Cariño vs. ACCFA

Permanent civil service employees whose positions are abolished in bad faith — as a mere subterfuge to replace them with political protégés — are entitled to reinstatement and back salaries, because the constitutional guarantee that no officer or employee in the Civil Service shall be removed or suspended except for cause as provided by law recognizes no exception, regardless of whether the position is primarily confidential.

The petitioners were permanent employees of the Agricultural Credit and Cooperative Financing Administration (ACCFA), a government agency. They held positions as Confidential Agents and Confidential Investigators, were civil service eligibles of the first grade, and — except for one — were all lawyers. Originally assigned to the Special Operations Service unit of the ACCFA, their duties consisted of conducting investigations of irregularities in any branch of the ACCFA and appearing as witnesses in court. Some were later transferred to the Office of General Counsel. The constitutional framework governing their employment was the 1935 Constitution's provisions on the Civil Service, particularly Section 1 and Section 4 of Article XII.

Petitioners Eldo J. Cariño, Arsenio C. Miguel, Johnny F. Ilar, Sotero M. de Castro, Gustavo E. Espino, and Licerio D. Espinosa were appointed permanent employees of the ACCFA at various dates beginning in 1955. They were all first grade civil service eligibles, and except for Espino, all were lawyers. Their positions were Confidential Agent or Confidential Investigator, with annual salaries ranging from P2,400 to P3,480. Originally assigned to the Special Operations Service unit of the ACCFA, their duties consisted of conducting investigations of irregularities in any branch of the ACCFA and appearing as witnesses in court. De Castro, Miguel, and Ilar were transferred to the Office of General Counsel on August 11, 1958, per Special Order No. 673.

On September 17, 1958, petitioners were advised that their items in the budget were abolished by the Board of Governors, and consequently their services were terminated. The stated reason was economy. However, the trial court found that shortly after the abolition, appointments to many positions involving higher salaries were extended to new appointees. While these new appointments carried designations different from "confidential investigator" or "confidential agent," the work involved was the same work performed by the petitioners who were removed. The trial court characterized the abolition as "a mere subterfuge to remove petitioners in order to give room to their (members of the Board of Governors') own political proteges."

Petitioners sought administrative relief. On October 23, 1958, they wrote the ACCFA Board of Governors requesting reinstatement, underscoring their civil service eligibility, efficiency, and the permanence of their positions. On October 28, 1958, Espino wrote the Commissioner of Civil Service seeking clarification and advice, but on October 30, 1958, the Commissioner referred the matter to the ACCFA Administrator instead of resolving it. On November 21, 1958, the ACCFA administrator justified the abolition on grounds of economy, the confidential nature of the positions, and the dependence of tenure on the appointing power. A follow-up letter from Espino dated December 12, 1958 merited no reply from the Civil Service Commissioner. On December 15, 1958, Espino wrote to Major Federico Salcedo of the PCAPE seeking presidential intervention, but was informed that no action could be taken because of the alleged retrenchment policy enunciated by the ACCFA Board of Governors. Petitioners then filed the present suit for mandamus in the Court of First Instance of Manila to compel reinstatement, payment of back salaries, moral damages, attorney's fees, and costs. After suit was filed, de Castro and Cariño collected one-month separation pay, and all petitioners except Ilar received terminal leave pay. Licerio D. Espinosa withdrew his petition because he was reinstated by respondents.

• Bad Faith Abolition: Petitioners maintained that the abolition of their positions was a mere subterfuge to remove them in favor of political protégés, as evidenced by the creation of new positions with different titles but the same work, and at higher salaries, shortly after the abolition.
• Right to Reinstatement: Petitioners argued that as permanent civil service employees, they could not be removed except for cause as provided by law, and that they had not lost the confidence of their superiors — on the contrary, four of them had received progressively merited promotions in pay.
• Exhaustion of Administrative Remedies: Petitioners contended that they had substantially exhausted all administrative remedies, as the Civil Service Commissioner sat on their petition, the appeal to the Civil Service Board became a useless ceremony, and the Office of the President had closed the door to further action.
• No Estoppel: Petitioners asserted that acceptance of separation pay and terminal leave benefits did not amount to estoppel, because the employer-employee relationship placed them in a position of adherence rather than choice, and they had not relented on their claim.
• Moral Damages: Petitioners sought moral damages in the sum of P15,000 for each of them.
• Attorney's Fees: Petitioners asked that the award of attorney's fees be raised from P500 to P2,000 for each petitioner, citing their contract with counsel.

• Primarily Confidential Positions: Respondents claimed that petitioners' positions were "primarily confidential" in nature, and that their tenure depended upon the appointing power.
• Failure to Exhaust Administrative Remedies: Respondents argued that petitioners failed to exhaust all administrative remedies before filing suit, which was the ground upon which the lower court dismissed the petition.
• Estoppel: Respondents urged that petitioners were estopped from seeking reinstatement because they accepted their separation pay and terminal leave benefits.

• Validity of Abolition: Whether the abolition of petitioners' positions was done in good faith or was a subterfuge to remove them in favor of political protégés.
• Security of Tenure for Confidential Positions: Whether primarily confidential positions are exempt from the constitutional guarantee that no officer or employee in the Civil Service shall be removed or suspended except for cause as provided by law.
• Exhaustion of Administrative Remedies: Whether petitioners failed to exhaust administrative remedies before filing the mandamus suit.
• Estoppel: Whether petitioners were estopped from seeking reinstatement by their acceptance of separation pay and terminal leave benefits.
• Moral Damages: Whether moral damages should be awarded to petitioners.
• Attorney's Fees: Whether the award of attorney's fees should be increased from P500.

• Validity of Abolition: No. The abolition was done in bad faith, constituting abolition of the employees themselves rather than their positions, as the same offices were promptly restored under different names and occupied by new appointees performing the same work.
• Security of Tenure for Confidential Positions: No exemption. The Constitution does not exempt primarily confidential positions from the operation of the principle that no officer or employee in the Civil Service shall be removed or suspended except for cause as provided by law, which recognizes no exception.
• Exhaustion of Administrative Remedies: No failure. Petitioners had substantially exhausted administrative remedies, as the Civil Service Commissioner sat on their petition, the appeal to the Civil Service Board became a useless ceremony, and the Office of the President had closed the door to further action; moreover, the question was purely legal and the dismissal was patently illegal, fitting recognized exceptions to the exhaustion rule.
• Estoppel: No estoppel. Acceptance of separation pay and terminal leave benefits did not amount to estoppel, because employer and employee do not stand on the same footing, and the employee's acceptance was a case of adherence, not choice.
• Moral Damages: No award. Respondents were sued in their official capacities and could not be held personally liable; moreover, moral damages are already included in, if not absorbed by, the back salaries to which petitioners were entitled.
• Attorney's Fees: Yes, increased to P1,000 total. While ACCFA was not bound by petitioners' contract with counsel, the efforts exerted, the questions involved, and the benefits resulting from counsel's services justified a total award of P1,000 for all petitioners.

• Validity of Abolition: The trial court correctly found that the abolition was "a mere subterfuge to remove petitioners in order to give room to their (members of the Board of Governors') own political proteges," because shortly after the abolition, appointments to many positions involving higher salaries were extended to new appointees performing the same work under different designations. The same offices were promptly restored under other names and occupied by new and different appointees. This constituted abolition of the employees themselves, not their positions. Bad faith tainted the removal, which was done in whimsical exercise of arbitrary power. As permanent employees, petitioners were entitled to restoration to their positions and payment of salaries from separation to reinstatement.

• Security of Tenure for Confidential Positions: Section 1, Article XII of the Constitution merely excepts primarily confidential positions from the rule requiring appointments to be made on the basis of merit and fitness as determined by competitive examinations. However, the Constitution does not exempt such positions from the principle enunciated in Section 4 of Article XII, that "No officer or employee in the Civil Service shall be removed or suspended except for cause as provided by law," which recognizes no exception. This ruling was based on Corpus vs. Cuaderno and reiterated in Hernandez vs. Villegas. Accordingly, even assuming petitioners' positions were primarily confidential, their removal without cause was unconstitutional.

• Exhaustion of Administrative Remedies: Petitioners had in substance exhausted all administrative remedies. The Civil Service Commissioner sat on their petition, which stopped them from appealing to the Civil Service Board. The appeal to the Civil Service Board became a useless ceremony because the Office of the President had closed the door to further action, stating that no action could be taken because of the alleged retrenchment policy. At any rate, exhaustion of administrative remedies is not a hard and fast rule and admits of exceptions, including where the question in dispute is purely legal and where the controverted act is patently illegal. The present case fit both exceptions: the question was purely one of law and the dismissal was patently illegal.

• Estoppel: Acceptance of separation pay and terminal leave benefits would not amount to estoppel. Employer and employee do not stand on the same footing; the employer drove the employee to the wall, and the latter, out of a job, had to face the harsh necessities of life and was in no position to resist money proffered. The employee's acceptance was a case of adherence, not choice. Petitioners did not relent on their claim but pressed it, and were deemed not to have waived any of their rights, pursuant to the principle renuntiatio non praesumitur.

• Moral Damages: Respondents who composed the ACCFA board were sued in their official capacities as government officials and could not be held personally liable, because as private individuals — contradistinguished from their being ACCFA officials — they were not parties to the suit. Furthermore, moral damages are already included in, if not absorbed by, the back salaries to which petitioners were entitled. Equitable considerations precluded departure from this rule.

• Attorney's Fees: While Article 2208 of the Civil Code allows recovery of attorney's fees, ACCFA as a third party was not bound by the contract between petitioners and their counsel. The fixation of attorney's fees rests on the sound discretion of the court. Considering the efforts exerted by counsel, the questions involved, and the benefits resulting from the services rendered, a total award of P1,000 for all petitioners was fair and reasonable, an increase from the P500 awarded below.

• Security of Tenure in the Civil Service — The constitutional guarantee that "No officer or employee in the Civil Service shall be removed or suspended except for cause as provided by law" (Section 4, Article XII of the Constitution) recognizes no exception. Even primarily confidential positions, while exempt from the merit-and-fitness requirement for appointments under Section 1, Article XII, are not exempt from the security of tenure guarantee. The Court applied this by holding that even assuming petitioners' positions were primarily confidential, their removal without cause was unconstitutional.

• Bad Faith Abolition of Positions — The abolition of positions is invalid when done in bad faith as a subterfuge to remove employees in favor of political protégés. Where the same offices are promptly restored under different names and occupied by new appointees performing the same work, the action constitutes abolition of the employees themselves, not their positions. Bad faith taints such removal as a whimsical exercise of arbitrary power, entitling permanent employees to reinstatement and back salaries.

• Exceptions to Exhaustion of Administrative Remedies — The doctrine of exhaustion of administrative remedies is not a hard and fast rule and admits of exceptions, including: (1) where the question in dispute is purely a legal one, and (2) where the controverted act is patently illegal. The Court applied both exceptions, finding that the question was purely one of law and the dismissal was patently illegal.

• No Estoppel from Acceptance of Separation Benefits — An employee's acceptance of separation pay and terminal leave benefits does not estoppel them from seeking reinstatement, because employer and employee do not stand on the same footing. The employee, driven to the wall and out of work, accepts benefits out of adherence rather than choice. The principle renuntiatio non praesumitur (waiver is not presumed) applies.

• Moral Damages Absorbed by Back Salaries — In cases of illegal dismissal of civil service employees, moral damages are already included in, if not absorbed by, the back salaries to which the employees are entitled. The Court declined to break away from this rule on equitable considerations.

• "This, we must say, is no more than abolition of the employees themselves — not their positions. Bad faith taints such removal. It was done in whimsical exercise of arbitrary power." — This passage articulates the ratio decidendi on the invalidity of bad-faith abolition of positions, distinguishing genuine abolition from removal disguised as abolition.

• "the Constitution does not exempt such position from the operation of the principle emphatically and categorically enunciated in Section 4 of Article XII, that — 'No officer or employee in the Civil Service shall be removed or suspended except for cause as provided by law.' and which recognizes no exception." — This passage establishes the canonical formulation that the security of tenure guarantee admits of no exception, even for primarily confidential positions.

• "Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same footing." — This passage defines the Court's reasoning on why acceptance of separation benefits does not bar an illegal-dismissal claim, grounded in the disparity of bargaining power between employer and employee.

• "His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed it. They are deemed not to have waived any of their rights. Renuntiatio non praesumitur." — This passage states the doctrine that waiver is not presumed, applied in the context of an employee's acceptance of benefits under economic duress.

• Corpus vs. Cuaderno, L-23721, March 31, 1965 — Controlling precedent followed for the proposition that the Constitution does not exempt primarily confidential positions from the security of tenure guarantee under Section 4, Article XII, which recognizes no exception.
• Hernandez vs. Villegas, L-17287, June 30, 1965 — Followed with approval, citing Corpus vs. Cuaderno, for the rule that even assuming a position is primarily confidential, it is nevertheless subject to the constitutional provision that no officer or employee shall be removed except for cause.
• Jover vs. Borra, 40 O.G. No. 7, 2755 — Cited for the ruling that the constitutional precept in Section 1, Article XII merely excepts primarily confidential positions from the merit-and-fitness requirement for appointments, not from the security of tenure guarantee.
• Gonzales vs. Hechanova, 60 O.G. No. 6, pp. 802, 806 — Cited for the exceptions to the exhaustion of administrative remedies doctrine, specifically where the question is purely legal and where the controverted act is patently illegal.
• Philippine Sugar Institute vs. Court of Industrial Relations, L-13475, September 29, 1960 — Cited in support of the principle that waiver is not presumed (renuntiatio non praesumitur).
• Diaz vs. Amante, 55 O.G. No. 41, pp. 8643, 8646 — Cited for the rule that moral damages are already included in, if not absorbed by, back salaries in illegal dismissal cases.
• Briones vs. Osmeña, 55 O.G. No. 11, pp. 1920-23 — Cited among cases supporting reinstatement of employees whose positions were abolished in bad faith.

• Section 1, Article XII, Constitution (1935) — Provides that appointments in the Civil Service, except as to those which are policy-determining, primarily confidential, or highly technical in nature, shall be made only according to merit and fitness, to be determined as far as practicable by competitive examination. The Court held that this provision merely excepts primarily confidential positions from the merit-and-fitness appointment requirement, not from the security of tenure guarantee.
• Section 4, Article XII, Constitution (1935) — Provides that "No officer or employee in the Civil Service shall be removed or suspended except for cause as provided by law." The Court held that this provision recognizes no exception and applies even to primarily confidential positions.
• Article 2208, Civil Code — Allows recovery of attorney's fees. The Court applied this provision in fixing attorney's fees at P1,000 total for all petitioners, exercising sound judicial discretion.
• Republic Act No. 1052, as amended by Republic Act No. 1787 — Governs separation pay, providing one month pay or 15 days pay for every year of service, whichever is greater, with a fraction of at least six months considered as one whole year. The lower court ordered separation pay under this statute, but the Supreme Court modified the judgment to order reinstatement and back salaries instead.
• Sections 3 and 5, Civil Service Act of 1949 — Cited in relation to the security of tenure guarantee for civil service employees.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, and Castro, JJ., concurred.