RICARDO G. PALOMA v. PHILIPPINE AIRLINES
RICARDO G. PALOMA v. PHILIPPINE AIRLINES
RICARDO G. PALOMA v. PHILIPPINE AIRLINES
PHILIPPINE AIRLINES
580 Phil. 88
SECOND DIVISION
DECISION
VELASCO JR., J.:
The Case
Before us are these two consolidated petitions for review under Rule 45 separately
interposed by Ricardo G. Paloma and Philippine Airlines, Inc. (PAL) to nullify and set
[1]
aside the Amended Decision dated May 31, 2001 of the Court of Appeals (CA) in
[2]
CA-G.R. SP No. 56429, as effectively reiterated in its Resolution of January 14,
2003.
The Facts
Paloma worked with PAL from September 1957, rising from the ranks to retire, after
35 years of continuous service, as senior vice president for finance. In March 1992, or
some nine (9) months before Paloma retired on November 30, 1992, PAL was
privatized.
By way of post-employment benefits, PAL paid Paloma the total amount of PhP
5,163,325.64 which represented his separation/retirement gratuity and accrued
vacation leave pay. For the benefits thus received, Paloma signed a document
[3]
denominated Release and Quitclaim but inscribed the following reservation
therein: "Without prejudice to my claim for further leave benefits embodied in my
aide memoire transmitted to Mr. Roberto Anonas covered by my 27 Nov. 1992 letter x
x x."
The leave benefits Paloma claimed being entitled to refer to his 450-day accrued sick
leave credits which PAL allegedly only paid the equivalent of 18 days. He anchored his
[4]
entitlement on Executive Order No. (EO) 1077 dated January 9, 1986, and his
having accumulated a certain number of days of sick leave credits, as acknowledged in
a letter of Alvia R. Leaño, then an administrative assistant in PAL. Leaño's letter dated
November 12, 1992 pertinently reads:
lawyerly.ph/juris/view/cb2c5# 1/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
At your request, we are pleased to confirm herewith the balance of your sick
leave credits as they appear in our records: 230 days.
Had there been no ceiling as mandated by Company policy, your sick leave
[5]
credits would have totaled 450 days to date.
Answering Paloma's written demands for conversion to cash of his accrued sick leave
credits, PAL asserted having paid all of Paloma's commutable sick leave credits due
him pursuant to company policy made applicable to PAL officers starting 1990.
The company leave policy adverted to grants PAL's regular ground personnel a
graduated sick leave benefits, those having rendered at least 25 years of service being
entitled to 20 days of sick leave for every year of service. An employee, under the
policy, may accumulate sick leaves with pay up to 230 days. Subject to defined
qualifications, sick leave credits in excess of 230 days shall be commutable to cash at
the employee's option and shall be paid in lump sum on or before May 31st of the
following year they were earned.[6] Per PAL's records, Paloma appears to have, for
the period from 1990 to 1992, commuted 58 days of his sick leave credits, broken
down as follows: 20 days each in 1990 and 1991 and 18 days in 1992.
Subsequently, Paloma filed before the Arbitration Branch of the National Labor
Relations Commission (NLRC) a Complaint[7] for Commutation of Accrued Sick
Leaves Totaling 392 days. In the complaint, docketed as NLRC-NCR-Case No. 00-
08-05792-94, Paloma alleged having accrued sick leave credits of 450 days
commutable upon his retirement pursuant to EO 1077 which allows retiring
government employees to commute, without limit, all his accrued vacation and sick
leave credits. And of the 450-day credit, Paloma added, he had commuted only 58
days, leaving him a balance of 392 days of accrued sick leave credits for
commutation.
Issues having been joined with the filing by the parties of their respective position
papers,[8] the labor arbiter rendered on June 30, 1995 a Decision[9] dispositively
reading:
WHEREFORE, premises considered, respondent PHILIPPINE AIRLINE[S],
INC. is hereby ordered to pay within ten (10) days from receipt hereof herein
complainant Ricardo G. Paloma, the sum of Six Hundred Seventy Five Thousand
Pesos (P675,000.00) representing his one Hundred sixty two days [162]
accumulated sick leave credits, plus ten (10%) percent attorney's fees of
P67,500.00, or a total sum of P742,500.00.
SO ORDERED.
lawyerly.ph/juris/view/cb2c5# 2/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
The labor arbiter held that PAL is not covered by the civil service system and,
accordingly, its employees, like Paloma, cannot avail themselves of the beneficent
provision of EO 1077. This executive issuance, per the labor arbiter's decision, applies
only to government officers and employees covered by the civil service, exclusive of
the members of the judiciary whose leave and retirement system is covered by a
special law.
However, the labor arbiter ruled that Paloma is entitled to a commutation of his
alternative claim for 202 accrued sick leave credits less 40 days for 1990 and 1991.
Thus, the grant of commutation for 162 accrued leave credits.
Both parties appealed[10] the decision of the labor arbiter to the NLRC.
On November 26, 1997, the First Division of the NLRC rendered a Decision affirming
that of the labor arbiter, thus:
WHEREFORE, as recommended, both appeals are DISMISSED. The decision of
Labor Arbiter Felipe T. Garduque II dated June 30, 1995 is AFFIRMED.
[11]
SO ORDERED.
Both parties moved for reconsideration. In its Resolution of November 10, 1999, the
NLRC, finding Paloma to have, upon his retirement, commutable accumulated sick
leave credits of 230 days, modified its earlier decision, disposing as follows:
In view of all the foregoing, our decision dated November 26, 1997, be modified
by increasing the sick leave benefits of complainant to be commuted to cash from
162 days to 230 days.
[12]
SO ORDERED.
From the above modificatory resolution of the NLRC, PAL went to the CA on a
petition for certiorari under Rule 65, the recourse docketed as CA-G.R. SP No. 56429.
By a Decision dated April 28, 2000, the CA found for PAL, thus:
WHEREFORE, the petition is granted. Public respondent's November 10, 1999
Resolution is set aside. And the complaint of Ricardo Paloma is hereby
DISMISSED. Without costs.
[13]
SO ORDERED.
lawyerly.ph/juris/view/cb2c5# 3/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
On May 31, 2001, the CA issued the assailed Amended Decision reversing its April 28,
2000 Decision. The fallo of the Amended Decision reads:
WHEREFORE, premises considered, our Judgment, dated 28 April 2000 is
hereby vacated and, set aside, and another one entered reinstating the
Resolution, dated 10 November 1999, issued by the public respondent National
Labor Relations Commission in NLRC NCR Case No. 00-08-05792-94 [NLRC
NCR CA No. 009652-95], entitled Ricardo G. Paloma v. Philippine Airlines,
Incorporated, with the only modification that the total sums granted by Labor
Arbiter Felipe T. Garduque II (P742,500.00, inclusive of the ten percent (10%)
attorney's fees), as affirmed by public respondent National Labor Relations
Commission, First Division, in said NLRC Case No. 00-08-05792-94, shall earn
legal interest from the date of the institution of the complaint until fully
paid/discharged. (Art. 2212, New Civil Code).
[15]
SO ORDERED.
Justifying its amendatory action, the CA stated that EO 1077 applies to PAL and
necessarily to Paloma on the following rationale: Section 2(1) of Article IX(B) of the
1987 Constitution applies prospectively and, thus, the expressed limitation therein on
the applicability of the civil service law only to government-owned and controlled
corporations (GOCCs) with original charters does not preclude the applicability of EO
1077 to PAL and its then employees. This conclusion, the CA added, becomes all the
more pressing considering that PAL, at the time of the issuance of EO 1077, was still a
GOCC and that Paloma had already 29 years of service at that time. The appellate
court also stated that since PAL had then no existing retirement program, the
provisions of EO 1077 shall serve as a retirement program for Paloma who had
meanwhile acquired vested rights under the EO pursuant to Arts. 100[16] and 287[17]
of the Labor Code.
Paloma immediately appealed the CA's Amended Decision via a Petition for Review
on Certiorari under Rule 45, docketed as G.R. No. 148415. On the other hand, PAL
first sought reconsideration of the Amended Decision, coming to us after the CA, per
its January 14, 2003 Resolution, denied the desired reconsideration. In net effect
then, PAL's Petition for Review on Certiorari, docketed as G.R. No. 156764, assails
both the Amended Decision and Resolution of the CA.
The Issues
lawyerly.ph/juris/view/cb2c5# 4/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
In G.R. No. 156764, PAL raises the following issues for our consideration:
1. May an employee of a non-government corporation [invoke EO] 1077 which
the then President Ferdinand E. Marcos issued on January 9, 1986, solely
for the benefit of government officers and employees covered by the civil
service?
The issues submitted boil down to the question of whether or not EO 1077, before
PAL's privatization, applies to its employees, and corollarily, whether or not Paloma is
entitled to a commutation of his accrued sick leave credits. Subsumed to the main
issue because EO 1077 applies only to government employees subject to civil service
law is the question of whether or not PAL--which, as early as 1960 until its
privatization, had been considered as a government-controlled corporation--is
covered by and subject to the limitations peculiar under the civil service system.
Considering the applicable law and jurisprudence in the light of the undisputed
factual milieu of the instant case, the setting aside of the assailed amended decision
and resolution of the CA is indicated.
WHEREAS, by special law, members of the judiciary are not subject to such
restriction;
xxxx
Section 1. Any officer [or] employee of the government who retires or voluntary
resigns or is separated from the service through no fault of his own and whose
leave benefits are not covered by special law, shall be entitled to the
commutation of all the accumulated vacation and/or sick leaves to his credit,
exclusive of Saturdays, Sundays, and holidays, without limitation as to the
number of days of vacation and sick leaves that he may accumulate.
(Emphasis supplied.)
Paloma maintains that he comes within the coverage of EO 1077, the same having
been issued in 1986, before he severed official relations with PAL, and at a time when
the applicable constitutional provision on the coverage of the civil service made no
distinction between GOCCs with original charters and those without, like PAL which
was incorporated under the Corporation Code. Implicit in Paloma's contention is the
submission that he earned the bulk of his sick leave credits under the aegis of the 1973
Constitution when PAL, being then a government-controlled corporation, was under
civil service coverage.
The Court can allow that PAL, during the period material, was a government-
controlled corporation in the sense that the GSIS owned a controlling interest over its
stocks. One stubborn fact, however, remains: Through the years, PAL functioned as a
private corporation and managed as such for profit. Their personnel were never
considered government employees. It may perhaps not be amiss for the Court to take
judicial notice of the fact that the civil service law and rules and regulations have not
actually been made to apply to PAL and its employees. Of governing application to
them was the Labor Code. Consider: (a) Even during the effectivity of the 1973
Constitution but prior to the promulgation on January 17, 1985 of the decision in No.
L-64313 entitled National Housing Corporation v. Juco,[24] the Court no less
recognized the applicability of the Labor Code to, and the authority of the NLRC to
exercise jurisdiction over, disputes involving discipline, personnel movements, and
dismissal in GOCCs, among them PAL;[25] (b) Company policy and collective
bargaining agreements (CBAs), instead of the civil service law and rules, govern the
terms and conditions of employment in PAL. In fact, Ople rhetorically asked how PAL
can be covered by the civil service law when, at one time, there were three (3) CBAs in
PAL, one for the ground crew, one for the flight attendants, and one for the pilots;[26]
and (c) When public sector unionism was just an abstract concept, labor unions in
PAL with the right to engage in strike and other concerted activities were already
active.[27]
Not to be overlooked of course is the 1964 case of Phil. Air Lines Employees' Assn.,
wherein the Court stated that "the Civil Service Law has not been actually applied to
PAL."[28]
Given the foregoing considerations, Paloma cannot plausibly be accorded the benefits
of EO 1077 which, to stress, was issued to narrow the gap between the leave privileges
between the members of the judiciary, on one hand, and other government officers
and employees in the civil service, on the other. That PAL and Paloma may have, at
a time, come within the embrace of the civil service by virtue of the 1973 Constitution
is of little moment at this juncture. As held in National Service Corporation v.
National Labor Relations Commission (NASECO),[29] the issue of whether or not a
given GOCC falls within the ambit of the civil service subject, vis-à-vis disputes
respecting terms and conditions of employment, to the jurisdiction of the Civil Service
Commission or the NLRC, as the case may be, resolves itself into the question of
which between the 1973 Constitution, which does not distinguish between a GOCC
with or without an original charter, and the 1987 Constitution, which does, is in place.
To borrow from the 1988 NASECO ruling, it is the 1987 Constitution, which delimits
the coverage of the civil service, that should govern this case because it is the
Constitution in place at the time the case was decided, even if, incidentally, the cause
of action accrued during the effectivity of the 1973 Constitution. This has been the
consistent holding of the Court in subsequent cases involving GOCCs without original
charters.[30]
It cannot be overemphasized that when Paloma filed his complaint for commutation
of sick leave credits, private interests already controlled, if not owned, PAL. Be this as
it may, Paloma, when he filed said complaint, cannot even assert being covered by the
lawyerly.ph/juris/view/cb2c5# 7/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
civil service and, hence, entitled to the benefits attached to civil service employment,
such as the right under EO 1077 to accumulate and commute leave credits without
limit. In all, then, Paloma, while with PAL, was never a government employee covered
by the civil service law. As such, he did not acquire any vested rights on the retirement
benefits accorded by EO 1077.
What governs Paloma's entitlement to sick leave benefits and the computation and
commutation of creditable benefits is not EO 1077, as the labor arbiter and originally
the NLRC correctly held, but PAL's company policy on the matter which, as found
below, took effect in 1990. The text of the policy is reproduced in the CA's April 28,
2000 Decision and sets out the following pertinent rules:
lawyerly.ph/juris/view/cb2c5# 8/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
POLICY
Regular employees shall be entitled to a yearly period of sick leave with pay, the
exact number of days to be determined on the basis of the employee's category
and length of service in the company.
RULES
xxxx
4. An employee may accumulate sick leave with pay up to Two
Hundred Thirty (230) days;
An employee who has accumulated seventy-five (75) days sick leave credit at the
end of each year may, at his option, commute seventy-five percent (75%) of his
current sick leave entitlement to cash and the other twenty-five percent (25%) to
be added to his accrued sick leave credits up to two hundred thirty (230)
calendar days.
Sick leave credits in excess of two hundred thirty (230) days shall be
commutable to cash at the employee's option, and shall be paid in
lump sum on or before May 31st of the following year it was earned.
[31] (Emphasis ours.)
As may be gathered from the records, accrued sick leave credits in excess of 230 days
were not, if earned before 1990 when the above policy took effect, commutable to
cash; they were simply forfeited. Those earned after 1990, but still subject to the 230-
day threshold rule, were commutable to cash to the extent of 75% of the employee's
current entitlement, and payable on or before May 31st of the following year,
necessarily implying that the privilege to commute is time-bound.
It appears that Paloma had, as of 1990, more than 230 days of accrued sick leave
credits. Following company policy, Paloma was deemed to have forfeited the
monetary value of his leave credits in excess of the 230-day ceiling. Now, then, it is
lawyerly.ph/juris/view/cb2c5# 9/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
undisputed that he earned additional accrued sick leave credits of 20 days in 1990 and
1991 and 18 days in 1992, which he duly commuted pursuant to company policy and
received with the corresponding cash value. Therefore, PAL is correct in contending
that Paloma had received whatever was due on the commutation of his accrued sick
leave credits in excess of the 230 days limit, specifically the 58 days commutation for
1990, 1991, and 1992.
The query that comes next is how the 230 days accrued sick leave credits Paloma
undoubtedly had when he retired are to be treated. Is this otherwise earned credits
commutable to cash? These should be answered in the negative.
The labor arbiter granted 162 days commutation, while the NLRC allowed the
commutation of the maximum 230 days. The CA, while seemingly affirming the
NLRC's grant of 230 days commutation, actually decreed a 162-day commutation. We
cannot sustain any of the dispositions thus reached for lack of legal basis, for PAL's
company policy upon which either disposition was predicated did not provide for a
commutation of the first 230 days accrued sick leave credits employees may have
upon their retirement. Hence, the NLRC and the CA, by their act of allowing
commutation to cash, erred as they virtually read in the policy something not written
or intended therein. Indeed, no law provides for commutation of unused or accrued
sick leave credits in the private sector. Commutation is allowed by way of voluntary
endowment by an employer through a company policy or by a CBA. None of such
medium presently obtains and it would be incongruous if the Court fills up the
vacuum.
Confronted with a similar situation as depicted above, the Court, in Baltazar v. San
Miguel Brewery, Inc., declared as follows:
In connection with the question of whether or not appellee is entitled to the cash
value of six months accumulated sick leave, it appears that while under the last
paragraph of Article 5 of appellant's Rules and Regulations of the Health,
Welfare and Retirement Plan (Exhibit 3), unused sick leave may be accumulated
up to a maximum of six months, the same is not commutable or payable in cash
upon the employee's option.
In our view, the only meaning and import of said rule and regulation is that if an
employee does not choose to enjoy his yearly sick leave of thirty days, he may
accumulate such sick leave up to a maximum of six months and enjoy this six
months sick leave at the end of the sixth year but may not commute it to cash.
[32]
In fine, absent any provision in the applicable company policy authorizing the
commutation of the 230 days accrued sick leave credits existing upon retirement,
Paloma may not, as a matter of enforceable right, insist on the commutation of his
sick leave credits to cash.
As PAL's senior vice-president for finance upon his retirement, Paloma knew or at
lawyerly.ph/juris/view/cb2c5# 10/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
least ought to have known the company policy on accrued sick leave credits and how it
was being implemented. Had he acted on that knowledge in utmost good faith, these
proceedings would have not come to pass.
WHEREFORE, the petition under G.R. No. 148415 is hereby DISMISSED for
lack of merit, while the petition under G.R. No. 156764 is hereby GIVEN DUE
COURSE. The Amended Decision dated May 31, 2001 of the CA in CA-G.R. SP No.
56429 and its Resolution of January 14, 2003 are hereby ANNULLED and SET
ASIDE, and the CA Decision dated April 28, 2000 is accordingly REINSTATED.
SO ORDERED.
[1] Rollo (G.R. No. 148415), pp. 55-65. Penned by Associate Justice Renato C.
Dacudao (now retired) and concurred in by Associate Justices Bennie A. Adefuin-de la
Cruz and Eliezer R. de los Santos.
[4] "Revising the Computation of Creditable Vacation and Sick Leaves of Government
Officers and Employees."
[8] Rollo (G.R. No. 156764), pp. 61-73, Position Paper for Complainant, dated
September 28, 1994; id. at 74-82, Position Paper for Respondent, dated October 24,
1994.
[10] Id. at 102-115, PAL's Appeal to NLRC, dated August 15, 1995; id. at 123-137,
Paloma's Memorandum on Appeal, dated August 16, 1995.
[11] Id. at 149-160. Penned by Commissioner Vicente S.E. Veloso and concurred in by
Commissioner Alberto R. Quimpo.
[13] Id. at 222-231. Penned by Associate Justice Renato C. Dacudao and concurred in
by Associate Justices Quirino D. Abad Santos, Jr. and Bennie A. Adefuin-de la Cruz.
xxxx
[21] National Service Corporation v. NLRC, Nos. L-69870 & L-70295, November 29,
1988, 168 SCRA 122, 135.
[25] National Service Corporation, supra note 21, at 133; citing Philippine Airlines,
Inc. v. NLRC, No. L-62961, September 2, 1983, 124 SCRA 583.
[26] Record of the Constitutional Commission, Vol. I, pp. 583-585; cited in National
Service Corporation, supra.
[29]
lawyerly.ph/juris/view/cb2c5# 12/13
5/11/2020 RICARDO G. PALOMA v. PHILIPPINE AIRLINES
[29] Supra note 21.
[30] See Postigo v. Philippine Tuberculosis Society, Inc., G.R. No. 155146, January
24, 2006, 479 SCRA 628; Juco v. NLRC, G.R. No. 98107, August 18, 1997, 277 SCRA
528; Davao City Water District v. Civil Service Commission, G.R. Nos. 95237-38,
September 13, 1991, 201 SCRA 593; PNOC-Energy Development Corporation v.
NLRC, G.R. No. 79182, September 11, 1991, 201 SCRA 487; PNOC-Energy
Development Corporation v. Leogardo, G.R. No. 58494, July 5, 1989, 175 SCRA 26;
Trade Union of the Philippines and Allied Services (TUPAS) v. National Housing
Corporation, G.R. No. 49677, May 4, 1989, 173 SCRA 33; Lumanta v. NLRC, G.R. No.
82819, February 8, 1989, 170 SCRA 79.
lawyerly.ph/juris/view/cb2c5# 13/13