Philippine Airlines, Inc. vs. Ahmee, et al.

An employer with a bank crediting arrangement for employees’ salaries and benefits proves payment by submitting evidence that it transmitted a copy of the payroll or advisory to the bank and that the bank received it; once such proof is presented, the burden of evidence shifts to the employees to show their accounts were not credited. The payrolls and 13th month register submitted by PAL proved only preparation, not payment, and the CBA benefits could not be forfeited by a personnel policy not incorporated into the CBA.

Philippine Airlines, Inc. (PAL) employed the respondents/petitioners as pilots holding the ranks of captain, first officer, second officer, and system engineer; they were members of the Airline Pilots’ Association of the Philippines (ALPAP), the sole and exclusive bargaining agent. Their terms and conditions were governed by the 1994-2000 PAL-ALPAP CBA and related documents, including the PAL-ALPAP Comprehensive Settlement of Pending Labor Dispute, the 1991-1994 CBA provisions not modified, the PAL-ALPAP Retirement Plan of 1967, and the Trust Agreement. PAL later underwent corporate rehabilitation, and claims against it were suspended under Presidential Decree No. 902-A.

PAL employed 49 pilots as captains, first officers, second officers, and system engineers, all members of ALPAP, the sole and exclusive bargaining agent of PAL pilots. On December 9, 1997, ALPAP filed a notice of strike with the Department of Labor and Employment imputing unfair labor practice against PAL. On December 23, 1997, DOLE Secretary Cresencio B. Trajano issued an order assuming jurisdiction over the labor dispute. While the dispute was being settled, ALPAP went on strike on June 5, 1998. Secretary Trajano issued a return-to-work order on June 7, 1998, but the PAL employees failed to report for work despite PAL’s efforts to reach them. PAL considered them strikers and terminated their employment on June 7, 1998. On June 23, 1998, PAL was placed under receivership. The employees continued their picket until June 25, 1998, and reported for work the following day, but PAL refused to accept them. On July 1, 1998, the Securities and Exchange Commission issued an order declaring that all claims against PAL were deemed suspended.

On June 7, 2001, the PAL employees filed a complaint for illegal dismissal, unfair labor practice, payment of certain monetary benefits, damages, and attorney’s fees with the NLRC. They claimed unpaid salaries for services rendered after the last payday of May 31, 1998; transportation allowances for April and May 1998 and June 1-7, 1998; rice subsidies for May 1998 and June 1-7, 1998; productivity pay for May 1998 and June 1-7, 1998; 13th month pay; Christmas bonus under the CBA; pro-rated cash conversion of unutilized days off; vacation time earned but not taken for 1998; proportionate share in the Retirement Fund; and pro-rata share in the Pilot’s Occupational Disability Fund.

On August 28, 2002, Labor Arbiter Dolores M. Peralta-Beley rendered a Decision dismissing the complaint for illegal dismissal and unfair labor practice, but suspended the resolution of the monetary claims in view of PAL’s ongoing corporate rehabilitation. After the SEC granted PAL’s exit from rehabilitation on September 28, 2007, and after the Court’s rulings in Ahmee became final, the employees filed a Motion to Resume Proceedings dated April 17, 2009 before the Labor Arbiter. During the May 28, 2009 hearing, LA Peralta-Beley directed the employees to submit a computation of their claims. On June 11, 2009, they filed a Submission containing the individual claims of only 45 PAL employees. On September 22, 2011, LA Quintin B. Cueto III issued an Order partially granting the claims: the salaries for May 16-31, 1998 and the 13th month pay were deemed paid, and PAL was directed to submit its computation of transportation allowance and productivity pay based on actual services rendered; all other claims were dismissed. The LA found that PAL had paid the May 16-31, 1998 salaries based on the May 31, 1998 payroll and cash vouchers showing amounts credited to the employees’ bank payroll accounts, and that the 13th month pay had been paid based on the 1998 13th Month Pay Payroll Register. The LA denied the claims for Christmas bonus, rice subsidy, unused days off, and vacation leaves, and rejected the claims for shares in the retirement and pilot’s occupational disability funds, holding that the action should be directed against the trustee bank.

The employees appealed, attaching the Verification and Certification of 10 PAL employees. On April 4, 2012, the NLRC Second Division dismissed the appeal for lack of merit and affirmed the Labor Arbiter. The NLRC found that the appeal suffered from defective or insufficient verification and could only be deemed perfected as to the 10 employees who signed it. It ruled that the 13th month pay was sufficiently proved by PAL’s 13th Month Payroll Register, that the employees failed to prove they had rendered service to be entitled to unpaid salaries, and that the retirement and occupational disability funds were administered by a Retirement Committee whose members were not appointed by PAL. The NLRC denied reconsideration on October 29, 2012.

The employees then filed a Petition for Certiorari before the CA, accompanied by a verification and certification separately signed by 9 PAL employees. On January 28, 2013, the CA allowed them to rectify the defective and insufficient verification within 10 days from notice. In compliance, eight more employees submitted their verification. The CA found that the 18 employees who signed the verification were not authorized by the remaining 31 employees to sign on their behalf, and applied Loquias vs. Office of the Ombudsman to declare that the Petition for Certiorari satisfied the formal requirements only as to those who signed it. On the monetary claims, the CA ruled that the PAL Payroll Listing for Allied Bank and the 1998 13th Month Pay Payroll Register did not prove payment of the employees’ salaries and 13th month pay because they merely listed names, account numbers, and net pay without proof that the employees received the amounts. The CA held that the employees were entitled to transportation allowance and productivity pay based on actual services rendered, rice subsidy, unutilized days off, and vacation leave, but not to Christmas bonus because they failed to prove that PAL granted it to all other employees. It also declared that the claims for shares in the Retirement Fund and Occupational Disability Fund should be directed to the Trustee Fund. Both parties filed Motions for Partial Reconsideration, but the CA denied them on October 5, 2015.

• Res Judicata (PAL in G.R. No. 221065): PAL argued that the employees’ monetary claims were barred by res judicata because the employees had insisted and prayed for resolution of their salaries and monetary benefits in Ahmee, and the finality of the February 4, 2008 Resolution precluded them from claiming those benefits.
• Dropped Employees (PAL in G.R. No. 221065): PAL argued that the CA should have dismissed the petition as to Belmonte, R. Castillo, Enriquez, Gaona, Gutierrez, Iliscupides, Jabier, Mercano, Porcuna, and Uson because the NLRC had earlier dropped them as parties and their belated compliance could not resurrect their legal standing.
• Payment Evidence (PAL in G.R. No. 221065): PAL maintained that the PAL Payroll Listing for Allied Bank and the 1998 13th Month Pay Payroll Register were not mere scintillae but substantial evidence of payment, showing amounts credited to the employees’ bank accounts; requiring receipts or bank certification demanded proof beyond substantial evidence.
• Forfeiture and Management Prerogative (PAL in G.R. No. 221065): PAL contended that the CA should have denied the CBA benefits under paragraph (g) of the PAL Personnel Policies & Procedures Manual, which states that a dismissed employee generally forfeits all entitlements to company benefits and privileges; entitlement to CBA benefits did not defeat PAL’s prerogative to limit or forfeit such privileges, and Sy vs. Metropolitan Bank & Trust Company allegedly applied.
• Verification and Certification (PAL Employees in G.R. No. 221164): The employees maintained that compelling reasons and special circumstances justified the failure of the 31 employees to comply with the rules on verification and certification against forum shopping, and that nobody should have been dropped because all employees had the same cause of action against PAL.

• Common Cause of Action (PAL Employees in G.R. No. 221065): The employees countered that all 49 employees were similarly situated and shared a common cause of action against PAL, so the signatures of 18 employees should benefit the rest and no one should have been dropped.
• Payment (PAL Employees in G.R. No. 221065): The employees argued that the payroll listing and 13th month payroll register did not prove actual receipt because they merely listed names, account numbers, and net pay without showing that the amounts were credited to or received by them.
• CBA Benefits (PAL Employees in G.R. No. 221065): The employees maintained that they were entitled to the CBA benefits; extending the forfeiture policy to the CBA abused management prerogative and circumvented their rights under existing laws and the CBA.
• Dropped Employees (PAL in G.R. No. 221164): PAL countered that employees dropped by the NLRC due to defective or insufficient verification and certification no longer had legal standing, and belated compliance before the CA could not resurrect their standing as parties.

• Verification and Certification Against Forum Shopping: Whether the signatures of only 18 of the 49 PAL employees substantially complied with the rules on verification and certification against forum shopping.
• Entitlement of Non-Signing Employees: Whether the 31 PAL employees who did not sign the verification and certification are also entitled to the judgment award.
• Res Judicata: Whether the monetary claims of the PAL employees are barred by res judicata in view of the final ruling in Ahmee.
• Substantial Evidence of Payment: Whether the PAL Payroll Listing for Allied Bank and the 1998 13th Month Pay Payroll Register constitute substantial evidence of payment of unpaid salaries and 13th month pay under a bank crediting arrangement.
• Forfeiture of CBA Benefits: Whether the PAL employees forfeited their CBA benefits—transportation allowance, productivity pay, rice subsidy, unutilized days off, and vacation leave—by reason of dismissal and paragraph (g) of PAL’s personnel policies.
• Christmas Bonus: Whether the PAL employees are entitled to Christmas bonus under the CBA.

• Verification and Certification Against Forum Shopping: Yes. The signatures of 18 of the 49 employees substantially complied because all shared a common interest and common cause of action, and justifiable reasons existed for the others’ failure to sign.
• Entitlement of Non-Signing Employees: Yes. The collective nature of the case and the presence of special and compelling circumstances meant the 31 non-signing employees should not have been dropped and are entitled to the judgment award.
• Res Judicata: No. Ahmee settled only the illegal dismissal complaint; the monetary claims remained suspended and were not adjudicated on the merits, so res judicata did not bar them.
• Substantial Evidence of Payment: No. The payrolls and 13th month register proved only preparation, not submission to or receipt by Allied Bank; under the bank crediting arrangement, proof of the second stage is the minimum requirement for payment.
• Forfeiture of CBA Benefits: No. The forfeiture provision in PAL’s personnel policies was not incorporated into the CBA; management prerogative cannot defeat CBA benefits, and the CBA could not be unilaterally modified.
• Christmas Bonus: No. The CBA made the Christmas bonus discretionary and conditioned on PAL granting it to all other employees; no proof of such grant was presented.

• Verification and Certification Against Forum Shopping: The rules distinguish verification from certification against forum shopping. Verification is substantially complied with when one with ample knowledge signs and the allegations are in good faith or true and correct; at least one petitioner may verify. Certification is stricter and must be signed by all, but substantial compliance is allowed under reasonable or justifiable circumstances, especially when all petitioners share a common interest and common cause of action or defense, in which case one signature may suffice. Here, the 49 employees were similarly situated, raised common allegations and defenses, and pursued a collective claim for unpaid salaries and CBA benefits. The 18 signatures thus substantially complied. Justifiable reasons existed: almost ten years had passed from complaint to LA decision; some employees had retired, worked abroad, relocated, or died. The substantive merits—claims for salaries, 13th month pay, and accrued CBA benefits—also constituted compelling reasons to relax the rule. The CA’s 10-day extension was insufficient to locate all employees after almost 15 years from separation, including seven years of suspended claims. Both CA and NLRC erred in dropping non-signing employees.
• Entitlement of Non-Signing Employees: Because the case was collective and all employees shared a common interest and cause of action, the signatures of the 18 employees benefited the others. The Court has consistently allowed petitions to prosper despite certification signed by only one or some petitioners sharing a common interest. The 31 non-signing employees are therefore entitled to the judgment award.
• Res Judicata: Res judicata requires a final judgment on the merits by a court with jurisdiction and identity of parties, subject matter, and cause of action. Ahmee stemmed from LA Peralta-Beley’s August 28, 2002 Decision, which dismissed the illegal dismissal complaint but deferred the claims for allowances and vacation leave conversion because of PAL’s rehabilitation. The NLRC and CA affirmed, and the Supreme Court’s affirmance in Ahmee was confined to the finding that PAL did not unjustly terminate the employees and that the monetary claims would not be resolved until PAL was no longer under receivership. Thus, Ahmee was conclusive only as to illegal dismissal, not the suspended monetary claims, which were not adjudicated on the merits. Res judicata did not bar them.
• Substantial Evidence of Payment: In labor cases, the quantum is substantial evidence, and the employer bears the burden of proving payment because payrolls and records are in its custody. Payrolls and vouchers are substantial evidence of payment only if they show actual receipt by the employee and the dates or period covering the claimed amounts. Under a bank crediting arrangement, there are three stages: preparation of payroll by the employer; submission and receipt by the bank of the payroll or advisory; and crediting to employees’ accounts. The employer controls the first, shares the second with the bank, and has no active control over the third. The minimum proof of payment is evidence of the second stage—proof that the payroll or advisory was submitted to or received by the bank. Once that is shown, the burden of evidence shifts to the employees to prove their accounts were not credited. PAL’s payroll listing and 13th month register only proved preparation; they did not show submission to or receipt by Allied Bank. The presumption of regularity of business entries under Rule 130, Section 43 covers preparation, not receipt. Thus, no substantial evidence of payment.
• Forfeiture of CBA Benefits: Management prerogative is limited by law, the CBA, and fair play. A CBA is the law between the parties and must be complied with in good faith; Article 264 of the Labor Code prohibits termination or modification during its lifetime. Only provisions embodied in the CBA are enforceable. The 1994-2000 PAL-ALPAP CBA incorporated the Comprehensive Settlement, unmodified 1991-1994 CBA provisions, the Retirement Plan of 1967, and the Trust Agreement; it did not incorporate PAL’s personnel policies or paragraph (g)’s forfeiture provision. The specific CBA provisions on productivity allowance, transportation allowance, Christmas bonus, rice subsidy, days off, and vacation leave did not refer to the personnel policies. PAL could not unilaterally supplement the CBA; Article XXVIII required mutual written agreement for amendments. Sy vs. Metropolitan Bank & Trust Company was not on all fours because it involved a retirement plan in the nature of a contract of adhesion, whereas here the benefits were based on a CBA. Thus, the employees did not forfeit transportation allowance, productivity pay, rice subsidy, unutilized days off, and vacation leave.
• Christmas Bonus: The CBA provided that pilots shall be granted a separate Christmas bonus at PAL’s discretion but are entitled to it in any year when PAL grants the same to all other employees of the airline. The employees failed to prove that PAL granted the Christmas bonus to all other employees. The CA correctly rejected this claim.

• Substantial Compliance with Verification and Certification Against Forum Shopping — Verification and certification are treated differently. Verification is substantially complied with when a person with sufficient knowledge signs and the allegations are in good faith or true and correct; at least one petitioner may verify. Certification against forum shopping is stricter and must be signed by all, but substantial compliance is allowed under reasonable or justifiable circumstances, especially when all petitioners share a common interest and common cause of action or defense, in which case the signature of one or some may suffice. The Court applied this to 18 of 49 employees, given their collective claim and the difficulty of locating all after many years.
• Res Judicata — A final judgment on the merits by a court of competent jurisdiction is conclusive on the parties in later suits as to all points and matters determined. Requisites: (1) former judgment final; (2) on the merits; (3) by a court with jurisdiction over subject matter and parties; and (4) identity of parties, subject matter, and cause of action. The Court found the requisites absent as to monetary claims because Ahmee only settled illegal dismissal and left monetary claims suspended.
• Substantial Evidence and Burden of Proof of Payment in Labor Cases — In labor cases, substantial evidence is required, and the employer bears the burden of proving payment because payrolls and records are in its custody. Payrolls and vouchers are substantial evidence of payment only if they show actual receipt by the employee and the dates or period covering the claimed amounts. The Court applied this to reject PAL’s payrolls.
• Bank Crediting Arrangement as Proof of Payment — In a bank crediting arrangement, there are three stages: (1) preparation of payroll by the employer; (2) submission and receipt by the bank of the payroll or advisory; and (3) crediting to employees’ accounts. The minimum requirement to prove payment is evidence of the second stage—proof of submission or receipt by the bank. Once shown, the burden of evidence shifts to the employees to prove non-crediting. PAL failed to prove the second stage.
• Management Prerogative and the CBA as Law Between the Parties — Management prerogative is subject to limitations in law, the CBA, and general principles of fair play and justice. A CBA is the law between the parties and must be complied with in good faith; it cannot be unilaterally modified. Only provisions embodied in the CBA are enforceable. The Court applied this to hold that PAL’s personnel policy forfeiture provision, not incorporated into the CBA, could not defeat CBA benefits.
• Presumption of Regularity of Business Entries — Entries in the course of business enjoy a presumption of regularity under Rule 130, Section 43. The presumption covers the preparation of payroll entries, not the receipt of salaries or benefits by employees. PAL’s payrolls therefore did not prove payment.
• Contract of Adhesion vs. CBA — A company retirement plan is in the nature of a contract of adhesion, not a bilateral agreement. A CBA, by contrast, is a negotiated contract and the law of the plant. This distinction distinguished Sy vs. Metropolitan Bank & Trust Company from the present case.

• "Thus, the minimum requirement to prove payment by an employer with an existing bank crediting arrangement of its employees' salaries and other benefits is evidence of the second stage, i.e., proof of submission or receipt by the bank of the payroll or advisory." — This states the Court’s new rule for proving payment under a bank crediting arrangement.
• "Once the employer submits valid proof of the second stage, the burden of evidence will shift to the employees who will then refute the claim of payment and prove that their respective bank accounts were not credited with any amounts during the applicable periods." — This defines the burden-shifting mechanism in bank-crediting payment disputes.
• "Under reasonable or justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest and invoke a common cause of action or defense, the signature of only one of them in the certification against forum shopping substantially complies with the Rule." — This is the substantial-compliance rule applied to the 18 signatures.
• "Where a proposal raised by a contracting party does not find print in the CBA, it is not a part thereof and the proponent has no claim whatsoever to its implementation." — This supports the holding that PAL’s personnel policy forfeiture provision was not part of the CBA.

• Altres vs. Empleo, 594 Phil. 246 (2008) — Summarized the doctrines on defective verification and certification against forum shopping; the Court relied on it to distinguish the two and to allow substantial compliance.
• San Miguel Corporation vs. Aballa, 500 Phil. 170 (2005) — Held that signatures of only 3 of 97 employees substantially complied with verification and certification due to the collective nature of the case; followed and applied to the 18 of 49 employees.
• Abaria vs. National Labor Relations Commission, 678 Phil. 64 (2011) — Held that 47 of 88 employees who signed the certification could speak for the others sharing a common cause of action; relied on to hold that the non-signing employees should not have been dropped.
• HLC Construction and Development Corporation vs. Emily Homes Subdivision Homeowners Association, 458 Phil. 392 (2003) — Allowed one plaintiff to sign the certificate of non-forum shopping for co-plaintiffs sharing a common interest; cited for substantial compliance.
• Espina vs. Court of Appeals, 548 Phil. 255 (2007) — Found substantial compliance where 25 of 28 employees signed the certification in a collective illegal dismissal case; cited as precedent.
• Loquias vs. Office of the Ombudsman, 392 Phil. 596 (2000) — Applied by the CA to limit the petition to those who signed the verification and certification; the Supreme Court did not adopt that restrictive result, allowing substantial compliance instead.
• Ahmee vs. PAL, G.R. No. 180152, July 23, 2008 — The prior final ruling invoked by PAL for res judicata; the Court held it settled only the illegal dismissal complaint and did not adjudicate the suspended monetary claims.
• Salvaloza vs. National Labor Relations Commission, 650 Phil. 543 (2010) — Payroll sheets substantially established payment of salaries and benefits; cited as an example of sufficient proof, distinguished because PAL’s payrolls did not show receipt.
• Iran vs. National Labor Relations Commission, 352 Phil. 261 (1998) — Vouchers covering only a particular year did not prove payment for other years; applied to require proof covering the claimed periods.
• Pro Maximum Security Agency, Inc. vs. Padojinog, G.R. No. 210184, February 5, 2014 — Incomplete payroll sheets did not establish payment of all claimed periods; cited in the same line of rulings.
• Lusabia vs. Super K Drug Corp., 877 Phil. 575 (2020) — Incomplete payrolls did not sufficiently establish full payment of salaries; cited to support the requirement of complete proof.
• Sy vs. Metropolitan Bank & Trust Company, 537 Phil. 71 (2006) — Distinguished; its ruling on retirement benefits under a company retirement plan did not apply because the present benefits were based on a CBA.
• Samahang Manggagawa sa Top Form Manufacturing vs. National Labor Relations Commission, 356 Phil. 480 (1998) — Held that only provisions embodied in the CBA are enforceable; relied on to reject PAL’s unincorporated forfeiture policy.
• Rivera vs. San Miguel Brewery Corporation, Inc., 133 Phil. 89 (1968) — Cited for the principle that a CBA is the law of the plant.
• Goya, Inc. vs. Goya, Inc. Employees Union-FFW, 701 Phil. 645 (2013) — Defined management prerogative and its limitations; cited in the CBA forfeiture analysis.
• KAR ASIA, Inc. vs. Corona, 480 Phil. 627 (2004) — Cited on the presumption of regularity of entries in the course of business; applied to limit the presumption to payroll preparation.
• Vergara vs. ANZ Global Services and Operations Manila, Inc., 897 Phil. 487 (2021) — Cited for the substantial evidence standard in labor cases.
• Pigcaulan vs. Security and Credit Investigation, Inc., 679 Phil. 1 (2012) — Cited for the rule that the employer bears the burden of proving payment.
• Marby Food Ventures Corp. vs. Dela Cruz, 878 Phil. 509 (2020) — Cited for the reason the burden is on the employer: payroll and personnel records are in the employer’s custody.
• Denila vs. Republic of the Phils., 877 Phil. 380 (2020) — Cited for the definition of res judicata.
• PO3 Ines vs. Pangandaman, 881 Phil. 211 (2020) — Cited for the requisites of res judicata.

• Presidential Decree No. 902-A — Cited as the basis for suspending the monetary claims while PAL was under corporate rehabilitation.
• Article 264, Labor Code (as renumbered in 2015) — Provides that when a CBA exists, neither party shall terminate or modify it during its lifetime. Applied to prevent PAL from unilaterally modifying the CBA through its personnel policy.
• Article 254, Labor Code — Cited in the decision as mandating that PAL respect the CBA and abide by its provisions in good faith.
• Rule 130, Section 43, Rules of Court — Entries in the course of business may be received as prima facie evidence. Applied to payroll entries only as to their preparation, not as proof of receipt by employees.
• Article III, Sections 3, 4, 12, and 15 of the 1994-2000 PAL-ALPAP CBA — Govern productivity allowance, transportation allowance, Christmas bonus, and rice subsidy. The Court used these to uphold the employees’ entitlements except the discretionary Christmas bonus.
• Article VI, Section 11 and Article XVIII, Section 7 in relation to Article XVIII, Section 1 of the CBA — Govern unutilized days off and vacation leave. Applied to uphold the employees’ claims.
• Article XXVII of the CBA — Provides for retirement benefits and refers to the PAL-ALPAP Retirement Plan of 1967 and Trust Agreement. Used to show which documents formed part of the CBA.
• Article XXVIII of the CBA — Requires any amendment or supplement to be proposed in writing and executed by both parties. Applied to reject PAL’s unilateral reliance on its personnel policy.
• Paragraph (g), PAL Personnel Policies & Procedures Manual — States that a dismissed employee generally forfeits all entitlements to company benefits and privileges. Held not incorporated into the CBA and therefore inapplicable to defeat CBA benefits.

Hernando, Zalameda, Rosario, and Marquez, JJ., concur.