Вы находитесь на странице: 1из 73

I. GOMEZ-CASTILLO V.

COMELEC

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 187231 June 22, 2010

MINERVA GOMEZ-CASTILLO Petitioner,


vs.
COMISSION ON ELECTIONS and STRIKE B. REVILLA, Respondents.

DECISION

BERSAMIN, J.:

Petitioner Minerva Gomez-Castillo (Castillo) hereby seeks to nullify the orders dated
January 30, 2009 and March 11, 20091 issued in EAC No. A-01-2009 by the Commission
on Elections (COMELEC).

Antecedents

Castillo and respondent Strike P. Revilla ran for Municipal Mayor of Bacoor, Cavite during
the May 14, 2007 local elections. After the Municipal Board of Canvassers proclaimed
Revilla as the elected Municipal Mayor of Bacoor, Cavite, Castillo filed an Election
Protest Ad Cautelam2 in the Regional Trial Court (RTC) in Bacoor, Cavite, which was
eventually raffled to Branch 19.

Through his Answer, Revilla sought the dismissal of the election protest, alleging that it
was filed in the wrong Branch of the RTC. He pointed out that Supreme Court
Administrative Order (SCAO) No. 54-2007 designated Branch 22 of the RTC in Imus,
Cavite and Branch 88 of the RTC in Cavite City to hear, try and decide election contests
involving municipal officials in Cavite; and that contrary to SCAO No. 54-2007, Castillo
filed his protest in the RTC in Bacoor, Cavite, which was not the proper court.

On November 21, 2008, Branch 19 dismissed Castillo’s election protest for being violative
of SCAO No. 54-2007.

On December 23, 2008, Castillo presented a notice of appeal.3 Thereupon, the RTC
ordered that the complete records of the protest be forwarded to the Election Contests
Adjudication Department (ECAD) of the COMELEC.4 1avvphi1

The First Division of the COMELEC dismissed the appeal for being brought beyond the
five-day reglementary period, noting that although Castillo had received the November 21,
2008 order of the RTC on December 15 , 2008, she filed her notice of appeal on
December 23, 2008, a day too late to appeal, to wit:
Pursuant to Section 3, Rule 22 of the COMELEC Rules of Procedure which requires the
appellant to file her notice of appeal "within five (5) days after promulgation of the decision
of the court xxx" and considering further that jurisprudence holds that perfection of an
appeal in the manner and within the period laid down by law is not only mandatory but
JURISDICTIONAL, this Commission, First Division, RESOLVES to DISMISS the instant
appeal for appellant's failure to file her Notice of Appeal within the five (5) day
reglementary period.

SO ORDERED.5

Castillo moved for the reconsideration of the dismissal of her appeal, but the COMELEC
denied the motion because she did not pay the motion fees required under Sec. 7(f), Rule
40 of the COMELEC Rules of Procedure, as amended by COMELEC Resolution No.
02-0130, viz:

The "Motion for Reconsideration" filed by protestant-appellant Minerva G. Castillo, thru


registered mail on 13 February 2009 and received by this Commission on 4 March 2009,
seeking reconsideration of the Commission's (First Division) Order dated 30 January 2009,
is hereby DENIED for failure of the movant to pay the necessary motion fees under Sec.
7(f), Rule 40 of the Comelec Rules of Procedure6 as amended by Comelec Resolution no.
02-0130.7 1avvphi1

Castillo has brought the present recourse, contending that the COMELEC’s orders
dismissing her appeal and denying her motion for reconsideration were issued with grave
abuse of discretion amounting to lack or excess of jurisdiction.

Parties’ Arguments

Castillo insists that her notice of appeal was seasonably filed; otherwise, the RTC would
not have given due course to his appeal; that Section 3, Rule 22 of the COMELEC Rules
of Procedure, cited in the assailed order dated January 30, 2009, did not apply to her case,
because Section 2 of Rule I of the COMELEC Rules of Procedure provides that:

Sec. 2. Applicability.- These rules, except Part VI, shall apply to all actions and
proceedings brought before the Commission. Part VI shall apply to election contests
and Quo Warranto cases cognizable by courts of general jurisdiction.

that the COMELEC Rules of Procedure applied only to actions and proceedings brought
before the COMELEC, not to actions or proceedings originating in courts of general
jurisdiction; that even assuming that the appeal was belatedly filed, the rules on election
contests should be liberally construed to the end that mere technical objections would not
defeat the will of the people in the choice of public officers; that the Court relaxed on
numerous occasions the application of the rules in order to give due course to belated
appeals upon strong and compelling reasons; that an electoral contest like hers was
imbued with public interest, because it involved the paramount need to clarify the real
choice of the electorate; that Section 4 of Rule I of the COMELEC Rules of Procedure
even allows the COMELEC to suspend its own rules of procedure in order to obtain a
speedy disposition of all matters pending before the COMELEC; and that the COMELEC
should not have dismissed her motion for reconsideration for her mere failure to pay the
corresponding filing fee, but should have considered the soundness of her argument to
the effect that SCAO No. 54-2007 continued to vest jurisdiction to try and decide election
contest involving elective municipal officials in the RTC as a whole, rendering the
designation of the RTC branches to handle election protests akin to a designation of
venue.

Castillo further insists that Section 12 of Rule 2 of the COMELEC Rules of Procedure
provides that assignment of cases to the specially designated courts should be done
exclusively by raffle conducted by the executive judge or by the judges designated by the
Supreme Court; and that her protest was thus duly raffled to the RTC in Bacoor, Cavite,
considering that SCAO 54-2007 should be construed as a permissive rule that cannot
supersede the general rule that jurisdiction over election contests is vested in the RTC.

In his comment,8 Revilla submits that the COMELEC correctly dismissed Castillo’s appeal
for being filed beyond the five-day reglementary period prescribed in Section 3 of Rule 22
of the COMELEC Rules of Procedure, thus:

Section 3. Notice of Appeal. - Within five (5) days after promulgation of the decision of the
court, the aggrieved party may filed with said court a notice of appeal, and serve a copy
thereof upon the attorney of record of the adverse party.

that A.M. No. 07-4-15-SC, otherwise known as The Rules of Procedure in Election
Contests Involving Elective Municipal and Barangay Officials, clearly and categorically
directed:

Section 8. Appeal. - An aggrieved party may appeal the decision to the commission on
Elections, within five days after promulgation, by filing a notice of appeal with the court
that rendered the decision, with copy served on the adverse counsel or party if not
represented by counsel.

that the period for filing an appeal is not a mere technicality of law or procedure and the
right to appeal is merely a statutory privilege that may be exercised only in the manner
prescribed by the law; that the notice of appeal, even on the assumption that it was filed
on time, still remained futile due to the petitioner’s failure to pay the corresponding fee for
the motion for reconsideration; that the failure to pay the filing fee rendered the motion for
reconsideration a mere scrap of paper, because it prevented the COMELEC from
acquiring jurisdiction over the protest; and that the COMELEC could not be faulted for
applying its procedural rules to achieve a just and expeditious determination of every
proceeding brought before it.

Issues

Does Section 13 of Rule 2 of A.M. No. 07-4-15-SC designate the RTC Branch that has
jurisdiction over an election contest, or does it merely designate the proper venue for
filing?

In case the RTC was incorrect, is the error enough to warrant the reversal of its order of
dismissal despite its having attained finality?

Ruling

The petition has no merit.

A
Error of Petitioner in filing the protest in RTC in Bacoor, not jurisdictional
It is well-settled that jurisdiction is conferred by law. As such, jurisdiction cannot be fixed
by the will of the parties; nor be acquired through waiver nor enlarged by the omission of
the parties; nor conferred by any acquiescence of the court. The allocation of jurisdiction
is vested in Congress, and cannot be delegated to another office or agency of the
Government.

The Rules of Court does not define jurisdictional boundaries of the courts. In promulgating
the Rules of Court, the Supreme Court is circumscribed by the zone properly denominated
as the promulgation of rules concerning pleading, practice, and procedure in all
courts;9 consequently, the Rules of Court can only determine the means, ways or manner
in which said jurisdiction, as fixed by the Constitution and acts of Congress, shall be
exercised. The Rules of Court yields to the substantive law in determining jurisdiction.10

The jurisdiction over election contests involving elective municipal officials has been
vested in the RTC by Section 251, Batas Pambansa Blg. 881 (Omnibus Election
Code).11 On the other hand, A.M. No. 07-4-15-SC, by specifying the proper venue where
such cases may be filed and heard, only spelled out the manner by which an RTC with
jurisdiction exercises such jurisdiction. Like other rules on venue, A.M. No. 07-4-15-SC
was designed to ensure a just and orderly administration of justice,12 and is permissive,
because it was enacted to ensure the exclusive and speedy disposition of election
protests and petitions for quo warranto involving elective municipal officials.13

Castillo’s filing her protest in the RTC in Bacoor, Cavite amounted only to a wrong choice
of venue. Hence, the dismissal of the protest by Branch 19 constituted plain error,
considering that her wrong choice did not affect the jurisdiction of the RTC. What Branch
19 should have done under the circumstances was to transfer the protest to Branch 22 of
the RTC in Imus, Cavite, which was the proper venue. Such transfer was proper, whether
she as the protestant sought it or not, given that the determination of the will of the
electorate of Bacoor, Cavite according to the process set forth by law was of the highest
concern of our institutions, particularly of the courts.

B
Castillo’s tardy appeal should be dismissed

Section 8 of A.M. No. 07-4-15-SC provides that:

Section 8. Appeal. - An aggrieved party may appeal the decision to the Commission on
Elections within five days after promulgation by filing a notice of appeal with the court that
rendered the decision with copy served on the adverse counsel or party if not represented
by counsel.

Although Castillo had received the November 21, 2008 order of the RTC on December 15,
2008, she filed her notice of appeal only on December 23, 2008, or eight days after her
receipt of the decision. Her appeal was properly dismissed for being too late under the
aforequoted rule of the COMELEC.

Castillo now insists that her appeal should not be dismissed, because she claims that the
five-day reglementary period was a mere technicality, implying that such period was but a
trivial guideline to be ignored or brushed aside at will.
Castillo’s insistence is unacceptable. The period of appeal and the perfection of appeal
are not mere technicalities to be so lightly regarded, for they are essential to the finality of
judgments, a notion underlying the

stability of our judicial system.14 A greater reason to adhere to this notion exists herein, for
the short period of five days as the period to appeal recognizes the essentiality of time in
election protests, in order that the will of the electorate is ascertained as soon as possible
so that the winning candidate is not deprived of the right to assume office, and so that any
doubt that can cloud the incumbency of the truly deserving winning candidate is quickly
removed.

Contrary to Castillo’s posture, we cannot also presume the timeliness of her appeal from
the fact that the RTC gave due course to her appeal by its elevating the protest to the
COMELEC. The presumption of timeliness would not arise if her appeal was actually
tardy.

It is not trite to observe, finally, that Castillo’s tardy appeal resulted in the finality of the
RTC’s dismissal even before January 30, 2002. This result provides an additional reason
to warrant the assailed actions of the COMELEC in dismissing her appeal. Accordingly,
the Court finds that the COMELEC’s assailed actions were appropriate and lawful, not
tainted by either arbitrariness or whimsicality,

WHEREFORE, the petition is dismissed for lack of merit.

SO ORDERED.

II. DBM V. KOLONWELL TRADING

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 175608 June 8, 2007

DEPARTMENT of BUDGET and MANAGEMENT PROCUREMENT SERVICE (DBM-PS)


and the Inter-Agency Bids and Awards Committee (IABAC), petitioners,
vs.
KOLONWEL TRADING, respondent.

x --------------------------------------------------x

G.R. No. 175616 June 8, 2007

VIBAL PUBLISHING HOUSE, INC., LG & M CORPORATION and SD PUBLICATIONS,


INC., petitioners,
vs.
KOLONWEL TRADING, respondent.
x --------------------------------------------------x

G.R. No. 175659 June 8, 2007

DEPARTMENT OF EDUCATION, petitioner,


vs.
KOLONWEL TRADING, respondent.

DECISION

GARCIA, J.:

Before the Court are these consolidated three (3) petitions for review under Rule 45 of the
Rules of Court, with a prayer for a temporary restraining order, to nullify and set aside
the Order1 dated December 4, 2006 of the Manila Regional Trial Court (RTC), Branch 18,
in SP Civil Case No. 06-116010, a special civil action for certiorari and prohibition thereat
commenced by herein respondent Kolonwel Trading (Kolonwel for short) against the
Department of Budget and Management Procurement Service (DBM-PS), et al.

At the core of the controversy are the bidding and the eventual contract awards for the
supply and delivery of some 17.5 million copies of Makabayan (social studies) textbooks
and teachers manuals, a project of the Department of Education (DepEd).

The factual antecedents:

In the middle of 2005, the DepEd requested the services of the DBM-PS to undertake the
aforementioned procurement project which is to be jointly funded by the World Bank (WB),
through the Second Social Expenditure Management Program (SEMP2) of the Philippines
(RP) – International Bank for Reconstruction and Development (IBRD) Loan Agreement
No. 7118-PH2 (Loan No. 7118-PH, hereinafter) dated September 12, 2002; and the Asian
Development Bank (ADB), through SEDIP Loan No. 1654-PHI. Earlier, the Executive
Director of the Government Procurement Policy Board (GPPB), in reply to a DepEd query,
stated that "procurement[s] for MAKABAYAN …textbooks where funds therefore (sic) are
sourced from World Bank Loan shall be governed by the applicable procurement
guidelines of the foreign lending institution. The 2005 Call for Submission of Textbooks
and Teacher’s Manuals shall be viewed vis-à-vis relevant World Bank guidelines."3

On October 27, 2005, the DBM-PS Inter-Agency Bids and Awards Committee (IABAC)
called for a bidding for the supply of the Makabayan textbooks and manuals, divided into
three (3) lots, to wit: Lot 1 for Sibika Grades 1-3; Lot 2 for HeKaSi Grades 4-6 and Lot 3 for
Araling Panlipunan Years I-IV. Of the entities, foreign and local, which responded and
procured the Bidding Documents,4 only eleven (11) bidders submitted, either as principal
or in joint venture arrangement, proposals for the different lots. Among them were Watana
Phanit Printing & Publishing Co., Ltd., of Thailand (Watana, for short), petitioner Vibal
Publishing House, Inc., (Vibal, hereinafter), Daewoo International Corporation of South
Korea (Daewoo, for brevity) and respondent Kolonwel. Kolonwel’s tender appeared to
cover all three (3) lots.5

Following the bid and the book content/body evaluation process, the IABAC, via
Resolution (Res.) No. 001-20066dated March 9, 2006, resolved "to recommend to the [WB]
and the [ADB] failure of bids for all lots in view of the abovementioned disqualifications,
non-compliance and reservations of [DepEd]." Issues of "Conflict of interest" with respect
to Watana and Vibal, "failure in cover stock testing" for Kolonwel and DepEd’s
"reservation" were among the disqualifying reasons stated in the resolution.

On March 15, 2006, the IABAC submitted to WB for its review and information Res. No.
001-2006. Appended to the covering letter was a document entitled "Bid Evaluation
Report and Recommendation for Award of Contract."7

The following events, as recited in the assailed Manila RTC order and as borne out by the
records, then transpired:

1. In a letter8 dated April 24, 2006 to the DepEd and the DBM-PS IABAC Chairman, the
WB, through its Regional Senior Economist, Ms. Rekha Menon, disagreed, for stated
reasons, with the IABAC’s finding of conflict of interest on the part of Vibal and Watana
and the rejection of their bids. Ms. Menon, however, upheld the disqualification of all the
other bidders. She thus asked the IABAC to review its evaluation and to provide the WB
with the revised Bid Evaluation Report (BER), taking into account the December 31, 2006
RP-IBRD Loan closing date.

2. On May 11, 2006, the IABAC informed Kolonwel of its or its bid’s failure to post qualify
and of the grounds for the failure.9

In its reply-letter of May 18, 2006,10 Kolonwel raised several issues and requested that its
disqualification be reconsidered and set aside. In reaction, IABAC apprised WB of
Kolonwel’s concerns stated in its letter-reply.

3) Subsequently, the IABAC, agreeing with WB’s position articulated in Ms. Menon,
issued Res. No. 001-2006-A effectively recommending to WB the contract award to Vibal
of Sibika 1 & 3 and HekaSi 5; to Watana of Sibika 2 and HeKaSi 4 & 5 and to Daewoo of
Sibika 3. Upon review, WB offered "no objection" to the recommended award.11

4) The issuance of notices of award and the execution on September 12, 2006 of the
corresponding Purchaser-Supplier contracts followed.12

5. On June 23, 2006, the DBM-PS IABAC chairman informed Kolonwel of the denial of its
request for reconsideration and of the WB’s concurrence with the denial.13 The IABAC
denied, on September 8, 2006, a second request for reconsideration of Kolonwel14 after
WB found the reasons therefor, as detailed in PS IABAC Res. No. 001-2006-B15 dated
July 18, 2006, unmeritorious, particularly on the aspect of cover stock testing.

Such was the state of things when on, October 12, 2006, Kolonwel filed with the RTC of
Manila a special civil action for certiorari and prohibition with a prayer for a temporary
restraining order (TRO) and/or writ of preliminary injunction. Docketed as SP Civil Case
No. 06-116010, and raffled to Branch 18 of the court,16 the petition sought to nullify IABAC
Res. Nos. 001-2006 and 001-2006-A and to set aside the contract awards in favor of Vibal
and Watana. In support of its TRO application, Kolonwel alleged, among other things, that
the supply-awardees were rushing with the implementation of the void supply contracts to
beat the loan closing-date deadline.

A week after, the Manila RTC scheduled - and eventually conducted - a summary hearing
on the TRO application. In an order17 of October 31, 2006, as amended in another
order18 dated November 20, 2006, the court granted a 20-day TRO enjoining the IABAC,
et al, starting November 6, 2006, from proceeding with the subject September 12, 2006
purchase- supply contracts. In the original order, the court set the preliminary conference
and hearing for the applied preliminary injunction on November 7, and 8, 2006,
respectively.

In the meantime, Vibal filed an urgent motion to dismiss19 Kolonwel’s petition on several
grounds, among them want of jurisdiction and lack of cause of action, inter alia alleging
that the latter had pursued judicial relief without first complying with the protest procedure
prescribed by Republic Act (R.A.) No. 9184, otherwise known as the "Government
Procurement Reform Act." The DepEd later followed with its own motion to dismiss, partly
based on the same protest provision. As records show, the trial court did not conduct a
hearing on either dismissal motions, albeit it heard the parties on their opposing claims
respecting the propriety of issuing a writ of preliminary injunction.

On December 4, 2006, the Manila RTC issued its assailed Order 20 finding for Kolonwel,
as petitioner a quo, disposing as follows:

WHEREFORE, the court grants the petition for certiorari and prohibition. The IABAC
Resolution No. 001-2006-A dated May 30, 2006 is annulled and set aside. IABAC
Resolution No. 001-2006 is declared validly and regularly issued in the absence of a
showing of grave abuse of discretion or excess of jurisdiction. All subsequent actions of
the respondents resulting from the issuance of IABAC Resolution No. 001-2006-A are
consequently nullified and set aside. This court grants a final injunction pursuant to Sec. 9
of Rule 58 of the Rules of Court as amended, restraining respondents Department of
Education and Culture (sic), [DBM-PS], [IABAC], Vibal Publishing House, Inc., LG & M
Corporation and SD Publications from the commission or continuance of acts, contracts or
transactions proceeding from the issuance of IABAC Resolution No. 001-2006-A.

SO ORDERED. (Emphasis and words in brackets supplied)

Hence, these three (3) petitions which the Court, per its Resolution21 of January 16, 2007,
ordered consolidated. Earlier, the Court issued, in G. R. No. 175616, a TRO22 enjoining
the presiding judge23 of the RTC of Manila, Branch 18, from proceeding with SP Civil Case
No. 06-116010 or implementing its assailed order.

Petitioners urge the annulment of the assailed RTC Order dated December 4, 2006, on
jurisdictional ground, among others. It is their parallel posture that the Manila RTC erred in
assuming jurisdiction over the case despite respondent Kolonwel’s failure to observe the
protest mechanism provided under Sec. 55 in relation to Secs. 57 and 58 of R.A. No. 9184,
respectively reading as follows:

Sec. 55. Protest on Decision of the BAC.- Decisions of the BAC [Bids and Awards
Committee] in all stages of procurement may be protested to the head of the procuring
entity…. Decisions of the BAC may be protested by filing a verified position paper and
paying a non-refundable protest fee. The amount of the protest fee and the periods during
which the protest may be filed and resolved shall be specific in the IRR.

Sec. 57. Non-interruption of the Bidding Process. In no case shall any process taken from
any decision treated in this Article stay or delay the bidding process. Protests must first be
resolved before any award is made.

Sec. 58. Report to Regular Courts; Certiorari.- Court action may be resorted to only after
the protests contemplated in this Article shall have been completed. Cases that are
filed in violation of the process specified in this article shall be dismissed for lack of
jurisdiction. The [RTC] shall have jurisdiction over final decisions of the head of the
procuring entity. (Emphasis and words in bracket added.)

As a counterpoint, the respondent draws attention to its having twice asked, and having
been twice spurned by, the IABAC to reconsider its disqualification, obviously agreeing
with the Manila RTC that the judicial window was already opened under the exhaustion of
available administrative remedies principle. In the same breath, however, the respondent
would argue, again following the RTC’s line, that it was prevented from filing a protest
inasmuch as the government had not issued the Implementing Rules and Regulations
(IRR) of R.A. No. 9184 to render the protest mechanism of the law operative for
foreign-funded projects.

The Court is unable to lend concurrence to the trial court’s and respondent’s positions on
the interplay of the protest and jurisdictional issues. As may be noted, the aforequoted
Section 55 of R.A. No. 9184 sets three (3) requirements that must be met by the party
desiring to protest the decision of the Bids and Awards Committee (BAC). These are: 1)
the protest must be in writing, in the form of a verified position paper; 2) the protest must
be submitted to the head of the procuring entity; and 3) the payment of a non-refundable
protest fee. The jurisdictional caveat that authorizes courts to assume or, inversely,
precludes courts from assuming, jurisdiction over suits assailing the BAC’s decisions is in
turn found in the succeeding Section 58 which provides that the courts would have
jurisdiction over such suits only if the protest procedure has already been completed.

Respondent’s letters of May 18, 200624 and June 28, 200625 in which it requested
reconsideration of its disqualification cannot plausibly be given the status of a protest in
the context of the aforequoted provisions of R.A. No. 9184. For one, neither of the
letter-request was addressed to the head of the procuring entity, in this case the DepEd
Secretary or the head of the DBM Procurement Service, as required by law. For another,
the same letters were unverified. And not to be overlooked of course is the fact that the
third protest-completing requirement, i.e., payment of protest fee, was not complied with.

Given the above perspective, it cannot really be said that the respondent availed itself of
the protest procedure prescribed under Section 55 of R.A. No. 9184 before going to the
RTC of Manila via a petition for certiorari. Stated a bit differently, respondent sought
judicial intervention even before duly completing the protest process. Hence, its filing
of SP Civil Case No. 06-116010 was precipitate. Or, as the law itself would put it, cases
that are filed in violation of the protest process "shall be dismissed for lack of jurisdiction."

Considering that the respondent’s petition in RTC Manila was actually filed in violation of
the protest process set forth in Section 55 of R.A. No. 9184, that court could not have
lawfully acquired jurisdiction over the subject matter of this case. In fact, Section 58, supra,
of R.A. No. 9184 emphatically states that cases filed in violation of the protest process
therein provided "shall be dismissed for lack of jurisdiction."

It is to be stressed that the protest mechanism adverted to is a built-in administrative


remedy embodied in the law itself. It was not prescribed by an administrative agency
tasked with implementing a statute through the medium of interpretative circulars or
bulletins. Ignoring thus this administrative remedy would be to defy the law itself.

It will not avail the respondent any to argue that the absence of an IRR to make the protest
mechanism under R.A. No. 9184 become operative for foreign-funded projects was what
prevented it from complying with the protest procedure. As the last sentence of the
afore-quoted Section 55 of R.A. No. 9184 is couched, the specific office of an IRR for
foreign-funded project, vis-à-vis the matter of protest, is limited to fixing "the amount of the
protest fee and the periods during which the protest may be filed and resolved." Surely,
the absence of provisions on protest fee and reglementary period does not signify the
deferment of the implementation of the protest mechanism as a condition sine qua non to
resort to judicial relief. As applied to the present case, the respondent had to file a protest
and pursue it until its completion before going to court. There was hardly any need to wait
for the specific filing period to be prescribed by the IRR because the protest, as a matter of
necessity, has to be lodged before court action.

Neither is it necessary that the amount of protest fee be prescribed first. Respondent
could very well have proceeded with its protest without paying the required protest fee,
remitting the proper amount once the appropriate IRR fixed the protest fee.

There may perhaps be room for relaxing the prescription on protest if a bona fide attempt
to comply with legal requirements had been made. But the fact alone that the respondent
did not even submit a verified position paper by way of protest argues against such
plausibility. Significantly, none of the reconsideration-seeking letters of the respondent
advert to the protest procedure under Section 55 of R.A. No. 9184, even by way of noting
that it was at a loss as to the inoperativeness of such provision in the light of the absence
of an IRR.

In its petition before the Manila RTC, the respondent veritably admitted to not complying
with the protest requirement, albeit with the lame excuse that it was effectively barred from
complying with the required administrative remedies of protest. Neither did the respondent
then argue that it was not able to comply due to the absence of an IRR for foreign- funded
projects.

At any rate, there is, in fact a set of implementing rules and regulations, denominated as
"IRR-A," issued on July 11, 2003 by the GPPB and the Joint Congressional Oversight
Committee, Section 55.126 of which provides that prior to a resort to protest, the aggrieved
party must first file a motion for reconsideration of the decision of the BAC. It is only after
the BAC itself denies reconsideration that the protest, accompanied by a fixed protest fee,
shall be filed within the period defined in the IRR.

It may be that IRR-A specifically defines its coverage to "all fully domestically-funded
procurement activities," it being also provided that "foreign-funded procurement activities
shall be the subject of a subsequent issuance." 27However, a similarly drawn argument
involving IRR-A was set aside in Abaya v. Ebdane,28 a case involving Loan Agreement No.
PH-P204 entered into by and between the RP and the Japan Bank for International
Cooperation (JBIC) for the implementation DPWH Contract Package No. I (CP I). Wrote
the Court in Abaya:

Admittedly, IRR-A covers only fully domestically-funded procurement activities from


procurement planning up to contract implementation and that it is expressly stated that
IRR-B for foreign-funded procurement activities shall be subject of a subsequent issuance.
Nonetheless, there is no reason why the policy behind Section 77 of IRR-A cannot be
applied to foreign-funded procurement projects like the CP I project. Stated differently, the
policy on the prospective or non-retroactive application of RA 9184 with respect to
domestically-funded procurement projects cannot be any different with respect to
foreign-funded procurement projects …. It would be incongruous, even absurd, to provide
for the prospective application of RA 9184 with respect to domestically-funded
procurement projects and, on the other hand, as urged by the petitioners, apply RA 9184
retroactively with respect to foreign-funded procurement projects. To be sure, the
lawmakers could not have intended such an absurdity.

As in Abaya, there really should be no reason why the policy behind Section 55.l of IRR-A
on the procedure for protest cannot be applied, even analogously, to foreign-funded
procurement projects, such as those in this case. Indeed, there is no discernable
justification why a different procedure should obtain with respect to foreign-funded
procurement undertakings as opposed to a locally funded project, and certainly there is no
concrete foundation in R.A. 9184 to indicate that Congress intended such a variance in
the protest procedure.

The Manila RTC, in granting the petition for certiorari and prohibition, stated the
observation that there was "substantial compliance of the requirement of protest."29 Yet, it
is not even clear that respondent Kolonwel, in its dealings with the IABAC, particularly in
seeking reconsideration of its decision, was even aware of the protest requirements. What
is beyond dispute, however, is that courts are precluded by express legislative command
from entertaining protests from decisions of the BAC. What Congress contextually
intended under the premises was that not only would there be a distinct administrative
grievance mechanism to be observed in assailing decisions of the BAC, but that courts
would be without jurisdiction over actions impugning decisions of the BACs, unless, in the
meantime, the protest procedure mandated under Section 55 of R.A. No. 9184 is brought
to its logical completion.

It is Congress by law, not the courts by discretion, which defines the court’s jurisdiction not
otherwise conferred by the Constitution. Through the same medium, Congress also draws
the parameters in the exercise of the functions of administrative agencies. Section 55 of
R.A. No. 9184 could not be any clearer when it mandates the manner of protesting the
decision of bids and awards committees. Similarly, there can be no quibbling that, under
Section 58 of the same law, courts do not have jurisdiction over decisions of the BACs
unless the appropriate protest has been made and completed. The absence of the IRR
does not detract from the reality that R.A. No. 9184 requires a protest to be filed under the
form therein prescribed.

Given the above perspective, the Manila RTC had no jurisdiction over respondent
Kolonwel’s petition for certiorari and prohibition. Accordingly, it ought to have granted
herein petitioners’ motion to dismiss, but it did not. Worse, the court even added another
layer to its grievous error when it granted the respondent’s basic petition for certiorari and
prohibition itself.

Compounding the Manila RTC’s error is its having proceeded with SP Civil Case No.
06-116010 even without acquiring jurisdiction over Watana. As may be recalled, the
respondent, in its petition before the RTC, impleaded Watana as one of the defendants,
the latter having been awarded by the IABAC Sibika 2 and HeKaSi 4 &5. The records,
however, show that Watana was not served with summons. The Sheriff’s Return dated
October 18, 2006, noted that summons was not served on Watana and another defendant
at "No. 1281 G. Araneta Avenue cor. Ma. Clara Street, Quezon City, on the ground that
said companies were not holding office thereat according to Mr. Marvin V. Catacutan."

There can be no dispute that Watana is an indispensable party to the respondent’s


petition in SP Civil Case No. 06-116010, Kolonwel having therein assailed and sought to
nullify the contract-award made in its and Vibal’s favor. Indispensable parties are those
with such interest in the controversy that a final decree would necessarily affect their
rights so that courts cannot proceed without their presence.30 All of them must be included
in a suit for an action to prosper or for a final determination to be had.31 Watana, to repeat,
was never served with summons; neither did it participate in the proceedings below.
Plainly, then, the Manila RTC did not acquire jurisdiction over one of the indispensable
parties, the joinder of whom is compulsory.32

With the foregoing disquisitions, the Court finds it unnecessary to even dwell on the other
points raised in this consolidated cases. In the light, however, of the Manila RTC’s holding
that the WB Guidelines on Procurement under IBRD Loans do not in any way provided
superiority over local laws on the matter,33 the Court wishes to state the following
observation:

As may be recalled, all interested bidders were put on notice that the DepEd’s
procurement project was to be funded from the proceeds of the RP-IBRD Loan No.
7118-PH,34 Section 1, Schedule 4 of which stipulates that "Goods … shall be procured in
accordance with the provisions of Section 135 of the ‘Guidelines for Procurement under
IBRD Loans.’" Accordingly, the IABAC conducted the bidding for the supply of textbooks
and manuals based on the WB Guidelines, particularly the provisions on International
Competitive Bidding (ICB). Section 4 of R.A. No. 9184 expressly recognized this particular
process, thus:

Sec. 4. Scope and application. - This Act shall apply to the Procurement of … Goods and
Consulting Services, regardless of source of funds, whether local or foreign by all
branches and instrumentalities of government …. Any treaty or international or executive
agreement affecting the subject matter of this Act to which the Philippine government is a
signatory shall be observed. (Emphasis added.)

The question as to whether or not foreign loan agreements with international financial
institutions, such as Loan No. 7118-PH, partake of an executive or international
agreement within the purview of the Section 4 of R.A. No. 9184, has been answered by
the Court in the affirmative in Abaya, supra. Significantly, Abaya declared that the
RP-JBIC loan agreement was to be of governing application over the CP I project and that
the JBIC Procurement Guidelines, as stipulated in the loan agreement, shall primarily
govern the procurement of goods necessary to implement the main project.

Under the fundamental international law principle of pacta sunt servanda,36 which is in fact
embodied in the afore-quoted Section 4 of R.A. No. 9184, the RP, as borrower, bound
itself to perform in good faith its duties and obligation under Loan No. 7118- PH. Applying
this postulate in the concrete to this case, the IABAC was legally obliged to comply with,
or accord primacy to, the WB Guidelines on the conduct and implementation of the
bidding/procurement process in question.

WHEREFORE, the instant consolidated petitions are GRANTED and the assailed Order
dated December 4, 2006 of the Regional Trial Court of Manila in its SP Case No.
06-116010 is NULLIFIED and SET ASIDE.

No cost.

SO ORDERED.

III. COMELEC V. AGUIRRE


Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 171208 September 7, 2007

THE COMMISSION ON ELECTIONS, petitioner,


vs.
HON. THELMA CANLAS TRINIDAD-PE AGUIRRE, Presiding Judge, Regional Trial
Court, Br. 129, Caloocan City, and MA. LEONISA GENOVIA, respondents.

DECISION

CARPIO MORALES, J.:

The present petition for Certiorari under Rule 64 of the Rules of Court involves jurisdiction
over an election offense punishable under the Omnibus Election Code by "imprisonment
of not less than one year but not more than six years."

On the directive of the Commission on Elections (COMELEC) En Banc,1 its Law


Department filed an Information against respondent Ma. Leonisa Genovia, for violation of
Section 261 (z) (3) of the Omnibus Election Code which penalizes

"Any person who votes in substitution for another whether with or without the latter’s
knowledge and/or consent." (Underscoring supplied)

The accusatory portion of the Information, dated July 26, 2005, which was filed before the
Regional Trial Court (RTC) of Caloocan City where it was docketed as Criminal Case No.
C-73774, reads:

That on or about July 15, 2002 Synchronized Barangay and Sangguniang Kabataan (SK)
Elections, in the City of Caloocan, Metro Manila, Philippines, and within the jurisdiction of
this Honorable Court, the above-named accused, did, then and there, willfully and
unlawfully, cast her vote in substitution of another person by misrepresenting herself to be
Emely Genovia and voted in substitution of said Emely Genovia, a registered voter in
Precinct No. 779-A, Barangay 60, Caloocan City.2

Under Section 264 of the Omnibus Election Code, violation of any election offense is
punishable as follows:

SECTION 264. Penalties. – Any person found guilty of any election offense under
this Code shall be punished with imprisonment of not less than one year but not
more than six years and shall not be subject to probation. In addition, the guilty party
shall be sentenced to suffer disqualification to hold public office and deprivation of the
right of suffrage. If he is a foreigner, he shall be sentenced to deportation which shall be
enforced after the prison term has been served. Any political party found guilty shall be
sentenced to pay a fine of not less than ten thousand pesos, which shall be imposed upon
such party after criminal action has been instituted in which their corresponding officials
have been found guilty. x x x (Italics in the original; emphasis and underscoring supplied)
By Order of September 21, 2005,3 Branch 129 of the Caloocan RTC dismissed the case
for lack of jurisdiction, it citing Section 32(2) of Batas Pambansa (B.P.) Blg. 129 (The
Judiciary Reorganization Act of 1980) reading:

Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Criminal Cases. – Except in cases falling within the exclusive
jurisdiction of Regional Trial Courts and of the Sandiganbayan, the Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:

xxxx

(2) Exclusive original jurisdiction over all offenses punishable with imprisonment
not exceeding six (6) years irrespective of the amount of fine regardless of other
imposable accessory penalties, including the civil liability arising from such offenses or
predicated thereon, irrespective of kind, nature, or value amount thereof: Provided,
however, That in offenses involving damage to property through criminal negligence, they
shall have exclusive original jurisdiction thereof. (Italics in the original; emphasis and
underscoring supplied)

The COMELEC moved to reconsider the trial court’s dismissal order,4 inviting attention to
Section 268 of the Omnibus Election Code which reads:

SECTION 268. Jurisdiction of courts. – The regional trial court shall have the exclusive
original jurisdiction to try and decide any criminal action or proceedings for violation of this
Code, except those relating to the offense of failure to register or failure to vote which shall
be under the jurisdiction of the metropolitan or municipal trial courts. From the decision of
the courts, appeal will lie as in other criminal cases. (Underscoring supplied)

By a one sentence Order of November 15, 2005,5 the trial court denied the COMELEC’s
motion for "lack of merit."

Hence, the present petition for certiorari under Rule 64,6 the COMELEC contending that
the dismissal order is contrary to Section 268 of the Omnibus Election Code.

The COMELEC argues that under the above-quoted provision of Section 268 of the
Omnibus Election Code, all criminal cases for violation of the Code, except those relating
to failure to register or failure to vote which shall be under the exclusive jurisdiction of
inferior courts, fall under the exclusive jurisdiction of regional trial courts.7

The petition is meritorious.

From the above-quoted provision of Section 32 of BP Blg. 129, jurisdiction of first-level


courts – the metropolitan trial courts, municipal trial courts and municipal circuit trial courts
– does not cover criminal cases which, by specific provision of law, fall within the exclusive
jurisdiction of regional trial courts (and of the Sandiganbayan).8

As correctly argued by the COMELEC, Section 268 of the Omnibus Election Code
specifically provides, regional trial courts have exclusive jurisdiction to try and decide any
criminal action or proceedings for violation of the Code "except those relating to the
offense of failure to register or failure to vote."
It bears emphasis that Congress has the plenary power to define, prescribe and apportion
the jurisdictions of various courts. Hence, it may, by law, provide that a certain class of
cases should be exclusively heard and determined by a specific court. Section 268 of
Omnibus Election Code is one such and must thus be construed as an exception to BP
Blg. 129, the general law on jurisdiction of courts.9

In fine, while BP Blg. 129 lodges in municipal trial courts, metropolitan trial courts and
municipal circuit trial courts jurisdiction over criminal cases carrying a penalty of
imprisonment of less than one year but not exceeding six years, following Section 268 of
the Omnibus Election Code, any criminal action or proceeding which bears the same
penalty, with the exception of the therein mentioned two cases, falls within the exclusive
original jurisdiction of regional trial courts.

WHEREFORE, the petition is GRANTED. The challenged orders of respondent Judge


Thelma Canlas Trinided-Pe Aguirre, in Criminal Case No. C-73774 are SET ASIDE.
Respondent judge is DIRECTED to reinstate the case to the court docket and to conduct
appropriate proceedings thereon with reasonable dispatch.

SO ORDERED.

IV. SEVILLENO V. COMELEC

V. COSCO V. KEMPER

Republic of the Philippines


Supreme Court

Baguio City

THIRD DIVISION

COSCO PHILIPPINES SHIPPING, INC., G.R. No. 179488


Petitioner,
Present:

VELASCO, JR., J., Chairperson,


- versus - PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.
KEMPER INSURANCE COMPANY,
Respondent. Promulgated:

April 23, 2012


x--------------------------------------------------x

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision[1] and Resolution[2] of the Court of Appeals (CA), in
CA-G.R. CV No. 75895, entitled Kemper Insurance Company v. Cosco Philippines
Shipping, Inc. The CA Decision reversed and set aside the Order dated March 22, 2002 of
the Regional Trial Court (RTC), Branch 8, Manila, which granted the Motion to Dismiss
filed by petitioner Cosco Philippines Shipping, Inc., and ordered that the case be
remanded to the trial court for further proceedings.
The antecedents are as follows:

Respondent Kemper Insurance Company is a foreign insurance company based in Illinois,


United States of America (USA) with no license to engage in business in the Philippines,
as it is not doing business in the Philippines, except in isolated transactions; while
petitioner is a domestic shipping company organized in accordance with Philippine laws.

In 1998, respondent insured the shipment of imported frozen boneless beef (owned by
Genosi, Inc.), which was loaded at a port in Brisbane, Australia, for shipment to Genosi,
Inc. (the importer-consignee) in the Philippines. However, upon arrival at the Manila port,
a portion of the shipment was rejected by Genosi, Inc. by reason of spoilage arising from
the alleged temperature fluctuations of petitioner's reefer containers.

Thus, Genosi, Inc. filed a claim against both petitioner shipping company and respondent
Kemper Insurance Company. The claim was referred to McLarens Chartered for
investigation, evaluation, and adjustment of the claim. After processing the claim
documents, McLarens Chartered recommended a settlement of the claim in the amount of
$64,492.58, which Genosi, Inc. (the consignee-insured) accepted.
Thereafter, respondent paid the claim of Genosi, Inc. (the insured) in the amount of
$64,492.58. Consequently, Genosi, Inc., through its General Manager, Avelino S.
Mangahas, Jr., executed a Loss and Subrogation Receipt[3] dated September 22, 1999,
stating that Genosi, Inc. received from respondent the amount of $64,492.58 as the full
and final satisfaction compromise, and discharges respondent of all claims for losses and
expenses sustained by the property insured, under various policy numbers, due to
spoilage brought about by machinery breakdown which occurred on October 25,
November 7 and 10, and December 5, 14, and 18, 1998; and, in consideration thereof,
subrogates respondent to the claims of Genosi, Inc. to the extent of the said
amount. Respondent then made demands upon petitioner, but the latter failed and
refused to pay the said amount.
Hence, on October 28, 1999, respondent filed a Complaint for Insurance Loss and
Damages[4] against petitioner before the trial court, docketed as Civil Case No. 99-95561,
entitled Kemper Insurance Company v. Cosco Philippines Shipping, Inc. Respondent
alleged that despite repeated demands to pay and settle the total amount
of US$64,492.58, representing the value of the loss, petitioner failed and refused to pay
the same, thereby causing damage and prejudice to respondent in the amount of
US$64,492.58; that the loss and damage it sustained was due to the fault and negligence
of petitioner, specifically, the fluctuations in the temperature of the reefer container
beyond the required setting which was caused by the breakdown in the electronics
controller assembly; that due to the unjustified failure and refusal to pay its just and valid
claims, petitioner should be held liable to pay interest thereon at the legal rate from the
date of demand; and that due to the unjustified refusal of the petitioner to pay the said
amount, it was compelled to engage the services of a counsel whom it agreed to pay 25%
of the whole amount due as attorney's fees. Respondent prayed that after due hearing,
judgment be rendered in its favor and that petitioner be ordered to pay the amount of
US$64,492.58, or its equivalent in Philippine currency at the prevailing foreign exchange
rate, or a total of P2,594,513.00, with interest thereon at the legal rate from date of
demand, 25% of the whole amount due as attorney's fees, and costs.

In its Answer[5] dated November 29, 1999, petitioner insisted, among others, that
respondent had no capacity to sue since it was doing business in the Philippines without
the required license; that the complaint has prescribed and/or is barred by laches; that no
timely claim was filed; that the loss or damage sustained by the shipments, if any, was
due to causes beyond the carrier's control and was due to the inherent nature or
insufficient packing of the shipments and/or fault of the consignee or the hired stevedores
or arrastre operator or the fault of persons whose acts or omissions cannot be the basis of
liability of the carrier; and that the subject shipment was discharged under required
temperature and was complete, sealed, and in good order condition.

During the pre-trial proceedings, respondent's counsel proffered and marked its exhibits,
while petitioner's counsel manifested that he would mark his client's exhibits on the next
scheduled pre-trial. However, on November 8, 2001, petitioner filed a Motion to
Dismiss,[6] contending that the same was filed by one Atty. Rodolfo A. Lat, who failed to
show his authority to sue and sign the corresponding certification against forum
shopping. It argued that Atty. Lat's act of signing the certification against forum shopping
was a clear violation of Section 5, Rule 7 of the 1997 Rules of Court.
In its Order[7] dated March 22, 2002, the trial court granted petitioner's Motion to Dismiss
and dismissed the case without prejudice, ruling that it is mandatory that the certification
must be executed by the petitioner himself, and not by counsel. Since respondent's
counsel did not have a Special Power of Attorney (SPA) to act on its behalf, hence, the
certification against forum shopping executed by said counsel was fatally defective and
constituted a valid cause for dismissal of the complaint.

Respondent's Motion for Reconsideration[8] was denied by the trial court in an


Order[9] dated July 9, 2002.

On appeal by respondent, the CA, in its Decision[10] dated March 23, 2007, reversed and
set aside the trial court's order. The CA ruled that the required certificate of non-forum
shopping is mandatory and that the same must be signed by the plaintiff or principal party
concerned and not by counsel; and in case of corporations, the physical act of signing
may be performed in behalf of the corporate entity by specifically authorized individuals.
However, the CA pointed out that the factual circumstances of the case warranted the
liberal application of the rules and, as such, ordered the remand of the case to the trial
court for further proceedings.
Petitioner's Motion for Reconsideration[11] was later denied by the CA in the
Resolution[12] dated September 3, 2007.

Hence, petitioner elevated the case to this Court via Petition for Review
on Certiorari under Rule 45 of the Rules of Court, with the following issues:

THE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT ATTY. RODOLFO


LAT WAS PROPERLY AUTHORIZED BY THE RESPONDENT TO SIGN THE
CERTIFICATE AGAINST FORUM SHOPPING DESPITE THE UNDISPUTED FACTS
THAT:

A) THE PERSON WHO EXECUTED THE SPECIAL POWER OF ATTORNEY (SPA)


APPOINTING ATTY. LAT AS RESPONDENT'S ATTORNEY-IN-FACT WAS MERELY AN
UNDERWRITER OF THE RESPONDENT WHO HAS NOT SHOWN PROOF THAT HE
WAS AUTHORIZED BY THE BOARD OF DIRECTORS OF RESPONDENT TO DO SO.

B) THE POWERS GRANTED TO ATTY. LAT REFER TO [THE AUTHORITY TO


REPRESENT DURING THE] PRE-TRIAL [STAGE] AND DO NOT COVER THE
SPECIFIC POWER TO SIGN THE CERTIFICATE.[13]

Petitioner alleged that respondent failed to submit any board resolution or secretary's
certificate authorizing Atty. Lat to institute the complaint and sign the certificate of
non-forum shopping on its behalf. Petitioner submits that since respondent is a juridical
entity, the signatory in the complaint must show proof of his or her authority to sign on
behalf of the corporation. Further, the SPA[14] dated May 11, 2000, submitted by Atty. Lat,
which was notarized before the Consulate General of Chicago, Illinois, USA, allegedly
authorizing him to represent respondent in the pre-trial and other stages of the
proceedings was signed by one Brent Healy (respondent's underwriter), who lacks
authorization from its board of directors.
In its Comment, respondent admitted that it failed to attach in the complaint a concrete
proof of Atty. Lat's authority to execute the certificate of non-forum shopping on its behalf.
However, there was subsequent compliance as respondent submitted an authenticated
SPA empowering Atty. Lat to represent it in the pre-trial and all stages of the proceedings.
Further, it averred that petitioner is barred by laches from questioning the purported defect
in respondent's certificate of non-forum shopping.

The main issue in this case is whether Atty. Lat was properly authorized by respondent to
sign the certification against forum shopping on its behalf.

The petition is meritorious.


We have consistently held that the certification against forum shopping must be signed by
the principal parties.[15] If, for any reason, the principal party cannot sign the petition, the
one signing on his behalf must have been duly authorized.[16] With respect to a
corporation, the certification against forum shopping may be signed for and on its behalf,
by a specifically authorized lawyer who has personal knowledge of the facts required to
be disclosed in such document.[17] A corporation has no power, except those expressly
conferred on it by the Corporation Code and those that are implied or incidental to its
existence. In turn, a corporation exercises said powers through its board of directors
and/or its duly authorized officers and agents. Thus, it has been observed that the power
of a corporation to sue and be sued in any court is lodged with the board of directors that
exercises its corporate powers. In turn, physical acts of the corporation, like the signing of
documents, can be performed only by natural persons duly authorized for the purpose by
corporate by-laws or by a specific act of the board of directors.[18]
In Philippine Airlines, Inc. v. Flight Attendants and Stewards Association of the Philippines
(FASAP),[19] we ruled that only individuals vested with authority by a
valid boardresolution may sign the certificate of non-forum shopping on behalf of a
corporation. We also required proof of such authority to be presented. The petition is
subject to dismissal if a certification was submitted unaccompanied by proof of the
signatory's authority.

In the present case, since respondent is a corporation, the certification must be executed
by an officer or member of the board of directors or by one who is duly authorized by a
resolution of the board of directors; otherwise, the complaint will have to be
dismissed.[20] The lack of certification against forum shopping is generally not curable by
mere amendment of the complaint, but shall be a cause for the dismissal of the case
without prejudice.[21] The same rule applies to certifications against forum shopping
signed by a person on behalf of a corporation which are unaccompanied by proof that said
signatory is authorized to file the complaint on behalf of the corporation.[22]

There is no proof that respondent, a private corporation, authorized Atty. Lat, through a
board resolution, to sign the verification and certification against forum shopping on its
behalf. Accordingly, the certification against forum shopping appended to the complaint
is fatally defective, and warrants the dismissal of respondent's complaint for Insurance
Loss and Damages (Civil Case No. 99-95561) against petitioner.
In Republic v. Coalbrine International Philippines, Inc.,[23] the Court cited instances
wherein the lack of authority of the person making the certification of non-forum shopping
was remedied through subsequent compliance by the parties therein. Thus,

[w]hile there were instances where we have allowed the filing of a certification against
non-forum shopping by someone on behalf of a corporation without the accompanying
proof of authority at the time of its filing, we did so on the basis of a special circumstance
or compelling reason. Moreover, there was a subsequent compliance by the submission
of the proof of authority attesting to the fact that the person who signed the certification
was duly authorized.

In China Banking Corporation v. Mondragon International Philippines, Inc., the CA


dismissed the petition filed by China Bank, since the latter failed to show that its bank
manager who signed the certification against non-forum shopping was authorized to do so.
We reversed the CA and said that the case be decided on the merits despite the failure to
attach the required proof of authority, since the board resolution which was subsequently
attached recognized the pre-existing status of the bank manager as an authorized
signatory.

In Abaya Investments Corporation v. Merit Philippines, where the complaint before the
Metropolitan Trial Court of Manila was instituted by petitioner's Chairman and President,
Ofelia Abaya, who signed the verification and certification against non-forum shopping
without proof of authority to sign for the corporation, we also relaxed the rule. We did so
taking into consideration the merits of the case and to avoid a re-litigation of the issues
and further delay the administration of justice, since the case had already been decided
by the lower courts on the merits. Moreover, Abaya's authority to sign the certification was
ratified by the Board.[24]

Contrary to the CA's finding, the Court finds that the circumstances of this case do not
necessitate the relaxation of the rules. There was no proof of authority submitted, even
belatedly, to show subsequent compliance with the requirement of the law. Neither was
there a copy of the board resolution or secretary's certificate subsequently submitted to
the trial court that would attest to the fact that Atty. Lat was indeed authorized to file said
complaint and sign the verification and certification against forum shopping, nor did
respondent satisfactorily explain why it failed to comply with the rules. Thus, there exists
no cogent reason for the relaxation of the rule on this matter. Obedience to the
requirements of procedural rules is needed if we are to expect fair results therefrom, and
utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal
construction.[25]

Moreover, the SPA dated May 11, 2000, submitted by respondent allegedly authorizing
Atty. Lat to appear on behalf of the corporation, in the pre-trial and all stages of the
proceedings, signed by Brent Healy, was fatally defective and had no evidentiary value. It
failed to establish Healy's authority to act in behalf of respondent, in view of the absence
of a resolution from respondent's board of directors or secretary's certificate proving the
same. Like any other corporate act, the power of Healy to name, constitute, and appoint
Atty. Lat as respondent's attorney-in-fact, with full powers to represent respondent in the
proceedings, should have been evidenced by a board resolution or secretary's certificate.

Respondent's allegation that petitioner is estopped by laches from raising the defect in
respondent's certificate of non-forum shopping does not hold water.
In Tamondong v. Court of Appeals,[26] we held that if a complaint is filed for and in behalf
of the plaintiff who is not authorized to do so, the complaint is not deemed filed. An
unauthorized complaint does not produce any legal effect. Hence, the court
should dismiss the complaint on the ground that it has no jurisdiction over the complaint
and the plaintiff.[27] Accordingly, since Atty. Lat was not duly authorized by respondent to
file the complaint and sign the verification and certification against forum shopping, the
complaint is considered not filed and ineffectual, and, as a necessary consequence, is
dismissable due to lack of jurisdiction.

Jurisdiction is the power with which courts are invested for administering justice; that is,
for hearing and deciding cases. In order for the court to have authority to dispose of the
case on the merits, it must acquire jurisdiction over the subject matter and the
parties. Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, and
to be bound by a decision, a party should first be subjected to the
court's jurisdiction.[28] Clearly, since no valid complaint was ever filed with the RTC,
Branch 8, Manila, the same did not acquire jurisdiction over the person of respondent.

Since the court has no jurisdiction over the complaint and respondent, petitioner is not
estopped from challenging the trial court's jurisdiction, even at the pre-trial stage of the
proceedings. This is so because the issue of jurisdiction may be raised at any stage of the
proceedings, even on appeal, and is not lost by waiver or by estoppel.[29]

In Regalado v. Go,[30] the Court held that laches should be clearly present for
the Sibonghanoy[31] doctrine to apply, thus:

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence, could or should have been done
earlier, it is negligence or omission to assert a right within a reasonable length of time,
warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it.

The ruling in People v. Regalario that was based on the landmark doctrine enunciated
in Tijam v. Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather
than the rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction
only in cases in which the factual milieu is analogous to that in the cited case. In such
controversies, laches should have been clearly present; that is, lack of jurisdiction must
have been raised so belatedly as to warrant the presumption that the party entitled to
assert it had abandoned or declined to assert it.

In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion
to dismiss filed by the Surety almost 15 years after the questioned ruling had been
rendered. At several stages of the proceedings, in the court a quo as well as in the Court
of Appeals, the Surety invoked the jurisdiction of the said courts to obtain affirmative relief
and submitted its case for final adjudication on the merits. It was only when the adverse
decision was rendered by the Court of Appeals that it finally woke up to raise the question
of jurisdiction.[32]

The factual setting attendant in Sibonghanoy is not similar to that of the present case so
as to make it fall under the doctrine of estoppel by laches. Here, the trial court's
jurisdiction was questioned by the petitioner during the pre-trial stage of the proceedings,
and it cannot be said that considerable length of time had elapsed for laches to attach.
WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of
Appeals, dated March 23, 2007 and September 3, 2007, respectively, in CA-G.R. CV No.
75895 are REVERSED and SET ASIDE. The Orders of the Regional Trial Court, dated
March 22, 2002 and July 9, 2002, respectively, in Civil Case No. 99-95561,
are REINSTATED.

SO ORDERED

VI. GO V. DISTINCTION PROPERTIES DEV

Republic of the Philippines


SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 194024 April 25, 2012

PHILIP L. GO, PACIFICO Q. LIM and ANDREW Q. LIM Petitioners,


vs.
DISTINCTION PROPERTIES DEVELOPMENT AND CONSTRUCTION,
INC. Respondent.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure assailing the March 17, 2010 Decision and October 7, 2010 Resolution of
1 2

the Court of Appeals (CA) in CA-G.R. SP No. 110013 entitled "Distinction Properties
Development & Construction, Inc. v. Housing Land Use Regulatory Board (NCR), Philip L.
Go, Pacifico Q. Lim and Andrew Q. Lim."

Factual and Procedural Antecedents:


Philip L. Go, Pacifico Q. Lim and Andrew Q. Lim (petitioners) are registered individual
owners of condominium units in Phoenix Heights Condominium located at H.
Javier/Canley Road, Bo. Bagong Ilog, Pasig City, Metro Manila.

Respondent Distinction Properties Development and Construction, Inc. (DPDCI) is a


corporation existing under the laws of the Philippines with principal office at No. 1020
Soler Street, Binondo, Manila. It was incorporated as a real estate developer, engaged in
the development of condominium projects, among which was the Phoenix Heights
Condominium.

In February 1996, petitioner Pacifico Lim, one of the incorporators and the then president
of DPDCI, executed a Master Deed and Declaration of Restrictions (MDDR) of Phoenix
3

Heights Condominium, which was filed with the Registry of Deeds. As the developer,
DPDCI undertook, among others, the marketing aspect of the project, the sale of the units
and the release of flyers and brochures.

Thereafter, Phoenix Heights Condominium Corporation (PHCC) was formally organized


and incorporated. Sometime in 2000, DPDCI turned over to PHCC the ownership and
possession of the condominium units, except for the two saleable commercial
units/spaces:

1. G/F Level BAS covered by Condominium Certificate of Title (CCT) No. 21030 utilized
as the PHCC’s administration office, and

2. G/F Level 4-A covered by CCT No. PT-27396/C-136-II used as living quarters by the
building administrator.

Although used by PHCC, DPDCI was assessed association dues for these two units.

Meanwhile, in March 1999, petitioner Pacifico Lim, as president of DPDCI, filed


an Application for Alteration of Plan pertaining to the construction of 22 storage units in
4

the spaces adjunct to the parking area of the building. The application, however, was
disapproved as the proposed alteration would obstruct light and ventilation.

In August 2004, through its Board, PHCC approved a settlement offer from DPDCI for the
5

set-off of the latter’s association dues arrears with the assignment of title over CCT Nos.
21030 and PT-27396/C-136-II and their conversion into common areas. Thus, CCT Nos.
PT-43400 and PT-43399 were issued by the Registrar of Deeds of Pasig City in favor of
PHCC in lieu of the old titles. The said settlement between the two corporations likewise
included the reversion of the 22 storage spaces into common areas. With the conformity
of PHCC, DPDCI’s application for alteration (conversion of unconstructed 22 storage units
and units GF4-A and BAS from saleable to common areas) was granted by the Housing
and Land Use Regulatory Board (HLURB). 6

In August 2008, petitioners, as condominium unit-owners, filed a complaint before the


7

HLURB against DPDCI for unsound business practices and violation of the MDDR. The
case was docketed as REM- 080508-13906. They alleged that DPDCI committed
misrepresentation in their circulated flyers and brochures as to the facilities or amenities
that would be available in the condominium and failed to perform its obligation to comply
with the MDDR.
In defense, DPDCI denied that it had breached its promises and representations to the
public concerning the facilities in the condominium. It alleged that the brochure attached to
the complaint was "a mere preparatory draft" and not the official one actually distributed to
the public, and that the said brochure contained a disclaimer as to the binding effect of the
supposed offers therein. Also, DPDCI questioned the petitioners’ personality to sue as the
action was a derivative suit.

After due hearing, the HLURB rendered its decision in favor of petitioners. It held as
8

invalid the agreement entered into between DPDCI and PHCC, as to the alteration or
conversion of the subject units into common areas, which it previously approved, for the
reason that it was not approved by the majority of the members of PHCC as required
under Section 13 of the MDDR. It stated that DPDCI’s defense, that the brochure was a
mere draft, was against human experience and a convenient excuse to avoid its obligation
to provide the facility of the project. The HLURB further stated that the case was not a
derivative suit but one which involved contracts of sale of the respective units between the
complainants and DPDCI, hence, within its jurisdiction pursuant to Section 1, Presidential
Decree (P.D.) No. 957 (The Subdivision and Condominium Buyers’ Protective Decree), as
amended. The decretal portion of the HLURB decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Ordering respondent to restore/provide proper gym facilities, to restore the hallway at


the mezzanine floor.

2. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS as
illegal, and consequently, and ordering respondent to continue paying the condominium
dues for these units, with interest and surcharge.

3. Ordering the Respondent to pay the sum of Php998,190.70, plus interests and
surcharges, as condominium dues in arrears and turnover the administration office to
PHCC without any charges pursuant to the representation of the respondent in the
brochures it circulated to the public with a corresponding credit to complainants’ individual
shares as members of PHCC entitled to such refund or reimbursements.

4. Ordering the Respondent to refund to the PHCC the amount of Php1,277,500.00,


representing the cost of the deep well, with interests and surcharges with a corresponding
credit to complainants’ individual shares as members of PHCC entitled to such refund or
reimbursements.

5. Ordering the Respondent to pay the complainants moral and exemplary damages in the
amount of ₱ 10,000.00 and attorney’s fees in the amount of ₱ 10,000.00.

All other claims and counterclaims are hereby dismissed accordingly.

IT IS SO ORDERED. 9

Aggrieved, DPDCI filed with the CA its Petition for Certiorari and Prohibition dated August
10

11, 2009, on the ground that the HLURB decision was a patent nullity constituting an act
without or beyond its jurisdiction and that it had no other plain, speedy and adequate
remedy in the course of law.
On March 17, 2010, the CA rendered the assailed decision which disposed of the case in
favor of DPDCI as follows:

WHEREFORE, in view of the foregoing, the petition is GRANTED. Accordingly, the


assailed Decision of the HLURB in Case No. REM-0800508-13906 is ANNULLED and
SET ASIDE and a new one is entered DISMISSING the Complaint a quo.

IT IS SO ORDERED. 11

The CA ruled that the HLURB had no jurisdiction over the complaint filed by petitioners as
the controversy did not fall within the scope of the administrative agency’s authority under
P.D. No. 957. The HLURB not only relied heavily on the brochures which, according to the
CA, did not set out an enforceable obligation on the part of DPDCI, but also erroneously
cited Section 13 of the MDDR to support its finding of contractual violation.

The CA held that jurisdiction over PHCC, an indispensable party, was neither acquired nor
waived by estoppel. Citing Carandang v. Heirs of De Guzman, it held that, in any event,
12

the action should be dismissed because the absence of PHCC, an indispensable party,
rendered all subsequent actuations of the court void, for want of authority to act, not only
as to the absent parties but even as to those present.

Finally, the CA held that the rule on exhaustion of administrative remedies could be
relaxed. Appeal was not a speedy and adequate remedy as jurisdictional questions were
continuously raised but ignored by the HLURB. In the present case, however, "[t]he
bottom line is that the challenged decision is one that had been rendered in excess of
jurisdiction, if not with grave abuse of discretion amounting to lack or excess of
jurisdiction."
13

Petitioners filed a motion for reconsideration of the said decision. The motion, however,
14

was denied by the CA in its Resolution dated October 7, 2010.

Hence, petitioners interpose the present petition before this Court anchored on the
following

GROUNDS

(1)

THE COURT OF APPEALS ERRED IN HOLDING THAT THE HLURB HAS NO


JURISDICTION OVER THE INSTANT CASE;

(2)

THE COURT OF APPEALS ALSO ERRED IN FINDING THAT PHCC IS AN


INDISPENSABLE PARTY WHICH WARRANTED THE DISMISSAL OF THE CASE BY
REASON OF IT NOT HAVING BEEN IMPLEADED IN THE CASE;

(3)

THE COURT OF APPEALS HAS LIKEWISE ERRED IN RELAXING THE RULE ON


NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES BY DECLARING THAT THE
APPEAL MAY NOT BE A SPEEDY AND ADEQUATE REMEDY WHEN
JURISDICTIONAL QUESTIONS WERE CONTINUOUSLY RAISED BUT IGNORED BY
THE HLURB; and

(4)

THAT FINALLY, THE COURT A QUO ALSO ERRED IN NOT GIVING DUE RESPECT
OR EVEN FINALITY TO THE FINDINGS OF THE HLURB. 15

Petitioners contend that the HLURB has jurisdiction over the subject matter of this case.
Their complaint with the HLURB clearly alleged and demanded specific performance upon
DPDCI of the latter’s contractual obligation under their individual contracts to provide a
back-up water system as part of the amenities provided for in the brochure, together with
an administration office, proper gym facilities, restoration of a hallway, among others.
They point out that the violation by DPDCI of its obligations enumerated in the said
complaint squarely put their case within the ambit of Section 1, P.D. No. 957, as amended,
enumerating the cases that are within the exclusive jurisdiction of the HLURB. Likewise,
petitioners argue that the case was not a derivative suit as they were not suing for and in
behalf of PHCC. They were suing, in their individual capacities as condominium unit
buyers, their developer for breach of contract. In support of their view that PHCC was not
an indispensable party, petitioners even quoted the dispositive portion of the HLURB
decision to show that complete relief between or among the existing parties may be
obtained without the presence of PHCC as a party to this case. Petitioners further argue
that DPDCI’s petition before the CA should have been dismissed outright for failure to
comply with Section 1, Rule XVI of the 2004 Rules of Procedure of the HLURB providing
for an appeal to the Board of Commissioners by a party aggrieved by a decision of a
regional officer.

DPDCI, in its Comment, strongly objects to the arguments of petitioners and insists that
16

the CA did not err in granting its petition. It posits that the HLURB has no jurisdiction over
the complaint filed by petitioners because the controversies raised therein are in the
nature of "intra-corporate disputes." Thus, the case does not fall within the jurisdiction of
the HLURB under Section 1, P.D. No. 957 and P.D. No. 1344. According to DPDCI,
petitioners sought to address the invalidation of the corporate acts duly entered and
executed by PHCC as a corporation of which petitioners are admittedly members of, and
not the acts pertaining to their ownership of the units. Such being the case, PHCC should
have been impleaded as a party to the complaint. Its non-inclusion as an indispensable
party warrants the dismissal of the case. DPDCI further avers that the doctrine of
exhaustion is inapplicable inasmuch as the issues raised in the petition with the CA are
purely legal; that the challenged administrative act is patently illegal; and that the
procedure of the HLURB does not provide a plain, speedy and adequate remedy and its
application may cause great and irreparable damage. Finally, it claims that the decision of
the HLURB Arbiter has not attained finality, the same having been issued without
jurisdiction.

Essentially, the issues to be resolved are: (1) whether the HLURB has jurisdiction over the
complaint filed by the petitioners; (2) whether PHCC is an indispensable party; and (3)
whether the rule on exhaustion of administrative remedies applies in this case.

The petition fails.

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is
conferred by law and determined by the allegations in the complaint which comprise a
concise statement of the ultimate facts constituting the plaintiff's cause of action. The
nature of an action, as well as which court or body has jurisdiction over it, is determined
based on the allegations contained in the complaint of the plaintiff, irrespective of whether
or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.
The averments in the complaint and the character of the relief sought are the ones to be
consulted. Once vested by the allegations in the complaint, jurisdiction also remains
vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein. Thus, it was ruled that the jurisdiction of the HLURB to hear
17

and decide cases is determined by the nature of the cause of action, the subject matter or
property involved and the parties. 18

Generally, the extent to which an administrative agency may exercise its powers depends
largely, if not wholly, on the provisions of the statute creating or empowering such
agency. With respect to the HLURB, to determine if said agency has jurisdiction over
19

petitioners’ cause of action, an examination of the laws defining the HLURB’s jurisdiction
and authority becomes imperative. P.D. No. 957, specifically Section 3, granted the
20

National Housing Authority (NHA) the "exclusive jurisdiction to regulate the real estate
trade and business." Then came P.D. No. 1344 expanding the jurisdiction of the NHA
21

(now HLURB), as follows:

SECTION 1. In the exercise of its functions to regulate the real estate trade and business
and in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority shall have exclusive jurisdiction to hear and decide cases of the
following nature:

(a) Unsound real estate business practices;

(b) Claims involving refund and any other claims filed by subdivision lot or condominium
unit buyer against the project owner, developer, dealer, broker or salesman; and

(c) Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker
or salesman.

This provision must be read in light of the law’s preamble, which explains the reasons for
enactment of the law or the contextual basis for its interpretation. A statute derives its
22

vitality from the purpose for which it is enacted, and to construe it in a manner that
disregards or defeats such purpose is to nullify or destroy the law. P.D. No. 957, as
23

amended, aims to protect innocent subdivision lot and condominium unit buyers against
fraudulent real estate practices. 24

The HLURB is given a wide latitude in characterizing or categorizing acts which may
constitute unsound business practice or breach of contractual obligations in the real
estate trade. This grant of expansive jurisdiction to the HLURB does not mean, however,
that all cases involving subdivision lots or condominium units automatically fall under its
jurisdiction. The CA aptly quoted the case of Christian General Assembly, Inc. v. Ignacio, 25

wherein the Court held that:

The mere relationship between the parties, i.e., that of being subdivision owner/developer
and subdivision lot buyer, does not automatically vest jurisdiction in the HLURB. For an
action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the
nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have
consistently held that the concerned administrative agency, the National Housing
Authority (NHA) before and now the HLURB, has jurisdiction over complaints aimed at
compelling the subdivision developer to comply with its contractual and statutory
obligations. [Emphases supplied]
26

In this case, the complaint filed by petitioners alleged causes of action that apparently are
not cognizable by the HLURB considering the nature of the action and the reliefs sought.
A perusal of the complaint discloses that petitioners are actually seeking to nullify and
invalidate the duly constituted acts of PHCC - the April 29, 2005 Agreement entered into
27

by PHCC with DPDCI and its Board Resolution which authorized the acceptance of the
28

proposed offsetting/settlement of DPDCI’s indebtedness and approval of the conversion


of certain units from saleable to common areas. All these were approved by the HLURB.
Specifically, the reliefs sought or prayers are the following:

1. Ordering the respondent to restore the gym to its original location;

2. Ordering the respondent to restore the hallway at the second floor;

3. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS as
illegal, and consequently, ordering respondent to continue paying the condominium dues
for these units, with interest and surcharge;

4. Ordering the respondent to pay the sum of PHP998,190.70, plus interest and
surcharges, as condominium dues in arrears and turnover the administration office to
PHCC without any charges pursuant to the representation of the respondent in the
brochures it circulated to the public;

5. Ordering the respondent to refund to the PHCC the amount of PHP1,277,500.00,


representing the cost of the deep well, with interests and surcharges;

6. Ordering the respondent to pay the complainants moral/exemplary damages in the


amount of PHP100,000.00; and

7. Ordering the respondent to pay the complainant attorney’s fees in the amount of
PHP100,000.00, and PHP3,000.00 for every hearing scheduled by the Honorable Office. 29

As it is clear that the acts being assailed are those of PHHC, this case cannot prosper for
failure to implead the proper party, PHCC.

An indispensable party is defined as one who has such an interest in the controversy or
subject matter that a final adjudication cannot be made, in his absence, without injuring or
affecting that interest. In the recent case of Nagkakaisang Lakas ng Manggagawa sa
30

Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines Corporation, the Court had the


31

occasion to state that:

Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final
determination can be had of an action shall be joined as plaintiffs or defendants." If there
is a failure to implead an indispensable party, any judgment rendered would have no
effectiveness. It is "precisely ‘when an indispensable party is not before the court (that) an
action should be dismissed.’ The absence of an indispensable party renders all
subsequent actions of the court null and void for want of authority to act, not only as to the
absent parties but even to those present." The purpose of the rules on joinder of
indispensable parties is a complete determination of all issues not only between the
parties themselves, but also as regards other persons who may be affected by the
judgment. A decision valid on its face cannot attain real finality where there is want of
indispensable parties. (Underscoring supplied)
32

Similarly, in the case of Plasabas v. Court of Appeals, the Court held that a final decree
33

would necessarily affect the rights of indispensable parties so that the Court could not
proceed without their presence. In support thereof, the Court in Plasabas cited the
following authorities, thus:

"The general rule with reference to the making of parties in a civil action requires the
joinder of all indispensable parties under any and all conditions, their presence being a
sine qua non of the exercise of judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348) For
this reason, our Supreme Court has held that when it appears of record that there are
other persons interested in the subject matter of the litigation, who are not made parties to
the action, it is the duty of the court to suspend the trial until such parties are made either
plaintiffs or defendants. (Pobre, et al. v. Blanco, 17 Phil. 156). x x x Where the petition
failed to join as party defendant the person interested in sustaining the proceeding in the
court, the same should be dismissed. x x x When an indispensable party is not before the
court, the action should be dismissed. (People, et al. v. Rodriguez, et al., G.R. Nos.
L-14059-62, September 30, 1959) (sic)

"Parties in interest without whom no final determination can be had of an action shall be
joined either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The burden of
procuring the presence of all indispensable parties is on the plaintiff. (39 Amjur [sic] 885).
The evident purpose of the rule is to prevent the multiplicity of suits by requiring the
person arresting a right against the defendant to include with him, either as co-plaintiffs or
as co-defendants, all persons standing in the same position, so that the whole matter in
dispute may be determined once and for all in one litigation. (Palarca v. Baginsi, 38 Phil.
177, 178).

From all indications, PHCC is an indispensable party and should have been impleaded,
either as a plaintiff or as a defendant, in the complaint filed before the HLURB as it would
34

be directly and adversely affected by any determination therein. To belabor the point, the
causes of action, or the acts complained of, were the acts of PHCC as a corporate body.
Note that in the judgment rendered by the HLURB, the dispositive portion in particular,
DPDCI was ordered (1) to pay ₱ 998,190.70, plus interests and surcharges, as
condominium dues in arrears and turnover the administration office to PHCC; and (2) to
refund to PHCC ₱ 1,277,500.00, representing the cost of the deep well, with interests and
surcharges. Also, the HLURB declared as illegal the agreement regarding the conversion
of the 22 storage units and Units GF4-A and BAS, to which agreement PHCC was a party.

Evidently, the cause of action rightfully pertains to PHCC. Petitioners cannot exercise the
same except through a derivative suit. In the complaint, however, there was no allegation
that the action was a derivative suit. In fact, in the petition, petitioners claim that their
complaint is not a derivative suit. In the cited case of Chua v. Court of Appeals, the
35 36

Court ruled:

For a derivative suit to prosper, it is required that the minority stockholder suing for and on
behalf of the corporation must allege in his complaint that he is suing on a derivative
cause of action on behalf of the corporation and all other stockholders similarly situated
who may wish to join him in the suit. It is a condition sine qua non that the corporation be
impleaded as a party because not only is the corporation an indispensable party, but it is
also the present rule that it must be served with process. The judgment must be made
binding upon the corporation in order that the corporation may get the benefit of the suit
and may not bring subsequent suit against the same defendants for the same cause of
action. In other words, the corporation must be joined as party because it is its cause of
action that is being litigated and because judgment must be a res adjudicata against it.
(Underscoring supplied)

Without PHCC as a party, there can be no final adjudication of the HLURB’s judgment.
The CA was, thus, correct in ordering the dismissal of the case for failure to implead an
indispensable party.

To justify its finding of contractual violation, the HLURB cited a provision in the MDDR, to
wit:

Section 13. Amendment. After the corporation shall have been created, organized and
operating, this MDDR may be amended, in whole or in part, by the affirmative vote of Unit
owners constituting at least fifty one (51%) percent of the Unit shares in the Project at a
meeting duly called pursuant to the Corporation By Laws and subject to the provisions of
the Condominium Act.

This citation, however, is misplaced as the above-quoted provision pertains to the


amendment of the MDDR. It should be stressed that petitioners are not asking for any
change or modification in the terms of the MDDR. What they are really praying for is a
declaration that the agreement regarding the alteration/conversion is illegal. Thus, the
Court sustains the CA’s finding that:

There was nothing in the records to suggest that DPDCI sought the amendment of a part
or the whole of such MDDR. The cited section is somewhat consistent only with the
principle that an amendment of a corporation’s Articles of Incorporation must be assented
to by the stockholders holding more than 50% of the shares. The MDDR does not
contemplate, by such provision, that all corporate acts ought to be with the concurrence of
a majority of the unit owners.
37

Moreover, considering that petitioners, who are members of PHCC, are ultimately
challenging the agreement entered into by PHCC with DPDCI, they are assailing, in effect,
PHCC’s acts as a body corporate. This action, therefore, partakes the nature of an
"intra-corporate controversy," the jurisdiction over which used to belong to the Securities
and Exchange Commission (SEC), but transferred to the courts of general jurisdiction or
the appropriate Regional Trial Court (RTC), pursuant to Section 5b of P.D. No. 902-A, as38

amended by Section 5.2 of Republic Act (R.A.) No. 8799. 39

An intra-corporate controversy is one which "pertains to any of the following relationships:


(1) between the corporation, partnership or association and the public; (2) between the
corporation, partnership or association and the State in so far as its franchise, permit or
license to operate is concerned; (3) between the corporation, partnership or association
and its stockholders, partners, members or officers; and (4) among the stockholders,
partners or associates themselves." 40

Based on the foregoing definition, there is no doubt that the controversy in this case is
essentially intra-corporate in character, for being between a condominium corporation and
its members-unit owners. In the recent case of Chateau De Baie Condominium
Corporation v. Sps. Moreno, an action involving the legality of assessment dues against
41

the condominium owner/developer, the Court held that, the matter being an
intra-corporate dispute, the RTC had jurisdiction to hear the same pursuant to R.A. No.
8799.
As to the alleged failure to comply with the rule on exhaustion of administrative remedies,
the Court again agrees with the position of the CA that the circumstances prevailing in this
case warranted a relaxation of the rule.

The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial


system. The thrust of the rule is that courts must allow administrative agencies to carry
1âwphi1

out their functions and discharge their responsibilities within the specialized areas of their
respective competence. It has been held, however, that the doctrine of exhaustion of
42

administrative remedies and the doctrine of primary jurisdiction are not ironclad rules. In
the case of Republic of the Philippines v. Lacap, the Court enumerated the numerous
43

exceptions to these rules, namely: (a) where there is estoppel on the part of the party
invoking the doctrine; (b) where the challenged administrative act is patently illegal,
amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction
that will irretrievably prejudice the complainant; (d) where the amount involved is relatively
so small as to make the rule impractical and oppressive; (e) where the question involved
is purely legal and will ultimately have to be decided by the courts of justice; (f) where
judicial intervention is urgent; (g) where the application of the doctrine may cause great
and irreparable damage; (h) where the controverted acts violate due process; (i) where
the issue of non-exhaustion of administrative remedies has been rendered moot; (j) where
there is no other plain, speedy and adequate remedy; (k) where strong public interest is
involved; and (l) in quo warranto proceedings. [Underscoring supplied]
44

The situations (b) and (e) in the foregoing enumeration obtain in this case.

The challenged decision of the HLURB is patently illegal having been rendered in excess
of jurisdiction, if not with grave abuse of discretion amounting to lack or excess of
jurisdiction. Also, the issue on jurisdiction is purely legal which will have to be decided
ultimately by a regular court of law. As the Court wrote in Vigilar v. Aquino: 45

It does not involve an examination of the probative value of the evidence presented by the
parties. There is a question of law when the doubt or difference arises as to what the law
is on a certain state of facts, and not as to the truth or the falsehood of alleged facts. Said
question at best could be resolved only tentatively by the administrative authorities. The
final decision on the matter rests not with them but with the courts of justice. Exhaustion of
administrative remedies does not apply, because nothing of an administrative nature is to
be or can be done. The issue does not require technical knowledge and experience but
one that would involve the interpretation and application of law.

Finally, petitioners faulted the CA in not giving respect and even finality to the findings of
fact of the HLURB. Their reliance on the case of Dangan v. NLRC, reiterating the
46

well-settled principles involving decisions of administrative agencies, deserves scant


consideration as the decision of the HLURB in this case is manifestly not supported by law
and jurisprudence.

Petitioners, therefore, cannot validly invoke DPDCI’s failure to fulfill its obligation on the
basis of a plain draft leaflet which petitioners were able to obtain, specifically Pacifico Lim,
having been a president of DPDCI. To accord petitioners the right to demand compliance
with the commitment under the said brochure is to allow them to profit by their own act.
This, the Court cannot tolerate.

In sum, inasmuch as the HLURB has no jurisdiction over petitioners’ complaint, the Court
sustains the subject decision of the CA that the HLURB decision is null and void ab
initio. This disposition, however, is without prejudice to any action that the parties may
rightfully file in the proper forum.

WHEREFORE, the petition is DENIED.

SO ORDERED.

VII. LETTERS OF ATTY. MENDOZA V. PAL

EN BANC

March 13, 2018

G.R. No. 178083

FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES


(FASAP), Petitioner
vs.
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and THE COURT OF APPEALS,
Respondents

IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R. NO. 178083 - FLIGHT
ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (F ASAP) vs.
PHILIPPINE AIRLINES, INC., ETAL.

RESOLUTION

BERSAMIN, J.:

In determining the validity of a retrenchment, judicial notice may be taken of the financial
losses incurred by an employer undergoing corporate rehabilitation. In such a case, the
presentation of audited financial statements may not be necessary to establish that the
employer is suffering from severe financial losses.

Before the Court are the following matters for resolution, namely:

(a) Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion
for Reconsideration of the Decision of July 22, 2008 filed by respondents Philippine
Airlines, Inc. (PAL) and Patria Chiong; and
1

(b) Motion for Reconsideration [Re: The Honorable Court’s Resolution dated 13 March
2012 ] of petitioner Flight Attendants and Stewards Association of the Philippines
2

(FASAP).

Antecedents

To provide a fitting backgrounder for this resolution, we first lay down the procedural
antecedents.
Resolving the appeal of F ASAP, the Third Division of the Court promulgated its decision
3

on July 22, 2008 reversing the decision promulgated on August 23, 2006 by the Court of
Appeals (CA) and entering a new one finding PAL guilty of unlawful
retrenchment, disposing:
4

WHEREFORE, the instant petition is GRANTED. The assailed Decision of


the Court of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006,
which affirmed the Decision of the NLRC setting aside the Labor Arbiter's
findings of illegal retrenchment and its Resolution of May 29, 2007
denying the motion for reconsideration, are REVERSED and SET
ASIDE and a new one is rendered:

1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal


dismissal;

2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew


personnel who were covered by the retrenchment and demotion scheme
of June 15, 1998 made effective on July 15, 1998, without loss of seniority
rights and other privileges, and to pay them full backwages, inclusive of
allowances and other monetary benefits computed from the time of their
separation up to the time of their actual reinstatement, provided that with
respect to those who had received their respective separation pay, the
amounts of payments shall be deducted from their backwages. Where
reinstatement is no longer feasible because the positions previously held
no longer exist, respondent Corporation shall pay backwages plus, in lieu
of reinstatement, separation pay equal to one (1) month pay for every year
of service;

3. ORDERING Philippine Airlines, Inc. to pay attorney's fees equivalent to


ten percent (10%) of the total monetary award.

Costs against respondent PAL.

SO ORDERED. 5

The Third Division thereby differed from the decision of the Court of Appeals (CA), which
had pronounced in its appealed decision promulgated on August 23, 2006 that the 6

remaining issue between the parties concerned the manner by which PAL had carried out
the retrenchment program. Instead, the Third Division disbelieved the veracity of PAL’s
7

claim of severe financial losses, and concluded that PAL had not established its severe
financial losses because of its non-presentation of audited financial statements. It further
concluded that PAL had implemented the retrenchment program in bad faith, and had not
used fair and reasonable criteria in selecting the employees to be retrenched.

After PAL filed its Motion for Reconsideration, the Court, upon motion, held oral
8 9

arguments on the following issues:

WHETHER THE GROUNDS FOR RETRENCHMENT WERE


ESTABLISHED
II

WHETHER PAL RESORTED TO OTHER COST-CUTTING MEASURES


BEFORE IMPLEMENTING ITS RETRENCHMENT PROGRAM

III

WHETHER FAIR AND REASONABLE CRITERIA WERE FOLLOWED IN


IMPLEMENTING THE RETRECHMENT PROGRAM

IV

WHETHER THE QUITCLAIMS WERE VALIDLY AND VOLUNTARILY


EXECUTED

Upon conclusion of the oral arguments, the Court directed the parties to explore a
possible settlement and to submit their respective memoranda. Unfortunately, the parties
10

did not reach any settlement; hence, the Court, through the Special Third
Division, resolved the issues on the merits through the resolution of October 2, 2009
11

denying PAL’s motion for reconsideration, thus:


12

WHEREFORE, for lack of merit, the Motion for Reconsideration is


hereby DENIED with FINALITY. The assailed Decision dated July 22,
2008 is AFFIRMED with MODIFICATION in that the award of attorney's
fees and expenses of litigation is reduced to ₱2,000,000.00. The case is
hereby REMANDED to the Labor Arbiter solely for the purpose of
computing the exact amount of the award pursuant to the guidelines
herein stated.

No further pleadings will be entertained.

SO ORDERED. 13

The Special Third Division was unconvinced by PAL’s change of theory in urging the June
1998 Association of Airline Pilots of the Philippines (ALP AP) pilots' strike as the reason
behind the immediate retrenchment; and observed that the strike was a temporary
occurrence that did not require the immediate and sweeping retrenchment of around
1,400 cabin crew.

Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of October 2,
2009 and Second Motion for Reconsideration of the Decision of July 22, 2008. 14

On October 5, 2009, the writer of the resolution of October 2, 2009, Justice Consuelo
Ynares-Santiago, compulsorily retired from the Judiciary. Pursuant to A.M. No.
99-8-09-SC, G.R. No. 178083 was then raffled to Justice Presbitero J. Velasco, Jr., a
15

Member of the newly-constituted regular Third Division. Upon the Court's subsequent
16

reorganization, G.R. No. 178083 was transferred to the First Division where Justice
17

Velasco, Jr. was meanwhile re-assigned. Justice Velasco, Jr. subsequently inhibited
himself from the case due to personal reasons. Pursuant to SC Administrative Circular
18

No. 84-2007, G.R. No. 178083 was again re-raffled to Justice Arturo D. Brion, whose
membership in the Second Division resulted in the transfer of G.R. No. 178083 to said
Division.
19
On September 7, 2011, the Second Division denied with finality PAL’s Second Motion for
Reconsideration of the Decision of July 22, 2008. 20

Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel, sent a
series of letters inquiring into the propriety of the successive transfers of G.R. No.
178083. His letters were docketed as A.M. No. 11- 10-1-SC.
21

On October 4, 2011, the Court En Banc issued a resolution: (a) assuming jurisdiction
22

over G.R. No. 178083; (b)recalling the September 7, 2011 resolution of the Second
Division; and (c) ordering the re-raffle of G.R. No. 178083 to a new Member-in-Charge.

Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the issues
raised against the recall of the resolution of September 7, 2011, the Court En
Banc promulgated its resolution in A.M. No. 11-10-1-SC on March 13, 2012, in which it
23

summarized the intricate developments involving G.R. No. 178083, viz.:

To summarize all the developments that brought about the present


dispute--expressed in a format that can more readily be appreciated in
terms of the Court en bane's ruling to recall the September 7, 2011 ruling -
the F ASAP case, as it developed, was attended by special and unusual
circumstances that saw:

(a) the confluence of the successive retirement of three Justices (in a


Division of five Justices) who actually participated in the assailed Decision
and Resolution;

(b) the change in the governing rules-from the A.M.s to the IRSC
regime-which transpired during the pendency of the case;

(c) the occurrence of a series of inhibitions in the course of the case


(Justices Ruben Reyes, Leonardo-De Castro, Corona, Velasco, and
Carpio), and the absences of Justices Sereno and Reyes at the critical
time, requiring their replacement; notably, Justices Corona, Carpio,
Velasco and Leonardo-De Castro are the four most senior Members of the
Court;

(d) the three re-organizations of the divisions, which all took place during
the pendency of the case, necessitating the transfer of the case from the
Third Division, to the First, then to the Second Division;

(e) the unusual timing of Atty. Mendoza’s letters, made after the ruling
Division had issued its Resolution of September 7, 2011, but before the
parties received their copies of the said Resolution; and

(t) finally, the time constraint that intervened, brought about by the parties’
receipt on September 19, 2011 of the Special Division’s Resolution of
September 7, 2011, and the consequent running of the period for finality
computed from this latter date; and the Resolution would have lapsed to
finality after October 4, 2011, had it not been recalled by that date.

All these developments, in no small measure, contributed in their own


peculiar way to the confusing situations that attended the September 7,
2011 Resolution, resulting in the recall of this Resolution by the Court en
banc.24

In the same resolution of March 13, 2012, the Court En Banc directed the re-raffle of G.R.
No. 178083 to the remaining Justices of the former Special Third Division who participated
in resolving the issues pursuant to Section 7, Rule 2 of the Internal Rules of the Supreme
Court, explaining:

On deeper consideration, the majority now firmly holds the view that
Section 7, Rule 2 of the IRSC should have prevailed in considering the
raffle and assignment of cases after the 2nd MR was accepted, as
advocated by some Members within the ruling Division, as against the
general rule on inhibition under Section 3, Rule 8. The underlying
constitutional reason, of course, is the requirement of Section 4(3), Article
VIII of the Constitution already referred to above.

The general rule on statutory interpretation is that apparently conflicting


provisions should be reconciled and harmonized, as a statute must be so
construed as to harmonize and give effect to all its provisions whenever
possible. Only after the failure at this attempt at reconciliation should one
provision be considered the applicable provision as against the other.

Applying these rules by reconciling the two provisions under


consideration, Section 3, Rule 8 of the IRSC should be read as the
general rule applicable to the inhibition of a Member-in-Charge. This
general rule should, however, yield where the inhibition occurs at the
late stage of the case when a decision or signed resolution is
assailed through an MR. At that point, when the situation calls for
the review of the merits of the decision or the signed resolution made by
a ponente (or writer of the assailed ruling), Section 3, Rule 8 no longer
applies and must yield to Section 7, Rule 2 of the IRSC which
contemplates a situation when the ponente is no longer available,
and calls for the referral of the case for raffle among the remaining
Members of the Division who acted on the decision or on the signed
resolution. This latter provision should rightly apply as it gives those who
intimately know the facts and merits of the case, through their previous
participation and deliberations, the chance to take a look at the decision or
resolution produced with their participation.

To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition,


but it must yield to the more specific Section 7, Rule 2 of the IRSC where
the obtaining situation is for the review on the merits of an already issued
decision or resolution and the ponente or writer is no longer available to
act on the matter. On this basis, the ponente, on the merits of the case on
review, should be chosen from the remaining participating Justices,
namely, Justices Peralta and Bersamin. 25

This last resolution impelled F ASAP to file the Motion for Reconsideration [Re: The
Honorable Court’s Resolution dated 13 March 2012], praying that the September 7, 2011
resolution in G.R. No. 178083 be reinstated. 26

We directed the consolidation of G.R. No. 178083 and A.M. No. 11- 10-1-SC on April 17,
2012.27
Issues

PAL manifests that the Motion for Reconsideration of the Resolution of October 2, 2009
and Second Motion for Reconsideration of the Decision of July 22, 2008 is its first motion
for reconsideration vis-a-vis the October 2, 2009 resolution, and its second as to the July
22, 2008 decision. It states therein that because the Court did not address the issues
raised in its previous motion for reconsideration, it is re-submitting the same, viz.:

xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE


TO THE FOLLOWING COMPELLING EVIDENCE AND
CIRCUMSTANCES CLEARLY SHOWING PALS; DIRE FINANCIAL
CONDITION AT THE TIME OF THE RETRENCHMENT: (A)
PETITIONER'S ADMISSIONS OF PAL'S FINANCIAL LOSSES; (B) THE
UNANIMOUS FINDINGS OF THE SECURITIES AND EXCHANGE
COMMISSION (SEC), THE LABOR ARBITER, THE NATIONAL LABOR
RELATIONS COMMISSION (NLRC) AND THE COURT OF APPEALS
CONFIRMING PAL'S FINANCIAL CRISIS; (C) PREVIOUS CASES
DECIDED BY THE HONORABLE COURT RECOGNIZING PAL'S DIRE
FINANCIAL STATE; AND (D) PAL BEING PLACED BY THE SEC UNDER
SUSPENSION OF PAYMENTS AND CORPORATE REHABILITATION
AND RECEIVERSHIP

II

xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE


COURT'S CONCLUSION THAT PAL DID NOT EXERCISE GOOD FAITH
[IN] ITS PREROGATIVE TO RETRENCH EMPLOYEES

III

THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR
AND REASONABLE CRITERIA IN ASCERTAINING WHO WOULD BE
RETRENCHED IS CONTRARY TO ESTABLISHED FACTS, EVIDENCE
ON RECORD AND THE FINDINGS OF THE NLRC AND THE COURT OF
APPEALS 28

PAL insists that FASAP, while admitting PAL’s serious financial condition, only questioned
before the Labor Arbiter the alleged unfair and unreasonable measures in retrenching the
employees; that F ASAP categorically manifested before the NLRC, the CA and this
29

Court that PAL’s financial situation was not the issue but rather the manner of terminating
the 1,400 cabin crew; that the Court's disregard of FASAP's categorical admissions was
contrary to the dictates of fair play; that considering that the Labor Arbiter, the NLRC and
30

the CA unanimously found PAL to have experienced financial losses, the Court should
have accorded such unanimous findings with respect and finality; that its being placed
31

under suspension of payments and corporate rehabilitation and receivership already


sufficiently indicated its grave financial condition; and that the Court should have also
32

taken judicial notice of the suspension of payments and monetary claims filed against PAL
that had reached and had been consequently resolved by the Court. 33
PAL describes the Court's conclusion that it was not suffering from tremendous financial
losses because it was on the road to recovery a year after the retrenchment as a
mere obiter dictum that was relevant only in rehabilitation proceedings; that whether or not
its supposed "stand-alone" rehabilitation indicated its ability to recover on its own was a
technical issue that the SEC was tasked to determine in the rehabilitation proceedings;
that at any rate, the supposed track to recovery in 1999 and the capital infusion of
$200,000,000.00 did not disprove the enormous losses it was sustaining; that, on the
contrary, the capital infusion accented the severe financial losses suffered because the
capital infusion was a condition precedent to the approval of the amended and restated
rehabilitation plan by the Securities and Exchange Commission (SEC) with the conformity
of PAL's creditors; and that PAL took nine years to exit from rehabilitation. 34

As regards the implementation of the retrenchment program in good faith, PAL argues
that it exercised sound management prerogatives and business judgment despite its
critical financial condition; that it did not act in due haste in terminating the services of the
affected employees considering that FASAP was being consulted thereon as early as
February 17, 1998; that it abandoned "Plan 14" due to intervening events, and instead
proceeded to implement "Plan 22" which led to the recall/rehire of some of the retrenched
employees; and that in selecting the employees to be retrenched, it adopted a fair and
35

reasonable criteria pursuant to the collective bargaining agreement (CBA) where


performance efficiency ratings and inverse seniority were basic considerations. 36

With reference to the Court's resolution of October 2, 2009, PAL maintains that:

PAL HAS NOT CHANGED ITS POSITION THAT THE REDUCTION OF


PAL'S LABOR FORCE OF ABOUT 5,000 EMPLOYEES, INCLUDING
THE 1,423 FASAP MEMBERS, WAS THE RESULT OF A CONFLUENCE
OF EVENTS, THE EXPANSION OF PAL’S FLEET, THE ASIAN
FINANCIAL CRISIS OF 1997, AND ITS CONSEQUENCES ON PAL'S
OPERATIONS, AND THE PILOT’S STRIKE OF JUNE 1998, AND THAT
PAL SURVIVED BECAUSE OF THE IMPLEMENTATION OF ITS
REHABILITATION PLAN (LATER "AMENDED AND RESTATED
REHABILITATION PLAN") WHICH INCLUDED AMONG ITS
COMPONENT ELEMENTS, THE REDUCTION OF LABOR FORCE

II

THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S


REDUCTION OF THE NUMBER OF CABIN CREW IN ACCORD WITH
ITS ENTRY INTO REHABILITATION AND THE CONSEQUENT
TERMINATION OF EMPLOYMENT OF CABIN CREW PERSONNEL AS
A VALID EXERCISE OF MANAGEMENT PREROGATIVE

III

PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS


FINANCIAL LOSSES, SO AS TO JUSTIFY THE ENTRY INTO
REHABILITATION AND THE CONSEQUENT REDUCTION OF CABIN
CREW PERSONNEL
IV

THE HONORABLE COURT ERRED IN HOLDING THAT THERE WAS


NO SUFFICIENT BASIS FOR PAL TO IMPLEMENT THE
RETRENCHMENT OF CABIN CREW PERSONNEL

UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF


LESS DRASTIC COST-CUTTING MEASURES WAS NO LONGER
POSSIBLE AND SHOULD NOT BE REQUIRED FOR A VALID
RETRENCHMENT; IN ANY EVENT, PAL HAD IMPLEMENTED LESS
DRASTIC COST-CUTTING MEASURES BEFORE IMPLEMENTING THE
DOWNSIZING PROGRAM

VI

QUITCLAIMS WERE VALIDLY EXECUTED 37

PAL contends that the October 2, 2009 resolution focused on an entirely new basis - that
of PAL’s supposed change in theory. It denies having changed its theory, however, and
maintains that the reduction of its workforce had resulted from a confluence of several
events, like the flight expansion; the 1997 Asian financial crisis; and the ALP AP pilots’
strike. PAL explains that when the pilots struck in June 1998, it had to decide quickly as it
38

was then facing closure in 18 days due to serious financial hemorrhage; hence, the strike
came as the final blow.

PAL posits that its business decision to downsize was far from being a hasty, knee-jerk
reaction; that the reduction of cabin crew personnel was an integral part of its corporate
rehabilitation, and, such being a management decision, the Court could not supplant the
decision with its own judgment’ and that the inaccurate depiction of the strike as a
temporary disturbance was lamentable in light of its imminent financial collapse due to the
concerted action. 39

PAL submits that the Court’s declaration that PAL failed to prove its financial losses and to
explore less drastic cost-cutting measures did not at all jibe with the totality of the
circumstances and evidence presented; that the consistent findings of the Labor Arbiter,
the NLRC, the CA and even the SEC, acknowledging its serious financial difficulties could
not be ignored or disregarded; and that the challenged rulings of the Court conflicted with
the pronouncements made in Garcia v. Philippine Airlines, Inc. and related cases that
40 41

acknowledged PAL’s grave financial distress.

In its comment, FASAP counters that a second motion for reconsideration was a
42

prohibited pleading; that PAL failed to prove that it had complied with the requirements for
a valid retrenchment by not submitting its audited financial statements; that PAL had
immediately terminated the employees without prior resort to less drastic measures; and
that PAL did not observe any criteria in selecting the employees to be retrenched.

FASAP stresses that the October 4, 2011 resolution recalling the September 7, 2011
decision was void for failure to comply with Section 14, Article VIII of the 1987 Constitution;
that the participation of Chief Justice Renato C. Corona who later on inhibited from G.R.
No. 178083 had further voided the proceedings; that the 1987 Constitution did not require
that a case should be raffled to the Members of the Division who had previously decided it;
and that there was no error in raffling the case to Justice Brion, or, even granting that
there was error, such error was merely procedural.

The issues are restated as follows:

Procedural

IS THE RESOLUTION DATED OCTOBER 4, 2011 IN A.M. NO. 11-10-


1-SC (RECALLING THE SEPTEMBER 7, 2011 RESOLUTION) VOID
FOR FAIL URE TO COMPLY WITH SECTION 14, RULE VIII OF THE
1987 CONSTITUTION?

II

MAY THE COURT ENTERTAIN THE SECOND MOTION FOR


RECONSIDERATION FILED BY THE RESPONDENT PAL?

Substantive

DID PAL LAWFULLY RETRENCH THE 1,400 CABIN CREW


PERSONNEL?

DID PAL PRESENT SUFFICIENT EVIDENCE TO PROVE


THAT IT INCURRED SERIOUS FINANCIAL LOSSES
WHICH JUSTIFIED THE DOWNSIZING OF ITS CABIN
CREW?

DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING


THE RETRENCHMENT PROGRAM?

DID PAL COMPLY WITH SECTION 112 OF THE PALF


ASAP CBA IN SELECTING THE EMPLOYEES TO BE
RETRENCHED?

III

ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT


PROGRAM, DID THE RETRENCHED EMPLOYEES SIGN VALID
QUITCLAIMS?

Ruling of the Court


After a thorough review of the records and all previous dispositions,
we GRANT the Motion for Reconsideration of the Resolution of October 2, 2009 and
Second Motion for Reconsideration of the Decision of July 22, 2008 filed by PAL and
Chiong; and DENY the Motion for Reconsideration [Re: The Honorable Court’s
Resolution dated 13 March 2012] of FASAP.
43

Accordingly, we REVERSE the July 22, 2008 decision and the October 2, 2009 resolution;
and AFFIRM the decision promulgated on August 23, 2006 by the CA.

The resolution of October 4, 2011


was a valid issuance of the Court

The petitioner urges the Court to declare as void the October 4, 2011 resolution
promulgated in A.M. No. 11-10-1-SC for not citing any legal basis in recalling the
September 7, 2011 resolution of the Second Division.

The urging of the petitioner is gravely flawed and mistaken.

The requirement for the Court to state the legal and factual basis for its decisions is found
in Section 14, Article VIII of the 1987 Constitution, which reads:

Section 14. No decision shall be rendered by any court without expressing


therein clearly and distinctly the facts and the law on which it is based.

The constitutional provision clearly indicates that it contemplates only a decision, which is
the judgment or order that adjudicates on the merits of a case. This is clear from the text
and tenor of Section 1, Rule 36 of the Rules of Court, the rule that implements the
constitutional provision, to wit:

Section 1. Rendition of judgments and final orders. A judgment or final


order determining the merits of the case shall be in writing personally
and directly prepared by the judge, stating clearly and distinctly the
facts and the law on which it is based, signed by him, and filed with the
clerk of court.

The October 4, 2011 resolution did not adjudicate on the merits of G.R. No. 178083. We
explicitly stated so in the resolution of March 13, 2012. What we thereby did was instead
to exercise the Court's inherent power to recall orders and resolutions before they attain
finality. In so doing, the Court only exercised prudence in order to ensure that the Second
Division was vested with the appropriate legal competence in accordance with and under
the Court's prevailing internal rules to review and resolve the pending motion for
reconsideration. We rationalized the exercise thusly:

As the narration in this Resolution shows, the Court acted on its own
pursuant to its power to recall its own orders and resolutions before
their finality. The October 4, 2011 Resolution was issued to
determine the propriety of the September 7, 2011 Resolution given
the facts that came to light after the ruling Division's examination of
the records. To point out the obvious, the recall was not a ruling on
the merits and did not constitute the reversal of the substantive
issues already decided upon by the Court in the FASAP case in its
previously issued Decision (of July 22, 2008) and Resolution (of
October 2, 2009). In short, the October 4, 2011 Resolution was not meant
and was never intended to favor either party, but to simply remove any
doubt about the validity of the ruling Division's action on the case. The
case, in the ruling Division's view, could be brought to the Court en
banc since it is one of "sufficient importance"; at the very least, it involves
the interpretation of conflicting provisions of the IRSC with potential
jurisdictional implications.

At the time the Members of the ruling Division went to the Chief Justice to
recommend a recall, there was no clear indication of how they would
definitively settle the unresolved legal questions among themselves. The
only matter legally certain was the looming finality of the September 7,
2011 Resolution if it would not be immediately recalled by the Court en
banc by October 4, 2011. No unanimity among the Members of the ruling
Division could be gathered on the unresolved legal questions; thus, they
concluded that the matter is best determined by the Court en banc as it
potentially involved questions of jurisdiction and interpretation of
conflicting provisions of the IRSC. To the extent of the recommended
recall, the ruling Division was unanimous and the Members communicated
this intent to the Chief Justice in clear and unequivocal terms. (Bold 44

underscoring for emphasis)

It should further be clear from the same March 13, 2012 resolution that the factual
considerations for issuing the recall order were intentionally omitted therefrom in
obeisance to the prohibition against public disclosure of the internal deliberations of the
Court.45

Still, F ASAP assails the impropriety of the recall of the September 7, 2011 resolution. It
contends that the raffle of G.R. No. 178083 to the Second Division had not been
erroneous but in "full and complete consonance with Section 4(3) Article VIII of the
Constitution;" and that any error thereby committed was only procedural, and thus a
46

mere "harmless error" that did not invalidate the prior rulings made in G.R. No. 178083. 47

The contention of F ASAP lacks substance and persuasion.

The Court carefully expounded in the March 13, 2012 resolution on the resulting
jurisdictional conflict that arose from the raffling of G.R. No. 178083 resulting from the
successive retirements and inhibitions by several Justices who at one time or another had
been assigned to take part in the case. The Court likewise highlighted the importance of
referring the case to the remaining Members who had actually participated in the
deliberations, for not only did such participating Justices intimately know the facts and
merits of the parties' arguments but doing so would give to such Justices the opportunity
to review their decision or resolution in which they had taken part. As it turned out, only
Justice Diosdado M. Peralta and Justice Lucas P. Bersamin were the remaining Members
of the Special Third Division, and the task of being in charge procedurally fell on either of
them. As such, it is fallacious for FASAP to still insist that the previous raffle had
48

complied with Section 4(3), Article VIII of the 1987 Constitution just because the Members
of the Division actually took part in the deliberations.

FASAP is further wrong to insist on the application of the harmless error rule. The rule is
embodied in Section 6, Rule 51 of the Rules of Court, which states:
Section 6. Harmless error. No error in either the admission or the
exclusion of evidence and no error or defect in any ruling or order or in
anything done or omitted by the trial court or by any of the parties is
ground for granting a new trial or for setting aside, modifying, or otherwise
disturbing a judgment or order, unless refusal to take such action appears
to the court inconsistent with substantial justice. The court at every stage
of the proceedings must disregard any error or defect which does not
affect the substantial rights of the parties.

The harmless error rule obtains during review of the things done by either the trial court or
by any of the parties themselves in the course of trial, and any error thereby found does
not affect the substantial rights or even the merits of the case. The Court has had
occasions to apply the rule in the correction of a misspelled name due to clerical
error; the signing of the decedents' names in the notice of appeal by the heirs; the trial
49 50

court's treatment of the testimony of the party as an adverse witness during


cross-examination by his own counsel; and the failure of the trial court to give the
51

plaintiffs the opportunity to orally argue against a motion. All of the errors extant in the
52

mentioned situations did not have the effect of altering the dispositions rendered by the
respective trial courts. Evidently, therefore, the rule had no appropriate application herein.

The Court sees no justification for the urging of FASAP that the participation of the late
Chief Justice Corona voided the recall order. The urging derives from FASAP’s failure to
distinguish the role of the Chief Justice as the Presiding Officer of the Banc. In this regard,
we advert to the March 13, 2012 resolution, where the Court made the following
observation:

A final point that needs to be fully clarified at this juncture, in light of the
allegations of the Dissent is the role of the Chief Justice in the recall of the
September 7, 2011 Resolution. As can be seen from the xxx narration,
the Chief Justice acted only on the recommendation of the ruling
Division, since he had inhibited himself from participation in the case
long before. The confusion on this matter could have been brought
about by the Chief Justice's role as the Presiding Officer ofthe
Court en banc (particularly in its meeting of October 4, 2011), and the
fact that the four most senior Justices of the Court (namely, Justices
Corona, Carpio, Velasco and Leonardo-De Castro) inhibited from
participating in the case. In the absence of any clear personal
malicious participation, it is neither correct nor proper to hold the
Chief Justice personally accountable for the collegial ruling of the
Court en banc. (Bold underscoring supplied for emphasis)
53

To reiterate, the Court, whether sitting En Banc or in Division, acts as a collegial body. By
virtue of the collegiality, the Chief Justice alone cannot promulgate or issue any decisions
or orders. In Complaint of Mr. Aurelio Jndencia Arrienda Against SC Justices Puna,
Kapunan, Pardo, YnaresSantiago, the Court has elucidated on the collegial nature of the
54

Court in relation to the role of the Chief Justice, viz.:

The complainant’s vituperation against the Chief Justice on account of


what he perceived was the latter's refusal "to take a direct positive and
favorable action" on his letters of appeal overstepped the limits of proper
conduct. It betrayed his lack of understanding of a fundamental principle in
our system of laws. Although the Chief Justice is primus inter pares, he
cannot legally decide a case on his own because of the Court's nature as
a collegial body. Neither can the Chief Justice, by himself, overturn the
decision of the Court, whether of a division or the en banc.

There is only one Supreme Court from whose decisions all other courts
are required to take their bearings.While most of the Court's work is
performed by its three divisions, the Court remains one court-single,
unitary, complete and supreme. Flowing from this is the fact that, while
individual justices may dissent or only partially concur, when the Court
states what the law is, it speaks with only one voice. Any doctrine or
principle of law laid down by the court may be modified or reversed only by
the Court en banc. 55

Lastly, any lingering doubt on the validity of the recall order should be dispelled by the fact
that the Court upheld its issuance of the order through the March 13, 2012 resolution,
whereby the Court disposed:

WHEREFORE, premises considered, we hereby confirm that the


Court en bane has assumed jurisdiction over the resolution of the
merits of the motions for reconsideration of Philippine Airlines, Inc.,
addressing our July 22, 2008 Decision and October 2, 2009
Resolution; and that the September 7, 2011 ruling of the Second
Division has been effectively recalled. This case should now be raffled
either to Justice Lucas P. Bersamin or Justice Diosdado M. Peralta (the
remaining members of the case) as Member-in-Charge in resolving the
merits of these motions.

xxxx

The Flight Attendants and Stewards Association of the Philippines’


Motion for Reconsideration of October 17, 2011 is hereby denied; the
recall of the September 7, 2011 Resolution was made by the Court on
its own before the ruling’s finality pursuant to the Court’s power of
control over its orders and resolutions. Thus, no due process issue
ever arose.

SO ORDERED.

II

PAL's Second Motion for Reconsideration


| of the Decision of July 22, 2008
| could be allowed in the higher interest of justice

FASAP asserts that PAL’s Second Motion for Reconsideration of the Decision of July 22,
2008 was a prohibited pleading; and that the July 22, 2008 decision was not anymore
subject to reconsideration due to its having already attained finality.

FASAP’s assertions are unwarranted.

With the Court’s resolution of January 20, 2010 granting PAL’s motion for leave to file a
second motion for reconsideration, PAL's Second Motion for Reconsideration of the
56

Decision of July 22, 2008 could no longer be challenged as a prohibited pleading. It is


already settled that the granting of the motion for leave to file and admit a second motion
for reconsideration authorizes the filing of the second motion for
reconsideration. Thereby, the second motion for reconsideration is no longer a prohibited
57

pleading, and the Court cannot deny it on such basis alone. 58

Nonetheless, we should stress that the rule prohibiting the filing of a second motion for
reconsideration is by no means absolute. Although Section 2, Rule 52 of the Rules of
Court disallows the filing of a second motion for reconsideration, the Internal Rules of the
59

Supreme Court (IRSC) allows an exception, to wit:

Section 3. Second motion for reconsideration. - The Court shall not


entertain a second motion for reconsideration, and any exception to this
rule can only be granted in the higher interest of justice by the
Court en bane upon a vote of at least two-thirds of its actual
membership.There is reconsideration "in the higher interest of justice"
when the assailed decision is not only legally erroneous, but is likewise
patently unjust and potentially capable of causing unwarranted and
irremediable injury or damage to the parties. A second motion for
reconsideration can only be entertained before the ruling sought to
be reconsidered becomes final by operation of law or by the Court's
declaration.

In the Division, a vote of three Members shall be required to elevate a


second motion for reconsideration to the Court en banc.

The conditions that must concur in order for the Court to entertain a second motion for
reconsideration are the following, namely:

1. The motion should satisfactorily explain why granting the same would be in the higher
interest of justice;

2. The motion must be made before the ruling sought to be reconsidered attains finality;

3. If the ruling sought to be reconsidered was rendered by the Court through one of its
Divisions, at least three members of the Division should vote to elevate the case to the
Court En Banc; and

4. The favorable vote of at least two-thirds of the Court En Bane’s actual membership
must be mustered for the second motion for reconsideration to be granted. 60

Under the IRSC, a second motion for reconsideration may be allowed to prosper upon a
showing by the movant that a reconsideration of the previous ruling is necessary in the
higher interest of justice. There is higher interest of justice when the assailed decision is
not only legally erroneous, but is likewise patently unjust and potentially capable of
causing unwarranted and irremediable injury or damage to the parties. 61

PAL maintains that the July 22, 2008 decision contravened prevailing jurisprudence that 62

had recognized its precarious financial condition; that the decision focused on PAL’s
63

inability to prove its financial losses due to its failure to submit audited financial statements;
that the decision ignored the common findings on the serious financial losses suffered by
PAL made by the Labor Arbiter, the NLRC, the CA and even the SEC; and that the 64
decision and the subsequent resolution denying PAL’s motion for reconsideration would
negate whatever financial progress it had achieved during its rehabilitation. 65

These arguments of PAL sufficed to show that the assailed decision contravened settled
jurisprudence on PAL’s precarious financial condition. It cannot be gainsaid that there
were other businesses undergoing rehabilitation that would also be bound or negatively
affected by the July 22, 2008 decision. This was the higher interest of justice that the
Court sought to address, which the dissent by Justice Leonen is adamant not to
accept. Hence, we deemed it just and prudent to allow PAL’s Second Motion for
66

Reconsideration of the Decision of July 22, 2008.

It is timely to note, too, that the July 22, 2008 decision did not yet attain finality. The
October 4, 2011 resolution recalled the September 7, 2011 resolution denying PAL’s first
motion for reconsideration. Consequently, the July 22, 2008 decision did not attain finality.

The dissent by Justice Leonen nonetheless proposes a contrary view- that both the July
22, 2008 decision and the October 2, 2009 resolution had become final on November 4,
2009 upon the lapse of 15 days following PAL’s receipt of a copy of the resolution. To him,
the grant of leave to PAL to file the second motion for reconsideration only meant that the
motion was no longer prohibited but it did not stay the running of the reglementary period
of 15 days. He submits that the Court’s grant of the motion for leave to file the second
motion for reconsideration did not stop the October 2, 2009 resolution from becoming final
because a judgment becomes final by operation of law, not by judicial declaration. 67

The proposition of the dissent is unacceptable.

In granting the motion for leave to file the second motion for reconsideration, the Court
could not have intended to deceive the movants by allowing them to revel in some hollow
victory. The proposition manifestly contravened the basic tenets of justice and fairness.

As we see it, the dissent must have inadvertently ignored the procedural effect that a
second motion for reconsideration based on an allowable ground suspended the running
of the period for appeal from the date of the filing of the motion until such time that the
same was acted upon and granted. Correspondingly, granting the motion for leave to file
68

a second motion for reconsideration has the effect of preventing the challenged decision
from attaining finality. This is the reason why the second motion for reconsideration
should present extraordinarily persuasive reasons. Indeed, allowing pro forma motions
would indefinitely avoid the assailed judgment from attaining finality. 69

By granting PAL’s motion for leave to file a second motion for reconsideration, the Court
effectively averted the July 22, 2008 decision and the October 2, 2009 resolution from
attaining finality. Worthy of reiteration, too, is that the March 13, 2012 resolution expressly
recalled the September 7, 2011 resolution.

Given the foregoing, the conclusion stated in the dissent that the Banc was divested of the
jurisdiction to entertain the second motion for reconsideration for being a "third motion for
reconsideration;" and the unfair remark in the dissent that "[t]he basis of the supposed
70

residual power of the Court En Banc to, take on its own, take cognizance of Division cases
is therefore suspect" are immediately rejected as absolutely legally and factually
71

unfounded.
To start with, there was no "third motion for reconsideration" to speak of. The September
11, 2011 resolution denying PAL’s second motion for reconsideration had been recalled
by the October 4, 2011 resolution. Hence, PAL’s motion for reconsideration remained
unresolved, negating the assertion of the dissent that the Court was resolving the second
motion for reconsideration "for the second time."72

Also, the dissent takes issue against our having assumed jurisdiction over G.R. No.
178083 despite the clear reference made in the October 4, 2011 resolution to Sections
3(m) and (n), Rule 2 of the IRSC. Relying largely on the Court's construction of Section
4(3), Article VIII of the 1987 Constitution in Fortich v. Corona, the dissent opines that
73

the Banc could not act as an appellate court in relation to the decisions of the
Division; and that the Banc could not take cognizance of any case in the Divisions except
74

upon a prior consulta from the ruling Division pursuant to Section 3(m), in relation to
Section 3(1), Rule 2 of the IRSC.75

The Court disagrees with the dissent’s narrow view respecting the residual powers of
the Banc.

Fortich v. Corona, which has expounded on the authority of the Banc to accept cases
from the Divisions, is still the prevailing jurisprudence regarding the construction of
Section 4(3), Article VIII of the 1987 Constitution. However, Fortich v. Corona does not
apply herein. It is notable that Fortich v. Corona sprung from the results of the voting on
the motion for reconsideration filed by the Sumilao Farmers. The vote ended in an equally
divided Division ("two-two"). From there, the Sumilao Farmers sought to elevate the
matter to the Banc based on Section 4(3), Article VIII because the required three-member
majority vote was not reached. However, the factual milieu in Fortich v. Corona is not on
all fours with that in this case.

In the March 13, 2012 resolution, the Court recounted the exigencies that had prompted
the Banc to take cognizance of the matter, to wit:

On September 28, 2011, the Letters dated September 13 and 20, 2011 of
Atty. Mendoza to Atty. Vidal (asking that his inquiry be referred to the
relevant Division Members who took part on the September 7, 2011
Resolution) were "NOTED" by the regular Second Division. The Members
of the ruling Division also met to consider the queries posed by Atty.
Mendoza. Justice Brion met with the Members of the ruling Division
(composed of Justices Brion, Peralta, Perez, Bersamin, and Mendoza),
rather than with the regular Second Division (composed of Justices Carpio,
Brion, Perez, and Sereno), as the former were the active participants in
the September 7, 2011 Resolution.

In these meetings, some of the Members of the ruling Division saw the
problems pointed out above, some of which indicated that the ruling
Division might have had no authority to rule on the case. Specifically, their
discussions centered on the application of A.M. No. 99-8-09-SC for the
incidents that transpired prior to the effectivity of the IRSC, and on the
conflicting rules under the IRSC - - Section 3, Rule 8 on the effects of
inhibition and Section 7, Rule 2 on the resolution of MRs.

A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be
made among the other Members of the san1e Division who participated in
rendering the decision or resolution and who concurred therein, which
should now apply because the ruling on the case is no longer final after
the case had been opened for review on the merits. In other words, after
acceptance by the Third Division, through Justice Velasco, of the 2nd MR,
there should have been a referral to raffle because the excepting
qualification that the Clerk of Court cited no longer applied; what was
being reviewed were the merits of the case and the review should be by
the same Justices who had originally issued the original Decision and the
subsequent Resolution, or by whoever of these Justices are still left in the
Court, pursuant to the same A.M. No. 99-8-09- SC.

On the other hand, the raffle to Justice Brion was made by applying AC No.
84-2007 that had been superseded by Section 3, Rule 8 of the IRSC.
Even the use of this IRSC provision, however, would not solve the
problem, as its use still raised the question of the provision that should
really apply in the resolution of the MR: should it be Section 3, Rule 8 on
the inhibition of a Member-in-Charge, or Section 7, Rule 2 of the IRSC on
the inhibition of the ponente when an MR of a decision and a signed
resolution was filed. xxx

xxx xxx xxx

A comparison of these two provisions shows the semantic sources of the


seeming conflict: Section 7, Rule 2 refers to a situation where
the ponente has retired, is no longer a Member of the Court, is disqualified,
or has inhibited himself from acting on the case; while Section 3, Rule 8
generally refers to the inhibition of a Member-in-Charge who does not
need to be the writer of the decision or resolution under review.

Significantly, Section 7, Rule 2 expressly uses the word ponente (not


Member-in-Charge) and refers to a specific situation where
the ponente (or the writer of the Decision or the Resolution) is no longer
with the Court or is otherwise unavailable to review the decision or
resolution he or she wrote. Section 3, Rule 8, on the other hand, expressly
uses the term Member-in-Charge and generally refers to his or her
inhibition, without reference to the stage of the proceeding when the
inhibition is made.

Under Section 7, Rule 2, the case should have been re-raffled and
assigned to anyone of Justices Nachura (who did not retire until June 13,
2011), Peralta, or Bersamin, either (1) after the acceptance of the 2nd MR
(because the original rulings were no longer final); or (2) after Justice
Velasco's inhibition because the same condition existed, i.e., the need for
a review by the same Justices who rendered the decision or resolution. As
previously mentioned, Justice Nachura participated in both the original
Decision and the subsequent Resolution, and all three Justices were the
remaining Members who voted on the October 2, 2009 Resolution. On the
other hand, if Section 3, Rule 8 were to be solely applied after Justice
Velasco' s inhibition, the Clerk of Court would be correct in her
assessment and the raffle to Justice Brion, as a Member outside of Justice
Velasco’s Division, was correct.
These were the legal considerations that largely confronted the ruling
Division in late September 2011 when it deliberated on what to do with
Atty. Mendoza’s letters.

The propriety of and grounds for

the recall of the September 7,


2011 Resolution

Most unfortunately, the above unresolved questions were even further


compounded in the course of the deliberations of the Members of the
ruling Division when they were informed that the parties received the
ruling on September 19, 2011, and this ruling would lapse to finality after
the 15th day, or after October 4, 2011.

Thus, on September 30, 2011 (a Friday), the Members went to Chief


Justice Corona and recommended, as a prudent move, that the
September 7, 2011 Resolution be recalled at the very latest on October 4,
2011, and that the case be referred to the Court en bane for a ruling on the
questions Atty. Mendoza asked. The consequence, of course, of a failure
to recall their ruling was for that Resolution to lapse to finality. After finality,
any recall for lack of jurisdiction of the ruling Division might not be
understood by the parties and could lead to a charge of flip-flopping
against the Court. The basis for the referral is Section 3(n), Rule 2 of the
IRSC, which provides:

RULE 2.

OPERATING STRUCTURES

Section 3. Court en bane matters and eases.-The Court en bane shall act
on the following matters and cases:

xxxx

(n) cases that the Court en bane deems of sufficient importance to merit
its attention[.]"

Ruling positively, the Court en bane duly issued its disputed October 4,
2011 Resolution recalling the September 7, 2011 Resolution and ordering
the re-raffle of the case to a new Member-in-Charge. Later in the day, the
Court received PAL's Motion to Vacate (the September 7, 2011 ruling)
dated October 3, 2011. This was followed by FASAP's MR dated October
17, 2011 addressing the Court Resolution of October 4, 2011. The F
ASAP MR mainly invoked the violation of its right to due process as the
recall arose from the Court’s ex parte consideration of mere letters from
one of the counsels of the parties.

As the narration in this Resolution shows, the Court acted on its own
pursuant to its power to recall its own orders and resolutions before their
finality. The October 4, 2011 Resolution was issued to determine the
propriety of the September 7, 2011 Resolution given the facts that came to
light after the ruling Division’s examination of the records. To point out the
obvious, the recall was not a ruling on the merits and did not constitute the
reversal of the substantive issues already decided upon by the Court in
the F ASAP case in its previously issued Decision (of July 22, 2008) and
Resolution (of October 2, 2009). In short, the October 4, 2011 Resolution
was not meant and was never intended to favor either party, but to simply
remove any doubt about the validity of the ruling Division's action on the
case. The case, in the ruling Division's view, could be brought to the
Court en banc since it is one of "sufficient importance"; at the very least, it
involves the interpretation of conflicting provisions of the IRSC with
potential jurisdictional implications.

At the time the Members of the ruling Division went to the Chief Justice to
recommend a recall, there was no clear indication of how they would
definitively settle the unresolved legal questions among themselves. The
only matter legally certain was the looming finality of the September 7,
2011 Resolution if it would not be immediately recalled by the Court en
bane by October 4, 2011. No unanimity among the Members of the ruling
Division could be gathered on the unresolved legal questions; thus, they
concluded that the matter is best determined by the Court en bane as it
potentially involved questions of jurisdiction and interpretation of
conflicting provisions of the IRSC. To the extent of the recommended
recall, the ruling Division was unanimous and the Members communicated
this intent to the Chief Justice in clear and unequivocal terms. (Bold 76

scoring supplied for emphasis)

It is well to stress that the Banc could not have assumed jurisdiction were it not for the
initiative of Justice Arturo V. Brion who consulted the Members of the ruling Division as
well as Chief Justice Corona regarding the jurisdictional implications of the successive
retirements, transfers, and inhibitions by the Members of the ruling Division. This move by
Justice Brion led to the referral of the case to the Banc in accordance with Section 3(1),
Rule 2 of the IRSC that provided, among others, that any Member of the Division could
request the Court En Banc to take cognizance of cases that fell under paragraph (m). This
referral by the ruling Division became the basis for the Banc to issue its October 4, 2011
resolution.

For sure, the Banc, by assuming jurisdiction over the case, did not seek to act as
appellate body in relation to the acts of the ruling Division, contrary to the dissent's
position.77 The Bane's recall of the resolution of September 7, 2011 should not be so
characterized, considering that the Banc did not thereby rule on the merits of the case,
and did not thereby reverse the July 22, 2008 decision and the October 2, 2009 resolution.
The referral of the case to the Banc was done to address the conflict among the
provisions of the IRSC that had potential jurisdictional implications on the ruling made by
the Second Division.

At any rate, PAL constantly raised in its motions for reconsideration that the ruling Division
had seriously erred not only in ignoring the consistent findings about its precarious
financial situation by the Labor Arbiter, the NLRC, the CA and the SEC, but also in
disregarding the pronouncements by the Court of its serious fiscal condition. To be clear,
because the serious challenge by PAL against the ruling of the Third Division was
anchored on the Third Division’s having ignored or reversed settled doctrines or principles
of law, only the Banc could assume jurisdiction and decide to either affirm, reverse or
modify the earlier decision. The rationale for this arrangement has been expressed in Lu v.
Lu Ym thuswise:
78

It is argued that the assailed Resolutions in the present cases have


already become final, since a second motion for reconsideration is
prohibited except for extraordinarily persuasive reasons and only upon
express leave first obtained; and that once a judgment attains finality, it
thereby becomes immutable and unalterable, however unjust the result of
error may appear.

The contention, however, misses an important point. The doctrine


of immutability of decisions applies only to final and executory decisions.
Since the present cases may involve a modification or reversal of a
Court-ordained doctrine or principle, the judgment rendered by the Special
Third Division may be considered unconstitutional, hence, it can never
become final. It finds mooring in the deliberations of the framers of the
Constitution:

On proposed Section 3(4), Commissioner Natividad asked what the effect


would be of a decision that violates the proviso that "no doctrine or
principle of law laid down by the court in a decision rendered en bane or in
division may be modified or reversed except by the court en bane." The
answer given was that such a decision would be invalid. Following up,
Father Bernas asked whether the decision, if not challenged, could
become final and binding at least on the parties. Romulo answered
that, since such a decision would be in excess of jurisdiction, the
decision on the case could be reopened anytime. (emphasis and
underscoring supplied)

A decision rendered by a Division of this Court in violation of this


constitutional provision would be in excess of jurisdiction and, therefore,
invalid. Any entry of judgment may thus be said to be "inefficacious" since
the decision is void for being unconstitutional.

While it is true that the Court en bane exercises no appellate jurisdiction


over its Divisions, Justice Minerva Gonzaga-Reyes opined
in Firestone and concededly recognized that "[t]he only constraint is that
any doctrine or principle of law laid down by the Court, either rendered en
bane or in division, may be overturned or reversed only by the Court
sitting en banc."

That a judgment must become final at some definite point at the risk of
occasional error cannot be appreciated in a case that embroils not only a
general allegation of "occasional error" but also a serious accusation of a
violation of the Constitution, viz., that doctrines or principles of law were
modified or reversed by the Court's Special Third Division August 4, 2009
Resolution.

The law allows a determination at first impression that a doctrine or


principle laid down by the court en bane or in division may be modified or
reversed in a case which would warrant a referral to the Court En
Banc. The use of the word "may" instead of "shall" connotes probability,
not certainty, of modification or reversal of a doctrine, as may be deemed
by the Court. Ultimately, it is the entire Court which shall decide on the
acceptance of the referral and, if so, "to reconcile any seeming conflict, to
reverse or modify an earlier decision, and to declare the Court's doctrine."

The Court has the power and prerogative to suspend its own rules and to
exempt a case from their operation if and when justice requires it, as in the
present circumstance where movant filed a motion for leave after the
prompt submission of a second motion for reconsideration but,
nonetheless, still within 15 days from receipt of the last assailed
resolution.79

Lastly, the dissent proposes that a unanimous vote is required to grant PAL’s Second
Motion for Reconsideration of the Decision of July 22, 2008. The dissent justifies the
80

proposal by stating that "[a] unanimous court would debate and deliberate more fully
compared with a non-unanimous court. " 81

The radical proposal of the dissent is bereft of legal moorings. Neither the 1987
Constitution nor the IRSC demands such unanimous vote. Under Section 4(2), Article VIII
of the 1987 Constitution, decisions by the Bancshall be attained by a "concurrence of a
majority of the Members who actually took part in the deliberations on the issues in the
case and voted thereon." As a collegial body, therefore, the Court votes after deliberating
on the case, and only a majority vote is required, unless the 1987 Constitution specifies
82

otherwise. In all the deliberations by the Court, dissenting and concurring opinions are
welcome, they being seen as sound manifestations of "the license of individual Justices or
groups of Justices to separate themselves from "the Court’s" adjudication of the case
before them," thus:
83

[C]oncurring and dissenting opinions serve functions quite consistent with


a collegial understanding of the Court. Internally within the Court
itself---dissent promotes and improves deliberation and judgment.
Arguments on either side of a disagreement test the strength of their rivals
and demand attention and response. The opportunity for challenge and
response afforded by the publication of dissenting and concurring opinions
is a close and sympathetic neighbor of the obligation of reasoned
justification.

Externally for lower courts, the parties, and interested


bystanders-concurring and dissenting opinions are important guides to the
dynamic "meaning" of a decision by the Court. From a collegial
perspective, dissenting and concurring opinions offer grounds for
understanding how individual Justices, entirely faithful to their Court's
product, will interpret that product. The meaning each Justice brings to the
product of her Court will inevitably be shaped by elements of value and
judgment she brings to the interpretive endeavor; her dissent from the
Court's conclusions in the case in question is likely to be dense with
insight into these aspects of her judicial persona.
84

III

PAL implemented a valid retrenchment program

Retrenchment or downsizing is a mode of terminating employment initiated by the


employer through no fault of the employee and without prejudice to the latter, resorted to
by management during periods of business recession, industrial depression or seasonal
fluctuations or during lulls over shortage of materials. It is a reduction in manpower, a
measure utilized by an employer to minimize business losses incurred in the operation of
its business.
85

Anent retrenchment, Article 298 of the Labor Code provides as follows:


86

Article 298. Closure of Establishment and Reduction of Personnel. - The


employer may also terminate the employment of any employee
due to the installation of labor saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in
cases of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least
one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.

Accordingly, the employer may resort to retrenchment in order to avert serious business
losses. To justify such retrenchment, the following conditions must be present, namely:

1. The retrenchment must be reasonably necessary and likely to prevent business losses;

2. The losses, if already incurred, are not merely de minimis, but substantial, serious,
actual and real, or, if only expected, are reasonably imminent;

3. The expected or actual losses must be proved by sufficient and convincing evidence;

4. The retrenchment must be in good faith for the advancement of its interest and not to
defeat or circumvent the employees' right to security of tenure; and

5. There must be fair and reasonable criteria m ascertaining who would be dismissed and
who would be retained among the employees, such as status, efficiency, seniority,
physical fitness, age, and financial hardship for certain workers.
87

Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial losses because
it did not submit its audited financial statements as evidence; (2) observe good faith in
implementing the retrenchment program; and (3) apply a fair and reasonable criteria in
selecting who would be terminated.

Upon a critical review of the records, we are convinced that PAL had met all the standards
in effecting a valid retrenchment.

A
PAL’s serious financial losses were duly established

PAL was discharged of the


| burden to prove serious
| financial losses in view of
| F ASAP's admission

PAL laments the unfair and unjust conclusion reached in the July 22, 2008 decision to the
effect that it had not proved its financial losses due to its non-submission of audited
financial statements. It points out that the matter of financial losses had not been raised as
an issue before the Labor Arbiter, the NLRC, the CA, and even in the petition in G.R. No.
178083 in view of FASAP’s admission of PAL having sustained serious losses; and that
PAL’s having been placed under rehabilitation sufficiently indicated the financial distress
that it was suffering.

It is quite notable that the matter of PAL’s financial distress had originated from the
complaint filed by F ASAP whereby it raised the sole issue of "Whether or not respondents
committed Unfair Labor Practice." F ASAP believed that PAL, in terminating the 1,400
88

cabin crew members, had violated Section 23, Article VII and Section 31, Article IX of the
1995- 2000 P AL-FASAP CBA. Interestingly, FASAP averred in its position paper therein
that it was not opposed to the retrenchment program because it understood PAL’s
financial troubles; and that it was only questioning the manner and lack of standard in
carrying out the retrenchment, thus:

At the outset, it must be pointed out that complainant was never opposed
to the retrenchment program itself, as it understands respondent PAL’s
financial troubles. In fact, complainant religiously cooperated with
respondents in their quest for a workable solution to the
company-threatening problem. Attached herewith as Annexes "A" to "D"
are the minutes of its meetings with respondent PAL’s representatives
showing complainant's active participation in the deliberations on the
issue.

What complainant vehemently objects to are the manner and the lack of
criteria or standard by which the retrenchment program was implemented
or carried out, despite the fact that there are available criteria or standard
that respondents could have utilized or relied on in reducing its workforce.
In adopting a retrenchment program that was fashioned after the evil
prejudices and personal biases of respondent Patria Chiong, respondent
PAL grossly violated at least two important provisions of its CBA with
complainant - Article VII, Section 23 and Article IX, Sections 31and 32. 89

These foregoing averments of F ASAP were echoed in its reply and


90

memorandum submitted to the Labor Arbiter.


91

Evidently, FASAP’s express recognition of PAL’s grave financial situation meant that such
situation no longer needed to be proved, the same having become a judicial admission in 92

the context of the issues between the parties. As a rule, indeed, admissions made by
parties in the pleadings, or in the course of the trial or other proceedings in the same case
are conclusive, and do not require further evidence to prove them. By FASAP’s 93

admission of PAL’s severe financial woes, PAL was relieved of its burden to prove its dire
financial condition to justify the retrenchment. Thusly, PAL should not be taken to task for
the non-submission of its audited financial statements in the early part of the proceedings
inasmuch as the non-submission had been rendered irrelevant.

Yet, the July 22, 2008 decision ignored the judicial admission and unfairly focused on the
lack of evidence of PAL’s financial losses. The Special Third Division should have realized
that PAL had been discharged of its duty to prove its precarious fiscal situation in the face
of FASAP’s admission of such situation. Indeed, PAL did not have to submit the audited
financial statements because its being in financial distress was not in issue at all.

Nonetheless, the dissent still insists that PAL should be faulted for failing to prove its
substantial business losses, and even referred to several decisions of the Court wherein
94

the employers had purportedly established their serious business losses as a requirement
for a valid retrenchment.

Unfortunately, the cases cited by the dissent obviously had no application herein because
they originated from either simple complaints of illegal retrenchment, or unfair labor
practice, or additional separation pay.95

LVN Pictures originated from a complaint for unfair labor practice (ULP) based on
Republic Act No. 874 (Industrial Peace Act). The allegations in the complaint concerned
interference, discrimination and refusal to bargain collectively. The Court pronounced
therein that the employer (L VN Pictures) did not resort to ULP because it was able to
justify its termination, closure and eventual refusal to bargain collectively through the
financial statements showing that it continually incurred serious financial losses. Notably,
the Court did not interfere with the closure and instead recognized LVN’s management
prerogative to close its business and dismiss its employees.

North Davao Mining was a peculiar case, arising from a complaint for additional
separation pay, among others. The Court therein held that separation pay was not
required if the reason for the termination was due to serious business losses. It clarified
that Article 283 (now Art. 298) governed payment of separation benefits in case of closure
of business not due to serious business losses. When the reason for the closure was
serious business losses, the employer shall not be required to grant separation pay to the
terminated employees.

In Manatad, the complaint for illegal dismissal was based on the allegation that the
retrenchment program was illegal because the employer was gaining profits. Hence, the
core issue revolved around the existence (or absence) of grave financial losses that would
justify retrenchment.

In the cited cases, the employers had to establish that they were incurring serious
business losses because it was the very issue, if not intricately related to the main issue
presented in the original complaints. In contrast, the sole issue herein as presented by F
ASAP to the Labor Arbiter was the "manner of retrenchment," not the basis for
retrenchment. F ASAP itself, in representation of the retrenched employees, had admitted
in its position paper, as well as in its reply and memorandum submitted to the Labor
Arbiter the fact of serious financial losses hounding PAL. In reality, PAL was not remiss by
not proving serious business losses. FASAP’s admission of PAL’s financial distress
already established the latter's precarious financial state.

Judicial notice could be taken


of the financial losses
incurred; the presentation of
audited financial statements
was not required in such
circumstances

The July 22, 2008 decision recognized that PAL underwent corporate rehabilitation. In
seeming inconsistency, however, the Special Third Division refused to accept that PAL
had incurred serious financial losses, observing thusly:

The audited financial statements should be presented before the


Labor Arbiter who is in the position to evaluate evidence. They may
not be submitted belatedly with the Court of Appeals, because the
admission of evidence is outside the sphere of the appellate
court's certiorarijurisdiction. Neither can this Court admit in evidence
audited financial statements, or make a ruling on the question of whether
the employer incurred substantial losses justifying retrenchment on the
basis thereof, as this Court is not a trier of facts. Even so, this Court may
not be compelled to accept the contents of said documents blindly and
without thinking.

xxxx

In the instant case, PAL failed to substantiate its claim of actual and
imminent substantial losses which would justify the retrenchment of more
than 1,400 of its cabin crew personnel. Although the Philippine
economy was gravely affected by the Asian financial crisis, however,
it cannot be assumed that it has likewise brought PAL to the brink of
bankruptcy. Likewise, the fact that PAL underwent corporate
rehabilitation does not automatically justify the retrenchment of its
cabin crew personnel. (Emphasis supplied)
96

Indeed, that a company undergoes rehabilitation sufficiently indicates its fragile financial
condition. lt is rather unfortunate that when PAL petitioned for rehabilitation the term
"corporate rehabilitation" still had no clear definition. Presidential Decree No. 902-A, the
97

law then applicable, only set the remedy. Section 6(c) and (d) of P.D. No. 902-A gave an
98

insight into the precarious state of a distressed corporation requiring the appointment of a
receiver or the creation of a management committee, viz.:

xxxx

c) To appoint one or more receivers of the property, real and personal,


which is the subject of the action pending before the Commission in
accordance with the pertinent provisions of the Rules of Court in such
other cases whenever necessary in order to preserve the rights of the
parties-litigants and/or protect the interest of the investing public
and creditors: Provided, however, That the Commission may, in
appropriate cases, appoint a rehabilitation receiver of corporations,
partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to the powers of a
regular receiver under the provisions of the Rules of Court, such functions
and powers as are provided for in the succeeding paragraph d)
hereof: Provided,further, That the Commission may appoint a
rehabilitation receiver of corporations, partnerships or other associations
supervised or regulated by other government agencies, such as banks
and insurance companies, upon request of the government agency
concerned: Provided, finally, That upon appointment of a management
committee, rehabilitation receiver, board or body, pursuant to this
Decree, all actions for claims against corporations, partnerships or
associations under management or receivership pending before any
court, tribunal, board or body shall be suspended accordingly.

d) To create and appoint a management committee, board, or body upon


petition or moto propio to undertake the management of corporations,
partnerships or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent
danger of dissipation, loss, wastage or destruction of assets or other
properties of paralyzation of business operations of such
corporations or entities which may be prejudicial to the interest of
minority stockholders, parties-litigants or the general
public: Provided, further, That the Commission may create or appoint a
management committee, board or body to undertake the management of
corporations, partnerships or other associations supervised or regulated
by other government agencies, such as banks and insurance companies,
upon request of the government agency concerned.

The management committee or rehabilitation receiver, board or body shall


have the power to take custody of, and control over, all the existing assets
and property of such entities under management; to evaluate the existing
assets and liabilities, earnings and operations of such corporations,
partnerships or other associations; to determine the best way to
salvage and protect the interest of the investors and creditors; to
study, review and evaluate the feasibility of continuing operations and
restructure and rehabilitate such entities if determined to be feasible by
the Commission. It shall report and be responsible to the Commission until
dissolved by order of the Commission: Provided, however, That the
Commission may; on the basis of the findings and recommendation of the
management committee, or rehabilitation receiver, board or body, or on its
own findings; determine that the continuance in business of such
corporation or entity would not be feasible or profitable nor work to
the best interest of the stockholders, parties-litigants, creditors, or
the general public, order the dissolution of such corporation entity
and its remaining assets liquidated accordingly. The management
committee or rehabilitation receiver, board or body may overrule or revoke
the actions of the previous management and board of directors of the
entity or entities under management notwithstanding any provision of law,
articles of incorporation or by-laws to the contrary.

The management committee, or rehabilitation receiver, board or body


shall not be subject to any action, claim or demand for, or in connection
with, any act done or omitted to be done by it in good faith in the exercise
of its functions, or in connection with the exercise of its power herein
conferred. (Bold underscoring supplied for emphasis)

After having been placed under corporate rehabilitation and its rehabilitation plan having
been approved by the SEC on June 23, 2008, PAL’s dire financial predicament could not
be doubted. Incidentally, the SEC’s order of approval came a week after PAL had sent out
notices of termination to the affected employees. It is thus difficult to ignore the fact that
PAL had then been experiencing difficulty in meeting its financial obligations long before
its rehabilitation.

Moreover, the fact that airline operations were capital intensive but earnings were volatile
because of their vulnerability to economic recession, among others. The Asian financial
99

crisis in 1997 had wrought havoc among the Asian air carriers, PAL included. The 100

peculiarities existing in the airline business made it easier to believe that at the time of the
Asian financial crisis, PAL incurred liabilities amounting to ₱90,642,933,919.00, which
were way beyond the value of its assets that then only stood at ₱85,109,075,35l.

Also, the Court cannot be blind and indifferent to current events affecting the society and 101

the country’s economy, but must take them into serious consideration in its adjudication
102

of pending cases. In that regard, Section 2, Rule 129 of the Rules of Court recognizes that
the courts have discretionary authority to take judicial notice of matters that are of public
knowledge, or are capable of unquestionable demonstration, or ought to be known to
judges because of their judicial functions. The principle is based on convenience and
103

expediency in securing and introducing evidence on matters that are not ordinarily
capable of dispute and are not bona fidedisputed. 104

Indeed, the Labor Arbiter properly took cognizance of PAL’s substantial financial losses
during the Asian financial crisis of 1997. On its part, the NLRC recognized the grave
105

financial distress of PAL based on its ongoing rehabilitation/receivership. The CA 106

likewise found that PAL had implemented a retrenchment program to counter its
tremendous business losses that the strikes of the pilot's union had aggravated. Such 107

recognitions could not be justly ignored or denied, especially after PAL's financial and
operational difficulties had attracted so much public attention that even President Estrada
had to intervene in order to save PAL as the country’s flag carrier. 108

The Special Third Division also observed that PAL had submitted a "stand-alone"
rehabilitation program that was viewed as an acknowledgment that it could "undertake
recovery on its own and that it possessed enough resources to weather the financial
storm." The observation was unfounded considering that PAL -had been constrained to
submit the "stand-alone" rehabilitation plan on December 7, 1998 because of the lack of a
strategic partner.109

We emphasize, too, that the presentation of the audited financial statements should not
the sole means by Which to establish the employer's serious financial losses. The
presentation of audited financial statements, although convenient in proving the unilateral
claim of financial losses, is not required for all cases of retrenchment. The evidence
required for each case of retrenchment really depends on the particular circumstances
obtaining. The Court has cogently opined in that regard:

That petitioners were not able to present financial statements for years
prior to 2005 should not be automatically taken against them. Petitioner
BEMI was organized and registered as a corporation in 2004 and started
business operations in 2005 only. While financial statements for
previous years may be material in establishing the financial trend for
an employer, these are not indispensable in all cases of
retrenchment. The evidence required for each case of retrenchment
will still depend on its particular circumstances. In fact, in Revidad v.
National Labor Relations Commission, the Court declared that "proof
of actual financial losses incurred by the company is not a
condition sine qua non for retrenchment," and retrenchment may be
undertaken by the employer to prevent even future losses:

In its ordinary connotation, the phrase "to prevent losses" means that
retrenchment or termination of the services of some employees is
authorized to be undertaken by the employer sometime before the
anticipated losses are actually sustained or realized. It is not, in other
words, the intention of the lawmaker to compel the employer to stay his
hand and keep all his employees until after losses shall have in fact
materialized. If such an intent were expressly written into the law, that law
may well be vulnerable to constitutional attack as unduly taking property
from one man to be given to another. (Bold underscoring supplied for
110

emphasis)

In short, to require a distressed corporation placed under rehabilitation or receivership to


still submit its audited financial statements may become unnecessary or superfluous.

Under P.D. No. 902-A, the SEC was empowered during rehabilitation proceedings to
thoroughly review the corporate and financial documents submitted by PAL. Hence, by
the time when the SEC ordered PAL’s rehabilitation, suspension of payments and
receivership, the SEC had already ascertained PAL’s serious financial condition, and the
clear and imminent danger of its losing its corporate assets. To require PAL in the
proceedings below to still prove its financial losses would only trivialize the SEC’s order
and proceedings. That would be unfortunate because we should not ignore that the SEC
was then the competent authority to determine whether or not a corporation experienced
serious financial losses. Hence, the SEC's order - presented as evidence in the
proceedings below - sufficiently established PAL’s grave financial status.

Finally, PAL argues that the Special Third Division should not have deviated from the
pronouncements made in Garcia v. Philippine Airlines, Inc., Philippine Airlines, Inc. v.
Kurangking, Philippine Airlines v. Court of Appeals, Philippine Airlines v. Zamora,
Philippine Airlines v. PALEA, and Philippine Airlines v. National Labor Relations
Commission, all of which judicially recognized PAL’s dire financial condition.

The argument of PAL is valid and tenable.

Garcia v. Philippine Airlines, Inc. discussed the unlikelihood of reinstatement pending


appeal because PAL had been placed under corporate rehabilitation, explaining that
unlike the ground of substantial losses contemplated in a retrenchment case, the state of
corporate rehabilitation was judicially pre-determined by a competent court and not
formulated for the first time by the employer, viz.:

While reinstatement pending appeal aims to avert the continuing threat or


danger to the survival or even the life of the dismissed employee and his
family, it does not contemplate the period when the employer-corporation
itself is similarly in a judicially monitored state of being resuscitated in
order to survive.

The parallelism between a judicial order of corporation rehabilitation as a


justification for the non-exercise of its options, on the one hand, and a
claim of actual and imminent substantial losses as ground for
retrenchment, on the other hand, stops at the red line on the financial
statements. Beyond the analogous condition of financial gloom, as
discussed by Justice Leonardo Quisumbing in his Separate Opinion, are
more salient distinctions. Unlike the ground of substantial losses
contemplated in a retrenchment case, the state of corporate rehabilitation
was judicially pre-determined by a competent court and not formulated for
the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order
placing a corporation under rehabilitation. Respondent was, during the
period material to the case, effectively deprived of the alternative choices
under Article 223 of the Labor Code, not only by virtue of the statutory
injunction but also in view of the interim relinquishment of management
control to give way to the full exercise of the powers of the rehabilitation
receiver. Had there been no need to rehabilitate, respondent may have
opted for actual physical reinstatement pending appeal to optimize the
utilization of resources. Then again, though the management may think
this wise, the rehabilitation receiver may decide otherwise, not to mention
the subsistence of the injunction on claims. 111

In Philippine Airlines v. Kurangking; Philippine Airlines v. Court of Appeals, Philippine


Airlines v. PALEA and Philippine Airlines v. National Labor Relations Commission, the
Court uniformly upheld the suspension of monetary claims against PAL because of the
SEC’s order placing it under receivership. The Court emphasized the need to suspend the
payment of the claims pending the rehabilitation proceedings in order to enable the
management committee/receiver to channel the efforts towards restructuring and
rehabilitation. Philippine Airlines v. Zamorareiterated this rule and deferred to the prior
judicial notice taken by the Court in suspending the monetary claims of illegally dismissed
employees. 112

Through these rulings, the Court consistently recognized PAL’s financial troubles while
undergoing rehabilitation and suspension of payments. Considering that the ruling related
to conditions and circumstances that had occurred during the same period as those
obtaining in G.R. No. 178083, the Court cannot take a different view.

It is also proper to indicate that the Court decided the other cases long before the
promulgation of the assailed July 22, 2008 decision. Hence, the Special Third Division
should not have regarded the financial losses as an issue that still required determination.
Instead, it should have just simply taken judicial notice of the serious financial losses
being suffered by PAL. To still rule that PAL still did not prove such losses certainly
113

conflicted with the antecedent judicial pronouncements about PAL’s dire financial state.

As such, we cannot fathom the insistence by the dissent that the Court had not taken
judicial notice but merely "recognized" that PAL was under corporate rehabilitation.
Judicial notice is the cognizance of certain facts that judges may properly take and act on
without proof because they already know them. It is the manner of recognizing and
acknowledging facts that no longer need to be proved in court. In other words, when the
Court "recognizes" a fact, it inevitably takes judicial notice of it.

For sure, it would not have been the first time that the Court would have taken judicial
notice of the findings of the SEC and of antecedent jurisprudence recognizing the fact of
rehabilitation by the employer. The Court did so in the 2002 case of Clarion Printing
House, Inc. v. National Labor Relations Commission, to wit:
114
Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A)
("REORGANIZATION OF THE SECURITIES AND EXCHANGE
COMMISSION WITH ADDITIONAL POWERS AND PLACING SAID
AGENCY UNDER THE ADMINISTRATIVE SUPERVISION OF THE
OFFICE OF THE PRESIDENT"), as amended, read:

SEC. 5. In addition to the regulatory and adjudicative functions of THE


SECURITIES AND EXCHANGE COMMISSION over corporations,
partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original
and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx

(d) Petitions of corporations, partnerships or associations


declared in the state of suspension of payments in cases where the
corporation, partnership or association possesses sufficient
property to cover all debts but foresees the impossibility of meeting
them when they respectively fall due or in cases where the
corporation, partnership, association has no sufficient assets to
cover its liabilities, but is under the management of a Rehabilitation
Receiver or Management Committee created pursuant to this Decree.

SEC. 6. In order to effectively exercise such jurisdiction, the Commission


shall possess the following powers:

xxx xxx xxx

(c) To appoint one or more receivers of the property, real and personal,
which is the subject of the action pending before the Commission in
accordance with the provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants
and/or protect the interest of the investing public and creditors:
Provided, however, That the Commission may in
appropriate cases, appoint a rehabilitation receiver of corporations,
partnerships or other associations not supervised or regulated by
other government agencies who shall have, in addition to powers of
the regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding
paragraph (d) hereof: ...

(d) To create and appoint a management committee, board or body upon


petition or motupropio to undertake the management of corporations,
partnership or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent
danger of dissipation,· loss, wastage or destruction of assets or
other properties or paralization of business operations of such
corporations or entities which may be prejudicial to the interest of
minority stockholders, parties-litigants of the general public: ...
(Emphasis and underscoring supplied).

From the above-quoted provisions of P.D. No. 902-A, as amended, the


appointment of a receiver or management committee by the SEC
presupposes a finding that, inter alia, a company possesses sufficient
property to cover all its debts but "foresees the impossibility of meeting
them when they respectively fall due" and "there is imminent danger of
dissipation, loss, wastage or destruction of assets of other properties or
paralization of business operations."

That the SEC, mandated by law to have regulatory functions over


corporations, partnerships or associations, appointed an interim receiver
for the EYCO Group of Companies on its petition in light of, as quoted
above, the therein enumerated "factors beyond the control and
anticipation of the management" rendering it unable to meet its obligation
as they fall due, and thus resulting to "complications and problems ... to
arise that would impair and affect [its] operations ... " shows that CLARION,
together with the other member-companies of the EYCO Group of
Companies, was suffering business reverses justifying, among other
things, the retrenchment of its employees.

This Court in fact takes judicial notice of the Decision of the Court of
Appeals dated June 11, 2000 in CA-G.R. SP No. 55208, "Nikon Industrial
Corp., Nikolite Industrial Corp., et al. [including CLARION], otherwise
known as the EYCO Group of Companies v. Philippine National Bank,
Solidbank Corporation, et al., collectively known and referred as the
'Consortium of Creditor Banks,"' which was elevated to this Court via
Petition for Certiorari and docketed as G.R. No. 145977, but which petition
this Court dismissed by Resolution dated May 3, 2005:

Considering the joint manifestation and motion to dismiss of petitioners


and respondents dated February 24, 2003, stating that the parties have
reached a final and comprehensive settlement of all the claims and
counterclaims subject matter of the case and accordingly, agreed to the
dismissal of the petition for certiorari, the Court Resolved to DISMISS the
petition for certiorari (Underscoring supplied).

The parties in G.R. No. 145977 having sought, and this Court having
granted, the dismissal of the appeal of the therein petitioners including
CLARION, the CA decision which affirmed in toto the September 14, 1999
Order of the SEC, the dispositive portion of which SEC Order reads:

WHEREFORE, premises considered, the appeal is as it is hereby, granted


and the Order dated 18 December 1998 is set aside. The Petition to be
Declared in State of Suspension of payments is hereby disapproved and
the SAC Plan terminated. Consequently, all committee,
conservator/receivers created pursuant to said Order are dissolved and
discharged and all acts and orders issued therein are vacated.

The Commission, likewise, orders the liquidation and dissolution of


the appellee corporations.The case is hereby remanded to the hearing
panel below for that purpose.

xxx xxx x x x (Emphasis and underscoring supplied),

has now become final and executory. Ergo, the SEC's disapproval of the
EYCO Group of Companies' "Petition for the Declaration of Suspension of
Payment ... " and the order for the liquidation and dissolution of these
companies including CLARION, must be deemed to have been
unassailed.

That judicial notice can be taken of the above-said case of Nikon Industrial
Corp. et al. v. PNB et al.,there should be no doubt.

As provided in Section 1, Rule 129 of the Rules of Court:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial


notice, without the introduction of evidence, of the existence and territorial
extent of states, their political history, forms of government and symbols of
nationality, the law of nations, the admiralty and maritime courts of the
world and their seals, the political constitution and history of the
Philippines, the official acts of thelegislative, executive
and judicial departments of the Philippines, the laws of nature, the
measure of time, and the geographical divisions. (Emphasis and
underscoring supplied)

which Mr. Justice Edgardo L. Paras interpreted as follows:

A court will take judicial notice of its own acts and records in the same
case, of facts established in prior proceedings in the same case, of the
authenticity of its own records of another case between the same parties,
of the files of related cases in the same court, and of public records
on file in the same court. In addition judicial notice will be taken of the
record, pleadings or judgment of a case in another court between the
same parties or involving one of the same parties, as well as of the record
of another case between different parties in the same court. Judicial notice
will also be taken of court personnel. (Emphasis and underscoring
supplied)

In fine, CLARION's claim that at the time it terminated Miclat it was


experiencing business reverses gains more light from the SEC's
disapproval of the EYCO Group of Companies' petition to be declared in
state of suspension of payment, filed before Miclat’stermination, and of
the SEC’s consequent order for the group of companies’ dissolution and
liquidation.115

At any rate, even assuming that serious business losses had not been proved by PAL, it
would still be justified under Article 298 of the Labor Code to retrench employees to
prevent the occurrence of losses or its closing of the business, provided that the projected
losses were not merely de minimis, but substantial, serious, actual, and real, or, if only
expected, were reasonably imminent as perceived objectively and in good faith by the
employer. In the latter case, proof of actual financial losses incurred by the employer
116

would not be a condition sine qua nonfor retrenchment, viz.:


117

Third, contrary to petitioner’s asseverations, proof of actual financial


losses incurred by the company is not a condition sine qua non for
retrenchment. Retrenchment is one of the economic grounds to dismiss
employees, which is resorted to by an employer primarily to avoid or
minimize business losses. The law recognize this under Article 283 of the
Labor Code x x x
xxxx

In its ordinary connotation, the phrase "to prevent losses" means that
retrenchment or termination of the services of some employees is
authorized to be undertaken by the employer sometime before the
anticipated losses are actually sustained or realized. It is not, in other
words, the intention of the lawmaker to compel the employer to stay his
hand and keep all his employees until after losses shall have in fact
materialized. If such an intent were expressly written into the law, that law
may well be vulnerable to constitutional attack as unduly taking property
from one man to be given to another.

At the other end of the spectrum, it seems equally clear that not every
asserted possibility of loss is sufficient legal warrant for the reduction of
personnel. In the nature of things, the possibility of incurring the losses is
constantly present, in greater or lesser degree, in the carrying on of
business operations, since some, indeed many, of the factors which
impact upon the profitability or viability of such operations may be
substantially outside the control of the employer.

On the bases of these consideration, it follows that the employer bears the
burden to prove his allegation of economic or business reverses with clear
and satisfactory evidence, it being in the nature of an affirmative defense.
As earlier discussed, we are fully persuaded that the private respondent
has been and is besieged by a continuing downtrend in both its business
operations and financial resources, thus amply justifying its resort to
drastic cuts in personnel and costs. 118

PAL retrenched in good faith

The employer is burdened to observe good faith in implementing a retrenchment program.


Good faith on its part exists when the retrenchment is intended for the advancement of its
interest and is not for the purpose of defeating or circumventing the rights of the employee
under special laws or under valid agreements. 119

The July 22, 2008 decision branded the recall of the retrenched employees and the
implementation of "Plan 22" instead of "Plan 14" as badges of bad faith on the part of PAL.
On the other hand, the October 2, 2009 resolution condemned PAL for changing its theory
by attributing the cause of the retrenchment to the ALP AP pilots’ strike.

PAL refutes the adverse observations, and maintains that its position was clear and
consistent - that the reduction of its labor force was an act of survival and a less drastic
measure as compared to total closure and liquidation that would have otherwise resulted;
that downsizing had been an option to address its financial losses since 1997; that the
120

reduction of personnel was necessary as an integral part of the means to ensure the
success of its corporate rehabilitation plan to restructure its business; and that the
121

downsizing of its labor force was a sound business decision undertaken after an
assessment of its financial situation and the remedies available to it.
122
A hard look at the records now impels the reconsideration of the July 22, 2008 decision
and the resolution of October 2, 2009.

PAL could not have been motivated by ill will or bad faith when it decided to terminate
FASAP’s affected members. On the contrary, good faith could be justly inferred from
PAL’s conduct before, during and after the implementation of the retrenchment plan.

Notable in this respect was PAL’s candor towards FASAP regarding its plan to implement
the retrenchment program. This impression is gathered from PAL’s letter dated February
11, 1998 inviting FASAP to a meeting to discuss the matter, thus:

Roberto D. Anduiza
President

Flight Attendants’ and Stewards' Association of the Philippines (FASAP)

xxxx

Mr. Anduiza:

Due to critical business losses and in view of severe financial reverses,


Philippine Airlines must undertake drastic measures to strive at survival. In
order to meet maturing obligations amidst the present regional crisis, the
Company will implement major cost-cutting measures in its fleet plan,
operating budget, routes and frequencies. These moves include the
closure of stations, downsizing of operations and reducing the workforce
through layoff/retrenchment or retirement.

In this connection, the Company would like to meet with the Flight
Attendants' and Stewards’ Association of the Philippines (FASAP) to
discuss the implementation of the lay-off/retrenchment or retirement of F
ASAP-covered employees. The meeting shall be at the Allied Bank Center
(81h Floor-Board Room) on February 12, 1998 at 4:00 p.m.

This letter serves as notice in compliance with Article 283 of the Labor
Code, as amended and DOLE Orders Nos[.] 9 and 10, Series of 1997.

Very truly yours,

(Sgd.)
JOSE ANTONIO GARCIA
President & Chief Operating Officer 123

The records also show that the parties met on several occasions to explore cost-cutting
124

measures, including the implementation of the retrenchment program. PAL likewise


manifested that the retrenchment plan was temporarily shelved while it implemented other
measures (like termination of probationary cabin attendant, and
work-rotations). Obviously, the dissent missed this part as it stuck to the belief that PAL
125

did not implement other cost-cutting measures prior to retrenchment. 126

Given PAL’s dire financial predicament, it becomes understandable that PAL was
constrained to finally implement the retrenchment program when the ALPAP pilots strike
crippled a major part of PAL’s operations. In Rivera v. Espiritu, we observed that said
127 128

strike wrought "serious losses to the financially beleaguered flag carrier;" that "PAL’s
financial situation went from bad to worse;" and that "[f]aced with bankruptcy, PAL
adopted a rehabilitation plan and downsized its labor force by more than one-third." Such
observations sufficed to show that retrenchment became a last resort, and was not the
rash and impulsive decision that F ASAP would make it out to be now.

As between maintaining the number of its flight crew and PAL’s survival, it was
reasonable for PAL to choose the latter alternative. This Court cannot legitimately force
PAL as a distressed employer to maintain its manpower despite its dire financial condition.
To be sure, the right of PAL as the employer to reasonable returns on its investments and
to expansion and growth is also enshrined in the 1987 Constitution. Thus, although labor
129

is entitled to the right to security of tenure, the State will not interfere with the employer's
valid exercise of its management prerogative.

Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation Receiver and
Approval of a Rehabilitation Plan with the SEC on June 19, 1998, before the retrenchment
became effective. PAL likewise manifested that:
130

x x x The Rehabilitation Plan and Amended Rehabilitation Plan submitted


by PAL in pursuance of its corporate rehabilitation, and which obtained the
joint approval of PAL’s creditors and the SEC, had as a primary
component, the downsizing of PAL’s labor force by at least 5,000,
including the 1,400 flight attendants. As conceptualized by a team of
industry experts, the cutting down of operations and the consequent
reduction of work force, along with the restructuring of debts with
significant "haircuts" and the capital infusion of Mr. Lucio Tan
amounting to US$200 million, were the key components of PAL's
rehabilitation. The Interim Rehabilitation Receiver was replaced by a
Permanent Rehabilitation Receiver on June 7, 1999. (Bold underscoring
131

supplies for emphasis)

Being under a rehabilitation program, PAL had no choice but to implement the measures
contained in the program, including that of reducing its manpower. Far from being an
impulsive decision to defeat its employees’ right to security of tenure, retrenchment
resulted from a meticulous plan primarily aimed to resuscitate PAL’s operations.

Good faith could also be inferred from PAL’s compliance with the basic requirements
under- Article 298 of the Labor Code prior to laying-off its affected employees. Notably,
the notice of termination addressed to the Department of Labor and Employment (DOLE)
identified the reasons behind the massive termination, as well as the measures PAL had
undertaken to prevent the situation, to wit:

June 15, 1998

HON. MAXIMO B. LIM


THE REGIONAL DIRECTOR
Department of Labor and Employment
Regional Office No. NCR

Dear Sir:
This is to inform you that Philippine Air Lines, Inc. (PAL) will be
implementing a retrenchment program one (1) month from notice hereof in
order to prevent bankruptcy.

PAL is forced to take this action because of continuous losses it has


suffered over the years which losses were aggravated by the PALEA
strike in October 1996, peso depreciation, Asian currency crisis,
causing a serious drop in our yield and the collapse of passenger
traffic in the region. Specifically, PAL suffered a net loss of ₱2.18
Billion during the fiscal year 1995-1996, ₱2.50 Billion during the fiscal
year 1996-1997 and ₱8.08 Billion for the period starting April 1, 1997
to March 31, 1998.

These uncontrolled heavy losses have left PAL with no recourse but to
reduce its fleet and its flight frequencies both in the domestic and
international sectors to ensure its survival.

In an effort to avoid a reduction of personnel, PAL has resorted to other


measures, such as freeze on all hiring, no salary increase for
managerial and confidential staff (even for promotions), reduction of
salaries of senior management personnel, freeze on staff movements,
pre-termination of temporary staff contracts and negotiations with
foreign investors. But all these measures failed to avert the
continued losses.

Finally, all the efforts of PAL to preserve the employment of its


personnel were shattered by the illegal strike of its pilots which has
cause irreparable damage to the company's cash flow. Consequently,
the company is now no longer able to meet its maturing obligations
and is not about to go into default in all its major loans. It is presently
under threat of receiving a barrage of suits from its creditors who will
go after the assets of the corporation.

Under the circumstances, PAL is left with no recourse but to reduce its
fleet and its flight frequencies both in the domestic and international
sectors to ensure its survival. Consequently, a reduction of personnel is
inevitable.

All affected employees in the attached list will be given the corresponding
benefits which they may be entitled to.

Very truly yours,

(Sgd)

JOSE ANTONIO GARCIA

President & Chief Operating Officer 132

As regards the observation made in the decision of July 22, 2008 to the effect that the
recall of the flight crew members indicated bad faith, we hold to the contrary.
PAL explained how the recall process had materialized, as follows:

During this time, the Company was slowly but steadily recovering. Its
finances were improving and additional planes were flying. Because of the
Company's steady recovery, necessity dictated more employees to man
and service the additional planes and flights. Thus, instead of taking in
new hires, the Company first offered employment to employees who were
previously retrenched. A recall/rehire plan was initiated.

The recall/rehire plan was a success. A majority of retrenched employees


were recalled/rehired and went back to work including the members of
petitioner union. In the process of recall/rehire, many employees who
could not be recalled for various reasons (such as, among others, being
unfit for the job or the employee simply did not want to work for the
Company anymore) decided to accept separation benefits and executed,
willingly and voluntarily, valid quitclaims. Those who received separation
packages included a good number of the members of the petitioner
union.133

Contrary to the statement in the dissent that the implementation of Plan 22 instead of Plan
14 indicated bad faith, PAL reasonably demonstrated that the recall was devoid of bad
134

faith or of an attempt on its part to circumvent its affected employees’ right to security of
tenure. Far from being tainted with bad faith, the recall signified PAL’s reluctance to part
with the retrenched employees. Indeed, the prevailing unfavorable conditions had only
compelled it to implement the retrenchment.

The rehiring of previously retrenched employees should not invalidate a retrenchment


program, the rehiring being an exercise of the employer's right to continue its business.
Thus, we pointed out in one case:

We likewise cannot sustain petitioners' argument that their dismissal was


illegal on the basis that Lapanday did not actually cease its operation, or
that they have rehired some of the dismissed employees and even hired
new set of employees to replace the retrenched employees.

The law acknowledges the right of every business entity to reduce its
workforce if such measure is made necessary or compelled by economic
factors that would otherwise endanger its stability or existence. In
exercising its right to retrench employees, the firm may choose to close all,
or a part of, its business to avoid further losses or mitigate expenses.
In Caffco International Limited v. Office of the Minister-Ministry of Labor
and Employment, the Court has aptly observed that -

Business enterprises today are faced with the pressures of economic


recession, stiff competition, and labor unrest. Thus, businessmen are
always pressured to adopt certain changes and programs in order to
enhance their profits and protect their investments. Such changes may
take various forms. Management may even choose to close a branch, a
department, a plant, or a shop.

In the same manner, when Lapanday continued its business operation


and eventually hired some of its retrenched employees and new
employees, it was merely exercising its right to continue its business. The
fact that Lapanday chose to continue its business does not automatically
make the retrenchment illegal. We reiterate that in retrenchment, the goal
is to prevent impending losses or further business reversals - it therefore
does not require that there is an actual closure of the business. Thus,
when the employer satisfactorily proved economic or business losses with
sufficient supporting evidence and have complied with the requirements
mandated under the law to justify retrenchment, as in this case, it cannot
be said that the subsequent acts of the employer to rehire the retrenched
employees or to hire new employees constitute bad faith. It could have
been different if from the beginning the retrenchment was illegal and the
employer subsequently hired new employees or rehired some of the
previously dismissed employees because that would have constituted bad
faith. Consequently, when Lapanday continued its operation, it was merely
exercising its prerogative to streamline its operations, and to rehire or hire
only those who are qualified to replace the services rendered by the
retrenched employees in order to effect more economic and efficient
methods of production and to forestall business losses. The rehiring or
reemployment of retrenched employees does not necessarily negate the
presence or imminence of losses which prompted Lapanday to retrench.

In spite of overwhelming support granted by the social justice provisions of


our Constitution in favor of labor, the fundan1ental law itself guarantees,
even during the process of tilting the scales of social justice towards
workers and employees, "the right of enterprises to reasonable returns of
investment and to expansion and growth." To hold otherwise would not
only be oppressive and inhuman, but also counter-productive and
ultimately subversive of the nation's thrust towards a resurgence in our
economy which would ultimately benefit the majority of our people. Where
appropriate and where conditions are in accord with law and jurisprudence,
the Court has authorized valid reductions in the workforce to forestall
business losses, the hemorrhaging of capital, or even to recognize an
obvious reduction in the volume of business which has rendered certain
employees redundant. 135

Conselquently, we cannot pass judgment on the motive behind PAL's initiative to


implement "Plan 22" instead of "Plan 14." The prerogative thereon belonged to the
management alone due to its being in the best position to assess its own financial
situation and operate its own business. Even the Court has no power to interfere with such
exercise of the prerogative.

PAL used fair and reasonable criteria in selecting the


employees to be retrenched pursuant to the CBA

The July 22, 2008 decision agreed with the holding by the CA that PAL was not obligated
to consult with F ASAP on the standards to be used in evaluating the performance of its
employees. Nonetheless, PAL was found to be unfair and unreasonable in selecting the
employees to be retrenched by doing away with the concept of seniority, loyalty, and past
efficiency by solely relying on the employees' 1997 performance rating; and that the
retrenchment of employees due to "other reasons," without any details or specifications,
was not allowed and had no basis in fact and in law. 136
PAL contends that it used fair and reasonable criteria in accord with Sections 23, 30 and
112 of the 1995-2000 CBA; that the NLRC’s use of the phrase "other reasons" referred
137

to the varied grounds (i.e. excess sick leaves, previous service of suspension orders,
passenger complains, tardiness, etc.) employed in conjunction with seniority in selecting
the employees to be terminated; that the CBA did not require reference to performance
138

rating of the previous years, but to the use of an efficiency rating for a single year; and 139

that it adopted both efficiency rating and inverse seniority as criteria in the selection
pursuant to Section 112 of the CBA. 140

PAL’s contentions are meritorious.

In selecting the employees to be dismissed, the employer is required to adopt fair and
reasonable criteria, taking into consideration factors like: (a) preferred
status; (b) efficiency; and (c) seniority, among others. The requirement of fair and
141

reasonable criteria is imposed on the employer to preclude the occurrence of arbitrary


selection of employees to be retrenched. Absent any showing of bad faith, the choice of
who should be retrenched must be conceded to the employer for as long as a basis for the
retrenchment exists. 142

We have found arbitrariness in terminating the employee under the guise of a


retrenchment program wherein the employer discarded the criteria it adopted in
terminating a particular employee; when the termination discriminated the employees on
143

account of their union membership without regard to their years of service; the timing of
144

the retrenchment was made a day before the employee may be regularized; when the 145

employer disregarded altogether the factor of seniority and choosing to retain the newly
hired employees; that termination only followed the previous retrenchment of two
146

non-regular employees; and when there is no appraisal or criteria applied in the


147

selection. 148

On the other hand, we have considered as valid the retrenchment of the employee based
on work efficiency, or poor performance; or the margins of contribution of the
149 150

consultants to the income of the company; or absenteeism, or record of disciplinary


151

action, or efficiency and work attitude; or when the employer exerted efforts to solicit the
152

employees' participation in reviewing the criteria to be used in selecting the workers to be


laid off.
153

In fine, the Court will only strike down the retrenchment of an employee as capricious,
whimsical, arbitrary, and prejudicial in the absence of a clear-cut and uniform guideline
followed by the employer in selecting him or her from the work pool. Following this
standard, PAL validly implemented its retrenchment program.

PAL resorted to both efficiency rating and inverse seniority in selecting the employees to
be subject of termination. As the NLRC keenly pointed out, the "ICCD Masterank 1997
Ratings - Seniority Listing" submitted by PAL sufficiently established the criteria for the
selection of the employees to be laid off. To insist on seniority as the sole basis for the
selection would be unwarranted, it appearing that the applicable CBA did not establish
such limitation. This counters the statement in the dissent that the retrenchment program
was based on unreasonable standards without regard to service, seniority, 1oya1ty and
performance. 154

In this connection, we adopt the following cogent observations by the CA on the matter for
being fully in accord with law and jurisprudence:
FASAP insists that several CBA provisions have been violated by the
retrenchment. They are the provisions on seniority, performance appraisal,
reduction in personnel and downgrading and pem1anent OCARs.
Seniority and performance stand out because these were the main
considerations of PAL in selecting workers to be retrenched. Under the
CBA, seniority is defined "to mean a measure of a regular Cabin
Attendant’s claim in relation to other regular Cabin Attendants holding
similar positions, to preferential consideration whatever the Company
exercises its right to promote to a higher paying position of lay-off of any
Cabin Attendant." Seniority, however, is not the sole determinant of
retention. This is clear under Article XIII on performance appraisal of
the CBA provisions.

Under the CBA, several factors are likewise taken into consideration
like performance and professionalism in addition to the seniority
factor. However, the criteria for performance and professionalism are
not indicated in the CBA but are to be formulated by PAL in
consultation with FASAP. Where there is retrenchment, cabin
attendants who fail to attain at least 85% of the established criteria
shall be demoted progressively. Domestic cabin attendants, the
occupants of lowest rung of the organizational hierarchy, are to be
retrenched once they fail to meet the required percentage.

We have painstakingly examined the records and We find no


indication that these provisions have been grossly disregarded as to
taint the retrenchment with illegality. PAL relied on specific
categories of criteria, such as merit awards, physical appearance,
attendance and checkrides, to guide its selection of employees to be
removed. We do not find anything legally objectionable in the
adoption of the foregoing norms. On the contrary, these norms are
most relevant to the nature of a cabin attendant's work.

However, the contention of FASAP that these criteria required its


prior conformity before adoption is not supported by Section 30,
Article VIII of the CBA. Note should be taken that this provision only
mandates PAL to "meet and consult" the Association (FASAP) in the
formulation of the Performance and Professionalism Appraisal
System." By the ordinary import of this provision, PAL is only
required to confer with FASAP; it is not at all required to forge an
addendum to the CBA, which will concretize the appraisal system as
basis for retrenchment or retention. 155

To require PAL to further limit its criteria would be inconsistent with jurisprudence and the
principle of fairness. Instead, we hold that for as long as PAL followed a rational criteria
defined or set by the CBA and existing laws and jurisprudence in determining who should
be included in the retrenchment program., it sufficiently met the standards of fain1ess and
reason in its implementation of its retrenchment program.

The retrenched employees signed valid quitclaims


The July 22, 2008 decision struck down as illegal the quitclaims executed by the
retrenched employees because of the mistaken conclusion that the retrenchment had
been unlawfully executed.

We reverse.

In EDI Staffbuilders International, Inc. v. National Labor Relations Commission, 156


we laid
down the basic contents of valid and effective quitclaims and waivers, to wit:

In order to prevent disputes on the validity and enforceability of quitclaims


and waivers of employees under Philippine laws, said agreements should
contain the following:

1. A fixedamount as full and final compromise settlement;

2. The benefits of the employees if possible with the corresponding


amounts, which the employees arc giving up in consideration of the
fixed compromise amount;

3. A statement that the employer has dearly explained to the


employee in English, Filipino, or in the dialect known to the
employees - that by signing the waiver or quitclaim, they are forfeiting or
relinquishing their right to receive the benefits which are due them under
the law; and

4. A statement that the employees signed and executed the document


voluntarily, and had fully understood the contents of the document
and that their consent was freely givenwithout any threat, violence,
duress, intimidation, or undue influence exerted on their person. (Bold 157

supplied for emphasis)

The release and quitclaim signed by the affected employees substantially satisfied the
aforestated requirements. The consideration was clearly indicated in the document in the
English language, including the benefits that the employees would be relinquishing in
exchange for the amounts to be received. There is no question that the employees who
had occupied the position of flight crew knew and understood the English language.
Hence, they fully comprehended the terms used in the release and quitclaim that they
signed.

Indeed, not all quitclaims are per se invalid or against public policy. A quitclaim is invalid
1a\^/phi 1

or contrary to public policy only: (1) where there is clear proof that the waiver was
wrangled from an unsuspecting or gullible person; or (2) where the terms of settlement are
unconscionable on their face. Based on these standards, we uphold the release and
158

quitclaims signed by the retrenched employees herein.

WHEREFORE, the Court:

(a) GRANTS the Motion for Reconsideration of the Resolution of October 2, 2009 and
Second Motion for Reconsideration of the Decision of July 22, 2008 filed by the
respondents Philippine Airlines, Inc. and Patria Chiong;
(b) DENIES the Motion for Reconsideration (Re: The Honorable Court's Resolution dated
March 13, 2012)filed by the petitioner Flight Attendants and Stewards Association of the
Philippines;

(c) SETSASIDE the decision dated July 22, 2008 and resolution dated October 2, 2009;
and

(d) AFFIRMS the decision of the Court of Appeals dated August 23, 2006.

No pronouncement on costs of still.

SO ORDERED.

Вам также может понравиться