CASE 2011-0213: BANK OF THE PHILIPPINE ISLANDS VS. BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN BPI UNIBANK (G.R. NO. 164301, 19 OCTOBER 2011, LEONARDO- DE CASTRO, J.) SUBJECT: RIGHT OF A UNION TO REQUEST TERMINATION OF EMPLOYEES ABSORBED BY SURVIVING CORPORATION IN A MERGER. (BRIEF TITLE: BPI VS. BPI EMPLOYEES UNION).

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DISPOSITIVE:

WHEREFORE, the Motion for Reconsideration is DENIED.  The Decision dated August 10, 2010 is AFFIRMED, subject to the qualifications that:

(a)  Petitioner is deemed to have assumed the employment contracts of the Far East Bank and Trust Company (FEBTC) employees upon effectivity of the merger without break in the continuity of their employment, even without express stipulation in the Articles of Merger; and

(b)  Aside from the thirty (30) days, counted from notice of finality of the August 10, 2010 Decision, given to former FEBTC employees to join the respondent, said employees shall be accorded full procedural due process before their employment may be terminated.

SO ORDERED.

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SUBJECTS/DOCTRINES/DIGEST:

FEBTC EMPLOYEES WERE ABSORBED BY BPI.  THE UNION SHOP CLAUSE IN THE BPI CBA PROVIDES THAT NEW EMPLOYEES WHO MAY HEREAFTER BE REGULARLY EMPLOYED BY BPI SHALL, WITHIN THIRTY (30) DAYS AFTER THEY BECOME REGULAR EMPLOYEES, JOIN THE UNION AS A CONDITION OF THEIR CONTINUED EMPLOYMENT. OTHERWISE THE UNION CAN ASK PBI TO TERMINATE THESE EMPLOYEES. DOES THIS CLAUSE COVER EMPLOYEES OF FEBTC ABSORBED BY BPI?

YES. BUT THE EMPLOYEES WHO DO NOT JOIN THE UNION ARE ENTITLED TO PROCEDURAL DUE PROCESS BEFORE THEIR EMPLOYMENT IS TERMINATED. SPECIFICALLY, THEY ARE ENTITLED TO THE TWIN REQUIREMENT OF NOTICE AND HEARING.

Although it is accepted that non-compliance with a union security clause is a valid ground for an employee’s dismissal, jurisprudence dictates that such a dismissal must still be done in accordance with due process.  This much we decreed in General Milling Corporation v. Casio,^[1][25] to wit:

The Court reiterated in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos that:

While respondent company may validly dismiss the employees expelled by the union for disloyalty under the union security clause of the collective bargaining agreement upon the recommendation by the union, this dismissal should not be done hastily and summarily thereby eroding the employees’ right to due process, self-organization and security of tenure. The enforcement of union security clauses is authorized by law provided such enforcement is not characterized by arbitrariness, and always with due process. Even on the assumption that the federation had valid grounds to expel the union officers, due process requires that these union officers be accorded a separate hearing by respondent company.

The twin requirements of notice and hearing constitute the essential elements of procedural due process. The law requires the employer to furnish the employee sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee of the employer’s decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality.

Irrefragably, GMC cannot dispense with the requirements of notice and hearing before dismissing Casio, et al. even when said dismissal is pursuant to the closed shop provision in the CBA. The rights of an employee to be informed of the charges against him and to reasonable opportunity to present his side in a controversy with either the company or his own union are not wiped away by a union security clause or a union shop clause in a collective bargaining agreement. x x x^[2][26] (Emphases supplied.)

In light of the foregoing, we find it appropriate to state that, apart from the fresh thirty (30)-day period from notice of finality of the Decision given to the affected FEBTC employees to join the Union before the latter can request petitioner to terminate the former’s employment, petitioner must still accord said employees the twin requirements of notice and hearing on the possibility that they may have other justifications for not joining the Union.  Similar to our August 10, 2010 Decision, we reiterate that our ruling presupposes there has been no material change in the situation of the parties in the interim.

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BPI ARGUES THAT  THE FORMER FEBTC EMPLOYEES WHO WERE ABSORBED BY BPI AS REGULAR EMPLOYEES SHOULD NOT BE CONSIDERED AS NEW EMPLOYEES OF BPI. IS THEIR ARGUMENT CORRECT?

NO, BECAUSE IT WOULD DEFEAT THE PURPOSE OF A UNION SHOP CLAUSE UNDER LABOR LAW. THE COURT REASONED THIS WAY:

          Even in our August 10, 2010 Decision, we already observed that the legal fiction in the law on mergers (that the surviving corporation continues the corporate existence of the non-surviving corporation) is mainly a tool to adjudicate the rights and obligations between and among the merged corporations and the persons that deal with them.^[3][14]  Such a legal fiction cannot be unduly extended to an interpretation of a Union Shop Clause so as to defeat its purpose under labor law.  Hence, we stated in the Decision that:

           In any event, it is of no moment that the former FEBTC employees retained the regular status that they possessed while working for their former employer upon their absorption by petitioner. This fact would not remove them from the scope of the phrase “new employees” as contemplated in the Union Shop Clause of the CBA, contrary to petitioner’s insistence that the term “new employees” only refers to those who are initially hired as non-regular employees for possible regular employment. 

The Union Shop Clause in the CBA simply states that “new employees” who during the effectivity of the CBA “may be regularly employed” by the Bank must join the union within thirty (30) days from their regularization. There is nothing in the said clause that limits its application to only new employees who possess non-regular status, meaning probationary status, at the start of their employment. Petitioner likewise failed to point to any provision in the CBA expressly excluding from the Union Shop Clause new employees who are “absorbed” as regular employees from the beginning of their employment. What is indubitable from the Union Shop Clause is that upon the effectivity of the CBA, petitioner’s new regular employees (regardless of the manner by which they became employees of BPI) are required to join the Unionas a condition of their continued employment.^[4][15]

           Although by virtue of the merger BPI steps into the shoes of FEBTC as a successor employer as if the former had been the employer of the latter’s employees from the beginning it must be emphasized that, in reality, the legal consequences of the merger only occur at a specific date, i.e., upon its effectivity which is the date of approval of the merger by the SEC.  Thus, we observed in the Decision that BPI and FEBTC stipulated in the Articles of Merger that they will both continue their respective business operations until the SEC issues the certificate of merger and in the event no such certificate is issued, they shall hold each other blameless for the non-consummation of the merger.^[5][16] We likewise previously noted that BPI made its assignments of the former FEBTC employees effective on April 10, 2000, or after the SEC approved the merger.^[6][17]  In other words, the obligation of BPI to pay the salaries and benefits of the former FEBTC employees and its right of discipline and control over them only arose with the effectivity of the merger.  Concomitantly, the obligation of former FEBTC employees to render service to BPI and their right to receive benefits from the latter also arose upon the effectivity of the merger.  What is material is that all of these legal consequences of the merger took place during the life of an existing and valid CBA between BPI and theUnion wherein they have mutually consented to include a Union Shop Clause. 

From the plain, ordinary meaning of the terms of the Union Shop Clause, it covers employees who (a) enter the employ of BPI during the term of the CBA; (b) are part of the bargaining unit (defined in the CBA as comprised of BPI’s rank and file employees); and (c) become regular employees without distinguishing as to the manner they acquire their regular status.  Consequently, the number of such employees may adversely affect the majority status of theUnionand even its existence itself, as already amply explained in the Decision.

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BUT THERE ARE DIFFERENCES BETWEEN NEW EMPLOYEES HIRED AS PROBATIONARY AND FEBTC EMPLOYEES HIRED BY VIRTUE OF THE MERGER. WOULD THIS NOT JUSTIFY THE CONTENTION THAT FEBTC EMPLOYEES SHOULD NOT BE CONSIDERED AS NEW EMPLOYEES?

THESE DIFFERENCES ARE TOO INSUBSTANTIAL. BOTH EMPLOYEES WERE HIRED/EMPLOYED ONLY AFTER THE CBA WAS SIGNED. AT THE TIME THEY ARE BEING REQUIRED TO JOIN THE UNION, THEY ARE BOTH ALREADY REGULAR RANK AND FILE EMPLOYEES OF BPI. THEY BELONG TO THE SAME BARGAINING UNIT BEING REPRESENTED BY THE UNION. THEY BOTH ENJOY BENEFITS THAT THE UNION WAS ABLE TO SECURE FOR THEM UNDER THE CBA.

          Indeed, there are differences between (a) new employees who are hired as probationary or temporary but later regularized, and (b) new employees who, by virtue of a merger, are absorbed from another company as regular and permanent from the beginning of their employment with the surviving corporation.  It bears reiterating here that these differences are too insubstantial to warrant the exclusion of the absorbed employees from the application of the Union Shop Clause.  In the Decision, we noted that:

Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired non-regular employee who was regularized weeks or months after his hiring and a new employee who was absorbed from another bank as a regular employee pursuant to a merger, for purposes of applying the Union Shop Clause. Both employees were hired/employed only after the CBA was signed. At the time they are being required to join the Union, they are both already regular rank and file employees of BPI. They belong to the same bargaining unit being represented by the Union. They both enjoy benefits that the Unionwas able to secure for them under the CBA. When they both entered the employ of BPI, the CBA and the Union Shop Clause therein were already in effect and neither of them had the opportunity to express their preference for unionism or not. We see no cogent reason why the Union Shop Clause should not be applied equally to these two types of new employees, for they are undeniably similarly situated.^[7][18]

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BUT THE FEBTC EMPLOYEES HAD NO SAY IN THE MERGER OF FEBTC AND BPI. WHY SHOULD THEY BE SUBJECT TO A UNION CLOSE SHOP PROVISION IN A CBA CREATED WITHOUT THEIR PARTICIPATION?

COURTS MUST PLACE A PRACTICAL AND REALISTIC CONSTRUCTION UPON A CBA, GIVING DUE CONSIDERATION TO THE CONTEXT IN WHICH IT IS NEGOTIATED AND PURPOSE WHICH IT IS INTENDED TO SERVE.^[8][19]  IN LIKE MANNER BPI UNION LIKEWISE CANNOT PREVENT BPI TO MERGE WITH FEBTC WHICH IN THE PROCESS WOULD AFFECT THE NUMBER OF EMPLOYEES IN THE BARGAINING UNIT AND AFFECT THE UNION’S MAJORITY STATUS.

Again, it is worthwhile to highlight that a contrary interpretation of the Union Shop Clause would dilute its efficacy and put the certified union that is supposedly being protected thereby at the mercy of management.  For if the former FEBTC employees had no say in the merger of its former employer with another bank, as petitioner BPI repeatedly decries on their behalf, the Union likewise could not prevent BPI from proceeding with the merger which undisputedly affected the number of employees in the bargaining unit that the Union represents and may negatively impact on the Union’s majority status.  In this instance, we should be guided by the principle that courts must place a practical and realistic construction upon a CBA, giving due consideration to the context in which it is negotiated and purpose which it is intended to serve.^[9][19] 

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Republic of the Philippines

Supreme Court

Manila

EN BANC

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

R E S O L U T I O N

LEONARDO-DE CASTRO, J.:

In the present incident, petitioner Bank of the Philippine Islands (BPI) moves for reconsideration^[10][1] of our Decision dated August 10, 2010, holding that former employees of the Far East Bank and Trust Company (FEBTC) “absorbed” by BPI pursuant to the two banks’ merger in 2000 were covered by the Union Shop Clause in the then existing collective bargaining agreement (CBA)^[11][2] of BPI with respondent BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank (the Union). 

          To recall, the Union Shop Clause involved in this long standing controversy provided, thus:

ARTICLE II

x x x x

Section 2.  Union Shop  – New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as a condition of their continued employment.  It is understood that membership in good standing in the Union is a condition of their continued employment with the Bank.^[12][3]   (Emphases supplied.)

The bone of contention between the parties was whether or not the “absorbed” FEBTC employees fell within the definition of “new employees” under the Union Shop Clause, such that they may be required to join respondent union and if they fail to do so, the Union may request BPI to terminate their employment, as the Union in fact did in the present case. Needless to state, BPI refused to accede to theUnion’s request.  Although BPI won the initial battle at the Voluntary Arbitrator level, BPI’s position was rejected by the Court of Appeals which ruled that the Voluntary Arbitrator’s interpretation of the Union Shop Clause was at war with the spirit and rationale why the Labor Code allows the existence of such provision.  On review with this Court, we upheld the appellate court’s ruling and disposed of the case as follows:

WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the Court of Appeals is AFFIRMED, subject to the thirty (30) day notice requirement imposed herein. Former FEBTC employees who opt not to become union members but who qualify for retirement shall receive their retirement benefits in accordance with law, the applicable retirement plan, or the CBA, as the case may be.^[13][4]

Notwithstanding our affirmation of the applicability of the Union Shop Clause to former FEBTC employees, for reasons already extensively discussed in the August 10, 2010 Decision, even now BPI continues to protest the inclusion of said employees in the Union Shop Clause.

          In seeking the reversal of our August 10, 2010 Decision, petitioner insists that the parties to the CBA clearly intended to limit the application of the Union Shop Clause only to new employees who were hired as non-regular employees but later attained regular status at some point after hiring. FEBTC employees cannot be considered new employees as BPI merely stepped into the shoes of FEBTC as an employer purely as a consequence of the merger.^[14][5] 

Petitioner likewise relies heavily on the dissenting opinions of our respected colleagues, Associate Justices Antonio T. Carpio and Arturo D. Brion. From both dissenting opinions, petitioner derives its contention that “the situation of absorbed employees can be likened to old employees of BPI, insofar as their full tenure with FEBTC was recognized by BPI and their salaries were maintained and safeguarded from diminution” but such absorbed employees “cannot and should not be treated in exactly the same way as old BPI employees for there are substantial differences between them.”^[15][6]  Although petitioner admits that there are similarities between absorbed and new employees, they insist there are marked differences between them as well.  Thus, adopting Justice Brion’s stance, petitioner contends that the absorbed FEBTC employees should be considered “a sui generis group of employees whose classification will not be duplicated until BPI has another merger where it would be the surviving corporation.”^[16][7]  Apparently borrowing from Justice Carpio, petitioner propounds that the Union Shop Clause should be strictly construed since it purportedly curtails the right of the absorbed employees to abstain from joining labor organizations.^[17][8] 

          Pursuant to our directive, the Unionfiled its Comment^[18][9] on the Motion for Reconsideration.  In opposition to petitioner’s arguments, the Union, in turn, adverts to our discussion in the August 10, 2010 Decision regarding the voluntary nature of the merger between BPI and FEBTC, the lack of an express stipulation in the Articles of Merger regarding the transfer of employment contracts to the surviving corporation, and the consensual nature of employment contracts as valid bases for the conclusion that former FEBTC employees should be deemed new employees.^[19][10]  The Union argues that the creation of employment relations between former FEBTC employees and BPI (i.e., BPI’s selection and engagement of former FEBTC employees, its payment of their wages, power of dismissal and of control over the employees’ conduct) occurred after the merger, or to be more precise, after the Securities and Exchange Commission’s (SEC) approval of the merger.^[20][11]  TheUnion likewise points out that BPI failed to offer any counterargument to the Court’s reasoning that:

The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual employee’s right or freedom of association, is not to protect the union for the union’s sake. Laws and jurisprudence promote unionism and afford certain protections to the certified bargaining agent in a unionized company because a strong and effective union presumably benefits all employees in the bargaining unit since such a union would be in a better position to demand improved benefits and conditions of work from the employer. x x x.

x x x Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in recognition that ultimately the individual employee will be benefited by that policy. In the hierarchy of constitutional values, this Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy of encouraging unionism as an instrument of social justice.^[21][12]

          While most of the arguments offered by BPI have already been thoroughly addressed in the August 10, 2010 Decision, we find that a qualification of our ruling is in order only with respect to the interpretation of the provisions of the Articles of Merger and its implications on the former FEBTC employees’ security of tenure.

          Taking a second look on this point, we have come to agree with Justice Brion’s view that it is more in keeping with the dictates of social justice and the State policy of according full protection to labor to deem employment contracts as automatically assumed by the surviving corporation in a merger, even in the absence of an express stipulation in the articles of merger or the merger plan. In his dissenting opinion, Justice Brion reasoned that:

To my mind, due consideration of Section 80 of the Corporation Code, the constitutionally declared policies on work, labor and employment, and the specific FEBTC-BPI situation — i.e., a merger with complete “body and soul” transfer of all that FEBTC embodied and possessed and where both participating banks were willing (albeit by deed, not by their written agreement) to provide for the affected human resources by recognizing continuity of employment — should point this Court to a declaration that in a complete merger situation where there is total takeover by one corporation over another and there is silence in the merger agreement on what the fate of the human resource complement shall be, the latter should not be left in legal limbo and should be properly provided for, by compelling the surviving entity to absorb these employees. This is what Section 80 of the Corporation Code commands, as the surviving corporation has the legal obligation to assume all the obligations and liabilities of the merged constituent corporation.

Not to be forgotten is that the affected employees managed, operated and worked on the transferred assets and properties as their means of livelihood; they constituted a basic component of their corporation during its existence. In a merger and consolidation situation, they cannot be treated without consideration of the applicable constitutional declarations and directives, or, worse, be simply disregarded. If they are so treated, it is up to this Court to read and interpret the law so that they are treated in accordance with the legal requirements of mergers and consolidation, read in light of the social justice, economic and social provisions of our Constitution. Hence, there is a need for the surviving corporation to take responsibility for the affected employees and to absorb them into its workforce where no appropriate provision for the merged corporation’s human resources component is made in the Merger Plan.^[22][13]

          By upholding the automatic assumption of the non-surviving corporation’s existing employment contracts by the surviving corporation in a merger, the Court strengthens judicial protection of the right to security of tenure of employees affected by a merger and avoids confusion regarding the status of their various benefits which were among the chief objections of our dissenting colleagues.  However, nothing in this Resolution shall impair the right of an employer to terminate the employment of the absorbed employees for a lawful or authorized cause or the right of such an employee to resign, retire or otherwise sever his employment, whether before or after the merger, subject  to existing contractual obligations.  In this manner, Justice Brion’s theory of automatic assumption may be reconciled with the majority’s concerns with the successor employer’s prerogative to choose its employees and the prohibition against involuntary servitude.

          Notwithstanding this concession, we find no reason to reverse our previous pronouncement that the absorbed FEBTC employees are covered by the Union Shop Clause.

          Even in our August 10, 2010 Decision, we already observed that the legal fiction in the law on mergers (that the surviving corporation continues the corporate existence of the non-surviving corporation) is mainly a tool to adjudicate the rights and obligations between and among the merged corporations and the persons that deal with them.^[23][14]  Such a legal fiction cannot be unduly extended to an interpretation of a Union Shop Clause so as to defeat its purpose under labor law.  Hence, we stated in the Decision that:

           In any event, it is of no moment that the former FEBTC employees retained the regular status that they possessed while working for their former employer upon their absorption by petitioner. This fact would not remove them from the scope of the phrase “new employees” as contemplated in the Union Shop Clause of the CBA, contrary to petitioner’s insistence that the term “new employees” only refers to those who are initially hired as non-regular employees for possible regular employment. 

The Union Shop Clause in the CBA simply states that “new employees” who during the effectivity of the CBA “may be regularly employed” by the Bank must join the union within thirty (30) days from their regularization. There is nothing in the said clause that limits its application to only new employees who possess non-regular status, meaning probationary status, at the start of their employment. Petitioner likewise failed to point to any provision in the CBA expressly excluding from the Union Shop Clause new employees who are “absorbed” as regular employees from the beginning of their employment. What is indubitable from the Union Shop Clause is that upon the effectivity of the CBA, petitioner’s new regular employees (regardless of the manner by which they became employees of BPI) are required to join the Unionas a condition of their continued employment.^[24][15]

           Although by virtue of the merger BPI steps into the shoes of FEBTC as a successor employer as if the former had been the employer of the latter’s employees from the beginning it must be emphasized that, in reality, the legal consequences of the merger only occur at a specific date, i.e., upon its effectivity which is the date of approval of the merger by the SEC.  Thus, we observed in the Decision that BPI and FEBTC stipulated in the Articles of Merger that they will both continue their respective business operations until the SEC issues the certificate of merger and in the event no such certificate is issued, they shall hold each other blameless for the non-consummation of the merger.^[25][16] We likewise previously noted that BPI made its assignments of the former FEBTC employees effective on April 10, 2000, or after the SEC approved the merger.^[26][17]  In other words, the obligation of BPI to pay the salaries and benefits of the former FEBTC employees and its right of discipline and control over them only arose with the effectivity of the merger.  Concomitantly, the obligation of former FEBTC employees to render service to BPI and their right to receive benefits from the latter also arose upon the effectivity of the merger.  What is material is that all of these legal consequences of the merger took place during the life of an existing and valid CBA between BPI and theUnion wherein they have mutually consented to include a Union Shop Clause. 

From the plain, ordinary meaning of the terms of the Union Shop Clause, it covers employees who (a) enter the employ of BPI during the term of the CBA; (b) are part of the bargaining unit (defined in the CBA as comprised of BPI’s rank and file employees); and (c) become regular employees without distinguishing as to the manner they acquire their regular status.  Consequently, the number of such employees may adversely affect the majority status of theUnionand even its existence itself, as already amply explained in the Decision.

          Indeed, there are differences between (a) new employees who are hired as probationary or temporary but later regularized, and (b) new employees who, by virtue of a merger, are absorbed from another company as regular and permanent from the beginning of their employment with the surviving corporation.  It bears reiterating here that these differences are too insubstantial to warrant the exclusion of the absorbed employees from the application of the Union Shop Clause.  In the Decision, we noted that:

Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired non-regular employee who was regularized weeks or months after his hiring and a new employee who was absorbed from another bank as a regular employee pursuant to a merger, for purposes of applying the Union Shop Clause. Both employees were hired/employed only after the CBA was signed. At the time they are being required to join the Union, they are both already regular rank and file employees of BPI. They belong to the same bargaining unit being represented by the Union. They both enjoy benefits that the Unionwas able to secure for them under the CBA. When they both entered the employ of BPI, the CBA and the Union Shop Clause therein were already in effect and neither of them had the opportunity to express their preference for unionism or not. We see no cogent reason why the Union Shop Clause should not be applied equally to these two types of new employees, for they are undeniably similarly situated.^[27][18]

Again, it is worthwhile to highlight that a contrary interpretation of the Union Shop Clause would dilute its efficacy and put the certified union that is supposedly being protected thereby at the mercy of management.  For if the former FEBTC employees had no say in the merger of its former employer with another bank, as petitioner BPI repeatedly decries on their behalf, the Union likewise could not prevent BPI from proceeding with the merger which undisputedly affected the number of employees in the bargaining unit that the Union represents and may negatively impact on the Union’s majority status.  In this instance, we should be guided by the principle that courts must place a practical and realistic construction upon a CBA, giving due consideration to the context in which it is negotiated and purpose which it is intended to serve.^[28][19] 

We now come to the question:  Does our affirmance of our ruling that former FEBTC employees absorbed by BPI are covered by the Union Shop Clause violate their right to security of tenure which we expressly upheld in this Resolution?  We answer in the negative.

In Rance v. National Labor Relations Commission,^[29][20] we held that:

It is the policy of the state to assure the right of workers to “security of tenure” (Article XIII, Sec. 3 of the New Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act of social justice. When a person has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should be protected against any arbitrary deprivation of his job. Article 280 of the Labor Code has construed security of tenure as meaning that “the employer shall not terminate the services of an employee except for a just cause or when authorized by” the Code.  x x x (Emphasis supplied.)

We have also previously held that the fundamental guarantee of security of tenure and due process dictates that no worker shall be dismissed except for a just and authorized cause provided by law and after due process is observed.^[30][21]  Even as we now recognize the right to continuous, unbroken employment of workers who are absorbed into a new company pursuant to a merger, it is but logical that their employment may be terminated for any causes provided for under the law or in jurisprudence without violating their right to security of tenure.  As Justice Carpio discussed in his dissenting opinion, it is well-settled that termination of employment by virtue of a union security clause embodied in a CBA is recognized in our jurisdiction.^[31][22]  In Del Monte Philippines, Inc. v. Saldivar,^[32][23] we explained the rationale for this policy in this wise:

Article 279 of the Labor Code ordains that “in cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by [Title I, Book Six of the Labor Code].” Admittedly, the enforcement of a closed-shop or union security provision in the CBA as a ground for termination finds no extension within any of the provisions under Title I, Book Six of the Labor Code. Yet jurisprudence has consistently recognized, thus: “It is State policy to promote unionism to enable workers to negotiate with management on an even playing field and with more persuasiveness than if they were to individually and separately bargain with the employer. For this reason, the law has allowed stipulations for ‘union shop’ and ‘closed shop’ as means of encouraging workers to join and support the union of their choice in the protection of their rights and interests vis-a-vis the employer.”^[33][24] (Emphasis supplied.)

Although it is accepted that non-compliance with a union security clause is a valid ground for an employee’s dismissal, jurisprudence dictates that such a dismissal must still be done in accordance with due process.  This much we decreed in General Milling Corporation v. Casio,^[34][25] to wit:

The Court reiterated in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos that:

While respondent company may validly dismiss the employees expelled by the union for disloyalty under the union security clause of the collective bargaining agreement upon the recommendation by the union, this dismissal should not be done hastily and summarily thereby eroding the employees’ right to due process, self-organization and security of tenure. The enforcement of union security clauses is authorized by law provided such enforcement is not characterized by arbitrariness, and always with due process. Even on the assumption that the federation had valid grounds to expel the union officers, due process requires that these union officers be accorded a separate hearing by respondent company.

The twin requirements of notice and hearing constitute the essential elements of procedural due process. The law requires the employer to furnish the employee sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee of the employer’s decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality.

Irrefragably, GMC cannot dispense with the requirements of notice and hearing before dismissing Casio, et al. even when said dismissal is pursuant to the closed shop provision in the CBA. The rights of an employee to be informed of the charges against him and to reasonable opportunity to present his side in a controversy with either the company or his own union are not wiped away by a union security clause or a union shop clause in a collective bargaining agreement. x x x^[35][26] (Emphases supplied.)

In light of the foregoing, we find it appropriate to state that, apart from the fresh thirty (30)-day period from notice of finality of the Decision given to the affected FEBTC employees to join the Union before the latter can request petitioner to terminate the former’s employment, petitioner must still accord said employees the twin requirements of notice and hearing on the possibility that they may have other justifications for not joining the Union.  Similar to our August 10, 2010 Decision, we reiterate that our ruling presupposes there has been no material change in the situation of the parties in the interim.

WHEREFORE, the Motion for Reconsideration is DENIED.  The Decision dated August 10, 2010 is AFFIRMED, subject to the qualifications that:

(a)  Petitioner is deemed to have assumed the employment contracts of the Far East Bank and Trust Company (FEBTC) employees upon effectivity of the merger without break in the continuity of their employment, even without express stipulation in the Articles of Merger; and

(b)  Aside from the thirty (30) days, counted from notice of finality of the August 10, 2010 Decision, given to former FEBTC employees to join the respondent, said employees shall be accorded full procedural due process before their employment may be terminated.

SO ORDERED.

WE CONCUR:

RENATO C. CORONA

Chief Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

C E R T I F I C A T I O N

          Pursuant to Article VIII, Section 13 of the Constitution, I certify that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

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Decision

SERENO, J.:

Petitioner filed this present Petition for Review^[1][1] under Rule 45 of the Rules of Court, seeking a reversal of the Court of Appeals Decision,^[2][2] the dispositive portion of which states:

WHEREFORE, premises considered, the Decision dated April 15, 1996 rendered by the Regional Trial Court of Makati City, Branch 60, is hereby AFFIRMED, with MODIFICATIONS, as follows:

1)      The legal interest rate of six percent (6%) per annum should be computed from the date of the filing of the complaint which shall become twelve percent (12%) per annum from the time the judgment becomes final and executory until its satisfaction.

2)      The award of P300,000.00 as exemplary damages is reduced to P50,000.00;

3)      The award of P400,00.00 as attorney’s fees is likewise reduced to P75,000.00;

4)      The Decision is hereby affirmed in all other respects.

SO ORDERED.

The case arose when petitioner refused to pay the demurrage being collected by respondent.

The facts are as follows:

In a contract dated 26 April 1983, respondent was appointed as the exclusive Philippine indent representative of Richco Rotterdam B.V. (Richco), a foreign corporation, in the sale of the latter’s commodities. Under one of the terms of the contract, respondent was to assume the liabilities of all the Philippine buyers, should they fail to honor the commitments on the discharging operations of each vessel, including the payment of demurrage and other penalties. In such instances, Richco shall have the option to debit the account of respondent corresponding to the liabilities of the buyers, and respondent shall then be deemed to be subrogated to all the rights of Richco against these defaulting buyers.^[3][3]

Sometime in 1987, petitioner purchased Canadian barley and soybean meal from Richco. The latter thereafter chartered four (4) vessels to transport the products to thePhilippines. Each of the carrier bulk cargoes was covered by a Contract of Sale executed between respondent as the seller and duly authorized representative of Richco and petitioner as the buyer. The four contracts specifically referred to the charter party in determining demurrage or dispatch rate. The contract further provided that petitioner guarantees to settle any demurrage due within one (1) month from respondent’s presentation of the statement.

Upon delivery of the barley and soybean meal, petitioner failed to discharge the cargoes from the four (4) vessels at the computed allowable period to do so. Thus, it incurred a demurrage amounting to a total of US$193,937.41.

On numerous occasions, on behalf of Richco, respondent demanded from petitioner the payment of the demurrage, to no avail. Consequently, on 20 October 1991, Richco sent a communication to respondent, informing it that the demurrage due from petitioner had been debited from the respondent’s account.

Thereafter, on 12 February 1992, respondent filed with the Regional Trial Court (RTC), National Capital Judicial Region,MakatiCity, a Complaint for demurrage and damages against petitioner. Meanwhile, the latter raised the defense that the delay was due to respondent’s inefficiency in unloading the cargo.

On 15 April 1996, after trial on the merits, the RTC rendered a Decision^[4][4] holding petitioner liable to pay demurrage and damages to respondent, to wit:

34. WHEREFORE, the Court hereby renders judgment as follows:

34.1 The defendant REPUBLIC FLOUR MILLS CORPORATION is ordered to pay the plaintiff FORBES FACTORS, INC. the following:

34.1.1. US$193,937.41 or its Philippine PESO equivalent at the rate of exchange at the time of payment – As demurrage.

34.1.2 Six (6) percent of the amount in the preceding paragraph 34.1.1 – Per annum from October 29, 1991 until the said amount is fully paid – As damages.

34.1.3. P300,000.00 – As exemplary damages.

34.1.4. P 400,000.00 – As attorney’s fees.

34.2. The COUNTERCLAIM is DISMISSED; and

34.3. Cost is taxed against the defendant.

The RTC found that the delay in discharging the cargoes within the allowable period was due to petitioner’s failure to provide enough barges on which to load the goods. It likewise found that petitioner in fact acknowledged that the latter had incurred demurrage when it alleged that the computation was bloated. Petitioner was thus liable to pay demurrage based on the sales contracts executed with respondent and on the contract executed between respondent and Richco.

Finally, the court ruled that respondent was entitled to damages from petitioner’s “wanton, fraudulent, reckless, oppressive or malevolent” refusal to pay the latter’s liabilities despite repeated demands.

Subsequently, petitioner appealed to the Court of Appeals (CA), alleging that respondent was not a real party-in-interest to bring the collection suit. Petitioner insisted that the payment of demurrage should be made to the owner of the vessels that transported the goods, and not to respondent who was merely the indent representative of Richco, the charterer of the vessel. In addition, petitioner claimed that it was denied due process when the RTC refused to reset the hearing for the presentation of Reynaldo Santos, petitioner’s witness and export manager. Finally, petitioner contested the RTC’s award of exemplary damages and attorney’s fees.

On 18 February 2002, the CA promulgated the assailed Decision. It upheld the validity of the Contracts of Sale and held that these had the force of law between the contracting parties and must be complied with in good faith. However, the appellate court modified the trial court’s award of damages. It held that exemplary damages are not intended to enrich anyone, thus, reducing the amount from P300,000 to P50,000. It also found the award of attorney’s fees to be excessive, and consequently reduced it from P400,000 to P75,000.

Hence this Petition.

Three issues are raised for the resolution by this Court. First, petitioner assails the right of respondent to demand payment of demurrage. Petitioner asserts that, by definition, demurrage is the sum fixed by the contract of carriage as remuneration to the ship owner for the detention of the vessel beyond the number of days allowed by the charter party.^[5][5] Thus, since respondent is not the ship owner, it has no right to demand the payment of demurrage and has no personality to bring the claim against petitioner. Second, petitioner questions the propriety of the award of damages in favor of respondent. And third, the former insists that it was denied due process when the RTC denied its Motion to reset the hearing to present its witness.

We find the petition without merit.

The facts are undisputed. The delay incurred by petitioner in discharging the cargoes from the vessels was due to its own fault. Its obligation to demurrage is established by the Contracts of Sale it executed, wherein it agreed to the conditions to provide all discharging facilities at its expense in order to effect the immediate discharge of cargo; and to place for its account all discharging costs, fees, taxes, duties and all other charges incurred due to the nature of the importation.^[6][6]

Meanwhile, respondent unequivocally established that Richco charged to it the demurrage due from petitioner. Thus, at the moment that Richco debited the account of respondent, the latter is deemed to have subrogated to the rights of the former, who in turn, paid demurrage to the ship owner. It is therefore immaterial that respondent is not the ship owner, since it has been able to prove that it has stepped into the shoes of the creditor.

Subrogation is either “legal” or “conventional.” Legal subrogation is an equitable doctrine and arises by operation of the law, without any agreement to that effect executed between the parties; conventional subrogation rests on a contract, arising where “an agreement is made that the person paying the debt shall be subrogated to the rights and remedies of the original creditor.”^[7][7] The case at bar is an example of legal subrogation, the petitioner and respondent having no express agreement on the right of subrogation. Thus, it is of no moment that the Contracts of Sale did not expressly state that demurrage shall be paid to respondent. By operation of law, respondent has become the real party-in-interest to pursue the payment of demurrage.  As aptly stated by the RTC:

19. True it is that demurrage is, as a rule, an amount payable to a shipowner by a charterer for the detention of the vessel beyond the period allowed for the loading or unloading or sailing. This however, does not mean that a party cannot stipulate with another who is not a shipowner, on demurrage. In this case, FORBES stipulated under the charter parties on demurrage with the shipowners. This stipulation could be the basis of the provisions on demurrage in the four (4) Contracts of Sale (Exhs. B, N, X, and CC) and contract between FORBES and RICHCO (Exh. A).

xxx                               xxx                               xxx

20. RICHCO debited the US$193,937.41 from the accounts of FORBES as evidenced by Exh. OO. Hence, FORBES was subrogated to the right of RICHCO to collect the said amount from RFM pursuant to the contract between RICHCO and FORBES (Exh. A).

21. Under Exh. A, FORBES guaranteed its “…buyers (sic) payment schedule…” Consequently, it was subrogated to the rights of RICHCO arising from the failure of RFM to pay its demurrage and FORBES paid for it. The subrogation was pursuant to Articles 1302 and 2067, New Civil Code, which read:

“Art. 1302. It is presumed that there is legal subrogation:

(1)   When a creditor pays another creditor who is preferred, even without the debtor’s knowledge;

(2)   When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3)   When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter’s share.”

“Art. 2067. The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor.

If the guarantor has compromised with the creditor, he cannot demand of the debtor more than what he has really paid.”

As we held in Fireman’s Fund Insurance Company v. Jamila & Company, Inc.:

…Subrogation has been referred to as the doctrine of substitution. It “is an arm of equity that may guide or even force one to pay a debt for which an obligation was incurred but which was in whole or in part paid by another” (83 C.J.S. 576, 678, note 16, citing Fireman’s Fund Indemnity Co. vs. State Compensation Insurance Fund, 209 Pac. 2d 55).

“Subrogation is founded on principles of justice and equity, and its operation is governed by principles of equity. It rests on the principle that substantial justice should be attained regardless of form, that is, its basis is the doing of complete, essential, and perfect justice between all the parties without regard to form”(83 C.J.S. 579- 80)^[8][8]

  Anent the second issue, we have previously held in Pepsi Cola Products Phil., Inc. v. Court of Appeals,^[9][9] that a motion for continuance of postponement is not a matter of right. Rather, the motion is addressed to the sound discretion of the court, whose action thereon will not be disturbed by appellate courts in the absence of clear and manifest abuse of discretion, resulting in a denial of substantial justice.

On the last issue, we find that the award of exemplary damages proper. Petitioner refused to honor the contract despite respondent’s repeated demands and its proof of payment to Richco; and despite its repeated promise to settle its outstanding obligations in the span of almost five years. Petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. Because respondent was also forced to initiate the present Complaint, it was only proper that it was awarded attorney’s fees. Lastly, the CA was correct in reducing the award of exemplary damages or attorney’s fees, since neither is meant to enrich anyone.

WHEREFORE, in view of the foregoing, the assailed Decision of the Court of Appeals is hereby AFFIRMED. The present Petition is DENIED.

          SO ORDERED.

MARIA LOURDES P. A. SERENO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

       ARTURO D. BRION                                 BIENVENIDO L. REYES

           Associate Justice                                                Associate Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

A T T E S T A T I O N

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                            ANTONIO T. CARPIO

                                                                  Associate Justice

                                                                      Chairperson, Second Division

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

                                                                            Chief Justice

CASE 2011-0211: NEMESIO FLORAN AND CARIDAD FLORAN VS. ATTY. ROY PRULE EDIZA (A.C. NO. 5325, 19 OCTOBER 2011, CARPIO, J.) SUBJECT: OBLIGATION OF A LAWYER TO BE TRUTHFUL, FAIR AND HONEST IN PROTECTING HIS CLIENT’S RIGHTS (BRIEF TITLE: SPOUSES FLORAN VS. ATTY. EDIZA)

===========================

DISPOSITIVE:

WHEREFORE, we find respondent Atty. Roy Prule Ediza administratively liable for violating Rule 1.01 of Canon 1, Canon 15, and Rule 18.03 of Canon 18 of the Code of Professional Responsibility. He is hereby SUSPENDED from the practice of law for six months, effective upon receipt of this Decision. He is DIRECTED to return to the Spouses Nemesio and Caridad Floran the two (2) sets of documents that he misled the spouses and Sartiga Epal to sign. He is further ORDERED to pay Spouses Nemesio and Caridad Floran, within 30 days from receipt of this Decision, the amount of P125,463.38, with legal interest from 8 September 2000 until fully paid. He is warned that a repetition of the same or similar acts in the future shall be dealt with more severely.

Let a copy of this Decision be entered in the record of respondent as attorney. Further, let other copies be served on the IBP and the Office of the Court Administrator, which is directed to circulate them to all the courts in the country for their information and guidance.

SO ORDERED.

===========================

SECOND DIVISION

x- – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

DECISION

CARPIO, J.:

The Case

This administrative case arose from an Affidavit/Complaint filed by spouses Nemesio (Nemesio) and Caridad (Caridad) Floran against Atty. Roy Prule Ediza (Atty. Ediza) for unethical conduct.

The Facts

Spouses Floran own an unregistered 3.5525 hectare parcel of land, particularly described as Cad. Lot No. 422-A, Pls-923 and situated in San Martin, Villanueva, Misamis Oriental. The land is covered by a tax declaration in the name of Sartiga Epal (Epal), a relative, who gave the property to the Spouses Floran.

On 9 August 1996, a certain Esteban Valera filed an action¹ for judicial foreclosure of mortgage on the house situated on the land owned by the Spouses Floran with the Regional Trial Court (RTC) of Cagayan de Oro City, Branch 41. The action for foreclosure involved an amount of P7,500.

Spouses Floran sought the assistance of Atty. Ediza. On 24 September 1996, Atty. Ediza filed a Motion to Dismiss on the grounds of lack of jurisdiction and cause of action. On 23 October 1996, the RTC granted the motion to dismiss the case without prejudice based on non-compliance with barangay conciliation procedures under the Revised Katarungang Pambarangay Law.

Sometime in 1997, the Spouses Floran sold a hectare or 10,910 square meters of their 3.5525 hectare land to Phividec Industrial Authority (Phividec) for P25 per square meter totaling to the amount of P272,750, payable in three installments – (1) P55,132; (2) P120,000, and (3) P97,618. The installments were paid and released within the months of June to July 1997. The sale was evidenced by a Deed of Undertaking of Lot Owner executed by Nemesio and Phividec’s representative and notarized by Atty. Ediza on 31 March 1997.

Phividec then required the couple to execute a waiver in Phividec’s favor. The Spouses Floran again sought the help of Atty. Ediza for the preparation and notarization of the waiver. Atty. Ediza informed the Spouses Floran to have the original owner of the land, Epal, sign a Deed of Absolute Sale in their favor. Atty. Ediza gave the Spouses Floran several documents for Epal to sign. Caridad visited Epal in Bunawan, Agusan del Sur and acquired her approval and expressed assent to the conveyance, as evidenced by a Deed of Absolute Sale made by Epal in favor of Nemesio for P2,000.

On 11 June 1998, Nemesio and Phividec executed the Deed of Absolute Sale of Unregistered Land. Out of the total amount of P272,750, which Phividec paid and released to the Spouses Floran, Atty. Ediza received the amount of P125,463.38 for the titling of the remaining portion of the land, other expenses and attorney’s fees.

Spouses Floran went back to Atty. Ediza several times to follow-up on the title. However, Atty. Ediza failed to fulfill his promises. After the lapse of two years, with the land still unregistered, the Spouses Floran asked Atty. Ediza for the return of their money. Atty. Ediza refused. Thus, Spouses Floran presented their complaint before the chapter president of the Integrated Bar of the Philippines (IBP) Misamis Oriental.

The IBP called the Spouses Floran and Atty. Ediza to a conference. During the dialogue, Atty. Ediza refused to return the money but promised to tear a document evidencing sale by the Spouses Floran to him of one hectare land of their property for P50,000. The Spouses Floran claimed that they had no knowledge that they executed such document in favor of Atty. Ediza and suspected that they might have signed a document earlier which Atty. Ediza told them not to read. Afterwards, the Spouses Floran filed their formal complaint before the Supreme Court.

In the Complaint/Affidavit dated 8 September 2000, Caridad alleged that Atty. Ediza gave them certain documents, including a Deed of Absolute Sale, for Epal to sign in order to transfer the land in their name. However, the Spouses Floran later discovered that one of the documents given by Atty. Ediza is a deed of sale for a one hectare land in the same property executed by Epal in favor of Atty. Ediza for a consideration of P2,000. When the Spouses Floran confronted Atty. Ediza, he initially denied the document but then later promised to tear and destroy it.

In his Comment dated 23 January 2001, Atty. Ediza claimed that the Spouses Floran voluntarily gave him one hectare of the 3.5525 hectare land as payment for handling and winning the civil case for foreclosure of mortgage. Atty. Ediza explained that the Spouses Floran did not find the lot interesting, lacking in good topography. He also stated that the property only had an assessed value of P23,700 at the time it was presented to him.

Thereafter, towards the end of 1996, when Atty. Ediza learned that Phividec was interested to buy a hectare of the Spouses Floran’s land, and considering that he has a hectare of undivided portion in the property, he suggested to the Spouses Floran that both of them sell half a hectare each and equally share in the proceeds of the sale. After Phividec made its full payment, Atty. Ediza gave fifty percent of the proceeds to the Spouses Floran and he kept the other half. Thereafter, Atty. Ediza wanted his remaining share in the land consisting of 4,545 square meters be titled in his name. Atty. Ediza conveyed this to the Spouses Floran and volunteered to take care of titling the land, including the Spouses Floran’s remaining share, with no cost to them.

Atty. Ediza stated that since Phividec had not yet applied for a separate tax declaration which would segregate its portion from the remainder of the property, he thought of holding in abeyance the separate survey on the remainder of the land. Also, Atty. Ediza was in a hurry to have the land titled with the intention of selling it so he informed the Spouses Floran to just follow up with Phividec.

At the IBP conference, Atty. Ediza stated that he only agreed to return the 4,545 square meter portion of the land to amicably settle the case with the Spouses Floran. He asserted that the Deed of Sale signed by the Spouses Floran in his favor served as payment for the dismissal of the case he handled for the Spouses Floran. Atty. Ediza denied that the money he received was intended for the titling of the remaining portion of the land. Atty. Ediza claimed that the complaint against him stemmed from a case where he represented a certain Robert Sabuclalao for recovery of land. The land was being occupied by the Church of the Assembly of God where Nemesio Floran serves as pastor.

In a Resolution dated 7 March 2001, the Court resolved to refer the case to the IBP for investigation, report and recommendation.

The IBP’s Report and Recommendation

On 14 August 2008, the investigating commissioner of the Commission on Bar Discipline of the IBP submitted his Report and found that Atty. Ediza (1) failed to meet the standards prescribed by Rule 1.01 of Canon 1 and Canon 15, and (2) violated Rule 18.03 of Canon 18 of the Code of Professional Responsibility. The IBP recommended that Atty. Ediza be imposed the penalty of six months suspension from the practice of law.

In finding Atty. Ediza guilty of violating the Code of Professional Responsibility, the Investigating Commissioner opined:

After careful evaluation of the claims of the parties vis-a-vis the documents available, the version of the complainants appear to be credible while that of the respondent is shot through with inconsistencies.

x x x

b. The foreclosure case of complainants involved only P7,500.00 and respondent Ediza filed only a single motion and attended only two hearings. Thus, it is highly incredible [that] complainants whom respondent Ediza claims were destitute will voluntarily and generously donate to him 1 hectare of their land valued at P50,000.00. As it turned out, the 1 hectare portion is worth not only P50,000.00 [but] more than P200,000.00.

c. The deed of sale of a portion of complainants’ land to respondent Ediza is admittedly simulated because while it states that the consideration for the sale is P50,000.00, neither party claims that any money was paid by respondent Ediza to complainants.

      d.            As a lawyer, Atty. Ediza must be aware that a deed of sale involving real property must be notarized to be enforceable. The document was unexplainably never notarized.

Thus, this Commission finds that respondent Ediza must have caused the complainants to unknowingly sign the deed of sale of a portion of their property in his favor. It may further be noted that in their complaint, complainants allege that they saw in the files of respondent Ediza a copy of deed of sale of a property executed by Sartiga Epal in favor of Atty. Ediza which he promised to destroy when confronted about it by complainants. This was never denied by Atty. Ediza.

Such conduct fails to come up to the standard prescribed by Canon 1.01 that “A lawyer shall not engage in unlawful, dishonest, immoral and deceitful conduct” and Canon 15 that “A lawyer shall observe candor, fairness and loyalty in all his dealings and transaction with his client.”

On the second issue, x x x the claim of the complainants that they agreed to give P125,000.00 of the proceeds of the sale of their property to respondent Ediza to register the remaining portion also appears to be more credible for the following reasons:

1.      There is no credible reason for complainants to expect and demand that respondent Ediza undertake the registration of their property except that they have paid for it. If they were aware that they gave 1 hectare of their property to respondent Ediza for handling their civil case and that they are not paying respondent Ediza to register their property, it is not likely that simple folks like them would be so bold to demand for such valuable service from him for free.

2.      There is no credible reason for respondent to willingly undertake for free for complainants the not so simple task of registering an untitled property.

3.      As previously stated, the P125,000.00 given to respondent Ediza by complainants is obviously too generous for simply having handled the civil case involving only P7,500.00. There must have been another reason for complainants to willingly pay the said amount to respondent and the registration for their remaining property appears to be a credible reason.

It should also be noted that respondent Atty. Ediza does not even allege that he has taken any step towards accomplishing the registration of the property of the complainants prior to the filing of this complaint. Whether or not he agreed to do it for free or for a fee, respondent Ediza should have complied with his promise to register the property of complainants unless he has valid reasons not to do so. He has not also given any credible explanation why he failed to do so.

Such conduct of respondent Ediza violates Canon 18.03 that “A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable.”

Atty. Ediza filed a Motion for Reconsideration. On 26 June 2011, in Resolution No. XIX-2011-433, the Board of Governors of the IBP affirmed the findings of the investigating commissioner. The resolution states:

RESOLVED to unanimously DENY Respondent’s Motion for Reconsideration, there being no cogent reason to reverse the findings of the Board and it being a mere reiteration of the matters which had already been threshed out and taken into consideration. Thus, for lack of substantial ground or reason to disturb it, the Board of Governors’ Resolution No. XVIII-2008-401 dated August 14, 2008 is hereby AFFIRMED.

The Court’s Ruling

After a careful review of the records of the case, we agree with the findings of the IBP and find reasonable grounds to hold respondent Atty. Ediza administratively liable.

The practice of law is a privilege bestowed by the State on those who show that they possess the legal qualifications for it. Lawyers are expected to maintain at all times a high standard of legal proficiency and morality, including honesty, integrity and fair dealing. They must perform their fourfold duty to society, the legal profession, the courts and their clients, in accordance with the values and norms of the legal profession as embodied in the Code of Professional Responsibility.²

Rule 1.01 of Canon 1, Canon 15, and Rule 18.03 of Canon 18 of the Code of Professional Responsibility provide:

CANON 1

A LAWYER SHALL UPHOLD THE CONSTITUTION, OBEY THE LAWS OF THE LAND AND PROMOTE RESPECT FOR LAW OF AND LEGAL PROCESSES.

Rule 1.01 – A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct. x x x

CANON 15

A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS DEALINGS AND TRANSACTIONS WITH HIS CLIENTS.

CANON 18

A LAWYER SHALL SERVE HIS CLIENT WITH COMPETENCE AND DILIGENCE.

Rule 18.03 – A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable.

In the present case, the Spouses Floran assert that they had no knowledge that they signed a deed of sale to transfer a portion of their land in favor of Atty. Ediza. They also insist that Atty. Ediza failed to comply with his promise to register their property despite receiving the amount of P125,463.38. On the other hand, Atty. Ediza maintains that he acquired the land from the Spouses Floran because of their “deep gratitude” to him in the dismissal of the civil case for foreclosure of mortgage. Atty. Ediza further claims that the amount of P125,463.38 which he received was his rightful share from the sale of the land.

It is clear from the records that Atty. Ediza deceived the Spouses Floran when he asked them to unknowingly sign a deed of sale transferring a portion of their land to Atty. Ediza. Atty. Ediza also did the same to Epal when he gave Caridad several documents for Epal to sign. Atty. Ediza made it appear that Epal conveyed her rights to the land to him and not to the Spouses Floran. Moreover, when the sale of the Spouses Floran’s land pushed through, Atty. Ediza received half of the amount from the proceeds given by the buyer and falsely misled the Spouses Floran into thinking that he will register the remaining portion of the land.

Lamentably, Atty. Ediza played on the naïveté of the Spouses Floran to deprive them of their valued property. This is an unsavory behavior from a member of the legal profession. Aside from giving adequate attention, care and time to his client’s case, a lawyer is also expected to be truthful, fair and honest in protecting his client’s rights. Once a lawyer fails in this duty, he is not true to his oath as a lawyer.

In Santos v. Lazaro³ and Dalisay v. Mauricio,⁴ we held that Rule 18.03 of the Code of Professional Responsibility is a basic postulate in legal ethics. Indeed, when a lawyer takes a client’s cause, he covenants that he will exercise due diligence in protecting the latter’s rights. Failure to exercise that degree of vigilance and attention expected of a good father of a family makes the lawyer unworthy of the trust reposed in him by his client and makes him answerable not just to his client but also to the legal profession, the courts and society.

The Supreme Court, as guardian of the legal profession, has ultimate disciplinary power over attorneys. This authority to discipline its members is not only a right, but a moral and legal obligation as well. The Court will not tolerate such action from a member of the legal profession who deliberately and maliciously did not protect his client’s interests.

In view of the foregoing, we find that suspension from the practice of law for six months is warranted. Atty. Ediza is directed to return to the Spouses Floran the two (2) sets of documents that he misled the spouses and Epal to sign. Atty. Ediza is also directed to return the amount of P125,463.38, representing the amount he received from the proceeds of the sale of the land belonging to the Spouses Floran, with legal interest from the time of the filing of the administrative complaint until fully paid.

WHEREFORE, we find respondent Atty. Roy Prule Ediza administratively liable for violating Rule 1.01 of Canon 1, Canon 15, and Rule 18.03 of Canon 18 of the Code of Professional Responsibility. He is hereby SUSPENDED from the practice of law for six months, effective upon receipt of this Decision. He is DIRECTED to return to the Spouses Nemesio and Caridad Floran the two (2) sets of documents that he misled the spouses and Sartiga Epal to sign. He is further ORDERED to pay Spouses Nemesio and Caridad Floran, within 30 days from receipt of this Decision, the amount of P125,463.38, with legal interest from 8 September 2000 until fully paid. He is warned that a repetition of the same or similar acts in the future shall be dealt with more severely.

Let a copy of this Decision be entered in the record of respondent as attorney. Further, let other copies be served on the IBP and the Office of the Court Administrator, which is directed to circulate them to all the courts in the country for their information and guidance.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

ARTURO D. BRION

Associate Justice

MARIA LOURDES P. A. SERENO BIENVENIDO L. REYES

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

* Designated Acting Member per Special Order No. 1114 dated 3 October 2011.

1 Docketed as Civil Case No. 96-516.

2 Spouses Garcia v. Atty. Bala, 512 Phil. 486 (2005).

3 445 Phil. 1 (2003).

4 496 Phil. 393 (2005).