SAPPARI K. SAWADJAAN, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, THE CIVIL SERVICE COMMISSION AND AL-AMANAH INVESTMENT BANK OF THE PHILIPPINES, RESPONDENTS.

Sawadjaan versus Court of Appeals

The Case

Sappari K. Sawadjaan, a bank employee dismissed for dishonesty, brings a special civil action for certiorari against the Court of Appeals, the Civil Service Commission, and the Al-Amanah Islamic Investment Bank of the Philippines. He asks the Supreme Court to set aside the rulings that affirmed his dismissal, arguing that the bank had no valid by-laws and therefore no authority to investigate and dismiss him, and that the Civil Service Commission acted without jurisdiction. The case matters because it teaches the bar candidate two enduring lessons: that certiorari cannot substitute for a lost appeal, and that a corporation which fails to file its by-laws on time does not ipso facto lose its corporate powers, nor may its existence be attacked collaterally by one who accepted employment from it.

Procedural History

The bank's Investigating Committee heard the administrative charge, declared Sawadjaan in default when he refused to appear, and recommended suspension. The Board of Directors, however, adopted a resolution finding him guilty of dishonesty and conduct prejudicial to the best interest of the service, and dismissing him from the service. On reconsideration, the Board reduced the penalty to suspension of six months and one day. Sawadjaan appealed to the Merit System Protection Board, but the Civil Service Commission took up the appeal, dismissed it for lack of merit, and affirmed the dismissal resolution. It later denied his motion for reconsideration.

Sawadjaan then went to the Supreme Court by petition for certiorari, which was referred to the Court of Appeals. The Court of Appeals affirmed the Civil Service Commission resolutions. Sawadjaan filed a motion for new trial, which his counsel later adopted as a motion for reconsideration; the Court of Appeals denied it. He then filed the present petition for certiorari under Rule 65, challenging the Court of Appeals decision and resolution. The Supreme Court dismissed the petition, and later denied his motion for reconsideration.

Facts

Sappari K. Sawadjaan was among the first employees of the Philippine Amanah Bank when it was created in 1973. He rose through the ranks from security guard to settling clerk, bookkeeper, credit investigator, project analyst, appraiser and inspector, and eventually loans analyst. In February 1988, while designated as appraiser and investigator, he was assigned to inspect the properties offered as collateral by Compressed Air Machineries and Equipment Corporation for a credit line of Five Million Pesos. The properties were covered by two transfer certificates of title. On the basis of his Inspection and Appraisal Report, the bank granted the loan.

In January 1990, Congress created the Al-Amanah Islamic Investment Bank of the Philippines, transferring to it all assets, liabilities, and capital accounts of the old bank. Sawadjaan was retained in the reorganization. When the borrower failed to pay, the bank discovered that one certificate of title was spurious, the property described therein non-existent, and that the property covered by the other certificate had a prior existing mortgage in favor of another person. The transaction had cost the bank Six Million Pesos in losses.

The bank's Board of Directors created an Investigating Committee. Sawadjaan was charged with dishonesty and conduct prejudicial to the best interest of the service, and was preventively suspended. He refused to submit to the committee's jurisdiction, alleging partiality, and did not appear at the hearings, so he was declared in default and the prosecution presented evidence ex parte. The committee found that he could not be held liable for dishonesty because no evidence showed he profited, but held him liable for conduct prejudicial to the best interest of the service and recommended suspension. The Board of Directors nonetheless found him guilty of dishonesty and dismissed him, later reducing the penalty to suspension of six months and one day on reconsideration.

Issues

• Whether or not the petition for certiorari under Rule 65 may prosper as a substitute for the lost remedy of appeal under Rule 45.
• Whether or not the Al-Amanah Islamic Investment Bank of the Philippines had the authority to investigate and discipline its employees despite the alleged failure to promulgate rules of procedure.
• Whether or not the Civil Service Commission had jurisdiction over the administrative case against Sawadjaan.
• Whether or not the bank's failure to file its by-laws within the prescribed period deprived it of juridical personality and authority to initiate the administrative case.
• Whether or not Sawadjaan was properly found liable for dishonesty and conduct prejudicial to the best interest of the service.

Applicable Provisions

Section 26 of Republic Act No. 6848, the charter of the Islamic Bank, provides:

Section 26. Powers of the Board. The Board of Directors shall have the broadest powers to manage the Islamic Bank, x x x The Board shall adopt policy guidelines necessary to carry out effectively the provisions of this Charter as well as internal rules and regulations necessary for the conduct of its Islamic banking business and all matters related to personnel organization, office functions and salary administration.

This provision bears on the case because the Court held that it does not require the bank to promulgate rules of procedure before administrative discipline may be imposed, and that the grant of the broadest powers to manage would be an idle ceremony if the Board were powerless to discipline its employees.

Item Number 2 of Executive Order No. 26, Series of 1992, entitled Prescribing Procedure and Sanctions to Ensure Speedy Disposition of Administrative Cases, provides:

All administrative agencies shall adopt and include in their respective Rules of Procedure provisions designed to abbreviate administrative proceedings.

This provision bears on the case because the Court held that it likewise does not require the bank to promulgate rules of procedure before imposing administrative discipline.

Item Number 1 of Civil Service Commission Resolution No. 93-2387 provides:

Decisions in administrative cases involving officials and employees of the civil service appealable to the Commission pursuant to Section 47 of Book V of the Code (i.e., Administrative Code of 1987) including personnel actions such as contested appointments shall now be appealed directly to the Commission and not to the MSPB.

This provision bears on the case because it establishes that the Civil Service Commission, not the Merit System Protection Board, had jurisdiction over Sawadjaan's appeal.

Ruling

On the first issue, the Court held that the petition must fail because certiorari will not lie as a substitute for the lost remedy of appeal. The general rule is that the remedy to obtain reversal or modification of a judgment on the merits is appeal, even if the error ascribed is lack of jurisdiction or grave abuse of discretion. Sawadjaan's counsel received the Court of Appeals resolution denying reconsideration on 27 December 1999, so the fifteen-day reglementary period to appeal under Rule 45 lapsed on 11 January 2000. He filed his petition for certiorari only on 23 February 2000, over a month late. The Court found no special reasons to make out an exception.

On the second issue, the Court held that the bank was not required to promulgate rules of procedure before imposing administrative discipline. The issue was raised for the first time on appeal and may not be raised for the first time, save in exceptional circumstances, none of which obtained. Even on the merits, Section 26 of Republic Act No. 6848 gives the Board the broadest powers to manage the bank, and this grant would be an idle ceremony if the Board were powerless to discipline its employees.

On the third issue, the Court held that the Civil Service Commission had jurisdiction. Sawadjaan submitted himself to its jurisdiction by filing a motion for reconsideration, and a party who asks for affirmative relief cannot later impugn the tribunal's jurisdiction after an adverse result. Under Civil Service Commission Resolution No. 93-2387, appeals in administrative cases are taken directly to the Commission and not to the Merit System Protection Board.

On the fourth issue, the Court held that the bank's failure to file its by-laws on time did not deprive it of personality. At the very least, the bank may be considered a de facto corporation whose right to exercise corporate powers may not be inquired into collaterally in any private suit to which it may be a party. Moreover, a corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its powers, and the procedure for revocation of registration had not been initiated. The Court added that the case is not a corporate controversy but a labor dispute, and that regardless of whether the bank is a corporation, a partnership, a sole proprietorship, or a sari-sari store, it was the petitioner's employer. One who assumes an obligation to an ostensible corporation cannot resist performance on the ground that there was in fact no corporation.

On the fifth issue, the Court held that Sawadjaan was properly found liable. As appraiser and investigator, he was expected to conduct an ocular inspection and check the certificates of title against those on file with the Registry of Deeds. He failed to conduct these routine checks and deliberately misrepresented in his appraisal report that the loan application was in order. That he did not profit from his false report was of no moment, and neither did the fact that it was not deliberate or willful detract from the nature of the act as dishonest. What was apparent was that he stated something to be a fact when he was not sure that it was so.

Doctrine

A special civil action for certiorari under Rule 65 will not lie as a substitute for the lost remedy of appeal under Rule 45. The remedy to obtain reversal or modification of a judgment on the merits is appeal, even if the error ascribed is lack of jurisdiction or grave abuse of discretion.

A corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its corporate powers. At the very least, it may be considered a de facto corporation whose right to exercise corporate powers may not be inquired into collaterally in any private suit to which it may be a party. One who assumes an obligation to an ostensible corporation cannot resist performance on the ground that there was in fact no corporation.

Under Section 26 of Republic Act No. 6848, the Board of Directors of the Islamic Bank has the broadest powers to manage the bank, including the power to discipline its employees, and no separate promulgation of rules of procedure is required before administrative discipline may be imposed.

Under Civil Service Commission Resolution No. 93-2387, appeals in administrative cases involving officials and employees of the civil service are taken directly to the Civil Service Commission and not to the Merit System Protection Board. A party who asks for affirmative relief from a tribunal is estopped from denying that tribunal's jurisdiction after an adverse result.

Dishonesty does not require proof of profit or benefit. Neither the fact that the act was not deliberate or willful detracts from its nature as dishonest where the employee stated something to be a fact when he was not sure that it was so.

Disposition

The Supreme Court dismissed the petition and affirmed the assailed resolutions of the Civil Service Commission. Sawadjaan lost, and his dismissal from the service stood.

Remember This

Memorize this line: certiorari will not lie as a substitute for the lost remedy of appeal, and a corporation that fails to file its by-laws on time does not ipso facto lose its corporate powers. Examiners use this case to test the rule against substituting certiorari for appeal, the de facto corporation doctrine, and the principle that dishonesty does not require proof of profit.