Fundamental Powers and the Bill of Rights Full

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FUNDAMENTAL POWERS AND THE BILL OF RIGHTS

G.R. No. 166494 June 29, 2007

CARLOS SUPERDRUG CORP., doing business under the name andstyle "Carlos Superdrug," ELSIE M. CANO, doing business under the name and style "Advance Drug," Dr. SIMPLICIO L. YAP, JR.,doing business under the name and style "City Pharmacy," MELVINS. DELA SERNA, doing business under the name and style "Boticadela Serna," and LEYTE SERV-WELL CORP., doing business under the name and style "Leyte Serv-Well Drugstore," petitioners,vs.DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT (DSWD),DEPARTMENT OF HEALTH (DOH), DEPARTMENT OF FINANCE(DOF), DEPARTMENT OF JUSTICE (DOJ), and DEPARTMENT OFINTERIOR and LOCAL GOVERNMENT (DILG), respondents.

D E C I S I O N

AZCUNA, J .:

This is a petition 1 for Prohibition with Prayer for Preliminary Injunctionassailing the constitutionality of Section 4(a) of Republic Act (R.A.) No.9257 ,2 otherwise known as the "Expanded Senior Citizens Act of 2003."

Petitioners are domestic corporations and proprietors operatingdrugstores in the Philippines.

Public respondents, on the other hand, include the Department of SocialWelfare and Development (DSWD), the Department of Health (DOH), theDepartment of Finance (DOF), the Department of Justice (DOJ), and theDepartment of Interior and Local Government (DILG) which have beenspecifically tasked to monitor the drugstores’ compliance with the law;promulgate the implementing rules and regulations for the effectiveimplementation of the law; and prosecute and revoke the licenses of erring drugstore establishments.

The antecedents are as follows:

On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432 ,3 wassigned into law by President Gloria Macapagal-Arroyo and it became

effective on March 21, 2004. Section 4(a) of the Act states:

SEC. 4. Privileges for the Senior Citizens . – The senior citizens shall beentitled to the following:

(a) the grant of twenty percent (20%) discount from all establishmentsrelative to the utilization of services in hotels and similar lodgingestablishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including funeral and burial services for the death of senior citizens;

. . .

The establishment may claim the discounts granted under (a) , (f), (g) and(h) as tax deduction based on the net cost of the goods sold or services

rendered: Provided , That the cost of the discount shall be allowed asdeduction from gross income for the same taxable year that the discount

is granted. Provided, further, That the total amount of the claimed taxdeduction net of value added tax if applicable, shall be included in their

gross sales receipts for tax purposes and shall be subject to proper

documentation and to the provisions of the National Internal RevenueCode, as amended .4

On May 28, 2004, the DSWD approved and adopted the ImplementingRules and Regulations of R.A. No. 9257, Rule VI, Article 8 of whichstates:

Article 8. Tax Deduction of Establishments. – The establishment mayclaim the discounts granted under Rule V, Section 4 – Discounts for Establishments ;5 Section 9, Medical and Dental Services in PrivateFacilities[, ]6 and Sections 1 0 7 and 11 8 – Air, Sea and Land Transportation

as tax deduction based on the net cost of the goods sold or servicesrendered. Provided , That the cost of the discount shall be allowed asdeduction from gross income for the same taxable year that the discountis granted; Provided, further, That the total amount of the claimed taxdeduction net of value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal RevenueCode, as amended; Provided, finally, that the implementation of the taxdeduction shall be subject to the Revenue Regulations to be issued bythe Bureau of Internal Revenue (BIR) and approved by the Department of Finance (DOF) .9

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On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines (DSAP) concerning the meaning of a tax deduction under the Expanded Senior Citizens Act, the DOF, throughDirector IV Ma. Lourdes B. Recente, clarified as follows:

1) The difference between the Tax Credit (under the Old Senior Citizens Act) and Tax Deduction (under the Expanded Senior Citizens Act).

1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior Citizens Act) grants twenty percent (20%) discount from all establishments relativeto the utilization of transportation services, hotels and similar lodgingestablishment, restaurants and recreation centers and purchase of medicines anywhere in the country, the costs of which may be claimed bythe private establishments concerned as tax credit .

Effectively, a tax credit is a peso-for- peso deduction from a taxpayer’stax liability due to the government of the amount of discounts suchestablishment has granted to a senior citizen. The establishmentrecovers the full amount of discount given to a senior ci tizen and hence,

the government shoulders 100% of the discounts granted.

It must be noted, however, that conceptually, a tax credit scheme under the Philippine tax system, necessitates that prior payments of taxes havebeen made and the taxpayer is attempting to recover this tax paymentfrom his/her income tax due. The tax credit scheme under R.A. No. 7432is, therefore, inapplicable since no tax payments have previouslyoccurred.

1.2. The provision under R.A. No. 9257, on the other hand, provides thatthe establishment concerned may claim the discounts under Section 4(a),

(f), (g) and (h) as tax deduction from gross income, based on the netcost of goods sold or services rendered.

Under this scheme, the establishment concerned is allowed to deductfrom gross income, in computing for its tax liability, the amount of discounts granted to senior citizens. Effectively, the government loses interms of foregone revenues an amount equivalent to the marginal taxrate the said establishment is liable to pay the government. This will bean amount equivalent to 32% of the twenty percent (20%) discounts sogranted. The establishment shoulders the remaining portion of thegranted discounts.

It may be necessary to note that while the burden on [the] government isslightly diminished in terms of its percentage share on the discountsgranted to senior citizens, the number of potential establishments thatmay claim tax deductions, have however, been broadened. Aside fromthe establishments that may claim tax credits under the old law, moreestablishments were added under the new law such as: establishmentsproviding medical and dental services, diagnostic and laboratoryservices, including professional fees of attending doctors in all private

hospitals and medical facilities, operators of domestic air and seatransport services, public railways and skyways and bus transportservices.

A simple illustration might help amplify the points discussed above, asfollows:

Tax Deduction Tax Credit

Gross Sales x x x x x x x x x x x x

Less : Cost of goods sold x x x x x x x x x x

Net Sales x x x x x x x x x x x x

Less: Operating Expenses:

Tax Deduction on Discounts x x x x --

Other deductions: x x x x x x x x

Net Taxable Income x x x x x x x x x x

Tax Due x x x x x x

Less: Tax Credit -- ______x x

Net Tax Due -- x x

As shown above, under a tax deduction scheme, the tax deduction ondiscounts was subtracted from Net Sales together with other deductionswhich are considered as operating expenses before the Tax Due wascomputed based on the Net Taxable Income. On the other hand, under



a tax credit scheme, the amount of discounts which is the taxcredit item, was deducted directly from the tax due amount .10

Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or the Policies and Guidelines to Implement the Relevant Provisions of Republic Act 9257, otherwise known as the "Expanded Senior Citizens

Act of 2003 " 11 was issued by the DOH, providing the grant of twentypercent (20%) discount in the purchase of unbranded generic medicinesfrom all establishments dispensing medicines for the exclusive use of thesenior citizens.

On November 12, 2004, the DOH issued Administrative Order No177 12 amending A.O. No. 171. Under A.O. No. 177, the twenty percentdiscount shall not be limited to the purchase of unbranded genericmedicines only, but shall extend to both prescription and non-prescriptionmedicines whether branded or generic. Thus, it stated that "[t]he grant of twenty percent (20%) discount shall be provided in the purchase of medicines from all establishments dispensing medicines for the exclusiveuse of the senior citizens."

Petitioners assail the constitutionality of Section 4(a) of the ExpandedSenior Citizens Act based on the following grounds :13

1) The law is confiscatory because it infringes Art. III, Sec. 9 of theConstitution which provides that private property shall not be taken for public use without just compensation;

2) It violates the equal protection clause (Art. III, Sec. 1) enshrined in our Constitution which states that "no person shall be deprived of life, libertyor property without due process of law, nor shall any person be denied of

the equal protection of the laws;" and

3) The 20% discount on medicines violates the constitutional guaranteein Article XIII, Section 11 that makes "essential goods, health and other social services available to all people at affordable cost. "14

Petitioners assert that Section 4(a) of the law is unconstitutional becauseit constitutes deprivation of private property. Compelling drugstoreowners and establishments to grant the discount will result in a loss of profit

and capital because 1) drugstores impose a mark-up of only 5% to 10%on branded medicines; and 2) the law failed to provide a schemewhereby drugstores will be justly compensated for the discount.

Examining petitioners’ arguments, it is apparent that what petitioners areultimately questioning is the validity of the tax deduction scheme as areimbursement mechanism for the twenty percent (20%) discount thatthey extend to senior citizens.

Based on the afore-stated DOF Opinion, the tax deduction scheme doesnot fully reimburse petitioners for the discount privilege accorded tosenior citizens. This is because the discount is treated as a deduction, atax-deductible expense that is subtracted from the gross income andresults in a lower taxable income. Stated otherwise, it is an amount that isallowed by law 15 to reduce the income prior to the application of the taxrate to compute the amount of tax which is due .16 Being a tax deduction,the discount does not reduce taxes owed on a peso for peso basis butmerely offers a fractional reduction in taxes owed.

Theoretically, the treatment of the discount as a deduction reduces thenet income of the private establishments concerned. The discounts givenwould have entered the coffers and formed part of the gross sales of theprivate establishments, were it not for R.A. No. 9257.

The permanent reduction in their total revenues is a forced subsidycorresponding to the taking of private property for public use or benefit .17 This constitutes compensable taking for which petitioners wouldordinarily become entitled to a just compensation.

Just compensation is defined as the full and fair equivalent of the

property taken from its owner by the expropriator. The measure is not thetaker’s gain but the owner’s loss. The word just is used to intensify themeaning of the word compensation , and to convey the idea that theequivalent to be rendered for the property to be taken shall be real,substantial, full and ample .18

A tax deduction does not offer full reimbursement of the senior citizendiscount. As such, it would not meet the definition of just compensation .19

Having said that, this raises the question of whether the State, inpromoting the health and welfare of a special group of citizens, can

impose upon private establishments the burden of partly subsidizing agovernment program.








































The Court believes so.

The Senior Citizens Act was enacted primarily to maximize thecontribution of senior citizens to nation-building, and to grant benefits andprivileges to them for their improvement and well-being as the Stateconsiders them an integral part of our society .20

The priority given to senior citizens finds i ts basis in the Constitution asset forth in the law itself. Thus, the Act provides:

SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:

SECTION 1. Declaration of Policies and Objectives. – Pursuant to ArticleXV, Section 4 of the Constitution, it is the duty of the family to take careof its elderly members while the State may design programs of socialsecurity for them. In addition to this, Section 10 in the Declaration of Principles and State Policies provides: "The State shall provide social

justice in all phases of national development." Further, Article XIII,Section 11, provides: "The State shall adopt an integrated andcomprehensive approach to health development which shall endeavor tomake essential goods, health and other social services available to all thepeople at affordable cost. There shall be priority for the needs of theunderprivileged sick, elderly, disabled, women and children." Consonantwith these constitutional principles the following are the declared policiesof this Act:

. . .

(f) To recognize the important role of the private sector in theimprovement of the welfare of senior citizens and to actively seek

their partnership .21

To implement the above policy, the law grants a twenty percent discountto senior citizens for medical and dental services, and diagnostic andlaboratory fees; admission fees charged by theaters, concert halls,circuses, carnivals, and other similar places of culture, leisure andamusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments, restaurants andrecreation centers; and purchases of medicines for the exclusive use or enjoyment of senior citizens. As a form of reimbursement, the lawprovides that business establishments extending the twenty percentdiscount to senior citizens may claim the discount as a tax deduction.

The law is a legitimate exercise of police power which, similar to thepower of eminent domain, has general welfare for its object. Police power is not capable of an exact definition, but has been purposely veiled ingeneral terms to underscore its comprehensiveness to meet allexigencies and provide enough room for an efficient and flexibleresponse to conditions and circumstances, thus assuring the greatestbenefits. 22 Accordingly, it has been described as "the most essential,insistent and the least limitable of powers, extending as it does to all the

great public needs. "23

It is "[t]he power vested in the legislature by theconstitution to make, ordain, and establish all manner of wholesome andreasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for thegood and welfare of the commonwealth, and of the subjects of thesame. "24

For this reason, when the conditions so demand as determined by thelegislature, property rights must bow to the primacy of police power because property rights, though sheltered by due process, must yield togeneral welfare .25

Police power as an attribute to promote the common good would bediluted considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is invalidated.Moreover, in the absence of evidence demonstrating the allegedconfiscatory effect of the provision in question, there is no basis for itsnullification in view of the presumption of validity which every law has inits favor .26

Given these, it is incorrect for petitioners to insist that the grant of thesenior citizen discount is unduly oppressive to their business, becausepetitioners have not taken time to calculate correctly and come up with afinancial report, so that they have not been able to show properly whether or not the tax deduction scheme really works greatly to their disadvantage .27

In treating the discount as a tax deduction, petitioners insist that they willincur losses because, referring to the DOF Opinion, for every P1.00

senior citizen discount that petitioners would give, P0.68 will be

shouldered by them as only P0.32 will be refunded by the government by

way of a tax deduction.

To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance drug Norvasc as an example. According to the



































latter, it acquires Norvasc from the distributors at P37.57 per tablet, and

retails it atP39.60 (or at a margin of 5%). If it grants a 20% discount to

senior citizens or an amount equivalent to P7.92, then it would have to

sell Norvasc at P31.68 which translates to a loss from capital of P5.89

per tablet. Even if the government will allow a tax deduction, only P2.53

per tablet will be refunded and not the full amount of the discount whichis P7.92. In short, only 32% of the 20% discount will be reimbursed to the

drugstores .28

Petitioners’ computation is flawed. For purposes of reimbursement, thelaw states that the cost of the discount shall be deducted from grossincome ,29 the amount of income derived from all sources beforededucting allowable expenses, which will result in net income. Here,petitioners tried to show a loss on a per transaction basis, which shouldnot be the case. An income statement, showing an accounting of petitioners’ sales, expenses, and net profit (or loss) for a given periodcould have accurately reflected the effect of the discount on their income.

Absent any financial statement, petitioners cannot substantiate their claim that they will be operating at a loss should they give the discount. In

addition, the computation was erroneously based on the assumption thattheir customers consisted wholly of senior citizens. Lastly, the 32% taxrate is to be imposed on income, not on the amount of the discount.

Furthermore, it is unfair for petitioners to criticize the law because theycannot raise the prices of their medicines given the cutthroat nature of the players in the industry. It is a business decision on the part of petitioners to peg the mark-up at 5%. Selling the medicines belowacquisition cost, as alleged by petitioners, is merely a result of thisdecision. Inasmuch as pricing is a property right, petitioners cannotreproach the law for being oppressive, simply because they cannot affordto raise their prices for fear of losing their customers to competition.

The Court is not oblivious of the retail side of the pharmaceutical industryand the competitive pricing component of the business. While theConstitution protects property rights, petitioners must accept the realitiesof business and the State, in the exercise of police power, can intervenein the operations of a business which may result in an impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIIIof the Constitution provides the precept for the protection of property,various laws and jurisprudence, particularly on agrarian reform and the

regulation of contracts and public utilities, continuously serve as a

reminder that the right to property can be relinquished upon thecommand of the State for the promotion of public good .30

Undeniably, the success of the senior citizens program rests largely onthe support imparted by petitioners and the other private establishmentsconcerned. This being the case, the means employed in invoking theactive participation of the private sector, in order to achieve the purposeor objective of the law, is reasonably and directly related. Withoutsufficient proof that Section 4(a) of R.A. No. 9257 is arbitrary, and thatthe continued implementation of the same would be unconscionablydetrimental to petitioners, the Court will refrain from quashing a legislativeact .31

WHEREFORE, the petition is DISMISSED for lack of merit.

No costs.

SO ORDERED.

G.R. No. 158793 June 8, 2006

JAMES MIRASOL, RICHARD SANTIAGO, and LUZONMOTORCYCLISTS FEDERATION, INC., Petitioners,vs.DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLLREGULATORY BOARD, Respondents.

D E C I S I O N

CARPIO, J .:

This petition for review on certiorar i1 seeks to reverse the Decision dated10 March 2003 of the Regional Trial Court, Branch 147, Makati City(RTC) in Civil Case No. 01- 034, as well as the RTC’s Ord er dated 16June 2003 which denied petitioners’ Motion for Reconsideration.Petitioners assert that Department of Public Works and Highways’(DPWH) Department Order No. 74 (DO 74), Department Order No. 215(DO 215), and the Revised Rules and Regulations on Limited AccessFacilities of the Toll Regulatory Board (TRB) violate Republic Act No.2000 (RA 2000) or the Limited Access Highway Act. Petitioners also seek























to declare Department Order No. 123 (DO 123) and Administrative Order No. 1 (AO 1 )2 unconstitutional.

Antecedent Facts

The facts are not in dispute. As summarized by the Solicitor General, thefacts are as follows:

1. On January 10, 2001, petitioners filed before the trial court aPetition for Declaratory Judgment with Application for TemporaryRestraining Order and Injunction docketed as Civil Case No. 01-034. The petition sought the declaration of nullity of the followingadministrative issuances for being inconsistent with the provisionsof Republic Act 2000, entitled "Limited Access Highway Act"enacted in 1957:

a. DPWH Administrative Order No. 1, Series of 1968;

b. DPWH Department Order No. 74, Series of 1993;

c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities promulgated in 199[8] by the DPWH thruthe Toll Regulatory Board (TRB).

2. Previously, pursuant to i ts mandate under R.A. 2000, DPWHissued on June 25, 1998 Department Order (DO) No. 215declaring the Manila-Cavite (Coastal Road) Toll Expressway aslimited access facilities.

3. Accordingly, petitioners filed an Amended Petition on February8, 2001 wherein petitioners sought the declaration of nullity of theaforesaid administrative issuances. Moreover, petitioners prayedfor the issuance of a temporary restraining order and/or preliminary injunction to prevent the enforcement of the total banon motorcycles along the entire breadth of North and SouthLuzon Expressways and the Manila-Cavite (Coastal Road) TollExpressway under DO 215.

4. On June 28, 2001, the trial court, thru then Presiding JudgeTeofilo Guadiz, after due hearing, issued an order grantingpetitioners’ application for preliminary injunction. On July 16,

2001, a writ of preliminary injunction was issued by the trial court,

conditioned upon petitioners’ filing of cash bond in the amountofP100,000.00, which petitioners subsequently complied with.

5. On July 18, 2001, the DPWH acting thru the TRB, issuedDepartment Order No. 123 allowing motorcycles with enginedisplacement of 400 cubic centimeters inside limited accessfacilities (toll ways).

6. Upon the assumption of Honorable Presiding Judge Ma.Cristina Cornejo, both the petitioners and respondents wererequired to file their respective Memoranda. Petitioners likewisefiled [their] Supplemental Memorandum. Thereafter, the case wasdeemed submitted for decision.

7. Consequently, on March 10, 2003, the trial court issued theassailed decision dismissing the petition but declaring invalid DO123. Petitioners moved for a reconsideration of the dismissal of their petition; but it was denied by the trial court in its Order datedJune 16, 2003 .3

Hence, this petition.

The RTC’s Ruling

The dispositive portion of the RTC’s Decision dated 10 March 2003reads:

WHEREFORE, [t]he Petition is denied/dismissed insofar as petitionersseek to declare null and void ab initio DPWH Department Order No. 74,Series of 1993, Administrative Order No. 1, and Art. II, Sec. 3(a) of the

Revised Rules on Limited Access Facilities promulgated by the DPWHthru the TRB, the presumed validity thereof not having been overcome;but the petition is granted insofar as DPWH Department Order No. 123 isconcerned, declaring the same to be invalid for being violative of theequal protection clause of the Constitution.

SO ORDERED .4

The Issues

Petitioners seek a reversal and raise the following issues for resolution:















1. WHETHER THE RTC’S DECISION IS ALREADY BARRED BYRES JUDICATA;

2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONSCONTRAVENE RA 2000; AND

3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL .5

The Ruling of the Court

The petition is partly meritorious.

Whether the RTC’s Decision Dismissing Petitioners’ Case is Barred by Res Judicata

Petitioners rely on the RTC’s Order dated 28 June 2001, which grantedtheir prayer for a writ of preliminary injunction. Since respondents did notappeal from that Order, petitioners argue that the Order became "a final

judgment" on the issues. Petitioners conclude that the RTC erred when itsubsequently dismissed their petition in its Decision dated 10 March2003.

Petitioners are mistaken. As the RTC correctly stated, the Order dated 28June 2001 was not an adjudication on the merits of the case that wouldtrigger res judicata . A preliminary injunction does not serve as a finaldetermination of the issues. It i s a provisional remedy, which merelyserves to preserve the status quo until the court could hear the merits of the case .6 Thus, Section 9 of Rule 58 of the 1997 Rules of CivilProcedure requires the issuance of a final injunction to confirm thepreliminary injunction should the court during trial determine that the acts

complained of deserve to be permanently enjoined. A preliminaryinjunction is a mere adjunct, an ancillary remedy which exists only as anincident of the main proceeding .7

Validity of DO 74, DO 215 and the TRB Regulations

Petitioners claim that DO 74 ,8 DO 215 ,9 and the TRB’s Rules andRegulations issued under them violate the provisions of RA 2000. Theycontend that the two issuances unduly expanded the power of the DPWHin Section 4 of RA 2000 to regulate toll ways. Petitioners assert that theDPWH’s regulatory authority is l imited to acts like redesigning curbings or

central dividing sections. They claim that the DPWH is only allowed to re-

design the physical structure of toll ways, and not to determine "who or what can be qualified as toll way users. "10

Section 4 of RA 200 0 11 reads:

SEC. 4. Design of limited access facility. — The Department of PublicWorks and Communications is authorized to so design any limitedaccess facility and to so regulate, restrict, or prohibit access as tobest serve the traffic for which such facility is intended ; and itsdetermination of such design shall be final. In this connection, it isauthorized to divide and separate any limited access facility into separateroadways by the construction of raised curbings, central dividingsections, or other physical separations, or by designating such separateroadways by signs, markers, stripes, and the proper lane for such trafficby appropriate signs, markers, stripes and other devices. No person,shall have any right of ingress or egress to, from or across limited accessfacilities to or from abutting lands, except at such designated points atwhich access may be permitted, upon such terms and conditions as maybe specified from time to time. (Emphasis supplied)

On 19 February 1968, Secretary Antonio V. Raquiza of the Departmentof Public Works and Communications issued AO 1, which, amongothers, prohibited motorcycles on limited access highways. The pertinentprovisions of AO 1 read:

SUBJECT: Revised Rules and Regulations Governing Limited AccessHighways

By virtue of the authority granted the Secretary [of] Public Worksand Communications under Section 3 of R.A. 2000 , otherwise known

as the Limited Access Highway Act, the following rules and regulationsgoverning limited access highways are hereby promulgated for theguidance of all concerned:

x x x x

Section 3 – On limited access highways, it is unlawful for any personor group of persons to :

x x x x

(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (notmotorized);































x x x x12 (Emphasis supplied)

On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public Works and Highways issued DO 74:

SUBJECT: Declaration of the North Luzon Expressway from Balintawakto Tabang and the South Luzon Expressway from Nichols to Alabang asLimited Access Facilities

Pursuant to Section 2 of Republic Act No. 2000, a limited access facilityis defined as "a highway or street especially designed for through traffic,and over, from, or to which owners or occupants of abutting land or other persons have no right or easement or only a l imited right or easement of access, light, air or view by reason of the fact that their proper[t]y abutsupon such limited access facility or for any other reason. Such highwaysor streets may be parkways, from which trucks, buses, and other commerical [sic] vehicles shall be excluded; or they may be free waysopen to use by all customary forms of street and highway traffic."

Section 3 of the same Act authorizes the Department of Public Worksand Communications (now Department of Public Works and Highways)"to plan, designate, establish, regulate, vacate, alter, improve, maintain,and provide limited access facilities for public use wherever it is of theopinion that traffic conditions, present or future, will justify such specialfacilities."

Therefore, by virtue of the authority granted above, the Department of Public Works and Highways hereby designates and declares theBalintawak to Tabang Sections of the North Luzon Expressway, and theNichols to Alabang Sections of the South Luzon Expressways, to be

LIMITED ACCESS HIGHWAYS/FACILITIES subject to such rules andregulations that may be imposed by the DPWH thru the Toll RegulatoryBoard (TRB).

In view thereof, the National Capital Region (NCR) of this Department ishereby ordered, after consultation with the TRB and in coordination withthe Philippine National Police (PNP), to close all illegal openings alongthe said Limited Access Highways/Facilities. In this connection, the NCRis instructed to organize its own enforcement and security group for thepurpose of assuring the continued closure of the right-of-way fences andthe implementation of the rules and regulations that may be imposed bythe DPWH thru the TRB.

This Order shall take effect immediately .13

On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO215:

SUBJECT: Declaration of the R-1 Expressway, from Seaside drive toZapote, C-5 Link Expressway, from Zapote to Noveleta, of the ManilaCavite Toll Expressway as Limited Access Facility.

Pursuant to Section 2 of Republic Act No. 2000, a limited access facilityis defined as "a highway or street especially designed for through traffic,and over, from, or to which owners or occupants of abutting land or other persons have no right or easement or only a limited right or easement of access, light, air or view by reason of the fact that their property abutsupon such limited access facility or for any other reason. Such highwaysor streets may be parkways, from which trucks, buses, and other commercial vehicles shall be excluded; or they may be free ways open touse by all customary forms of street and highway traffic."

Section 3 of the same Act authorizes the Department of Public Worksand Communications (now Department of Public Works and Highways)"to plan, designate, establish, regulate, vacate, alter, improve, maintain,and provide limited access facilities for public use wherever it is of theopinion that traffic conditions, present or future, will justify such specialfacilities."

Therefore, by virtue of the authority granted above, the Department of Public Works and Highways hereby designates and declares the R-1Expressway, C-5 Link Expressway and the R-1 Extension ExpresswaySections of the Manila Cavite Toll Expressway to be LIMITED ACCESS

HIGHWAYS/FACILITIES subject to such rules and regulations that maybe imposed by the DPWH thru the Toll Regulatory Board (TRB).

In view thereof, the National Capital Region (NCR) of this Department ishereby ordered, after consultation with the TRB and in coordination withthe Philippine National Police (PNP), to close all illegal openings alongthe said Limited Access Highways/Facilities. In this connection, the NCRis instructed to organize its own enforcement and security group for thepurpose of assuring the continued closure of the right-of-way fences andthe implementation of the rules and regulations that may be imposed bythe DPWH thru the TRB.

This Order shall take effect immediately .14















The RTC held that Section 4 of RA 2000 expressly authorized the DPWHto design limited access facilities and to regulate, restrict, or prohibitaccess as to serve the traffic for which such facilities are intended.

According to the RTC, such authority to regulate, restrict, or prohibitlogically includes the determination of who and what can and cannot bepermitted entry or access into the limited access facilities. Thus, the RTCconcluded that AO 1, DO 74, and the Revised Rules and Regulations onLimited Access Facilities, which ban motorcycles’ entry or access to the

limited access facilities, are not inconsistent with RA 2000.

RA 2000, otherwise known as the Limited Access Highway Act, wasapproved on 22 June 1957. Section 4 of RA 2000 provides that"[t]he Department of Public Works and Communications is authorizedto so design any limited access facility and to so regulate, restrict, or prohibit access as to best serve the traffic for which such facility isintended." The RTC construed this authorization to regulate, restrict, or prohibit access to limited access facilities to apply to the Department of Public Works and Highways (DPWH) .

The RTC’s ruling is based on a wrong premise. The RTC assumed thatthe DPWH derived its authority from its predecessor, the Department of Public Works and Communications, which is expressly authorized toregulate, restrict, or prohibit access to limited access facilities under Section 4 of RA 2000. However, such assumption fails to consider theevolution of the Department of Public Works and Communications.

Under Act No. 2711, otherwise known as the Revised AdministrativeCode, approved on 10 March 1917, there were only seven executivedepartments, namely: the Department of the Interior, the Department of Finance, the Department of Justice, the Department of Agriculture andCommerce, the Department of Public Works and Communications ,the Department of Public Instruction, and the Department of Labor .15 On20 June 1964, Republic Act No. 413 616 created the Land TransportationCommission under the Department of Public Works andCommunications. Later, the Department of Public Works andCommunications was restructured into the Department of Public Works,Transportation and Communications.

On 16 May 1974, Presidential Decree No. 458 (PD 458) separated theBureau of Public Highways from the Department of Public Works,Transportation and Communications and created it as a department to beknown as Department of Public Highways. Under Section 3 of PD 458,

the Department of Public Highways is "responsible for developing and

implementing programs on the construction and maintenance of roads,bridges and airport runways."

With the amendment of the 1973 Philippine Constitution in 1976,resulting in the shift in the form of government, national agencies wererenamed from Departments to Ministries. Thus, the Department of PublicWorks, Transportation and Communications became the Ministry of Public Works, Transportation and Communications .

On 23 July 1979, then President Ferdinand E. Marcos issued ExecutiveOrder No. 546 (EO 546), creating a Ministry of Public Works anda Ministry of Transportation and Communications .17 Under Section 1of EO 546, the Ministry of Public Works assumed the public works functions of the Ministry of Public Works, Transportation andCommunications . The functions of the Ministry of Public Works werethe "construction, maintenance and repair of port works, harbor facilities,lighthouses, navigational aids, shore protection works, airport buildingsand associated facilities, public buildings and school buildings,monuments and other related structures, as well as undertaking harbor

and river dredging works, reclamation of foreshore and swamplandareas, water supply, and flood control and drainage works. "18

On the other hand, the Ministry of Transportation andCommunications became the "primary policy, planning, programming,coordinating, implementing, regulating and administrative entity of theexecutive branch of the government in the promotion, development, andregulation of a dependable and coordinated network of transportation andcommunication systems. "19 The functions of the Ministry of Transportation and Communications were:

a. Coordinate and supervise all activities of the Ministry relative totransportation and communications;

b. Formulate and recommend national policies andguidelines for the preparation and implementation of anintegrated and comprehensive transportation andcommunications system at the national, regional and locallevels ;

c. Establish and administer comprehensive and integratedprograms for transportation and communication, and for thispurpose, may call on any agency, corporation, or organization,whether government or private, whose development programs























include transportation and communications as an integral part toparticipate and assist in the preparation and implementation of such programs;

d. Regulate, whenever necessary, activities relative totransportation and communications and prescribe andcollect fees in the exercise of such power ;

e. Assess, review and provide direction to transportation andcommunications research and development programs of thegovernment in coordination with other institutions concerned; and

f. Perform such other functions as may be necessary to carry intoeffect the provisions of this Executive Order .20 (Emphasissupplied)

On 27 July 1981, then President Marcos issued Executive Order No. 710(EO 710), which merged the Ministry of Public Works and the Ministry of Public Highways for "greater simplicity and economy in operations. "21 The

restructured agency became known as the Ministry of Public Worksand Highways . Under Section 1 of EO 710 the functions of the Ministryof Public Works and the Ministry of Public Highways 22 were transferred tothe Ministry of Public Works and Highways.

Upon the ratification of the 1987 Constitution in February 1987, theformer Ministry of Public Works and Highways became the Departmentof Public Works and Highways (DPWH) and the former Ministry of Transportation and Communications became the Department of Transportation and Communications (DOTC) .

DPWH issued DO 74 and DO 215 declaring certain expressways aslimited access facilities on 5 April 1993 and 25 June 1998, respectively.Later, the TRB, under the DPWH, issued the Revised Rules andRegulations on Limited Access Facilities. However, on 23 July 1979, longbefore these department orders and regulations were issued,the Ministry of Public Works, Transportation andCommunications was divided into two agencies – the Ministry of PublicWorks and the Ministry of Transportation and Communications – byvirtue of EO 546. The question is, which of these two agencies is now authorized to regulate, restrict, or prohibit access to limited accessfacilities ? 23

Under Section 1 of EO 546, the Ministry of Public Works (now DPWH )assumed the public works functions of the Ministry of Public Works,Transportation and Communications . On the other hand, among thefunctions of the Ministry of Transportation andCommunications (now Department of Transportation andCommunications [DOTC] ) were to (1) formulate and recommendnational policies and guidelines for the preparation and implementation of an integrated and comprehensive transportation and communications

systems at the national, regional, and local levels; and (2) regulate,whenever necessary, activities relative to transportation andcommunications and prescribe and collect fees in the exercise of suchpower. Clearly, under EO 546, it is the DOTC, not the DPWH, which hasauthority to regulate, restrict, or prohibit access to limited access facilities.

Even under Executive Order No. 125 (EO 125 )24 and Executive Order No.125-A (EO 125-A) ,25 which further reorganized the DOTC, the authority toadminister and enforce all laws, rules and regulations relative totransportation is clearly with the DOTC .26

Thus, DO 74 and DO 215 are void because the DPWH has no authorityto declare certain expressways as limited access facilities. Under the law,it is the DOTC which is authorized to administer and enforce all laws,rules and regulations in the field of transportation and to regulate relatedactivities.

Since the DPWH has no authority to regulate activities relative totransportation, the TRB 27 cannot derive its power from the DPWH to issueregulations governing limited access facilities. The DPWH cannotdelegate a power or function which it does not possess in the first place.Since DO 74 and DO 215 are void, it follows that the rules implementingthem are likewise void.

Whether AO 1 and DO 123 are Unconstitutional

DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July2001. DO 123 reads in part:

SUBJECT: Revised Rules and Regulations Governing Limited AccessHighways

By virtue of the authority granted the Secretary of Public Works andHighways under Section 3 of R.A. 2000, otherwise known as theLimited Access Highway Act , the following revised rules and



































necessitates the imposition of guidelines in the manner of its use andoperation. Inevitably, such rules will restrict certain rights. But the merefact that certain rights are restricted does not invalidate the rules.

Consider Section 3(g) of AO 1, which prohibits the conduct of ralliesinside toll ways .38 The regulation affects the right to peaceably assemble.The exercise of police power involves restriction, restriction being implicitin the power itself. Thus, the test of constitutionality of a police power

measure is limited to an inquiry on whether the restriction imposed onconstitutional rights is reasonable, and not whether it imposes arestriction on those rights.

None of the rules outlined in AO 1 strikes us as arbitrary and capricious.The DPWH, through the Solicitor General, maintains that the toll wayswere not designed to accommodate motorcycles and that their presencein the toll ways will compromise safety and traffic considerations. TheDPWH points out that the same study the petitioners rely on cites that theinability of other drivers to detect motorcycles is the predominant cause of accidents .39 Arguably, prohibiting the use of motorcycles in toll ways may

not be the "best" measure to ensure the safety and comfort of those whoply the toll ways.

However, the means by which the government chooses to act is not judged in terms of what is "best," rather, on simply whether the act isreasonable. The validity of a police power measure does not dependupon the absolute assurance that the purpose desired can in fact beprobably fully accomplished, or upon the certainty that it will best servethe purpose intended .40 Reason, not scientific exactitude, is the measureof the validity of the governmental regulation. Arguments based on whatis "best" are arguments reser ved for the Legislature’s discussion. Judicialintervention in such matters will only be warranted if the assailedregulation is patently whimsical. We do not find the situation in this caseto be so.

Neither do we find AO 1 oppressive. Petitioners are not being deprived of their right to use the limited access facility. They are merely beingrequired, just like the rest of the public, to adhere to the rules on how touse the facility. AO 1 does not infringe upon petitioners’ right to travel butmerely bars motorcycles, bicycles, tricycles, pedicabs, and any non-

motorized vehicles as the mode of traveling along limited accesshighways .41 Several cheap, accessible and practical alternative modes of transport are open to petitioners. There is nothing oppressive in being

required to take a bus or drive a car instead of one’s scooter,bicycle, calesa , or motorcycle upon using a toll way.

Petitioners’ reliance on the s tudies they gathered is misplaced. Policepower does not rely upon the existence of definitive studies to support itsuse. Indeed, no requirement exists that the exercise of police power mustfirst be conclusively justified by research. The yardstick has always beensimply whether the government’s act is reasonable and not

oppressive .42 The use of "reason" in this sense is simply meant to guardagainst arbitrary and capricious government action. Scientific certaintyand conclusiveness, though desirable, may not be demanded in everysituation. Otherwise, no government will be able to act in situationsdemanding the exercise of its residual powers because it will be tied upconducting studies.

A police power measure may be assailed upon proof that it undulyviolates constitutional limitations like due process and equal protection of the law .43 Petitioners’ attempt to seek redress from the motorcycle banunder the aegis of equal protection must fail. Petitioners’ contention that

AO 1 unreasonably singles out motorcycles is specious. To begin with,classification by itself is not prohibited .44

A classification can only be assailed if it is deemed invidious, that is, it isnot based on real or substantial differences. As explained by Chief Justice Fernando in Bautista v. Juinio :45

x x x To assure that the general welfare be promoted, which is the end of law, a regulatory measure may cut into the rights to liberty and property.Those adversely affected may under such circumstances invoked theequal protection clause only if they can show that the governmental actassailed, far from being inspired by the attainment of the common wealwas prompted by the spirit of hostility, or at the very least, discriminationthat finds no support in reason. It suffices then that the laws operateequally and uniformly on all persons under similar circumstances or thatall persons must be treated in the same manner, the conditions not beingdifferent, both in the privileges conferred and the liabilities imposed.Favoritism and undue preference cannot be allowed. For the principle isthat equal protection and security shall be given to every person under circumstances, which if not identical is analogous. If law be looked uponin terms of burden or charges, those that fall within a class should betreated in the same fashion, whatever restrictions cast on some in thegroup equally binding the rest.



































We find that it i s neither warranted nor reasonable for petitioners to saythat the only justifiable classification among modes of transport is themotorized against the non-motorized. Not all motorized vehicles arecreated equal. A 16-wheeler truck is substantially different from other light vehicles. The first may be denied access to some roads where thelatter are free to drive. Old vehicles may be reasonably differentiated fromnewer models .46We find that real and substantial differences existbetween a motorcycle and other forms of transport sufficient to justify its

classification among those prohibited from plying the toll ways. Amongstall types of motorized transport, it is obvious, even to a child, that amotorcycle is quite different from a car, a bus or a truck. The mostobvious and troubling difference would be that a two-wheeled vehicle isless stable and more easily overturned than a four-wheeled vehicle.

A classification based on practical convenience and common knowledgeis not unconstitutional simply because it may lack purely theoretical or scientific uniformity. Moreover, we take note that the Philippines is hometo a host of unique motorized modes of transport ranging from modifiedhand-carts ( kuliglig ) to bicycle "sidecars" outfitted with a motor. To followpetitioners’ argument to its logical conclusion would open up toll ways toall these contraptions. Both safety and traffic considerations militateagainst any ruling that would bring about such a nightmare.

Petitioners complain that the prohibition on the use of motorcycles in tollways unduly deprive them of their right to travel.

We are not persuaded.

A toll way is not an ordinary road. As a facility designed to promote thefastest access to certain destinations, its use, operation, andmaintenance require close regulation. Public interest and safety requirethe imposition of certain restrictions on toll ways that do not apply toordinary roads. As a special kind of road, it is but reasonable that not allforms of transport could use it.

The right to travel does not mean the right to choose any vehicle intraversing a toll way. The right to travel refers to the right to move fromone place to another. Petitioners can traverse the toll way any time theychoose using private or public four-wheeled vehicles. Petitioners are notdenied the right to move from Point A to Point B along the toll way.Petitioners are free to access the toll way, much as the rest of the publiccan. The mode by which petitioners wish to travel pertains to the manner of using the toll way, a subject that can be validly l imited by regulation.

Petitioners themselves admit that alternative routes are available to them.Their complaint is that these routes are not the safest and mostconvenient. Even if their claim is true, it hardly qualifies as an unduecurtailment of their freedom of movement and travel. The right to traveldoes not entitle a person to the best form of transport or to the mostconvenient route to his destination. The obstructions found in normalstreets, which petitioners complain of (i.e., potholes, manholes,construction barriers, etc.), are not suffered by them alone.

Finally, petitioners assert that their possession of a driver’s license fromthe Land Transportation Office (LTO) and the fact that their vehicles areregistered with that office entitle them to use all kinds of roads in thecountry. Again, petitioners are mistaken. There exists no absolute right todrive. On the contrary, this privilege , is heavily regulated. Only a qualifiedgroup is allowed to drive motor vehicles: those who pass the testsadministered by the LTO. A driver’s license issued by the LTO merelyallows one to drive a particular mode of transport. It is not a license todrive or operate any form of transportation on any type of road. Vehicleregistration in the LTO on the other hand merely signifies theroadworthiness of a vehicle. This does not preclude the government fromprescribing which roads are accessible to certain vehicles.

WHEREFORE, we PARTLY GRANT the petition. We MODIFY theDecision dated 10 March 2003 of the Regional Trial Court, Branch 147,Makati City and its Order dated 16 June 2003 in Civil Case No. 01-034.We declare VOIDDepartment Order Nos. 74, 215, and 123 of theDepartment of Public Works and Highways, and the Revised Rules andRegulations on Limited Access Facilities of the Toll Regulatory Board.We declare VALID Administrative Order No. 1 of the Department of Public Works and Communications.

SO ORDERED.

ANTONIO T. CARPIO Associate Justice

G.R. No. 168081 October 17, 2008

ARMANDO G. YRASUEGUI, petitioners,vs.PHILIPPINE AIRLINES, INC., respondents.

D E C I S I O N






REYES, R.T., J . :

THIS case portrays the peculiar story of an international flight stewardwho was dismissed because of his failure to adhere to the weightstandards of the airline company.

He is now before this Court via a petition for review on c ertiorari claimingthat he was illegally dismissed. To buttress his stance, he argues that (1)his dismissal does not fall under 282(e) of the Labor Code; (2) continuingadherence to the weight standards of the company is not a bona fideoccupational qualification; and (3) he was discriminated against becauseother overweight employees were promoted instead of being disciplined.

After a meticulous consideration of all arguments pro and con , We upholdthe legality of dismissal. Separation pay, however, should be awarded infavor of the employee as an act of social justice or based on equity. Thisis so because his dismissal i s not for serious misconduct. Neither is itreflective of his moral character.

The Facts

Petitioner Armando G. Yrasuegui was a former international flightsteward of Philippine Airlines, Inc. (PAL). He stands five feet and eightinches (5’8") with a large body frame. The proper weight for a man of hisheight and body structure is from 147 to 166 pounds, the ideal weightbeing 166 pounds, as mandated by the Cabin and Crew AdministrationManua l1 of PAL.

The weight problem of petitioner dates back to 1984. Back then, PALadvised him to go on an extended vacation leave from December 29,

1984 to March 4, 1985 to address his weight concerns. Apparently,petitioner failed to meet the company’s weight standards, promptinganother leave without pay from March 5, 1985 to November 1985.

After meeting the required weight, petitioner was allowed to return towork. But petitioner’s weight problem recurred. He again went on leavewithout pay from October 17, 1988 to February 1989.

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over hisideal weight. In line with company policy, he was removed from flight dutyeffective May 6, 1989 to July 3, 1989. He was formally requested to trim

down to his ideal weight and report for weight checks on several dates.He was also told that he may avail of the services of the company

physician should he wish to do so. He was advised that his case will beevaluated on July 3, 1989 .2

On February 25, 1989, petitioner underwent weight check. It wasdiscovered that he gained, instead of losing, weight. He was overweightat 215 pounds, which is 49 pounds beyond the limit. Consequently, hisoff-duty status was retained.

On October 17, 1989, PAL Line Administrator Gloria Dizon personallyvisited petitioner at his residence to check on the progress of his effort tolose weight. Petitioner weighed 217 pounds, gaining 2 pounds from hisprevious weight. After the visit, petitioner made a commitmen t3 to reduceweight in a letter addressed to Cabin Crew Group Manager AugustoBarrios. The letter, in full, reads:

Dear Sir:

I would like to guaranty my commitment towards a weight loss from 217pounds to 200 pounds from today until 31 Dec. 1989.

From thereon, I promise to continue reducing at a reasonable percentageuntil such time that my ideal weight is achieved.

Likewise, I promise to personally report to your office at the designatedtime schedule you will set for my weight check.

Respectfully Yours,

F/S Armando Yrasuegu i4

Despite the lapse of a ninety-day period given him to reach his idealweight, petitioner remained overweight. On January 3, 1990, he wasinformed of the PAL decision for him to remain grounded until such timethat he satisfactorily complies with the weight standards. Again, he wasdirected to report every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was givenone more month to comply with the weight requirement. As usual, he wasasked to report for weight check on different dates. He was reminded thathis grounding would continue pending satisfactory compliance with theweight standards .5

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Again, petitioner failed to report for weight checks, although he was seensubmitting his passport for processing at the PAL Staff Service Division.

On April 17, 1990, petitioner was formally warned that a repeated refusalto report for weight check would be dealt with accordingly. He was givenanother set of weight check dates .6 Again, petitioner ignored the directiveand did not report for weight checks. On June 26, 1990, petitioner wasrequired to explain his refusal to undergo weight checks .7

When petitioner tipped the scale on July 30, 1990, he weighed at 212pounds. Clearly, he was still way over his ideal weight of 166 pounds.

From then on, nothing was heard from petitioner until he followed up hiscase requesting for leniency on the latter part of 1992. He weighed at 219pounds on August 20, 1992 and 205 pounds on November 5, 1992.

On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for violation of company standards on weightrequirements. He was given ten (10) days from receipt of the charge

within which to file his answer and submit controverting evidence .8

On December 7, 1992, petitioner submitted his Answer .9 Notably, he didnot deny being overweight. What he claimed, instead, is that his violation,if any, had already been condoned by PAL since "no action has beentaken by the company" regarding his case "since 1988." He also claimedthat PAL discriminated against him because "the company has not beenfair in treating the cabin crew members who are similarly si tuated."

On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was undergoing a weight reduction program to lose at

least two (2) pounds per week so as to attain his ideal weight .10

On June 15, 1993, petitioner was formally informed by PAL that due tohis inability to attain his ideal weight, "and considering the utmostleniency" extended to him "which spanned a period covering a total of almost five (5) years," his services were considered terminated "effectiveimmediately. "11

His motion for reconsideration having been denied ,12 petitioner filed acomplaint for illegal dismissal against PAL.

Labor Arbiter, NLRC and CA Dispositions

On November 18, 1998, Labor Arbiter Valentin C. Reyes rule d 13 thatpetitioner was illegally dismissed. The dispositive part of the Arbiter rulingruns as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered,declaring the compl ainant’s dismissal illegal, and ordering the respondentto reinstate him to his former position or substantially equivalent one, andto pay him:

a. Backwages of Php10,500.00 per month from his dismissal on June 15,1993 until reinstated, which for purposes of appeal is hereby set fromJune 15, 1993 up to August 15, 1998 at P651,000.00;

b. Attorney’s fees of five percent (5%) of the total award.

SO ORDERED .14

The Labor Arbiter held that the weight standards of PAL are reasonablein view of the nature of the job of petitioner .15 However, the weightstandards need not be complied with under pain of dismissal since hisweight did not hamper the performance of his duties .16 Assuming that itdid, petitioner could be transferred to other positions where his weightwould not be a negative factor .17 Notably, other overweight employees,i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of being disciplined .18

Both parties appealed to the National Labor Relations Commission(NLRC) .19

On October 8, 1999, the Labor Arbiter issued a writ of execution directing

the reinstatement of petitioner without loss of seniority rights and other benefits .20

On February 1, 2000, the Labor Arbiter denied 21 the Motion to Quash Writof Executio n22 of PAL.

On March 6, 2000, PAL appealed the denial of its motion to quash to theNLRC .23

On June 23, 2000, the NLRC rendered judgmen t24 in the following tenor:














































































WHEREFORE , premises considered[,] the Decision of the Arbiter dated18 November 1998 as modified by our findings herein, is hereby

AFFIRMED and that part of the dispositive portion of said decisionconcerning complainant’s entitlement to backwages shall be deemed torefer to complainant’s entitlement to his full backwages, inclusive of allowances and to his other benefits or their monetary equivalent insteadof simply backwages, from date of dismissal until his actual reinstatementor finality hereof. Respondent is enjoined to manifests ( sic ) its choice of

the form of the reinstatement of complainant, whether physical or throughpayroll within ten (10) days from notice failing which, the same shall bedeemed as complainant’s reinstatement through payroll and execution incase of non-payment shall accordingly be issued by the Arbiter. Bothappeals of respondent thus, are DISMISSED for utter lack of merit .25

According to the NLRC, "obesity, or the tendency to gain weightuncontrollably regardless of the amount of food intake, is a disease initself. "26 As a consequence, there can be no intentional defiance or serious misconduct by petitioner to the lawful order of PAL for him to loseweight .27

Like the Labor Arbiter, the NLRC found the weight standards of PAL tobe reasonable. However, it found as unnecessary the Labor Arbiter holding that petitioner was not remiss in the performance of his duties asflight steward despite being overweight. According to the NLRC, theLabor Arbiter should have limited himself to the issue of whether thefailure of petitioner to attain his ideal weight constituted willful defiance of the weight standards of PAL .28

PAL moved for reconsideration to no avail .29 Thus, PAL elevated thematter to the Court of Appeals (CA) via a petition for certiorari under Rule65 of the 1997 Rules of Civil Procedure .30

By Decision dated August 31, 2004, the CA reversed 31 the NLRC:

WHEREFORE, premises considered, we hereby GRANT the petition.The assailed NLRC decision is declared NULL and VOID and is herebySET ASIDE. The private respondent’s complaint is hereby DISMISSED.No costs.

SO ORDERED .32

The CA opined that there was grave abuse of discretion on the part of theNLRC because it "looked at wrong and irrelevant considerations "33 in

evaluating the evidence of the parties. Contrary to the NLRC ruling, theweight standards of PAL are meant to be a continuing qualification for anemployee’s position .34 The failure to adhere to the weight standards isan analogous cause for the dismissal of an employee under Article282(e) of the Labor Code in relation to Article 282(a). It is not willfuldisobedience as the NLRC seemed to suggest .35 Said the CA, "theelement of willfulness that the NLRC decision cites is an irrelevantconsideration in arriving at a conclusion on whether the dismissal is

legally proper. "36

In other words, "the relevant question to ask is not oneof willfulness but one of reasonableness of the standard and whether or not the employee qualifies or continues to qualify under this standard. "37

Just like the Labor Arbiter and the NLRC, the CA held that the weightstandards of PAL are reasonable .38 Thus, petitioner was legallydismissed because he repeatedly failed to meet the prescribed weightstandards .39 It is obvious that the issue of discrimination was only invokedby petitioner for purposes of escaping the result of his dismissal for beingoverweight .40

On May 10, 2005, the CA denied petitioner’s motion for reconsideration .41 Elaborating on its earlier ruling, the CA held that theweight standards of PAL are a bona fide occupational qualification which,in case of violation, "justifies an employee’s separation from theservice. "42

Issues

In this Rule 45 petition for review, the following issues are posed for resolution:

I.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED INHOLDING THAT PETITIONER’S OBESITY CAN BE A GROUND FORDISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THELABOR CODE OF THE PHILIPPINES;

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED INHOLDING THAT PETITIONER’S DISMISSAL FOR OBESITY CAN BEPREDICATED ON THE "BONA FIDE OCCUPATIONALQUALIFICATION (BFOQ) DEFENSE";










































































III.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED INHOLDING THAT PETITIONER WAS NOT UNDULY DISCRIMINATED

AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHTCABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES ORPROMOTED;

IV.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERREDWHEN IT BRUSHED ASIDE PETITIONER’S CLAIMS FORREINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT

AND ACADEMIC .43 (Underscoring supplied)

Our Ruling

I. The obesity of petitioner is a ground for dismissal under Article282(e) 44 of the Labor Code .

A reading of the weight standards of PAL would lead to no other conclusion than that they constitute a continuing qualification of anemployee in order to keep the job. Tersely put, an employee may bedismissed the moment he is unable to comply with his ideal weight asprescribed by the weight standards. The dismissal of the employee wouldthus fall under Article 282(e) of the Labor Code. As explained by the CA:

x x x [T]he standards violated in this case were not mere "orders" of theemployer; they were the "prescribed weights" that a cabin crewmust maintain in order to qual ify for and keep his or her posi t ion in

the company . In other words, they were standards thatestablish contin uing qual if icat ions for an employee’s position. In thissense, the failure to maintain these standards does not fall under Article282(a) whose express terms require the element of willfulness in order tobe a ground for dismissal. The failure to meet the employer’s qual ifying s tandards is in fact a ground that does not squarely fall under grounds(a) to (d) and is therefore one that falls under Article 282(e) – the "other causes analogous to the foregoing."

By its nature, these "qualifying standards" are norms that apply pr io r to and af ter an employee is hired. They apply pr io r to employment because these are the standards a job applicant mustinitially meet in order to be hired. They apply after hir ing because an

employee must continue to meet these standards while on the job inorder to keep his job. Under this perspective, a violation is not one of thefaults for which an employee can be dismissed pursuant to pars. (a) to (d)of Article 282; the employee can be dismissed simply because he nolonger "qualifies" for his job irrespective of whether or not the failure toqualify was willful or intentional. x x x45

Petitioner, though, advances a very interesting argument. He claims that

obesity is a "physical abnormality and/or illness. "46

Relying on Nadura v.Benguet Consolidated, Inc. ,47 he says his dismissal is illegal:

Conscious of the fact that Nadura’s case cannot be made to fall squarelywithin the specific causes enumerated in subparagraphs 1(a) to (e),Benguet invokes the provisions of subparagraph 1(f) and says thatNadura’s illness – occasional attacks of asthma – is a cause analogousto them.

Even a cursory reading of the legal provision under consideration issufficient to convince anyone that, as the trial court said, "illness cannot

be included as an analogous cause by any stretch of imagination."

It is clear that, except the just cause mentioned in sub-paragraph 1(a), allthe others expressly enumerated in the law are due to the voluntaryand/or willful act of the employee. How Nadura’s illness could beconsidered as "analogous" to any of them is beyond our understanding,there being no claim or pretense that the same was contracted throughhis own voluntary act .48

The reliance on Nadura is off-tangent. The factual milieu in Nadura issubstantially different from the case at bar.First, Nadura was not decidedunder the Labor Code. The law applied in that case was Republic Act(RA) No. 1787.Second, the issue of flight safety is absent in Nadura ,thus, the rationale there cannot apply here. Third, in Nadura , theemployee who was a miner, was laid off from work because of illness,i.e., asthma. Here, petitioner was dismissed for his failure to meet theweight standards of PAL. He was not dismissed due to illness. Fourth,the issue in Nadura is whether or not the dismissed employee is entitledto separation pay and damages. Here, the issue centers on the proprietyof the dismissal of petitioner for his failure to meet the weight standardsof PAL. Fifth, in Nadura , the employee was not accorded due process.Here, petitioner was accorded utmost leniency. He was given more thanfour (4) years to comply with the weight standards of PAL.



























In the case at bar, the evidence on record militates against petitioner’sclaims that obesity is a disease. That he was able to reduce his weightfrom 1984 to 1992 clearly shows that it i s possible for him to lose weightgiven the proper attitude, determination, and self-discipline. Indeed,during the clarificatory hearing on December 8, 1992, petitioner himself claimed that "[t]he issue is could I bring my weight down to ideal weightwhich is 172, then the answer is yes. I can do it now. "49

True, petitioner claims that reducing weight is costing him "a lot of expenses. "50 However, petitioner has only himself to blame. He couldhave easily availed the assistance of the company physician, per theadvice of PAL .51 He chose to ignore the suggestion. In fact, he repeatedlyfailed to report when required to undergo weight checks, without offeringa valid explanation. Thus, his fluctuating weight indicates absence of willpower rather than an illness.

Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation and Hospitals ,52decided by the United StatesCourt of Appeals (First Circuit). In that case, Cook worked from 1978 to

1980 and from 1981 to 1986 as an institutional attendant for the mentallyretarded at the Ladd Center that was being operated by respondent. Shetwice resigned voluntarily with an unblemished record. Even respondentadmitted that her performance met the Center’s legitimate expectations.In 1988, Cook re-applied for a similar position. At that time, "she stood5’2" tall and weighed over 320 pounds." Respondent claimed that themorbid obesity of plaintiff compromised her ability to evacuate patients incase of emergency and it also put her at greater risk of serious diseases.

Cook contended that the action of respondent amounted to discriminationon the basis of a handicap. This was in direct violation of Section 504(a)of the Rehabilitation Act of 1973 ,53 which incorporates the remediescontained in Title VI of the Civil Rights Act of 1964. Respondent claimed,however, that morbid obesity could never constitute a handicap within thepurview of the Rehabilitation Act. Among others, obesity is a mutablecondition, thus plaintiff could simply lose weight and rid herself of concomitant disability.

The appellate Court disagreed and held that morbid obesity is a disabilityunder the Rehabilitation Act and that respondent discriminated againstCook based on "perceived" disability. The evidence included experttestimony that morbid obesity is a physiological disorder. It involves adysfunction of both the metabolic system and the neurological appetite –

suppressing signal system, which is capable of causing adverse effectswithin the musculoskeletal, respiratory, and cardiovascular systems.

Notably, the Court stated that "mutability is relevant only in determiningthe substantiality of the limitation flowing from a given impairment," thus"mutability only precludes those conditions that an individual can easilyand quickly reverse by behavioral alteration."

Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the District of Rhode Island, Cook was sometimebefore 1978 "at least one hundred pounds more than what is considered

appropriate of her height." According to the Circuit Judge, Cook weighed"over 320 pounds" in 1988. Clearly, that is not the case here. At hisheaviest, petitioner was only less than 50 pounds over his ideal weight.

In fine, We hold that the obesity of petitioner, when placed in the contextof his work as flight attendant, becomes an analogous cause under

Article 282(e) of the Labor Code that justifies his dismissal from theservice. His obesity may not be unintended, but is nonetheless voluntary.

As the CA correctly puts it, "[v]oluntariness basically means that the justcause is solely attributable to the employee without any external forceinfluencing or controlling his actions. This element runs through all just

causes under Article 282, whether they be in the nature of a wrongfulaction or omission. Gross and habitual neglect, a recognized just cause,is considered voluntary although it lacks the element of intent found in

Article 282(a), (c), and (d). "54

II. The dismissal of petitioner can be predicated on the bona fideoccupational qualification defense.

Employment in particular jobs may not be limited to persons of aparticular sex, religion, or national origin unless the employer can showthat sex, religion, or national origin is an actual qualification for performing the job. The qualification is called a bona fide occupationalqualification (BFOQ) .55 In the United States, there are a few federal andmany state job discrimination laws that contain an exception allowing anemployer to engage in an otherwise unlawful form of prohibiteddiscrimination when the action is based on a BFOQ necessary to thenormal operation of a business or enterprise .56

Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute providing for it .57Further, there is no existing BFOQstatute that could justify his dismissal .58

Both arguments must fail.









































First, the Constitution ,59 the Labor Code ,60 and RA No. 727 7 61 or theMagna Carta for Disabled Person s 62 contain provisions similar to BFOQ.

Second, in British Columbia Public Service Employee Commission(BSPSERC) v. The British Columbia Government and ServiceEmployee’s Union (BCGSEU) ,63 the Supreme Court of Canada adoptedthe so-called "Meiorin Test" in determining whether an employment policyis justified. Under this test, (1) the employer must show that it adopted the

standard for a purpose rationally connected to the performance of the job ;64 (2) the employer must establish that the standard is reasonablynecessar y65 to the accomplishment of that work-related purpose; and (3)the employer must establish that the standard is reasonably necessary inorder to accomplish the legitimate work-related purpose. Similarly, in Star Paper Corporation v. Simbol ,66 this Court held that in order to justify aBFOQ, the employer must prove that (1) the employment qualification isreasonably related to the essential operation of the job involved; and (2)that there is factual basis for believing that all or substantially all personsmeeting the qualification would be unable to properly perform the dutiesof the job .67

In short, the test of reasonableness of the company policy is usedbecause it is parallel to BFOQ .68 BFOQ is valid "provided it reflects aninherent quality reasonably necessary for satisfactory job performance. "69

In Duncan Association of Detailman-PTGWTO v. Glaxo WellcomePhilippines, Inc. ,70 the Court did not hesitate to pass upon the validity of acompany policy which prohibits its employees from marrying employeesof a rival company. It was held that the company policy is reasonableconsidering that its purpose is the protection of the interests of thecompany against possible competitor infiltration on its trade secrets andprocedures.

Verily, there is no merit to the argument that BFOQ cannot be applied if ithas no supporting statute. Too, the Labor Arbiter ,71 NLRC ,72 and CA 73 areone in holding that the weight standards of PAL are reasonable. Acommon carrier, from the nature of its business and for reasons of publicpolicy, is bound to observe extraordinary diligence for the safety of thepassengers it transports .74 It is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances .75

The law leaves no room for mistake or oversight on the part of a common

carrier. Thus, it is only logical to hold that the weight standards of PAL

show its effort to comply with the exacting obligations imposed upon it bylaw by virtue of being a common carrier.

The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In order to achieve this, it mustnecessarily rely on its employees, most particularly the cabin flight deckcrew who are on board the aircraft. The weight standards of PAL shouldbe viewed as imposing strict norms of discipline upon its employees.

In other words, the primary objective of PAL in the imposition of theweight standards for cabin crew is flight safety. It cannot be gainsaid thatcabin attendants must maintain agility at all times in order to inspirepassenger confidence on their ability to care for the passengers whensomething goes wrong. It is not farfetched to say that airline companies,

just like all common carriers, thrive due to public confidence on their safety records. People, especially the riding public, expect no less thanthat airline companies transport their passengers to their respectivedestinations safely and soundly. A lesser performance is unacceptable.

The task of a cabin crew or flight attendant is not limited to serving mealsor attending to the whims and caprices of the passengers. The mostimportant activity of the cabin crew is to care for the safety of passengersand the evacuation of the aircraft when an emergency occurs. Passenger safety goes to the core of the job of a cabin attendant. Truly, airlinesneed cabin attendants who have the necessary strength to openemergency doors, the agility to attend to passengers in cramped workingconditions, and the stamina to withstand grueling flight schedules.

On board an aircraft, the body weight and size of a cabin attendant areimportant factors to consider in case of emergency. Aircrafts haveconstricted cabin space, and narrow aisles and exit doors. Thus, thearguments of respondent that "[w]hether the airline’s flight attendants areoverweight or not has no direct relation to i ts mission of transportingpassengers to their destination"; and that the weight standards "hasnothing to do with airworthiness of respondent’s airlines," must fail.

The rationale in Western Air Lines v. Criswel l 76 relied upon by petitioner cannot apply to his case. What was involved there were two (2) airlinepilots who were denied reassignment as flight engineers upon reachingthe age of 60, and a flight engineer who was forced to retire at age 60.They sued the airline company, alleging that the age-60 retirement for flight engineers violated the Age Discrimination in Employment Act of

1967. Age-based BFOQ and being overweight are not the same. The










































































case of overweight cabin attendants is another matter. Given thecramped cabin space and narrow aisles and emergency exit doors of theairplane, any overweight cabin attendant would certainly have difficultynavigating the cramped cabin area.

In short, there is no need to individually evaluate their ability to performtheir task. That an obese cabin attendant occupies more space than aslim one is an unquestionable fact which courts can judicially recognize

without introduction of evidence .77

It would also be absurd to requireairline companies to reconfigure the aircraft in order to widen the aislesand exit doors just to accommodate overweight cabin attendants likepetitioner.

The biggest problem with an overweight cabin attendant is the possibilityof impeding passengers from evacuating the aircraft, should the occasioncall for it. The job of a cabin attendant during emergencies is to speedilyget the passengers out of the aircraft safely. Being overweightnecessarily impedes mobility. Indeed, in an emergency situation,seconds are what cabin attendants are dealing with, not minutes. Threelost seconds can translate into three lost lives. Evacuation might slowdown just because a wide-bodied cabin attendant is blocking the narrowaisles. These possibilities are not remote.

Petitioner is also in estoppel. He does not dispute that the weightstandards of PAL were made known to him prior to his employment. He ispresumed to know the weight limit that he must maintain at all times .78 Infact, never did he question the authority of PAL when he was repeatedlyasked to trim down his weight. Bona fides exigit ut quod convenit fiat .Good faith demands that what is agreed upon shall be done. Kung ang tao ay tapat kanyang tutup arin ang napagkasunduan.

Too, the weight standards of PAL provide for separate weight limitationsbased on height and body frame for both male and female cabinattendants. A progressive discipline is imposed to allow non-compliantcabin attendants sufficient opportunity to meet the weight standards.Thus, the clear-cut rules obviate any possibility for the commission of abuse or arbitrary action on the part of PAL.

III. Petitioner failed to substantiate his claim that he wasdiscriminated against by PAL .

Petitioner next claims that PAL is using passenger safety as a convenientexcuse to discriminate against him .79 We are constrained, however, to

hold otherwise. We agree with the CA that "[t]he element of discrimination came into play in this case as a secondary position for theprivate respondent in order to escape the consequence of dismissal thatbeing overweight entailed. It is a confession-and-avoidance position thatimpliedly admitted the cause of dismissal, including the reasonablenessof the applicable standard and the private respondent’s failure tocomply. "80 It is a basic rule in evidence that each party must prove hisaffirmative allegation .81

Since the burden of evidence lies with the party who asserts anaffirmative allegation, petitioner has to prove his allegation withparticularity. There is nothing on the records which could support thefinding of discriminatory treatment. Petitioner cannot establishdiscrimination by simply naming the supposed cabin attendants who areallegedly similarly situated with him. Substantial proof must be shown asto how and why they are similarly situated and the differential treatmentpetitioner got from PAL despite the similarity of his situation with other employees.

Indeed, except for pointing out the names of the supposed overweightcabin attendants, petitioner miserably failed to indicate their respectiveideal weights; weights over their ideal weights; the periods they wereallowed to fly despite their being overweight; the particular flightsassigned to them; the discriminating treatment they got from PAL; andother relevant data that could have adequately established a case of discriminatory treatment by PAL. In the words of the CA, "PAL really hadno substantial case of discrimination to meet. "82

We are not unmindful that findings of facts of administrative agencies,like the Labor Arbiter and the NLRC, are accorded respect, evenfinality.83 The reason is simple: administrative agencies are experts inmatters within their specific and specialized jurisdiction .84 But the principleis not a hard and fast rule. It only applies if the findings of facts are dulysupported by substantial evidence. If it can be shown that administrativebodies grossly misappreciated evidence of such nature so as to compel aconclusion to the contrary, their findings of facts must necessarily bereversed. Factual findings of administrative agencies do not haveinfallibility and must be set aside when they fail the test of arbitrariness .85

Here, the Labor Arbiter and the NLRC inexplicably misappreciatedevidence. We thus annul their findings.







































To make his claim more believable, petitioner invokes the equalprotection clause guarant y86 of the Constitution. However, in the absenceof governmental interference, the liberties guaranteed by the Constitutioncannot be invoked .87 Put differently, the Bill of Rights is not meant to beinvoked against acts of private individuals .88 Indeed, the United StatesSupreme Court, in interpreting the Fourteenth Amendment ,89 which is thesource of our equal protection guarantee, is consistent in saying that theequal protection erects no shield against private conduct, however

discriminatory or wrongful .90

Private actions, no matter how egregious,cannot violate the equal protection guarantee .91

IV. The claims of petitioner for reinstatement and wages are moot .

As his last contention, petitioner avers that his claims for reinstatementand wages have not been mooted. He is entitled to reinstatement and hisfull backwages, "from the time he was illegally dismissed" up to the timethat the NLRC was reversed by the CA .92

At this point, Article 223 of the Labor Code finds relevance:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned,shall immediately be executory, even pending appeal. The employeeshall either be admitted back to work under the same terms andconditions prevailing prior to his dismissal or separation or, at the optionof the employer, merely reinstated in the payroll. The posting of a bondby the employer shall not stay the execution for reinstatement providedherein.

The law is very clear. Although an award or order of reinstatement is self-executory and does not require a writ of execution ,93 the option toexercise actual reinstatement or payroll reinstatement belongs to theemployer. It does not belong to the employee, to the labor tribunals, or even to the courts.

Contrary to the allegation of petitioner that PAL "did everything under thesun" to frustrate his "immediate return to his previous position, "94 there isevidence that PAL opted to physically reinstate him to a substantiallyequivalent position in accordance with the order of the Labor Arbiter .95 Infact, petitioner duly received the return to work notice on February 23,2001, as shown by his signature .96

Petitioner cannot take refuge in the pronouncements of the Court in acas e 97 that "[t]he unjustified refusal of the employer to reinstate thedismissed employee entitles him to payment of his salaries effective fromthe time the employer failed to reinstate him despite the issuance of awrit of execution "98 and ""even if the order of reinstatement of the Labor

Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the employee during the period of appeal until reversal by the higher court. "99 He failed to prove that he

complied with the return to work order of PAL. Neither does it appear onrecord that he actually rendered services for PAL from the moment hewas dismissed, in order to insist on the payment of his full backwages.

In insisting that he be reinstated to his actual position despite beingoverweight, petitioner in effect wants to render the issues in the presentcase moot. He asks PAL to comply with the impossible. Time and again,the Court ruled that the law does not exact compliance with theimpossible .100

V. Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

Normally, a legally dismissed employee is not entitled to separation pay.This may be deduced from the language of Article 279 of the Labor Codethat "[a]n employee who is unjustly dismissed from work shall be entitledto reinstatement without loss of seniority rights and other privileges andto his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation waswithheld from him up to the time of his actual reinstatement." Luckily for petitioner, this is not an i ronclad rule.

Exceptionally, separation pay is granted to a legally dismissed employeeas an act "social justice, "101 or based on "equity. "102 In both instances, it isrequired that the dismissal (1) was not for serious misconduct; and (2)does not reflect on the moral character of the employee .103

Here, We grant petitioner separation pay equivalent to one-half (1/2)month’s pay for every year of service .104 It should include regular allowances which he might have been receiving .105 We are not blind tothe fact that he was not dismissed for any serious misconduct or to anyact which would reflect on his moral character. We also recognize that hisemployment with PAL lasted for more or less a decade.



















































































WHEREFORE , the appealed Decision of the Court of Appealsis AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui isentitled to separation pay in an amount equivalent to one-half (1/2)month’s pay for every year of service, which should include his regular allowances.

SO ORDERED.

G.R. No. 188920 February 16, 2010

JOSE L. ATIENZA, JR., MATIAS V. DEFENSOR, JR., RODOLFO G.VALENCIA, DANILO E. SUAREZ, SOLOMON R. CHUNGALAO,SALVACION ZALDIVAR-PEREZ, HARLIN CAST-ABAYON, MELVIN G.MACUSI and ELEAZAR P. QUINTO, Petitioners,vs.COMMISSION ON ELECTIONS, MANUEL A. ROXAS II, FRANKLIN M.DRILON and J.R. NEREUS O. ACOSTA, Respondents.

D E C I S I O N

ABAD, J .:

This petition is an offshoot of two earlier cases already resolved by theCourt involving a leadership dispute within a political party. In this case,the petitioners question their expulsion from that party and assail thevalidity of the election of new party leaders conducted by therespondents.

Statement of the Facts and the Case

For a better understanding of the controversy, a brief recall of thepreceding events is in order.

On July 5, 2005 respondent Franklin M. Drilon (Drilon), as erstwhilepresident of the Liberal Party (LP), announce d his party’s withdrawal of support for the administration of President Gloria Macapagal-Arroyo. Butpetitioner Jose L. Atienza, Jr. (Atienza), LP Chairman, and a number of party members denounced Drilon’s move, claiming that he made theannouncement without consulting his party.

On March 2, 2006 petitioner Atienza hosted a party conference to

supposedly discuss local autonomy and party matters but, when

convened, the assembly proceeded to declare all positions in the LP’sruling body vacant and elected new officers, with Atienza as LPpresident. Respondent Drilon immediately filed a petition 1 with theCommission on Elections (COMELEC) to nullify the elections. He claimedthat it was illegal considering that the party’s electing bodies, the NationalExecutive Council (NECO) and the National Political Council(NAPOLCO), were not properly convened. Drilon also claimed that under the amended LP Constitution ,2 party officers were elected to a fixed

three-year term that was yet to end on November 30, 2007.

On the other hand, petitioner Atienza claimed that the majority of the LP ’sNECO and NAPOLCO attended the March 2, 2006 assembly. Theelection of new officers on that occasion could be likened to "peoplepower," wherein the LP majority removed respondent Drilon as presidentby direct action. Atienza also said that the amendments 3 to the originalLP Constitution, or the Salonga Constitution, giving LP officers a fixedthree-year term, had not been properly ratified. Consequently, the term of Drilon and the other officers already ended on July 24, 2006.

On October 13, 2006, the COMELEC issued a resolution ,4 partiallygranting respondent Drilon’s petition. It annulled the March 2, 2006elections and ordered the holding of a new election under COMELECsupervision. It held that the election of petitioner Atienza and the otherswith him was invalid since the electing assembly did not convene inaccordance with the Salonga Constitution. But, since the amendments tothe Salonga Constitution had not been properly ratified, Drilon’s term maybe deemed to have ended. Thus, he held the position of LP president in aholdover capacity until new officers were elected.

Both sides of the dispute came to this Court to challenge the COMELECrulings. On April 17, 2007 a divided Court issued a resolution ,5 grantingrespondent Drilon’s petition and denying that of petitioner Atienza. TheCourt held, through the majority, that the COMELEC had jurisdiction over the intra-party leadership dispute; that the Salonga Constitution had beenvalidly amended; and that, as a consequence, respondent Drilon’s termas LP president was to end only on November 30, 2007.

Subsequently, the LP held a NECO meeting to elect new party leadersbefore respondent Drilon’s term expired. Fifty -nine NECO members outof the 87 who were supposedly qualified to vote attended. Before theelection, however, several persons associated with petitioner Atienzasought to clarify their membership status and raised issues regarding the

composition of the NECO. Eventually, that meeting installed respondentManuel A. Roxas II (Roxas) as the new LP president.

http://www.lawphil.net/judjuris/juri2010/feb2010/gr_188920_2010.html#fnt1




















On January 11, 2008 petitioners Atienza, Matias V. Defensor, Jr.,Rodolfo G. Valencia, Danilo E. Suarez, Solomon R. Chungalao,Salvacion Zaldivar-Perez, Harlin Cast-Abayon, Melvin G. Macusi, andEleazar P. Quinto, filed a petition for mandatory and prohibitoryinjunction 6 before the COMELEC against respondents Roxas, Drilon andJ.R. Nereus O. Acosta, the party secretary general. Atienza, et al. soughtto enjoin Roxas from assuming the presidency of the LP, claiming thatthe NECO assembly which elected him was invalidly convened. They

questioned the existence of a quorum and claimed that the NECOcomposition ought to have been based on a list appearing in the party’s60th Anniversary Souvenir Program. Both Atienza and Drilon adoptedthat list as common exhibit in the earlier cases and it showed that theNECO had 103 members.

Petitioners Atienza, et al. also complained that Atienza, the incumbentparty chairman, was not invited to the NECO meeting and that somemembers, like petitioner Defensor, were given the status of "guests"during the meeting. Atienza’s allies allegedly raised these issues butrespondent Drilon arbitrarily thumbed them down and "railroaded" theproceedings. He suspended the meeting and moved it to another room,where Roxas was elected without notice to Atienza’s allies.

On the other hand, respondents Roxas, et al. claimed that Roxas’election as LP president faithfully complied with the provisions of theamended LP Constitution. The party’s 60th Anniversary Souvenir Program could not be used for determining the NECO members becausesupervening events changed the body’s number and composition . SomeNECO members had died, voluntarily resigned, or had gone on leaveafter accepting positions in the government. Others had lost their re-election bid or did not run in the May 2007 elections, making themineligible to serve as NECO members. LP members who got elected to

public office also became part of the NECO. Certain persons of nationalstature also became NECO members upon respondent Drilon’snomination, a privilege granted the LP president under the amended LPConstitution. In other words, the NECO membership was not fixed or static; it changed due to supervening circumstances.

Respondents Roxas, et al. also claimed that the party deemed petitioners Atienza, Zaldivar-Perez, and Cast-Abayon resigned for holding the illegalelection of LP officers on March 2, 2006. This was pursuant to a March14, 2006 NAPOLCO resolution that NECO subsequently ratified.Meanwhile, certain NECO members, like petitioners Defensor, Valencia,

and Suarez, forfeited their party membership when they ran under other

political parties during the May 2007 elections. They were dropped fromthe roster of LP members.

On June 18, 2009 the COMELEC issued the assailed resolution denyingpetitioners Atienza, et al.’s petition. It noted that the May 2007 electionsnecessarily changed the composition of the NECO since the amendedLP Constitution explicitly made incumbent senators, members of theHouse of Representatives, governors and mayors members of that body.

That some lost or won these positions in the May 2007 elections affectedthe NECO membership. Petitioners failed to prove that the NECO whichelected Roxas as LP president was not properly convened.

As for the validity of petitioners Atienza, et al.’s expulsion as LPmembers, the COMELEC observed that this was a membership issuethat related to disciplinary action within the political party. The COMELECtreated it as an internal party matter that was beyond its jurisdiction toresolve.

Without filing a motion for reconsideration of the COMELEC resolution,

petitioners Atienza, et al. filed this petition for certiorari under Rule 65.

The Issues Presented

Respondents Roxas, et al. raise the following threshold issues:

1. Whether or not the LP, which was not impleaded in the case, isan indispensable party; and

2. Whether or not petitioners Atienza, et al., as ousted LPmembers, have the requisite legal standing to question Roxas’

election.

Petitioners Atienza, et al., on the other hand, raise the followingissues:

3. Whether or not the COMELEC gravely abused its discretionwhen it upheld the NECO membership that elected respondentRoxas as LP president;

4. Whether or not the COMELEC gravely abused its discretionwhen it resolved the issue concerning the validity of the NECO

meeting without first resolving the i ssue concerning the expulsionof Atienza, et al. from the party; and






5. Whether or not respondents Roxas, et al. violated petitioners Atienza, et al.’s constitutional right to due process by the latter’sexpulsion from the party.

The Court’s Ruling

One. Respondents Roxas, et al. assert that the Court should dismiss thepetition for failure of petitioners Atienza, et al. to implead the LP as an

indispensable party. Roxas, et al. point out that, since the petition seeksthe issuance of a writ of mandatory injunction against the NECO, thecontroversy could not be adjudicated with finality without making the LP aparty to the case .7

But petitioners Atienza, et al.’s causes of action in this ca se consist inrespondents Roxas, et al.’s disenfranchisement of Atienza, et al. from theelection of party leaders and in the illegal election of Roxas as partypresident. Atienza, et al. were supposedly excluded from the elections bya series of "despotic acts" of Roxas, et al., who controlled theproceedings. Among these acts are Atienza, et al.’s expulsion from the

party, their exclusion from the NECO, and respondent Drilon’s"railroading" of election proceedings. Atienza, et al. attributed all theseillegal and prejudicial acts to Roxas, et al.

Since no wrong had been imputed to the LP nor had some affirmativerelief been sought from it, the LP is not an indispensable party.Petitioners Atienza, et al.’s prayer for the undoing of respondents Roxas,et al .’s acts and the reconvening of the NECO are directed againstRoxas, et al.

Two. Respondents Roxas, et al. also claim that petitioners Atienza, et al.have no legal standing to question the election of Roxas as LP presidentbecause they are no longer LP members, having been validly expelledfrom the party or having joined other political parties .8 As non-members,they have no stake in the outcome of the action.

But, as the Court held in David v. Macapagal-Arroyo ,9 legal standing insuits is governed by the "real parties-in-interest" rule under Section 2,Rule 3 of the Rules of Court. This states that "every action must beprosecuted or defended in the name of the real party-in-interest." And"real party-in-interest" is one who stands to be benefited or injured by the

judgment in the suit or the party entitled to the avails of the suit. In other words, the plaintiff’s standing is based on his own right to the relief sought. In raising petitioners Atienza, et al.’s lack of standing as a

threshold issue, respondents Roxas, et al. would have the Courthypothetically assume the truth of the allegations in the petition.

Here, it is precisely petitioners Atienza, et al.’s allegations thatrespondents Roxas, et al. deprived them of their rights as LP membersby summarily excluding them from the LP roster and not allowing them totake part in the election of its officers and that not all who sat in theNECO were in the correct list of NECO members. If Atienza , et al.’s

allegations were correct, they would have been irregularly expelled fromthe party and the election of officers, void. Further, they would be entitledto recognition as members of good standing and to the holding of a newelection of officers using the correct list of NECO members. To thisextent, therefore, Atienza, et al. who want to take part in another electionwould stand to be benefited or prejudiced by the Court’s decision in thiscase. Consequently, they have legal standing to pursue this petition.

Three. In assailing respondent Roxas’ election as LP president,petitioners Atienza, et al. claim that the NECO members allowed to takepart in that election should have been limited to those in the list of NECOmembers appearing in the party’s 60th Anniversary Souvenir Program.

Atienza, et al. allege that respondent Drilon, as holdover LP president,adopted that list in the earlier cases before the COMELEC and it shouldthus bind respondents Roxas, et al. The Court’s decision in the earlier cases, said Atienza, et al., anointed that list for the next party election.Thus, Roxas, et al. in effect defied the Court’s ruling when they removed

Atienza as party chairman and changed the NECO’s composition .10

But the list of NECO members appearing in the party’s 60th AnniversarySouvenir Program was drawn before the May 2007 elections. After the2007 elections, changes in the NECO membership had to be redrawn tocomply with what the amended LP Constitution required. RespondentDrilon adopted the souvenir program as common exhibit in the earlier cases only to prove that the NECO, which supposedly elected Atienza asnew LP president on March 2, 2006, had been improperly convened. Itcannot be regarded as an immutable list, given the nature and character of the NECO membership.

Nothing in the Court’s resolution in the earlier cases implies that theNECO membership should be pegged to the party’s 60th AnniversarySouvenir Program. There would have been no basis for such a position.The amended LP Constitution did not intend the NECO membership tobe permanent. Its Section 27 11 provides that the NECO shall include all

incumbent senators, members of the House of Representatives,governors, and mayors who were LP members in good standing for at






















least six months. It follows from this that with the national and localelections taking place in May 2007, the number and composition of theNECO would have to yield to changes brought about by the elections.

Former NECO members who lost the offices that entitled them tomembership had to be dropped. Newly elected ones who gained theprivilege because of their offices had to come in. Furthermore, former NECO members who passed away, resigned from the party, or went on

leave could not be expected to remain part of the NECO that convenedand held elections on November 26, 2007. In addition, Section 27 of theamended LP Constitution expressly authorized the party president tonominate "persons of national stature" to the NECO. Thus, petitioners

Atienza, et al. cannot validly object to the admission of 12 NECOmembers nominated by respondent Drilon when he was LP president.Even if this move could be regarded as respondents Roxas, et al.’s wayof ensuring their election as party officers, there was certainly nothingirregular about the act under the amended LP Constitution.

The NECO was validly convened in accordance with the amended LPConstitution. Respondents Roxas, et al. explained in details how theyarrived at the NECO composition for the purpose of electing the partyleaders .12 The explanation is logical and consistent with party rules.Consequently, the COMELEC did not gravely abuse its discretion when itupheld the composition of the NECO that elected Roxas as LP president.

Petitioner Atienz a claims that the Court’s resolution in the earlier casesrecognized his right as party chairman with a term, like respondent Drilon,that would last up to November 30, 2007 and that, therefore, his ouster from that position violated the Court’s resolution. But the Court’sresolution in the earlier cases did not preclude the party from disciplining

Atienza under Sections 29 13 and 46 14 of the amended LP Constitution.The party could very well remove him or any officer for cause as i t saw fit.

Four. Petitioners Atienza, et al. lament that the COMELEC selectivelyexercised its jurisdiction when it ruled on the composition of the NECObut refused to delve into the legality of their expulsion from the party. Thetwo issues, they said, weigh heavily on the leadership controversyinvolved in the case. The previous rulings of the Court, they claim,categorically upheld the jurisdiction of the COMELEC over intra-partyleadership disputes .15

But, as respondents Roxas, et al. point out, the key issue in this case is

not the validity of the expulsion of petitioners Atienza, et al. f rom the

party, but the legitimacy of the NECO assembly that elected respondentRoxas as LP president. Given the COMELEC’s finding as upheld by thisCourt that the membership of the NECO in question complied with the LPConstitution, the resolution of the issue of whether or not the party validlyexpelled petitioners cannot affect the election of officers that the NECOheld. 1avvphi1

While petitioners Atienza, et al. claim that the majority of LP members

belong to their faction, they did not specify who these members were andhow their numbers could possibly affect the composition of the NECOand the outcome of its election of party leaders. Atienza, et al. has notbothered to assail the individual qualifications of the NECO memberswho voted for Roxas. Nor did Atienza, et al. present proof that the NECOhad no quorum when it then assembled. In other words, the claims of

Atienza, et al. were totally unsupported by evidence.

Consequently, petitioners Atienza, et al. cannot claim that their expulsionfrom the party impacts on the party leadership issue or on the election of respondent Roxas as president so that it was indispensable for theCOMELEC to adjudicate such claim. Under the circumstances, thevalidity or invalidity of Atienza, et al.’s expulsion was purely amembership issue that had to be settled within the party. It is an internalparty matter over which the COMELEC has no jurisdiction.

What is more, some of pe titioner Atienza’s allies raised objections beforethe NECO assembly regarding the status of members from their faction.Still, the NECO proceeded with the election, implying that itsmembership, whose composition has been upheld, voted out thoseobjections.

The COMELEC’s jurisdiction over intra -party disputes is limited. It doesnot have blanket authority to resolve any and all controversies involvingpolitical parties. Political parties are generally free to conduct their activities without interference from the state. The COMELEC mayintervene in disputes internal to a party only when necessary to thedischarge of its constitutional functions.

The COMELEC’s jurisdiction over intra -party leadership disputes hasalready been settled by the Court. The Court ruled in Kalaw v.Commission on Election s 16 that the COMELEC’s powers and functionsunder Section 2, Article IX-C of the Constitution, "include theascertainment of the identity of the political party and its legitimate

officers responsible for its acts." The Court also declared in another





















cas e 17 that the COMELEC’s pow er to register political parties necessarilyinvolved the determination of the persons who must act on its behalf.Thus, the COMELEC may resolve an intra-party leadership dispute, in aproper case brought before it, as an incident of its power to register political parties.

The validity of respondent Roxas’ election as LP president is a leadershipissue that the COMELEC had to settle. Under the amended LP

Constitution, the LP president is the issuing authority for certificates of nomination of party candidates for all national elective positions. It is alsothe LP president who can authorize other LP officers to issue certificatesof nomination for candidates to local elective posts .18 In simple terms, it isthe LP president who certifies the official standard bearer of the party.

The law also grants a registered political party certain rights andprivileges that will redound to the benefit of its official candidates. Itimposes, too, legal obligations upon registered political parties that haveto be carried out through their leaders. The resolution of the leadershipissue is thus particularly significant in ensuring the peaceful and orderlyconduct of the elections .19

Five. Petitioners Atienza, et al. argue that their expulsion from the party isnot a simple issue of party membership or discipline; it involves aviolation of their constitutionally-protected right to due process of law.They claim that the NAPOLCO and the NECO should have firstsummoned them to a hearing before summarily expelling them from theparty. According to Atienza, et al., proceedings on party discipline are theequivalent of administrative proceedings 20 and are, therefore, covered bythe due process requirements laid down in Ang Tibay v. Court of Industrial Relations .21

But the requirements of administrative due process do not apply to theinternal affairs of political parties. The due process standards set in AngTibay cover only administrative bodies created by the state and throughwhich certain governmental acts or functions are performed. Anadministrative agency or instrumentality "contemplates an authority towhich the state delegates governmental power for the performance of astate function. "22 The constitutional limitations that generally apply to theexercise of the state’s powers thus, apply too, to adminis trative bodies.

The constitutional limitations on the exercise of the state’s powers arefound in Article III of the Constitution or the Bill of Rights. The Bil l of

Rights, which guarantees against the taking of li fe, property, or liberty

without due process under Section 1 is generally a limitation on thestate’s powers in relation to the rights of its citizens. The right to dueprocess is meant to protect ordinary citizens against arbitrary governmentaction, but not from acts committed by private individuals or entities. Inthe latter case, the specific statutes that provide reliefs from such privateacts apply. The right to due process guards against unwarrantedencroachment by the state into the fundamental rights of i ts citizens andcannot be invoked in private controversies involving private parties .23

Although political parties play an important role in our democratic set-upas an intermediary between the state and its citizens, it i s still a privateorganization, not a state instrument. The discipline of members by apolitical party does not involve the right to life, liberty or property withinthe meaning of the due process clause. An individual has no vested right,as against the state, to be accepted or to prevent his removal by apolitical party. The only rights, if any, that party members may have, inrelation to other party members, correspond to those that may have beenfreely agreed upon among themselves through their charter, which is acontract among the party members. Members whose rights under their charter may have been violated have recourse to courts of law for theenforcement of those rights, but not as a due process issue against thegovernment or any of its agencies.

But even when recourse to courts of law may be made, courts willordinarily not interfere in membership and disciplinary matters within apolitical party. A political party is free to conduct its internal affairs,pursuant to its constitutionally-protected right to free association. InSinaca v. Mula ,24 the Court said that judicial restraint in internal partymatters serves the public interest by allowing the political processes tooperate without undue interference. It is also consistent with the statepolicy of allowing a free and open party system to evolve, according to

the free choice of the people .25

To conclude, the COMELEC did not gravely abuse its discretion when itupheld Roxas’ election as LP president but refused to rule on the validityof Atienza, et al.’s expulsion from the party . While the question of partyleadership has implications on the COMELEC’s performance of i tsfunctions under Section 2, Article IX-C of the Constitution, the samecannot be said of the issue pertaining to Atienza, et al.’s expulsion fromthe LP. Such expulsion is for the moment an issue of party membershipand discipline, in which the COMELEC cannot intervene, given thelimited scope of its power over political parties.






































WHEREFORE, the Court DISMISSES the petition and UPHOLDS theResolution of the Commission on Elections dated June 18, 2009 inCOMELEC Case SPP 08-001.

SO ORDERED.

ROBERTO A. ABAD Associate Justice

DUE PROCESS

REPUBLIC OF THE PHILIPPINES,

Petitioner,

- versus -

JENNIFER B. CAGANDAHAN,

Respondent.

G.R. No. 166676

Present:

Quisumbing, J., Chairperson,

Carpio Morales,

Tinga,

VELASCO, JR., and

BRION, JJ.

Promulgated:

September 12, 2008

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

DECISION

QUISUMBING, J.:

This is a petition for review under Rule 45 of the Rules of Court raisingpurely questions of law and seeking a reversal of the Decision[1] datedJanuary 12, 2005 of the Regional Trial Court (RTC), Branch 33 of Siniloan, Laguna, which granted the Petition for Correction of Entries inBirth Certificate filed by Jennifer B. Cagandahan and ordered thefollowing changes of entries in Cagandahan’s birth certificate: (1) thename "Jennifer Cagandahan" changed to "Jeff Cagandahan" and (2)gender from "female" to "male."

The facts are as follows.

On December 11, 2003, respondent Jennifer Cagandahan filed a Petitionfor Correction of Entries in Birth Certificate2 before the RTC, Branch 33

of Siniloan, Laguna.

In her petition, she alleged that she was born on January 13, 1981 andwas registered as a female in the Certificate of Live Birth but whilegrowing up, she developed secondary male characteristics and wasdiagnosed to have Congenital Adrenal Hyperplasia (CAH) which is acondition where persons thus afflicted possess both male and femalecharacteristics. She further alleged that she was diagnosed to haveclitoral hyperthropy in her early years and at age six, underwent anultrasound where it was discovered that she has small ovaries. At agethirteen, tests revealed that her ovarian structures had minimized, she

has stopped growing and she has no breast or menstrual development.She then alleged that for all interests and appearances as well as in mindand emotion, she has become a male person. Thus, she prayed that her birth certificate be corrected such that her gender be changed fromfemale to male and her first name be changed from Jennifer to Jeff.

The petition was published in a newspaper of general circulation for three(3) consecutive weeks and was posted in conspicuous places by thesheriff of the court. The Solicitor General entered his appearance andauthorized the Assistant Provincial Prosecutor to appear in his behalf.

To prove her claim, respondent testified and presented the testimony of Dr. Michael Sionzon of the Department of Psychiatry, University of the



Philippines-Philippine General Hospital. Dr. Sionzon issued a medicalcertificate stating that respondent’s condition is known as CAH. Heexplained that genetically respondent is female but because her bodysecretes male hormones, her female organs did not develop normallyand she has two sex organs – female and male. He testified that thiscondition is very rare, that respondent’s uterus is not fully developedbecause of lack of female hormones, and that she has no monthly period.He further testified that respondent’s condition is permanent and

recommended the change of gender because respondent has made upher mind, adjusted to her chosen role as male, and the gender changewould be advantageous to her.

The RTC granted respondent ’s petition in a Decision dated January 12,2005 which reads:

The Court is convinced that petitioner has satisfactorily shown that he isentitled to the reliefs prayed [for]. Petitioner has adequately presented tothe Court very clear and convincing proofs for the granting of his petition.It was medically proven that petitioner’s body produces male hormones,and first his body as well as his action and feelings are that of a male. Hehas chosen to be male. He is a normal person and wants to beacknowledged and identified as a male.

WHEREFORE, premises considered, the Civil Register of Pakil, Lagunais hereby ordered to make the following corrections in the birth[c]ertificate of Jennifer Cagandahan upon payment of the prescribedfees:

a) By changing the name from Jennifer Cagandahan to JEFFCAGANDAHAN; and

b) By changing the gender from female to MALE.

It is likewise ordered that petitioner’s school records, voter’s registry,baptismal certificate, and other pertinent records are hereby amended toconform with the foregoing corrected data.

SO ORDERED.[3]

Thus, this petition by the Office of the Solicitor General (OSG) seeking areversal of the abovementioned ruling.

The issues raised by petitioner are:

THE TRIAL COURT ERRED IN GRANTING THE PETITIONCONSIDERING THAT:

I.

THE REQUIREMENTS OF RULES 103 AND 108 OF THE RULES OFCOURT HAVE NOT BEEN COMPLIED WITH; AND,

II.

CORRECTION OF ENTRY UNDER RULE 108 DOES NOT ALLOWCHANGE OF "SEX" OR "GENDER" IN THE BIRTH CERTIFICATE,WHILE RESPONDENT’S MEDICAL CONDITION, i.e., CONGENITAL

ADRENAL HYPERPLASIA DOES NOT MAKE HER A "MALE."4

Simply stated, the issue is whether the trial court erred in ordering thecorrection of entries in the birth certificate of respondent to change her sex or gender, from female to male, on the ground of her medicalcondition known as CAH, and her name from "Jennifer" to "Jeff," under

Rules 103 and 108 of the Rules of Court.

The OSG contends that the petition below is fatally defective for non-compliance with Rules 103 and 108 of the Rules of Court because whilethe local civil registrar is an indispensable party in a petition for cancellation or correction of entries under Section 3, Rule 108 of theRules of Court, respondent’s petition before the court a quo did notimplead the local civil registra r.5 The OSG further contends respondent’spetition is fatally defective since it failed to state that respondent is abona fide resident of the province where the petition was filed for at leastthree (3) years prior to the date of such filing as mandated under Section2(b), Rule 103 of the Rules of Court.6 The OSG argues that Rule 108does not allow change of sex or gender in the birth certificate andrespondent’s claimed medical condition known as CAH does not makeher a male.7

On the other hand, respondent counters that although the Local CivilRegistrar of Pakil, Laguna was not formally named a party in the Petitionfor Correction of Birth Certificate, nonetheless the Local Civil Registrar was furnished a copy of the Petition, the Order to publish on December 16, 2003 and all pleadings, orders or processes in the course of theproceedings,8 respondent is actually a male person and hence his birthcertificate has to be corrected to reflect his true sex/gender,9 change of sex or gender is allowed under Rule 108,10 and respondent substantially



complied with the requirements of Rules 103 and 108 of the Rules of Court.11

Rules 103 and 108 of the Rules of Court provide:

Rule 103

CHANGE OF NAME

Section 1. Venue. – A person desiring to change his name shall presentthe petition to the Regional Trial Court of the province in which heresides, [or, in the City of Manila, to the Juvenile and Domestic RelationsCourt].

Sec. 2. Contents of petition. – A petition for change of name shall besigned and verified by the person desiring his name changed, or someother person on his behalf, and shall set forth:

(a) That the petitioner has been a bona fide resident of the provincewhere the petition is filed for at least three (3) years prior to the date of such filing;

(b) The cause for which the change of the petitioner's name is sought;

(c) The name asked for.

Sec. 3. Order for hearing. – If the petition filed is sufficient in form andsubstance, the court, by an order reciting the purpose of the petition,shall fix a date and place for the hearing thereof, and shall direct that acopy of the order be published before the hearing at least once a week

for three (3) successive weeks in some newspaper of general circulationpublished in the province, as the court shall deem best. The date set for the hearing shall not be within thirty (30) days prior to an election nor within four (4) months after the last publication of the notice.

Sec. 4. Hearing. – Any interested person may appear at the hearing andoppose the petition. The Solicitor General or the proper provincial or cityfiscal shall appear on behalf of the Government of the Republic.

Sec. 5. Judgment. – Upon satisfactory proof in open court on the datefixed in the order that such order has been published as directed and that

the allegations of the petition are true, the court shall, if proper and

reasonable cause appears for changing the name of the petitioner,adjudge that such name be changed in accordance with the prayer of thepetition.

Sec. 6. Service of judgment. – Judgments or orders rendered inconnection with this rule shall be furnished the civil registrar of themunicipality or city where the court issuing the same is situated, whoshall forthwith enter the same in the civil register.

Rule 108

CANCELLATION OR CORRECTION OF ENTRIES

IN THE CIVIL REGISTRY

Section 1. Who may file petition. – Any person interested in any act,event, order or decree concerning the civil status of persons which hasbeen recorded in the civil register, may file a verified petition for thecancellation or correction of any entry relating thereto, with the Regional

Trial Court of the province where the corresponding civil registry islocated.

Sec. 2. Entries subject to cancellation or correction. – Upon good andvalid grounds, the following entries in the civil register may be cancelledor corrected: (a) births; (b) marriages; (c) deaths; (d) legal separations;(e) judgments of annulments of marriage; (f) judgments declaringmarriages void from the beginning; (g) legitimations; (h) adoptions; (i)acknowledgments of natural children; (j) naturalization; (k) election, lossor recovery of citizenship; (l) civil interdiction; (m) judicial determination of filiation; (n) voluntary emancipation of a minor; and (o) changes of name.

Sec. 3. Parties. – When cancellation or correction of an entry in the civilregister is sought, the civil registrar and all persons who have or claimany interest which would be affected thereby shall be made parties to theproceeding.

Sec. 4. Notice and publication. – Upon the filing of the petition, the courtshall, by an order, fix the time and place for the hearing of the same, andcause reasonable notice thereof to be given to the persons named in thepetition. The court shall also cause the order to be published once aweek for three (3) consecutive weeks in a newspaper of generalcirculation in the province.



Sec. 5. Opposition. – The civil registrar and any person having or claiming any interest under the entry whose cancellation or correction issought may, within fifteen (15) days from notice of the petition, or fromthe last date of publication of such notice, file his opposition thereto.

Sec. 6. Expediting proceedings. – The court in which the proceedings is

brought may make orders expediting the proceedings, and may alsogrant preliminary injunction for the preservation of the rights of the partiespending such proceedings.

Sec. 7. Order. – After hearing, the court may either dismiss the petition or issue an order granting the cancellation or correction prayed for. In either case, a certified copy of the judgment shall be served upon the civilregistrar concerned who shall annotate the same in his record.

The OSG argues that the petition below is fatally defective for non-compliance with Rules 103 and 108 of the Rules of Court because

respondent’s petition did not implead the local civil registrar. Section 3,Rule 108 provides that the civil registrar and all persons who have or claim any interest which would be affected thereby shall be made partiesto the proceedings. Likewise, the local civil registrar is required to bemade a party in a proceeding for the correction of name in the civilregistry. He is an indispensable party without whom no finaldetermination of the case can be had.[12] Unless all possibleindispensable parties were duly notified of the proceedings, the sameshall be considered as falling much too short of the requirements of therules.13 The corresponding petition should also implead as respondentsthe civil registrar and all other persons who may have or may claim tohave any interest that would be affected thereby.14 Respondent,however, invokes Section 6,[15] Rule 1 of the Rules of Court which statesthat courts shall construe the Rules liberally to promote their objectives of securing to the parties a just, speedy and inexpensive disposition of thematters brought before it. We agree that there is substantial compliancewith Rule 108 when respondent furnished a copy of the petition to thelocal civil registrar.

The determination of a person’ s sex appearing in his birth certificate is alegal issue and the court must look to the statutes. In this connection,

Article 412 of the Civil Code provides:

ART. 412. No entry in a civil register shall be changed or correctedwithout a judicial order.

Together with Article 376[16] of the Civil Code, this provision wasamended by Republic Act No. 9048[17] in so far as clerical or typographical errors are involved. The correction or change of such

matters can now be made through administrative proceedings andwithout the need for a judicial order. In effect, Rep. Act No. 9048removed from the ambit of Rule 108 of the Rules of Court the correctionof such errors. Rule 108 now applies only to substantial changes andcorrections in entries in the civil register.18

Under Rep. Act No. 9048, a correction in the civil registry involving thechange of sex is not a mere clerical or typographical error. It is asubstantial change for which the applicable procedure is Rule 108 of theRules of Court.19

The entries envisaged in Article 412 of the Civil Code and correctableunder Rule 108 of the Rules of Court are those provided in Articles 407and 408 of the Civil Code:

ART. 407. Acts, events and judicial decrees concerning the civil status of persons shall be recorded in the civil register.

ART. 408. The following shall be entered in the civil register:

(1) Births; (2) marriages; (3) deaths; (4) legal separations; (5) annulmentsof marriage; (6) judgments declaring marriages void from the beginning;

(7) legitimations; (8) adoptions; (9) acknowledgments of natural children;(10) naturalization; (11) loss, or (12) recovery of citizenship; (13) civilinterdiction; (14) judicial determination of filiation; (15) voluntaryemancipation of a minor; and (16) changes of name.

The acts, events or factual errors contemplated under Article 407 of theCivil Code include even those that occur after birth.20

Respondent undisputedly has CAH. This condition causes the early or "inappropriate" appearance of male characteristics. A person, likerespondent, with this condition produces too much androgen, a malehormone. A newborn who has XX chromosomes coupled with CAHusually has a (1) swollen clitoris with the urethral opening at the base, an



ambiguous genitalia often appearing more male than female; (2) normalinternal structures of the female reproductive tract such as the ovaries,uterus and fallopian tubes; as the child grows older, some features startto appear male, such as deepening of the voice, facial hair, and failure tomenstruate at puberty. About 1 in 10,000 to 18,000 children are born withCAH.

CAH is one of many conditions[21] that involve intersex anatomy. Duringthe twentieth century, medicine adopted the term "intersexuality" to applyto human beings who cannot be classified as either male or female.[22]The term is now of widespread use. According to Wikipedia,intersexuality "is the state of a living thing of a gonochoristic specieswhose sex chromosomes, genitalia, and/or secondary sex characteristicsare determined to be neither exclusively male nor female. An organismwith intersex may have biological characteristics of both male and femalesexes."

Intersex individuals are treated in different ways by different cultures. Inmost societies, intersex individuals have been expected to conform toeither a male or female gender role.[23] Since the rise of modern medicalscience in Western societies, some intersex people with ambiguousexternal genitalia have had their genitalia surgically modified to resembleeither male or female genitals.[24] More commonly, an intersex individualis considered as suffering from a "disorder" which is almost alwaysrecommended to be treated, whether by surgery and/or by taking lifetimemedication in order to mold the individual as neatly as possible into thecategory of either male or female.

In deciding this case, we consider the compassionate calls for recognitionof the various degrees of intersex as variations which should not besubject to outright denial. "It has been suggested that there is somemiddle ground between the sexes, a ‘no -man’s land’ for those individualswho are neither truly ‘male’ nor truly ‘female’."[25] The current state of Philippine statutes apparently compels that a person be classified either as a male or as a female, but this Court is not controlled by mereappearances when nature itself fundamentally negates such rigidclassification.

In the instant case, if we determine respondent to be a female, then thereis no basis for a change in the birth certificate entry for gender. But if wedetermine, based on medical testimony and scientific developmentshowing the respondent to be other than female, then a change in the

subject’s birth certificate entry is in order.

Biologically, nature endowed respondent with a mixed (neither

consistently and categorically female nor consistently and categoricallymale) composition. Respondent has female (XX) chromosomes.However, respondent’s body system naturally produces high levels of male hormones (androgen). As a result, respondent has ambiguousgenitalia and the phenotypic features of a male.

Ultimately, we are of the view that where the person is biologically or naturally intersex the determining factor in his gender classification wouldbe what the individual, like respondent, having reached the age of majority, with good reason thinks of his/her sex. Respondent here thinksof himself as a male and considering that his body produces high levelsof male hormones (androgen) there is preponderant biological support for considering him as being male. Sexual development in cases of intersexpersons makes the gender classification at birth inconclusive. It is atmaturity that the gender of such persons, like respondent, is fixed.

Respondent here has simply let nature take its course and has not takenunnatural steps to arrest or interfere with what he was born with. Andaccordingly, he has already ordered his life to that of a male. Respondentcould have undergone treatment and taken steps, like taking lifelongmedication,[26] to force his body into the categorical mold of a female buthe did not. He chose not to do so. Nature has instead taken its duecourse in respondent’s development to reveal more fully his malecharacteristics.

In the absence of a law on the matter, the Court will not dictate onrespondent concerning a matter so innately private as one’s sexualityand lifestyle preferences, much less on whether or not to undergomedical treatment to reverse the male tendency due to CAH. The Courtwill not consider respondent as having erred in not choosing to undergotreatment in order to become or remain as a female. Neither will theCourt force respondent to undergo treatment and to take medication inorder to fit the mold of a female, as society commonly currently knowsthis gender of the human species. Respondent is the one who has to live

with his intersex anatomy. To him belongs the human right to the pursuit



of happiness and of health. Thus, to him should belong the primordialchoice of what courses of action to take along the path of his sexualdevelopment and maturation. In the absence of evidence that respondentis an "incompetent"[27] and in the absence of evidence to show thatclassifying respondent as a male will harm other members of society whoare equally entitled to protection under the law, the Court affirms as validand justified the respondent’s position and his personal judgment of being a male.

In so ruling we do no more than give respect to (1) the diversity of nature;and (2) how an individual deals with what nature has handed out. In other words, we respect respondent’s congenital condition and his maturedecision to be a male. Life is already difficult for the ordinary person. Wecannot but respect how respondent deals with his unordinary state andthus help make his life easier, considering the unique circumstances inthis case.

As for respondent’s change of name under Rule 103, this Court has heldthat a change of name is not a matter of right but of judicial discretion, tobe exercised in the light of the reasons adduced and the consequencesthat will follow.[28] The trial court’s grant of respondent’s change of namefrom Jennifer to Jeff implies a change of a feminine name to a masculinename. Considering the consequence that respondent’s change of namemerely re cognizes his preferred gender, we find merit in respondent’schange of name. Such a change will conform with the change of the entryin his birth certificate from female to male.

WHEREFORE, the Republic’s petition is DENIED. The Decision datedJanuary 12, 2005 of the Regional Trial Court, Branch 33 of Siniloan,Laguna, is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

G.R. No. 164301 August 10, 2010

BANK OF THE PHILIPPINE ISLANDS, Petitioner,vs.BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OFUNIONS IN BPI UNIBANK, Respondent.

D E C I S I O N

LEONARDO-DE CASTRO, J .:

May a corporation invoke its merger with another corporation as a validground to exempt its "absorbed employees" from the coverage of a unionshop clause contained in its existing Collective Bargaining Agreement(CBA) with its own certified labor union? That is the question we shallendeavor to answer in this petition for review filed by an employer after the Court of Appeals decided in favor of respondent union, which is theemployees’ recognized collective bargaining representative.

At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on union security clauses, specifically Article 248 (e),

which states, "x x x Nothing in this Code or in any other law shall stop theparties from requiring membership in a recognized collective bargainingagent as a condition for employment, except those employees who arealready members of another union at the time of the signing of thecollective bargaining agreement. "1 This case which involves theapplication of a collective bargaining agreement with a union shop clauseshould be resolved principally from the standpoint of the clear provisionsof our labor laws, and the express terms of the CBA in question, and notby inference from the general consequence of the merger of corporationsunder the Corporation Code, which obviously does not deal with and,therefore, is silent on the terms and conditions of employment incorporations or juridical entities.

This issue must be resolved NOW, instead of postponing it to a futuretime when the CBA is renegotiated as suggested by the HonorableJustice Arturo D. Brion because the same issue may still be resurrectedin the renegotiation if the absorbed employees insist on their privilegedstatus of being exempt from any union shop clause or any variantthereof.

We find it significant to note that it is only the employer, Bank of thePhilippine Islands (BPI), that brought the case up to this Court via theinstant petition for review; while the employees actually involved in the

case did not pursue the same relief, but had instead chosen in effect to

http://www.lawphil.net/judjuris/juri2010/aug2010/gr_164301_2010.html#fnt1






acquiesce to the decision of the Court of Appeals which effectivelyrequired them to comply with the union shop clause under the existingCBA at the time of the merger of BPI with Far East Bank and TrustCompany (FEBTC), which decision had already become final andexecutory as to the aforesaid employees. By not appealing the decisionof the Court of Appeals, the aforesaid employees are bound by the saidCourt of Appeals’ decision to join BPI’s duly certified labor union. In viewof the apparent acquiescence of the affected FEBTC employees in the

Court of Appeals’ decision, BPI should not have pursued this petition for review. However, even assuming that BPI may do so, the same stillcannot prosper.

What is before us now is a petition for review under Rule 45 of the Rulesof Court of the Decision 2 dated September 30, 2003 of the Court of

Appeals, as reiterated in its Resolutio n 3 of June 9, 2004, reversing andsetting aside the Decision 4 dated November 23, 2001 of Voluntary

Arbitrator Rosalina Letrondo-Montejo, in CA-G.R. SP No. 70445, entitledBPI Employees Union-Davao Chapter-Federation of Unions in BPIUnibank v. Bank of the Philippine Islands, et al.

The antecedent facts are as follows:

On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on January 20, 2000 by and between BPI,herein petitioner, and FEBTC .5 This Article and Plan of Merger wasapproved by the Securities and Exchange Commission on April 7, 2000 .6

Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed by BPI as the survivingcorporation. FEBTC employees, including those in its different branchesacross the country, were hired by petitioner as its own employees, withtheir status and tenure recognized and salaries and benefits maintained.

Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank (hereinafter the "Union," for brevity) is theexclusive bargaining agent of BPI’s rank and file employees in DavaoCity. The former FEBTC rank-and-file employees in Davao City did notbelong to any labor union at the time of the merger. Prior to the effectivityof the merger, or on March 31, 2000, respondent Union invited saidFEBTC employees to a meeting regarding the Union Shop Clause(Article II, Section 2) of the existing CBA between petitioner BPI andrespondent Union .7

The parties both advert to certain provisions of the existing CBA, whichare quoted below:

ARTICLE I

Section 1. Recognition and Bargaining Unit – The BANK recognizes theUNION as the sole and exclusive collective bargaining representative of all the regular rank and file employees of the Bank offices in Davao City.

Section 2. Exclusions

Section 3. Additional Exclusions

Section 4. Copy of Contract

ARTICLE II

Section 1. Maintenance of Membership – All employees within thebargaining unit who are members of the Union on the date of theeffectivity of this Agreement as well as employees within the bargainingunit who subsequently join or become members of the Union during thelifetime of this Agreement shall as a condition of their continuedemployment with the Bank, maintain their membership in the Union ingood standing.

Section 2. Union Shop - New employees falling within the bargainingunit as defined in Article I of this Agreement, who may hereafter beregularly employed by the Bank shall, within thirty (30) days after theybecome regular employees, join the Union as a condition of their continued employment. It is understood that membership in good

standing in the Union is a condition of their continued employment withthe Bank .8 (Emphases supplied.)

After the meeting called by the Union, some of the former FEBTCemployees joined the Union, while others refused. Later, however, someof those who initially joined retracted their membership .9

Respondent Union then sent notices to the former FEBTC employeeswho refused to join, as well as those who retracted their membership,and called them to a hearing regarding the matter. When these former FEBTC employees refused to attend the hearing, the president of the

Union requested BPI to implement the Union Shop Clause of the CBAand to terminate their employment pursuant thereto .10





































After two months of management inaction on the request, respondentUnion informed petitioner BPI of i ts decision to refer the issue of theimplementation of the Union Shop Clause of the CBA to the GrievanceCommittee. However, the issue remained unresolved at this level and soit was subsequently submitted for voluntary arbitration by the parties .11

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision 12 datedNovember 23, 2001, ruled in favor of petitioner BPI’s interpretation that

the former FEBTC employees were not covered by the Union SecurityClause of the CBA between the Union and the Bank on the ground thatthe said employees were not new employees who were hired andsubsequently regularized, but were absorbed employees "by operation of law" because the "former employees of FEBTC can beconsidered assets and liabilities of the absorbed corporation ." TheVoluntary Arbitrator concluded that the former FEBTC employees couldnot be compelled to join the Union, as it was their constitutional right to

join or not to join any organization.

Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the same in an Order dated March 25, 2002 .13

Dissatisfied, respondent then appealed the Voluntary Arbitra tor’s decisionto the Court of Appeals. In the herein assailed Decision dated September 30, 2003, the Court of Appeals reversed and set aside the Decision of theVoluntary Arbitrator .14 Likewise, the Court of Appeals denied hereinpetitioner’s Motion for Reconsideration in a Resolution dated June 9,2004.

The Court of Appeals pertinently ruled in its Decision:

A union-shop clause has been defined as a form of union securityprovision wherein non-members may be hired, but to retain employmentmust become union members after a certain period.

There is no question as to the existence of the union-shop clause in theCBA between the petitioner-union and the company. The controversy liesin its application to the "absorbed" employees.

This Court agrees with the voluntary arbitrator that the ABSORBEDemployees are distinct and different from NEW employees BUT only in sofar as their employment service is concerned. The distinction ends there.In the case at bar, the absorbed employees’ length of service from itsformer employer is tacked with their employment with BPI. Otherwise

stated, the absorbed employees service is continuous and there is nogap in their service record.

This Court is persuaded that the similarities of "new" and "absorbed"employees far outweighs the distinction between them. The similaritieslies on the following, to wit: (a) they have a new employer; (b) newworking conditions; (c) new terms of employment and; (d) new companypolicy to follow. As such, they should be considered as "new" employees

for purposes of applying the provisions of the CBA regarding the "union-shop" clause.

To rule otherwise would definitely result to a very awkward and unfair situation wherein the "absorbed" employees shall be in a different if not,better situation than the existing BPI employees. The existing BPIemployees by virtue of the "union-shop" clause are required to pay themonthly union dues, remain as members in good standing of the unionotherwise, they shall be terminated from the company, and other union-related obligations. On the other hand, the "absorbed" employees shallenjoy the "fruits of labor" of the petitioner-union and its members for nothing in exchange. Certainly, this would disturb industrial peace in thecompany which is the paramount reason for the existence of the CBAand the union.

The voluntary arbitrator’s interpretation of the provisions of the CBAconcerning the coverage of the "union-shop" clause is at war with thespirit and the rationale why the Labor Code itself allows the existence of such provision.

The Supreme Court in the case of Manila Mandarin Employees Union vs.NLRC (G.R. No. 76989, September 29, 1987) rule, to quote:

"This Court has held that a valid form of union security, and such aprovision in a collective bargaining agreement is not a restriction of theright of freedom of association guaranteed by the Constitution.

A closed-shop agreement is an agreement whereby an employer bindshimself to hire only members of the contracting union who must continueto remain members in good standing to keep their jobs. It is "THE MOSTPRIZED ACHIEVEMENT OF UNIONISM." IT ADDS MEMBERSHIPAND COMPULSORY DUES. By holding out to loyal members a promiseof employment in the closed-shop, it wields group solidarity." (Emphasissupplied)


















Hence, the voluntary arbitrator erred in construing the CBA literally at theexpense of industrial peace in the company.

With the foregoing ruling from this Court, necessarily, the alternativeprayer of the petitioner to require the individual respondents to becomemembers or if they refuse, for this Court to direct respondent BPI todismiss them, follows .15

Hence, petitioner’s present recourse, raising the following issues:

I

WHETHER OR NOT THE COURT OF APPEALS GRAVELYERRED IN RULING THAT THE FORMER FEBTC EMPLOYEESSHOULD BE CONSIDERED ‘NEW’ EMPLOYEES OF BPI FORPURPOSES OF APPLYING THE UNION SHOP CLAUSE OFTHE CBA

II

WHETHER OR NOT THE COURT OF APPEALS GRAVELYERRED IN FINDING THAT THE VOLUNTARY ARBITRATOR’SINTERPRETATION OF THE COVERAGE OF THE UNIONSHOP CLAUSE IS "AT WAR WITH THE SPIRIT AND THERATIONALE WHY THE LABOR CODE ITSELF ALLOWS THEEXISTENCE OF SUCH PROVISION "16

In essence, the sole issue in this case is whether or not the former FEBTC employees that were absorbed by petitioner upon the merger between FEBTC and BPI should be covered by the Union Shop Clause

found in the existing CBA between petitioner and respondent Union.

Petitioner is of the position that the former FEBTC employees are notnew employees of BPI for purposes of applying the Union Shop Clauseof the CBA, on this note, petitioner points to Section 2, Article II of theCBA, which provides:

New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bankshall, within thirty (30) days after they become regular employees, jointhe Union as a condition of their continued employment. It is understoodthat membership in good standing in the Union is a condition of their continued employment with the Bank .17 (Emphases supplied.)

Petitioner argues that the term "new employees" in the Union ShopClause of the CBA is qualified by the phrases "who may hereafter beregularly employed" and "after they become regular employees" whichled petitioner to conclude that the "new employees" referred to in, andcontemplated by, the Union Shop Clause of the CBA were only thoseemployees who were "new" to BPI, on account of having been hiredinitially on a temporary or probationary status for possible regular employment at some future date. BPI argues that the FEBTC employeesabsorbed by BPI cannot be considered as "new employees" of BPI for purposes of applying the Union Shop Clause of the CBA .18

According to petitioner, the contrary interpretation made by the Court of Appeals of this particular CBA provision ignores, or even defies, whatpetitioner assumes as its clear meaning and scope which allegedlycontradicts the Court’s strict and restrictive enforcement of union securityagreements.

We do not agree.

Section 2, Article II of the CBA is silent as to how one becomes a "regular employee" of the BPI for the first time. There is nothing in the saidprovision which requires that a "new" regular employee first undergo atemporary or probationary status before being deemed as such under theunion shop clause of the CBA.

"Union security" is a generic term which is applied to and comprehends"closed shop," "union shop," "maintenance of membership" or any other form of agreement which imposes upon employees the obligation toacquire or retain union membership as a condition affecting employment.There is union shop when all new regular employees are required to jointhe union within a certain period for their continued employment. There ismaintenance of membership shop when employees, who are unionmembers as of the effective date of the agreement, or who thereafter become members, must maintain union membership as a condition for continued employment until they are promoted or transferred out of thebargaining unit or the agreement is terminated. A closed-shop, on theother hand, may be defined as an enterprise in which, by agreementbetween the employer and his employees or their representatives, noperson may be employed in any or certain agreed departments of theenterprise unless he or she is, becomes, and, for the duration of theagreement, remains a member in good standing of a union entirelycomprised of or of which the employees in interest are a part .19























In the case of Liberty Flour Mills Employees v. Liberty Flour Mills,Inc. ,20 we ruled that:

It is the policy of the State to promote unionism to enable theworkers to negotiate with management on the same level and withmore persuasiveness than if they were to individually andindependently bargain for the improvement of their respectiveconditions. To this end, the Constitution guarantees to them the rights

"to self-organization, collective bargaining and negotiations and peacefulconcerted actions including the right to strike in accordance with law."There is no question that these purposes could be thwarted if everyworker were to choose to go his own separate way instead of joining hisco-employees in planning collective action and presenting a united frontwhen they sit down to bargain with their employers. It is for this reasonthat the law has sanctioned stipulations for the union shop and the closedshop as a means of encouraging the workers to join and support thelabor union of their own choice as their representative in the negotiationof their demands and the protection of their interest vis-à-vis theemployer. (Emphasis ours.)

In other words, the purpose of a union shop or other union securityarrangement is to guarantee the continued existence of the union throughenforced membership for the benefit of the workers.

All employees in the bargaining unit covered by a Union Shop Clause intheir CBA with management are subject to its terms. However, under law and jurisprudence, the following kinds of employees areexempted from its coverage , namely, employees who at the time theunion shop agreement takes effect are bona fide members of a religiousorganization which prohibits its members from joining labor unions onreligious grounds ;21employees already in the service and already

members of a union other than the majority at the time the unionshop agreement took effect ;22 confidential employees who are excludedfrom the rank and file bargaining unit ;23 and employees excluded fromthe union shop by express terms of the agreement .

When certain employees are obliged to join a particular union as arequisite for continued employment, as in the case of Union SecurityClauses, this condition is a valid restriction of the freedom or right not to

join any labor organization because it is in favor of unionism. This Court,on occasion, has even held that a union security clause in a CBA is not arestriction of the right of freedom of association guaranteed by the

Constitution .24

Moreover, a closed shop agreement is an agreement whereby anemployer binds himself to hire only members of the contracting unionwho must continue to remain members in good standing to keep their

jobs. It is " the most prized achievement of unionism ." It addsmembership and compulsory dues. By holding out to loyal members apromise of employment in the closed shop, it wields group solidarity .25

Indeed, the situation of the former FEBTC employees in this case clearly

does not fall within the first three exceptions to the application of theUnion Shop Clause discussed earlier. No allegation or evidence of religious exemption or prior membership in another union or engagementas a confidential employee was presented by both parties. The solecategory therefore in which petitioner may prove its claim is the fourthrecognized exception or whether the former FEBTC employees areexcluded by the express terms of the existing CBA between petitioner and respondent.

To reiterate, petitioner insists that the term "new employees," as thesame is used in the Union Shop Clause of the CBA at issue, refers onlyto employees hired by BPI as non-regular employees who later qualify for regular employment and become regular employees, and notthose who, as a legal consequence of a merger, are allegedlyautomatically deemed regular employees of BPI. However, the CBA doesnot make a distinction as to how a regular employee attains such astatus. Moreover, there is nothing in the Corporation Law and the merger agreement mandating the automatic employment as regular employeesby the surviving corporation in the merger.

It is apparent that petitioner hinges its argument that the former FEBTCemployees were absorbed by BPI merely as a legal consequence of amerger based on the characterization by the Voluntary Arbiter of these

absorbed employees as included in the "assets and liabilities" of thedissolved corporation - assets because they help the Bank in itsoperation and liabilities because redundant employees may beterminated and company benefits will be paid to them, thus reducing theBank’s financial status. Based on this ratiocination, she ruled that thesame are not new employees of BPI as contemplated by the CBA atissue, noting that the Certificate of Filing of the Articles of Merger andPlan of Merger between FEBTC and BPI stated that "x x x the entireassets and liabilities of FAR EASTERN BANK & TRUST COMPANY willbe transferred to and absorbed by the BANK OF THE PHILIPPINEISLANDS x x x (underlining supplied). "26 In sum, the Voluntary Arbiter upheld the reasoning of petitioner that the FEBTC employees became






























BPI employees by "operation of law" because they are included in theterm "assets and liabilities."

Absorbed FEBTC Employees are Neither Assets nor Liabilities

In legal parlance, however, human beings are never embraced in theterm "assets and liabilities." Moreover, BPI’s absorption of former FEBTCemployees was neither by operation of law nor by legal consequence of

contract. There was no government regulation or law that compelled themerger of the two banks or the absorption of the employees of thedissolved corporation by the surviving corporation. Had there been suchlaw or regulation, the absorption of employees of the non-survivingentities of the merger would have been mandatory on the survivingcorporation .27 In the present case, the merger was voluntarily entered intoby both banks presumably for some mutually acceptable consideration.In fact, the Corporation Code does not also mandate the absorption of the employees of the non-surviving corporation by the survivingcorporation in the case of a merger. Section 80 of the Corporation Codeprovides:

SEC. 80. Effects of merger or consolidation . – The merger or consolidation, as provided in the preceding sections shall have thefollowing effects:

1. The constituent corporations shall become a single corporationwhich, in case of merger, shall be the surviving corporationdesignated in the plan of merger; and, in case of consolidation,shall be the consolidated corporation designated in the plan of consolidation;

2. The separate existence of the constituent corporations shallcease, except that of the surviving or the consolidatedcorporation;

3. The surviving or the consolidated corporation shall possess allthe rights, privileges, immunities and powers and shall be subjectto all the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereuponand thereafter possess all the rights, privileges, immunities andfranchises of each of the constituent corporations; and allproperty, real or personal, and all receivables due on whatever

account, including subscriptions to shares and other choses inaction, and all and every other interest of, or belonging to, or dueto each constituent corporation, shall be taken and deemed to betransferred to and vested in such surviving or consolidatedcorporation without further act or deed; and

5. The surviving or the consolidated corporation shall beresponsible and liable for all the liabilities and obligations of each

of the constituent corporations in the same manner as if suchsurviving or consolidated corporation had itself incurred suchliabilities or obligations; and any claim, action or proceedingpending by or against any of such constituent corporations maybe prosecuted by or against the surviving or consolidatedcorporation, as the case may be. Neither the rights of creditorsnor any lien upon the property of any of such constituentcorporations shall be impaired by such merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7,2000 did not contain any specific stipulation with respect to theemployment contracts of existing personnel of the non-surviving entitywhich is FEBTC. Unlike the Voluntary Arbitrator, this Court cannot upholdthe reasoning that the general stipulation regarding transfer of FEBTCassets and liabilities to BPI as set forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into the employof BPI and neither BPI nor the FEBTC employees allegedly could doanything about it. Even if it is so, it does not follow that the absorbedemployees should not be subject to the terms and conditions of employment obtaining in the surviving corporation .

The rule is that unless expressly assumed, labor contracts such asemployment contracts and collective bargaining agreements are not

enforceable against a transferee of an enterprise, labor contracts being inpersonam, thus binding only between the parties. A labor contract merelycreates an action in personam and does not create any real right whichshould be respected by third parties. This conclusion draws its force fromthe right of an employer to select his employees and to decide when toengage them as protected under our Constitution, and the same can onlybe restricted by law through the exercise of the police power .28

Furthermore, this Court believes that it is contrary to public policy todeclare the former FEBTC employees as forming part of the assets or liabilities of FEBTC that were transferred and absorbed by BPI in the

Articles of Merger. Assets and liabilities, in this instance, should bedeemed to refer only to property rights and obligations of FEBTC and do











not include the employment contracts of its personnel. A corporationcannot unilaterally transfer its employees to another employer likechattel. Certainly, if BPI as an employer had the right to choose who toretain among FEBTC’s employees, FEBTC employees had theconcomitant right to choose not to be absorbed by BPI. Even thoughFEBTC employees had no choice or control over the merger of their employer with BPI, they had a choice whether or not they would allowthemselves to be absorbed by BPI. Certainly nothing prevented theFEBTC’s employees from resigning or retiring and seeking employmentelsewhere instead of going along with the proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee without the consent of the employee is inviolation of an individual’s freedom to contract. It would have been adifferent matter if there was an express provision in the articles of merger that as a condition for the merger, BPI was being required to assume allthe employment contracts of all existing FEBTC employees with theconformity of the employees. In the absence of such a provision in thearticles of merger, then BPI clearly had the business managementdecision as to whether or not employ FEBTC’s employees. FEBTCemployees likewise retained the prerogative to allow themselves to beabsorbed or not; otherwise, that would be tantamount to involuntaryservitude.

There appears to be no dispute that with respect to FEBTC employeesthat BPI chose not to employ or FEBTC employees who chose to retire or be separated from employment instead of "being absorbed," BPI’sassumed liability to these employees pursuant to the merger isFEBTC’s liability to them in terms of separation pay ,29r etirement pa y30 or other benefits that may be due them depending on the circumstances.

Legal Consequences of Mergers

Although not binding on this Court, American jurisprudence on theconsequences of voluntary mergers on the right to employment andseniority rights is persuasive and illuminating. We quote the followingpertinent discussion from the American Law Reports:

Several cases have involved the situation where as a result of mergers ,consolidations, or shutdowns, one group of employees, who hadaccumulated seniority at one plant or for one employer, finds that their

jobs have been discontinued except to the extent that they are offered

employment at the place or by the employer where the work is to be

carried on in the future. Such cases have involved the question whether such transferring employees should be entitled to carry with them their accumulated seniority or whether they are to be compelled to start over at the bottom of the seniority list in the "new" job. It has been recognizedin some cases that the accumulated seniority does not survive andcannot be transferred to the "new" job.

In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597 , the shop work of

three formerly separate railroad corporations, which had previouslyoperated separate facilities, was consolidated in the shops of one of theroads. Displaced employees of the other two roads were givenpreference for the new jobs created in the shops of the railroad whichtook over the work. A controversy arose between the employees as towhether the displaced employees were entitled to carry with them to thenew jobs the seniority rights they had accumulated with their prior employers, that is, whether the rosters of the three corporations, for seniority purposes, should be "dovetailed" or whether the transferringemployees should go to the bottom of the roster of their new employer.Labor representatives of the various systems involved attempted to workout an agreement which, in effect, preserved the seniority status obtainedin the prior employment on other roads, and the action was for specificperformance of this agreement against a demurring group of the originalemployees of the railroad which was operating the consolidated shops.The relief sought was denied, the court saying that, absent some specificcontract provision otherwise, seniority rights were ordinarily l imited to theemployment in which they were earned, and concluding that the contractfor which specific performance was sought was not such a completedand binding agreement as would support such equitable relief, since therailroad, whose concurrence in the arrangements made was essential totheir effectuation, was not a party to the agreement.

Where the provisions of a labor contract provided that in the event that atrucker absorbed the business of another private contractor or commoncarrier, or was a party to a merger of lines, the seniority of theemployees absorbed or affected thereby should be determined by mutualagreement between the trucker and the unions involved, it was heldin Moore v International Brotherhood of Teamsters, etc. (1962, Ky) 356SW2d 241 , that the trucker was not required to absorb the affectedemployees as well as the business, the court saying that they could findno such meaning in the above clause, stating that it dealt only withseniority, and not with initial employment. Unless and until the absorbingcompany agreed to take the employees of the company whose businesswas being absorbed , no seniority problem was created, said the court,hence the provision of the contract could have no application.







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Furthermore, said the court, it did not require that the absorbing companytake these employees, but only that if it did take them the question of seniority between the old and new employees would be worked out byagreement or else be submitted to the grievance procedure .31 (Emphasisours.)

Indeed, from the tenor of local and foreign authorities, in voluntarymergers, absorption of the dissolved corporation’s employees or the

recognition of the absorbed employees’ service with their previousemployer may be demanded from the surviving corporation if required byprovision of law or contract. The dissent of Justice Arturo D. Brion tries tomake a distinction as to the terms and conditions of employment of theabsorbed employees in the case of a corporate merger or consolidationwhich will, in effect, take away from corporate management theprerogative to make purely business decisions on the hiring of employeesor will give it an excuse not to apply the CBA in force to the prejudice of its own employees and their recognized collective bargaining agent. Inthis regard, we disagree with Justice Brion.

Justice Brion takes the position that because the surviving corporationcontinues the personality of the dissolved corporation and acquires all thelatter’s rights and obligations, it is duty-bound to absorb the dissolvedcorporation’s employees, even in the absence of a stipulation in the planof merger. He proposes that this interpretation would provide thenecessary protection to labor as it spares workers from being "left in legallimbo."

However, there are instances where an employer can validly discontinueor terminate the employment of an employee without violating his right tosecurity of tenure. Among others, in case of redundancy, for example,superfluous employees may be terminated and such termination would

be authorized under Article 283 of the Labor Code .32

Moreover, assuming for the sake of argument that there is an obligationto hire or absorb all employees of the non-surviving corporation, there isstill no basis to conclude that the terms and conditions of employmentunder a valid collective bargaining agreement in force in the survivingcorporation should not be made to apply to the absorbed employees.

The Corporation Code and the Subject Merger Agreement are Silent onEfficacy, Terms and Conditions of Employment Contracts

The lack of a provision in the plan of merger regarding the transfer of employment contracts to the surviving corporation could have very wellbeen deliberate on the part of the parties to the merger, in order to grantthe surviving corporation the freedom to choose who among thedissolved corporation’s employees to retain, in accordance with thesurviving corporation’s business needs. If terminations, for instance dueto redundancy or labor-saving devices or to prevent losses, are done ingood faith, they would be valid. The surviving corporation too is duty-bound to protect the rights of its own employees who may be affected bythe merger in terms of seniority and other conditions of their employmentdue to the merger. Thus, we are not convinced that in the absence of astipulation in the merger plan the surviving corporation was compelled, or may be judicially compelled, to absorb all employees under the sameterms and conditions obtaining in the dissolved corporation as thesurviving corporation should also take into consideration the state of itsbusiness and its obligations to its own employees, and to their certifiedcollective bargaining agent or labor union.

Even assuming we accept Justice Brion’s theory that in a merger situation the surviving corporation should be compelled to absorb thedissolved corporation’s employee s as a legal consequence of the merger and as a social justice consideration, it bears to emphasize his dissentalso recognizes that the employee may choose to end his employment atany time by voluntarily resigning. For the employee to be "absorbed" byBP I, it requires the employees’ implied or express consent. It is becauseof this human element in employment contracts and the personal,consensual nature thereof that we cannot agree that, in a merger situation, employment contracts are automatically transferable from oneentity to another in the same manner that a contract pertaining to purelyproprietary rights – such as a promissory note or a deed of sale of property – is perfectly and automatically transferable to the surviving

corporation.

That BPI is the same entity as FEBTC after the merger is but a legalfiction intended as a tool to adjudicate rights and obligations between andamong the merged corporations and the persons that deal with them.

Although in a merger it is as if there is no change in the personality of theemployer, there is in reality a change in the situation of the employee.Once an FEBTC employee is absorbed, there are presumably changes inhis condition of employment even if his previous tenure and salary rate isrecognized by BPI. It is reasonable to assume that BPI would havedifferent rules and regulations and company practices than FEBTC and itis incumbent upon the former FEBTC employees to obey these new rulesand adapt to their new environment. Not the least of the changes in











employment condition that the absorbed FEBTC employees must face isthe fact that prior to the merger they were employees of an unorganizedestablishment and after the merger they became employees of aunionized company that had an existing collective bargaining agreementwith the certified union. This presupposes that the union who is party tothe collective bargaining agreement is the certified union that has, in theappropriate certification election, been shown to represent a majority of the members of the bargaining unit.

Likewise, with respect to FEBTC employees that BPI chose to employand who also chose to be absorbed, then due to BPI’s blanketassumption of liabilities and obligations under the articles of merger, BPIwas bound to respect the years of service of these FEBTC employeesand to pay the same, or commensurate salaries and other benefits thatthese employees previously enjoyed with FEBTC.

As the Union likewise pointed out in its pleadings, there were benefitsunder the CBA that the former FEBTC employees did not enjoy withtheir previous employer . As BPI employees, they will enjoy all theseCBA benefits upon their "absorption." Thus, although in a sense BPI iscontinuing FEBTC’s employment of these absorbed employees, BPI’semployment of these absorbed employees was not under exactly thesame terms and conditions as stated in the latter’s employment contractswith FEBTC. This further strengthens the view that BPI and the former FEBTC employees voluntarily contracted with each other for their employment in the surviving corporation.

Proper Appreciation of the Term "New Employees" Under the CBA

In any event, it is of no moment that the former FEBTC employeesretained the regular status that they possessed while working for their former employer upon their absorption by petitioner. This fact would notremove them from the scope of the phrase "new employees" ascontemplated in the Union Shop Clause of the CBA, contrary topetitioner’s insistence that the term "new employees" only refers to thosewho are initially hired as non-regular employees for possible regular employment.

The Union Shop Clause in the CBA simply states that "new employees"who during the effectivity of the CBA "may be regularly employed" by theBank must join the union within thirty (30) days from their regularization.There is nothing in the said clause that limits its application to only new

employees who possess non-regular status, meaning probationary

status, at the start of their employment. Petitioner likewise failed to pointto any provision in the CBA expressly excluding from the Union ShopClause new employees who are "absorbed" as regular employees fromthe beginning of their employment. What is indubitable from the UnionShop Clause is that upon the effectivity of the C BA, petitioner’s newregular employees (regardless of the manner by which they becameemployees of BPI) are required to join the Union as a condition of their continued employment.

The dissenting opinion of Justice Brion dovetails with Justice Carpio’sview only in their restrictive interpretation of who are "new employees"under the CBA. To our dissenting colleagues, the phrase "newemployees" (who are covered by the union shop clause) should onlyinclude new employees who were hired as probationary during the life of the CBA and were later granted regular status. They propose that theformer FEBTC employees who were deemed regular employees from thebeginning of their employment with BPI should be treated as a specialclass of employees and be excluded from the union shop clause.

Justice Brion himself points out that there is no clear, categoricaldefinition of "new employee" in the CBA. In other words, the term "newemployee" as used in the union shop clause is used broadly without anyqualification or distinction. However, the Court should not uphold aninterpretation of the term "new employee" based on the general andextraneous provisions of the Corporation Code on merger that woulddefeat, rather than fulfill, the purpose of the union shop clause. Toreiterate, the provision of the Article 248(e) of the Labor Code in pointmandates that nothing in the said Code or any other law should stop theparties from requiring membership in a recognized collective bargainingagent as a condition of employment.

Significantly, petitioner BPI never stretches its arguments so far as tostate that the absorbed employees should be deemed "old employees"who are not covered by the Union Shop Clause. This is not surprising.

By law and jurisprudence, a merger only becomes effective uponapproval by the Securities and Exchange Commission (SEC) of thearticles of merger. In Associated Bank v. Court of Appeals ,33 we held:

The procedure to be followed is prescribed under the Corporation Code.Section 79 of said Code requires the approval by the Securities andExchange Commission (SEC) of the articles of merger which, in turn,

must have been duly approved by a majority of the respective







stockholders of the constituent corporations. The same provision further states that the merger shall be effective only upon the issuance by theSEC of a certificate of merger. The effectivity date of the merger is crucialfor determining when the merged or absorbed corporation ceases toexist; and when its rights, privileges, properties as well as liabilities passon to the surviving corporation. (Emphasis ours.)

In other words, even though BPI steps into the shoes of FEBTC as the

surviving corporation, BPI does so at a particular point in time, i.e., theeffectivity of the merger upon the SEC’s issuance of a certificate of merger. In fact, the articles of merger themselves provided that both BPIand FEBTC will continue their respective business operations until theSEC issues the certificate of merger and in the event SEC does not issuesuch a certificate, they agree to hold each other blameless for the non-consummation of the merger.

Considering the foregoing principle, BPI could have only become theemployer of the FEBTC employees it absorbed after the approval by theSEC of the merger. If the SEC did not approve the merger, BPI would notbe in the position to absorb the employees of FEBTC at all. Indeed, thereis evidence on record that BPI made the assignments of its absorbedemployees in BPI effective April 10, 2000, or after the SEC’s approval of the merger .34 In other words, BPI became the employer of the absorbedemployees only at some point after the effectivity of the merger ,notwithstanding the fact that the absorbed employees’ years of servicewith FEBTC were voluntarily recognized by BPI.

Even assuming for the sake of argument that we consider the absorbedFEBTC employees as "old employees" of BPI who are not members of any union (i.e., it is their date of hiring by FEBTC and not the date of their absorption that is considered), this does not necessarily exclude them

from the union security clause in the CBA. The CBA subject of this casewas effective from April 1, 1996 until March 31, 2001. Based on theallegations of the former FEBTC employees themselves, there wereformer FEBTC employees who were hired by FEBTC after April 1,1996 and if their date of hiring by FEBTC is considered as their date of hiring by BPI, they would undeniably be considered "new employees" of BPI within the contemplation of the Union Shop Clause of the said CBA.Otherwise, it would lead to the absurd situation that we woulddiscriminate not only between new BPI employees (hired during the life of the CBA) and former FEBTC employees (absorbed during the life of theCBA) but also among the former FEBTC employees themselves. In other words, we would be treating employees who are exactly similarly si tuated

(i.e., the group of absorbed FEBTC employees) differently. This hardlysatisfies the demands of equality and justice.

Petitioner limited itself to the argument that its absorbed employees donot fall within the term "new employees" contemplated under the UnionShop Clause with the apparent objective of excluding all, and not justsome, of the former FEBTC employees from the application of the UnionShop Clause.

However, in law or even under the express terms of the CBA, there is nospecial class of employees called "absorbed employees." In order for theCourt to apply or not apply the Union Shop Clause, we can only classifythe former FEBTC employees as either "old" or "new." If they are not"old" employees, they are necessarily "new" employees. If they are newemployees, the Union Shop Clause did not distinguish between newemployees who are non-regular at their hi ring but who subsequentlybecome regular and new employees who are "absorbed" as regular andpermanent from the beginning of their employment. The Union ShopClause did not so distinguish, and so neither must we.

No Substantial Distinction Under the CBA Between Regular Employees Hired After Probationary Status and Regular EmployeesHired After the Merger

Verily, we agree with the Court of Appeals that there are no substantialdifferences between a newly hired non-regular employee who wasregularized weeks or months after his hiring and a new employee whowas absorbed from another bank as a regular employee pursuant to amerger, for purposes of applying the Union Shop Clause. Bothemployees were hired/employed only after the CBA was signed. At thetime they are being required to join the Union, they are both already

regular rank and file employees of BPI. They belong to the samebargaining unit being represented by the Union. They both enjoy benefitsthat the Union was able to secure for them under the CBA. When theyboth entered the employ of BPI, the CBA and the Union Shop Clausetherein were already in effect and neither of them had the opportunity toexpress their preference for unionism or not. We see no cogent reasonwhy the Union Shop Clause should not be applied equally to these twotypes of new employees, for they are undeniably similarly si tuated.

The effect or consequenc e of BPI’s so -called "absorption" of former FEBTC employees should be limited to what they actually agreed to, i.e.

recognition of the FEBTC employees’ years of service, salary rate and







other benefits with their previous employer. The effect should not bestretched so far as to exempt former FEBTC employees from the existingCBA terms, company policies and rules which apply to employeessimilarly situated. If the Union Shop Clause is valid as to other newregular BPI employees, there is no reason why the same clause wouldbe a violation of the "absorbed" employees’ freedom of association.

Non-Application of Union Shop Clause Contrary to the Policy of the

Labor Code and Inimical to Industrial Peace

It is but fair that similarly situated employees who enjoy the sameprivileges of a CBA should be likewise subject to the same obligationsthe CBA imposes upon them. A contrary interpretation of the Union ShopClause will be inimical to industrial peace and workers’ solidarity. Thisunfavorable situation will not be sufficiently addressed by asking theformer FEBTC employees to simply pay agency fees to the Union in lieuof union membership, as the dissent of Justice Carpio suggests. The factremains that other new regular employees, to whom the "absorbedemployees" should be compared, do not have the option to simply paythe agency fees and they must join the Union or face termination.

Petitioner’s restrictive reading of the Union Shop Clause could alsoinadvertently open an avenue, which an employer could readily use, inorder to dilute the membership base of the certified union in the collectivebargaining unit (CBU). By entering into a voluntary merger with a non-unionized company that employs more workers, an employer could getrid of its existing union by the simple expedient of arguing that the"absorbed employees" are not new employees, as are commonlyunderstood to be covered by a CBA’s union security clause. This couldthen lead to a new majority within the CBU that could potentially threatenthe majority status of the existing union and, ultimately, spell its demise

as the CBU’s bargaining representative. Such a dreaded but not entirelyfar-fetched scenario is no different from the ingenious and creative"union-busting" schemes that corporations have fomented throughout theyears, which this Court has foiled time and again in order to preserve andprotect the valued place of labor in this jurisdiction consistent with theConstitution’s mandate of insuring social justice.

There is nothing in the Labor Code and other applicable laws or the CBAprovision at issue that requires that a new employee has to be of probationary or non-regular status at the beginning of the employmentrelationship. An employer may confer upon a new employee the status of regular employment even at the onset of his engagement. Moreover, nolaw prohibits an employer from voluntarily recognizing the length of

service of a new employee with a previous employer in relation tocomputation of benefits or seniority but it should not unduly be interpretedto exclude them from the coverage of the CBA which is a bindingcontractual obligation of the employer and employees.

Indeed, a union security clause in a CBA should be interpreted to givemeaning and effect to its purpose, which is to afford protection to thecertified bargaining agent and ensure that the employer is dealing with a

union that represents the interests of the legally mandated percentage of the members of the bargaining unit.

The union shop clause offers protection to the certified bargaining agentby ensuring that future regular employees who (a) enter the employ of the company during the life of the CBA; (b) are deemed part of thecollective bargaining unit; and (c) whose number will affect the number of members of the collective bargaining unit will be compelled to join theunion. Such compulsion has legal effect, precisely because the employer by voluntarily entering in to a union shop clause in a CBA with thecertified bargaining agent takes on the responsibility of dismissing thenew regular employee who does not join the union.

Without the union shop clause or with the restrictive interpretation thereof as proposed in the dissenting opinions, the company can jeopardize themajority status of the certified union by excluding from union membershipall new regular employees whom the Company will "absorb" in futuremergers and all new regular employees whom the Company hires asregular from the beginning of their employment without undergoing aprobationary period. In this manner, the Company can increase thenumber of members of the collective bargaining unit and if this increaseis not accompanied by a corresponding increase in union membership,the certified union may lose its majority status and render it vulnerable to

attack by another union who wishes to represent the same bargainingunit .35

Or worse, a certified union whose membership falls below twenty percent(20%) of the total members of the collective bargaining unit may lose i tsstatus as a legitimate labor organization altogether, even in a situationwhere there is no competing union .36 In such a case, an interested partymay file for the cancellation of the union’s certificate of registration withthe Bureau of Labor Relations .37

Plainly, the restrictive interpretation of the union shop clause would place

the certified union’s very existence at the mercy and control of the















employer. Relevantly, only BPI, the employer appears to beinterested in pursuing this case . The former FEBTC employees havenot joined BPI in this appeal.

For the foregoing reasons, Justice Carpio’s proposal to simply require theformer FEBTC to pay agency fees is wholly inadequate to compensatethe certified union for the loss of additional membership supposedlyguaranteed by compliance with the union shop clause. This i s apart from

the fact that treating these "absorbed employees" as a special class of new employees does not encourage worker solidarity in the companysince another class of new employees (i.e. those whose were hired asprobationary and later regularized during the life of the CBA) would nothave the option of substituting union membership with payment of agency fees.

Justice Brion, on the other hand, appears to recognize the inherentunfairness of perpetually excluding the "absorbed" employees from theambit of the union shop clause. He proposes that this matter be left tonegotiation by the parties in the next CBA. To our mind, however, thisproposal does not sufficiently address the issue. With BPI already takingthe position that employees "absorbed" pursuant to its voluntary mergerswith other banks are exempt from the union shop clause, the chances of the said bank ever agreeing to the inclusion of such employees in afuture CBA is next to nil – more so, if BPI’s narrow interpretation of theunion shop clause is sustained by this Court.

Right of an Employee not to Join a Union is not Absolute and Must GiveWay to the Collective Good of All Members of the Bargaining Unit

The dissenting opinions place a premium on the fact that even if theformer FEBTC employees are not old employees, they nonetheless were

employed as regular and permanent employees without a gap in their service. However, an employee’s permanent and regular employmentstatus in itself does not necessarily exempt him from the coverage of aunion shop clause.

In the past this Court has upheld even the more stringent type of unionsecurity clause, i.e., the closed shop provision, and held that it can bemade applicable to old employees who are already regular andpermanent but have chosen not to join a union. In the early case of Juatv. Court of Industrial Relations ,38 the Court held that an old employee whohad no union may be compelled to join the union even if the collective

bargaining agreement (CBA) imposing the closed shop provision was

only entered into seven years after of the hiring of the said employee. Toquote from that decision:

A closed-shop agreement has been considered as one form of unionsecurity whereby only union members can be hired and workers mustremain union members as a condition of continued employment. Therequirement for employees or workers to become members of a union asa condition for employment redounds to the benefit and advantage of

said employees because by holding out to loyal members a promise of employment in the closed-shop the union wields group solidarity. In fact,it is said that "the closed-shop contract is the most prized achievement of unionism."

x x x x

This Court had categorically held in the case of Freeman Shirt Manufacturing Co., Inc., et al. vs. Court of Industrial Relations, et al. , G.R.No. L-16561, Jan. 28, 1961, that the closed-shop proviso of a collectivebargaining agreement entered into between an employer and a dulyauthorized labor union is applicable not only to the employees or laborersthat are employed after the collective bargaining agreement had beenentered into but also to old employees who are not members of any labor union at the time the said collective bargaining agreement was enteredinto. In other words, if an employee or laborer is already a member of alabor union different from the union that entered into a collectivebargaining agreement with the employer providing for a closed-shop, saidemployee or worker cannot be obliged to become a member of that unionwhich had entered into a collective bargaining agreement with theemployer as a condition for his continued employment. (Emphasis andunderscoring supplied.)

Although the present case does not involve a closed shop provision thatincluded even old employees, the Juat example is but one of the casesthat laid down the doctrine that the right not to join a union is notabsolute. Theoretically, there is nothing in law or jurisprudence to preventan employer and a union from stipulating that existing employees (whoalready attained regular and permanent status but who are not membersof any union) are to be included in the coverage of a union securityclause. Even Article 248(e) of the Labor Code only expresslyexempts old employees who already have a union from inclusion in aunion security clause .39











Contrary to the assertion in the dissent of Justice Carpio, Juat has notbeen overturned by Victoriano v. Elizalde Rope Workers’ Union 40 nor byReyes v. Trajano .41 The factual milieus of these three cases are vastlydifferent.

In Victoriano, the issue that confronted the Court was whether or notemployees who were members of the Iglesia ni Kristo (INK) sect could becompelled to join the union under a closed shop provision, despite thefact that their religious beliefs prohibited them from joining a union. In thatcase, the Court was asked to balance the constitutional right to religiousfreedom against a host of other constitutional provisions including thefreedom of association, the non-establishment clause, the non-impairment of contracts clause, the equal protection clause, and thesocial justice provision. In the end, the Court held that "religious freedom,although not unlimited, is a fundamental personal right and liberty, andhas a preferred position in the hierarchy of values. "42

However, Victoriano is consistent with Juat since they both affirm that theright to refrain from joining a union is not absolute. The relevant portion of Victoriano is quoted below:

The right to refrain from joining labor organizations recognized by Section3 of the Industrial Peace Act is , however, limited. The legal protectiongranted to such right to refrain from joining is withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop,by virtue of which the employer may employ only member of thecollective bargaining union, and the employees must continue to bemembers of the union for the duration of the contract in order to keeptheir jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before itsamendment by Republic Act No. 3350, provides that although it would bean unfair labor practice for an employer "to discriminate in regard to hire

or tenure of employment or any term or condition of employment toencourage or discourage membership in any labor organization" theemployer is, however, not precluded "from making an agreement with alabor organization to require as a condition of employment membershiptherein, if such labor organization is the representative of the employees."By virtue, therefore, of a closed shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs,wishes to be employed or to keep his employment, he must become amember of the collective bargaining union. Hence, the right of saidemployee not to join the labor union is curtailed andwithdrawn .43 (Emphases supplied.)

If Juat exemplified an exception to the rule that a person has the right notto join a union, Victoriano merely created an exception to the exceptionon the ground of religious freedom.

Reyes, on the other hand, did not involve the interpretation of any unionsecurity clause. In that case, there was no certified bargaining agent yetsince the controversy arose during a certification election. In Reyes, theCourt highlighted the idea that the freedom of association included theright not to associate or join a union in resolving the issue whether or notthe votes of members of the INK sect who were part of the bargainingunit could be excluded in the results of a certification election, simplybecause they were not members of the two contesting unions and wereexpected to have voted for "NO UNION" in view of their religiousaffiliation. The Court upheld the inclusion of the votes of the INKmembers since in the previous case of Victoriano we held that INKmembers may not be compelled to join a union on the ground of religiousfreedom and even without Victoriano every employee has the right tovote "no union" in a certification election as part of his freedom of association. However, Reyes is not authority for Justice Carpio’sproposition that an employee who is not a member of any union may

claim an exemption from an existing union security clause because healready has regular and permanent status but simply prefers not to join aunion.

The other cases cited in Justice Carpio’s dissent on this p oint are likewiseinapplicable. Basa v. Federacion Obrera de la Industria Tabaquera yOtros Trabajadores de Filipinas ,44 Anucension v. National Labor Union ,45 and Gonzales v. Central Azucarera de Tarlac Labor Unio n 46 allinvolved members of the INK. In line with Victoriano, these cases upheldthe INK members’ claimed exemption from the union security clause onreligious grounds. In the present case, the former FEBTC employees

never claimed any religious grounds for their exemption from the UnionShop Clause. As for Philips Industrial Development, Inc. v. NationalLabor Relations Corporation 47 and Knitjoy Manufacturing, Inc. v. Ferrer-Calleja ,48 the employees who were exempted from joining the respondentunion or who were excluded from participating in the certification electionwere found to be not members of the bargaining unit represented byrespondent union and were free to form/join their own union. In the caseat bar, it is undisputed that the former FEBTC employees were part of thebargaining unit that the Union represented. Thus, the rulings in Philipsand Knitjoy have no relevance to the issues at hand.

Time and again, this Court has ruled that the individual employee’s rightnot to join a union may be validly restricted by a union security clause in





































a CBA 49 and such union security clause is not a violation of theemployee’s constitutional right to freedom of association .50

It is unsurprising that significant provisions on labor protection of the1987 Constitution are found in Article XIII on Social Justice. Theconstitutional guarantee given the right to form union s 51 and the Statepolicy to promote unionism 52 have social justice considerations. InPeople’s I ndustrial and Commercial Employees and WorkersOrganization v. People’s Industrial and Commercial Corporation ,53 werecognized that "[l]abor, being the weaker in economic power andresources than capital, deserve protection that is actually substantial andmaterial."

The rationale for upholding the validity of union shop clauses in a CBA,even if they impinge upon the individual employee’s right or freedom of as sociation, is not to protect the union for the union’s sake. Laws and

jurisprudence promote unionism and afford certain protections to thecertified bargaining agent in a unionized company because a strong andeffective union presumably benefits all employees in the bargaining unitsince such a union would be in a better position to demand improvedbenefits and conditions of work from the employer. This is the rationalebehind the State policy to promote unionism declared in the Constitution,which was elucidated in the above-cited case of Liberty Flour MillsEmployees v. Liberty Flour Mills, Inc .54

In the case at bar, since the former FEBTC employees are deemedcovered by the Union Shop Clause, they are required to join the certifiedbargaining agent, which supposedly has gathered the support of themajority of workers within the bargaining unit in the appropriatecertification proceeding. Their joining the certified union would, in fact, bein the best interests of the former FEBTC employees for it unites their

interests with the majority of employees in the bargaining unit. Itencourages employee solidarity and affords sufficient protection to themajority status of the union during the life of the CBA which are theprecisely the objectives of union security clauses, such as the UnionShop Clause involved herein. We are indeed not being called to balancethe interests of individual employees as against the State policy of promoting unionism, since the employees, who were parties in the courtbelow, no longer contested the adverse Court of Appeals’ decision.Nonetheless, settled jurisprudence has already swung the balance infavor of unionism, in recognition that ultimately the individual employeewill be benefited by that policy. In the hierarchy of constitutional values,this Court has repeatedly held that the right to abstain from joining a labor

organization is subordinate to the policy of encouraging unionism as aninstrument of social justice.

Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to the former FEBTC employees who refuse to

join the union is the forfeiture of their retirement benefits. This is clearlynot the case precisely because BPI expressly recognized under themerger the length of service of the absorbed employees with FEBTC.Should some refuse to become members of the union, they may still optto retire if they are qualified under the law, the applicable retirement plan,or the CBA, based on their combined length of service with FEBTC andBPI. Certainly, there is nothing in the union shop clause that should beread as to curtail an employee’s eligibility to apply for retirement if qualified under the law, the existing retirement plan, or the CBA as thecase may be.

In sum, this Court finds it reasonable and just to conclude that the UnionShop Clause of the CBA covers the former FEBTC employees who werehired/employed by BPI during the effectivity of the CBA in a manner which petitioner describes as "absorption." A contrary appreciation of thefacts of this case would, undoubtedly, lead to an inequitable and veryvolatile labor situation which this Court has consistently ruled against. 1avvphi1

In the case of former FEBTC employees who initially joined the union butlater withdrew their membership, there is even greater reason for theunion to request their dismissal from the employer since the CBA alsocontained a Maintenance of Membership Clause.

A final point in relation to procedural due process, the Court is notunmindful that the former FEBTC employees’ refusal to join the unionand BPI’s refusal to enforce the Union Shop Clause in this instance may

have been based on the honest belief that the former FEBTC employeeswere not covered by said clause. In the interest of fairness, we believethe former FEBTC employees should be given a fresh thirty (30) daysfrom notice of finality of this decision to join the union before the uniondemands BPI to terminate their employment under the Union ShopClause, assuming said clause has been carried over in the present CBAand there has been no material change in the situation of the parties.

WHEREFORE , the petition is hereby DENIED , and the Decision datedSeptember 30, 2003 of the Court of Appeals is AFFIRMED , subject to thethirty (30) day notice requirement imposed herein. Former FEBTC

employees who opt not to become union members but who qualify for

























retirement shall receive their retirement benefits in accordance with law,the applicable retirement plan, or the CBA, as the case may be.

SO ORDERED.

Documents

Fundamental Powers and the Bill of Rights Full