G.R. No. 201073 - Philippine Airlines, Inc. vs. PAL Employees Savings and Loan Association, Inc.

Philippine Airlines, Inc. (PAL) and PAL Employees Savings and Loan Association, Inc. (PESALA) share a close institutional relationship. PESALA is a private non-stock corporation whose purpose is to promote thrift and saving among its members.
PESALA obtained its Certificate of Authority (No. C-062) from the Bangko Sentral ng Pilipinas (BSP) on January 28, 1972, based in part on a Certification issued on June 20, 1969 by PAL’s then Vice President for Industrial Relations, confirming PAL’s support for PESALA’s systems and its implementation of payroll deductions to collect deposits, capital contributions, and loan repayments.

On July 11, 1997, PESALA received a Letter from Atty. Jose C. Blanco, then PAL Labor Affairs Officer-in-Charge, informing PESALA of PAL’s decision to implement a maximum 40% salary deduction on all its Philippine-based employees.
PESALA foresaw that the imposition of the 40% ceiling—as contained in the existing collective bargaining agreements (CBAs)—would lead to significant shortfalls in the deductions remitted to it, resulting in an estimated monthly loss of interest income and difficulties in collecting the remaining balance due from its 13,000 members nationwide.

On August 6, 1997, PESALA filed a Complaint for Specific Performance, Damages, or Declaratory Relief, with attendant requests for a Temporary Restraining Order (TRO) and preliminary injunction before the Regional Trial Court (RTC) of Pasay City (Civil Case Nos. 97-1026 and 00-0016).
The TRO issued on August 11, 1997, enjoined PAL from implementing the 40% deduction on loan repayments, capital contributions, and deposits. Despite the TRO, PAL processed payroll for the August 1–15 period without full compliance, resulting in a reduced remittance to PESALA.

On September 3, 1997, the RTC issued a Writ of Preliminary Injunction (WPI) further enjoining PAL and its representatives from enforcing the 40% limitation, and directing PAL to strictly comply with the payroll deduction arrangement for PESALA.
PAL repeatedly failed to implement the court’s orders. For successive payroll periods from September 1997 to February 15, 1998, the actual deducted amounts were consistently less than the deduction advices, thereby causing an aggregate undeducted balance of approximately P44,488,716.41.

On March 11, 1998, the RTC ordered PAL to remit the undeducted balance of P44,488,716.41 to PESALA, based on the continuing discrepancies in payroll deductions caused by PAL’s noncompliance.
Following PAL’s failure to remedy the shortfall and inadequate assurances by its counsel during a December 4, 1998 hearing, PESALA filed a Petition for Indirect Contempt on January 17, 2000 against PAL officials. The RTC, in its November 6, 2002 Decision, made the preliminary injunction permanent and found PAL’s representatives guilty of indirect contempt, thereby ordering them to remit the undeducted amount immediately.

On November 11, 2002, PAL and its officials appealed the RTC Decision. The appeals were consolidated—Civil Case No. 97-1026 (docketed as CA-G.R. CV No. 82098) and Criminal Cases (docketed as CA-G.R. CR Nos. 28341 and 28655).
While the Court of Appeals dismissed the appeal corresponding to the civil case, it granted the appeals in the criminal cases regarding indirect contempt, thereby reversing the finding of contempt but affirming the RTC’s order for PAL to remit the undeducted amount.

PAL petitioned for review on certiorari, contesting that the Court of Appeals exceeded its jurisdiction by sustaining a remedy not specifically prayed for in the original complaint and by effectively holding PAL liable for the undeducted amount.
The petition raised issues regarding alleged violations of due process and the imposition of terms and conditions not provided for by applicable law, including references to relevant doctrines and precedents.

Whether the Court of Appeals erred by affirming an order that directed PAL to remit the undeducted amount of approximately P44,488,716.41—a remedy not specifically prayed for in PESALA’s original complaint.

PAL contended that the complaint only sought damages amounting to P3,840,000.00 monthly and did not call for the collection of the undeducted amount.
The issue also involved whether granting the relief amounted to a violation of PAL’s due process rights.

Whether the Court of Appeals, in sustaining the lower court’s order, improperly imposed liabilities on PAL as if it were a guarantor of the debts of PESALA’s members.

PAL argued that being made liable for the undeducted amount would unjustly render it responsible for the obligations of PESALA’s members.
This raised the question of whether such an imposition was legally and factually supported.

Whether the Court of Appeals’ ruling was contrary to law, particularly with respect to Article 2055 of the Civil Code and the statutory framework provided under Republic Act No. 8367, by effectively imposing terms or conditions not warranted by the complaint or the underlying facts.