G.R. No.

142399

June 19, 2007

PHILIPPINE AIRLINES, INCORPORATED, petitioner,

vs.
PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondent.
RESOLUTION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended, seeking
to set aside the 30 April 1999 Decision,1 and 10 March 2000 Resolution2 of the Court of Appeals, in
CA-G.R. SP No. 50161 entitled, "Philippine Airlines, Inc. v. National Labor Relations Commission
and Philippine Airlines Employees Association (PALEA)." In the assailed decision, the Court of
Appeals dismissed the petition filed by herein petitioner Philippine Airlines, Inc. (PAL); accordingly,
the appellate court affirmed the 28 January 1998 Decision3 and 23 June 1998 Resolution,4 of the
First Division of the National Labor Relations Commission (NLRC), reversing and setting aside the
12 March 1990 Decision,5 of the Labor Arbiter in NLRC NCR No. 00-03-01134-89, and ordering the
herein PAL to "pay the 13th month pay or mid-year bonus of the (concerned) members (of PALEA) x x
x."6
This case arose from a labor Complaint,7 filed by herein PALEA against herein PAL and one Mary
Anne del Rosario, Director of Personnel, PAL, on 1 March 1989, charging them with unfair labor
practice for the non-payment of 13th month pay of employees who had not been regularized as of the
30th of April 1988, as allegedly stipulated in the Collective Bargaining Agreement (CBA) entered into
by herein parties.
As culled from the records of the case, the facts are:
On 6 February 1987, herein parties, PAL and PALEA, the collective bargaining agent of the rank and
file employees of PAL, entered into a CBA that was to cover the period of 1986 1989. Part of said
agreement required PAL to pay its rank and file employees the following bonuses:
Section 4 13th Month Pay (Mid-year Bonus)
A 13th month pay, equivalent to one month's current basic pay, consistent with the existing
practice shall be paid in advance in May.
Section 5 Christmas Bonus
The equivalent of one month's basic pay as of November 30, shall be paid in December as a
Christmas bonus. Payment may be staggered in two (2) stages. It is distinctly understood
that nothing herein contained shall be construed to mean that the Company may not at its
sole discretion give an additional amount or increase the Christmas bonus. 8

Prior to the payment of the 13th month pay (mid year bonus), PAL released an implementing
guideline9 on 22 April 1988. It stated that:
1) Eligibility
a) Ground employees in the general payroll who are regular as of April 30, 1988;
b) Other ground employees in the general payroll, not falling within category a) above
shall receive their 13th Month Pay on or before December 24, 1988;
2) Amount
a) For category a) above, one month basic salary as of April 30, 1988;
b) Employees covered under 1 b) above shall be paid not less than 1/12 of their
basic salary for every month of service within the calendar year.
3) Payment Date: May 9, 1988 for category 1 a) above.10
PALEA assailed the implementation of the foregoing guideline. It is of the view that all employees of
PAL, whether regular or non-regular, should be paid their 13th month pay. In response to the above,
PAL informed PALEA that rank and file employees who were regularized after 30 April 1988 were not
entitled to the 13th month pay as they were already given the Christmas bonus in December of 1988,
per the Implementing Rules of Presidential Decree No. 851.11
PALEA, disagreeing with PAL, filed a Complaint12 for unfair labor practice before the NLRC on 1
March 1989. The union argued that "the cut-off period for regularization should not be used as the
parameter for granting [the] 13thmonth pay considering that the law does not distinguish the status of
employment but (sic) the law covers all employees."
In its Position Paper submitted before the labor arbiter, PAL countered that those rank and file
employees who were not regularized by 30 April of a particular year are, in principle, not denied their
13th month pay, considering they receive said mandatory bonus in the form of the Christmas Bonus;
that the Christmas Bonus given to all its employees is deemed a compliance with Presidential
Decree No. 851 and the latter's implementing rules; and that the foregoing has been the practice and
has been formally adopted in the previous CBA's as early as 1970.
On 12 March 1990, the Labor Arbiter rendered his decision dismissing the complaint for lack of
merit. The dispositive reads:
WHEREFORE, decision is hereby issued ordering the dismissal of the complaint. 13
The Labor Arbiter ruled that PAL was not guilty of unfair labor practice in withholding the grant of
the 13th Month Pay or Mid-Year Bonus, as set out in Section 4 of the CBA, to the concerned
employees. The giving of the particular bonus was said to be merely an additional practice made in

the past, "such being the case, it violated no agreement or existing practice or committed unfair labor
practice, as charged."14
On appeal to the NLRC, the assailed decision of the Labor Arbiter was reversed. The fallo of said
decision is quoted hereunder:
WHEREFORE, finding the appeal well-impressed with merit, the decision appealed from is
REVERSED and SET ASIDE and a new one ENTERED ordering respondent PAL to pay the
13th month pay or mid-year bonus of the members as discussed above.15
The subsequent motion for reconsideration filed by PAL was denied in a Resolution dated 23 June
1998.
Undaunted, PAL went to this Court via a Petition for Review on Certiorari. In view of this Court's
decision in St. Martin Funeral Homes v. NLRC,16 the petition was referred to the Court of Appeals for
proper resolution. The case was docketed as CA-G.R. SP No. 50161.
On 30 April 1999, the Court of Appeals promulgated its Decision dismissing the petition filed by PAL.
It affirmed the 28 January 1998 NLRC Resolution, viz:
WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of
merit.17
In said Decision, the Court of Appeals held that "from the x x x provision of the said inter-office
memo, employees who are regular as of 30 April 1988 and those regularized thereafter, are entitled
for (sic) the payment of the non-regular employees as provided for under letter (c) of the Guidelines
issued."18 It reasoned that "if the intention is not to include employees regularized beyond 30 April
1988, they would not have placed letter (c)."19 The Court of Appeals further rationalized that "wellsettled is the rule that all doubts should be resolved in favor of labor. To rule otherwise is a betrayal
of our zealous commitment to uphold the constitutional provision affording protection to labor." 20
PAL seasonably moved for the reconsideration of the aforequoted Court of Appeals Decision.
On 10 March 2000, the Court of Appeals promulgated its Resolution denying PAL's prayer for
reconsideration.
Hence, this Petition for Review on Certiorari filed under Rule 45 of the Rules of Court, as amended.
PAL raises only a single issue for consideration by this Court, that is, "can a court or quasi-judicial
agency amend or alter a Collective Bargaining Agreement by expanding its coverage to non-regular
employees who are not covered by the bargaining unit?"
We take note, however, that the Securities and Exchange Commission (SEC) had mandated the
rehabilitation of PAL. On 17 May 1999, the SEC approved the "Amended and Restated
Rehabilitation Plan" of PAL and appointed a "permanent rehabilitation receiver for the latter." 21 To
date, PAL is still undergoing rehabilitation.

The pertinent law concerning the suspension of actions for claims against corporations is
Presidential Decree No. 902-A,22 as amended.23 Particularly, Section 5(d) provides:
SECTION 5. In addition to the regulatory adjudicative functions of the Securities and
Exchange Commission over corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and decrees, it shall have original
and exclusive jurisdiction to hear and decide cases involving:
xxxx
d) Petitions of corporations, partnerships or associations to be declared in the state of
suspension of payments in cases where the corporation, partnership or association
possesses property to cover all its debts but foresees the impossibility of meeting them when
they respectively fall due or in cases where the corporation, partnership or association has
no sufficient assets to cover its liabilities, but is under the [management of a rehabilitation
receiver or] management committee created pursuant to this Decree.
Likewise, Section 6(c), to wit:
SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess
the following:
xxxx
c) To appoint one or more receivers of the property, real or personal, which is the subject of
the action pending before the Commission in accordance with the pertinent provisions of the
Rules of Court in such other cases whenever necessary in order to preserve the rights of the
parties-litigants and/or protect the interest of the investing public and creditors: x x x
Provided, finally, That upon appointment of a management committee, the rehabilitation
receiver, board or body, pursuant to this Decree, all actions for claims against corporations,
partnerships or associations under management or receivership pending before any court,
tribunal, board or body shall be suspended accordingly. (Emphasis supplied.)
The term "claim," as contemplated in Sec. 6(c) of Presidential Decree No. 902-A, refers "to debts or
demands of a pecuniary nature. It means 'the assertion of a right to have money paid.'" 24 In the case
at bar, in the event that the present petition is found to be without merit, PAL will be obliged to satisfy
the pecuniary claims of PALEA the payment of the 13th Month Pay for the particular year to all rank
and file employees whether or not regularized by 30 April 1988.
The underlying principle behind the suspension of claims pending rehabilitation proceedings was
explained in the case of BF Homes, Incorporated v. Court of Appeals.25 This Court clarified that:
In light of these powers, the reason for suspending actions for claims against the corporation
should not be difficult to discover. It is not really to enable the management committee or the
rehabilitation receiver to substitute the defendant in any pending action against it before any
court, tribunal, board or body.Obviously, the real justification is to enable the management

committee or rehabilitation receiver to effectively exercise its/his powers free from any
judicial or extra-judicial interference that might unduly hinder or prevent the "rescue" of the
debtor company. To allow such other action to continue would only add to the burden of the
management committee or rehabilitation receiver, whose time, effort and resources would be
wasted in defending claims against the corporation instead of being directed toward its
restructuring and rehabilitation.26 (Emphasis supplied.)
This Court's adherence to the above-stated rule has been resolute and steadfast as evidenced by its
oft-repeated application in a plethora of cases.27 If truth be told, there have been several PAL cases
to which said rule have been applied to. In Philippine Airlines, Inc. v. National Labor Relations
Commission,28 PAL questioned, albeit via a Petition for Certiorari under Rule 65 of the Rules of
Court, before us, the decision of the NLRC awarding separation pay to Quijano, an employee of
PAL. During the pendency of the petition, however, PAL moved for the suspension of proceedings of
the case by virtue of the SEC order, which appointed an Interim Rehabilitation Receiver for PAL. The
employee, however, argued that the claim for separation pay may be awarded despite PAL being
under a state of receivership since said claim was secured by the supersedeas bond posted by the
employer. The employee maintained that the suspension of proceedings provided in Section 6(c) of
Presidential Decree No. 902-A refers to actions or suits for claims against corporations placed under
receivership and not to Petitions forCertiorari initiated by the corporation under receivership. In a
Resolution dated 4 September 2000, this Court granted PAL's motion elucidating that:
In Rubberworld (Phils.), Inc. v. NLRC, we held that worker's claims before the NLRC and
labor arbiters are included among the actions suspended upon the placing under
receivership of the employer-corporations. Although strictly speaking, the ruling in
Rubberworld dealt with actions for claims pending before the NLRC and labor arbiters, we
find that the rationale for the automatic suspension therein set out would apply to the instant
case where the employee's claim was elevated on certiorari before this Court, x x x.
xxxx
The Court holds that rendition of judgment while petitioner is under a state of receivership
could render violence to the rationale for suspension of payments in Section 6 (c) of P.D.
902-A, if the judgment would result in the granting of private respondent's claim to separation
pay, thus defeating the basic purpose behind Section 6 (c) of P.D. 902-A which is to prevent
dissipation of the distressed company's resources. (Emphasis supplied.)
In another PAL case, specifically, Philippine Airlines, Inc. v. Court of Appeals,29 this Court again
resolved to grant PAL's Motion for Suspension of Proceedings by reason of the SEC Orders dated
23 June 1998 and 1 July 1998, appointing an Interim Rehabilitation Receiver and enjoining the
suspension of all claims for payment against PAL, respectively. Therein it was declared that this
Court is "not prepared to depart from the well-established doctrines" essentially maintaining that all
actions for claims against a corporation pending before any court, tribunal or board shall ipso jure be
suspended in whatever stage such actions may be found upon the appointment by the SEC of a
management committee or a rehabilitation receiver.
And, most recently, is the case of Philippine Airlines v. Zamora,30 we held in simple terms that:

Otherwise stated, no other action may be taken in, including the rendition of judgment during
the state of suspension what are automatically stayed or suspended are the proceedings
of an action or suit and not just the payment of claims during the execution stage after the
case had become final and executory.(Citation omitted)
The suspension of action for claims against a corporation under rehabilitation receiver or
management committee embraces all phases of the suit, be it before the trial court or any
tribunal or before this Court. Furthermore, the actions that are suspended cover all claims
against a distressed corporation whether for damages founded on a breach of contract of
carriage, labor cases, collection suits or any other claims of a pecuniary nature.
In actual fact, allowing such actions to proceed would only increase the work-load of the
management committee or the rehabilitation receiver, whose precious time and effort would
be dissipated and wasted in defending suits against the corporation, instead of being
channeled toward restructuring and rehabilitation.
All told, this Court is constrained to suspend the progress, development and other proceedings in the
present petition.
IN CONCURRENCE WITH THE ABOVE, NOW, THEREFORE, BE IT RESOLVED, as it is hereby
resolved, that in view of the ongoing rehabilitation of petitioner Philippine Airlines, Inc., herein
proceedings are heretoforeSUSPENDED until further notice from this Court. Accordingly, petitioner
Philippine Airlines, Inc. is hereby ORDEREDto quarterly update the Court as to the status of its
ongoing rehabilitation within ten (10) days from the beginning of every quarter, with a WARNING that
non-compliance therewith will merit disciplinary sanctions. No costs.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, JJ., concur.
Footnotes
Penned by Court of Appeals Associate Justice Eugenio S. Labitoria with Associate Justices
Jesus M. Elbinias and Marina L. Buzon, concurring; Annex "A" of the Petition; rollo, pp. 2025.
1

Annex "L" of the Petition; id. at 121.

Penned by NLRC Commissioner Alberto R. Quimpo with Commissioner Vicente S. E.

Veloso concurring; Presiding Commissioner Rogelio I. Rayala was on leave; Annex "G" of
the Petition; id. at 81 90.
3

Annex "I" of the Petition; id. at 96 97.

Annex "E" of the Petition; id. at 59 62.

Id. at 89.

Annex "B" of the Petition; id. at 27.

Id. at 82.

In the form of a Memorandum dated 22 April 1988.

10

Rollo, pp. 82-83.

Entitled "REQUIRING ALL EMPLOYERS TO PAY THEIR EMPLOYEES A 13 TH MONTH

PAY."
11

12

Rollo, p. 27.

13

Id. at 62.

14

Id. at 60.

15

Rollo, p. 89.

16

G.R. No. 142351, 22 November 2006, 507 SCRA 500, 504.

17

Rollo, p. 24.

18

Id.

19

Id.

20

Id.

In the case of Philippine Airlines v. Zamora, G.R. No. 166996, 6 February 2007, Mr. Renato
Z. Francisco was identified as the Permanent Rehabilitation Receiver.
21

REORGANIZATION OF THE SECURITIES AND EXCHANGE COMMISSION WITH

ADDITIONAL POWERS AND PLACING THE SAID AGENCY UNDER THE
ADMINISTRATIVE SUPERVISION OF THE OFFICE OF THE PRESIDENT.
22

On 15 December 2000, the Supreme Court, in A.M. No. 00-8-10-SC, adopted the Interim
Rules of Procedure on Corporate Rehabilitation and directed to be transferred from the SEC
to Regional Trial Courts all petitions for rehabilitation filed by corporations, partnerships, and
associations under Presidential Decree No. 902-A in accordance with the amendatory
provisions of Republic Act No. 8799. The rules require trial courts to issue, among other
things, a stay order in the "enforcement of all claims, whether for money or otherwise, and
whether such enforcement is by court action or otherwise," against the corporation under
rehabilitation, its guarantors and sureties not solidarily liable with it.
23

Although the jurisdiction of SEC over rehabilitation and suspension of payments cases was
transferred to the Regional Trial Courts pursuant to Republic Act No. 8799, otherwise known
as The Securities Regulation Code, which took effect on 8 August 2000, the SEC, pursuant
to Section 5.2 of the same law, retains jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
Sps. Sobrejuanite v. ASB Development Corporation, G.R. No. 165675, 30 September
2005, 471 SCRA 763, 771.
24

25

G.R. No. 76879 and G.R. No. 77143, 3 October 1990, 190 SCRA 262.

26

Id. at 269.

Alemar's Sibal and Sons, Inc. v. Elbinias, G.R. No. 75414, 4 June 1990, 186 SCRA 94; BF
Homes, Inc. v. Court of Appeals, G.R. No. 76879 and G.R. No. 77143, 3 October 1990, 190
SCRA 262; Bank of the Philippine Islands v. Court of Appeals, G.R. No. 97178, 10 January
1994, 229 SCRA 223; Rubberworld (Phils.) Inc. v. National Labor Relations Commission, 365
Phil. 273 (1999); Philippine Airlines v. National Labor Relations Commission, G.R. No.
123294, 4 September 2000; Philippine Airlines v. Sps. Kurangking, 438 Phil. 375
(2002); Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 123238, 11 July 2005;
Sobrejuanite v. ASB Development Corporation, G.R. No. 165675, 30 September 2005, 471
SCRA 763.
27

Promulgated by the Third Division of the Supreme Court, G.R. No. 123294, 4 September
2000.
28

29

Supreme Court's Second Division Resolution, G.R. No. 123238, 11 July 2005.

30

Supra note 21.