than
the Constitution commands. The idea that private business interest can be elevated
to the level of a compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary
liability of placement agencies vis-a-vis their foreign principals, there are
mechanisms already in place that can be employed to achieve that purpose without
infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and
Employment of Land-Based Overseas Workers, dated February 4, 2002, imposes
administrative disciplinary measures on erring foreign employers who default on
their contractual obligations to migrant workers and/or their Philippine agents.
These disciplinary measures range from temporary disqualification to preventive
suspension. The POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, dated May 23, 2003, contains similar administrative
disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive
means of aiding local placement agencies in enforcing the solidary liability of their
foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is
violative of the right of petitioner and other OFWs to equal protection.
Further, there would be certain misgivings if one is to approach the declaration
of the unconstitutionality of the subject clause from the lone perspective that the
clause directly violates state policy on labor under Section 3, 308[131] Article XIII of
the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,,309[132]
there are some which this Court has declared not judicially enforceable, Article
XIII being one,310[133] particularly Section 3 thereof, the nature of which, this Court,
in Agabon v. National Labor Relations Commission,311[134] has described to be not
self-actuating:
Thus, the constitutional mandates of protection to labor and security of
tenure may be deemed as self-executing in the sense that these are
automatically acknowledged and observed without need for any enabling
legislation. However, to declare that the constitutional provisions are enough
to guarantee the full exercise of the rights embodied therein, and the
realization of ideals therein expressed, would be impractical, if not unrealistic.
The espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to labor" and
"security of tenure", when examined in isolation, are facially unqualified, and
the broadest interpretation possible suggests a blanket shield in favor of labor
against any form of removal regardless of circumstance. This interpretation
implies an unimpeachable right to continued employment-a utopian notion,
doubtless-but still hardly within the contemplation of the framers.
308

309

310

311

Subsequent legislation is still needed to define the parameters of these


guaranteed rights to ensure the protection and promotion, not only the rights
of the labor sector, but of the employers' as well. Without specific and
pertinent legislation, judicial bodies will be at a loss, formulating their own
conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its
own, be a source of a positive enforceable right to stave off the
dismissal of an employee for just cause owing to the failure to serve proper
notice or hearing. As manifested by several framers of the 1987 Constitution,
the provisions on social justice require legislative enactments for their
enforceability.312[135] (Emphasis added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct


enforceable rights, for the violation of which the questioned clause may be declared
unconstitutional. It may unwittingly risk opening the floodgates of litigation to every
worker or union over every conceivable violation of so broad a concept as social
justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on
the working class any actual enforceable right, but merely clothes it with the
status of a sector for whom the Constitution urges protection through executive
or legislative action and judicial recognition. Its utility is best limited to being
an impetus not just for the executive and legislative departments, but for the
judiciary as well, to protect the welfare of the working class. And it was in fact
consistent with that constitutional agenda that the Court in Central Bank (now
Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng
Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno,
formulated the judicial precept that when the challenge to a statute is premised
on the perpetuation of prejudice against persons favored by the Constitution with
special protection -- such as the working class or a section thereof -- the Court
may recognize the existence of a suspect classification and subject the same to
strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny
formulated in Central Bank Employee Association exaggerate the significance of
Section 3, Article XIII is a groundless apprehension. Central Bank applied Article XIII
in conjunction with the equal protection clause. Article XIII, by itself, without the
application of the equal protection clause, has no life or force of its own as
elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject
clause violates petitioner's right to substantive due process, for it deprives him of
property, consisting of monetary benefits, without any existing valid governmental
purpose.313[136]
The argument of the Solicitor General, that the actual purpose of the subject
clause of limiting the entitlement of OFWs to their three-month salary in case of
illegal dismissal, is to give them a better chance of getting hired by foreign
employers. This is plain speculation. As earlier discussed, there is nothing in the text
312

313

of the law or the records of the deliberations leading to its enactment or the
pleadings of respondent that would indicate that there is an existing governmental
purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental
purpose; and it is for that precise reason that the clause violates not just petitioner's
right to equal protection, but also her right to substantive due process under
Section 1,314[137] Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries
for the entire unexpired period of nine months and 23 days of his employment
contract, pursuant to law and jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the
salary basis in the computation of his monetary award, because these are fixed
benefits that have been stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay.
For seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides
a Standard Employment Contract of Seafarers, in which salary is understood as the
basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime
pay is compensation for all work performed in excess of the regular eight hours, and
holiday pay is compensation for any work performed on designated rest days and
holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion
of overtime and holiday pay in the computation of petitioner's monetary award,
unless there is evidence that he performed work during those periods. As the Court
held in Centennial Transmarine, Inc. v. Dela Cruz,315[138]
However, the payment of overtime pay and leave pay should be
disallowed in light of our ruling in Cagampan v. National Labor Relations
Commission, to wit:
The rendition of overtime work and the submission of sufficient
proof that said was actually performed are conditions to be satisfied
before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the
contract provision guarantees the right to overtime pay but the
entitlement to such benefit must first be established.
In the same vein, the claim for the day's leave pay for the
unexpired portion of the contract is unwarranted since the same is
given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause or for
three months for every year of the unexpired term, whichever is less in the 5th
314

315

paragraph of Section 10 of Republic Act No. 8042 is DECLARED


UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005
Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is
AWARDED his salaries for the entire unexpired portion of his employment contract
consisting of nine months and 23 days computed at the rate of US$1,400.00 per
month.
No costs.
SO ORDERED.
The Constitution mandates "the principle of shared responsibility"
between workers and employers to promote industrial peace.
(Standard Chartered Bank Employees Union versus Hon. Nieves
Confesor, G.R. No. 114974 , 16 June 2004).
[G.R. No. 114974. June 16, 2004]
STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), petitioner, vs. The
Honorable MA. NIEVES R. CONFESOR, in her capacity as SECRETARY OF
LABOR AND EMPLOYMENT; and the STANDARD CHARTERED BANK,
respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for certiorari under Rule 65 of the Rules of Court filed by the
Standard Chartered Bank Employees Union, seeking the nullification of the
October 29, 1993 Order316[1] of then Secretary of Labor and Employment
Nieves R. Confesor and her resolutions dated December 16, 1993 and
February 10, 1994.
The Antecedents
Standard Chartered Bank (the Bank, for brevity) is a foreign banking
corporation doing business in the Philippines. The exclusive bargaining agent
of the rank and file employees of the Bank is the Standard Chartered Bank
Employees Union (the Union, for brevity).
In August of 1990, the Bank and the Union signed a five-year collective
bargaining agreement (CBA) with a provision to renegotiate the terms
thereof on the third year. Prior to the expiration of the three-year period 317[2]
but within the sixty-day freedom period, the Union initiated the negotiations.
On February 18, 1993, the Union, through its President, Eddie L. Divinagracia,
sent a letter318[3] containing its proposals319[4] covering political
provisions320[5] and thirty-four (34) economic provisions.321[6] Included
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319

320

therein was a list of the names of the members of the Unions negotiating
panel.322[7]
In a Letter dated February 24, 1993, the Bank, through its Country Manager
Peter H. Harris, took note of the Unions proposals. The Bank attached its
counter-proposal to the non-economic provisions proposed by the Union. 323[8]
The Bank posited that it would be in a better position to present its counterproposals on the economic items after the Union had presented its
justifications for the economic proposals.324[9] The Bank, likewise, listed the
members of its negotiating panel.325[10] The parties agreed to set meetings
to settle their differences on the proposed CBA.
Before the commencement of the negotiation, the Union, through
Divinagracia, suggested to the Banks Human Resource Manager and head of
the negotiating panel, Cielito Diokno, that the bank lawyers should be
excluded from the negotiating team. The Bank acceded. 326[11] Meanwhile,
Diokno suggested to Divinagracia that Jose P. Umali, Jr., the President of the
National Union of Bank Employees (NUBE), the federation to which the Union
was affiliated, be excluded from the Unions negotiating panel. 327[12]
However, Umali was retained as a member thereof.
On March 12, 1993, the parties met and set the ground rules for the
negotiation. Diokno suggested that the negotiation be kept a family affair.
The proposed non-economic provisions of the CBA were discussed first. 328[13]
Even during the final reading of the non-economic provisions on May 4, 1993,
there were still provisions on which the Union and the Bank could not agree.
Temporarily, the notation DEFERRED was placed therein. Towards the end of
the meeting, the Union manifested that the same should be changed to
DEADLOCKED to indicate that such items remained unresolved. Both parties
agreed to place the notation DEFERRED/DEADLOCKED.329[14]
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322

323

324

325

326

327

328

329

On May 18, 1993, the negotiation for economic provisions commenced. A


presentation of the basis of the Unions economic proposals was made. The
next meeting, the Bank made a similar presentation. Towards the end of the
Banks presentation, Umali requested the Bank to validate the Unions
guestimates, especially the figures for the rank and file staff. 330[15] In the
succeeding meetings, Umali chided the Bank for the insufficiency of its
counter-proposal on the provisions on salary increase, group hospitalization,
death assistance and dental benefits. He reminded the Bank, how the Union
got what it wanted in 1987, and stated that if need be, the Union would go
through the same route to get what it wanted.331[16]
Upon the Banks insistence, the parties agreed to tackle the economic
package item by item. Upon the Unions suggestion, the Bank indicated which
provisions it would accept, reject, retain and agree to discuss. 332[17] The
Bank suggested that the Union prioritize its economic proposals, considering
that many of such economic provisions remained unresolved. The Union,
however, demanded that the Bank make a revised itemized proposal.
In the succeeding meetings, the Union made the following proposals:
Wage Increase:
1st Year Reduced from 45% to 40%
2nd Year - Retain at 20%
Total = 60%
Group Hospitalization Insurance:
Maximum disability benefit reduced from P75,000.00 to P60,000.00 per
illness annually
Death Assistance:
For the employee -- Reduced from P50,000.00 to P45,000.00
For Immediate Family Member -- Reduced from P30,000.00 to P25,000.00
Dental and all others -- No change from the original demand.333[18]
In the morning of the June 15, 1993 meeting, the Union suggested that if the
Bank would not make the necessary revisions on its counter-proposal, it
would be best to seek a third party assistance. 334[19] After the break, the
Bank presented its revised counter-proposal335[20] as follows:
Wage Increase : 1st Year from P1,000 to P1,050.00
2nd Year P800.00 no change
Group Hospitalization Insurance

330

331

332

333

334

335

From: P35,000.00 per illness


To : P35,000.00 per illness per year
Death Assistance For employee
From: P20,000.00
To : P25,000.00
Dental Retainer Original offer remains the same336[21]
The Union, for its part, made the following counter-proposal:
Wage Increase: 1st Year - 40%
2nd Year - 19.5%
Group Hospitalization Insurance
From: P60,000.00 per year
To : P50,000.00 per year
Dental:
Temporary Filling/ P150.00
Tooth Extraction
Permanent Filling 200.00
Prophylaxis 250.00
Root Canal From P2,000 per tooth
To: 1,800.00 per tooth
Death Assistance:
For Employees: From P45,000.00 to P40,000.00
For Immediate Family Member: From P25,000.00 to P20,000.00.337[22]
The Unions original proposals, aside from the above-quoted, remained the
same.
Another set of counter-offer followed:
Management
Union
Wage Increase
1st Year P1,050.00
40%
2nd Year - 850.00
19.0%338[23]
Diokno stated that, in order for the Bank to make a better offer, the Union
should clearly identify what it wanted to be included in the total economic
package. Umali replied that it was impossible to do so because the Banks
counter-proposal was unacceptable. He furthered asserted that it would have
been easier to bargain if the atmosphere was the same as before, where
both panels trusted each other. Diokno requested the Union panel to refrain
from involving personalities and to instead focus on the negotiations. 339[24]
He suggested that in order to break the impasse, the Union should prioritize
the items it wanted to iron out. Divinagracia stated that the Bank should
make the first move and make a list of items it wanted to be included in the
economic package. Except for the provisions on signing bonus and uniforms,
the Union and the Bank failed to agree on the remaining economic provisions
of the CBA. The Union declared a deadlock 340[25] and filed a Notice of Strike
336

337

338

339

340

before the National Conciliation and Mediation Board (NCMB) on June 21,
1993, docketed as NCMB-NCR-NS-06-380-93.341[26]
On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP)
and Damages before the Arbitration Branch of the National Labor Relations
Commission (NLRC) in Manila, docketed as NLRC Case No. 00-06-04191-93
against the Union on June 28, 1993. The Bank alleged that the Union violated
its duty to bargain, as it did not bargain in good faith. It contended that the
Union demanded sky high economic demands, indicative of blue-sky
bargaining.342[27] Further, the Union violated its no strike- no lockout clause
by filing a notice of strike before the NCMB. Considering that the filing of
notice of strike was an illegal act, the Union officers should be dismissed.
Finally, the Bank alleged that as a consequence of the illegal act, the Bank
suffered nominal and actual damages and was forced to litigate and hire the
services of the lawyer.343[28]
On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R.
Confesor, pursuant to Article 263(g) of the Labor Code, issued an Order
assuming jurisdiction over the labor dispute at the Bank. The complaint for
ULP filed by the Bank before the NLRC was consolidated with the complaint
over which the SOLE assumed jurisdiction. After the parties submitted their
respective position papers, the SOLE issued an Order on October 29, 1993,
the dispositive portion of which is herein quoted:
WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank
Employees Union NUBE are hereby ordered to execute a collective bargaining
agreement incorporating the dispositions contained herein. The CBA shall be
retroactive to 01 April 1993 and shall remain effective for two years
thereafter, or until such time as a new CBA has superseded it. All provisions
in the expired CBA not expressly modified or not passed upon herein are
deemed retained while all new provisions which are being demanded by
either party are deemed denied, but without prejudice to such agreements
as the parties may have arrived at in the meantime.
The Banks charge for unfair labor practice which it originally filed with the
NLRC as NLRC-NCR Case No. 00-06-04191-93 but which is deemed
consolidated herein, is dismissed for lack of merit. On the other hand, the
Unions charge for unfair labor practice is similarly dismissed.
Let a copy of this order be furnished the Labor Arbiter in whose sala NLRCNCR Case No. 00-06-04191-93 is pending for his guidance and appropriate
action.344[29]
The SOLE gave the following economic awards:
1.Wage Increase:
a) To be incorporated to present salary rates:
Fourth year : 7% of basic monthly salary
Fifth year : 5% of basic monthly salary based on the 4 th year adjusted
salary

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342

343

344

b)

345

346

347

b) Additional fixed amount:


Fourth year : P600.00 per month
Fifth year : P400.00 per month
2. Group Insurance
a) Hospitalization : P45,000.00
b) Life : P130,000.00
c) Accident : P130,000.00
3. Medicine Allowance
Fourth year : P5,500.00
Fifth year : P6,000.00
4. Dental Benefits
Provision of dental retainer as proposed by the Bank, but without
diminishing existing benefits
5. Optical Allowance
Fourth year: P2,000.00
Fifth year : P2,500.00
6. Death Assistance
a) Employee : P30,000.00
b) Immediate Family Member : P5,000.00
7. Emergency Leave Five (5) days for each contingency
8. Loans
a) Car Loan : P200,000.00
Housing Loan : It cannot be denied that the costs attendant to having
ones own home have tremendously gone up. The need, therefore, to
improve on this benefit cannot be overemphasized. Thus, the
management is urged to increase the existing and allowable housing loan
that the Bank extends to its employees to an amount that will give
meaning and substance to this CBA benefit.345[30]
The SOLE dismissed the charges of ULP of both the Union and the Bank,
explaining that both parties failed to substantiate their claims. Citing
National Labor Union v. Insular-Yebana Tobacco Corporation, 346[31] the SOLE
stated that ULP charges would prosper only if shown to have directly
prejudiced the public interest.
Dissatisfied, the Union filed a motion for reconsideration with clarification,
while the Bank filed a motion for reconsideration. On December 16, 1993,
the SOLE issued a Resolution denying the motions. The Union filed a second
motion for reconsideration, which was, likewise, denied on February 10,
1994.
On March 22, 1994, the Bank and the Union signed the CBA. 347[32]
Immediately thereafter, the wage increase was effected and the signing
bonuses based on the increased wage were distributed to the employees
covered by the CBA.
The Present Petition
On April 28, 1994, the Union filed this petition for certiorari under Rule 65 of
the Rules of Procedure alleging as follows:
A.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE
UNIONS CHARGE OF UNFAIR LABOR PRACTICE IN VIEW OF THE CLEAR

EVIDENCE OF RECORD AND ADMISSIONS PROVING THE UNFAIR LABOR


PRACTICES CHARGED.348[33]
B.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON
OTHER UNFAIR LABOR PRACTICES CHARGED.349[34]
C.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE
CHARGES OF UNFAIR LABOR PRACTICES ON THE GROUND THAT NO PROOF
OF INJURY TO THE PUBLIC INTEREST WAS PRESENTED.350[35]
The Union alleges that the SOLE acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it found that the Bank did
not commit unfair labor practice when it interfered with the Unions choice of
negotiator. It argued that, Dioknos suggestion that the negotiation be limited
as a family affair was tantamount to suggesting that Federation President
Jose Umali, Jr. be excluded from the Unions negotiating panel. It further
argued that contrary to the ruling of the public respondent, damage or injury
to the public interest need not be present in order for unfair labor practice to
prosper.
The Union, likewise, pointed out that the public respondent failed to rule on
the ULP charges arising from the Banks surface bargaining. The Union
contended that the Bank merely went through the motions of collective
bargaining without the intent to reach an agreement, and made bad faith
proposals when it announced that the parties should begin from a clean
slate. It argued that the Bank opened the political provisions up for grabs,
which had the effect of diminishing or obliterating the gains that the Union
had made.
The Union also accused the Bank of refusing to disclose material and
necessary data, even after a request was made by the Union to validate its
guestimates.
In its Comment, the Bank prayed that the petition be dismissed as the Union
was estopped, considering that it signed the Collective Bargaining
Agreement (CBA) on April 22, 1994. It asserted that contrary to the Unions
allegations, it was the Union that committed ULP when negotiator Jose Umali,
Jr. hurled invectives at the Banks head negotiator, Cielito Diokno, and
demanded that she be excluded from the Banks negotiating team. Moreover,
the Union engaged in blue-sky bargaining and isolated the no strike-no
lockout clause of the existing CBA.
The Office of the Solicitor General, in representation of the public
respondent, prayed that the petition be dismissed. It asserted that the Union
failed to prove its ULP charges and that the public respondent did not commit
any grave abuse of discretion in issuing the assailed order and resolutions.
The Issues
The issues presented for resolution are the following: (a) whether or not the
Union was able to substantiate its claim of unfair labor practice against the
Bank arising from the latters alleged interference with its choice of
negotiator; surface bargaining; making bad faith non-economic proposals;
and refusal to furnish the Union with copies of the relevant data; (b) whether
or not the public respondent acted with grave abuse of discretion amounting
348

349

350

to lack or excess of jurisdiction when she issued the assailed order and
resolutions; and, (c) whether or not the petitioner is estopped from filing the
instant action.
The Courts Ruling
The petition is bereft of merit.
Interference under Article
248 (a) of the Labor Code
The petitioner asserts that the private respondent committed ULP, i.e.,
interference in the selection of the Unions negotiating panel, when Cielito
Diokno, the Banks Human Resource Manager, suggested to the Unions
President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the NUBE,
be excluded from the Unions negotiating panel. In support of its claim,
Divinagracia executed an affidavit, stating that prior to the commencement
of the negotiation, Diokno approached him and suggested the exclusion of
Umali from the Unions negotiating panel, and that during the first meeting,
Diokno stated that the negotiation be kept a family affair.
Citing the cases of U.S. Postal Service351[36] and Harley Davidson Motor Co.,
Inc., AMF,352[37] the Union claims that interference in the choice of the
Unions bargaining panel is tantamount to ULP.
In the aforecited cases, the alleged ULP was based on the employers
violation of Section 8(a)(1) and (5) of the National Labor Relations Act
(NLRA),353[38] which pertain to the interference, restraint or coercion of the
employer in the employees exercise of their rights to self-organization and to
bargain collectively through representatives of their own choosing; and the
refusal of the employer to bargain collectively with the employees
representatives. In both cases, the National Labor Relations Board held that
upon the employers refusal to engage in negotiations with the Union for
collective-bargaining contract when the Union includes a person who is not
an employee, or one who is a member or an official of other labor
organizations, such employer is engaged in unfair labor practice under
Section 8(a)(1) and (5) of the NLRA.
The Union further cited the case of Insular Life Assurance Co., Ltd.
Employees Association NATU vs. Insular Life Assurance Co., Ltd., 354[39]
wherein this Court said that the test of whether an employer has interfered
with and coerced employees in the exercise of their right to self-organization
within the meaning of subsection (a)(1) is whether the employer has
engaged in conduct which it may reasonably be said, tends to interfere with
the free exercise of employees rights under Section 3 of the Act. 355[40]
Further, it is not necessary that there be direct evidence that any employee
was in fact intimidated or coerced by statements of threats of the employer if
351

352

353

354

355

there is a reasonable inference that anti-union conduct of the employer does


have an adverse effect on self-organization and collective bargaining.356[41]
Under the International Labor Organization Convention (ILO) No. 87
FREEDOM OF ASSOCIATION AND PROTECTION OF THE RIGHT TO ORGANIZE
to which the Philippines is a signatory, workers and employers, without
distinction whatsoever, shall have the right to establish and, subject only to
the rules of the organization concerned, to job organizations of their own
choosing without previous authorization.357[42] Workers and employers
organizations shall have the right to draw up their constitutions and rules, to
elect their representatives in full freedom to organize their administration
and activities and to formulate their programs.358[43] Article 2 of ILO
Convention No. 98 pertaining to the Right to Organize and Collective
Bargaining, provides:
Article 2
1.Workers and employers organizations shall enjoy adequate protection
against any acts or interference by each other or each others agents or
members in their establishment, functioning or administration.
2. In particular, acts which are designed to promote the establishment of
workers organizations under the domination of employers or employers
organizations or to support workers organizations by financial or other
means, with the object of placing such organizations under the control of
employers or employers organizations within the meaning of this Article.
The aforcited ILO Conventions are incorporated in our Labor Code,
particularly in Article 243 thereof, which provides:
ART. 243. COVERAGE AND EMPLOYEES RIGHT TO SELF-ORGANIZATION. All
persons employed in commercial, industrial and agricultural enterprises and
in religious, charitable, medical or educational institutions whether operating
for profit or not, shall have the right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection.
and Articles 248 and 249 respecting ULP of employers and labor
organizations.
The said ILO Conventions were ratified on December 29, 1953. However,
even as early as the 1935 Constitution, 359[44] the State had already
expressly bestowed protection to labor as part of the general provisions. The
1973 Constitution,360[45] on the other hand, declared it as a policy of the
state to afford protection to labor, specifying that the workers rights to selforganization, collective bargaining, security of tenure, and just and humane
conditions of work would be assured. For its part, the 1987 Constitution,
356

357

358

359

360

aside from making it a policy to protect the rights of workers and promote
their welfare,361[46] devotes an entire section, emphasizing its mandate to
afford protection to labor, and highlights the principle of shared responsibility
between workers and employers to promote industrial peace.362[47]
Article 248(a) of the Labor Code, considers it an unfair labor practice when
an employer interferes, restrains or coerces employees in the exercise of
their right to self-organization or the right to form association. The right to
self-organization necessarily includes the right to collective bargaining.
Parenthetically, if an employer interferes in the selection of its negotiators or
coerces the Union to exclude from its panel of negotiators a representative of
the Union, and if it can be inferred that the employer adopted the said act to
yield adverse effects on the free exercise to right to self-organization or on
the right to collective bargaining of the employees, ULP under Article 248(a)
in connection with Article 243 of the Labor Code is committed.
In order to show that the employer committed ULP under the Labor Code,
substantial evidence is required to support the claim. Substantial evidence
has been defined as such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.363[48] In the case at bar, the
Union bases its claim of interference on the alleged suggestions of Diokno to
exclude Umali from the Unions negotiating panel.
The circumstances that occurred during the negotiation do not show that the
suggestion made by Diokno to Divinagracia is an anti-union conduct from
which it can be inferred that the Bank consciously adopted such act to yield
adverse effects on the free exercise of the right to self-organization and
collective bargaining of the employees, especially considering that such was
undertaken previous to the commencement of the negotiation and
simultaneously with Divinagracias suggestion that the bank lawyers be
excluded from its negotiating panel.
The records show that after the initiation of the collective bargaining process,
with the inclusion of Umali in the Unions negotiating panel, the negotiations
pushed through. The complaint was made only on August 16, 1993 after a
deadlock was declared by the Union on June 15, 1993.
It is clear that such ULP charge was merely an afterthought. The accusation
occurred after the arguments and differences over the economic provisions
became heated and the parties had become frustrated. It happened after the
parties started to involve personalities. As the public respondent noted,
passions may rise, and as a result, suggestions given under less adversarial
situations may be colored with unintended meanings. 364[49] Such is what
appears to have happened in this case.
The Duty to Bargain
Collectively
If at all, the suggestion made by Diokno to Divinagracia should be construed
as part of the normal relations and innocent communications, which are all
part of the friendly relations between the Union and Bank.
361

362

363

364

The Union alleges that the Bank violated its duty to bargain; hence,
committed ULP under Article 248(g) when it engaged in surface bargaining. It
alleged that the Bank just went through the motions of bargaining without
any intent of reaching an agreement, as evident in the Banks counterproposals. It explained that of the 34 economic provisions it made, the Bank
only made 6 economic counterproposals. Further, as borne by the minutes of
the meetings, the Bank, after indicating the economic provisions it had
rejected, accepted, retained or were open for discussion, refused to make a
list of items it agreed to include in the economic package.
Surface bargaining is defined as going through the motions of negotiating
without any legal intent to reach an agreement. 365[50] The resolution of
surface bargaining allegations never presents an easy issue. The
determination of whether a party has engaged in unlawful surface bargaining
is usually a difficult one because it involves, at bottom, a question of the
intent of the party in question, and usually such intent can only be inferred
from the totality of the challenged partys conduct both at and away from the
bargaining table.366[51] It involves the question of whether an employers
conduct demonstrates an unwillingness to bargain in good faith or is merely
hard bargaining.367[52]
The minutes of meetings from March 12, 1993 to June 15, 1993 do not show
that the Bank had any intention of violating its duty to bargain with the
Union. Records show that after the Union sent its proposal to the Bank on
February 17, 1993, the latter replied with a list of its counter-proposals on
February 24, 1993. Thereafter, meetings were set for the settlement of their
differences. The minutes of the meetings show that both the Bank and the
Union exchanged economic and non-economic proposals and counterproposals.
The Union has not been able to show that the Bank had done acts, both at
and away from the bargaining table, which tend to show that it did not want
to reach an agreement with the Union or to settle the differences between it
and the Union. Admittedly, the parties were not able to agree and reached a
deadlock. However, it is herein emphasized that the duty to bargain does not
compel either party to agree to a proposal or require the making of a
concession.368[53] Hence, the parties failure to agree did not amount to ULP
under Article 248(g) for violation of the duty to bargain.
We can hardly dispute this finding, for it finds support in the evidence. The
inference that respondents did not refuse to bargain collectively with the
complaining union because they accepted some of the demands while they
refused the others even leaving open other demands for future discussion is
correct, especially so when those demands were discussed at a meeting
called by respondents themselves precisely in view of the letter sent by the
union on April 29, 1960369[54]
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368

369

In view of the finding of lack of ULP based on Article 248(g), the accusation
that the Bank made bad faith provisions has no leg to stand on. The records
show that the Banks counter-proposals on the non-economic provisions or
political provisions did not put up for grabs the entire work of the Union and
its predecessors. As can be gleaned from the Banks counter-proposal, there
were many provisions which it proposed to be retained. The revisions on the
other provisions were made after the parties had come to an agreement. Far
from buttressing the Unions claim that the Bank made bad-faith proposals on
the non-economic provisions, all these, on the contrary, disprove such
allegations.
We, likewise, find that the Union failed to substantiate its claim that the Bank
refused to furnish the information it needed.
While the refusal to furnish requested information is in itself an unfair labor
practice, and also supports the inference of surface bargaining, 370[55] in the
case at bar, Umali, in a meeting dated May 18, 1993, requested the Bank to
validate its guestimates on the data of the rank and file. However, Umali
failed to put his request in writing as provided for in Article 242(c) of the
Labor Code:
Article 242. Rights of Legitimate Labor Organization
(c) To be furnished by the employer, upon written request, with the annual
audited financial statements, including the balance sheet and the profit and
loss statement, within thirty (30) calendar days from the date of receipt of
the request, after the union has been duly recognized by the employer or
certified as the sole and exclusive bargaining representatives of the
employees in the bargaining unit, or within sixty (60) calendar days before
the expiration of the existing collective bargaining agreement, or during the
collective negotiation;
The Union, did not, as the Labor Code requires, send a written request for the
issuance of a copy of the data about the Banks rank and file employees.
Moreover, as alleged by the Union, the fact that the Bank made use of the
aforesaid guestimates, amounts to a validation of the data it had used in its
presentation.
No Grave Abuse of Discretion
On the Part of the Public Respondent
The special civil action for certiorari may be availed of when the tribunal,
board, or officer exercising judicial or quasi-judicial functions has acted
without or in excess of jurisdiction and there is no appeal or any plain,
speedy, and adequate remedy in the ordinary course of law for the purpose
of annulling the proceeding.371[56] Grave abuse of discretion implies such
capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility which must be so patent
and gross as to amount to an invasion of positive duty or to a virtual refusal
to perform the duty enjoined or to act at all in contemplation of law. Mere
abuse of discretion is not enough.372[57]

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372

While it is true that a showing of prejudice to public interest is not a requisite


for ULP charges to prosper, it cannot be said that the public respondent
acted in capricious and whimsical exercise of judgment, equivalent to lack of
jurisdiction or excess thereof. Neither was it shown that the public
respondent exercised its power in an arbitrary and despotic manner by
reason of passion or personal hostility.
Estoppel not Applicable
In the Case at Bar
The respondent Bank argues that the petitioner is estopped from raising the
issue of ULP when it signed the new CBA.
Article 1431 of the Civil Code provides:
Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the
person relying thereon.
A person, who by his deed or conduct has induced another to act in a
particular manner, is barred from adopting an inconsistent position, attitude
or course of conduct that thereby causes loss or injury to another. 373[58]
In the case, however, the approval of the CBA and the release of signing
bonus do not necessarily mean that the Union waived its ULP claim against
the Bank during the past negotiations. After all, the conclusion of the CBA
was included in the order of the SOLE, while the signing bonus was included
in the CBA itself. Moreover, the Union twice filed a motion for reconsideration
respecting its ULP charges against the Bank before the SOLE.
The Union Did Not Engage
In Blue-Sky Bargaining
We, likewise, do not agree that the Union is guilty of ULP for engaging in
blue-sky bargaining or making exaggerated or unreasonable proposals. 374[59]
The Bank failed to show that the economic demands made by the Union were
exaggerated or unreasonable. The minutes of the meeting show that the
Union based its economic proposals on data of rank and file employees and
the prevailing economic benefits received by bank employees from other
foreign banks doing business in the Philippines and other branches of the
Bank in the Asian region.
In sum, we find that the public respondent did not act with grave abuse of
discretion amounting to lack or excess of jurisdiction when it issued the
questioned order and resolutions. While the approval of the CBA and the
release of the signing bonus did not estop the Union from pursuing its claims
of ULP against the Bank, we find that the latter did not engage in ULP. We,
likewise, hold that the Union is not guilty of ULP.
IN LIGHT OF THE FOREGOING, the October 29, 1993 Order and December
16, 1993 and February 10, 1994 Resolutions of then Secretary of Labor
Nieves R. Confesor are AFFIRMED. The Petition is hereby DISMISSED.
SO ORDERED.
Law on execution pending appeal of decisions reinstating dismissed
employee lays down a compassionate policy which, once more,
vivifies and enhances the provisions of the 1987 Constitution on
labor and the working man. (Alejandro Roquero versus PAL, G.R. No.
152329, 22 April 2003).
[G.R. No. 152329. April 22, 2003]
ALEJANDRO ROQUERO, petitioner, vs. PHILIPPINE AIRLINES, INC., respondent.
373

374

DECISION
PUNO, J.:
Brought up on this Petition for Review is the decision of the Court of Appeals
dismissing Alejandro Roquero as an employee of the respondent Philippine
Airlines, Inc.
Roquero, along with Rene Pabayo, were ground equipment mechanics of
respondent Philippine Airlines, Inc. (PAL for brevity). From the evidence on
record, it appears that Roquero and Pabayo were caught red-handed
possessing and using Methampethamine Hydrochloride or shabu in a raid
conducted by PAL security officers and NARCOM personnel.
The two alleged that they did not voluntarily indulge in the said act but were
instigated by a certain Jojie Alipato who was introduced to them by Joseph
Ocul, Manager of the Airport Maintenance Division of PAL. Pabayo alleged
that Alipato often bragged about the drugs he could smuggle inside the
company premises and invited other employees to take the prohibited drugs.
Alipato was unsuccessful, until one day, he was able to persuade Pabayo to
join him in taking the drugs. They met Roquero along the way and he agreed
to join them. Inside the company premises, they locked the door and Alipato
lost no time in preparing the drugs to be used. When they started the
procedure of taking the drugs, armed men entered the room, arrested
Roquero and Pabayo and seized the drugs and the paraphernalia used. 375[1]
Roquero and Pabayo were subjected to a physical examination where the
results showed that they were positive of drugs. They were also brought to
the security office of PAL where they executed written confessions without
the benefit of counsel.376[2]
On March 30, 1994, Roquero and Pabayo received a notice of administrative
charge377[3] for violating the PAL Code of Discipline. They were required to
answer the charges and were placed under preventive suspension.
Roquero and Pabayo, in their reply to notice of administrative charge, 378[4]
assailed their arrest and asserted that they were instigated by PAL to take
the drugs. They argued that Alipato was not really a trainee of PAL but was
placed in the premises to instigate the commission of the crime. They based
their argument on the fact that Alipato was not arrested. Moreover, Alipato
has no record of employment with PAL.
In a Memorandum dated July 14, 1994, Roquero and Pabayo were dismissed
by PAL.379[5] Thus, they filed a case for illegal dismissal.380[6]

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In the Labor Arbiters decision, the dismissal of Roquero and Pabayo was
upheld. The Labor Arbiter found both parties at fault PAL for applying means
to entice the complainants into committing the infraction and the
complainants for giving in to the temptation and eventually indulging in the
prohibited activity. Nonetheless, the Labor Arbiter awarded separation pay
and attorneys fees to the complainants.381[7]
While the case was on appeal with the National Labor Relations Commission
(NLRC), the complainants were acquitted by the Regional Trial Court (RTC)
Branch 114, Pasay City, in the criminal case which charged them with
conspiracy for possession and use of a regulated drug in violation of Section
16, Article III of Republic Act 6425, on the ground of instigation.
The NLRC ruled in favor of complainants as it likewise found PAL guilty of
instigation. It ordered reinstatement to their former positions but without
backwages.382[8] Complainants did not appeal from the decision but filed a
motion for a writ of execution of the order of reinstatement. The Labor
Arbiter granted the motion but PAL refused to execute the said order on the
ground that they have filed a Petition for Review before this Court. 383[9] In
accordance with the case of St. Martin Funeral Home vs. NLRC and
Bienvenido Aricayos,384[10] PALs petition was referred to the Court of
Appeals.385[11]
During the pendency of the case with the Court of Appeals, PAL and Pabayo
filed a Motion to Withdraw/Dismiss the case with respect to Pabayo, after
they voluntarily entered into a compromise agreement.386[12] The motion
was granted in a Resolution promulgated by the Former Thirteenth Division
of the Court of Appeals on January 29, 2002.387[13]
The Court of Appeals later reversed the decision of the NLRC and reinstated
the decision of the Labor Arbiter insofar as it upheld the dismissal of
Roquero. However, it denied the award of separation pay and attorneys fees
to Roquero on the ground that one who has been validly dismissed is not
entitled to those benefits.388[14]
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388

The motion for reconsideration by Roquero was denied. In this Petition for
Review on Certiorari under Rule 45, he raises the following issues:
1.Whether or not the instigated employee shall be solely responsible for an action
arising from the instigation perpetrated by the employer;
2. Can the executory nature of the decision, more so the reinstatement aspect
of a labor tribunals order be halted by a petition having been filed in higher
courts without any restraining order or preliminary injunction having been
ordered in the meantime?
3. Would the employer who refused to reinstate an employee despite a writ
duly issued be held liable to pay the salary of the subject employee from the
time that he was ordered reinstated up to the time that the reversed decision
was handed down?389[15]
I
There is no question that petitioner Roquero is guilty of serious misconduct
for possessing and using shabu. He violated Chapter 2, Article VII, section 4
of the PAL Code of Discipline which states:
Any employee who, while on company premises or on duty, takes or is under
the influence of prohibited or controlled drugs, or hallucinogenic substances
or narcotics shall be dismissed.390[16]
Serious misconduct is defined as the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. 391[17]
For serious misconduct to warrant the dismissal of an employee, it (1) must
be serious; (2) must relate to the performance of the employees duty; and
(3) must show that the employee has become unfit to continue working for
the employer.392[18]
It is of public knowledge that drugs can damage the mental faculties of the
user. Roquero was tasked with the repair and maintenance of PALs airplanes.
He cannot discharge that duty if he is a drug user. His failure to do his job
can mean great loss of lives and properties. Hence, even if he was instigated
to take drugs he has no right to be reinstated to his position. He took the
drugs fully knowing that he was on duty and more so that it is prohibited by
company rules. Instigation is only a defense against criminal liability. It
cannot be used as a shield against dismissal from employment especially
when the position involves the safety of human lives.
Petitioner cannot complain he was denied procedural due process. PAL
complied with the twin-notice requirement before dismissing the petitioner.
The twin-notice rule requires (1) the notice which apprises the employee of
the particular acts or omissions for which his dismissal is being sought along
with the opportunity for the employee to air his side, and (2) the subsequent

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notice of the employers decision to dismiss him. 393[19] Both were given by
respondent PAL.
II
Article 223 (3rd paragraph) of the Labor Code,394[20] as amended by Section
12 of Republic Act No. 6715,395[21] and Section 2 of the NLRC Interim Rules
on Appeals under RA No. 6715, Amending the Labor Code, 396[22] provide that
an order of reinstatement by the Labor Arbiter is immediately executory even
pending appeal. The rationale of the law has been explained in Aris (Phil.)
Inc. vs. NLRC:397[23]
In authorizing execution pending appeal of the reinstatement aspect of a
decision of the Labor Arbiter reinstating a dismissed or separated employee,
the 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.
xxxxxx
xxx
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 nations progress and stability.
x x xx x x x x x
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.
x x xx x x x x x
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.
The order of reinstatement is immediately executory. The unjustified refusal
of the employer to reinstate a dismissed employee entitles him to payment
of his salaries effective from the time the employer failed to reinstate him
despite the issuance of a writ of execution. 398[24] Unless there is a
restraining order issued, it is ministerial upon the Labor Arbiter to implement
the order of reinstatement. In the case at bar, no restraining order was
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398

granted. Thus, it was mandatory on PAL to actually reinstate Roquero or


reinstate him in the payroll. Having failed to do so, PAL must pay Roquero the
salary he is entitled to, as if he was reinstated, from the time of the decision
of the NLRC until the finality of the decision of this Court.
We reiterate the rule that technicalities have no room in labor cases where
the Rules of Court are applied only in a suppletory manner and only to
effectuate the objectives of the Labor Code and not to defeat them. 399[25]
Hence, 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. 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.
IN VIEW WHEREOF, the dismissal of petitioner Roquero is AFFIRMED, but
respondent PAL is ordered to pay the wages to which Roquero is entitled from
the time the reinstatement order was issued until the finality of this decision.
SO ORDERED.

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