G.R. No. 86819 - Adamson University vs. Adamson University Faculty and Employees Association

Case Summary (G.R. No. 86819)

Factual Background

AUFEA believed that the tuition fee increase granted for school year 1983-84 generated incremental tuition proceeds subject to the mandatory 60% allocation for faculty and other staff compensation. It therefore filed the complaint in the MOLE seeking recovery of the amount it claimed to represent the 60% share.

AU opposed the complaint by contending, first, that P.D. No. 451 had been repealed by the Educational Act of 1982, which took effect on September 12, 1982. Second, it argued that even assuming the continued applicability of P.D. No. 451, AUFEA was not entitled to any benefit because there were no actual increment proceeds in the tuition increase for school year 1983-84 upon which a 60% allocation could be based.

MOLE and Labor Arbiter Proceedings

The complaint was dismissed by the labor arbiter in a decision dated March 31, 1986 for lack of merit. AUFEA appealed to the NLRC. On September 30, 1988, the NLRC set aside the labor arbiter’s decision and ordered AU to remit P1,298,160.00, representing AUFEA’s claimed 60% share in the increment proceeds of the tuition fees collected for school year 1983-84.

AU sought reconsideration, but the NLRC denied AU’s motion in a resolution dated January 30, 1989, holding it had been filed out of time.

Petition for Certiorari and Motion for Reconsideration

AU then filed a petition for certiorari with the Court, challenging the NLRC action. On February 22, 1989, the Court dismissed the petition for AU’s failure to sufficiently show that the NLRC had committed grave abuse of discretion. AU moved for reconsideration, and the respondents were required to comment. After the required comments and the reply were filed, the Court found a cogent basis to grant reconsideration and revisited AU’s arguments.

The Parties’ Contentions

In support of its petition, AU presented two arguments. The first focused on procedural infirmity: AU alleged that the service of the NLRC decision upon the security guard of the TOEFEMI building, where AU’s former counsel had maintained office, was ineffective and did not cause the running of the ten-day period to appeal or file a motion for reconsideration. The second argument attacked the NLRC’s substantive ruling: AU claimed that the NLRC’s September 30, 1988 decision was contrary to the doctrine laid down in Cebu Institute of Technology vs. Hon. Blas Ople, et al.

Issue One: Validity of Service and Timeliness of the Motion for Reconsideration

On the first issue, the Court examined the manner in which the NLRC decision was served. The Court noted that the NLRC decision dated September 30, 1988 was served to the office of AU’s counsel on October 11, 1988 by delivering the copy through the security guard of the TOEFEMI building. At the time, AU’s then counsel was Atty. Adres Narvasa, whose office was in that building. The copy was addressed to Atty. Roberto I. Santos of that law office. The Court observed, however, that at the time of service the law office was already dissolved, because Atty. Narvasa had already been appointed to the Court.

Despite that, the record showed that the decision copy transmitted from AU’s former office reached AU’s present counsel on November 5, 1988, and present counsel promptly filed a motion for reconsideration on November 15, 1988. The NLRC rejected the motion on the ground that AU’s former counsel had not withdrawn nor filed a manifestation regarding the dissolution of his office, and thus was still treated as counsel for service purposes.

The Court held that the key question was whether serving the NLRC decision upon a building security guard where former counsel’s office was located constituted compliance with the Rules of Court. The Court invoked Section 4, Rule 13 of the Rules of Court, suppletory to the NLRC rules, which provides for personal service by delivering a copy to the party or attorney or leaving it in the attorney’s office with the clerk or a person in charge thereof. Where no person is found in the office or the office is not known, service may be made by leaving the copy at the party’s or attorney’s residence with a person of sufficient discretion to receive it.

The Court emphasized that, under the rule, service on anyone other than the attorney’s clerk or a person in charge of the attorney’s office is not legally effective. It relied on controlling jurisprudence holding that where the copy is served on a person who is neither a clerk nor a person in charge of the office, the service is invalid and the decision does not become executory. The Court cited doctrines that similarly treated an improperly served decision as ineffectual for triggering the period to appeal, including the Court’s ruling in PLDT vs. NLRC involving service at the ground floor when the office was on the ninth floor.

Applying these standards, the Court found that the security guard of the building was neither the office clerk nor a person in charge contemplated by the rules. Consequently, the Court held that the service on October 11, 1988 was an invalid service and did not start the running of the period for appeal or for filing the motion for reconsideration.

The Court also addressed the NLRC’s reliance on the failure of the former counsel to withdraw appearance. While it acknowledged that failure, it held that the NLRC could properly take judicial notice that Atty. Narvasa had already been elevated to the Supreme Court at the time of promulgation of the NLRC decision. It treated such matter as public knowledge in view of the nature of judicial functions and the fact that NLRC decisions are reviewable by the Supreme Court.

Issue Two: Substantive Entitlement to the 60% Incremental Tuition Proceeds Under the Governing Law

On the second issue, the Court evaluated the basis of the NLRC order requiring AU to remit P1,298,160.00 as AUFEA’s 60% share. The NLRC had grounded its ruling on two related propositions. First, it referenced the position that MECS Order No. 25 took effect on April 1, 1985 and that, prior to that, the governing rule required the 60% incremental proceeds to be applied to basic salaries and wages. Second, it reasoned that because the collective bargaining agreement (CBA) was concluded two days after AU had been granted authority to increase tuition fees, it did not necessarily follow that the parties intended that CBA benefits would come from the incremental proceeds.

The Court disagreed with the NLRC’s legal approach. It stated that in Cebu Institute of Technology vs. Hon. Blas Ople, the Court had ruled that P.D. No. 451 had been repealed by B.P. Blg. 232, effective September 11, 1982. From that date, the Court held, the governing law on the disposition of the 60% incremental tuition proceeds shifted to the pertinent provisions of B.P. Blg. 233, which mandated that not less than 60% of incremental tuition proceeds be used for salaries or wages, allowances, fringe benefits of faculty and support staff, including specified items such as cost of living allowance, thirteenth month pay, retirement fund contributions, social security, medicare, unpaid school personnel claims, and payment as may be prescribed by mandated wage orders, collective bargaining agreements, and voluntary employer practices.

On that basis, the Court held that Section 3(a) of P.D. No. 451, which limited disposition of the 60% incremental proceeds increase in tuition fees to salaries and wages, had been deemed abrogated by repeal as of September 11, 1982. The Court further cited its earlier interpretation in University of the East vs. UE Faculty Association, underscoring that even increases secured through collective bargaining could be charged against the 60% incremental proceeds under the law as clarified by the latest Malacañang decision then considered.

The Court next treated MECS Order No. 25 as an implementing administrative rule based on B.P. Blg. 232. It characterized the administrative issuance as interpretative of a pre-existing statute rather than one declaring new rights with obligations. Accordingly, the Court ruled that MECS Order No. 25 should be given retroactive effect, with its effectivity dated September 11, 1982 rather than April 1, 1985.

To support retroactivity, the Court invoked the principle that remedial or curative statutes operate retroactively, and further recognized the general purpose of rules and regulations to carry into effect a general provision of law. It supported this understanding with jurisprudence holding that interpretative rules and curative enactments may apply retroactively in order to effectuate legislative intent.

Guided by Cebu Institute of Technology, the Court concluded that the NLRC had committed a grave error by ruling that petitioner could not charge to the 60% incremental proceeds the items under paragraph 7.4 of MECS Order No. 25, including compensation items connected with collective bargaining.

Ruling of the Supreme Court

The Court granted AU’s motion for reconsideration. It set aside the resolution dated February 22, 1989 and granted the petition for certiorari. It reversed and set aside the NLRC’s decision dated September 30, 1988 and its resolution dated January 20, 1989. At the same time, it reinstated the labor arbiter’s decision dated March 31, 1986, which had dismissed AUFEA’s complaint for lack of merit. The Court affirmed the dismissal without pronouncement as to costs.

Legal Basis and Reasoning

The Cour

Case Syllabus (G.R. No. 86819)

Parties and Procedural Posture

Adamson Ozanam Educational Institution, Inc., also known as Adamson University (AU), filed a petition for certiorari seeking review of an adverse NLRC disposition.
Adamson University Faculty and Employees Association (AUFEA) pursued a complaint for recovery of a share in incremental proceeds from tuition fee increases.
Conrado Maglaya, as Commissioner of the National Labor Relations Commission (NLRC), acted for the respondent NLRC in resisting the petition.
The Labor Arbiter dismissed AUFEA’s complaint for lack of merit in a decision dated March 31, 1986.
The NLRC set aside the Labor Arbiter’s dismissal in a decision dated September 30, 1988 and ordered AU to remit P1,298,160.00 representing AUFEA’s sixty percent (60%) share in tuition increment proceeds for school year 1983-84.
AU’s motion for reconsideration of the NLRC decision was denied in a resolution dated January 30, 1989, for being filed out of time.
The AU filed the present certiorari petition, which was initially dismissed on February 22, 1989, but later reconsidered upon AU’s motion.
The Court granted the motion for reconsideration, overturned the February 22, 1989 dismissal, and ultimately reversed and set aside the NLRC rulings while affirming the Labor Arbiter’s dismissal of the complaint.

Key Factual Allegations

AU was granted by the then Ministry of Education, Culture & Sports (MECS) authority to increase tuition fees by ten percent (10%) and five percent (5%) for school year 1983-84.
AUFEA believed that under P.D. No. 451, sixty percent (60%) of the tuition increment proceeds should be allocated to increase salaries and wages of faculty members and other school personnel.
AUFEA filed a complaint in the Ministry of Labor & Employment (MOLE) seeking recovery of the claimed P.D. No. 451 sixty percent (60%) share.
AU maintained that P.D. No. 451 was repealed by the Educational Act of 1982 effective September 12, 1982, and that even assuming no repeal, the claim failed due to absence of “actual increment proceeds” for school year 1983-84.
The Labor Arbiter dismissed the complaint for lack of merit on March 31, 1986.
On September 30, 1988, the NLRC ordered AU to remit P1,298,160.00 as AUFEA’s 60% share in the increment proceeds of tuition fees collected for school year 1983-84.
AU argued that the NLRC wrongly treated its motion for reconsideration as late, due to allegedly defective service of the NLRC decision.

Issues Presented

The Court first resolved whether the service of the NLRC decision on AU’s former counsel through a security guard was legally effective, and whether it therefore triggered the running of the ten-day period to appeal or move for reconsideration.
The Court next resolved whether AUFEA could claim sixty percent (60%) of tuition increment proceeds under the applicable law, including whether items covered by collective bargaining and other wage-related benefits could be charged against the 60% incremental proceeds.
The Court assessed whether the NLRC’s disposition conflicted with controlling doctrines, particularly as stated in Cebu Institute of Technology vs. Hon. Blas Ople, et al..

Contentions of the Parties

AU argued that service of the NLRC decision upon the security guard of the TOEFEMI building—where the former counsel maintained office—was ineffective and did not commence the ten-day period for appeal.
AU further argued that the NLRC decision, on the merits, was contrary to the doctrine in Cebu Institute of Technology vs. Hon. Blas Ople, et al.
AU also maintained that P.D. No. 451 had been repealed by the Educational Act of 1982, and that the complaint should fail because there were no actual increment proceeds for school year 1983-84 to base the 60% allocation.
The NLRC, in denying reconsideration as untimely, reasoned that AU’s former counsel did not withdraw appearance or manifest office dissolution, thus AU’s procedural remedies were treated as late.
On the merits, the NLRC treated the wage allocation scheme as within the scope of MECS Order No. 25, and it ruled against AU’s position that the collective bargaining and other items were not necessarily intended to be funded from the incremental proceeds.

Applicable Procedural Rules

The Court applied Section 4, Rule 13 of the Rules of Court, as suppletory to NLRC rules, on personal service of papers.
Section 4, Rule 13 required that service be made by delivering a copy personally to the party or attorney or by leaving it in the attorney’s office with a clerk or a person with charge thereof.
Section 4, Rule 13 also provided a fallback method for when no person is found or the office is unknown, including leaving the copy at the residence with a person of sufficient discretion.
The Court treated service upon a person who is neither the clerk nor in charge of the attorney’s office as noncompliant with the rule.
The Court also relied on prior jurisprudence that invalid service prevents the decision from becoming executory and prevents the appeal period from commencing.

Applicable Substantive Law

The dispute on the merits centered on the legal treatment of the sixty percent (60%) incremental tuition proceeds mandated for salaries and wages or related fringe benefits.
The Court held that P.D. No. 451 was repealed by the Educational Act of 1982, as ruled in Cebu Institute of Technology vs. Hon. Blas Ople, et al.
After the repeal, the Court declared that B.P. Blg. 233 supplied the governing framework for disposing of sixty percent (60%) incremental tuition proceeds.
B.P. Blg. 233, Section 42 mandated that not less than sixty percent (60%) of incremental tuition proceeds be used for enumerated salary and wage-related purposes, including collective bargaining and voluntary employer practices, through the clause referencing mandated wage orders, collective bargaining agreements, and voluntary employer practices.
The Court treated MECS Order No. 25 as an implementing administrative rule interpretative of the educational law provision