MERALCO VS NLRC

Before this Court is a Petition for Review on Certiorari under

Rule 45 of the 1997 Revised Rules of Civil Procedure
seeking to reverse and set aside (1) the Decision[1] of
the Court of Appeals in CA-G.R. SP No. 50806, dated
24 April 2000, which modified the Decision[2] of the
National Labor Relations Commission (NLRC), dated
30 January 1996 in NLRC NCR CA No. 001737-91
(NLRC NCR Case No. 00-09-04432-89), and thereby
held the petitioner solidarily liable with the private
respondents for the satisfaction of the separation pay
of the latters employees; and (2) the Resolution[3] of
the appellate court, dated 27 September 2000, in the
same case which denied the petitioners Motion for
Reconsideration.
Petitioner Meralco Industrial Engineering Services
Corporation (MIESCOR) is a corporation duly
organized and existing under the laws of the Republic
of thePhilippines and a client of private
respondents. Private respondent Ofelia P. Landrito
General Services (OPLGS) is a business firm engaged
in providing and rendering general services, such as
janitorial and maintenance work to its clients, while
private respondent Ofelia P. Landrito is the Proprietor
and General Manager of OPLGS.
The factual milieu of the present case is as follows:
On 7 November 1984, petitioner and private
respondents executed Contract Order No. 166-84,
[4]
whereby the latter would supply the petitioner
janitorial services, which include labor, materials,
tools and equipment, as well as supervision of its
assigned employees, at petitioners Rockwell Thermal
Plant in Makati City. Pursuant thereto, private
respondents assigned their 49 employees as janitors
to petitioners Rockwell Thermal Plant with a daily
wage of P51.50 per employee.
On 20 September 1989, however, the aforesaid 49
employees (complainants) lodged a Complaint for
illegal deduction, underpayment, non-payment of
overtime pay, legal holiday pay, premium pay for
holiday and rest day and night differentials[5] against
the private respondents before the Labor Arbiter. The
case was docketed as NLRC NCR Case No. 00-0904432-89.
In view of the enactment of Republic Act No. 6727,
the contract between the petitioner and the private
respondents was amended[7] for the 10th time on 3
November 1989 to increase the minimum daily wage
per employee from P63.55 to P89.00 or P2,670.00
per month. Two months thereafter, or on 2 January
1990,[8]petitioner sent a letter to private respondents
informing them that effective at the close of business
hours on 31 January 1990, petitioner was terminating
Contract Order No. 166-84. Accordingly, at the end of
the business hours on 31 January 1990, the
complainants were pulled out from their work at the
petitioners Rockwell Thermal Plant. Thus, on 27
February 1990, complainants amended their
Complaint to include the charge of illegal dismissal
[6]

and to implead the petitioner as a party respondent

therein.
Since the parties failed to settle amicably before the
Labor Arbiter, they submitted their respective position
papers and other pleadings together with their
documentary evidence. Thereafter, a Decision was
rendered by the Labor Arbiter on 26 March 1991,
dismissing the Complaint against the petitioner for
lack of merit, but ordering the private respondents to
pay the complainants the total amount
of P487,287.07 representing unpaid wages,
separation pay and overtime pay; as well as
attorneys fees in an amount equivalent to 10% of the
award or P48,728.70. All other claims of the
complainants against the private respondents were
dismissed. [9]
Feeling aggrieved, private respondents appealed
the aforesaid Decision to the NLRC. Private
respondents alleged, among other things, that: (1) 48
of the 49 complainants had executed affidavits of
desistance and they had never attended any hearing
nor given any authority to anyone to file a case on
their behalf; (2) the Labor Arbiter erred in not
conducting a full-blown hearing on the case; (3) there
is only one complainant in that case who submitted a
position paper on his own; (4) the complainants were
not constructively dismissed when they were not
given assignments within a period of six months, but
had abandoned their jobs when they failed to report
to another place of assignment; and (5) the
petitioner, being the principal, was solidarily
liable with the private respondents for failure to
make an adjustment on the wages of the
complainants.[10] On 28 May 1993, the NLRC issued
a Resolution[11] affirming the Decision of the Labor
Arbiter dated 26 March 1991 with the modification
that the petitioner was solidarily liable with the
private respondents, ratiocinating thus:
We, however, disagree with the
dismissal of the case against [herein
petitioner]. Under Art. 107[12] of the Labor Code
of the Philippines, [herein petitioner] is
considered an indirect employer and can be held
solidarily liable with [private respondents] as an
independent contractor. Under Art. 109,[13] for
purposes of determining the extent of its
liability, [herein petitioner] is considered a
direct employer, hence, it is solidarily liable for
complainants (sic) wage differentials and
unpaid overtime. We find this situation obtaining in
this case in view of the failure of [private
respondents] to pay in full the labor standard benefits
of complainants, in which case liability is limited
thereto and does not extend to the establishment of
employer-employee relations.[14] [Emphasis
supplied].
Both private respondents and petitioner separately
moved for reconsideration of the aforesaid Resolution
of the NLRC. In their Motion for Reconsideration,
private respondents reiterated that the complainants
abandoned their work, so that private respondents

should not be liable for separation pay; and that

petitioner, not private respondents, should be liable
for complainants other monetary claims, i.e., for
wage differentials and unpaid overtime. The
petitioner, in its own Motion for Reconsideration,
asked that it be excluded from liability. It averred
that private respondents should be solely responsible
for their acts as it sufficiently paid private
respondents all the benefits due the complainants.
On 30 July 1993, the NLRC issued an Order[15] noting
that based on the records of the case, the
judgment award in the amount of P487,287.07
was secured by a surety bond posted by the
private respondents;[16] hence, there was no longer
any impediment to the satisfaction of the
complainants claims. Resultantly, the NLRC denied
the private respondents Motion for
Reconsideration. The NLRC likewise directed the
Labor Arbiter to enforce the monetary award against
the private respondents surety bond and to
determine who should finally shoulder the liability
therefor.[17]
Alleging grave abuse of discretion of the NLRC in its
issuance of the Resolution and Order dated 28 May
1993 and 30 July 1993, respectively, private
respondents filed before this Court a Petition
for Certiorari with prayer for the issuance of a writ of
preliminary injunction. The same was docketed as
G.R. No. 111506 entitledOfelia Landrito General
Services v. National Labor Relations Commission. The
said Petition suspended the proceedings before the
Labor Arbiter.
On 23 May 1994, however, this Court issued a
Resolution[18] dismissing G.R. No. 111506 for failure of
private respondents to sufficiently show that the NLRC
had committed grave abuse of discretion in rendering
its questioned judgment. This Courts Resolution in
G.R. No. 111506 became final and executory on 25
July 1994.[19]
As a consequence thereof, the proceedings before
the Labor Arbiter resumed with respect to the
determination of who should finally shoulder the
liability for the monetary awards granted to the
complainants, in accordance with the NLRC Order
dated 30 July 1993.
On 5 October 1994, the Labor Arbiter issued an Order,
[20]
which reads:
As can be gleaned from the Resolution dated
[28 May 1993], there is that necessity of clarifying
the respective liabilities of [herein petitioner] and
[herein private respondents] insofar as the judgment
award in the total sum of P487,287.07 is concerned.
The judgment award in the total sum
of P487,287.07 as contained in the Decision dated
[26 March 1991] consists of three (3) parts, as
follows: First, the judgment award on the
underpayment; Second, the judgment award on

separation pay; and Third, the judgment award on

the overtime pay.
The question now is: Which of these
awards is [petitioner] solidarily liable with
[private respondents]?
An examination of the record elicits
the finding that [petitioner] is solidarily liable
with [private respondents] on the judgment
awards on the underpayment and on the nonpayment of the overtime pay. xxx. This joint and
several liability of the contractor [private
respondents] and the principal [petitioner] is
mandated by the Labor Code to assure compliance
of the provisions therein, including the statutory
minimum wage (Art. 99,[21] Labor Code). The
contractor-agency is made liable by virtue of his
status as direct employer. The principal, on the
other hand, is made the indirect employer of the
contractor-agencys employees for purposes of
paying the employees their wages should the
contractor-agency be unable to pay them. This
joint and several liability facilitates, if not
guarantees, payment of the workers
performance of any work, task, job or project,
thus giving the workers ample protection as
mandated by the 1987 Constitution.
In sum, the complainants may enforce the
judgment award on underpayment and the nonpayment of overtime pay against either [private
respondents] and/or [petitioner].
However, in view of the finding in the
Decision that [petitioner] had adjusted its contract
price for the janitorial services it contracted with
[private respondents] conforming to the provisions of
Republic Act No. 6727, should the complainants
enforce the judgment on the underpayment and on
the non-payment of the overtime pay aginst (sic)
[petitioner], the latter can seek reimbursement from
the former [meaning (private respondents)], but
should the judgment award on the underpayment and
on the non-payment of the overtime pay be enforced
against [private respondents], the latter cannot seek
reimbursement against [petitioner].
The judgment award on separation pay is
the sole liability of [private respondents].
WHEREFORE, [petitioner] is jointly and
severally liable with [private respondents] in
the judgment award on underpayment and on
the non-payment of overtime pay. Should the
complainants enforce the above judgment
award against [petitioner], the latter can seek
reimbursement against [private respondents],
but should the aforementioned judgment award
be enforced against [private respondents], the
latter cannot seek reimbursement from the
[petitioner].

The judgment award on the payment

of separation pay is the sole liability of [private
respondents].
Let an alias writ of execution be
issued. [Emphasis supplied].
Again, both the private respondents and the
petitioner appealed the afore-quoted Order of the
Labor Arbiter to the NLRC. On 25 April 1995, the
NLRC issued a Resolution[22] affirming the Order
dated 5 October 1994 of the Labor Arbiter and
dismissing both appeals for non-posting of the appeal
or surety bond and/or for utter lack of merit.[23] When
the private respondents and the petitioner moved for
reconsideration, however, it was granted by the NLRC
in its Order[24] dated 27 July 1995. The NLRC thus set
aside its Resolution dated 25 April 1995, and directed
the private respondents and the petitioner to each
post an appeal bond in the amount ofP487,287.62 to
perfect their respective appeals.[25] Both parties
complied.[26]
On 30 January 1996, the NLRC rendered a Decision
modifying the Order of the Labor Arbiter dated 5
October 1994, the dispositive portion of which reads:
WHEREFORE, the [21 November 1994] appeal
of [herein petitioner] is hereby granted. The [5
October 1994] Order of Labor Arbiter Donato G.
Quinto, Jr., is modified to the extent that it still
held [petitioner] as jointly and severally
liable with [herein private respondents] in the
judgment award on underpayment and on the
non-payment of overtime pay,our directive
being that the Arbiter should now satisfy said
labor-standards award, as well as that of the
separation pay, exclusively through the surety
bond posted by [private respondents].
[27]
[Emphasis supplied].
Dissatisfied, private respondents moved for the
reconsideration of the foregoing Decision, but it was
denied by the NLRC in an Order[28] dated 30 October
1996. This NLRC Order dated 30 October
1996 became final and executory on 29 November
1996.
On 4 December 1996, private respondents filed a
Petition for Certiorari[29] before this Court assailing the
Decision and the Order of the NLRC dated 30 January
1996 and 30 October 1996, respectively. On 9
December 1998, this Court issued a
Resolution[30] referring the case to the Court of
Appeals conformably with its ruling in St. Martin
Funeral Home v. National Labor Relations
Commission.[31] The case was docketed before the
appellate court as CA-G.R. SP No. 50806.
The Petition made a sole assignment of error, to wit:
THE HONORABLE COMMISSION GRAVELY
ERRED AND GRAVELY ABUSED ITS DISCRETION IN
FINDING THAT THE ULTIMATE LIABILITY SHOULD
FALL ON THE [HEREIN PRIVATE RESPONDENTS]

ALONE, WITHOUT REIMBURSEMENT FROM THE

[HEREIN PETITIONER], IN ORDER TO SATISFY THE
MONETARY AWARDS OF THE [THEREIN
COMPLAINANTS].[32]
After due proceedings, the Court of Appeals rendered
the assailed Decision on 24 April 2000, modifying
the Decision of the NLRC dated 30 January 1996
and holding the petitioner solidarily liable with
the private respondents for the satisfaction of
the laborers separation pay. According to the
Court of Appeals:
The [NLRC] adjudged the payment of
separation pay to be the sole responsibility of [herein
private respondents] because (1) there is no
employer-employee relationship between [herein
petitioner] and the forty-nine (49) [therein
complainants]; (2) the payment of separation pay is
not a labor standard benefit. We disagree.
Again, We quote Article 109 of the Labor
Code, as amended, viz:
The provisions of existing laws to
the contrary
notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor or subcontractor
for any violation
of any provision of this Code
The abovementioned statute speaks of
any violation of any provision of this
Code. Thus, the existence or non-existence of
employer-employee relationship and whether or
not the violation is one of labor standards is
immaterial because said provision of law does
not make any distinction at all and, therefore,
this Court should also refrain from making any
distinction. Concomitantly, [herein petitioner]
should be jointly and severally liable with
[private respondents] for the payment of wage
differentials, overtime pay and separation pay of
the [therein complainants]. The joint and
several liability imposed to [petitioner] is,
again, without prejudice to a claim for
reimbursement by [petitioner] against [private
respondents] for reasons already discusses
(sic).
WHEREFORE, premises studiedly
considered, the assailed 30 January 1996 decision of
[the NLRC] is hereby modified insofar
as [petitioner] should be held solidarily liable
with [the private respondents] for the
satisfaction of the laborers separation pay. No
pronouncement as to costs.[33] [Emphasis supplied].
The petitioner filed a Motion for Reconsideration of
the aforesaid Decision but it was denied by the Court
of Appeals in a Resolution dated 27 September
2000.
Petitioner now comes before this Court via a Petition
for Review on Certiorari, docketed as G.R. No.
145402, raising the sole issue of whether or not the

Honorable Court of Appeals palpably erred when

it went beyond the issues of the case as it modified
the factual findings of the Labor Arbiter which
attained finality after it was affirmed by Public
Respondent NLRC and by the Supreme Court which
can no longer be disturbed as it became the law of
the case.[34]
Petitioner argues that in the assailed Decision
dated 24 April 2000, the Court of Appeals found that
the sole issue for its resolution was whether the
ultimate liability to pay the monetary awards in favor
of the 49 employees falls on the private respondents
without reimbursement from the petitioner. Hence,
the appellate court should have limited itself to
determining the right of private respondents to still
seek reimbursement from petitioner for the monetary
awards on the unpaid wages and overtime pay of the
complainants.
According to petitioner, the NLRC, in its Resolution
dated 28 May 1993, already found that petitioner had
fully complied with its salary obligations to the
complainants. Petitioner invokes the same NLRC
Resolution to support its claim that it was not liable to
share with the private respondents in the payment of
separation pay to complainants. When private
respondents questioned the said NLRC Resolution in a
Petition for Certiorari with this Court, docketed as
G.R. No. 111506, this Court found that the NLRC did
not commit grave abuse of discretion in the issuance
thereof and accordingly dismissed private
respondents Petition. Said NLRC Resolution,
therefore, has since become final and executory and
can no longer be disturbed for it now constitutes the
law of the case.
Assuming for the sake of argument that the Court of
Appeals can still take cognizance of the issue of
petitioners liability for complainants separation pay,
petitioner asserts that the appellate court seriously
erred in concluding that it is jointly and solidarily
liable with private respondents for the payment
thereof. The payment of separation pay should be the
sole responsibility of the private respondents because
there was no employer-employee relationship
between the petitioner and the complainants, and the
payment of separation pay is not a labor standards
benefit.
Law of the case has been defined as the opinion
delivered on a former appeal. It is a term applied to
an established rule that when an appellate court
passes on a question and remands the case to the
lower court for further proceedings, the question
there settled becomes the law of the case upon
subsequent appeal. It means that whatever is once
irrevocably established as the controlling legal rule or
decision between the same parties in the same case
continues to be the law of the case,whether correct
on general principles or not, so long as the facts on
which such decision was predicated continue to be the
facts of the case before the court.[35] Indeed, courts
must adhere thereto, whether the legal principles laid
down were correct on general principles or not or

whether the question is right or wrong because

public policy, judicial orderliness and economy require
such stability in the final judgments of courts or
tribunals of competent jurisdiction.[36]
Petitioners application of the law of the
case principle to the case at bar as regards its liability
for payment of separation pay is misplaced.
The only matters settled in the 23 May 1994 Resolution of
this Court in G.R. No. 111506, which can be regarded
as the law of the case, were (1) both the petitioner
and the private respondents were jointly and solidarily
liable for the judgment awards due the complainants;
and (2) the said judgment awards shall be enforced
against the surety bond posted by the private
respondents. However, the issue as regards the
liability of the petitioner for payment of separation
pay was yet to be resolved because precisely, the
NLRC, in its Order dated 30 July 1993, still directed
the Labor Arbiter to make a determination on who
should finally shoulder the monetary awards granted
to the complainants. And it was only after G.R. No.
111506 was dismissed by this Court that the Labor
Arbiter promulgated his Decision dated5 October
1994, wherein he clarified the respective liabilities of
the petitioner and the private respondents for the
judgment awards. In his 5 October 1994 Decision,
the Labor Arbiter explained that the solidary liability
of the petitioner was limited to the monetary awards
for wage underpayment and non-payment of overtime
pay due the complainants, and it did not, in any way,
extend to the payment of separation pay as the same
was the sole liability of the private respondents.
Nonetheless, this Court finds the present Petition
meritorious.
The Court of Appeals indeed erred when it ruled that
the petitioner was jointly and solidarily liable with the
private respondents as regards the payment of
separation pay.
The appellate court used as basis Article 109 of the
Labor Code, as amended, in holding the petitioner
solidarily liable with the private respondents for the
payment of separation pay:
ART. 109. Solidary Liability. - The provisions of
existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held
responsible with his contractor or subcontractor for
any violation of any provision of this Code. For
purposes of determining the extent of their civil
liability under this Chapter, they shall be considered
as direct employers. [Emphasis supplied].
However, the afore-quoted provision must be read in
conjunction with Articles 106 and 107 of the Labor
Code, as amended.
Article 107 of the Labor Code, as amended, defines an
indirect employer as any person, partnership,
association or corporation which, not being an
employer, contracts with an independent contractor

for the performance of any work, task, job or

project. To ensure that the contractors employees
are paid their appropriate wages, Article 106 of the
Labor Code, as amended, provides:
ART. 106. CONTRACTOR OR
SUBCONTRACTOR. x x x.
In the event that the contractor or
subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of
the work performed under the contract, in the same
manner and extent that he is liable to employees
directly employed by him. [Emphasis supplied].
Taken together, an indirect employer (as defined by Article
107) can only be held solidarily liable with the
independent contractor or subcontractor (as provided
under Article 109) in the event that the latter fails to
pay the wages of its employees (as described in
Article 106).
Hence, while it is true that the petitioner was the indirect
employer of the complainants, it cannot be held liable
in the same way as the employer in every
respect. The petitioner may be considered an indirect
employer only for purposes of unpaid wages. As
this Court succinctly explained in Philippine Airlines,
Inc. v. National Labor Relations Commission[37]:
While USSI is an independent contractor under the security
service agreement and PAL may be considered an
indirect employer, that status did not make PAL the
employer of the security guards in every respect. As
correctly posited by the Office of the Solicitor General,
PAL may be considered an indirect employer only for
purposes of unpaid wages since Article 106, which is
applicable to the situation contemplated in Section
107, speaks of wages. The concept of indirect
employer only relates or refers to the liability for
unpaid wages. Read together, Articles 106 and 109
simply mean that the party with whom an
independent contractor deals is solidarily liable with
the latter for unpaid wages, and only to that extent
and for that purpose that the latter is considered a
direct employer. The term wage is defined in Article
97(f) of the Labor Code as the remuneration of
earnings, however designated, capable of being
expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission
basis, or other method of calculating the unwritten
contract of employment for work done or to be done,
or for services rendered or to be rendered and
includes the fair and reasonable value, as determined
by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the
employee.
Further, there is no question that private respondents are
operating as an independent contractor and that the
complainants were their employees. There was no
employer-employee relationship that existed between
the petitioner and the complainants and, thus, the

former could not have dismissed the latter from

employment. Only private respondents, as the
complainants employer, can terminate their services,
and should it be done illegally, be held liable
therefor. The only instance when the principal can
also be held liable with the independent contractor or
subcontractor for the backwages and separation pay
of the latters employees is when there is proof that
the principal conspired with the independent
contractor or subcontractor in the illegal dismissal of
the employees, thus:
The liability arising from an illegal dismissal is unlike an
order to pay the statutory minimum wage, because
the workers right to such wage is derived from
law. The proposition that payment of back wages and
separation pay should be covered by Article 109,
which holds an indirect employer solidarily responsible
with his contractor or subcontractor for any violation
of any provision of this Code, would have been
tenable if there were proof - there was none in this
case - that the principal/employer had conspired with
the contractor in the acts giving rise to the illegal
dismissal. [38]
It is the established fact of conspiracy that will tie the
principal or indirect employer to the illegal dismissal
of the contractor or subcontractors employees. In
the present case, there is no allegation, much less
proof presented, that the petitioner conspired with
private respondents in the illegal dismissal of the
latters employees; hence, it cannot be held liable for
the same.
Neither can the liability for the separation pay of the
complainants be extended to the petitioner based on
contract. Contract Order No. 166-84 executed
between the petitioner and the private respondents
contains no provision for separation pay in the event
that the petitioner terminates the same. It is basic
that a contract is the law between the parties and the
stipulations therein, provided that they are not
contrary to law, morals, good customs, public order or
public policy, shall be binding as between the parties.
[39]
Hence, if the contract does not provide for such a
liability, this Court cannot just read the same into the
contract without possibly violating the intention of the
parties.
It is also worth noting that although the issue in CA-G.R. SP
No. 50806 pertains to private respondents right to
reimbursement from petitioner for the monetary
awards in favor of the complainants, they limited
their arguments to the monetary awards for
underpayment of wages and non-payment of
overtime pay, and were conspicuously silent on the
monetary award for separation pay. Thus, private
respondents sole liability for the separation pay of
their employees should have been deemed settled
and already beyond the power of the Court of Appeals
to resolve, since it was an issue never raised before it.
[40]

Although petitioner is not liable for complainants separation

pay, the Court conforms to the consistent findings in

the proceedings below that the petitioner is solidarily

liable with the private respondents for the judgment
awards for underpayment of wages and non-payment
of overtime pay.
In this case, however, private respondents had already
posted a surety bond in an amount sufficient to cover
all the judgment awards due the complainants,
including those for underpayment of wages and nonpayment of overtime pay. The joint and several
liability of the principal with the contractor and
subcontractor were enacted to ensure compliance
with the provisions of the Labor Code, principally
those on statutory minimum wage. This liability
facilitates, if not guarantees, payment of the workers
compensation, thus, giving the workers ample
protection as mandated by the 1987 Constitution.
[41]
With private respondents surety bond, it can
therefore be said that the purpose of the Labor Code
provision on the solidary liability of the indirect
employer is already accomplished since the interest of
the complainants are already adequately
protected. Consequently, it will be futile to
continuously hold the petitioner jointly and solidarily
liable with the private respondents for the judgment
awards for underpayment of wages and non-payment
of overtime pay.
But while this Court had previously ruled that the indirect
employer can recover whatever amount it had paid to
the employees in accordance with the terms of the
service contract between itself and the contractor,
[42]
the said ruling cannot be applied in reverse to this
case as to allow the private respondents (the
independent contractor), who paid for the judgment
awards in full, to recover from the petitioner (the
indirect employer).
Private respondents have nothing more to recover from
petitioner.
Petitioner had already handed over to private respondent
the wages and other benefits of the
complainants. Records reveal that it had complied
with complainants salary increases in accordance
with the minimum wage set by Republic Act No. 6727
by faithfully adjusting the contract price for the
janitorial services it contracted with private
respondents. [43] This is a finding of fact made by the
Labor Arbiter,[44] untouched by the NLRC[45] and
explicitly affirmed by the Court of Appeals,[46] and
which should already bind this Court.
This Court is not a trier of facts. Well-settled is the rule
that the jurisdiction of this Court in a petition for
review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of
law, not of fact, unless the factual findings complained
of are completely devoid of support from the evidence
on record, or the assailed judgment is based on a
gross misapprehension of facts. Besides, factual
findings of quasi-judicial agencies like the NLRC, when
affirmed by the Court of Appeals, are conclusive upon
the parties and binding on this Court.[47]

Having already received from petitioner the correct amount

of wages and benefits, but having failed to turn them
over to the complainants, private respondents should
now solely bear the liability for the underpayment of
wages and non-payment of the overtime pay.
WHEREFORE, premises considered, the instant Petition is
hereby GRANTED. The Decision and Resolution of
the Court of Appeals dated 24 April 2000 and27
September 2000, respectively, in CA-G.R. SP No.
50806, are hereby REVERSED AND SET
ASIDE. The Decision dated 30 January 1996 of the
National Labor Relations Commission in NLRC NCR CA
No. 001737-91 (NLRC NCR Case No. 00-09-0443289) is hereby REINSTATED. No costs.
SO ORDERED.

SILVA VS MATIONG
The Case
Before the Court is a petition for review[1] assailing
the 19 June 2003 Decision[2] and 26 September
2003 Resolution[3] of the Court of Appeals in CA-G.R.
SP No. 70399. The Court of Appeals granted the
petition for certiorari, prohibition and mandamus filed
by Leovigildo T. Mationg (respondent) and nullified
the orders of then Administrator Francisco Silva
(petitioner) of the National Electrification
Administration (NEA). The Court of Appeals also
denied petitioners Motion for Reconsideration.
The Facts
Aklan Electric Cooperative, Inc. (AKELCO) is an
electric cooperative under the supervision and control
of the NEA[4] pursuant to Presidential Decree No. 269
(PD 269),[5] as amended by Presidential Decree No.
1645 (PD 1645),[6] and to the Contract of Loan
between NEA and AKELCO dated 23 January 1996.
[7]
Respondent was the general manager of AKELCO.
The present controversy arose when the National
Power Corporation (NAPOCOR) cut-off the electricity
in Aklan from 18-20 March 2002 for AKELCOs failure
to pay its approximately P25 million obligation.
[8]
Edita Bueno (Bueno), NEA Officer-in-Charge and
Deputy Administrator for Cooperatives Development
and Special Projects, formed a team to take-over the
management and operations of AKELCO.[9] On 20
March 2002, NAPOCOR restored the power supply to

the area upon learning of the NEA take-over.

[10]
However, respondent remained the general
manager of AKELCO despite the NEA take-over.[11]
On the same day, the AKELCO Board of Directors
(AKELCO-BOD) received a complaint from the
different municipal mayors seeking the dismissal of
respondent as AKELCO general manager for gross
incompetence and mismanagement.[12] As early as 25
March 1998, the AKELCO-BOD had already received a
letter from the consumer-members of AKELCO
expressing their dissatisfaction and frustration over
the inefficiency of AKELCOs management.[13] An open
letter dated 20 March 2002 addressed to President
Gloria Macapagal-Arroyo requesting for the immediate
termination of respondent was published in numerous
newspapers.[14] The inefficiency of AKELCOs operation
also became the subject of the privilege speech
delivered by Congressman Gabrielle Calizo on 4 March
2002.[15]
The AKELCO-BOD issued Resolution No. 18 placing
respondent under indefinite preventive suspension to
prevent him from exerting undue influence while the
audit and investigation were being conducted by the
NEA management team.
On 21 March 2002, Bueno wrote a letter to the
AKELCO-BOD approving Board Resolution No. 18,
however, reducing the preventive suspension of
respondent to 30 days.
On 22 March 2002, Bueno issued a
Memorandum[16] stating that the NEA received
another AKELCO-BOD resolution, referred to as Board
Resolution No. 17, disowning and recalling Board
Resolution No. 18 and expressing full trust and
confidence in respondents management.
Based on these conflicting board resolutions, AKELCO
obviously had an intra-corporate dispute involving two
factions of Board of Directors: one, headed
byChito Peralta (the Peralta faction), and the other
headed
by Melanio Rentillo (the Rentillo faction). Due to the
complexity of the issue, Bueno revoked the approval
of Board Resolution No. 18 and submitted the
determination of the validity of the two board
resolutions to the NEA Board of Administrators (NEABOA). Further, Bueno directed the opposing parties to
submit their respective position papers on the matter
and enjoined them to cooperate with the NEA
management team. The two factions submitted their
respective position papers.
On 4 April 2002, Bueno issued Office Order No. 2002058[17] creating a Committee[18] to evaluate the
position papers of the two factions of the AKELCOBOD. The Committee recommended the approval of
Board Resolution No. 18 passed by the Peralta faction
and the disapproval of Board Resolution No. 17
passed by the Rentillo faction.

On 11 April 2002, petitioner issued a

Resolution[19] approving Board Resolution No. 18 and
disapproving Board Resolution No. 17. Petitioner
reiterated Buenosletter of 21 March 2002 placing
respondent under a 30-day preventive suspension.
On the same day, the NEA-BOA issued Resolution
No. 22[20] authorizing petitioner to remove
respondent as general manager of AKELCO subject to
the confirmation of the NEA-BOA, allegedly pursuant
to Section 5(e) of PD 269 as amended by PD 1645
(PD 269 as amended).
On 19 April 2002, petitioner issued an Order
for AKELCOs non-payment of its loans and noncompliance with NEA policies, orders and
guidelines. The pertinent portions of this order read:
xxxx
3.
The AKELCO Board is directed to pursue
action per approved Board Resolution 18, as
qualifiedly approved by this office, importantly, its
resolution placing Atty. Leovigildo T.Mationg under
preventive suspension for thirty (30) days and that
the investigation be terminated within the same
period.
4.
Pursuant to Section 5(a)(6), Chapter II of
P.D. 269, as amended by Section 3 of P.D. 1645,
Mr. Erico A. Bucoy is hereby designated to manage
AKELCO in the meantime that its General Manager is
under suspension.
x x x x[21] (Emphasis supplied)
On 2 May 2002, respondent filed a petition[22] with the Court
of Appeals to enjoin petitioner from enforcing the 11
April 2002 Resolution and the 19 April 2002Order.
During the pendency of the petition, the NEA-approved
AKELCO BOD, along with the NEA-appointed Executive
Officer Erico Bucoy (Bucoy), issued Board Resolution
No. 32[23] constituting itself as an investigating
committee to look into the complaints against
respondent. In an undated letter, Bucoy informed
respondent of the investigation of the charges against
him and asked him to show why he should not be
terminated as general manager of AKELCO.

On 8 May 2002, the NEA-BOA issued Board Resolution No.

26[24] confirming petitioners Order dated 19 April
2002 which provided, among others, the preventive
suspension of respondent for 30 days.
On 11 May 2002, the AKELCO-BOD terminated its
investigation and issued Resolution No. 2, Series of
2002-05-11,[25] finding respondent guilty of willful
breach of trust and confidence to the consumermembers and gross and habitual neglect of his duties
as general manager of AKELCO. The AKELCO-BOD

terminated respondents services effective on the

same day.
On 17 May 2002, petitioner issued an Order[26] approving
AKELCO-BOD Resolution No. 2, Series of 2002-05-11
terminating respondent as AKELCO general manager
for willful breach of trust and confidence.
On 30 May 2002, respondent filed a Manifestation and
Supplemental Motion[27] with the Court of Appeals
assailing his removal as AKELCO general manager and
praying for the nullification of petitioners issuances
and for reinstatement as AKELCO general manager.
Meanwhile, the NEA-BOA issued Resolution No.
37[28] on 5 June 2002 confirming petitioners Order
dated 17 May 2002 approving the removal of
respondent.
In its Decision of 19 June 2003,[29] the Court of
Appeals granted respondents petition and nullified
the assailed Resolution and Orders.
The dispositive portion of the decision reads:
WHEREFORE, the instant petition is
hereby GRANTED. The Resolution dated 11 April
2002, Order dated 19 April 2002 and Order dated 17
May 2002 are hereby NULLIFIED AND SET
ASIDE. Respondent is hereby ORDERED to reinstate
petitioner as general manager of AKELCO without
prejudice however to the conduct of proper
proceedings for his suspension and termination as
stated herein, if warranted.
SO ORDERED.[30]
The Court of Appeals denied petitioners motion for
reconsideration in its Resolution of 26 September
2003.[31]

electric cooperative concerned or other similar entity

fails after due notice to comply with NEA orders, rules
and regulations and/or decisions, or with any of the
terms of the Loan Agreement, the NEA Board of
Administrators may take preventive and/or
disciplinary measures including suspension and/or
removal and replacement of any or all of the
members of the Board of Directors, officers or
employees of the Cooperative, other borrower
institutions or supervised or controlled entities as the
NEA Board of Administrators may deem fit and
necessary and to take any other remedial measures
as the law or the Loan Agreement may provide.
x x x It is the Board of Administrators and not
the Administrator himself who is empowered to
suspend and/or terminate the incumbent
general manager and appoint an acting general
manager of an erring electric cooperative. The
Administrator cannot arrogate unto himself a power
that is not given to him by the statute. It is a wellestablished rule of law that a public official must trace
his powers from the statute that created the office or
position. The power, however, need not be express
but may be implied from the wording of the law. In
the absence of such conferment, the public official
cannot validly exercise the power. If executed and
properly challenged, the unauthorized exercise of
such power may be set aside. x x x
xxxx
x x x whether or not the Board of
Administrators may validly delegate the
foregoing powers to the NEA Administrator. We
hold that it cannot. To sanction this delegation
would violate the
maxim: potestas delegata non delegari potest (what
has been delegated cannot be delegated).
x x x x[32] (Emphasis supplied)

Hence, this petition.

The Ruling of the Court of Appeals
In nullifying petitioners issuances and reinstating
respondent as general manager of AKELCO, the Court
of Appeals ruled as follows:
At the outset, We shall first tackle respondents
assertion that the instant case does not fall within our
jurisdiction. In essence, respondent argues that the
foregoing acts establish a labor dispute cognizable
only by the Labor Arbiter. We disagree.
x x x What is at issue is whether or not respondent
is vested with the authority to issue the assailed
resolutions and orders.
xxxx
Furthermore, under Section 5 of the same law
which amended Section 10 of PD No. 269, if the

In its Resolution dated 26 September 2003 denying

petitioners motion for reconsideration,[33] the Court of
Appeals passed upon the
allegedly undiscussedissues petitioner raised. The
Court of Appeals reiterated that it has jurisdiction
over the case. The Court of Appeals also held that
this case is an exception to the principle of exhaustion
of administrative remedies since petitioners issuances
were patently illegal and this case involved purely
legal issues. The Court of Appeals rejected
petitioners allegation of respondents forumshopping. Despite petitioners opposition, the Court
of Appeals allowed respondents Manifestation and
Supplemental Motion to resolve this case on the
merits instead of dismissing it on pure technicality.
The Issues
While petitioner raised numerous issues in his 121page Memorandum,[34] the crucial issue in this case is

whether petitioners approval of the AKELCOBODsresolutions suspending and terminating

respondent as AKELCO general manger is
valid. Inextricably related to this issue is the question
of whether the NEA-BOAsauthorization for and
confirmation of respondents suspension and removal
as AKELCO general manager by petitioner as then
NEA Administrator are legal.
The Ruling of the Court
The petition is meritorious.
Procedural Matters
At the outset, the Court declares that its resolution of the
present case is confined to determining the validity
of petitioners Resolution and Orders insofar as the
preventive suspension and dismissal of respondent
are concerned. The Court will refrain from discussing
other matters raised by petitioner immaterial to the
resolution of this main issue, such as the transfer of
the AKELCO office to Lezo, Aklan, which is allegedly
pending before the Court of Appeals,[35] the
management take-over of AKELCO, and the
composition of the AKELCO-BOD. The Court is not
a trier of facts. These incidental matters which
definitely require an examination of facts and
evidence are not proper in a petition for review which
should only raise questions of law.[36]
Concerning the procedural issues raised by petitioner,
suffice it to state that substantial justice and the
public interest involved in this case far outweigh any
procedural lapses committed by respondent. Justice
dictates that this Court resolve the instant
controversy on the merits than dismiss it on the
grounds of forum-shopping, non-amendment of the
petition before the Court of Appeals, collateral attack
of various issuances of the NEA-BOA, exclusion of
indispensable parties, and non-exhaustion of
administrative remedies.
Moreover, the Court finds no reversible error in the Court of
Appeals findings on the issues of jurisdiction, forumshopping, exhaustion of administrative remedies, and
amendment of the petition for certiorari. On the
issue of jurisdiction, there is evidently no employment
relationship between the parties. Hence, the instant
controversy does not involve a labor dispute requiring
the expertise of the National Labor Relations
Commission. This case involves the exercise of the
enforcement power of the NEA under Section 10 of PD
269 as amended.[37]
On the issue of exhaustion of administrative remedies, the
Court holds that the main issues for resolution in this
case are purely legal. Thus, the instant case falls
within the recognized exceptions to the rule of
exhaustion of administrative remedies.[38]
On the issue of forum-shopping, the Court sustains the
Court of Appeals ruling that appeal is not a speedy
and adequate remedy for respondent. Respondents

appeal to the NEA-BOA appears to be a futile

exercise because the assailed issuances were
subsequently confirmed by the NEA-BOA. Hence,
respondent properly filed a petition for certiorari with
the Court of Appeals challenging the authority of
petitioner to suspend and remove him.
On the issues of collateral attack of various NEA-BOA
issuances and exclusion of indispensable parties, the
Court notes that petitioner raised them for the first
time on appeal. Settled is the rule that issues not
raised in the court a quo cannot be raised for the first
time on appeal because to do so would be offensive to
the basic rules of justice and fair play.[39]
Enforcement Power of the NEA
The NEA, as a public corporation, acts through its
Board of Administrators, composed of a Chairman
and four members, one of whom is the Administrator
asex-officio member.[40] The NEA exercises supervision
and control[41] over electric cooperatives organized
and operating under the mandate of PD 269, as
amended. The extent of government control over
electric cooperatives covered by PD 269, as amended,
is largely a function of the NEA as a primary source
of funds of these electric cooperatives. [42]
In exercising its power of supervision and control over
electric cooperatives, the NEA, through its Board of
Administrators, can issue orders, rules and
regulations, and motu proprio or upon petition of third
parties, can conduct investigations in all matters
affecting electric cooperatives pursuant to Section 10
of PD 269, as amended. Further, the NEA-BOA may
avail of the remedial measures enumerated in Section
10 of PD 269, as amended, in case of non-compliance
by the electric cooperative concerned with NEA
orders, rules and regulations, and decisions, or with
any of the terms of the Loan Agreement. One of
these remedial measures, Section 10(e) of PD 269, as
amended, provides for the suspension or removal of
members of the Board of Directors, officers or
employees of the defiant electric cooperative as the
NEA-BOA may deem fit and necessary, thus:
Section 10. Enforcement Powers and Remedies. In the
exercise of its power of supervision and control over
electric cooperatives and other borrower, supervised
or controlled entities, the NEA is empowered to issue
orders, rules and regulations and motu proprio or
upon petition of third parties, to conduct
investigations, referenda and other similar actions in
all matters affecting said electric cooperatives and
other borrower, or supervised or controlled entities.
If the electric cooperative concerned or other
similar entity fails after due notice to comply with NEA
orders, rules and regulations and/or decisions, or with
any of the terms of the Loan Agreement, the NEA
Board of Administrators may avail of any or all of the
following remedies:
xxxx

(e) Take preventive and/or disciplinary measures

including suspension and/or removal and replacement
of any or all of the members of the Board of Directors,
officers or employees of the Cooperative, other
borrower institutions or supervised or controlled
entities as the NEA Board of Administrators may deem
fit and necessary and to take any other remedial
measures as the law or the Loan Agreement may
provide.
The question is whether the NEA-BOA can delegate
to the NEA Administrator its power under Section
10(e) of PD 269, as amended, to take preventive and
disciplinary measures against electric cooperative
officers.
Petitioner maintains that such power of the NEA-BOA can be
lawfully delegated to the NEA Administrator by virtue
of Section 5(b)(7) of PD 269, as amended. Section
5(b)(7) refers to the NEA Administrators other
powers and duties which may be vested in him by the
NEA-BOA.
On the other hand, respondent contends that the
power of the NEA-BOA under Section 10(e) of PD 269,
as amended, is reserved solely to the NEA-BOA. In
other words, the power of the NEA-BOA under Section
10(e) of PD 269, as amended, cannot be validly
delegated to the NEA Administrator.
Under Section 10 of PD 269, as amended, the power
to impose preventive and disciplinary measures on
erring electric cooperative officers can be exercised by
the NEA-BOA as a collegial body to whom all the
powers of the NEA had been vested in.[43] Section
10(e) of PD 269, as amended, categorically states
that the NEA-BOA may take preventive or disciplinary
measures against an erring electric cooperative officer
as the NEA-BOA may deem fit and necessary.
Contrary to the ruling of the Court of Appeals, there
was no undue delegation of power by the NEA-BOA to
the NEA Administrator. Resolution No. 22 provides:
WHEREAS, in Section 5(e) of P.D. No. 1645, the NEA
Board may take preventive and/or disciplinary
measures including suspension and/or removal and
replacement of any or all of the members of the
Board of Directors, officers or employees of the
electric cooperative, other borrowing institutions or
supervised or controlled entities as the NEA Board of
Administrators may deem fit and necessary and to
take any other remedial measures as the law or the
Loan Agreement may provide;
RESOLVED TO AUTHORIZE THE
ADMINISTRATOR, as he is hereby authorized, to
remove the General Manager of Aklan Electric
Cooperative, Inc. (AKELCO) as the Administrator may
deem fit and necessary, subject to confirmation of
the Board of Administrators.[44] (Emphasis
supplied)

It is clear from Resolution No. 22 that any action of the NEA

Administrator is subject to the confirmation of the
NEA-BOA. What is delegated to the NEA
Administrator is only the power to investigate and to
make a recommendation, not the power to discipline.
[45]
The disciplining authority is still the NEABOA. The authority of the NEA Administrator is only
recommendatory. If it were otherwise, there is no
need for any confirmation by the NEA-BOA. Thus,
any sanction or penalty arising from any investigation
by the NEA Administrator takes effect only upon
confirmation by the NEA-BOA.
The act of the NEA-BOA in delegating the power to
investigate to the NEA Administrator is not without
basis. Hence:
The rule that requires an administrative officer to exercise
his own judgment and discretion does not preclude
him from utilizing, as a matter of practical
administrative procedure, the aid of subordinates to
investigate and report to him the facts, on the basis
of which the officer makes his decisions. It is
sufficient that the judgment and discretion finally
exercised are those of the officer authorized by law.
x x x[46]
Even this Court, in its exercise of its disciplinary authority
over lower court justices, judges, judicial employees
and lawyers, delegates the power to investigate
administrative complaints. Thus:
[T]he Constitution grants the Supreme Court disciplinary
authority over all lower court justices and judges, as
well as judicial employees and lawyers. While the
investigation of administrative complaints is delegated
usually to the Office of the Court Administrator (OCA)
or the Integrated Bar of the Philippines (IBP), the
Court nonetheless makes its own judgments of the
cases [where] sanctions are imposed. It does not
merely adopt or solely rely on the recommendations
of the OCA or the IBP.[47]
In this case, the phrase subject to confirmation of the
Board of Administrators implies that the final
decision rests on the NEA-BOA. The NEA-BOA may
confirm, modify or nullify the act of the NEA
Administrator.
Further, the delegation of authority by the NEA-BOA was in
accordance with Section 5(b)(7) of PD 269, as
amended, which grants the NEA Administrator the
following powers and duties:
(1)
(2)

(3)

To execute and administer the policies, plans and

program, and the rules and regulations, approved or
promulgated by the Board of Administrators;
To submit for the consideration of the Board of
Administrators such policies, plans and programs as
he deems necessary to carry out the provisions and
purposes of this Decree;
To direct and supervise the operation and internal
administration of the NEA and, for this purpose, to

(4)

(5)
(6)

(7)

delegate some or any of his powers and duties to

subordinate officials of the NEA;
Subject to the guidelines and policies established
by the Board of Administrators, to appoint and fix the
number and compensation of subordinate officials and
employees of the NEA; Provided, however, [t]he
provisions of the Civil Service Law and Position
Classification Law shall not apply to the appointment
and compensation of any such subordinate official or
employee;
For cause, to remove, suspend, or otherwise
discipline any subordinate official or employee;
To prepare an annual report on the activities of the
NEA at the close of each fiscal year and to submit a
copy thereof to the President of the Philippines and
when it comes into existence, the Prime Minister and
the appropriate committee of, and as determined by,
the National Assembly; and
To exercise such other powers and duties as
may be vested in him by the Board of
Administrators.
x x x x (Emphasis supplied)
The Court notes that petitioner did
not motu proprio issue the assailed Resolution and
Orders suspending and removing respondent as
AKELCO general manager. The AKELCO-BOD initiated
the suspension and termination of respondent
through the issuance of Board Resolutions. The
AKELCO-BOD submitted its Board Resolutions
suspending and removing respondent to NEA for
approval. This procedure is in accordance with
Section 24(a) of PD 269, as amended, which states in
part that the management of a cooperative shall be
vested in its Board [of Directors], subject to the
supervision and control of NEA which shall have the
right to x x xapprove all policies and resolutions. In
approving the AKELCO-BOD resolutions, petitioner
was acting pursuant to the authorization[48] issued by
the NEA-BOA. More importantly, the NEA-BOA
confirmed petitioners issuances approving the
suspension and removal of respondent.

The Court notes that petitioners counsel relied on several

decisions of the Court of Appeals in addition to
Supreme Court cases to buttress his arguments. The
Court reminds counsel that decisions of the Court of
Appeals are neither controlling nor conclusive on this
Court. Moreover, the Court strongly suggests that
petitioners counsel be brief and straightforward in
drafting pleadings. He should, as much as possible,
refrain from quoting lengthily irrelevant portions of
Supreme Court decisions. The Court further advises
petitioners counsel to observe and maintain the
respect due to courts at all times. An unfavorable
judgment can never justify the use of intemperate
language against the courts.
WHEREFORE, the Court GRANTS the petition. The
Court SETS ASIDE the 19 June 2003 Decision and 26
September 2003 Resolution of the Court of Appeals in
CA-G.R. SP No. 70399. The Court declares VALID
the NEA-BOA Resolution No. 37 dated 5 June 2002
confirming NEA Administrator Francisco Silvas Order
of 17 May 2002 approving the AKELCO-BOD

Resolution No. 2 of 11 May 2002 terminating

respondent Leovigildo T. Mationg as General Manager
of AklanElectric Cooperative, Inc.
SO ORDERED.
MARIA PAZ V. NEPOMUCENO, JOINED BY HER
HUSBAND, FERMIN A. NEPOMUCENO,
PETITIONERS, VS. CITY OF SURIGAO AND
SALVADOR SERING IN HIS CAPACITY AS CITY
MAYOR OF SURIGAO, RESPONDENTS.
DECISION
CORONA, J.:
Petitioners assail the February 29, 2000 decision[1] and
October 12, 2000 resolution of the Court of Appeals
(CA) in CA-G.R. CV No. 56461 affirming with
modification the decision of the Regional Trial Court
(RTC) of Surigao City, Branch 32, in Civil Case No.
4570.
Civil Case No. 4570 was a complaint for "Recovery of
Real Property and/or its Market Value" filed by
petitioner Maria Paz Nepomuceno to recover a 652 sq.
m. portion[2] of her 50,000 sq. m. lot[3] which was
occupied, developed and used as a city road by the
city government of Surigao. Maria Paz alleged that the
city government neither asked her permission to use
the land nor instituted expropriation proceedings for
its acquisition. On October 4, 1994, she and her
husband, co-petitioner, Fermin A. Nepomuceno, wrote
respondent (then Surigao City Mayor) Salvador Sering
a letter proposing an amicable settlement for the
payment of the portion taken over by the city. They
subsequently met with Mayor Sering to discuss their
proposal but the mayor rebuffed them in public and
refused to pay them anything. In a letter dated
January 30, 1995, petitioners sought reconsideration
of the mayor's stand. But again, the city mayor
turned this down in his reply dated January 31, 1995.
As a consequence, petitioners claimed that they
suffered mental anguish, embarrassment,
disappointment and emotional distress which entitled
them to moral damages.
In their answer, respondents admitted the existence
of the road in question but alleged that it was
constructed way back in the 1960s during the
administration of former Mayor Pedro Espina. At that
time, the lot was owned by the spouses Vicente and
Josefa Fernandez who signed a road right-of-way
agreement in favor of the municipal government.
However, a copy of the agreement could no longer be
found because the records were completely destroyed
and lost when the Office of the City Engineer was
demolished by typhoon Nitang in 1994.
After hearing the parties and evaluating their
respective evidence, the RTC rendered its
decision[4] and held:
WHEREFORE, premises considered, judgment is hereby
rendered ordering the City of Surigao to pay to Maria
Paz V. Nepomuceno and her husband, Fermin

Nepomuceno, the sum of P5,000.00 as attorney's

fees, and the further sum of P3,260.00 as
compensation for the portion of land in dispute, with
legal interest thereon from 1960 until fully paid, and
upon payment, directing her to execute the
corresponding deed of conveyance in favor of the said
defendant. The Clerk of Court shall execute the
necessary instrument in the event of her failure to do
so.
The claims for moral and exemplary damages are
denied for lack of basis. No pronouncement as to
costs.
SO ORDERED.[5]
Unsatisfied with that decision, the petitioners appealed to
the CA. As stated earlier, the CA modified the RTC
decision and held that petitioners were entitled to
P30,000 as moral damages for having been rebuffed
by Mayor Sering in the presence of other people. It
also awarded petitioners P20,000 as attorney's fees
and litigation expenses considering that they were
forced to litigate to protect their rights and had to
travel to Surigao City from their residence in Ormoc
City to prosecute their claim. The CA affirmed the
decision of the trial court in all other respects.
Petitioners filed a motion for reconsideration but it
was denied. Hence, this petition.
Petitioners claim that, in fixing the value of their
property, justice and equity demand that the value at
the time of actual payment should be the basis, not
the value at the time of the taking as the RTC and CA
held. They demand P200/sq. m. or a total sum of
P130,400 plus legal interest. In the alternative,
petitioners pray for the re-examination of the
meaning of just compensation and cite the separate
concurring opinion of Justice Antonio Barredo
in Municipality of La Carlota v. Spouses Gan.[6]
Petitioners also assert that the CA decision in Spouses
Mamerto Espina, Sr. and Flor Espina v. City of
Ormoc[7]should be applied to this case because of the
substantial factual similarity between the two cases.
In that case, the City of Ormoc was directed to
institute a separate expropriation proceeding over the
subject property.
Moreover, petitioners maintain that exemplary
damages should be awarded because respondent City
of Surigao illegally took their property.
Petitioners' arguments are without merit.
In a long line of cases, we have consistently ruled
that where actual taking is made without the benefit
of expropriation proceedings and the owner seeks
recovery of the possession of the property prior to the
filing of expropriation proceedings, it is the value of
the property at the time of taking that is controlling
for purposes of compensation.[8] As pointed out
in Republic v. Lara,[9] the reason for this rule is:
The owner of private property should be compensated
only for what he actually loses; it is not
intended that his compensation shall extend

beyond his loss or injury. And what he loses is

only the actual value of his property at the time
it is taken. This is the only way the compensation to
be paid can be truly just; i.e., "just" not only to the
individual whose property is taken, "but to the public,
which is to pay for it."
Thus, the value of petitioners' property must be ascertained
as of 1960 when it was actually taken. It is as of that
time that the real measure of their loss may fairly be
adjudged. The value, once fixed, shall earn interest at
the legal rate until full payment is effected,
conformably with other principles laid down by case
law.[10]
Regarding petitioners' contention on the applicability
of Article 1250 of the Civil Code,[11] Republic v.
CA[12] is enlightening:
Article 1250 of the Civil Code, providing that, in case of
extraordinary inflation or deflation, the value of the
currency at the time of the establishment of the
obligation shall be the basis for the payment when no
agreement to the contrary is stipulated, has strict
application only to contractual obligations. In
other words, a contractual agreement is needed for
the effects of extraordinary inflation to be taken into
account to alter the value of the currency. (emphasis
supplied)
Since there was never any contractual obligation between
the parties in this case, Article 1250 of the Civil Code
finds no application.
Moreover, petitioners cannot properly insist on the
application of the CA decision inSpouses Mamerto
Espina, Sr. and Flor Espina v. City of Ormoc. [13] A
decision of the CA does not establish judicial
precedent. A ruling of the CA on any question of law
is not binding on this Court.[14] In fact, the Court may
review, modify or reverse any such ruling of the CA.
Finally, we deny petitioners' prayer for exemplary
damages. Exemplary damages may be imposed by
way of example or correction for the public good.
[15]
The award of these damages is meant to be a
deterrent to socially deleterious actions. [16]Exemplary
damages would have been appropriate had it been
shown that the city government indeed misused its
power of eminent domain.[17] In this case, both the
RTC and the CA found there was no socially
deleterious action or misuse of power to speak of. We
see no reason to rule otherwise.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.
AYALA CORPORATION, petitioner.
vs.
ROSA-DIANA REALTY AND DEVELOPMENT
CORPORATION, respondent.
DE LEON, J.:
Before us is a petition for review on certiorari seeking the
reversal of a decision rendered by the Court of
Appeals in C.A. G.R. C.V. No. 4598 entitled "Ayala

Corporation vs. Rosa-Diana Realty and Development

Corporation, dismissing Ayala Corporations petition
for lack of merit.
The facts of the case are not in dispute:
Petitioner Ayala Corporation (herein-after referred to as
Ayala) was the registration owner of a parcel of land
located in Alfaro Street, Salcedo Village, Makati City
with an area of 840 square meters, more or less and
covered by Transfer Certificate of Title (TCT) No.
233435 of the Register of Deeds of Rizal.
On April 20, 1976, Ayala sold the lot to Manuel Sy married
to Vilma Po and Sy Ka Kieng married to Rosa Chan.
The Deed of Sale executed between Ayala and the
buyers contained Special conditions of sale and Deed
Restrictions. Among the Special Conditions of Sale
were.
The vendee shall build on the lot and submit the building
plans to the vendor before September 30, 1976 for
the latters approval.
The construction of the building shall start on or before
March 30, 1977 and completed before 1979. Before
such completion, neither no the title released even if
the purchase price shall have been fully paid.
There shall be no resale of the property.
The Deed Restrictions, on the other hand, contained the
stipulation that the gross floor area of the building to
be constructed shall not be more than five (5) times
the lot area and the total height shall not exceed forty
two (42) meters. The restrictions were to expire in
the year 2025.
Manuel Sy and Sy Ka Kieng failed to construct the building
in violation of the Special Conditions of Sale.
Notwithstanding the violation, Manuel Sy anf Sy Ka
Kieng, in April 1989, were able to sell the lot to
respondent Rosa-Diana Realty and Development
Corporation (hereinafter referred to as Rosa-Diana)
with Ayalas approval. As a consideration for Ayala to
release the Certificate of title of the subject property,
Rosa Diana, on July 27, 1989 executed an
Undertaking, together with the buildings plans for a
condominium project, known as "The Peak", Ayala
released title to the lot, thereby enabling Rosa-Diana t
register the deed of sale in its favor and obtain
Certificate of Title No. 165720 in its name. The title
carried as encumbrances the special conditions of sale
and the deed restrictions. Rosa-Dianas building plans
as approved by Ayala were subject to strict
compliance of cautionary notices appearing on the
building plans and to the restrictions encumbering the
Lot regarding the use and occupancy of the same.
Thereafter, Rosa-Diana submitted to the building official of
Makati another set of building plans for "The Peak"
which Rosa-Diana submitted to Ayala for approval
envisioned a 24-meter high, seven (7) storey
condominium project with a gross floor area of
3,968.56 square meters, the building plans which
Rosa-Diana submitted to the building official of
Makati, contemplated a 91.65 meter high, 38 storey
condominium building with a gross floor area of
23,305.09 square meters.1 Needless to say, while the
first set of building plans complied with the deed
restrictions, the latter set seceded the same.
During the construction of Rosa-Dianas condominium
project, Ayala filed an action with the Regional Trial
Court (RTC) of Makati, Branch 139 for specific

performance, with application for a writ of preliminary

injunction/temporary restraining order against RosaDiana Realty seeking to compel the latter to comply
with the contractual obligations under the deed of
restrictions annotated on its title as well as with the
building plans it submitted to the latter. In the
alternative, Ayala prayed for rescission of the sale of
the subject lot to Rosa-Diana Realty.
The lower court denied Ayalas prayer for injunctive relief,
thus enabling Rosa-Diana to complete the
construction of the buildi any kind in court directly
affecting title to the land or the use or occupation
thereof for which a notice of lis pendens may be held
proper.3 The decision of the LRA, however, was
overturned by the Court of Appeals in C.A. G.R. S.P.
No. 29157. In G.R. No. 112774, We affirmed the
ruling of the CA on February 16, 1994 saying.
We agree with respondent court that the notice of lis
pendens is not proper in this instance. The case
before the trial court is a personal action since the
cause of action thereof arises primarily from the
alleged violation of the Deed of Restriction.
In the meantime, Ayala completed its presentation of
evidence before the trial court. Rosa-Diana filed a
Demurrer to Evidence averring that Ayala failed to
establish its right to the relief sought in-as much as
(a) Ayala admittedly does not enforce the deed
restrictions uniformly and strictly (b) Ayala has lost its
right/power to enforce the restrictions due to its own
acts and omissions; and (c) the deed restrictions are
no longer valid and effective against lot buyers in
Ayalas controlled subdivision.
The trial court sustained Rosa-Dianas Demurrer to Evidence
saying that Ayala was guilty of abandonment and/or
estoppel due to its failure to enforce the terms of
deed of restrictions and special conditions of sale
against Manuel Sy and Sy Ka Kieng. The trial court
noted that notwithstanding the violation of the special
conditions of sale, Manuel Sy and Sy Ka Kieng were
able to transfer the title to Rosa-Diana with the
approval of Ayala. The trial court added that Ayalas
failure to enforce the restrictions with respect to
Trafalgar, Shellhouse, Eurovilla, LPL Plaza, Parc
Regent, LPL Mansion and Leronville, which are located
within Salcedo Village, shows that Ayala discriminated
against those which it wants to have the obligation
enforced. The trial court then concluded that for Ayala
to discriminatory choose which obligor would be made
to follow certain conditions and which should not, did
not seem fair and legal.
The Court of Appeals affirmed the ruling of the trial court
saying that the "appeal is seated by the doctrine of
the law of the case in C.A. G.R. S.P. No. 29157" where
it was stated that
xxx Ayala is bared from enforcing the Deed of Restriction in
question pursuant to the doctrine of waiver and
estoppel. Under the terms of the deed of sale, the
vendee Sy Ka Kieng assumed faithful compliance with
the special conditions of sale and with the Salcedo
Village Deed of Restrictions. One of the conditions was
that a building would be constructed within one year.
However, Sy Ka Kieng failed to construct the building
as required under the Deed Sale. Ayala did nothing to
enforce the terms of the contract. In fact, it even
agreed to the sale of the lot by Sy Ka Kieng in favor of

petitioner Realty in 1989 or thirteen (13) years later.

We, therefore, see no justifiable reason for Ayala to
attempt to enforce the terms of the conditions of sale
against the petitioner.
xxx
The Court of Appeals also cited C.A. G.R. C.V. No. 46488
entitled, "Ayala Corporation vs. Ray Burton
Development Corporation which relied on C.A. G.R.
S.P. No. 29157 in ruling that Ayala is barred from
enforcing the deed restrictions in dispute. Upon a
motion for reconsideration filed by herein petitioner,
the Court of Appeals clarified that "the citation of the
decision in Ayala Corporation vs. Ray Burton
Development Corporation, Ca G.R. C.V. No. 46488,
February 27, 1996, was made not because said
decision is res judicata to the case at bar but rather
because it is precedential under the doctrine of stare
decisis."
Upon denial of said motion for reconsideration, Ayala filed
the present appeal.
Ayala contends that the pronouncement of the Court of
Appeals in C.A. G.R. S.P. No. 29157 that it is estopped
from enforcing the deed restrictions is merely obiter
dicta inasmuch as the only issue raised in the
aforesaid case was the propriety of a lis
pendens annotation on Rosa-Dianas certificate of
title.
Ayala avers that Rosa-Diana presented no evidence
whatsoever on Ayalas supposed waiver or estoppel in
C.A. G.R
. S.P. No. 29157. Ayala likewise pointed out that at
the time C.A. G.R. S.P. No. 29157 was on appeal, the
issues of the validity and continued viability of the
deed of restrictions and their enforceability by Ayala
were joined and then being tried before the trial
court.
Petitioners assignment of errors in the present appeal may
essentially be summarized as follows:
The Court of Appeals acted in manner not in accord with law
and the applicable decisions of the Supreme Court in
holding that the doctrine of the law of the case,
or stare decisis, operated to dismiss Ayalas appeal.
The Court of Appeals erred as a matter of law and departed
from the accepted and usual course of judicial
proceedings when it failed to expressly pass upon the
specific errors assigned in Ayalas appeal.
A discussion on the distinctions between law of the case,
stare decisis and obiter dicta is in order.
The doctrine of the law of the case has certain affinities
with, but is clearly distinguishable from, the doctrines
of res judicata and stare decisis, principally on the
ground that the rule of the law of the case operates
only in the particular case and only as a rule of policy
and not as one of law.4 At variance with the doctrine
of stare decisis, the ruling adhered to in the particular
case under the doctrine of the law of the case need
not be followed as a precedent in subsequent
litigation between other parties, neither by the
appellate court which made the decision followed on a
subsequent appeal in the same case, nor by any other
court. The ruling covered by the doctrine of the law of
the case is adhered to in the single case where it
arises, but is not carried into other cases as a
precedent.5 On the other hand, under the doctrine of

stare decisis, once a point of law has been established

by the court, that point of law will, generally, be
followed by the same court and by all courts of lower
rank in subsequent cases where the same legal issue
is raised.6 Stare decisis proceeds from the first
principle of justice that, absent powerful
countervailing considerations, like cases ought to be
decided alike.7
The Court of Appeals, in ruling against petitioner Ayala
Corporation stated that the appeal is sealed by the
doctrine of the law of the case, referring to G.R. No.
112774 entitled "Ayala Corporation, petitioner
vs. Courts of Appeals, et al., respondents". The Court
of Appeals likewise made reference to C.A. G.R. C.V.
No. 46488 entitled, "Ayala Corporation vs. Ray Burton
Development Corporation, Inc." in ruling against
petitioner saying that it is jurisprudentially under the
doctrine of stare decisis.
It must be pointed out that the only issue that was raised
before the Court of Appeals in C.A. G.R. S.P. No.
29157 was whether or not the annotation of lis
pendens is proper. The Court of Appeals, in its
decision, in fact stated "the principal issue to be
resolved is: whether or not an action for specific
performance, or in the alternative, rescission of deed
of sale to enforce the deed of restrictions governing
the use of property, is a real or personal action, or
one that affects title thereto and its use or occupation
thereof.8
In the aforesaid decision, the Court of Appeals even
justified the cancellation of the notice of lis
pendens on the ground that Ayala had ample
protection should it succeed in proving its allegations
regarding the violation of the deed of
restrictions, without unduly curtailing the right of the
petitioner to fully enjoy its property in the meantime
that there is as yet no decision by the trial court. 9
From the foregoing, it is clear that the Court of Appeals was
aware that the issue as to whether petitioner is
estopped from enforcing the deed of restrictions has
yet to be resolved by the trial court. Though it did
make a pronouncement that the petitioner is
estopped from enforcing the deed of restrictions, it
also mentioned at the same time that this particular
issue has yet to be resolved by the trial court.
Notably, upon appeal to this Court, We have affirmed
the ruling of the Court of Appeals only as regards the
particular issue of the propriety of the cancellation of
the notice of lis pendens.
We see no reason then, how the law of the case or stare
decisis can be held to be applicable in the case at
bench. If at all, the pronouncement made by the
Court of Appeals that petitioner Ayala is barred from
enforcing the deed of restrictions can only be
considered as obiter dicta. As earlier mentioned the
only issue before the Court of Appeals at the time was
the propriety of the annotation of the lis pendens. The
additional pronouncement of the Court of Appeals that
Ayala is estopped from enforcing the deed of
restrictions even as it recognized that this said issue
is being tried before the trial court was not necessary
to dispose of the issue as to the propriety of the
annotation of the lis pendens. A dictum is an opinion
of a judge which does not embody the resolution or
determination of the court, and made without

argument, or full consideration of the point, not the

proffered deliberate opinion of the judge himself.10 It
is not necessarily limited to issues essential to the
decision but may also include expressions of opinion
which are not necessary to support the decision
reached by the court. Mere dicta are not binding
under the doctrine of stare decisis11.
While the Court of Appeals did not err in ruling that the
present petition is not barred by C.A. G.R. C.V. No.
46488 entitled "Ayala Corporation vs. Ray Burton
Development Inc." under the doctrine of res
judicata, neither, however, can the latter case be cited
as presidential under the doctrine of stare decisis. It
must be pointed out that at the time the assailed
decision was rendered, C.A. G.R. C.V. No. 46488 was
on appeal with this Court. Significantly, in the
decision. We have rendered in Ayala Corporation vs.
Ray Burton Development Corporation12 which became
final and executory on July 5, 1999 we have clearly
stated that "An examination of the decision in the
said Rosa-Diana case reveals that the sole issue
raised before the appellate court was the propriety of
the lis pendens annotation. However, the appellate
court went beyond the sole issue and made factual
findings bereft of any basis in the record to
inappropriately rule that AYALA is in estoppel and has
waived its right to enforce the subject restrictions.
Such ruling was immaterial to the annotation of the
lis pendens. The finding of estoppel was thus
improper and made in excess of jurisdiction."
Coming now to the merits of the case, petitioner avers that
the Court of Appeals departed from the usual course
of judicial proceedings when it failed to expressly pass
upon the specific errors assigned in its appeal.
Petitioner reiterates its contention that law and
evidence do not support the trial courts findings that
Ayala has waived its right to enforce the deed of
restrictions.
We find merit in the petition.
It is basic that findings of fact of the trial court and the
Court of Appeals are conclusive upon the Supreme
Court when supported by substantial evidence. 13 We
are constrained, however, to review the trial court'
findings of fact, which the Court of Appeals chose not
to pass upon, in as much as there is ample evidence
on record to show that certain facts were overlooked
which would affect the disposition of the case.
In its assailed decision of February 4, 1994, the trial court,
ruled in favor of respondent Rosa-Diana Realty on the
ground that Ayala had not acted fairly when it did not
institute an action against the original vendees
despite the latters violation of the Special Conditions
of Sale but chose instead to file an action against
herein respondent Rosa-Diana. The trial court added
that although the 38-storey building of Rosa-Diana is
beyond the total height restriction, it was not violative
of the National Building Code. According to the trial
court the construction of the 38 storey building known
as "The Peak" has not been shown to have been
prohibited by law and neither is it against public
policy.
It bears emphasis that as complainant, Ayala had the
prerogative to initiate an action against violators of
the deed restrictions. That Rosa-Diana had acted in
bad faith is manifested by the fact that it submitted

two sets of building plans, one which was in

conformity with the deed restrictions submitted to
Ayala and MACEA, and the other, which exceeded the
height requirement in the deed restrictions to the
Makati building official for the purpose of procuring a
building permit from the latter. Moreover, the
violation of the deed restrictions committed by
respondent can hardly be denominated as a minor
violation. It should be pointed out that the original
building plan which was submitted to and approved by
petitioner Ayala Corporation, envisioned a twenty four
(24) meter high, seven (7) storey condominium
whereas the respondents building plan which was
submitted to and approved by the building official of
Makati is that of a thirty eight (38) storey, 91.65
meters high, building. At present, the Peak building of
respondent which actually stands at 133.65 meters
with a total gross floor area of 23,305.09 square
meters, seriously violates the dimensions indicated in
the building plans submitted by Rosa-Diana to
petitioner Ayala for approval in as much as the Peak
building exceeds the approved height limit by about
109 meters and the allowable gross floor area under
the applicable deed restrictions by about 19,105
square meters. Clearly, there was a gross violation of
the deed restrictions and evident bad faith by the
respondent.
It may not be amiss to mention that the deed restrictions
were revised in a general membership meeting of the
association of lot owners in Makati Central Business
District the Makati Commercial Estate Association,
Inc. (MACEA).
Whereby direct height restrictions were abolished in lieu of
floor area limits. Respondent, however, did not vote
for the approval of this revision during the General
Membership meeting, which was held on July 11,
1990 at the Manila Polo Clud Pavilion, Makati, and
Metro Manila. Hence, respondent continues to be
bound by the original deed restrictions applicable to
Lot 7, Block 1 and annotated on its title to said lot. In
any event, assumingarguendo that respondent voted
for the approval of direct height restrictions in lieu of
floor area limits, the total floor area of its Peak
building would still be violative of the floor area limits
to the extent of about 9,865 square meters of
allowable floor area under the MACEA revised
restrictions.
Respondent Rosa-Diana avers that there is nothing illegal or
unlawful in the building plans which it used in the
construction of the Peak condominium inasmuch as it
bears the imprimatur of the building official of Makati,
who is tasked to determine whether building and
construction plans are in accordance with the law,
notably, the National Building Code."
Respondent Rosa-Diana, however, misses the point
inasmuch as it has freely consented to be bound by
the deed restrictions when it entered into a contract
of sale with spouses Manuel Sy and Sy Ka Kieng.
While respondent claims that it was under the
impression that Ayala was no longer enforcing the
deed restrictions, the Undertaking14it executed belies
this same claim. In said Undertaking, respondent
agreed to construct and complete the construction of
the house on said lot as required under the special
condition of sale." Respondent likewise bound itself to

abide and comply with x x x the condition of the

rescission of the scale by Ayala Land, Inc. on the
grounds therein stated x x x.
Contractual obligations between parties have the force of
law between them and absent any allegation that the
same are contrary to law, morals, good custom, public
order or public policy, they must be complied with in
good faith. Hence, Article 1159 of the New Civil Code
provides.
"Obligations arising from contracts have the force of law
between the contracting parties and should be
complied with in good faith."
Respondent Rosa-Diana insists that the trial court had
already ruled that the undertaking executed by its
Chairman and President cannot validly bind RosaDiana and hence, it should not be held bound by the
deed restrictions.
We agree with petitioner Ayalas observation that
respondent Rosa-Dianas special and affirmative
defenses before the trial court never mentioned any
allegation that its president and chairman were not
authorized to execute the Undertaking. It was
inappropriate therefore for the trial court to rule that
in the absence of any authority or confirmation from
the Board of Directors of respondent Rosa-Diana, its
Chairman and the President cannot validly enter into
an undertaking relative to the construction of the
building on the lot within one year from July 27, 1989
and in accordance with the deed restrictions,
Curiously, while the trial court stated that it cannot be
presumed that the Chairman and the President can
validly bind respondent Rosa-Diana to enter into the
aforesaid Undertaking in the absence of any authority
or confirmation from the Board of Directors, the trial
court held that the ordinary presumption of regularity
of business transactions is applicable as regards the
Deed of Sale which was executed by Manuel Sy and
Sy Ka Kieng and respondent Rosa-Diana. In the light
of the fact that respondent Rosa-Diana never alleged
in its Answer that its president and chairman were not
authorized to execute the Undertaking, the aforesaid
ruling of the trial court is without factual and legal
basis and suppressing to say the least.
The fact alone that respondent Rosa-Diana conveniently
prepared two sets of building plans with one set
which fully conformed to the Deed Restrictions and
another in gross violation of the same should have
cautioned the trial court to conclude that respondent
Rose-Diana was under the erroneous impression that
the Deed Restrictions were no longer enforceable and
that it never intended to be bound by the Undertaking
signed by its President and Chairman. We reiterate
that contractual obligations have the force of law
between parties and unless the same is contrary to
public policy morals and good customs, they must be
complied by the parties in good faith.
Petitioners, in its Petition, prays that judgement be
rendered:
ordering Rosa-Diana Realty and Development Corporation
to comply with its contractual obligations in the
construction of the Peak by removing, or closing down
and prohibiting Rosa-Diana from using, selling,
leasing or otherwise disposing, of the portions of
areas thereof constructed beyond or in excess of the
approved height, as shown by the building plans

submitted to, and approved by, Ayala, including any

other portion of the building constructed not in
accordance with the said building plans, during the
effectivity of the Deed Restrictions;
Alternatively, in the event specific performance has become
impossible;
ordering the cancellation and recession of the April 20,
1976 Deed of Sale by Ayala in favor of the original
vendees thereof as well as the subsequent Deed of
Sale executed by such original vendees in favor of
Rosa-Diana, and ordering Rosa-Diana to return Ayala
Lot 7, Block 1 of Salcedo Village;
ordering the cancellation of Transfer Certificate of Title No.
165720 (in the name of Rosa-Diana) and directing the
office of the Register of Deeds of Makati to issue a
new title over the lot in the name of Ayala; and
Ordering Rosa-Diana to pay Ayala attorneys fees in the
amount of P500, 000.00, exemplary damages in the
amount of P5, 000,000.00 and the costs of suit.
It must be noted that during the trial respondent RosaDiana was able to complete the construction of The
Peak as a building with a height of thirty-eight (38)
floors or 133.65 meters. Having been completed for a
number of years already, it would be reasonable to
assume that it is now fully tenanted. Consequently,
the remedy of specific performance by respondent is
no longer feasible. However, neither can we grant
petitioners prayer for the cancellation and rescission
of the April 20, 1976 Deed of Sale by petitioner Ayala
in favor of respondent Rosa-Diana inasmuch as the
resale of the property by the original vendees,
spouses Manuel Sy and Ka Kieng to comply with their
obligation to construct a building within one year from
April 20, 1976, has effectively waived its right to
rescind the sale of the subject lot to the original
vendees.
Faced with the same question as to the proper remedy
available to petitioner in the case of "Ayala
Corporation vs. Ray Burton Development Inc., a case
which is on all fours with the case at bench, we ruled
therein that the party guilty of violating the deed
restrictions may only be held alternatively liable for
substitute performance of its obligation, that is, for
the payment of damages. In the aforesaid case it was
observed that the Consolidated and Revised Deed
Restrictions (CRDR) imposed development charges on
constructions which exceed the estimated Gross
Limits permitted under the original Deed Restrictions
but which are within the limits of the
CRDRs.1wphi1.nt
The pertinent portion of the Deed of Restrictions reads:
3. DEVELOPMENT CAHRGE For building construction within
the Gross Floor Area limits defined under Paragraphs
C-2.1 to C-2.4 above, but which will result in a Gross
Floor Area exceeding certain standards defined in
Paragraphs C-3.1-C below, the OWNER shall pay
MACEA, prior to the construction of any new building
a DEVELOPMENT CHARGE as a contribution to a trust
fund to be administered by MACEA. This trust fund
shall be used to improve facilities and utilities in
Makati Central District.
3.1 The amount of the development charge that shall be
due from the OWNER shall be computed as follows:
DEVELOPMENT
CAHRGE = A x (B-C-D)

Where:
A is equal to the a Area Assessment which shall be set at
Five Hundred Pesos (P500.00) until December 31,
1990. Each January 1st thereafter, such amount shall
increase by ten percent (10%) over the immediately
preceding year; provided that beginning 1995 and at
the end of every successive five-year period
thereafter, the increase in the Area Assessment shall
be reviewed and adjusted by the VENDOR to
correspond to the accumulated increase in the
construction cost index during the immediately
preceding five years as based on the weighted
average of wholesale price and wage indices of the
National Census and Statistics Office and the Bureau
of Labor Statistics.
B Is equal to the Gross Floor Area of the completed or
expanded building in square meters.
C is equal to the estimated Gross Floor Area permitted
under the original deed restrictions, derived by
multiplying the lot area by the effective original FAR
shown below for each location.
We then ruled in the aforesaid case that the development;
charges are a fair measure of compensatory damages
which therein respondent Ray Burton Development
Inc. is liable to Ayala Corporation. The dispositive
portion of the decision in the said case, which is
squarely applicable to the case at bar, reads as,
follows:
WHEREFORE, premises considered, the assailed Decision of
the Court of Appeals dated February 27, 1996, in CA
G.R. C.V. No. 46488, and its Resolution dated
October 7, 1996 are hereby REVERSED and SET
ASIDE, and in lieu thereof judgement is hereby
rendered finding that:
The Deed Restrictions are valid and petitioner AYALA is not
estopped from enforcing them against lot owners who
have not yet adopted the Consolidated and Revised
Deed Restrictions.
Having admitted that the Consolidated and Revised Deed
Restrictions are the applicable Deed Restrictions to
Ray Burton Development Corporation, RBDC should
be, and is bound by the same.
Considering that Ray Burton Development Corporations
Trafalgar plaza exceeds the floor area limits of the
Deed Restrictions, RBDC is hereby ordered to pay
development charges as computed under the
provisions of the consolidated and Revised Deed
Restrictions currently in force.
Ray Burton Development corporation is further ordered to
pay AYALA exemplary damages in the amount of P2,
500,000.00 attorneys fees in the amount of
P250,000.00
SO ORDERED:
There is no reason why the same rule should not be
followed in the case at bar, the remedies of specific
performance and/or rescission prayed for by
petitioner no longer being feasible. In accordance with
the peculiar circumstances of the case at bar, the
development charges would certainly be a fair
measure of compensatory damages to petitioner
Ayala.
Exemplary damages in the sum of P2, 500,000.00 as
prayed for by petitioner are also in order inasmuch as
respondent Rosa-Diana was in evident bad faith when
it submitted a set of building plans in conformity with

the deed restrictions to petitioner Ayala for the sole

purpose of obtaining title to the property, but only to
prepare and later on submit another set of buildings
plans which are in gross violation of the Deed
Restrictions. Petitioner Ayala is likewise entitled to an
award of attorneys fees in the sum of P250, 000.00.
WHEREFORE, the assailed Decision of the Court of Appeals
dated December 4, 1997 and its Resolution dated
June 19, 1998, C.A. G.R. C.V. No. 4598, are
REVERSED and SET ASIDE. In lieu thereof, judgement
is rendered.
orderings respondent Rosa-Diana Realty and Development
Corporation to pay development charges as computed
under the provisions of the consolidated and Revised
Deed Restrictions currently in force; and
ordering respondent Rosa-Diana Realty and Development
Corporation to pay petitioner Ayala Corporation
exemplary damages in the sum of P2,500,00.00,
attorneys fees in the sum of P250,000.00 and the
costs of the suit.
SO ORDERED.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
SILIMAN VS PAALAN
Important ditto ung failure ni paalan appeal decision na
valid retirement at failure siliman appeal ung liability
nila sa additional retirement benefits
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review
on Certiorari under Rule 45 of the Revised Rules of
Court, filed by petitioner Silliman University seeking
to reverse and set aside the Decision[1] of the Court of
Appeals dated 19 January 2005, and its
Resolution[2] dated 7 December 2005. The Court of
Appeals, in its assailed Decision and Resolution,
affirmed the Decision[3] of the National Labor Relations
Commission (NLRC) dated 22 May 2002, and its
Resolution[4] dated 18 December 2003, which upheld
the validity of the retirement of
respondent Nanila Fontelo-Paalan but ordered the
petitioner to pay her the amount of P64,680.00, as
additional retirement benefits. The dispositive portion
of the Court of Appeals Decision reads:
WHEREFORE, premises considered, the
Resolution dated December 18, 2003 of the National
Labor Relations Commission, Fourth
Division, Cebu City, in NLRC Case No. V-000960-2000
(RAB VII-05-0064-2000-D), is hereby AFFIRMED. No
pronouncement as to costs.[5]
The present controversy stems from the following
antecedent factual and procedural facts:
In 1962, respondent was employed by the petitioner
and was assigned to the Medical Records Section of
the Silliman University Medical Center. She was later

promoted as the Head of the Medical Records Section,

the position she held until her retirement on 31 May
1997 at the age of 57 years old.[6]
Respondents retirement was pursuant to the provision of
the petitioners retirement plan, integrated into the
employees employment contract, providing that
retirement shall be automatic for any member [7] after
reaching the age of 65 or after 35 years of
uninterrupted service to the university.[8] Accordingly,
respondent, on 2 June 1997, received her retirement
benefits in the sum of P102,410.00 and P46,219.25,
as additional adjustment.[9]
Almost three years after she received her retirement
benefits or on 19 May 2000, respondent filed with the
NLRC a Complaint[10] for illegal dismissal against
petitioner. Respondent averred in her Position Paper
that the stipulation in the retirement program
providing for compulsory retirement after rendering
35 years of uninterrupted service constitutes a
violation of her constitutional right to security of
tenure and is in contravention of the provision of
Republic Act No. 7641[11]providing that the
compulsory retirement age is 65 years old.
In arguing that its retirement program has a legal
basis, petitioner cited the provision of Article
287 of the Labor Code, to wit:
Article 287. Retirement. - Any employee may be retired
upon reaching the retirement age established in the
collective bargaining agreement or other applicable
employment contract.
xxxx
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty-five
(65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years
in the said establishment may retire and shall be
entitled to retirement pay equivalent to at least onehalf (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as
one whole year.
Petitioner asserted that the compulsory retirement
age of 65 years applies only in cases where
there is no agreement between the employer
and the employee embodied either in the
employment contract or the Collective
Bargaining Agreement. Thus, since it has an
existing retirement program integrated in its
employees employment contract, the provisions
of the said retirement program providing for
compulsory retirement after rendering 35 years
of uninterrupted service shall govern the
retirement of its employees. In addition,
petitioner advanced that the security of tenure
clause in the Constitution presupposes that
there is an existing and ongoing employment

and not after the employment was already

severed on account of a valid retirement and
after the employee received retirement benefits
on account of such retirement.
On 15 September 2000, the Labor Arbiter rendered a
Decision[12] declaring the petitioner guilty of illegal
dismissal and ordered the reinstatement of
respondent. The dispositive portion of the Decision
reads:
WHEREFORE, in view of the foregoing premises, judgment
is hereby rendered declaring the [petitioner] guilty of
illegal dismissal and is hereby ordered to reinstate
[respondent] to her former position without loss of
seniority rights and privileges and to pay the
[respondent] her full backwages from the time of her
dismissal until actual reinstatement computed as
follows:
Salary Received

P6,809.00
X 36 months
----------------P 245,124.00

Less: Retirement Received

by Complainant

148,629.25
-----------------Total Backwages -------------- P 96,494.75
Ten percent (10%) attorneys fees is adjudicated from the
total monetary award.[13]
On appeal, the NLRC reversed the ruling of the Labor
Arbiter and directed that the complaint for
illegal dismissal filed by the respondent be
dismissed for lack of merit in a
Decision[14] promulgated on 22 May 2002. In
upholding the validity of the retirement plan,
the NLRC declared that company policies and
rules and regulations, which are of long
standing and known to the employees, are
considered agreed upon and part of the
employment contract; and so long as they are
not unreasonable and oppressive, they are
bound to be respected. The decretal part of the
NLRC Decision reads:
WHEREFORE, in view of all the foregoing, this instant
appeal of the [petitioner] is granted. The appealed
Decision dated September 15, 2000 is REVERSED,
SET ASIDE and VACATED, and the complaint is
dismissed for lack of merit.[15]
Aggrieved, respondent interposed a Motion for
Reconsideration but was denied by the NLRC in a
Resolution dated 18 December 2003. In the same
resolution, however, the NLRC modified its decision by
adjudging the petitioner liable for the amount
of P64,680.00 as additional retirement benefits. The
amount was arrived at based on Section 5, Rule II of
the Rules Implementing the New Retirement Law.
[16]
Thus, the NLRC resolved as follows:

WHEREFORE, premises considered, the decision under

consideration is hereby AFFIRMED with a modification
in that [petitioner] is hereby ordered to pay
[respondent] the amount of Sixty Four Thousand Six
Hundred Eighty Pesos (P64, 680.00) representing
additional retirement benefits.[17]
Petitioner sought the reversal of
the aforequoted resolution through a Motion for
Reconsideration,[18] but before the NLRC could
act on the same, respondent already raised the
unfavorable NLRC Decision to the Court of
Appeals.
On 19 April 2004, the NLRC resolved the Motion for
Reconsideration filed by the petitioner by affirming
the assailed Resolution finding no cogent reason to
depart from its earlier findings. Thereafter, petitioner
did not file a Petition for Certiorari before the Court of
Appeals questioning the latest NLRC
resolution. Instead, he merely filed a Supplemental
Memorandum Ad Cautelam assailing the same.
On 19 January 2005, the Court of Appeals
promulgated a Decision[19] affirming the
Decision of the NLRC, both with respect to the
validity of respondents retirement and
petitioners liability for the balance of
respondents retirement benefits.
Only the respondent, however, filed a Motion for
Reconsideration of the Court of Appeals decision
while the petitioner interjected an Opposition thereto
with Manifestation Ad Cautelam posing its objection to
respondents Motion for Reconsideration and
reiterating the arguments previously raised in
its Supplemental Memorandum Ad Cautelam.[20]
Finding no matter which will compel the modification or
reversal of its earlier Decision, the Court of Appeals
denied respondents Motion for Reconsideration in a
Resolution[21] dated 7 December 2005.
Having lost her case in the appellate court,
respondent opted to accept the adverse
judgment and no longer questioned the
same. Instead, it was the petitioner who now
appeared unsatisfied with the findings of the
NLRC, as affirmed by the Court of Appeals, that
it was still liable for the balance of respondents
retirement benefits in the sum
of P64,680.00. Hence, this instant Petition for
Review on Certiorari, raising this sole issue:
WHETHER OR NOT THE PETITIONER IS LIABLE FOR
THE BALANCE OF RETIREMENT BENEFITS AS
ADJUDGED BY THE NLRC AND AFFIRMED BY THE
COURT OF APPEALS.
We are mindful that the petitioner had initially manifested
its opposition to the NLRC ruling that it is still liable
for the deficiency in retirement benefits due the

respondent by timely interposing a Motion for

Reconsideration thereof. Convincingly, however, when
the NLRC denied its Motion for Reconsideration,
petitioner obviously no longer objected to the award,
as it did not take any further action thereon. Such
was a serious procedural lapse warranting the
dismissal of the instant case.
As admitted by the petitioner, it received a copy of the
NLRC Resolution dated 19 April 2004 denying its
Motion for Reconsideration on 13 July 2004.[22] It
had, therefore, until 13 September 2004[23] to file a
Petition for Certiorari before the Court of Appeals,
[24]
but failed to do so. Instead, it was the respondent
who timely assailed the adverse decision before the
appellate court.
In Industrial Management International
Development Corporation v. National Labor Relations
Commission,[25] we have ruled that:
It is an elementary principle of procedure that the
resolution of the court in a given issue as
embodied in the dispositive part of a decision or
order is the controlling factor as to settlement of
rights of the parties. Once a decision or order
becomes final and executory, it is removed from
the power or jurisdiction of the court which
rendered it to further alter or amend it. It
thereby becomes immutable and unalterable and any
amendment or alteration which substantially affects a
final and executory judgment is null and void for lack
of jurisdiction, including the entire proceedings held
for that purpose. An order of execution which varies
the tenor of the judgment or exceeds the terms
thereof is a nullity. (Emphasis supplied.)
Irrefragably, the Resolution of the NLRC dated 19
April 2004, denying petitioners Motion for
Reconsideration of the earlier NLRC Resolution
dated 18 December 2003, which ordered
petitioner to pay respondent the balance of her
retirement benefits, already became final
and executory. By failing to file a Petition
for Certiorariafter the receipt of the 19 April
2004 Resolution, petitioner is deemed to have
acquiesced to the adverse judgment. Further, it
cannot be convincingly argued that the Petition
for Certiorari filed by the respondent also inured
to the benefit of the petitioner, for not only are
their interests separate and distinct, but they
are completely in conflict with each other. [26]
To further underscore the significance of timely assailing an
adverse decision, we have thus ruled in ItogonSuyoc Mines Inc. v. National Labor Relations
Commission[27] that:
The rule is well-settled that a party cannot impugn the
correctness of a judgment not appealed from by
him; and while he may make counter assignment
of errors, he can do so only to sustain the
judgment on other grounds but not to seek

modification or reversal thereof, for in such

case, he must appeal. (Emphasis supplied.)
Stated differently, a party who does not appeal[28] from a
judgment can no longer seek modification or reversal
of the same. He may oppose the appeal of the other
party only on grounds consistent with the
judgment. Since the petitioner in the case at bar
failed to question the finding of the NLRC that it was
still liable for the balance of respondents retirement
benefits, the same had therefore long become final
and executory and it can no longer impugn the same
in this action.
Considering that the judgment is already final
and executory against the party who does not appeal,
[29]
then the winning party already acquired vested
rights by virtue of said judgment. Time and again, we
never fail to press the dictum that just as the losing
party has the privilege to file an appeal within
the prescribed period, so does the winner also
have the correlative right to enjoy the finality of
the decision.[30]
It also bears to emphasize that in respondents Petition
for Certiorari before the Court of Appeals, the issues
extensively discussed by the parties were limited to
whether respondents retirement violated her security
of tenure and thus amounted to illegal dismissal and
whether the petitioners retirement plan is valid and
binding on the respondent. Petitioner only
resurrected its objection to the Order of the NLRC for
the payment of the balance of respondents
retirement benefits in an Opposition with
Manifestation Ad Cautelam,[31] which cannot be
deemed a substitute for a Petition for Certiorari.
Consequently, we are already without jurisdiction to take
cognizance of the present Petition and resolve the
substantive issues raised herein lest we transgress
the well-established statutory and jurisprudential
principles succinctly laid above. While in the review of
cases, we relax procedural rules to serve substantial
justice, we do so only based on exceptional grounds
or under extraordinary circumstances.[32] Petitioner
failed to establish any exceptional grounds or
extraordinary circumstances that may warrant the
relaxation of the procedural rules. Neither did
petitioner even bother to explain its failure to
question the adverse NLRC Resolution, a procedural
course of undiscounted significance, the omission of
which throws the entire case into a travesty, as what
happened in the case at bar.
Having resolved the instant Petition, we now proceed to
address the Manifestation and Supplemental
Memorandum, filed by respondent on 17 May 2007,
calling our attention to the recent Decision of the First
Division of this Court in Alpha
C. Jaculbe v. Silliman University, [33] promulgated
last 16 March 2007. Based onJaculbe, respondent
prays for the reversal of the NLRC and the Court of
Appeals Decisions finding that he was not illegally
dismissed by petitioner.

Indeed, both Jaculbe and herein respondent were retired by

herein petitioner based on the same retirement plan,
we however find that the ruling of the First Division of
this Court in Jaculbe bears no significance to the case
at bar since the factual and procedural circumstances
attendant in herein petition are different and distinct
from those in Jaculbe and to yield to respondents
plea for substantial justice would cause serious
transgression of well-settled procedural principles.
Firstly, in the said case, Jaculbe timely raised the adverse
decision of the Court of Appeals (which affirmed the
finding of the NLRC that Jaculbe was not illegally
dismissed by the university). In contrast, respondent
in the case at bar no longer appealed the Court of
Appeals Decision dated 19 January 2005, which ruled
that he was not illegally dismissed by petitioner and
merely ordered petitioner to pay the balance of
respondents retirement benefits. Instead, it was the
petitioner which interposed the present Petition
assailing the appellate courts finding that it still has
to pay additional retirement benefits to the
respondent.
Secondly, the issues raised in Jaculbe were different from
the issue raised in the instant Petition. In that case,
the following questions were posed to and squarely
resolved by the First Division: (1)
whether Jaculbes separation from employment was
illegal; and (2) whether the provision on the
universitys retirement plan providing for the
employees compulsory retirement after 35 years of
uninterrupted service is valid. On the other hand,
the sole issue presented for our resolution in the
present petition is whether the petitioner is still liable
for additional retirement benefits to the respondent as
found by the NLRC and affirmed by the Court of
Appeals.
Thirdly, no entry of judgment has yet been made
in Jaculbe, thus, it has not yet become final
and executory so as to serve as a jurisprudential
precedent to the present case. Until and unless the
same has become final and executory, the First
Division still has jurisdiction to affirm, modify, or
reverse its Decision in Jaculbe, depending on how it
shall weigh and resolve the pending Motion for
Reconsideration therein.
And finally, as we are denying the petitioners prayer for the
reversal of the Court of Appeals Decision (insofar as it
holds petitioner liable for the balance of respondents
retirement benefits) on the ground of serious
procedural defect, we are also constrained to disallow
for the same reason the respondents prayer in her
Manifestation and Supplemental Memorandum to
reverse the NLRC and the Court of Appeals Decisions
(as regards their finding that respondent was not
illegally dismissed).
In sum, the finding of the NLRC holding the petitioner liable
for additional compensation benefits is binding on
petitioner; in the same way that the finding of the
Court of Appeals that respondent was not illegally

dismissed is conclusive on respondent, both findings

having become final and executory. By the petitioner
and respondents inaction and presumed acquiescence
to the conclusions of the NLRC and the Court of
Appeals, respectively, they had allowed the same to
attain finality. Not having been timely appealed, these
issues are already beyond our jurisdiction to resolve,
and the findings of the NLRC and the Court of Appeals
as to them can no longer be disturbed without
violating the fundamental legal principle that, on the
ground of public policy, final and executory judgment
is immutable and unalterable and may no longer be
modified in any respect, even if the modification is
meant to correct erroneous conclusions of fact and
law, regardless of whether it will be made by the
court that rendered it or by the highest court of the
land.[34]
We cannot condone the practice of parties who, either by
their own or their counsels inadvertence, have

allowed a judgment to become final

and executory and, after the same had reached
finality, seeks the shield of substantial justice to assail
it. The finality of decision is a jurisdictional event
which cannot be made to depend on the convenience
of the party. To rule otherwise would completely
negate the purpose of the rule on completeness of
service, which is to place the date of receipt of
pleadings, judgment and processes beyond the power
of the party to determine at his pleasure.[35]
WHEREFORE, IN VIEW OF THE FOREGOING, the instant
Petition is DENIED. The Decision dated 19 January
2005, and the Resolution dated 7 December 2005,
rendered by the Court of Appeals in CA-G.R. SP No.
84023, are hereby AFFIRMED. Costs against the
petitioner.
SO ORDERED.