G.R. No. 112090 - People vs. Lazaro y Servania

Petitioner: St. Joseph’s College, a non-stock, non-profit Catholic educational institution.
Respondent: St. Joseph’s College Workers Association (Samahan), the legitimate labor organization representing the non-faculty employees of the college.
There exists a Collective Bargaining Agreement (CBA) covering the period from June 1, 1999, to May 31, 2004, which provides, among other things, that a specified percentage of the incremental proceeds from any tuition fee increase shall be allocated for employees’ salaries and benefits.

For School Year 2000-2001, petitioner increased tuition fees across all its departments.
Under Article VII, Section 1 of the CBA, the agreement stipulated that a designated portion (eighty-five percent [85%] per the contract) of the incremental proceeds from the fee increase would be allocated for adjustments in employee salaries and benefits.
Two different formulas were used to compute the incremental proceeds:

Defined incremental proceeds as the difference between the current year’s tuition fee income (Y2) and the previous year’s tuition fee income (Y1).
Y2 was computed as the product of the increased tuition fee and the actual number of enrollees for School Year 2000-2001; Y1 was computed as the product of the previous year’s tuition fee and its actual number of enrollees.
This computation resulted in an incremental proceeds figure of P1,560,942.74, from which 85% (P1,326,801.33) was earmarked for employee benefits.

Utilized a formula where Incremental Proceeds per Level (IP) = Net Number of Students (N) multiplied by the difference between the new and old tuition fees (TF2 – TF1).
The total incremental proceeds were obtained by aggregating this computation across all levels and departments, resulting in an amount of P4,906,307.58, with 85% (P4,170,360.59) allegedly due for disbursement to the employees.

Petitioner argued that the computation must be based on actual income figures from the previous school year (using the actual number of enrollees) rather than projections or expected numbers for the current year.
Respondent maintained that using the rate increase per student multiplied by the current enrollees was correct, regardless of any potential decrease in overall income due to lower enrollment figures.

The parties were unable to reconcile their computation methods and resorted to voluntary arbitration.
The Panel of Voluntary Arbitrators (composed of Aniano G. Bagabaldo, Angel A. Ancheta, and Norberto M. Alensuela) rendered a decision:

They ruled in favor of utilizing the previously used formula (from the years 1997-1998, 1998-1999, and 1999-2000) for computing the incremental proceeds.
The arbitrators ordered the respondent school to pay backwages, allowances, and other benefits computed using that formula, plus an additional amount for expenses incurred by the union in the litigation.

Petitioner moved for reconsideration of the arbitrators’ decision, which was denied.
Respondent then appealed to the Court of Appeals (CA).

The computation involved taking the difference in the tuition fee rates (the increased tuition fee minus the previous tuition fee) and multiplying this by the actual number of enrollees for the current school year.
For tertiary levels, the computation was done on a per unit basis due to differential student loads.

The CA further cited Section 5 of Republic Act No. 6728, which mandates that seventy percent (70%) of the proceeds from a tuition fee increase must be allocated for employee compensation.
The CA’s decision, which endorsed the respondent’s method of computation, was remanded for re-computation of the incremental proceeds.

Whether the incremental proceeds from a tuition fee increase should be computed merely by multiplying the per-student fee increase by the actual current number of enrollees, or should also consider the decrease in tuition fee income arising from fewer enrollees.
The contention centers on whether adjustments based on actual income (factoring in losses due to decreased enrollment, exemptions, dropouts, and bad debts) should affect the computation of funds to be distributed to employees.

Whether the judicial branch should reinterpret the computing formula to account for operational losses of a private school resulting from lower actual income despite a nominal fee increase.
Balancing the statutory mandate that a specific percentage (70% as per RA 6728, notwithstanding the contractual rate of 85%) of tuition fee increases be allocated for personnel benefits, against the school’s argument that no incremental proceeds exist if total income decreases.

Whether it is within the judiciary’s power to remedy perceived financial or operational hardships of a private institution by modifying the strict application of the statutory computation formula.
The underlying issue of whether the remedial measures for a school’s financial plight should be sought in the judicial process or through legislative intervention.