SERGIO I. CARBONILLA, EMILIO Y. LEGASPI IV, AND ADONAIS Y. REJUSO, PETITIONERS, VS. BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, …

Carbonilla versus Board of Airlines Representatives

The Case

This is a consolidated review of two petitions arising from a single controversy over the validity of a customs administrative order that raised the overtime pay rates and added meal and transportation allowances for Bureau of Customs personnel stationed at the Ninoy Aquino International Airport, to be shouldered by the international airlines. On one side are customs employees led by Sergio Carbonilla, together with Emilio Legaspi the Fourth and Adonais Rejuso, who wanted to intervene to collect their differential pay. On the other side are the Office of the President, the Department of Finance, and the Bureau of Customs, who defend the order. Arrayed against both is the Board of Airlines Representatives, the association of member airlines that refused to pay. The case matters because it fixes the line between the appellate jurisdiction of the Court of Appeals over the Office of the President and the exclusive appellate jurisdiction of the Court of Tax Appeals over customs money charges, and because it tests how far a statute may delegate rate-fixing power to an administrative body.

Procedural History

The Board of Airlines Representatives wrote the Department of Finance to oppose the order, and an undersecretary replied that there was no valid ground to disturb it. The airlines then asked the Office of the President to review that reply. The Office of the President treated the request as an appeal, required the appeal fee and an appeal memorandum, and in a decision dated 12 March 2007 denied the appeal and affirmed the Department of Finance. It denied reconsideration in a resolution dated 14 March 2008.

The airlines filed a petition for review under Rule 45 before the Court of Appeals. The customs employees moved to intervene, and the Court of Appeals denied intervention in a resolution dated 26 February 2009. On 9 July 2009, the Court of Appeals rendered its decision setting aside the Office of the President and declaring Section 3506 of the Tariff and Customs Code, Customs Administrative Order 7-92, and Customs Administrative Order 1-2005 unenforceable against the airlines. The customs employees sought reconsideration, which was denied in a resolution dated 5 August 2010, and they came to the Supreme Court by petition for review. The Office of the President, the Department of Finance, and the Bureau of Customs likewise sought reconsideration, which was denied in a resolution dated 26 October 2010, and they too came to the Supreme Court by petition for review. The two petitions were consolidated before this Court.

Facts

The Bureau of Customs issued Customs Administrative Order 1-2005, amending an earlier order, and the Department of Finance approved it on 9 February 2006. Both orders rested on Section 3506 in relation to Section 608 of the Tariff and Customs Code. The amendment adjusted the overtime rate of customs personnel from an exchange rate of 25 pesos to one United States dollar to the then rate of 55 pesos to one dollar, and it also provided for traveling and meal allowances. The increase took effect on 16 March 2005.

The airlines learned of the proposed increase only in 2004, through unofficial reports. They wrote the Bureau of Customs to object and asked for a meeting. They wrote the Secretary of Finance twice in early 2005, reiterating their concerns. When the Bureau demanded payment of overtime services from the member airlines, they refused and signified their intention to seek suspension of the order. An undersecretary of finance later informed them that there was no valid ground to disturb the order and that its implementation was legally proper.

The airlines then asked the Office of the President to review that reply. The Office of the President denied the appeal, holding that the Bureau had merely exercised rule-making power, that its validity could be attacked only in a direct action before the regular courts, and that in any event the appeal was filed beyond the thirty-day period under Administrative Order 18. The Court of Appeals reversed, holding that it had jurisdiction, that the appeal was not late, and that Section 3506 failed the completeness and sufficient standard tests and that the allowances violated the constitutional ban on additional compensation. Hence these petitions.

Issues

• Whether or not the Court of Appeals committed a reversible error in denying the intervention of the customs employees.
• Whether or not the Court of Appeals had jurisdiction over the airlines' petition, as against the exclusive appellate jurisdiction of the Court of Tax Appeals.
• Whether or not the airlines' appeal before the Office of the President was filed on time.
• Whether or not the officers of some member airlines who executed the verification and certification of non-forum shopping had the necessary authorization.
• Whether or not the airlines were guilty of laches and estoppel.
• Whether or not the Court of Appeals committed a reversible error in declaring Section 3506 of the Tariff and Customs Code and the two customs administrative orders unenforceable against the airlines.

Applicable Provisions

Section 1 of Rule 19 of the 1997 Rules of Civil Procedure governs who may intervene:

Section 1. Who may intervene. - A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding.

This provision is the basis for denying intervention, because the employees' claim for back pay could be fully protected in a separate proceeding.

Section 7 of Republic Act No. 9282 defines the appellate jurisdiction of the Court of Tax Appeals:

Section 7. Jurisdiction. - The CTA shall exercise: (a) Exclusive appellate jurisdiction, to review by appeal, as herein provided: 4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees and other money charges, seizure, detention or release of property affected, fines forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs.

The Court cites this to explain why the airlines' recourse lay with the Office of the President and then the Court of Appeals, not with the Court of Tax Appeals, since what was assailed was a rule and not a decision of the Commissioner of Customs.

Ruling

On the first issue, the Court held that the denial of intervention was correct. Intervention is not a matter of right but is addressed to the sound discretion of the court, and that discretion will not be reviewed unless exercised arbitrarily or capriciously. The employees' own motion showed they were after differential and back payments, which could be pursued in a separate proceeding. Their motion for reconsideration of the denial was itself denied in open court, and they did not act on that denial, so it had attained finality.

On the second issue, the Court held that the Court of Appeals had jurisdiction. Its authority stems from Rule 43, which allows appeals from awards, judgments, final orders or resolutions of any quasi-judicial agency, including the Office of the President. The exercise of that appellate jurisdiction is entirely distinct from the question of whether the airlines committed a procedural error in going to the Office of the President instead of the Court of Tax Appeals.

On the third issue, the Court held that the airlines' letters were not an appeal under Administrative Order 18 at all. That order's appeal refers to adversarial cases, not to a review of administrative rules and regulations. The airlines were merely exhausting administrative remedies, and the Office of the President's action did not foreclose their remedy in the regular courts.

On the remaining issues, the Court held that the petition of the Office of the President, the Department of Finance, and the Bureau of Customs was meritorious. The Court found that the airlines were not guilty of laches or estoppel, and that the Court of Appeals erred in declaring Section 3506 and the two customs administrative orders unenforceable against the airlines.

Doctrine

First, intervention is permissive, not a matter of right. The court weighs whether intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether the intervenor's rights may be fully protected in a separate proceeding. Once discretion is exercised, it cannot be controlled by certiorari or mandamus absent arbitrariness or caprice.

Second, appeals from the Office of the President in the exercise of quasi-judicial functions lie with the Court of Appeals under Rule 43. This is distinct from the exclusive appellate jurisdiction of the Court of Tax Appeals over decisions of the Commissioner of Customs involving customs duties, fees, and other money charges.

Third, the appeal under Administrative Order 18 refers to adversarial cases and does not cover a request to review administrative rules and regulations. A party seeking such review is merely exhausting administrative remedies and may still repair to the regular courts.

Fourth, the validity of a statute delegating rate-fixing power turns on the completeness and sufficient standard tests. The statute must set out the policy and the limits of the delegate's authority with sufficient clarity.

Disposition

The petition of the customs employees was denied for lack of merit, while the petition of the Office of the President, the Department of Finance, and the Bureau of Customs was granted, with the Court of Appeals decision set aside insofar as it declared Section 3506 and the customs administrative orders unenforceable against the airlines.

Remember This

Memorize this line: intervention is not a matter of right but lies in the sound discretion of the court, and the appeal under Administrative Order 18 covers only adversarial cases, not the review of administrative rules. Examiners use this case to test the boundary between Rule 43 appeals from the Office of the President and the exclusive appellate jurisdiction of the Court of Tax Appeals, and to test the completeness and sufficient standard tests on delegated rate-fixing power.