J.A.B. Bulao & Associates

LEGAL NOTE 0100: USING STRONG, HURTFUL AND TACTLESS LANGUAGE AGAINST THE COURT CONSTITUTES DIRECT CONTEMPT.

SOURCE:  DENIS B. HABAWEL and ALEXIS F. MEDINA VS. THE COURT OF TAX APPEALS, FIRST DIVISION (G.R. NO. 174759, 07 SEPTEMBER 2011, BERSAMIN J.) SUBJECTS: CRITIZING JUDGES; DIRECT CONTEMPT OF COURT. (BRIEF TITLE: HABAWEL VS. CTA).

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DISPOSITIVE:

ACCORDINGLY, we DISMISS the petition for certiorari; UPHOLD the resolutions dated May 16, 2006 and July 26, 2006; and MODIFY the penalty imposed on Attorney Denis B. Habawel and Attorney Alexis F. Medina by deleting the penalty of imprisonment and sentencing them only to pay the fine of P2,000.00 each.

SO ORDERED.

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LAWYERS HABAWEL AND MEDINA FILED PETITION  AT RTC MANDALUYONG FOR REFUND OF ALLEGED EXCESS TAXES PAID BY THEIR CLIENT. RTC MANDALUYONG DENIED THE PETITION. THEY FILED PETITION FOR REVIEW AT CTA WHICH ALSO DENIED THEIR PETITION. THEY MOVED FOR RECONSIDERATION. CTA DENIED BUT FOUND THEM GUILTY OF DIRECT CONTEMPT FOR USING DEROGATORY, OFFENSIVE AND DISRESPECTFULLY LANGUAGE WHEN THEY STATED IN THEIR MOTION FOR RECONSIDERATION THAT:    “it is gross ignorance of the law for the Honorable Court to have held that it has no jurisdiction over this instant petition; the grossness of this Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction over the instant case” and “this Court lacked the understanding and respect for the doctrine of “stare decisis”.

ARE LAWYERS HABAWEL AND MEDINA GUILTY OF DIRECT CONTEMPT?

YES.  THEY VIOLATED RULE 11.03 OF THE CODE OF PROFESSIONAL RESPONSIBILITY.

Canon 11 of the Code of Professional Responsibility mandates all attorneys to observe and maintain the respect due to the courts and to judicial officers and to insist on similar conduct by others.  Rule 11.03 of the Code of Professional Responsibility specifically enjoins all attorneys thus:

       Rule 11.03. – A lawyer shall abstain from scandalous, offensive or menacing language or behavior before the Courts.

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MAY AN ATTORNEY CRITICIZE A JUDGE?

YES PROVIDED THE CRITICISM IS MADE IN RESPECTFUL TERMS AND THROUGH LEGITIMATE CHANNELS.

          It is conceded that an attorney or any other person may be critical of the courts and their judges provided the criticism is made in respectful terms and through legitimate channels. In that regard, we have long adhered to the sentiment aptly given expression to in the leading case of In re: Almacen:^[1][25]

xxx every citizen has the right to comment upon and criticize the actuations of public officers. This right is not diminished by the fact that the criticism is aimed at a judicial authority, or that it is articulated by a lawyer.  Such right is especially recognized where the criticism concerns a concluded litigation, because then the court’s actuation are thrown open to public consumption.

xxx

Courts and judges are not sacrosanct. They should and expect critical evaluation of their performance.  For like the executive and the legislative branches, the judiciary is rooted in the soil of democratic society, nourished by the periodic appraisal of the citizens whom it is expected to serve.

Well-recognized therefore is the right of a lawyer, both as an officer of the court and as a citizen, to criticize in properly respectful terms and through legitimate channels the acts of courts and judges.xxx

xxx

         Hence, as a citizen and as officer of the court, a lawyer is expected not only to exercise the right, but also to consider it his duty to avail of such right. No law may abridge this right. Nor is he “professionally answerable for a scrutiny into the official conduct of the judges, which would not expose him to legal animadversion as a citizen.” xxx

xxx

         But it is the cardinal condition of all such criticism that it shall be bona fide, and shall not spill over the walls of decency and propriety. A wide chasm exists between fair criticism, on the one hand, and abuse and slander of courts and the judges thereof, on the other. Intemperate and unfair criticism is a gross violation of the duty of respect to courts. It is such a misconduct that subjects a lawyer to disciplinary action. (emphasis supplied)^[2][26]

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WHAT IS THE TEST TO DETERMINE WHETHER CRITICISM OF THE COURT IS PROPER OR NOT?

THE TEST IS WHETHER OR NOT THE CRITICISM IS:

A)     BONA FIDE OR DONE IN GOOD FAITH AND

B)     DOES NOT SPILL OVER THE WALLS OF DECENCY AND PROPRIETY.

          The test for criticizing a judge’s decision is, therefore, whether or not the criticism is bona fide or done in good faith, and does not spill over the walls of decency and propriety.

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WHAT WERE THE STATEMENTS MADE BY THE LAWYERS WHICH WERE CONSIDERED DIRECT CONTEMPT OF COURT?

THEIR STATEMENTS WERE:

(a) “[i]t is gross ignorance of the law for the Honorable Court to have held that it has no jurisdiction over the instant petition;”^[3][27]

 (b) “[t]he grossness of the Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction;”^[4][28]

and (c) the “Honorable Court’s lack of understanding or respect for the doctrine of stare decisis.”^[5][29]

          Here, the petitioners’ motion for reconsideration contained the following statements, to wit: (a) “[i]t is gross ignorance of the law for the Honorable Court to have held that it has no jurisdiction over the instant petition;”^[6][27] (b) “[t]he grossness of the Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction;”^[7][28] and (c) the “Honorable Court’s lack of understanding or respect for the doctrine of stare decisis.”^[8][29]

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WHY WERE SUCH STATEMENT CONTEMPTUOUS?

BECAUSE THEY ARE EQUIVALENT TO A MISBEHAVIOR COMMITTED IN THE PRESENCE OF OR SO NEAR A COURT OR JUDGE AS TO INTERRUPT THE ADMINISTRATION OF JUSTICE.^[9][31]

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WHAT WERE THE FAULTS OF THE LAWYERS IN MAKING SUCH STATEMENTS?

THEY OVERSTEPPED THE BOUNDS OF PROPRIETY AS ATTORNEYS AND DISREGARDED THEIR SWORN DUTY TO RESPECT THE COURTS?

By such statements, the petitioners clearly and definitely overstepped the bounds of propriety as attorneys, and disregarded their sworn duty to respect the courts. . . .  

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SUPPOSE A LAWYER MAKES  IN HIS  PLEADING AN IMPUTATION OF GROSS IGNORANCE AGAINST A JUDGE, HOW WOULD IT BE CONSIDERED?

IT WOULD BE CONSIDERED DIRECT CONTEMPT OF COURT, ESPECIALLY IN THE ABSENCE OF ANY EVIDENCE.

. . . . . An imputation in a pleading of gross ignorance against a court or its judge, especially in the absence of any evidence, is a serious allegation,^[10][30] and constitutes direct contempt of court. It is settled that derogatory, offensive or malicious statements contained in pleadings or written submissions presented to the same court or judge in which the proceedings are pending are treated as direct contempt because they are  equivalent to a misbehavior committed in the presence of or so near a court or judge as to interrupt the administration of justice.^[11][31]

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BUT IT WAS NOT READ IN OPEN COURT?

EVEN THOUGH. IT IS EQUIVALENT TO MISBEHAVIOUR COMMITTED IN OPEN COURT.

This is true, even if the derogatory, offensive or malicious statements are

not read in open court.^[12][32] Indeed, in Dantes v. Judge Ramon S. Caguioa,^[13][33] where the petitioner’s motion for clarification stated that the respondent judge’s decision constituted gross negligence and ignorance of the rules, and was pure chicanery and sophistry, the Court held that “a pleading containing derogatory, offensive or malicious statements when submitted before a court or judge in which the proceedings are pending is direct contempt because it is equivalent to a misbehavior committed in  the presence of or so near a court or judge as to interrupt the administration of justice.”^[14][34]

………………………..

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CAN THE COURT JUST SIMPLY CONDONE OR IGNORE THE REMARKS?

NO.  EVEN IF OBVIOUSLY CORRECT. EVEN IF THE STATEMENTS WERE USED TO EXPLAIN THEIR CLIENTS’ POSITION IN THE CASE.

Such contempt of court cannot be condoned or be simply ignored and set aside, however, for the characterization that the statements were “strong, tactless and hurtful,” although obviously correct, provides no ground to be lenient towards the petitioners, even assuming that such “strong, tactless and hurtful” statements were used to explain their client’s position in the case.^[15][37] The statements manifested a disrespect towards the CTA and the members of its First Division approaching disdain.

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IS THERE AN EXCEPTION TO THE RULE THAT STRONG, TACTLESS AND HURTFUL LANGUAGE IS CONSIDERED CONTEMPTUOUS?

YES. IN ONE CASE THE SUPREME COURT RULED THAT  SNIDE REMARKS OR SARCASTIC INNUENDOS MADE BY COUNSELS ARE NOT CONSIDERED CONTEMPTUOUS CONSIDERING THAT UNFAVORABLE DECISION USUALLY INCITE BITTER FEELINGS.

BUT NOTE THAT IN THIS PRESENT CASE SUCH RULING WAS NOT CONSIDERED.

Nor was the offensiveness of their “strong, tactless and hurtful” language minimized on the basis that “snide remarks or sarcastic innuendos made by counsels are not considered contemptuous considering that unfavorable decision usually incite bitter feelings.”^[16][38] By branding the CTA and the members of its First Division as “totally unaware or ignorant” of Section 7(a)(3) of Republic Act No. 9282, and making the other equally harsh statements, the petitioners plainly assailed the legal learning of the members of the CTA First Division. To hold such language as reflective of a very deliberate move on the part of the petitioners to denigrate the CTA and the members of its First Division is not altogether unwarranted.

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BUT WHY WAS THE COURT VERY STRICT  AGAINST THE TWO LAWYERS?

BECAUSE IN THEIR COMPLIANCE THEY WERE UNREPENTANT AND THEIR LEGAL ARGUMENTS IN THEIR MOTION FOR RECONSIDERATION WERE WRONG.

The petitioners’ disdain towards the members of the CTA First Division for ruling against their side found firm confirmation in their compliance, in which they unrepentantly emphasized such disdain in the following telling words:

3. Admittedly, the language of the Motion for Reconsideration was not endearing. However, the undersigned counsel found it necessary to bluntly call the Honorable Court’s attention to the grievousness of the error by calling a spade a spade. The advocacy needed a strong articulation of the gravity of the error of the Honorable Court in avoiding the substantial and transcendental issues by the simple expedient of dismissing the petition for alleged lack of jurisdiction, in violation of Section 14, Article VIII of the Constitution, which requires that the Decision must express clearly and distinctly the facts and the law on which the Decision was based.

xxx

      10. Since the Honorable Court simply quoted Section 7(a)(5), and it totally ignored Section 7(a)(3), to perfunctorily find that “(U)ndoubtedly, appeals of the decisions or rulings of the Regional Trial Court concerning real property taxes evidently do not fall within the jurisdiction of the CTA,” the undersigned counsel formed a perception that the Honorable Court was totally unaware or ignorant of the new provision, Section 7(a)(3). Hence the statements that it was gross ignorance of the law for the Honorable Court to have held that it has no jurisdiction, as well as, the grossness of the Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction over the instant case were an honest and frank articulation of undersigned counsel’s perception that was influenced by its failure to understand why the Honorable Court totally ignored Section 7(a)(3) in ruling on its lack of jurisdiction. (emphasis supplied)^[17][39]

We might have been more understanding of the milieu in which the petitioners made the statements had they convinced us that the CTA First Division truly erred in holding itself bereft of jurisdiction over the appeal of their client. But our review of the text of the legal provisions involved reveals that the error was committed by them, not by the CTA First Division. This result became immediately evident from a reading of Section 7(a)(3) and Section 7(a)(5) of Republic Act No. 9282, the former being the anchor for their claim that the CTA really had jurisdiction, to wit:

Section 7. Jurisdiction. – The CTA shall exercise:

(a)     Exclusive appellate jurisdiction to review by appeal, as herein provided:

xxx

(3)     Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction; (emphasis supplied)

xxx

(5)     Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals; (emphasis supplied)

xxx

          As can be read and seen, Section 7(a)(3) covers only appeals of the “(d)ecisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction.” The provision is clearly limited to local tax disputes decided by the Regional Trial Courts. In contrast, Section 7(a)(5) grants the CTA cognizance of appeals of the “(d)ecisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals.” In its resolution of March 15, 2006, therefore, the CTA First Division forthrightly explained why, contrary to the petitioners’ urging, Section 7(a)(3) was not applicable by clarifying that a real property tax, being an ad valorem tax, could not be treated as a local tax.^[18][40]

It would have been ethically better for the petitioners to have then retreated and simply admitted their blatant error upon being so informed by the CTA First Division about the untenability of their legal position on the matter, but they still persisted by going on in their compliance dated March 27, 2006 to also blame the CTA First Division for their “perception” about the CTA First Division’s “being totally oblivious of Section 7(a)(3)” due to “the terseness of the Decision dated 05 January 2006,” viz:

          12. Undersigned counsel regrets having bluntly argued that this Honorable Court was grossly ignorant of Section 7(a)(3) because from the terseness of the Decision dated 05 January 2006, the undersigned counsel perceived the Honorable Court as being totally oblivious of Section 7(a)(3). Had the reasons discussed in the Resolution dated 15 March 2006 been articulated in the 05 January 2006 decision, there would have been no basis for undersigned counsels to have formed the above-mentioned perception.^[19][41] (emphasis supplied)

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WHAT LANGUAGE SHOULD AN ATTORNEY USE?

FAIR AND TEMPERATE LANGUAGE.  HARSH AND INTEMPERATE LANGUAGE HAS NO PLACE IN THE LEGAL PROFESSION. ARGUMENTS MUST BE WON THROUGH CIVILITY AND FAIRNESS.

          The foregoing circumstances do not give cause for the Court to excuse the petitioners’ contemptuous and offensive language. No attorney, no matter his great fame or high prestige, should ever brand a court or judge as grossly ignorant of the law, especially if there was no sincere or legitimate reason for doing so. Every attorney must use only fair and temperate language in arguing a worthy position on the law, and must eschew harsh and intemperate language that has no place in the educated ranks of the Legal Profession. Truly, the Bar should strive to win arguments through civility and fairness, not by “heated and acrimonious tone,” as the Court aptly instructed in Slade Perkins v. Perkins,^[20][42] to wit:

The court notices with considerable regret the heated and acrimonious tone of the remarks of the counsel for appellant, in his brief, in speaking of the action of the trial judge. We desire to express our opinion that excessive language weakens rather than strengthens the persuasive force of legal reasoning.  We have noticed a growing tendency to use language that experience has shown not to be conducive to the orderly and proper administration of justice. We therefore bespeak the attorneys of this court to desist from such practices, and to treat their opposing attorneys, and the judges who have decided their cases in the lower court adversely to their contentions with that courtesy all have a right to expect. (emphasis supplied)

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WHAT IS THE NATURE OF THE POWER TO PUNISH CONTEMPT OF COURT?

IT IS EXERCISED ON THE PRESERVATIVE NOT ON THE VINDICTIVE PRINCIPLE.

          The power to punish contempt of court is exercised on the preservative and not on the vindictive principle, and only occasionally should a court invoke its inherent power to punish contempt of court in order to retain that respect without which the administration of justice must falter or fail.^[21][46] We reiterate that the sanction the CTA First Division has visited upon the petitioners was preservative, for the sanction maintained and promoted the proper respect that attorneys and their clients should bear towards the courts of justice.

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WAS THE PENALTY IMPOSED BY THE CTA PROPER?

NO. IT WAS EXCESSIVE AND VERGES ON THE VINDICTIVE.

Inasmuch as the circumstances indicate that the petitioners’ tone of apology was probably feigned, for they did not relent but continued to justify their contemptuous language, they do not merit any leniency. Nonetheless, the penalty of imprisonment for ten days and a fine of P2,000.00 is excessive punishment of the direct contempt of court for using contemptuous and offensive language and verges on the vindictive. The Court foregoes the imprisonment.

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WHAT ARE THE SANCTIONS BASED ON PREVIOUS SUPREME COURT DECISIONS?

NOT UNIFORM. THE SANCTION HAS RANGED FROM A WARNING (TO BE MORE CIRCUMSPECT), A REPRIMAND WITH STERN WARNING AGAINST A REPETITION OF THE MISCONDUCT, A FINE OF P2,000.00, A FINE OF P5,000.00, AND EVEN INDEFINITE SUSPENSION FROM THE PRACTICE OF LAW.

The Court’s treatment of contemptuous and offensive language used by counsel in pleadings and other written submissions to the courts of law, including this Court, has not been uniform. The treatment has dealt with contemptuous and offensive language either as contempt of court or administrative or ethical misconduct, or as both. The sanction has ranged from a warning (to be more circumspect), a reprimand with stern warning against a repetition of the misconduct, a fine of P2,000.00, a fine of P5,000.00, and even indefinite suspension from the practice of law.

The sanction has usually been set depending on whether the offensive language is viewed as contempt of court or as ethical misconduct. In Re: Letter Dated 21 February 2005 of Atty. Noel S. Sorreda,^[22][47] the errant lawyer who made baseless accusations of manipulation in his letters and compliance to this Court was indefinitely suspended from the practice of law. Although he was further declared guilty of contempt of court, the Court prescribed no separate penalty on him, notwithstanding that he evinced no remorse and did not apologize for his actions that resulted from cases that were decided against his clients for valid reasons. In Re: Conviction of Judge Adoracion G. Angeles,^[23][48] the complaining State Prosecutor, despite his strong statements to support his position not being considered as direct contempt of court, was warned to be more circumspect in language. In contrast, Judge Angeles was reprimanded and handed a stern warning for the disrespectful language she used in her pleadings filed in this Court, which declared such language to be below the standard expected of a judicial officer. In Nuñez v. Atty. Arturo B. Astorga,^[24][49] Atty. Astorga was meted a P2,000.00 fine for conduct unbecoming of a lawyer for hurling insulting language against the opposing counsel. Obviously, the language was dealt with administratively, not as contempt of court. In Ng v. Atty. Benjamin C. Alar,^[25][50] the Court prescribed a higher fine of P5,000.00 coupled with a stern warning against Atty. Alar who, in his motion for reconsideration and to inhibit, cast insults and diatribes against the NLRC First Division and its members. Yet again, the fine was a disciplinary sanction.

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HOW DID THE COURT ARRIVED AT THE SANCTION IMPOSED ON ATTY. HABAWEL AND ATTY. MEDINA?

          Despite having earlier directed the petitioners through its resolution of March 15, 2006 that they should “explain within five (5) days from receipt of this Resolution why (they) should not be held for indirect contempt and/or subject to disciplinary action,”^[26][51] the CTA First Division was content with punishing them for direct contempt under Section 1,^[27][52] Rule 71 of the Rules of Court, and did not anymore pursue the disciplinary aspect. The Court concurs with the offended court’s treatment of the offensive language as direct contempt. Thus, we impose on each of them a fine of P2,000.00, the maximum imposable fine under Section 1 of Rule 71, taking into consideration the fact that the CTA is a superior court of the same level as the Court of Appeals, the second highest court of the land. The penalty of imprisonment, as earlier clarified, is deleted. Yet, they are warned against using offensive or intemperate language towards a court or its judge in the future, for they may not be as lightly treated as they now are.

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Republic of thePhilippines

Supreme Court

Manila

FIRST DIVISION

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D E C I S I O N

BERSAMIN, J.:

Found guilty of direct contempt by the First Division of the Court of Tax Appeals (CTA First Division), and sanctioned with imprisonment for a period of ten days and a fine of P2,000.00, the petitioners have come to the Court for relief through certiorari, claiming that the CTA First Division’s  finding and sentence were made in grave abuse of its discretion because the language they used in their motion for reconsideration as the attorneys for a party was contumacious. Specifically, they assail the resolution dated May 16, 2006,^[28][1] whereby the CTA First Division disposed as follows:

       WHEREFORE, premises considered, this Court finds Attorneys Denis B. Habawel and Alexis F. Medina of the Ponce Enrile Reyes and Manalastas  Law Offices guilty of DIRECT CONTEMPT. Each counsel is

hereby ORDERED TO PAY a fine of Two Thousand Pesos and to SUFFER IMPRISONMENT for a period of ten (10) days.

         SO ORDERED.^[29][2]

and the resolution dated July 26, 2006,^[30][3] whereby the CTA First Division denied their motion for reconsideration and reiterated the penalties.

Antecedents

          The petitioners were the counsel of Surfield Development Corporation (Surfield), which sought from the Office of the City Treasurer of Mandaluyong City the refund of excess realty taxes paid from 1995 until 2000.^[31][4]  After the City Government of Mandaluyong City denied its claim for refund,^[32][5] Surfield initiated a special civil action for mandamus in the Regional Trial Court (RTC) in  Mandaluyong City, which was docketed as SCA No. MC03-2142 entitled Surfield Development Corporation v. Hon. City Treasurer of Mandaluyong City, and Hon. City Assessor of Mandaluyong City, and assigned to Branch 214.^[33][6]  Surfield later amended its petition to include its claim for refund of the excess taxes paid from 2001 until 2003.^[34][7]

On October 15, 2004, the RTC dismissed the petition on the ground that the period to file the claim had already prescribed and that Surfield had failed to exhaust administrative remedies. The RTC ruled that the grant of a tax refund was not a ministerial duty compellable by writ of mandamus.^[35][8]

          Surfield, represented by the petitioners, elevated the dismissal to the CTA via petition for review (CTA AC No. 5 entitled Surfield Development Corporation v. Hon. City Treasurer and Hon. City Assessor, Mandaluyong City).^[36][9] The appeal was assigned to the First Division, composed of Presiding Justice Ernesto D. Acosta, Associate Justice Lovell R. Bautista and Associate Justice Caesar A. Casanova.

In its decision dated January 5, 2006,^[37][10] the CTA First Division denied the petition for lack of jurisdiction and for failure to exhaust the remedies provided under Section 253^[38][11] and Section 226^[39][12] of Republic Act No. 7160 (Local Government Code).

          Undeterred, the petitioners sought reconsideration in behalf of Surfield,^[40][13] insisting that the CTA had jurisdiction pursuant to Section 7(a)(3) of Republic Act No. 9282;^[41][14] and arguing that the CTA First Division manifested its “lack of understanding or respect” for the doctrine of stare decisis in not applying the ruling in Ty v. Trampe (G.R. No. 117577,  December 1, 1995, 250 SCRA 500), to the effect that there was no need to file an appeal before the Local Board of Assessment Appeals pursuant to Section 22 of Republic Act No. 7160.

          On March 15, 2006, the CTA First Division denied Surfield’s motion for reconsideration. On the issue of jurisdiction, the CTA First Division explained that the jurisdiction conferred by Section 7(a)(3) of Republic Act No. 1125, as amended by Republic Act No. 9282, referred to appeals from the decisions, orders, or resolutions of the RTCs in local tax cases and did not include the real property tax, an ad valorem tax, the refund of excess payment of which Surfield was claiming. Accordingly, the CTA First Division ruled that the jurisdiction of the CTA concerning real property tax cases fell under a different section of Republic Act No. 9282 and under a separate book of Republic Act No. 7160.

          In addition, the CTA First Division, taking notice of the language the petitioners employed in the motion for reconsideration, required them to explain within five days from receipt why they should not be liable for indirect contempt or be made subject to disciplinary action, thusly:

         IN VIEW OF THE FOREGOING, petitioner’s Motion for Reconsideration is hereby DENIED for lack of merit. And insofar as the merits of the case are concerned let this Resolution be considered as the final decision on the matter.

         However, this Court finds the statements of petitioner’s counsel that “it is gross ignorance of the law for the Honorable Court to have held that it has no jurisdiction over this instant petition; the grossness of this Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction over the instant case” and “this Court lacked the understanding and respect for the doctrine of “stare decisis” as derogatory, offensive and disrespectful. Lawyers are charged with the basic duty to “observe and maintain the respect due to the courts of justice and judicial officers;” they vow solemnly to conduct themselves “with all good fidelity…to the courts.” As a matter of fact, the first canon of legal ethics enjoins them “to maintain towards the courts a respectful attitude, not for the sake of the temporary incumbent of the judicial office, but for the maintenance of its superior importance.” Therefore, petitioner’s counsel is hereby ORDERED to explain within five (5) days from receipt of this Resolution why he should not be held for indirect contempt and/or subject to disciplinary action.

         SO ORDERED.^[42][15]

          The petitioners submitted a compliance dated March 27, 2006,^[43][16] in which they appeared to apologize but nonetheless justified their language as, among others, “necessary to bluntly call the Honorable Court’s attention to the grievousness of the error by calling a spade by spade.”^[44][17]

In its first assailed resolution, the CTA First Division found the petitioners’ apology wanting in sincerity and humility, observing that they chose words that were “so strong, which brings disrepute the Court’s honor and integrity” for brazenly pointing to “the Court’s alleged ignorance and grave abuse of discretion,” to wit:

       In their Compliance, the Court finds no sincerity and humility when counsels Denis B. Habawel and Alexis F. Medina asked for apology. In fact, the counsels brazenly pointed the Court’s alleged ignorance and grave abuse of discretion. Their chosen words are so strong, which brings disrepute the Court’s honor and integrity. We quote:

a)   “Admittedly, the language of the Motion for Reconsideration was not endearing. However, the undersigned counsel found it necessary to bluntly call the Honorable Court’s attention to the grievousness of the error by calling a spade a spade. The advocacy needed a strong articulation of the gravity of the error of the Honorable Court in avoiding the substantial and transcendental issues by the simple expedient of dismissing the petition for alleged lack of jurisdiction, in violation of Section 14, Article VIII of the Constitution, which requires that the Decision must express clearly and distinctly the facts and the law on which the Decision was based” (par. 3 of the Compliance; docket, p. 349);

b)   “Since the Honorable Court simply quoted Section 7(a)(5) and it totally ignored Section 7(a)(3), to perfunctorily find that “(U)ndoubtedly, appeals of the decisions or rulings of the Regional Trial Court concerning real property taxes evidently do not fall within the jurisdiction of the CTA,” the undersigned counsel formed a perception that the Honorable Court was totally unaware or ignorant of the new provision, Section 7(a)(3). Hence, the statements that it was gross ignorance of the law for the Honorable Court to have held that it has not [sic] jurisdiction, as well as, the grossness of the Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction over the instant case were an honest and frank articulation of undersigned counsel’s perception that was influenced by its failure to understand why the Honorable Court totally ignored Section 7(a)(3) in ruling on its lack of jurisdiction” (par. 10 of the Compliance; docket, p. 353);^[45][18]

Accordingly, the CTA First Division adjudged both of the petitioners guilty of direct contempt of court for failing to uphold their duty of preserving the integrity and respect due to the courts, sentencing each to suffer imprisonment of ten days and to pay P2,000.00 as fine.

          Seeking reconsideration,^[46][19] the petitioners submitted that they could not be held guilty of direct contempt because: (a) the phrase gross ignorance of the law was used in its legal sense to describe the error of judgment and was not directed to the character or competence of the decision makers; (b) there was no “unfounded accusation or allegation,” or “scandalous, offensive or menacing,” “intemperate, abusive, abrasive or threatening,” or “vile, rude and repulsive” statements or words contained in their motion for reconsideration; (c) there was no statement in their motion for reconsideration that brought the authority of the CTA and the administration of the law into disrepute; and (d) they had repeatedly offered their apology in their compliance.^[47][20]

Their submissions did not convince and move the CTA First Division to reconsider, which declared through its second assailed resolution that:

The tone of an irate lawyer would almost always reveal the sarcasm in the phrases used. The scurrilous attacks made in the guise of pointing out errors of judgment almost always result to the destruction of the high esteem and regard towards the Court.^[48][21]

and disposed thusly:

         WHEREFORE, petitioners’ Motion for Reconsideration is hereby DENIED for lack of merit. Each counsel is hereby ORDERED TO PAY a fine of Two Thousand Pesos and to SUFFER IMPRISONMENT for a period of ten (10) days.

         SO, ORDERED.^[49][22]

Issues

          Arguing that they were merely prompted by their “(z)ealous advocacy and an appalling error” committed by the CTA First Division to frankly describe such error as gross ignorance of the law, the petitioners now attribute grave abuse of discretion to the CTA First Division in finding that:

I

THE PETITIONERS’ LANGUAGE IN THE SUBJECT MOTION AND COMPLIANCE WAS CONTUMACIOUS;

II

THE PETITIONERS WERE NOT SINCERE IN THEIR APOLOGY AND WERE ARROGANT;

III

THE EXERCISE OF CONTEMPT POWER WAS WITHIN THE LIMITS SET BY THE SUPREME COURT; AND

IV

THE PETITIONERS WERE GUILTY BEYOND REASONABLE DOUBT OF DIRECT CONTEMPT.

          The petitioners continue to posit that the phrase gross ignorance of the law was used in its strict legal sense to emphasize the gravity of the error of law committed by the CTA First Division; and that the statements described by the CTA First Division as “abrasive, offensive, derogatory, offensive and disrespectful” should be viewed within the context of the general tone and language of their motion for reconsideration; that their overall language was “tempered, restrained and respectful” and should not be construed as a display of contumacious attitude or as “a flouting or arrogant belligerence in defiance of the court” to be penalized as direct contempt; that the CTA First Division did not appreciate the sincerity of their apology; and that they merely pointed out the error in the decision of the CTA First Division.

          For its part, the CTA First Division contends that a reading of the motion for reconsideration and the character of the words used therein by the petitioners indicated that their statements reflected no humility, nor were they “expressive of a contrite heart;” and that their submissions instead “reflected arrogance and sarcasm, that they even took the opportunity to again deride the public respondent on the manner of how it wrote the decision.”^[50][23]

          The Office of the Solicitor General (OSG) opines that submitting a pleading containing derogatory, offensive and malicious statements to the same court or judge in which the proceedings are pending constitutes direct contempt; and that the CTA First Division did not abuse its discretion in finding the petitioners liable for direct contempt under Section 1, Rule 71 of the Rules of Court.^[51][24]

Ruling

          We dismiss the petition for certiorari, and declare that the CTA First Division did not abuse its discretion, least of all gravely, in finding that the petitioners committed direct contempt of court.

Canon 11 of the Code of Professional Responsibility mandates all attorneys to observe and maintain the respect due to the courts and to judicial officers and to insist on similar conduct by others.  Rule 11.03 of the Code of Professional Responsibility specifically enjoins all attorneys thus:

       Rule 11.03. – A lawyer shall abstain from scandalous, offensive or menacing language or behavior before the Courts.

          It is conceded that an attorney or any other person may be critical of the courts and their judges provided the criticism is made in respectful terms and through legitimate channels. In that regard, we have long adhered to the sentiment aptly given expression to in the leading case of In re: Almacen:^[52][25]

xxx every citizen has the right to comment upon and criticize the actuations of public officers. This right is not diminished by the fact that the criticism is aimed at a judicial authority, or that it is articulated by a lawyer.  Such right is especially recognized where the criticism concerns a concluded litigation, because then the court’s actuation are thrown open to public consumption.

xxx

Courts and judges are not sacrosanct. They should and expect critical evaluation of their performance.  For like the executive and the legislative branches, the judiciary is rooted in the soil of democratic society, nourished by the periodic appraisal of the citizens whom it is expected to serve.

Well-recognized therefore is the right of a lawyer, both as an officer of the court and as a citizen, to criticize in properly respectful terms and through legitimate channels the acts of courts and judges.xxx

xxx

         Hence, as a citizen and as officer of the court, a lawyer is expected not only to exercise the right, but also to consider it his duty to avail of such right. No law may abridge this right. Nor is he “professionally answerable for a scrutiny into the official conduct of the judges, which would not expose him to legal animadversion as a citizen.” xxx

xxx

         But it is the cardinal condition of all such criticism that it shall be bona fide, and shall not spill over the walls of decency and propriety. A wide chasm exists between fair criticism, on the one hand, and abuse and slander of courts and the judges thereof, on the other. Intemperate and unfair criticism is a gross violation of the duty of respect to courts. It is such a misconduct that subjects a lawyer to disciplinary action. (emphasis supplied)^[53][26]

          The test for criticizing a judge’s decision is, therefore, whether or not the criticism is bona fide or done in good faith, and does not spill over the walls of decency and propriety.

          Here, the petitioners’ motion for reconsideration contained the following statements, to wit: (a) “[i]t is gross ignorance of the law for the Honorable Court to have held that it has no jurisdiction over the instant petition;”^[54][27] (b) “[t]he grossness of the Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction;”^[55][28] and (c) the “Honorable Court’s lack of understanding or respect for the doctrine of stare decisis.”^[56][29]

The CTA First Division held the statements to constitute direct contempt of court meriting prompt penalty.

We agree.

By such statements, the petitioners clearly and definitely overstepped the bounds of propriety as attorneys, and disregarded their sworn duty to respect the courts. An imputation in a pleading of gross ignorance against a court or its judge, especially in the absence of any evidence, is a serious allegation,^[57][30] and constitutes direct contempt of court. It is settled that derogatory, offensive or malicious statements contained in pleadings or written submissions presented to the same court or judge in which the proceedings are pending are treated as direct contempt because they are  equivalent to a misbehavior committed in the presence of or so near a court or judge as to interrupt the administration of justice.^[58][31] This is true, even if the derogatory, offensive or malicious statements are not read in open court.^[59][32] Indeed, in Dantes v. Judge Ramon S. Caguioa,^[60][33] where the petitioner’s motion for clarification stated that the respondent judge’s decision constituted gross negligence and ignorance of the rules, and was pure chicanery and sophistry, the Court held that “a pleading containing derogatory, offensive or malicious statements when submitted before a court or judge in which the proceedings are pending is direct contempt because it is equivalent to a misbehavior committed in the presence of or so near a court or judge as to interrupt the administration of justice.”^[61][34]

In his dissent, Justice Del Castillo, although conceding that the petitioners’ statements were “strong, tactless and hurtful,”^[62][35] regards the statements not contemptuous, or not necessarily assuming the level of contempt for being explanations of their position “in a case under consideration” and because “an unfavorable decision usually incites bitter feelings.”^[63][36]

Such contempt of court cannot be condoned or be simply ignored and set aside, however, for the characterization that the statements were “strong, tactless and hurtful,” although obviously correct, provides no ground to be lenient towards the petitioners, even assuming that such “strong, tactless and hurtful” statements were used to explain their client’s position in the case.^[64][37] The statements manifested a disrespect towards the CTA and the members of its First Division approaching disdain. Nor was the offensiveness of their “strong, tactless and hurtful” language minimized on the basis that “snide remarks or sarcastic innuendos made by counsels are not considered contemptuous considering that unfavorable decision usually incite bitter feelings.”^[65][38] By branding the CTA and the members of its First Division as “totally unaware or ignorant” of Section 7(a)(3) of Republic Act No. 9282, and making the other equally harsh statements, the petitioners plainly assailed the legal learning of the members of the CTA First Division. To hold such language as reflective of a very deliberate move on the part of the petitioners to denigrate the CTA and the members of its First Division is not altogether unwarranted.

The petitioners’ disdain towards the members of the CTA First Division for ruling against their side found firm confirmation in their compliance, in which they unrepentantly emphasized such disdain in the following telling words:

3. Admittedly, the language of the Motion for Reconsideration was not endearing. However, the undersigned counsel found it necessary to bluntly call the Honorable Court’s attention to the grievousness of the error by calling a spade a spade. The advocacy needed a strong articulation of the gravity of the error of the Honorable Court in avoiding the substantial and transcendental issues by the simple expedient of dismissing the petition for alleged lack of jurisdiction, in violation of Section 14, Article VIII of the Constitution, which requires that the Decision must express clearly and distinctly the facts and the law on which the Decision was based.

xxx

      10. Since the Honorable Court simply quoted Section 7(a)(5), and it totally ignored Section 7(a)(3), to perfunctorily find that “(U)ndoubtedly, appeals of the decisions or rulings of the Regional Trial Court concerning real property taxes evidently do not fall within the jurisdiction of the CTA,” the undersigned counsel formed a perception that the Honorable Court was totally unaware or ignorant of the new provision, Section 7(a)(3). Hence the statements that it was gross ignorance of the law for the Honorable Court to have held that it has no jurisdiction, as well as, the grossness of the Honorable Court’s ignorance of the law is matched only by the unequivocal expression of this Honorable Court’s jurisdiction over the instant case were an honest and frank articulation of undersigned counsel’s perception that was influenced by its failure to understand why the Honorable Court totally ignored Section 7(a)(3) in ruling on its lack of jurisdiction. (emphasis supplied)^[66][39]

We might have been more understanding of the milieu in which the petitioners made the statements had they convinced us that the CTA First Division truly erred in holding itself bereft of jurisdiction over the appeal of their client. But our review of the text of the legal provisions involved reveals that the error was committed by them, not by the CTA First Division. This result became immediately evident from a reading of Section 7(a)(3) and Section 7(a)(5) of Republic Act No. 9282, the former being the anchor for their claim that the CTA really had jurisdiction, to wit:

Section 7. Jurisdiction. – The CTA shall exercise:

(a)     Exclusive appellate jurisdiction to review by appeal, as herein provided:

xxx

(3)     Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction; (emphasis supplied)

xxx

(5)     Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals; (emphasis supplied)

xxx

          As can be read and seen, Section 7(a)(3) covers only appeals of the “(d)ecisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction.” The provision is clearly limited to local tax disputes decided by the Regional Trial Courts. In contrast, Section 7(a)(5) grants the CTA cognizance of appeals of the “(d)ecisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals.” In its resolution of March 15, 2006, therefore, the CTA First Division forthrightly explained why, contrary to the petitioners’ urging, Section 7(a)(3) was not applicable by clarifying that a real property tax, being an ad valorem tax, could not be treated as a local tax.^[67][40]

It would have been ethically better for the petitioners to have then retreated and simply admitted their blatant error upon being so informed by the CTA First Division about the untenability of their legal position on the matter, but they still persisted by going on in their compliance dated March 27, 2006 to also blame the CTA First Division for their “perception” about the CTA First Division’s “being totally oblivious of Section 7(a)(3)” due to “the terseness of the Decision dated 05 January 2006,” viz:

          12. Undersigned counsel regrets having bluntly argued that this Honorable Court was grossly ignorant of Section 7(a)(3) because from the terseness of the Decision dated 05 January 2006, the undersigned counsel perceived the Honorable Court as being totally oblivious of Section 7(a)(3). Had the reasons discussed in the Resolution dated 15 March 2006 been articulated in the 05 January 2006 decision, there would have been no basis for undersigned counsels to have formed the above-mentioned perception.^[68][41] (emphasis supplied)

          The foregoing circumstances do not give cause for the Court to excuse the petitioners’ contemptuous and offensive language. No attorney, no matter his great fame or high prestige, should ever brand a court or judge as grossly ignorant of the law, especially if there was no sincere or legitimate reason for doing so. Every attorney must use only fair and temperate language in arguing a worthy position on the law, and must eschew harsh and intemperate language that has no place in the educated ranks of the Legal Profession. Truly, the Bar should strive to win arguments through civility and fairness, not by “heated and acrimonious tone,” as the Court aptly instructed in Slade Perkins v. Perkins,^[69][42] to wit:

The court notices with considerable regret the heated and acrimonious tone of the remarks of the counsel for appellant, in his brief, in speaking of the action of the trial judge. We desire to express our opinion that excessive language weakens rather than strengthens the persuasive force of legal reasoning.  We have noticed a growing tendency to use language that experience has shown not to be conducive to the orderly and proper administration of justice. We therefore bespeak the attorneys of this court to desist from such practices, and to treat their opposing attorneys, and the judges who have decided their cases in the lower court adversely to their contentions with that courtesy all have a right to expect. (emphasis supplied)

          We do not hesitate to punish the petitioners for the direct contempt of court. They threw out self-restraint and courtesy, traits that in the most trying occasions equate to rare virtues that all members of the Legal Profession should possess and cherish. They shunted aside the nobility of their profession. They wittingly banished the ideal that even the highest degree of zealousness in defending the causes of clients did not permit them to cross the line between liberty and license.^[70][43] Indeed, the Court has not lacked in frequently reminding the Bar that language, though forceful, must still be dignified; and though emphatic, must remain respectful as befitting advocates and in keeping with the dignity of the Legal Profession.^[71][44] It is always worthwhile to bear in mind, too, that the language vehicle did not run short of expressions that were emphatic, yet respectful; convincing, yet not derogatory; and illuminating, yet not offensive.^[72][45]  No attorney worthy of the title should forget that his first and foremost status as an officer of the Court calls upon him to be respectful and restrained in his dealings with a court or its judge. Clearly, the petitioners’ criticism of the CTA First Division was not bona fide or done in good faith, and spilled over the walls of propriety.

          The power to punish contempt of court is exercised on the preservative and not on the vindictive principle, and only occasionally should a court invoke its inherent power to punish contempt of court in order to retain that respect without which the administration of justice must falter or fail.^[73][46] We reiterate that the sanction the CTA First Division has visited upon the petitioners was preservative, for the sanction maintained and promoted the proper respect that attorneys and their clients should bear towards the courts of justice.

Inasmuch as the circumstances indicate that the petitioners’ tone of apology was probably feigned, for they did not relent but continued to justify their contemptuous language, they do not merit any leniency. Nonetheless, the penalty of imprisonment for ten days and a fine of P2,000.00 is excessive punishment of the direct contempt of court for using contemptuous and offensive language and verges on the vindictive. The Court foregoes the imprisonment.

The Court’s treatment of contemptuous and offensive language used by counsel in pleadings and other written submissions to the courts of law, including this Court, has not been uniform. The treatment has dealt with contemptuous and offensive language either as contempt of court or administrative or ethical misconduct, or as both. The sanction has ranged from a warning (to be more circumspect), a reprimand with stern warning against a repetition of the misconduct, a fine of P2,000.00, a fine of P5,000.00, and even indefinite suspension from the practice of law.

The sanction has usually been set depending on whether the offensive language is viewed as contempt of court or as ethical misconduct. In Re: Letter Dated 21 February 2005 of Atty. Noel S. Sorreda,^[74][47] the errant lawyer who made baseless accusations of manipulation in his letters and compliance to this Court was indefinitely suspended from the practice of law. Although he was further declared guilty of contempt of court, the Court prescribed no separate penalty on him, notwithstanding that he evinced no remorse and did not apologize for his actions that resulted from cases that were decided against his clients for valid reasons. In Re: Conviction of Judge Adoracion G. Angeles,^[75][48] the complaining State Prosecutor, despite his strong statements to support his position not being considered as direct contempt of court, was warned to be more circumspect in language. In contrast, Judge Angeles was reprimanded and handed a stern warning for the disrespectful language she used in her pleadings filed in this Court, which declared such language to be below the standard expected of a judicial officer. In Nuñez v. Atty. Arturo B. Astorga,^[76][49] Atty. Astorga was meted a P2,000.00 fine for conduct unbecoming of a lawyer for hurling insulting language against the opposing counsel. Obviously, the language was dealt with administratively, not as contempt of court. In Ng v. Atty. Benjamin C. Alar,^[77][50] the Court prescribed a higher fine of P5,000.00 coupled with a stern warning against Atty. Alar who, in his motion for reconsideration and to inhibit, cast insults and diatribes against the NLRC First Division and its members. Yet again, the fine was a disciplinary sanction.

          Despite having earlier directed the petitioners through its resolution of March 15, 2006 that they should “explain within five (5) days from receipt of this Resolution why (they) should not be held for indirect contempt and/or subject to disciplinary action,”^[78][51] the CTA First Division was content with punishing them for direct contempt under Section 1,^[79][52] Rule 71 of the Rules of Court, and did not anymore pursue the disciplinary aspect. The Court concurs with the offended court’s treatment of the offensive language as direct contempt. Thus, we impose on each of them a fine of P2,000.00, the maximum imposable fine under Section 1 of Rule 71, taking into consideration the fact that the CTA is a superior court of the same level as the Court of Appeals, the second highest court of the land. The penalty of imprisonment, as earlier clarified, is deleted. Yet, they are warned against using offensive or intemperate language towards a court or its judge in the future, for they may not be as lightly treated as they now are.

          ACCORDINGLY, we DISMISS the petition for certiorari; UPHOLD the resolutions dated May 16, 2006 and July 26, 2006; and MODIFY the penalty imposed on Attorney Denis B. Habawel and Attorney Alexis F. Medina by deleting the penalty of imprisonment and sentencing them only to pay the fine of P2,000.00 each.

SO ORDERED.

                                                                    LUCAS P. BERSAMIN

                                                                          Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

          TERESITA J. LEONARDO-DE CASTRO       MARIANO C. DEL CASTILLO

          Associate Justice                                          Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

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

          Pursuant to Section 13, Article VIII of the Constitution, 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

LEGAL NOTE 0098: WHAT IS CAUSE OF ACTION? WHEN DOES A COMPLAINT STATES A CAUSE OF ACTION?

SOURCE: DEVELOPMENT BANK OF THE PHILIPPINES VS. HON. SILVERIO Q. CASTILLO and CRISTINA TRINIDAD ZARATE ROMERO (G.R. NO. 163827, 17 AUGUST 2011, VILLARAMA, JR., J.) SUBJECT: CAUSE OF ACTION. (BRIEF TITLE: DBP VS. CASTILLO).

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THE CASE STORY:

SIBLINGS CORAZON AND GONZALO CO-OWNED A REAL PROPERTY. THEY MORTGAGED THE PROPERTY TO DBP. FOR FAILURE TO PAY THE LOAN, DBP FORCLOSED THE MORTGAGE. CORAZON DIED. HER DAUGHTER CRISTINA FOUND OUT THAT THE PROPERTY IS ALREADY IN THE NAME OF DBP. SHE FILED A CASE FOR RECONVEYANCE ON THE GROUND THAT DBP AND GONZALO CONNIVED SO THE PROPERTY WILL BE OWNED SOLELY BY GONZALO. HER PROOFS: HER MOTHER WAS NOT INFORMED OF THE FORECLOSURE AND THUS WAS DEPRIVED OF HER RIGHT TO REDEEM; GONZALO EXECUTED BUY-BACK AGREEMENT WITH DBP OVER THE PROPERTY. SHE ASKED FOR TRO AND INJUNCTION TO PREVENT THE SALE OF THE PROPERTY AT PUBLIC AUCTION. DBP FILED MOTION TO DISMISS AND OPPOSED TRO AND INJUNCTION ON THE GROUND THAT THERE IS NO CAUSE OF ACTION BECAUSE WHEN CRISTINA BECAME HEIR THE PROPERTY WAS ALREADY IN THE NAME OF DBP. RTC GRANTED TRO AND LATER INJUNCTION AND DENIED MOTION TO DISMISS. DPB MOVED FOR RECON. RTC DENIED. DBP FILED AN ANSWER AD CAUTELAM AND ALSO FILED PETITIONS AT CA RE THE TRO, INJUNCTION AND DENIAL OF MOTION TO DISMISS.  CA DENIED PETITIONS FOR BEING FILED OUT OF TIME. CA ALSO DENIED THE MOTION TO DISMISS FOR BEING MOOT BECAUSE DBP SUBSEQUENTLY FILED AN ANSWER.

WAS THE DENIAL OF THE MOTION TO DISMISS CORRECT?

YES BUT NOT BECAUSE IT WAS MOOT BUT BECAUSE ITS WAS WITHOUT MERIT SINCE THE COMPLAINT OF CRISTINA STATES A CAUSE OF ACTION.

Evidently, all the above elements of a cause of action are alleged in the complaint: (1) the legal right of the respondent over the subject property foreclosed premised on the fact that she is the sole heir of one of the owners who is entitled to the right of redemption; (2) the correlative obligation of defendant DBP, as the foreclosing entity, to respect such right of redemption; and (3) the act or omission of the defendant in violation of the legal right, i.e., the act of DBP and its co-defendant Zarate to cause the ostensible foreclosure of the subject property and the subsequent execution of a deed of conditional sale between the defendants even prior to the lapse of redemption period to deprive respondent’s mother of her right over the property.

XXXXXXXXXXXXXXXXXXXXXX

WHAT IS CAUSE OF ACTION?

A CAUSE OF ACTION IS THE ACT OR OMISSION BY WHICH A PARTY VIOLATES A RIGHT OF ANOTHER.^[1][24]

XXXXXXXXXXXXXXXXXXXXX

WHEN DOES A COMPLAINT STATES A CAUSE OF ACTION?

WHEN IT CONTAINS THREE ESSENTIAL ELEMENTS:

(1) A RIGHT IN FAVOR OF THE PLAINTIFF BY WHATEVER MEANS AND WHATEVER LAW IT ARISES;

(2) THE CORRELATIVE OBLIGATION OF THE DEFENDANT TO RESPECT SUCH RIGHT; AND

(3) THE ACT OR OMISSION OF THE DEFENDANT VIOLATES THE RIGHT OF THE PLAINTIFF. 

IF ANY OF THESE ELEMENTS IS ABSENT, THE COMPLAINT BECOMES VULNERABLE TO A MOTION TO DISMISS ON THE GROUND OF FAILURE TO STATE A CAUSE OF ACTION.^[2][25]

A cause of action is the act or omission by which a party violates a right of another.^[3][24]  A complaint states a cause of action when it contains three essential elements: (1) a right in favor of the plaintiff by whatever means and whatever law it arises; (2) the correlative obligation of the defendant to respect such right; and (3) the act or omission of the defendant violates the right of the plaintiff.  If any of these elements is absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.^[4][25]

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FIRST DIVISION

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

RESOLUTION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seeking to set aside the July 21, 2003 Decision^[5][1] of the Court of Appeals (CA) in CA-G.R. SP No. 53825 dismissing petitioner’s petition for certiorari.

The antecedents follow:

Corazon Zarate Romero and his brother Gonzalo Zarate co-owned a property covered by Transfer Certificate of Title (TCT) No. 10070^[6][2] of the Register of Deeds of Dagupan City.  The subject property, located inDagupanCity,Province ofPangasinan, is a 1,705-square-meter lot with a four-storey hotel erected thereon.

It appears that sometime in 1975, Corazon and Gonzalo obtained a loan from petitioner Development Bank of the Philippines (DBP).  As collateral, they executed a real estate mortgage^[7][3] over the subject property in favor of DBP.  On the alleged failure of the two borrowers to pay their amortizations, DBP foreclosed the real estate mortgage onSeptember 15, 1983.  Purportedly, no redemption was made within one year, and thus, DBP consolidated ownership over the subject property.

In March 1993, when Corazon passed away, her sole heir, her daughter respondent Cristina Trinidad Zarate Romero, asserted ownership over the subject property to the extent of one-half thereof.  However, respondent discovered that the property was already registered as early as June 13, 1989in the name of DBP under TCT No. 54142,^[8][4] with TCT No10070 in the names of her mother and uncle already cancelled.

Respondent filed before the Regional Trial Court (RTC) of DagupanCitya complaint^[9][5] for reconveyance, quieting of title and damages with prayer for a temporary restraining order (TRO) and writ of preliminary injunction to prevent DBP from conducting any auction sale on the subject property during the pendency of the case.  Respondent claimed that her uncle and DBP conspired in committing fraudulent acts relative to their true transaction and concealed the same from her mother, thereby depriving her of her right of redemption.

The RTC, after hearing, issued on November 24, 1998, a TRO^[10][6] restraining DBP from proceeding with its scheduled auction of the disputed property onNovember 25, 1998.  The dispositive portion of the trial court’s order reads:

It appearing that plaintiff Cristina Trinidad Romero y Zarate is the sole heir of the late Maria Corazon Zarate Romero[,] co-owner of the ½ pro[-]indiviso of the property covered by TCT No. 10070 which at present is carried in TCT No.54142 inthe name of DBP[,] and to avoid irreparable damage that may arise [from] the auction sale (public bidding) scheduled on November 25, 1998[,] this Court hereby issues a Temporary Restraining Order (TRO) AGAINST DEFENDANT Development Bank of the Philippines, Makati, Metro Manila from proceeding [with] the scheduled auction sale (public bidding) on November 25, 1998 at defendant’s head office at SAM BCG for a period of twenty (20) days from receipt of this order.

SO ORDERED.^[11][7]

DBP moved to lift the TRO arguing that it violates Section 2^[12][8] of Presidential Decree (P.D.) No. 385^[13][9] which prohibits the issuance of a restraining order, temporary or permanent, against government financing institutions like DBP to enjoin any action taken pursuant to the mandatory foreclosure clause of the decree.^[14][10]

On December 14, 1998, the RTC denied DBP’s motion to lift the TRO and granted respondent’s plea for an injunctive writ.^[15][11] The pertinent portions of the trial court’s order reads:

To the honest evaluation of this Court what is unrestrainable is the right of government financial institutions to foreclose mandatorily all loans with arrearages including interest and charges amounting to at least twenty (20%) percent of the total outstanding obligation.

x x x x

 To allay the fears of the plaintiff and to avoid any irreparable damage that may arise while the issues involved in the above case are still being resolved and determined by the Court in the light of the evidence so f[a]r presented, [considering that] there is a tendency on the part of the Development Bank of the Philippines of continuing the acts complained of (auction sale/Public bidding) and considering further [that] there [should] be no advantage … given to one [party] to the prejudice of the other while this case is still pending in Court, it is hereby ordered that a WRIT of Preliminary Injunction be issued against defendant Development Bank of the Philippines from conducting any auction sale of the property involved in the above case (formerly covered by TCT No. 10070 and at [present] covered by TCT No. 54142), upon posting  of a BOND by the plaintiff in the amount of P3 Million within five (5) days from receipt of this Order.^[16][12]

On even date, DBP moved to reconsider^[17][13] the December 14, 1998 Order and at the same time sought the dismissal of respondent’s complaint on the sole ground that the same states no cause of action.^[18][14]

On December 23, 1998, the writ of preliminary injunction^[19][15] was issued in favor of respondent.

On March 8, 1999, the RTC denied DBP’s motion for reconsideration of the denial of its motion for the lifting of the TRO.  The RTC likewise denied in the same order DBP’s motion to dismiss the complaint,^[20][16] and ordered DBP to file an answer.

On March 23, 1999, DBP moved to reconsider the March 8, 1999denial of its motion to dismiss.^[21][17]  But even before the RTC could resolve said motion, DBP filed its Answer^[22][18] on April 5, 1999.  A manifestation^[23][19] was later filed by DBP indicating that the answer it filed was a mere cautionary measure or what is known as an answer ad cautelam and thus without prejudice to any right of action it may take and without any waiver of any of the grounds for the dismissal of the complaint and any favorable resolution or order that a superior court may issue hereinafter.

On April 20, 1999, the RTC issued an order^[24][20] denying DBP’s motion for reconsideration of itsMarch 8, 1999 Order.  The RTC in the same order emphasized that DBP already filed an answer thereby rendering the motion to dismiss moot and academic.

On June 23, 1999, DBP filed a petition for certiorari^[25][21] before the CA assailing the following issuances of the RTC:

(1)              TRO datedNovember 24, 1998(received by DBP onNovember 24, 1998) issued against DBP enjoining it from proceeding with the scheduled auction sale of the disputed property;

(2)              Order datedDecember 14, 1998(received by DBP onDecember 16, 1998) denying its motion to lift the TRO and granting the respondents’ prayer for a writ of preliminary injunction;

(3)              Order datedMarch 8, 1999(received by DBP onMarch 18, 1999) denying DBP’s motion to dismiss and motion for reconsideration of theDecember 14, 1998Order; and

(4)              Order datedApril 20, 1999(received by DBP onApril 23, 1999) denying DBP’s motion for reconsideration of theMarch 8, 1999order.

In its assailed decision, the CA dismissed the petition on procedural grounds.  It held that the petition questioning the first three orders was filed late as the petition should have been filed within 60 days from receipt of the assailed orders.  The CA noted that as regards the third order, DBP was notified of the denial of its motion for reconsideration of the December 14, 1998 Order on March 18, 1999 and thus only had until May 17, 1999 to question the same.  The CA further stated that DBP’s subsequent filing of its Answer to the complaint rendered its motion to dismiss moot and academic.

Hence, the present appeal.

DBP raises the following issues for this Court’s consideration:

I.          WHETHER … THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ORDER OF THE COURT A QUO … DENYING DBP’S MOTION TO DISMISS….

II.         WHETHER … THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ORDER OF THE COURT A QUO … ISSUING THE TEMPORARY RESTRAINING ORDER AND THE PRELIMINARY INJUNCTION AGAINST PETITIONER DBP.

III.       WHETHER … THE RULES OF PROCEDURE [SHOULD NOT] BE APPLIED IN A VERY RIGID AND TECHNICAL SENSE SO AS NOT TO FRUSTRATE THE PROMOTION OF SUBSTANTIAL JUSTICE.^[26][22]

DBP insists that it is evident from the face of the complaint that respondent failed to state a cause of action.  DBP contends that respondent’s allegation of conspiracy between DBP and Gonzalo is bare and has no factual basis to stand on.  Further, DBP claims that respondent has no legal right over the subject property as she did not inherit the same in the first place.  At the time of death of respondent’s mother, the property was not anymore owned by the latter and therefore not part of her estate.  Thus, respondent has no legal right over the property and has no cause of action against DBP.  And because she had no right to the property, the issuance of the TRO and injunctive writ were likewise improper.  DBP also points to the following provisions of P.D. No. 385 that were allegedly violated with the issuance of the TRO and injunctive writ:

Section 1.  It shall be mandatory for government financial institutions, after the lapse of sixty (60) days from the issuance of this Decree, to foreclose the collaterals and/or securities for any loan, credit, accommodation, and/or guarantees granted by them whenever the arrearages on such account, including accrued interest and other charges, amount to at least twenty percent (20%) of the total outstanding obligations, including interest and other charges, as appearing in the books of account and/or related records of the financial institution concerned.  This shall be without prejudice to the exercise by the government financial institutions of such rights and/or remedies available to them under their respective contracts with their debtors, including the right to foreclose on loans, credits, accommodations and/or guarantees on which the arrearages are less than twenty percent (20%).

Sec. 2. No restraining order, temporary or permanent injunction shall be issued by the court against any government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is sought by the borrower(s) or any third party or parties, except after due hearing in which it is established by the borrower and admitted by the government financial institution concerned that twenty percent (20%) of the outstanding arrearages has been paid after the filing of foreclosure proceedings.

x x x x

Respondent, for her part, counters that the CA was correct in dismissing the petition for certiorari for having been filed beyond the sixty (60)-day reglementary period.  Also, respondent contends that the provisions of P.D. No. 385 relating to the proscription against the issuance of injunctive writs enjoining foreclosure sales are not applicable in the instant case.  She points out that what the RTC enjoined is not an auction sale arising from the foreclosure of mortgage as the subject property had long been foreclosed and title thereto consolidated in the name of DBP.  Rather, what the RTC enjoined was DBP’s sale of the subject property through ordinary public bidding which is not within the ambit of P.D. No. 385.

The petition should be denied.

As correctly ruled by the CA, the petition for certiorari assailing the orders pertaining to the grant of the TRO and the writ of injunction were filed out of time.  Notice of the issuance of the TRO was received by DBP on the same day it was granted,November 24, 1998; thus, the petition for certiorari should have been filed not later thanJanuary 23, 1999.  The denial of the motion for reconsideration of the order granting the writ of injunction, on the other hand, was received by DBP on March 18, 1999 and thus, it had only until May 17, 1999 to file the petition for certiorari.  DBP, however, filed its petition only onJune 23, 1999.

As to DBP’s motion to dismiss the complaint, we agree with the RTC and CA that the same should be denied, but not for the reason cited by said courts that it has been rendered moot and academic by DBP’s filing of its answer but because the same lacks merit.  Contrary to DBP’s submission, a perusal of the allegations of the complaint clearly reveals respondent’s cause of action against DBP.  The complaint states,

x x x x

1.1  Plaintiff is the sole heir and successor-in-interest of the late Ma. Corazon Zarate-Romero, who died intestate on6 March 1993.

x x x x

3.  During her lifetime, plaintiff’s predecessor-in-interest was the erstwhile owner pro-indiviso of that parcel of land, together with improvements, located in Dagupan City, which property used to be covered by Transfer Certificate of Title (TCT) No. 10070 of the Registry of Deeds of Dagupan City….

4.  In or about the year 1975, defendant Zarate, who was co-owner of the subject property, secured various personal loan obligations from the defendant DBP in the aggregate amount of P2,000,000.00.

4.1  To secure such putative loan obligations of the defendant Zarate, the latter, who wielded moral ascendancy over his younger sister and herein plaintiff’s predecessor-in-interest — Ma. Corazon Zarate-Romero, cajoled and prevailed upon the latter to mortgage the entirety of the subject property in favor of defendant DBP, including her one-half (1/2) pro-indiviso share in the same.

4.2  Accordingly, defendant Zarate assured the plaintiff’s predecessor-in-interest that the mortgage would be for a brief period only and that he (defendant Zarate) would forthwith pay and settle in full all his personal loan obligations with the defendant DBP to ensure that said mortgage is cancelled in the soonest time possible.

5.  At some point in time during the effectivity of the mortgage, however, defendant Zarate apparently saw an opportunity to claim the entirety of the subject property for himself, to the exclusion of plaintiff’s predecessor-in-interest.

5.1  Emboldened by, and taking advantage of, the complete trust and confidence reposed upon him by the plaintiff’s predecessor-in-interest anent the subject property, defendant Zarate conspired with the defendant DBP for the ostensible foreclosure of the subject property, with the end in view, however, of subsequently reacquiring the same for himself as sole owner.

6.  Pursuant to such sinister plot hatched by defendants, defendant DBP foreclosed the subject property in September of 1983 and, thereafter, bought the same for itself in the sum of P2,253,101.00 during the auction sale conducted by the Deputy Sheriff of Pangasinan….

7.  Significantly enough, and even before the lapse of the mortgagors’ right of redemption over the subject property, the herein defendants entered into a Deed of Conditional Sale over the same, with the defendant DBP as seller, and the defendant Zarate as buyer….

7.1  Needless to state, all the aforedescribed dealings, transactions and proceedings concerning the subject property — from its fraudulent foreclosure up to the highly anomalous execution of the Deed of Conditional Sale over the same — were concealed from plaintiff’s predecessor-in-interest and even from the plaintiff herself after the death of her mother.

x x x x^[27][23]

A cause of action is the act or omission by which a party violates a right of another.^[28][24]  A complaint states a cause of action when it contains three essential elements: (1) a right in favor of the plaintiff by whatever means and whatever law it arises; (2) the correlative obligation of the defendant to respect such right; and (3) the act or omission of the defendant violates the right of the plaintiff.  If any of these elements is absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.^[29][25]

Evidently, all the above elements of a cause of action are alleged in the complaint: (1) the legal right of the respondent over the subject property foreclosed premised on the fact that she is the sole heir of one of the owners who is entitled to the right of redemption; (2) the correlative obligation of defendant DBP, as the foreclosing entity, to respect such right of redemption; and (3) the act or omission of the defendant in violation of the legal right, i.e., the act of DBP and its co-defendant Zarate to cause the ostensible foreclosure of the subject property and the subsequent execution of a deed of conditional sale between the defendants even prior to the lapse of redemption period to deprive respondent’s mother of her right over the property.

WHEREFORE, the petition is DENIED for lack of merit.  The Decision dated July 21, 2003 of the Court of Appeals in CA-G.R. SP No. 53825 is AFFIRMED.

No costs.

SO ORDERED.

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

          Pursuant to Section 13, Article VIII of the 1987 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’s Division.

LEGAL NOTE 0097: CAN EMPLOYER CHANGE ASSIGNMENTS OF EMPLOYEES OR TRANSFER THEM? CAN EMPLOYER PLACE EMPLOYEES ON FLOATING STATUS?

SOURCE: NIPPON HOUSING PHIL. INC., and/or TADASHI OTA, HOROSHI TAKADA, YUSUHIRO KAWATA, MR. NOBOYUSHI and JOEL REYES VS. MAIAH ANGELA LEYNES (G.R. NO. 177816, 03 AUGUST 2011) SUBJECTS: ILLEGAL DISMISSAL; FLOATING STATUS; REDUNDANCY; EMPLOYER UPHELD; (BRIEF TITLE: NIPPON HOUSING VS. LEYNES)

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

CAN EMPLOYER CHANGE ASSIGNMENTS OF EMPLOYEES OR TRANSFER THEM?

YES. THE RIGHT OF EMPLOYEES TO SECURITY OF TENURE DOES NOT GIVE THEM VESTED RIGHT TO THEIR POSITIONS.

Indeed, the right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.^[1][38]

Considering that even labor laws discourage intrusion in the employers’ judgment concerning the conduct of their business, courts often decline to interfere in their legitimate business decisions,^[2][37] absent showing of illegality, bad faith or arbitrariness.  Indeed, the right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.^[3][38]

CAN THE EMPLOYER PLACE EMPLOYEES ON FLOATING STATUS?

YES. OFF-DETAILING IS NOT EQUIVALENT TO DISMISSAL SO LONG AS SUCH STATUS DOES NOT CONTINUE BEYOND A REASONABLE TIME AND IT IS ONLY WHEN SUCH A “FLOATING STATUS” LASTS FOR MORE THAN SIX MONTHS THAT THE EMPLOYEE MAY BE CONSIDERED TO HAVE BEEN CONSTRUCTIVELY DISMISSED.^[4][39]

The record shows that Leynes filed the complaint for actual illegal dismissal from which the case originated on 22 February 2002 or immediately upon being placed on floating status as a consequence of NHPI’s hiring of a new Property Manager for the Project. The rule is settled, however, that “off-detailing” is not equivalent to dismissal, so long as such status does not continue beyond a reasonable time and that it is only when such a “floating status” lasts for more than six months that the employee may be considered to have been constructively dismissed.^[5][39] A complaint for illegal dismissal filed prior to the lapse of said six-month and/or the actual dismissal of the employee is generally considered as prematurely filed.^[6][40]

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

WILL  COURTS INTERFERE IN THE BUSINESS DECISIONS OF EMPLOYERS?

COURTS ARE NOT INCLINED TO INTERFERE IN THE LEGITIMATE DECISIONS OF EMPLOYERS PROVIDED THERE IS NO SHOWING OF ILLEGALITY, BAD FAITH OR ARBITRARINESS.

Considering that even labor laws discourage intrusion in the employers’ judgment concerning the conduct of their business, courts often decline to interfere in their legitimate business decisions,^[7][37] absent showing of illegality, bad faith or arbitrariness.

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

SECOND DIVISION

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

D E C I S I O N

PEREZ, J.:

          Assailed in this petition for review on certiorari^[8][1] filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure is the 23 November 2006 Decision rendered by the Sixteenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 84781,^[9][2]  the decretal portion of which states:

          WHEREFORE, the foregoing considered, the petition is GRANTED and the assailed Decision and Resolution are REVERSED and SET ASIDE.  Accordingly, the Decision of the Labor Arbiter is REINSTATED.

            SO ORDERED.^[10][3]

The Facts

          From its original business of providing building maintenance, it appears that petitioner Nippon Housing Philippines, Inc. (NHPI) ventured into building management, providing such services as handling of the lease of condominium units, collection of dues and compliance with government regulatory requirements.  Having gained the Bay Gardens Condominium Project (the Project) of the Bay Gardens Condominium Corporation (BGCC) as its first and only building maintenance client, NHPI hired respondent Maiah Angela Leynes (Leynes) on 26 March 2001 for the position of Property Manager, with a salary of P40,000.00 per month.  Tasked with surveying the requirements of the government and the client for said project, the formulation of house rules and regulations and the preparation of the annual operating and capital expenditure budget, Leynes was also responsible for the hiring and deployment of manpower, salary and position determination as well as the assignment of the schedules and responsibilities of employees.^[11][4]

          On 6 February 2002, Leynes had a misunderstanding with Engr. Honesto Cantuba (Cantuba), the Building Engineer assigned at the Project, regarding the extension of the latter’s working hours.  Aside from instructing the security guards to bar Engr. Cantuba from entry into the Project and to tell him to report to the NHPI’s main office in Makati, Leynes also sent a letter dated 8 February 2002 by telefax to Joel Reyes (Reyes), NHPI’s Human Resources Department (HRD) Head, apprising the latter of said Building Engineer’s supposed insubordination and disrespectful conduct.^[12][5]  With Engr. Cantuba’s submission of a reply in turn accusing Leynes of pride, conceit and poor managerial skills,^[13][6] Hiroshi Takada (Takada), NHPI’s Vice President, went on to issue the 12 February 2002 memorandum, attributing the incident to “simple personal differences” and directing Leynes to allow Engr. Cantuba to report back for work.^[14][7]

          Disappointed with the foregoing management decision, Leynes submitted to Tadashi Ota, NHPI’s President, a letter dated 12 February 2002, asking for an emergency leave of absence for the supposed purpose of coordinating with her lawyer regarding her resignation letter.^[15][8]  While NHPI offered the Property Manager position to Engr. Carlos Jose on 13 February 2002^[16][9] as a consequence Leynes’ signification of her intention to resign, it also appears that Leynes sent another letter to Reyes by telefax on the same day, expressing her intention to return to work on 15 February 2002 and to call off her planned resignation upon the advice of her lawyer.^[17][10]  Having subsequently reported back for work and resumed performance of her assigned functions, Leynes was constrained to send out a 20 February 2002 written protest regarding the verbal information she supposedly received from Reyes that a substitute has already been hired for her position.^[18][11]  On 22 February 2002, Leynes was further served by petitioner Yasuhiro Kawata and Noboyushi Hisada, NHPI’s Senior Manager and Janitorial Manager,^[19][12] with a letter and memorandum from Reyes, relieving her from her position and directing her to report to NHPI’s main office while she was on floating status.^[20][13]

          Aggrieved, Leynes lost no time in filing against NHPI and its above-named officers the 22 February 2002 complaint for illegal dismissal, unpaid salaries, benefits, damages and attorney’s fees docketed before the arbitral level of the National Labor Relations Commission (NLRC) as NLRC-NCR South Sector Case No. 30-02-01119-02.^[21][14] Against Leynes’ claim that her being relieved from her position without just cause and replacement by one Carlos Jose amounted to an illegal dismissal from employment,^[22][15] NHPI and its officers asserted that the management’s exercise of the prerogative to put an employee on floating status for a period not exceeding six months was justified in view of her threatened resignation from her position and BGCC’s request for her replacement.^[23][16]  During the pendency of the case, however, Reyes eventually served the Department of Labor and Employment (DOLE)^[24][17] and Leynes with the 8 August 2002 notice terminating her services effective 22 August 2002, on the ground of redundancy or lack of a posting commensurate to her position at the Project.^[25][18]  Leynes was offered by NHPI the sum of P28,188.16 representing her unpaid wages, proportionate 13^th month pay, tax refund and service incentive leave pay (SILP).

          On 14 January 2003, Labor Arbiter Manuel Manansala rendered a decision, finding that NHPI’s act of putting Leynes on floating status was equivalent to termination from employment without just cause and compliance with the twin requirements of notice and hearing.  Likewise finding that NHPI’s officers acted with bad faith in effecting Leynes’ termination,^[26][19] the Labor Arbiter disposed of the case in the following wise:

            WHEREFORE, premises considered, judgment is hereby rendered:

            1.  Declaring respondent Nippon Housing Philippines, Inc. (NHPI) guilty of illegal dismissal for the reasons above-discussed.  Consequently, the aforenamed respondent is hereby directed to reinstate complainant Maiah Angela Leynes to her former position as Property Manager without loss of seniority rights and with full backwages from the time of her unjust dismissal up to the time of her actual reinstatement.  The backwages due to complainant Leynes is initially computed at P471,844.87 x x x subject to the finality of this Decision.

            Be that as it may, on account of strained relationship between the parties brought about by the institution of the instant case/complaint plus the fact that complainant Leynes occupied a managerial position, it is better for the parties to be separated.  Thus, in lieu of reinstatement, respondent NHPI is hereby directed to pay complainant Leynes the sum of P80,000.00 representing the latter’s initial separation pay subject to the finality of this Decision x x x.

            2.  Declaring respondent NHPI and individual respondents Tadashi Ota (President), Hirochi Takada (Vice President for Finance), Yasuhiro Kawata (Senior Manager), Noboyushi [Hisada] (Janitorial Manager), and Joel Reyes (HRD Manager) guilty of evident bad faith in effecting the dismissal of complainant Leynes from the service.  Consequently, the aforenamed respondents are hereby directed to pay, jointly and severally, complainant Leynes the sum of P20,000.00 for moral damages and the sum of P20,000.00 for exemplary damages;

            3. Directing respondent NHPI to pay complainant Leynes the total sum of P56,888.44 representing her unpaid salary, proportionate 13^th month pay, and proportionate service incentive leave pay x x x

            4.  Directing the aforenamed respondent NHPI to pay complainant Leynes ten (10%) percent attorney’s fees based on the total monetary award for having been forced to prosecute and/or litigate the instant case/complaint by hiring the services of legal counsel.

            5. Dismissing the other mon[e]y claims and/or charges of complainant Leynes for lack of merit.

            SO ORDERED.^[27][20]

          On appeal, the foregoing decision was reversed and set aside in the 30 September 2003 decision rendered by the NLRC in NLRC NCR CA No. 035229.  In ordering the dismissal of the complaint for lack of merit, the NLRC ruled that NHPI’s placement of Leynes on floating status was necessitated by the client’s contractually guaranteed right to request for her relief.^[28][21]  With Leynes’ elevation of the case to the CA on a Rule 65 petition for certiorari,^[29][22] the NLRC’s decision was, however, reversed and set aside in the herein assailed 23 November 2006 decision, upon the following findings and conclusions: (a) absent showing that there was a bona fide suspension of NHPI’s business operations, Leynes’ relief from her position – even though requested by the client – was tantamount to a constructive dismissal; (b) the bad faith of NHPI and its officers is evident from the hiring of Engr. Jose as Leynes’ replacement on 13 February 2002 or prior to her being relieved from her position on 22 February 2002; and, (c) the failure of NHPI and its officers to prove a just cause for Leynes’ termination, the redundancy of her services and their compliance with the requirements of due process renders them liable for illegal dismissal.^[30][23]   

          The motion for reconsideration of the foregoing decision filed by NHPI and its officers^[31][24] was denied for lack of merit in the CA’s 8 May 2007 resolution, hence, this petition.^[32][25] 

The Issues

          Petitioners NHPI and Kawata urge the grant of their petition on the following grounds, to wit:

I.       THE HONORABLE COURT OF APPEALS’ RULING THAT PETITIONERS’ DECISION TO PLACE RESPONDENT ON FLOATING STATUS IS TANTAMOUNT TO CONSTRUCTIVE DISMISSAL IS CONTRARY TO LAW AND SETTLED JURISPRUDENCE.

II.      THE HONORABLE COURT OF APPEALS’ DECLARATION THAT NHPI’S DECISION TO REDUNDATE RESPONDENT IS UNJUSTIFIED, IS CONTRARY TO LAW AND SETTLED JURISPRUDENCE.^[33][26]

The Court’s Ruling

          We find the petition impressed with merit.  

Petitioners argue that the CA erred in finding that Leynes was constructively dismissed when she was placed on floating status prior to her termination from employment on the ground of redundancy.  Maintaining that the employee’s right to security of tenure does not give him a vested right thereto as would deprive the employer of its prerogative to change his assignment or transfer him to where he will be most useful, petitioners call our attention to the supposed fact that Leynes was unacceptable to BGCC which had a contractually guaranteed right to ask for her relief.  Rather than outrightly terminating Leynes’ employment as a consequence of her threats to resign from her position, moreover, petitioners claim that she was validly placed on floating status pursuant to Article 286 of the Labor Code of the Philippines which provides as follows: 

            Art. 286.  When employment not deemed terminated. – The bona fide suspension of the operation of a business undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a civic duty shall not terminate employment.  In all such cases the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty.

Although the CA correctly found that the record is bereft of any showing that Leynes was unacceptable to BGCC, the evidence the parties adduced a quo clearly indicates that petitioners were not in bad faith when they placed the former under floating status. Disgruntled by NHPI’s countermanding of her decision to bar Engr. Cantuba from the Project, Leynes twice signified her intention to resign from her position to Ota on 12 February 2002.  Upon receiving the copy of the memorandum issued for Engr. Cantuba’s return to work, Leynes inscribed thereon the following handwritten note addressed to Ota, “Good Morning! I’m sorry but I would like to report to you my plan of resigning as your Prop. Manager. Thank You.”^[34][27]  In her application letter for an immediate emergency leave,^[35][28] Leynes also distinctly expressed her dissatisfaction over NHPI’s resolution of her dispute with Engr. Cantuba and announced her plan of coordinating with her lawyer regarding her resignation letter, to wit:

This is in line with the Management decision re: Return to work order of Mr. Honesto Cantuba atBayGardens.  I would like to express my deepest disappointed (sic) for having received this kind of decision from Nippon Housing Philippines, Inc.

Mr. Ota, I have been working with NHPI, as your Building Property Manager, for almost a year now.  I had exerted all my effort to set-up the Property Management, experienced each and every pain and sacrifice[d] everything before we were able to get theBayGardensproject.  Mr. Hiro Matsumoto, Hiroshi Takada and Yasuhiro Kawata had witnessed these things.

Given your decision, I am respecting this.  The most painful thing for me is that the management did not value my effort for what I have done to the Company.

I am therefore submitting my letter for emergency leave of absence starting today, while I am still coordinating with my Lawyer re: my resignation letter.

Thank you for your support.^[36][29] 

In view of the sensitive nature of Leynes’ position and the critical stage of the Project’s business development, NHPI was constrained to relay the situation to BGCC which, in turn, requested the immediate adoption of remedial measures from Takada, including the appointment of a new Property Manager for the Project.  Upon BGCC’s recommendation,^[37][30] NHPI consequently hired Engr. Jose on 13 February 2002 as Leynes’ replacement.^[38][31]  Far from being the indication of bad faith the CA construed the same to be, these factual antecedents suggest that NHPI’s immediate hiring of Engr. Jose as the new Property Manager for the Project was brought about by Leynes’ own rash announcement of her intention to resign from her position.  Although she subsequently changed her mind and sent Reyes a letter by telefax on 13 February 2002 announcing the reconsideration of her planned resignation and her intention to return to work on 15 February 2002,^[39][32] Leynes evidently had only herself to blame for precipitately setting in motion the events which led to NHPI’s hiring of her own replacement.

Acting on Leynes’ 20 February 2002 letter protesting against the hiring of her replacement and reiterating her lack of intention to resign from her position,^[40][33] the record, moreover, shows that NHPI simply placed her on floating status “until such time that another project could be secured” for her.^[41][34]  Traditionally invoked by security agencies when guards are temporarily sidelined from duty while waiting to be transferred or assigned to a new post or client,^[42][35] Article 286 of the Labor Code has been applied to other industries when, as a consequence of the bona fide suspension of the operation of a business or undertaking, an employer is constrained to put employees on floating status for a period not exceeding six months.^[43][36]  In brushing aside respondents’ reliance on said provision to justify the act of putting Leynes on floating status, the CA ruled that no evidence was adduced to show that there was a bona fide suspension of NHPI’s business.  What said court clearly overlooked, however, is the fact that NHPI had belatedly ventured into building management and, with BGCC as its only client in said undertaking, had no other Property Manager position available to Leynes.

Considering that even labor laws discourage intrusion in the employers’ judgment concerning the conduct of their business, courts often decline to interfere in their legitimate business decisions,^[44][37] absent showing of illegality, bad faith or arbitrariness.  Indeed, the right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.^[45][38]  The record shows that Leynes filed the complaint for actual illegal dismissal from which the case originated on 22 February 2002 or immediately upon being placed on floating status as a consequence of NHPI’s hiring of a new Property Manager for the Project. The rule is settled, however, that “off-detailing” is not equivalent to dismissal, so long as such status does not continue beyond a reasonable time and that it is only when such a “floating status” lasts for more than six months that the employee may be considered to have been constructively dismissed.^[46][39] A complaint for illegal dismissal filed prior to the lapse of said six-month and/or the actual dismissal of the employee is generally considered as prematurely filed.^[47][40]

Viewed in the light of the foregoing factual antecedents, we find that the CA reversibly erred in holding petitioners liable for constructively dismissing Leynes from her employment.  There is said to be constructive dismissal when an act of clear discrimination, insensitivity or disdain on the part of the employer has become so unbearable as to leave an employee with no choice but to forego continued employment.^[48][41]  Constructive dismissal exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay.^[49][42]   Stated otherwise, it is a dismissal in disguise or an act amounting to dismissal but made to appear as if it were not.^[50][43]  In constructive dismissal cases, the employer is, concededly, charged with the burden of proving that its conduct and action or the transfer of an employee are for valid and legitimate grounds such as genuine business necessity.^[51][44] To our mind, respondents have more than amply discharged this burden with proof of the circumstances surrounding Engr. Carlos’ employment as Property Manager for the Project and the consequent unavailability of a similar position for Leynes.

With no other client aside from BGCC for the building management side of its business, we find that NHPI was acting well within its prerogatives when it eventually terminated Leynes’ services on the ground of redundancy.  One of the recognized authorized causes for the termination of employment, redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet the demands of the business enterprise.^[52][45]  A redundant position is one rendered superfluous by any number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or phasing out of service activity priorly undertaken by the business.^[53][46] It has been held that the exercise of business judgment to characterize an employee’s service as no longer necessary or sustainable is not subject to discretionary review where, as here, it is exercised there is no showing of violation of the law or arbitrariness or malice on the part of the employer.^[54][47]  An employer has no legal obligation to keep more employees than are necessary for the operation of its business.^[55][48]

Considering that Leynes was terminated from service upon an authorized cause, we find that the CA likewise erred in faulting NHPI for supposedly failing to notify said employee of the particular act or omission leveled against her and the ground/s for which she was dismissed from employment.   Where dismissal, however, is for an authorized cause like redundancy, the employer is, instead, required to serve a written notice of termination on the worker concerned and the DOLE, at least one month from the intended date thereof.^[56][49]  Here, NHPI specifically made Leynes’ termination from service effective 22 August 2002, but only informed said employee of the same on 8 August 2002^[57][50] and filed with the DOLE the required Establishment Termination Report only on 16 August 2002.^[58][51]  For its failure to comply strictly with the 30-day minimum requirement for said notice and effectively violating Leynes’ right to due process, NHPI should be held liable to pay nominal damages in the sum of P50,000.00.  The penalty should understandably be stiffer because the dismissal process was initiated by the employer’s exercise of its management prerogative.^[59][52]

 Having been validly terminated on the ground of redundancy, Leynes is entitled to separation pay equivalent to one month salary for every year of service but not to the backwages adjudicated in her favor by the Labor Arbiter.^[60][53]  Hired by NHPI on 26 March 2001 and terminated effective 22 August 2002, Leynes is entitled to a separation pay in the sum of P40,000.00, in addition to her last pay which, taking into consideration her proportionate 13^th month pay, tax refund and SILP, was computed by NHPI at P28,188.16.^[61][54]  For lack of showing of bad faith, malice or arbitrariness on the part of NHPI, there is, however, no justifiable ground for an award of moral and exemplary damages.^[62][55]  For lack of factual or legal bases, we find no cause to award attorney’s fees in favor of Leynes.  In the absence of the same showing insofar as NHPI’s corporate officers are concerned, neither is there cause to hold them jointly and severally liable for the above-discussed monetary awards.

WHEREFORE, premises considered, the petition is GRANTED and the assailed 23 November 2006 Decision is, accordingly, REVERSED and SET ASIDE.  In lieu thereof, another is entered ordering NHPI to pay Leynes the following sums: (a) P40,000.00 as separation pay; (b) P28,188.16 representing her unpaid wages, proportionate 13^th month pay, tax refund and SILP; and (c) P50,000.00 by way of nominal damages. 

SO ORDERED.

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

TERESITA J. LEONARDO-DE CASTRO       ARTURO D. BRION                              

                    Associate Justice                                  Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

          I attest that the conclusions in the above Decision were 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        

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                           RENATO C. CORONA

                                                                           Chief Justice