J.A.B. Bulao & Associates

THE HERITAGE HOTEL MANILA, ACTING THROUGH ITS OWNER, GRAND PLAZA HOTEL CORPORATION VS. NATIONAL UNION OF WORKERS IN THE HOTEL, RESTAURANT AND ALLIED INDUSTRIES-HERITAGE HOTEL MANILA SUPERVISORS CHAPTER (NUWHRAIN-HHMSC) (G.R. NO. 178296, 12 JANUARY 2011, NACHURA, J.) SUBJECTS: JURISDICTION OF BUREAU OF LABOR RELATIONS; POWER OF CONTROL OF DOLE SECRETARY; UNION REGISTRATION. (BRIEF TITLE: HERITAGE HOTEL VS. NATIONAL UNION OF WORKERS.)

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DECISION

NACHURA, J.: 

          Before the Court is a petition for review on certiorari of the Decision^[1][1] of the Court of Appeals (CA) dated May 30, 2005 and Resolution dated June 4, 2007. The assailed Decision affirmed the dismissal of a petition for cancellation of union registration filed by petitioner, Grand Plaza Hotel Corporation, owner of Heritage Hotel Manila, against respondent, National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC), a labor organization of the supervisory employees of Heritage Hotel Manila.

          The case stemmed from the following antecedents:

On October 11, 1995, respondent filed with the Department of Labor and Employment-National Capital Region (DOLE-NCR) a petition for certification election.^[2][2]  The Med-Arbiter granted the petition on February 14, 1996 and ordered the holding of a certification election.^[3][3] On appeal, the DOLE Secretary, in a Resolution dated August 15, 1996, affirmed the Med-Arbiter’s order and remanded the case to the Med-Arbiter for the holding of a preelection conference on February 26, 1997. Petitioner filed a motion for reconsideration, but it was denied on September 23, 1996.

          The preelection conference was not held as initially scheduled; it was held a year later, or on February 20, 1998. Petitioner moved to archive or to dismiss the petition due to alleged repeated non-appearance of respondent. The latter agreed to suspend proceedings until further notice. The preelection conference resumed on January 29, 2000.

          Subsequently, petitioner discovered that respondent had failed to submit to the Bureau of Labor Relations (BLR) its annual financial report for several years and the list of its members since it filed its registration papers in 1995. Consequently, on May 19, 2000, petitioner filed a Petition for Cancellation of Registration of respondent, on the ground of the non-submission of the said documents. Petitioner prayed that respondent’s Certificate of Creation of Local/Chapter be cancelled and its name be deleted from the list of legitimate labor organizations. It further requested the suspension of the certification election proceedings.^[4][4] 

          On June 1, 2000, petitioner reiterated its request by filing a Motion to Dismiss or Suspend the [Certification Election] Proceedings,^[5][5] arguing that the dismissal or suspension of the proceedings is warranted, considering that the legitimacy of respondent is seriously being challenged in the petition for cancellation of registration. Petitioner maintained that the resolution of the issue of whether respondent is a legitimate labor organization is crucial to the issue of whether it may exercise rights of a legitimate labor organization, which include the right to be certified as the bargaining agent of the covered employees.

          Nevertheless, the certification election pushed through on June 23, 2000. Respondent emerged as the winner.^[6][6]

On June 28, 2000, petitioner filed a Protest with Motion to Defer Certification of Election Results and Winner,^[7][7] stating that the certification election held on June 23, 2000 was an exercise in futility because, once respondent’s registration is cancelled, it would no longer be entitled to be certified as the exclusive bargaining agent of the supervisory employees. Petitioner also claimed that some of respondent’s members were not qualified to join the union because they were either confidential employees or managerial employees. It then prayed that the certification of the election results and winner be deferred until the petition for cancellation shall have been resolved, and that respondent’s members who held confidential or managerial positions be excluded from the supervisors’ bargaining unit.

         Meanwhile, respondent filed its Answer^[8][8] to the petition for the cancellation of its registration. It averred that the petition was filed primarily to delay the conduct of the certification election, the respondent’s certification as the exclusive bargaining representative of the supervisory employees, and the commencement of bargaining negotiations. Respondent prayed for the dismissal of the petition for the following reasons: (a) petitioner is estopped from questioning respondent’s status as a legitimate labor organization as it had already recognized respondent as such during the preelection conferences; (b) petitioner is not the party-in-interest, as the union members are the ones who would be disadvantaged by the non-submission of financial reports; (c) it has already complied with the reportorial requirements, having submitted its financial statements for 1996, 1997, 1998, and 1999, its updated list of officers, and its list of members for the years 1995, 1996, 1997, 1998, and 1999; (d) the petition is already moot and academic, considering that the certification election had already been held, and the members had manifested their will to be represented by respondent.

          Citing National Union of Bank Employees v. Minister of Labor, et al.^[9][9] and Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma,^[10][10] the Med-Arbiter held that the pendency of a petition for cancellation of registration is not a bar to the holding of a certification election. Thus, in an Order^[11][11] dated January 26, 2001, the Med-Arbiter dismissed petitioner’s protest, and certified respondent as the sole and exclusive bargaining agent of all supervisory employees.

          Petitioner subsequently appealed the said Order to the DOLE Secretary.^[12][12] The appeal was later dismissed by DOLE Secretary Patricia A. Sto. Tomas (DOLE Secretary Sto. Tomas) in the Resolution of August 21, 2002.^[13][13] Petitioner moved for reconsideration, but the motion was also denied.^[14][14]

          In the meantime, Regional Director Alex E. Maraan (Regional Director Maraan) of DOLE-NCR finally resolved the petition for cancellation of registration. While finding that respondent had indeed failed to file financial reports and the list of its members for several years, he, nonetheless, denied the petition, ratiocinating that freedom of association and the employees’ right to self-organization are more substantive considerations. He took into account the fact that respondent won the certification election and that it had already been certified as the exclusive bargaining agent of the supervisory employees. In view of the foregoing, Regional Director Maraan—while emphasizing that the non-compliance with the law is not viewed with favor—considered the belated submission of the annual financial reports and the list of members as sufficient compliance thereof and considered them as having been submitted on time. The dispositive portion of the decision^[15][15] dated December 29, 2001 reads:

WHEREFORE, premises considered, the instant petition to delist the National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter from the roll of legitimate labor organizations is hereby DENIED.

SO ORDERED.^[16][16]

          Aggrieved, petitioner appealed the decision to the BLR.^[17][17] BLR Director Hans Leo Cacdac inhibited himself from the case because he had been a former counsel of respondent.

          In view of Director Cacdac’s inhibition, DOLE Secretary Sto. Tomas took cognizance of the appeal. In a resolution^[18][18] dated February 21, 2003, she dismissed the appeal, holding that the constitutionally guaranteed freedom of association and right of workers to self-organization outweighed respondent’s noncompliance with the statutory requirements to maintain its status as a legitimate labor organization.

Petitioner filed a motion for reconsideration,^[19][19] but the motion was likewise denied in a resolution^[20][20] dated May 30, 2003. DOLE Secretary Sto. Tomas admitted that it was the BLR which had jurisdiction over the appeal, but she pointed out that the BLR Director had voluntarily inhibited himself from the case because he used to appear as counsel for respondent. In order to maintain the integrity of the decision and of the BLR, she therefore accepted the motion to inhibit and took cognizance of the appeal.

          Petitioner filed a petition for certiorari with the CA, raising the issue of whether the DOLE Secretary acted with grave abuse of discretion in taking cognizance of the appeal and affirming the dismissal of its petition for cancellation of respondent’s registration.

          In a Decision dated May 30, 2005, the CA denied the petition. The CA opined that the DOLE Secretary may legally assume jurisdiction over an appeal from the decision of the Regional Director in the event that the Director of the BLR inhibits himself from the case. According to the CA, in the absence of the BLR Director, there is no person more competent to resolve the appeal than the DOLE Secretary. The CA brushed aside the allegation of bias and partiality on the part of the DOLE Secretary, considering that such allegation was not supported by any evidence.

          The CA also found that the DOLE Secretary did not commit grave abuse of discretion when she affirmed the dismissal of the petition for cancellation of respondent’s registration as a labor organization. Echoing the DOLE Secretary, the CA held that the requirements of registration of labor organizations are an exercise of the overriding police power of the State, designed for the protection of workers against potential abuse by the union that recruits them. These requirements, the CA opined, should not be exploited to work against the workers’ constitutionally protected right to self-organization.

          Petitioner filed a motion for reconsideration, invoking this Court’s ruling in Abbott Labs. Phils., Inc. v. Abbott Labs. Employees Union,^[21][21] which categorically declared that the DOLE Secretary has no authority to review the decision of the Regional Director in a petition for cancellation of union registration, and Section 4,^[22][22] Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code.

          In its Resolution^[23][23] dated June 4, 2007, the CA denied petitioner’s motion, stating that the BLR Director’s inhibition from the case was a peculiarity not present in the Abbott case, and that such inhibition justified the assumption of jurisdiction by the DOLE Secretary.

          In this petition, petitioner argues that:

I.

The Court of Appeals seriously erred in ruling that the Labor Secretary properly assumed jurisdiction over Petitioner’s appeal of the Regional Director’s Decision in the Cancellation Petition x x x.

A.             Jurisdiction is conferred only by law. The Labor Secretary had no jurisdiction to review the decision of the Regional Director in a petition for cancellation. Such jurisdiction is conferred by law to the BLR.

B.              The unilateral inhibition by the BLR Director cannot justify the Labor Secretary’s exercise of jurisdiction over the Appeal.

C.              The Labor Secretary’s assumption of jurisdiction over the Appeal without notice violated Petitioner’s right to due process.

II.

The Court of Appeals gravely erred in affirming the dismissal of the Cancellation Petition despite the mandatory and unequivocal provisions of the Labor Code and its Implementing Rules.^[24][24]

The petition has no merit.

          Jurisdiction to review the decision of the Regional Director lies with the BLR. This is clearly provided in the Implementing Rules of the Labor Code and enunciated by the Court in Abbott. But as pointed out by the CA, the present case involves a peculiar circumstance that was not present or covered by the ruling in Abbott. In this case, the BLR Director inhibited himself from the case because he was a former counsel of respondent. Who, then, shall resolve the case in his place?

In Abbott, the appeal from the Regional Director’s decision was directly filed with the Office of the DOLE Secretary, and we ruled that the latter has no appellate jurisdiction. In the instant case, the appeal was filed by petitioner with the BLR, which, undisputedly, acquired jurisdiction over the case. Once jurisdiction is acquired by the court, it remains with it until the full termination of the case.^[25][25]

Thus, jurisdiction remained with the BLR despite the BLR Director’s inhibition. When the DOLE Secretary resolved the appeal, she merely stepped into the shoes of the BLR Director and performed a function that the latter could not himself perform. She did so pursuant to her power of supervision and control over the BLR.^[26][26]

          Expounding on the extent of the power of control, the Court, in Araneta, et al. v. Hon. M. Gatmaitan, et al.,^[27][27] pronounced that, if a certain power or authority is vested by law upon the Department Secretary, then such power or authority may be exercised directly by the President, who exercises supervision and control over the departments. This principle was incorporated in the Administrative Code of 1987, which defines “supervision and control” as including the authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate.^[28][28] Applying the foregoing to the present case, it is clear that the DOLE Secretary, as the person exercising the power of supervision and control over the BLR, has the authority to directly exercise the quasi-judicial function entrusted by law to the BLR Director.

          It is true that the power of control and supervision does not give the Department Secretary unbridled authority to take over the functions of his or her subordinate. Such authority is subject to certain guidelines which are stated in Book IV, Chapter 8, Section 39(1)(a) of the Administrative Code of 1987.^[29][29] However, in the present case, the DOLE Secretary’s act of taking over the function of the BLR Director was warranted and necessitated by the latter’s inhibition from the case and the objective to “maintain the integrity of the decision, as well as the Bureau itself.”^[30][30]

          Petitioner insists that the BLR Director’s subordinates should have resolved the appeal, citing the provision under the Administrative Code of 1987 which states, “in case of the absence or disability of the head of a bureau or office, his duties shall be performed by the assistant head.”^[31][31] The provision clearly does not apply considering that the BLR Director was neither absent nor suffering from any disability; he remained as head of the BLR. Thus, to dispel any suspicion of bias, the DOLE Secretary opted to resolve the appeal herself.

          Petitioner was not denied the right to due process when it was not notified in advance of the BLR Director’s inhibition and the DOLE Secretary’s assumption of the case. Well-settled is the rule that the essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain one’s side or an opportunity to seek a reconsideration of the action or ruling complained of.^[32][32] Petitioner had the opportunity to question the BLR Director’s inhibition and the DOLE Secretary’s taking cognizance of the case when it filed a motion for reconsideration of the latter’s decision. It would be well to state that a critical component of due process is a hearing before an impartial and disinterested tribunal, for all the elements of due process, like notice and hearing, would be meaningless if the ultimate decision would come from a partial and biased judge.^[33][33]  It was precisely to ensure a fair trial that moved the BLR Director to inhibit himself from the case and the DOLE Secretary to take over his function.

          Petitioner also insists that respondent’s registration as a legitimate labor union should be cancelled. Petitioner posits that once it is determined that a ground enumerated in Article 239 of the Labor Code is present, cancellation of registration should follow; it becomes the ministerial duty of the Regional Director to cancel the registration of the labor organization, hence, the use of the word “shall.”  Petitioner points out that the Regional Director has admitted in its decision that respondent failed to submit the required documents for a number of years; therefore, cancellation of its registration should have followed as a matter of course.

          We are not persuaded.

Articles 238 and 239 of the Labor Code read:

ART. 238. CANCELLATION OF REGISTRATION; APPEAL

            The certificate of registration of any legitimate labor organization, whether national or local, shall be canceled by the Bureau if it has reason to believe, after due hearing, that the said labor organization no longer meets one or more of the requirements herein prescribed.^[34][34]

            ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION.

            The following shall constitute grounds for cancellation of union registration:

            x x x x

            (d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the closing of every fiscal year and misrepresentation, false entries or fraud in the preparation of the financial report itself;

            x x x x

            (i) Failure to submit list of individual members to the Bureau once a year or whenever required by the Bureau.^[35][35]

          These provisions give the Regional Director ample discretion in dealing with a petition for cancellation of a union’s registration, particularly, determining whether the union still meets the requirements prescribed by law. It is sufficient to give the Regional Director license to treat the late filing of required documents as sufficient compliance with the requirements of the law. After all, the law requires the labor organization to submit the annual financial report and list of members in order to verify if it is still viable and financially sustainable as an organization so as to protect the employer and employees from fraudulent or fly-by-night unions. With the submission of the required documents by respondent, the purpose of the law has been achieved, though belatedly.

          We cannot ascribe abuse of discretion to the Regional Director and the DOLE Secretary in denying the petition for cancellation of respondent’s registration. The union members and, in fact, all the employees belonging to the appropriate bargaining unit should not be deprived of a bargaining agent, merely because of the negligence of the union officers who were responsible for the submission of the documents to the BLR.

           Labor authorities should, indeed, act with circumspection in treating petitions for cancellation of union registration, lest they be accused of interfering with union activities. In resolving the petition, consideration must be taken of the fundamental rights guaranteed by Article XIII, Section 3 of the Constitution, i.e., the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities. Labor authorities should bear in mind that registration confers upon a union the status of legitimacy and the concomitant right and privileges granted by law to a legitimate labor organization, particularly the right to participate in or ask for certification election in a bargaining unit.^[36][36] Thus, the cancellation of a certificate of registration is the equivalent of snuffing out the life of a labor organization. For without such registration, it loses – as a rule – its rights under the Labor Code.^[37][37] 

          It is worth mentioning that the Labor Code’s provisions on cancellation of union registration and on reportorial requirements have been recently amended by Republic Act (R.A.) No. 9481, An Act Strengthening the Workers’ Constitutional Right to Self-Organization, Amending for the Purpose Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines, which lapsed into law on May 25, 2007 and became effective on June 14, 2007. The amendment sought to strengthen the workers’ right to self-organization and enhance the Philippines’ compliance with its international obligations as embodied in the International Labour Organization (ILO) Convention No. 87,^[38][38] pertaining to the non-dissolution of workers’ organizations by administrative authority.^[39][39]  Thus, R.A. No. 9481 amended Article 239 to read:     

          ART. 239. Grounds for Cancellation of Union Registration.—The following may constitute grounds for cancellation of union registration:

            (a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification;

            (b) Misrepresentation, false statements or fraud in connection with the election of officers, minutes of the election of officers, and the list of voters;

            (c) Voluntary dissolution by the members.

          R.A. No. 9481 also inserted in the Labor Code Article 242-A, which provides:

          ART. 242-A. Reportorial Requirements.—The following are documents required to be submitted to the Bureau by the legitimate labor organization concerned:

            (a) Its constitution and by-laws, or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification of the constitution and by-laws within thirty (30) days from adoption or ratification of the constitution and by-laws or amendments thereto;

            (b) Its list of officers, minutes of the election of officers, and list of voters within thirty (30) days from election;

(c) Its annual financial report within thirty (30) days after the close of every fiscal year; and

            (d) Its list of members at least once a year or whenever required by the Bureau.

            Failure to comply with the above requirements shall not be a ground for cancellation of union registration but shall subject the erring officers or members to suspension, expulsion from membership, or any appropriate penalty.

          ILO Convention No. 87, which we have ratified in 1953, provides that “workers’ and employers’ organizations shall not be liable to be dissolved or suspended by administrative authority.” The ILO has expressed the opinion that the cancellation of union registration by the registrar of labor unions, which in our case is the BLR, is tantamount to dissolution of the organization by administrative authority when such measure would give rise to the loss of legal personality of the union or loss of advantages necessary for it to carry out its activities, which is true in our jurisdiction. Although the ILO has allowed such measure to be taken, provided that judicial safeguards are in place, i.e., the right to appeal to a judicial body, it has nonetheless reminded its members that dissolution of a union, and cancellation of registration for that matter, involve serious consequences for occupational representation. It has, therefore, deemed it preferable if such actions were to be taken only as a last resort and after exhausting other possibilities with less serious effects on the organization.^[40][40]

          The aforesaid amendments and the ILO’s opinion on this matter serve to fortify our ruling in this case. We therefore quote with approval the DOLE Secretary’s rationale for denying the petition, thus:

It is undisputed that appellee failed to submit its annual financial reports and list of individual members in accordance with Article 239 of the Labor Code. However, the existence of this ground should not necessarily lead to the cancellation of union registration. Article 239 recognizes the regulatory authority of the State to exact compliance with reporting requirements. Yet there is more at stake in this case than merely monitoring union activities and requiring periodic documentation thereof.

            The more substantive considerations involve the constitutionally guaranteed freedom of association and right of workers to self-organization. Also involved is the public policy to promote free trade unionism and collective bargaining as instruments of industrial peace and democracy. An overly stringent interpretation of the statute governing cancellation of union registration without regard to surrounding circumstances cannot be allowed. Otherwise, it would lead to an unconstitutional application of the statute and emasculation of public policy objectives. Worse, it can render nugatory the protection to labor and social justice clauses that pervades the Constitution and the Labor Code.

            Moreover, submission of the required documents is the duty of the officers of the union. It would be unreasonable for this Office to order the cancellation of the union and penalize the entire union membership on the basis of the negligence of its officers. In National Union of Bank Employees vs. Minister of Labor, L-53406, 14 December 1981, 110 SCRA 296, the Supreme Court ruled:

            As aptly ruled by respondent Bureau of Labor Relations Director Noriel: “The rights of workers to self-organization finds general and specific constitutional guarantees. x x x Such constitutional guarantees should not be lightly taken much less nullified. A healthy respect for the freedom of association demands that acts imputable to officers or members be not easily visited with capital punishments against the association itself.”

            At any rate, we note that on 19 May 2000, appellee had submitted its financial statement for the years 1996-1999. With this submission, appellee has substantially complied with its duty to submit its financial report for the said period. To rule differently would be to preclude the union, after having failed to meet its periodic obligations promptly, from taking appropriate measures to correct its omissions. For the record, we do not view with favor appellee’s late submission. Punctuality on the part of the union and its officers could have prevented this petition.^[41][41]

           WHEREFORE, premises considered, the Court of Appeals Decision dated May 30, 2005 and Resolution dated June 4, 2007 are AFFIRMED.

SO ORDERED.

                                      ANTONIO EDUARDO B. NACHURA

                                      Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

JOSE CATRAL MENDOZA

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

BELLE CORPORATION VS.  COMMISSIONER OF INTERNAL REVENUE (G.R. No. 181298, 10 JANUARY 2011,  DEL CASTILLO, J.) SUBJECT: REFUND OF EXCESS INCOME TAX PAYMENTS. BRIEF TITLE: BELL CORP VS. CIR

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D E C I S I O N

DEL CASTILLO, J.:

Section 69 of the old National Internal Revenue Code (NIRC) allows unutilized tax credits to be refunded as long as the claim is filed within the prescriptive period.  This, however, no longer holds true under Section 76 of the 1997 NIRC as the option to carry-over excess income tax payments to the succeeding taxable year is now irrevocable.

This Petition for Review on Certiorari^[1][1] under Rule 45 of the Rules of Court seeks to set aside the January 25, 2007 Decision^[2][2] and the January 21, 2008 Resolution^[3][3] of the Court of Appeals (CA).

Factual Antecedents

Petitioner Belle Corporation is a domestic corporation engaged in the real estate and property business.^[4][4] 

On May 30, 1997, petitioner filed with the Bureau of Internal Revenue (BIR) its Income Tax Return (ITR) for the first quarter of 1997, showing a gross income of P741,607,495.00, a deduction of P65,381,054.00, a net taxable income of P676,226,441.00 and an income tax due of P236,679,254.00, which petitioner paid on even date through PCI Bank, Tektite Tower Branch, an Authorized Agent Bank of the BIR.^[5][5]

On August 14, 1997, petitioner filed with the BIR its second quarter ITR, declaring an overpayment of income taxes in the amount of P66,634,290.00.  The computation of which is reproduced below:

In view of the overpayment, no taxes were paid for the second and third quarters of 1997.^[7][7]  Petitioner’s ITR for the taxable year ending December 31, 1997 thereby reflected an overpayment of income taxes in the amount of P132,043,528.00, computed as follows:

Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax credit to the succeeding taxable year by marking the tax credit option box in its 1997 ITR.^[9][9]

For the taxable year 1998, petitioner’s amended ITR showed an overpayment of P106,447,318.00, computed as follows:

Gross Income                                                                                        P  1,279,810,489.00

Less: Deduction                                                                         1,346,553,546.00

Taxable Income (Loss)                                                                        (P     66,743,057.00)

Tax Rate                                                                                                                          34%

Tax Due (Regular Income Tax)                                   –                                      NIL

Minimum Corporate Income Tax                                       P       25,596,210.00

Tax Due                                                                                          25,596,210.00

Less: Tax Credits/Payments

                   (a) Prior year’s excess Tax Credits                                  (P   132,041,528.00)

                   (b) Quarterly payment                                               –

                   (c) Creditable tax withheld                         –                                                                                  

Tax Payable/Overpayment                                                  (P   106,447,318.00)^[10][10] 

On April 12, 2000, petitioner filed with the BIR an administrative claim for refund of its unutilized excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.^[11][11]

Notwithstanding the filing of the administrative claim for refund, petitioner carried over the amount of P106,447,318.00 to the taxable year 1999 and applied a portion thereof to its 1999 Minimum Corporate Income Tax (MCIT) liability, as evidenced by its 1999 ITR.^[12][12]  Thus:

Gross Income                                                                                            P  708,888,638.00

Less: Deduction                                                                           1,328,101,776.00

Taxable Income                                                                       (P  619,213,138.00)

Tax Due                                                                                                            –                  

Minimum Corporate Income Tax                                            P   14,185,874.00

Less: Tax Credits/Payments

   (a) Prior year’s excess Credit                            P 106,447,318.00

   (b) Tax Payments for the 1st & 3rd Qtrs.        0

   (c) Creditable tax withheld                                               0                     P  106,447,318.00

TAX PAYABLE/REFUNDABLE                                   (P   92,261,444.00)^[13][13]

Proceedings before the Court of Tax Appeals (CTA)

On April 14, 2000, due to the inaction of the respondent Commissioner of Internal Revenue (CIR) and in order to toll the running of the two-year prescriptive period, petitioner appealed its claim for refund of unutilized excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00 with the CTA via a Petition for Review,^[14][14] docketed as CTA Case No. 6070.

In answer thereto, respondent interposed that:

4.     Petitioner’s alleged claim for refund/tax credit is subject to administrative routinary investigation/examination by respondent’s Bureau;

5.     Petitioner failed miserably to show that the total amount of P106,447,318.00 claimed as overpaid or excess income tax is refundable;

6.     Taxes paid and collected are presumed to have been paid in accordance with law; hence, not refundable;   

7.     In an action for tax refund, the burden is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund;

8.     It is incumbent upon petitioner to show that it has complied with the provisions of Section 204 (c) in relation to Section 229 of the tax Code;

9.     Well-established is the rule that refunds/tax credits are construed strictly against the taxpayer as they partake the nature of tax exemptions.^[15][15]

To prove entitlement to the refund, petitioner submitted, among others, the following documents: its ITR for the first quarter of taxable year 1997 (Exhibit “B”),^[16][16] its tentative ITRs for taxable years 1997 (Exhibit “D”)^[17][17] and 1998 (Exhibit “H”),^[18][18] its final ITRs for taxable years 1997 (Exhibit “E”),^[19][19] 1998 (Exhibit “I”)^[20][20] and 1999 (Exhibit “J”),^[21][21] its Letter Claim for Refund filed with the BIR (Exhibit “K”)^[22][22] and the Official Receipt issued by PCI Bank showing the income tax payment made by petitioner in the amount of P236,679,254.00  for the first quarter of 1997 (Exhibit “C”).^[23][23]

On April 10, 2001, the CTA rendered a Decision^[24][24] denying petitioner’s claim for refund.  It found:

[T]hat all the allegations made by the Petitioner as well as the figures accompanying Petitioner’s claim are substantiated by documentary evidence but noticed some flaws in Petitioner’s application of the pertinent laws involved.

It bears stressing that the applicable provision in the case at bar is Section 69 of the old Tax Code and not Section 76 of the 1997 Tax Code. Settled is the rule that under Section 69 of the old Tax Code, the carrying forward of any excess/overpaid income tax for a given taxable year is limited only up to the succeeding taxable year.

A painstaking scrutiny of Petitioner’s income tax returns would show that Petitioner carried over its 1997 refundable tax of P132,043,528.00 to the succeeding year of 1998 yielding an overpayment of P106,447,318.00 (Exhibit I-1) after deducting therefrom the minimum Corporate Income tax of P25,596,210.00.  However, Petitioner even went further to the taxable year 1999 and applied the Prior Year’s (1998) Excess Credit of P106,447,318.00 to its income tax liability.

True enough, upon verification of Petitioner’s 1999 Corporate Annual Income Tax Return (Exh. I), this Court found that the whole amount of P106,447,318.00 representing its prior year’s excess credit (subject of this claim) was carried forward to its 1999 income tax liability, details of the 1999 Income Tax Return are shown below as follows:

Gross Income                                                                                                 P     708,888,638.00

Less: Deduction                                                                                                 1,328,101,776.00

Taxable Income                                                                                            (P     619,213,138.00)

Tax Due                                                                                                                            –                   

Minimum Corporate Income Tax                                                                 P       14,185,874.00

Less: Tax Credits/Payments

   (a) Prior year’s excess Credit                                 P  106,447,318.00

   (b) Tax Payments for the 1st & 3rd Qtrs.                             0

   (c) Creditable tax withheld                                                      0                 P   106,447,318.00

TAX PAYABLE/REFUNDABLE                                                         (P     92,261,444.00)

It is an elementary rule in taxation that an automatic carry over of an excess income tax payment should only be made for the succeeding year. (Paseo Realty and Dev’t. Corp. vs. CIR, CTA Case No. 4528, April 30, 1993) True enough, implicit from the provisions of Section 69 of the NIRC, as amended, (supra) is the fact that the refundable amount may be credited against the income tax liabilities for the taxable quarters of the succeeding taxable year not succeeding years; and that the carry-over is only limited to the quarters of the succeeding taxable year. (citing ANSCOR Hagedorn Securities Inc. vs. CIR, CA-GR SP 38177, December 21, 1999) To allow the application of excess taxes paid for two successive years would run counter to the specific provision of the law above-mentioned.^[25][25]   (Emphasis supplied.)

Petitioner sought reconsideration^[26][26] of the CTA’s denial of its claim for refund, but the same was denied in a Resolution^[27][27] dated June 5, 2001, prompting petitioner to elevate the matter to the CA via a Petition for Review^[28][28] under Rule 43 of the Rules of Court.

Ruling of the Court of Appeals

On January 25, 2007, the CA, applying Philippine Bank of Communications v. Commissioner of Internal Revenue,^[29][29] denied the petition.  The CA explained that the overpayment for taxable year 1997 can no longer be carried over to taxable year 1999 because excess income payments can only be credited against the income tax liabilities of the succeeding taxable year, in this case up to 1998 only and not beyond.^[30][30]  Neither can the overpayment be refunded as the remedies of automatic tax crediting and tax refund are alternative remedies.^[31][31]  Thus, the CA ruled:

[W]hile BELLE may not have fully enjoyed the complete utilization of its option and the sum of Php106,447,318 still remained after it opted for a tax carry over of its excess payment for the taxable year 1998, but be that as it may, BELLE has only itself to blame for making such useless and damaging option, and BELLE may no longer opt to claim for a refund considering that the remedy of refund is barred after the corporation has previously opted for the tax carry over remedy. As a matter of fact, the CTA even made the factual findings that BELLE committed an aberration to exhaust its unutilized overpaid income tax by carrying it over further to the taxable year 1999, which is a blatant transgression of the “succeeding taxable year limit” provided for under Section 69 of the old NIRC.^[32][32]  (Emphasis supplied)

Hence, the fallo of the Decision reads:

WHEREFORE, premises considered, the instant Petition for Review is DENIED, and accordingly, the herein impugned April 10, 2001 Decision and June 5, 2001 Resolution of the CTA are hereby affirmed.

SO ORDERED.^[33][33]

Petitioner moved for reconsideration.^[34][34]  The CA, however, denied the same in a Resolution^[35][35] dated January 21, 2008.

Issues

Aggrieved, petitioner availed of the present recourse, raising the following assignment of errors:

A.          THE CA COMMITTED SERIOUS ERROR OF LAW IN APPLYING THE PBCOM CASE.

        A.1.    THE [DECISION IN THE] PBCOM CASE HAS ALREADY BEEN REPEALED.

        A.2.    ASSUMING ARGUENDO THAT THE [DECISION IN THE] PBCOM CASE HAS NOT BEEN REPEALED, IT HAS NO APPLICATION TO BELLE.

B.    THE CA COMMITTED SERIOUS ERROR OF LAW IN FINDING THAT BELLE’S REFUND CLAIM IS NOT ON ALL FOURS WITH THE CASES OF BPI FAMILY AND AB LEASING.

B.1.     BELLE’S ‘CARRYING-OVER’ OF ITS EXCESS INCOME TAX PAID FOR 1997 TO 1999 (BEYOND THE SUBSEQUENT YEAR) IS IMMATERIAL.

B.2.     BELLE’S PARTIAL USE OF ITS EXCESS INCOME TAX PAID IN 1998 (THE SUBSEQUENT YEAR) DOES NOT PRECLUDE BELLE FROM ASKING FOR A REFUND.^[36][36]

In a nutshell, the issue boils down to whether petitioner is entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.

Petitioner’s Arguments

Petitioner insists that it is entitled to a refund as the ruling in Philippine Bank of Communications v. Commissioner of Internal Revenue^[37][37] relied upon by the CA in denying its claim has been overturned by BPI-Family Savings Bank, Inc. v. Court of Appeals,^[38][38] AB Leasing and Finance Corporation v. Commissioner of Internal Revenue,^[39][39] Calamba Steel Center, Inc. v. Commissioner of Internal Revenue,^[40][40] and State Land Investment Corporation v. Commissioner of Internal Revenue.^[41][41]  In these cases, the taxpayers were allowed to claim refund of unutilized tax credits.^[42][42]  Similarly, in this case, petitioner asserts that it may still recover unutilized tax credits via a claim for refund.^[43][43] 

And while petitioner admits that it has committed a “blatant transgression” of the “succeeding taxable year limit” when it carried over its 1997 excess income tax payments beyond the taxable year 1998, petitioner believes that this should not result in the denial of its claim for refund but should only invalidate the application of its 1997 unutilized excess income tax payments to its 1999 income tax liabilities.^[44][44] Hence, petitioner postulates that a claim for refund of its unutilized tax credits for the taxable year 1997 may still be made because the carry-over thereof to the taxable year 1999 produced no legal effect, and is, therefore, immaterial to the resolution of its claim for refund.^[45][45]

Respondent’s Arguments

            Respondent, on the other hand, maintains that the cases of BPI-Family Savings Bank^[46][46] and AB Leasing^[47][47] are inapplicable as the facts obtaining therein are different from those of the present case.^[48][48]  What is controlling, therefore, is the ruling in Philippine Bank of Communications,^[49][49] that tax refund and tax credit are alternative remedies; thus, “the choice of one precludes the other.”^[50][50]  Respondent, therefore, submits that since petitioner has already applied its 1997 excess income tax payments to its liabilities for taxable year 1998, it is precluded from carrying over the same to taxable year 1999, or from filing a claim for refund.^[51][51]

Our Ruling

The petition has no merit.

Both the CTA and the CA erred in applying Section 69^[52][52] of the old NIRC.  The law applicable is Section 76 of the NIRC.

Unutilized excess income tax payments may be refunded within two years from the date of payment under Section 69 of the old NIRC

Under Section 69 of the old NIRC, in case of overpayment of income taxes, a corporation may either file a claim for refund or carry-over the excess payments to the succeeding taxable year.  Availment of one remedy, however, precludes the other.^[53][53] 

Although these remedies are mutually exclusive, we have in several cases allowed corporations, which have previously availed of the tax credit option, to file a claim for refund of their unutilized excess income tax payments.  

In BPI-Family Savings Bank,^[54][54] the bank availed of the tax credit option but since it suffered a net loss the succeeding year, the tax credit could not be applied; thus, the bank filed a claim for refund to recover its excess creditable taxes.  Brushing aside technicalities, we granted the claim for refund.

Likewise, in Calamba Steel Center, Inc.,^[55][55] we allowed the refund of excess income taxes paid in 1995 since these could not be credited to taxable year 1996 due to business losses.  In that case, we declared that “a tax refund may be claimed even beyond the taxable year following that in which the tax credit arises x x x provided that the claim for such a refund is made within two years after payment of said tax.”^[56][56]

In State Land Investment Corporation,^[57][57] we reiterated that “if the excess income taxes paid in a given taxable year have not been entirely used by a x x x corporation against its quarterly income tax liabilities for the next taxable year, the unused amount of the excess may still be refunded, provided that the claim for such a refund is made within two years after payment of the tax.”^[58][58] 

Thus, under Section 69 of the old NIRC, unutilized tax credits may be refunded as long as the claim is filed within the two-year prescriptive period.

The option to carry over excess income tax payments is irrevocable under Section 76 of the 1997 NIRC

This rule, however, no longer applies as Section 76 of the 1997 NIRC now reads:

Section 76.  Final Adjustment Return. – Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either:   

(a)  Pay the excess tax still due; or

(b)  Be refunded the excess amount paid, as the case may be.

In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for tax refund or issuance of a tax credit certificate shall be allowed therefor.   (Emphasis supplied)

Under the new law, in case of overpayment of income taxes, the remedies are still the same; and the availment of one remedy still precludes the other.  But unlike Section 69 of the old NIRC, the carry-over of excess income tax payments is no longer limited to the succeeding taxable year. Unutilized excess income tax payments may now be carried over to the succeeding taxable years until fully utilized.  In addition, the option to carry-over excess income tax payments is now irrevocable.  Hence, unutilized excess income tax payments may no longer be refunded.

In the instant case, both the CTA and the CA applied Section 69 of the old NIRC in denying the claim for refund.  We find, however, that the applicable provision should be Section 76 of the 1997 NIRC because at the time petitioner filed its 1997 final ITR, the old NIRC was no longer in force.  In Commissioner of Internal Revenue v. McGeorge Food Industries, Inc.,^[59][59] we explained that:

Section 76 and its companion provisions in Title II, Chapter XII should be applied following the general rule on the prospective application of laws such that they operate to govern the conduct of corporate taxpayers the moment the 1997 NIRC took effect on 1 January 1998. There is no quarrel that at the time respondent filed its final adjustment return for 1997 on 15 April 1998, the deadline under Section 77 (B) of the 1997 NIRC (formerly Section 70(b) of the 1977 NIRC), the 1997 NIRC was already in force, having gone into effect a few months earlier on 1 January 1998. Accordingly, Section 76 is controlling.

The lower courts grounded their contrary conclusion on the fact that respondent’s overpayment in 1997 was based on transactions occurring before 1 January 1998. This analysis suffers from the twin defects of missing the gist of the present controversy and misconceiving the nature and purpose of Section 76. None of respondent’s corporate transactions in 1997 is disputed here. Nor can it be argued that Section 76 determines the taxability of corporate transactions.  To sustain the rulings below is to subscribe to the untenable proposition that, had Congress in the 1997 NIRC moved the deadline for the filing of final adjustment returns from 15 April to 15 March of each year, taxpayers filing returns after 15 March 1998 can excuse their tardiness by invoking the 1977 NIRC because the transactions subject of the returns took place before 1 January 1998. A keener appreciation of the nature and purpose of the varied provisions of the 1997 NIRC cautions against sanctioning this reasoning.^[60][60]

Accordingly, since petitioner already carried over its 1997 excess income tax payments to the succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997.

To repeat, under the new law, once the option to carry-over excess income tax payments to the succeeding years has been made, it becomes irrevocable.  Thus, applications for refund of the unutilized excess income tax payments may no longer be allowed.

WHEREFORE, the petition is hereby DENIED.  The Decision dated January 25, 2007 and the Resolution dated January 21, 2008 of the Court of Appeals are hereby AFFIRMED only insofar as the denial of petitioner’s claim for refund is concerned.

            SO ORDERED.

MARIANO C. DEL CASTILLO 

Associate Justice 

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

JOSE PORTUGAL PEREZ

Associate Justice

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

            Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified 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

 RE:  LETTER-COMPLAINT OF ATTY. ARIEL SAMSON C. CAYETUNA, ET AL., ALL EMPLOYEES OF ASSOCIATE JUSTICE MICHAEL P. ELBINIAS AGAINST ASSOCIATE JUSTICE MICHAEL P. ELBINIAS, CA – MINDANAO STATION (A.M. OCA IPI NO. 08-127-CA-J, 11 JANUARY  2011, VELASCO, JR., J.) SUBJECT: ADMINISTRATIVE PROCEEDINGS AGAINST JUDGES. BRIEF TITLE: LETTER-COMPLAINT OF CAYETUNA.

x——————————————————————–x

R E S O L U T I O N

VELASCO, JR., J.:

The Case 

Complainants Attys. Ariel Samson C. Cayetuna, Cathy D. Cardino, Cynthia Y. Jamero, Grace L. Yulo, Ken Rinehart V. Sur, Roderick Roxas (driver), and Alfonso Abugho (utility worker) were confidential employees assigned in the Office of Associate Justice Michael P. Elbinias, Court of Appeals (CA) – Mindanao Station in Cagayan de Oro City, Misamis Oriental.  They filed with this Court an unverified letter-complaint^[1][1] dated April 30, 2008 charging Justice Elbinias with Gross Inefficiency; Bribe Solicitation; Drinking Liquor in Office Premises; Personal Use of Government Property and Resources; Falsification of a Favored Employee’s Daily Time Record; Disrespect Towards fellow Justices; Oppression through Intemperate, Oppressive and Threatening Language; and Grave Abuse of Authority. 

Complainants prayed for (1) the dismissal from service of Justice Elbinias; (2) his preventive suspension pending investigation of the instant administrative complaint; (3) the provision of “security” to them from his retaliation and reprisal on account of this complaint; and (4) the acceptance by the Court of their enclosed resignation letters^[2][2] without the prior approval of Justice Elbinias for fear that they would be peremptorily terminated by him instead.

Moreover, Atty. Cayetuna wrote then Chief Justice Reynato S. Puno a confidential letter^[3][3] dated April 30, 2008, narrating how he was instantly terminated by Justice Elbinias on April 24, 2008 due to his refusal to sign a letter-reply to a litigant, and asking for help in order to receive his salary for the second half of April 2008 and Representation and Transportation Allowance (RATA) for April 2008 which were not given to him when these emoluments were released to the CA employees in the CA – Mindanao Station on April 25, 2008 ostensibly because of his having been terminated the day before.  Likewise, on April 28, 2008, he was informed by the CA Cashier that he would no longer receive the Emergency Economic Assistance (EEA) and the midyear bonus on account of his termination.   

The Facts

The instant case precipitated from a letter-complaint, dated February 6, 2008, filed by a litigant (petitioner in CA-G.R. SP No. 01580, entitled Algabre v. RTC, Branch 15, Davao City, which was raffled to Justice Elbinias as ponente) before the Presidential Action Center (PAC) of the Office of the President requesting assistance for the resolution of the case which has been pending before the CA – Mindanao Station for almost a year since its filing on March 6, 2007.  The letter-complaint was referred by the PAC to Deputy Court Administrator (DCA) Reuben P. Dela Cruz, in-charge for Regions IX-XII, for appropriate action.

Consequently, on April 8, 2008, then DCA Jose P. Perez^[4][4] indorsed the letter-complaint to the CA – Mindanao Station for appropriate action.  On April 21, 2008, Justice Elbinias received a copy of said letter-complaint thru an Indorsement dated April 18, 2008 from CA Executive Justice Romulo V. Borja.

Justice Elbinias assigned Atty. Cayetuna to draft the letter-reply explaining what transpired with the case which had already been decided on February 28, 2008.  Justice Elbinias, however, asked Atty. Cayetuna to sign the letter-reply and he would simply note it.  This was not palatable to Atty. Cayetuna who balked at signing the letter-reply.  On April 24, 2008, he wrote^[5][5] Justice Elbinias explaining why he could not, in conscience, sign it.  This earned the ire of Justice Elbinias who peremptorily terminated Atty. Cayetuna’s employment with the CA through a letter^[6][6] dated April 24, 2008 to Ruby Jane B. Rivera, Personnel Officer of the CA – Mindanao Station. 

The very next day, or on April 25, 2008, when the RATA for the lawyers and the salaries of the CA employees in the CA – Mindanao Station were released, Atty. Cayetuna did not receive his salary for the second half of April 2008 and RATA for that month on account of his termination.  Likewise, he was informed on April 28, 2008 that he would no longer receive his EEA and midyear bonus.  These are the subjects of Atty. Cayetuna’s April 30, 2008 letter to then Chief Justice Puno.

The other complainants, in solidarity with Atty. Cayetuna, filed the instant unverified letter-complaint.

In the meantime, acting on the requested acceptance of their resignation letters, then CA Presiding Justice Conrado A. Vasquez, Jr. issued a recommendation^[7][7] on May 6, 2008 for the approval of the resignations of complainants to then Chief Justice Puno.  The resignations were duly approved on May 7, 2008.  The approved resignations, however, inadvertently excluded that of Atty. Cynthia Y. Jamero.  Thus, on May 8, 2008, CA Presiding Justice Vasquez, Jr. likewise recommended^[8][8] for approval Atty. Jamero’s resignation, which was approved on May 9, 2008.

On July 3, 2008, complainants sent another unverified letter-complaint^[9][9] dated June 18, 2008 thanking the Court for the speedy acceptance of their resignation letters.  Therein, they additionally alleged Justice Elbinias’ belligerent attitude when¾upon receipt on May 8, 2008 of the Court’s approval and acceptance of complainants’ resignation letters, which inadvertently excluded Atty. Jamero’s¾Justice Elbinias wrote a letter to the Personnel Officer of the CA – Mindanao Station terminating Atty. Jamero’s employment but antedating it May 7, 2008.  Moreover, complainants raised another grievance against Justice Elbinias who, allegedly under flimsy reasons, refused to sign their clearances.  Finally, they imputed malevolent intent on Justice Elbinias who allegedly—although not confirmed—gave a list of their names to then newly appointed CA Associate Justice Ayson in connection with the applications of some of them.  In fine, they reiterated their plea for the preventive suspension of Justice Elbinias pending resolution of the instant case to prevent him from using his position to further harass them.

In his Comment^[10][10] dated July 13, 2008, Justice Elbinias vehemently denied the charges.  While admitting telling complainants that he would fire them, he said this was on account of the poor, inefficient and sloppy draft work of the complainants-lawyers, and the unsatisfactory performance of complainants driver and utility worker.  He attributed the concerted efforts of complainants to preempt their dismissal by filing the instant complaint as also an attempt to put him in a bad light.  On the issue of the firing of Atty. Cayetuna allegedly on his refusal to sign the letter-reply to Mr. Algabre, Justice Elbinias asserted that the mention of CA Associate Justice Lim therein was factual as shown in Atty. Cayetuna’s drafts and did not put Justice Lim in a bad light.  Moreover, he maintained that he never forced Atty. Cayetuna to sign the letter-reply, but the latter “set him up” by raising such an issue and writing an “insincere” written objection about it.  And having lost confidence in Atty. Cayetuna, he had no option but to fire him.

Additionally, on September 15, 2008, after getting a copy of complainants’ June 18, 2008 letter-complaint, Justice Elbinias filed his Supplemental Comment.^[11][11]  Therein, he asserted the need to do an inventory of records and cases before he would sign their clearances, since complainants’ sudden abandonment of his office left it in disarray with records difficult to locate.  He maintained that he was reorganizing his office and the inventory was still not finished on June 18, 2008 when complainants wrote their additional letter-complaint.  He also accused complainants of collective theft for the loss of some documents from his chamber.

Meanwhile, on July 24, 2009, all the current employees assigned in the Office of Justice Elbinias in the CA – Mindanao Station sent the Court a letter^[12][12] of support for Justice Elbinias dated July 13, 2009.

Also, on account of Justice Elbinias’ transfer to the CA in Manila, the Young Men’s Christian Association (YMCA) of Misamis Oriental, Inc. issued Board Resolution No. 133-S-2009^[13][13] on August 7, 2009, expressing appreciation for Justice Elbinias’ integrity and dedication as a CA Associate Justice.  Similarly, the City Council of Cagayan de Oro City issued Resolution No. 9776-2009^[14][14] on August 18, 2009, commending Justice Elbinias for his integrity and dedication in serving the citizenry as Associate Justice of the CA.

On March 2, 2010, through a Resolution^[15][15] of even date, we required the parties to manifest whether they would submit the case for resolution based on the pleadings.

On March 22, 2010, Justice Elbinias filed his Manifestation^[16][16] to submit the instant case for resolution based on the basis of the pleadings.  Complainants, however, filed on April 15, 2010 a letter^[17][17] requesting for copies of the pleadings filed by Justice Elbinias, which was duly granted.^[18][18]

On June 4, 2010, complainants filed their Omnibus Reply and Manifestation,^[19][19] dated June 3, 2010, to Justice Elbinias’ comments and duly submitted the instant case for resolution based on the pleadings filed.  They argued that their unverified complaints were properly treated by the Court as anonymous complaints, since respondent justice admitted the material allegations therein relative to the DTR of Leofer Andoy, failure to timely act on cases with Temporary Restraining Order (TRO), the “undertakings” they submitted as per respondent’s instructions, non-signing of their clearances and deterring Justice Ayson from hiring some of them.  Moreover, they asserted that Atty. Cayetuna’s drafts could not have been stolen by the author thereof, and that they did not violate Republic Act No. (RA) 3019 in divulging confidential information to unauthorized persons as then Chief Justice Puno could not be considered an unauthorized person. 

Besides, complainants stressed, no liability under Articles 363 (planting of evidence), 364 (blemish reputation of another), 353 (public and malicious imputation of a crime, etc.) and 183 (perjury) of the Revised Penal Code can be attributed to them, since their letter-complaints were filed with utmost circumspection and confidentiality.  To debunk their alleged inefficiency and assert the contrary of respondent’s allegation that they preempted their inevitable termination by filing the instant complaints, they submitted their respective but similar performance ratings of “Very Satisfactory,” together with the comparative Judicial Data Statistics from the Information and Statistical Data Division of the CA, which tended to show that the output data on case disposition of Justice Elbinias did not substantially change before and after they resigned from his office.  They contended that all these prove that their alleged inefficiency had no factual basis.  Finally, they maintained that they had already contemplated resigning way before the incidents involving Atty. Cayetuna and Abugho happened because of, they reiterate, his demeaning and terrorizing actuations against them.

On July 16, 2010, Justice Elbinias filed his Rejoinder.^[20][20]  He assailed complainants’ Omnibus Reply and Manifestation for again being conveniently not under oath, concluding their allegations to be insincere and untruthful.  He countered and debunked the assertions and allegations of complainants.  He strongly posited that complainants misled or mischaracterized facts by falsely asserting his alleged admission of their allegations in his Comment and Supplemental Comment.

Our Ruling

After an assiduous study of the parties’ allegations and counter-allegations, with due consideration of the documents they submitted to bolster their respective positions, the Court is constrained to dismiss the instant case for being unsubstantiated.

Both the letter-complaints of April 30, 2008 and June 18, 2008 are unverified, while the June 3, 2010 Omnibus Reply and Manifestation of complainants is not under oath.  It must be noted that most of the complainants are lawyers, and are presumed and ought to know the formal requirement of verification for administrative complaints as stated under Section 1, Rule 140:

SECTION 1.  How instituted.¾Proceedings for the discipline of Judges of regular and special courts and Justices of the Court of Appeals and the Sandiganbayan may be instituted motu proprio by the Supreme Court or upon a verified complaint, supported by affidavits of persons who have personal knowledge of the facts alleged therein or by documents which may substantiate their allegations, or upon an anonymous complaint, supported by public records of indubitable integrity.  The complaint shall be in writing and shall state clearly and concisely the acts and omissions constituting violations of standards of conduct prescribed for Judges by law, the Rules of Court, or the Code of Judicial Conduct.  (Emphasis supplied.)

The above rule provides three ways by which administrative proceedings against judges may be instituted: (1) motu proprio by the Supreme Court; (2) upon verified complaint with affidavits of persons having personal knowledge of the facts alleged therein or by documents which may substantiate said allegations; or (3) upon an anonymous complaint supported by public records of indubitable integrity.^[21][21]

Indeed, complainants not only failed to execute a verified complaint but also never submitted their affidavits showing personal knowledge of the allegations embodied in their letter-complaints.  To cover this procedural deficiency, they assert that the Court properly recognized their letter-complaints as an anonymous complaint, relying on Sinsuat v. Hidalgo.^[22][22] 

In Sinsuat, the Court took cognizance of the unverified motion and subsequent letters of complainants submitted to the Office of the Court Administrator as an anonymous complaint, since therein respondent Judge Hidalgo admitted complainants’ material allegations and “the motion and letters sufficiently averred the specific acts upon which respondent’s alleged administrative liability was anchored.  And the averments are verifiable from the records of the trial court and the CA’s Decision.”^[23][23]  In short, the unverified complaint was properly considered as an anonymous complaint, since the material allegations were not only admitted by respondent judge but are also verifiable from public records of indubitable integrity, i.e., records of the trial court, as aptly found by the CA.

This is not the case in this instant.  Complainants’ reliance on Sinsuat is misplaced.  For one, even a passing perusal of the Comment and Supplemental Comment does not show respondent Justice Elbinias admitting the allegations in the letter-complaints. For another, the averments and material allegations of complainants are neither verifiable from public records of indubitable integrity nor supported or substantiated by other competent evidence submitted by complainants. 

The formal faux pas of complainants could have been remedied by the submission under oath of their subsequent pleadings, particularly the Omnibus Reply, where they traversed the points and defenses raised by respondent vis-à-vis their allegations.  And they could have appended thereto their respective affidavits attesting to their personal knowledge of the facts of their material allegations.  But, as it is, complainants chose not to place their Omnibus Reply under oath, much less submitted their affidavits.  Verily, after receiving copies of respondent’s Comment and Supplemental Comment, they had ample opportunity but chose not to correct the deficiencies of their complaints while submitting the instant case for resolution based on the pleadings filed sans their affidavits.

Complainants assert that Justice Elbinias admitted the material allegations in their letter-complaints, to wit:  (1) that, aware of Andoy’s absences in February 2008 which were not reflected in his (Andoy’s) Daily Time Record (DTR), Justice Elbinias nonetheless signed said DTR; (2) that respondent did not deny failing to timely act on the application for TRO in the cited cases in their complaint; (3) that respondent’s lawyers (complainants) submitted their “undertakings” as per his instructions; and (4) that he did not sign complainants’ clearances on account of office inventory of records and for lack of follow- up by complainants.

These assertions are belied by respondent’s comment and supplemental comment. 

Justice Elbinias denies being fully aware of Andoy’s absences when he signed the latter’s DTRs.  He points out that he was not aware whether Andoy filed leaves for his absences in December 2007, and whether Andoy declared or not his absences in February 2008, since he signs all the DTRs of his office staff which are submitted together.  Thus, he maintains that if Andoy did not mark as absent the days he was absent or whether he filed leaves for his absences, respondent charges it to inadvertence on his part for having signed Andoy’s DTRs which was done in good faith.  Indeed, without copies of the subject DTRs of Andoy as duly signed by respondent and the logbook of their office reflecting the time of the employees’ arrival and departure, we cannot ascribe any liability on respondent.

On his alleged failure to timely act on an application for a TRO, it bears stressing that Justice Elbinias, in his Comment, asserts what he calls an “undue interest and irregular involvement.”^[24][24]  While respondent does not deny the fact that no TRO was issued, such is not equivalent to an admission of wrongdoing.  Verily, the issuance of any provisional remedy, such as a TRO in the alleged case, is addressed to the sound discretion of the court upon certain conditions as provided by law that are amply shown by the applicant.  Consequently, undue delay or inaction on an application of a provisional remedy, like a TRO, cannot be imputed to the judge or court where there is no showing that the grant thereof is proper and well nigh dictated by an indubitable right of a party-applicant that needs protection.  Anent the allegation of undue delay in the resolution of motions for reconsideration, we agree with respondent that said allegation is general and lacks specificity.  Complainants merely made a general allegation of undue delay without particulars as to specific cases, the motions for reconsideration of which have been set for resolution after the adverse parties have filed their comments thereto and have not been resolved beyond the 90-day period.  On the alleged inaction on cases with TRO, complainants failed to show that the issuance of a TRO in a particular case is paramount to the provisional protection of a party’s right in esse.

The “undertakings” embodied in the application letters^[25][25] of complainant-Attys. Jamero, Sur, Cardino and Yulo submitted by Justice Elbinias in his Comment duly show the nature of confidential employees.  Complainants contend that these were accomplished and submitted by them upon the instructions of respondent.  We find it incredulous that the “undertakings” were made by complainant-lawyers at the behest of respondent.  It stands to reason that an applicant, among others, submits an application letter.  The application letters submitted by complainants to Justice Elbinias could not have been under the latter’s instruction and control.  Consequently, the application letters, without more, were certainly from complainants and could not have been under the direction of respondent.

The fact that Justice Elbinias did not sign the clearances of complainants is sufficiently explained in his Supplemental Comment that he was reorganizing his office and doing an inventory of the rollos of the cases assigned to him.  Besides, as aptly pointed out by respondent, complainants were not unduly prejudiced by his delay in signing their clearances for they were able to receive their benefits and were even rehired in the CA Mindanao – Station despite the lack of clearances, for such were not needed for their reemployment as shown by the letter^[26][26] of CA Presiding Justice Vasquez, Jr. to respondent dated September 5, 2008.

Even granting arguendo and considering the letter-complaints as anonymous complaints, still these cannot prosper as stated earlier because the averments and material allegations of complainants are neither verifiable from public records of indubitable integrity nor supported or substantiated by other competent evidence submitted by complainants. 

In Anonymous Complaint against Pershing T. Yared, Sheriff III, Municipal Trial Court in Cities, Canlaon City, this Court reiterated the rule pertaining to anonymous complaints, thus:

At the outset, the Court stresses that an anonymous complaints is always received with great caution, originating as it does from an unknown author.  However, a complaint of such sort does not always justify its outright dismissal for being baseless or unfounded for such complaint may be easily verified and may, without much difficulty, be substantiated and established by other competent evidence.^[27][27]  (Emphasis supplied.)

In the instant case, the charges of Gross Inefficiency; Bribe Solicitation; Drinking Liquor in Office Premises; Personal Use of Government Property and Resources; Falsification of a Favored Employee’s Daily Time Record; Disrespect Towards fellow Justices; Oppression through Intemperate, Oppressive and Threatening Language; and Grave Abuse of Authority are neither supported by public records nor substantiated by competent evidence.

Public records do not support any of the allegations.  The incident involving Engr. Rowell T. Magalang, Administrative Officer, Maintenance and Utility Unit of the CA Mindanao – Station merely shows a misunderstanding between respondent and the engineer concerned.^[28][28]  As regards those of complainants Roxas and Abugho relative to their unauthorized absence on March 19, 2008, it is embodied in the letter^[29][29] of even date by Justice Elbinias to the Personnel Officer of the CA Mindanao – Station, Ruby Jane B. Rivera, which evidently shows what it is.  Complainants allege the nastiness of respondent in marking absent Abugho and Roxas that day even if they were present, only on account of their going out of the office for a few minutes to buy food.  Respondent counters that both were absent and not around when he looked for them on March 19, 2008, as he would not have informed the CA Personnel Officer if it were not so.  Since the utility worker and the driver are expected to be at the office during office hours, then it is logical that if they were not around, then they could not be present.

It is well-settled that in administrative proceedings, the burden of proof that respondent committed the acts complained of rests on the complainant.^[30][30]  In the instant case, complainants have not shown, much less submitted, substantial evidence supporting their allegations.

Anent the untimely and peremptory termination of complainant Atty. Cayetuna, we find it to be a misunderstanding between respondent and his most senior lawyer which has been blown out of proportion. 

A cursory perusal of the drafts^[31][31] prepared by Atty. Cayetuna of the letter-reply to Algabre would readily show that the explanation is factual in nature and in no way pejorative to CA Associate Justice Lim.  Thus, there is really no basis for Atty. Cayetuna’s misgiving about signing said letter-reply.  And it is uncalled for Atty. Cayetuna to write a formal letter to respondent about his refusal to do so. 

It must be borne in mind that complainants, as primarily confidential employees, need the trust of their immediate superior, Justice Elbinias.  In Philippine Amusement and Gaming Corporation v. Angara,^[32][32] this Court reiterated the principle behind and the element of trust in the employment to a primarily confidential position.  We cited De los Santos vs. Mallare, thus:

Every appointment implies confidence, but much more than ordinary confidence is reposed in the occupant of a position that is primarily confidential.  The latter phrase denotes not only confidence in the aptitude of the appointee for the duties of the office but primarily close intimacy which insures freedom of intercourse without embarrassment or freedom from misgivings of betrayals of personal trust or confidential matters of state.^[33][33]

Moreover, it has been said that confidential employees work at the pleasure of the appointing authority.  Thus, there is no quibble that when the relation between respondent CA Associate Justice Elbinias and his lawyers has deteriorated to the extent that there is no longer intimacy between them that insures freedom of intercourse without embarrassment or freedom from misgivings of betrayals of personal trust or confidential matters of state, then the confidential employment is no longer tenable.  The right of respondent to change the confidential employees in his office cannot be disputed.

Even if the allegations have not been substantially proved, still it is incumbent for Justice Elbinias to reflect on how the conflict between him and his staff came about.  While we take notice of the letter of support from other employees in the CA Mindanao – Station, and the Resolutions from the YMCA and the City Council of Cagayan de Oro City commending him, we hope that Justice Elbinias learns from this experience to better and improve the management and supervision of his staff.

WHEREFORE, premises considered, the instant administrative complaint is hereby DISMISSED.

SO ORDERED.                    

                                                          PRESBITERO J. VELASCO, JR.

                                                                        Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

   ANTONIO T. CARPIO                    CONCHITA CARPIO MORALES                             

          Associate Justice                                           Associate Justice

ANTONIO EDUARDO B. NACHURA    TERESITA J. LEONARDO-DE CASTRO

         Associate Justice                                           Associate Justice

                    ARTURO D. BRION                               DIOSDADO M. PERALTA

                         Associate Justice                                             Associate Justice

                LUCAS P. BERSAMIN                    MARIANO C. DEL CASTILLO

          Associate Justice                                           Associate Justice

     ROBERTO A. ABAD                         MARTIN S. VILLARAMA, JR.

          Associate Justice                                           Associate Justice

       JOSE PORTUGAL PEREZ                        JOSE CATRAL MENDOZA

          Associate Justice                                           Associate Justice

MARIA LOURDES P.A. SERENO

Associate Justice