JOSE O. TEODORO AND ESPARANZA ZACARIAS, PETITIONERS, VS. HON. GUILLERMO CARAGUE, AS INCUMBENT SECRETARY OF BUDGET AND MANAGEMENT AND MESSRS. ALBERTO ROMULO AND MANUEL ALBA, RESP…

Petitioner Jose O. Teodoro
retired effective March 14, 1977 from the Philippine Foreign Service with the rank of Ambassador
under Rep. Act 1616. At the time of his
retirement, his highest basic salary received was P29,866.00 per annum or
P2,488.83 per month. Per leave credits
computation by the Office of the Personnel and Management Services of the then
Ministry (now Department of Foreign Affairs), he earned in the course of his about 31 years of service in the government a total of 285.96 working
days of unenjoyed leaves–275.082 days of which were earned abroad and the
remaining 10.834 days in the Home Office.

Upon the other hand, petitioner Esperanza Zacarias retired from
the Foreign Service with the rank of Career Minister, effective June 20,
1980. Her highest basic salary on the
date of her retirement was P3,112.00 per month. Per computation by the Office of the Personnel and Management of
the then Ministry of Foreign Affairs she earned unenjoyed vacation leave
credits of 319.667 days and sick leave credits of 660.661 days, or a total of
980.328 days. However, under the
Foreign Service Act (RA No. 708, as amended) and its implementing regulations,
she was entitled only to a maximum of 120 days vacation leave and 240 days sick
leave, or a total of 360 days leave, thereby forfeiting the excess of 620
days. In the computation of the
compensable unused leave credits of petitioner Zacarias by the then Ministry of
Foreign Affairs, it was admitted and accepted that all her leave credits of 360
working days were earned abroad.

Since petitioner Teodoro retired in 1977, payment of his unspent
accumulated leave credits of 275.082 days earned abroad was computed in
accordance with applicable rules and regulations existing prior to the
effectivity on January 1, 1978 of Presidential Decree No. 1285, which
retirement unspent accumulated leave credits were payable in US dollars at the exchange
rate of P2.00 to US$1.00.

So with that of the unenjoyed accumulated leave credits of
petitioner Zacarias, who, albeit retired effective June 20, 1980, had earned
the first 120 days of her unspent vacation leave credits and first 240 days of
her unused sick leave credits prior to January 1, 1978.

Thus, per computation by the Office of the Personnel and
Management Services of the then Ministry of Foreign Affairs, petitioner Teodoro
was entitled to US$15,000.00 for his 275.082 working days of unused leave
credits earned abroad.

Anent petitioner Zacarias’ petition, her 360 working days of
unused earned leave credits, computed at the exchange rate of P2.00 to US
$1.00, entitled her to a total leave pay of US$27,326.02. But since she had already received from the
Philippine Consulate General in San Francisco, California the sum of US$16,327.22,
the same as deducted therefrom. Upon
the other hand, the sum of US$2,899.10, which was deducted from said previous
payment as trust deposit, ought to be refunded and added to her total unpaid
leave pay, netting her the sum of US$13,846.90.

The then Ministry of Foreign Affairs, referred both claims for appropriate action to the Commission
on Audit, which concurred with
the Ministry’s computations and passed
in audit petitioners’ claims. This was
relayed in a 1st Indorsement
dated July 30, 1984 to the Commission’s resident Auditor at the Ministry of
Foreign Affairs.

Informed of the action taken by the Commission on Audit, then
Foreign Minister Arturo Tolentino wrote the respondent Budget Minister
informing the latter that the Ministry “will pay the terminal leave
benefits of Mr. Teodoro and Miss Zacarias in U.S. dollars at the exchange rate
of P2.00 to $1.00”. Accordingly,
the Ministry of Foreign Affairs requested the release of P429, 558.00 to cover
the payments of petitioners’ terminal leave benefits, as converted to
Philippine pesos in accordance with the exchange rate at the time of payments
thereof.

But the respondent Budget Minister denied the request and,
instead, released the amount of only P123,416.66 on the ground that under
Foreign Ministry–Budget Ministry Order
No. 30-83 dated December 1, 1983, payments of petitioners’ claims for terminal
leave pay shall in Philippine pesos to be converted at the rate of exchange
prevailing at the time of retirement.

Aggrieved, herein petitioners filed before this Court a Petition
for Writ of Mandamus and Damages to compel then respondent Budget
Minister Manuel Alba to release to the Ministry of Foreign Affairs the sum of
P306,141 for payment of the balance due the petitioners on their respective
claims for terminal leave pay, docketed as G.R. No. 70242.

However, this Court, in its Resolution promulgated on March 26,
1987, dismissed the aforesaid petition. Petitioners filed a Motion for Reconsideration and a second Motion for Reconsideration of the
aforementioned Resolution, but both motions were denied in the Resolutions of
September 10, 1987 and November 12, 1987, respectively.

About three (3) years after receipt on December 2, 1987 of the
aforesaid Resolution denying their Second Motion for Reconsideration,
petitioners filed on November 20, 1990 with this Court the instant Petition for
Review.

The instant petition seeks to annul the Court’s Resolutions dated
March 26, 1987, September 10, 1987 and November 12, 1987, all issued in G.R.
No. 70242 (Jose O. Teodoro and Esperanza Zacarias vs. Guillermo Carague as
Budget Minister), on the following grounds:

a) Respondent Budget
Minister exceeded his jurisdiction and/or committed grave abuse of discretion
in denying the Minister of Foreign Affairs’ request for the release of the
amount covering petitioners’ claims for terminal leave credits which was passed
in audit by the Commission on Audit; and

b) The disapproval
of the computations of petitioners’ claims for terminal leave credits in US
dollars at the exchange rate of P2.00 to US $1.00, is discriminatory since
other officers and employees of the Ministry of Foreign Affairs similarly
situated as petitioners were paid their terminal
leave credits in accordance therewith.

The issues to resolve in this case are:

a) Whether or not the grounds in support of the petition are
meritorious; and

b) If so, whether or not petitioners are entitled to the reliefs
demanded.

We note that petitioners admit the decision in their case has
already long become final. For all
intents and purposes, the instant case should ordinarily be already barred
since the old case, G.R. 70242 and the present case, G.R. 96004, have identity
of parties, subject matter, and cause of action. For as we have already held, once a litigant’s rights have been
adjudicated in a valid final judgment of a competent court, he should not be
granted an unbridled license to come back for another try (Santos vs.
Intermediate Appellate Court, 145 SCRA 238).

Considering however the surrounding circumstances, We can temper
technical rules with substantive justice to grant the reliefs prayed for by the
petitioners who have devoted
long years of their lives to public service. Rules of procedure are intended to promote, not to defeat substantial
justice, and therefore, they should not be applied in a very rigid and
technical sense (Calasiao Farmer’s Cooperative Marketing Association, Inc. vs.
Court of Appeals, 106 SCRA 630). Also,
it is within the inherent power and discretion of the Court to amend, modify or
reconsider a final judgment when “because of supervening events it becomes
imperative, in the higher interest of justice, to direct its modification in
order to harmonize the disposition with the prevailing circumstances, or
whenever it is necessary to accomplish the administration of justice.”
(Galindez v. Rural Bank of Llanera, 175 SCRA 132 (1989]). Besides no private individual will be
financially prejudiced should we overturn the final judgment in this case,
neither will the government be prejudiced because after all there is a price to
pay for the obtaining of distributive justice.

Some members of the Court, however, frown at the thought of
disregarding the principle of res judicata in the instant
case. This frown is hopelessly
unrealistic, cruel, and verily most unkind. Be it noted that this is not the first time in American or in Philippine
jurisprudence when the principle of res judicata has been set
aside in favor of substantial justice which is after all the avowed purpose of
all law and jurisprudence. Thus, the
following are in point:

“In this respect it has been declared that res judicata,
as the embodiment of a public policy, must at times be weighed against
competing interests, and must, on occasion, yield to other policies. The determination of the question is said to
require a compromise, in each case of the two opposing policies, of the
desirability of finality and the public interest in searching the right
result.” (46 Am. Jur. pp. 402-403).

“Underlying all discussion of the problem must be the
principle of fundamental fairness in the due process sense. It has accordingly been adjudged that the
public policy underlying the principle of the res judicata must
be considered together with the policy
that a party shall not be deprived of a fair adversary proceeding in which to
present his case.” (46 Am. Jur. p. 403).

“x x x Res judicata is to be disregarded if the
application would involve the sacrifice of justice to technicality.” (159
SCRA 264, Republic v. De los Angeles).

“Assuming in gratia argumenti that the prior
judgment of dismissal with prejudice was validly rendered within the lawful
discretion of the court and could not be considered as an adjudication on the
merits, nonetheless the principle of res judicata should be
disregarded if its application would involve the sacrifice of justice to
technicality. The application of the
said principle, under the particular
facts obtaining, would amount to denial of justice and/or bar to a vindication
of a legitimate grievance.” (Suarez vs. Court of Appeals, 193 SCRA 183
[1991].

“It is rather too late in the day for petitioner to question now
the lack or excess of jurisdiction of the Appellate Court in rendering the said
decision on the alleged ground that said Court is precluded from reversing the
award of the lot on the ground of res judicata. It should be obvious to petitioner that the
defense of res judicata when not interposed either in a motion to
dismiss or in an answer is deemed waived.” (Vergara vs. Ruque, 78 SCRA 312
[1977], citing Philippine Coal Miner’s Union vs. CEPOC, 10 SCRA 784 [1964]).

“It is axiomatic that for the doctrine of res judicata
to apply, it is essential that the prior judgment, invoked as a bar to a
subsequent action or proceeding, be inter alia one on the
merits. Equally perceptive is that if
the doctrine is not set up as a defense or ground of objection seasonably, it
is deemed waived; it cannot be asserted for the first time on appeal.”
(Alvarez, Jr. vs. Court of Appeals, 158 SCRA 407 [1988].

“The principle of res judicata should be
disregarded if its application would involve the sacrifice of justice to
technicality and/or a bar to a vindication
of a legitimate grievance.” (Ronquillo vs. Marasigan, 5 SCRA 304, 312).

“The dispensation of justice and the vindication of legitimate
grievance should not be barred by technicalities.” (Santiago vs. Ramirez,
8 SCRA 157).

“Res judicata as a defense is waived when
not interposed in a motion to dismiss or in an answer.”
(Vergara vs. Roque, 78 SCRA 312).

“Where res judicata was raised as a defense only
in the motion for reconsideration, the same is already deemed waived.” (Pulido vs. Pulido, 117 SCRA 16).

“If res judicata is not set up as a defense or
ground of objection seasonably it is deemed waived and cannot be assailed for
the first time on appeal.” (Alvarez, Jr. vs. Court of Appeals, 158 SCRA 401).

Be it finally noted that if res judicata is not set
up as a defense, it CANNOT be applied. Clearly this would be a WAIVER.

Going to the merits of the case, the then Minister of Budget
refused to release the amount represented by the Ministry of Foreign Affairs to
cover petitioners’ claims for terminal leave credits, since they did not
conform with Joint Ministry of Foreign Affairs – Ministry of the Budget Order
No. 30-83 dated December 1, 1983, particularly Section 6 thereof, to wit:

“SEC. 6. The foreign
service portion of the terminal leave credits earned prior to 1 January 1978,
computed on the basis of highest salary received shall be converted to US
dollars at the rate of P2.00 to $1.00 pursuant to Department Order No. 35-67
dated 9 October 1967 and Sec. 10 of
P.D. No. 1285, and shall be payable in Philippine
pesos at the rate of exchange prevailing
at the time of retirement, resignation,
separation from the service or death.” (Underscoring supplied)

Said Order which took effect on December
1, 1983 cannot apply retroactively to the claims of petitioners Teodoro and
Zacarias, who retired on March 14, 1977 and June 20, 1980, respectively. The law applicable is Section 3 of Department
Order No. 35-67 dated October 9, 1967,
to wit:

“Section 3. Leave
credits. Upon application, the
money value of the leave credits earned abroad of any official, officer, or
employee who retires, resigns or dies while in the service may be
paid to him in foreign currency at
the rate P2.00 to $1.00. (Underscoring supplied).

It was not required that the foreign currency due the subject
officer or employee be paid to him in Philippine pesos to be converted at the
rate of exchange prevailing at the time of retirement.

Moreover, Section 10 of Presidential Decree No. 1285, which took
effect on January 13, 1978, provides:

“Section 10. Accumulated
leaves. Upon retirement, death or separation from the service of any
officer or employee in the foreign service, unenjoyed vacation or sick leave
credits shall be computed on the basis of actual salary and shall be paid in
Philippine pesos and otherwise shall be on the same basis as home office
personnel who retire in the Philippines: Provided, That any accumulated leaves earned
as of the effectivity of this Decree
may be paid to officers and employees
leaving the service on the basis of
applicable rules and regulations existing prior
to this Decree.” (Underscoring supplied).

As aptly observed by the Solicitor General:

“Hence, to apply Joint Ministry of Foreign Affairs – Ministry
of the Budget Order No. 30-83 to accumulated leaves earned prior to the
effectivity of Presidential Decree No. 1285, would in effect be an amendment of
said Decree by the then Ministers of Foreign Affairs and Budget, which cannot
be countenanced.”

Surely a law, such as Presidential Decree No. 1285 cannot be
amended by a simple Department Order.

In addition, since other officers and employees of the then
Ministry of Foreign Affairs, who were similarly situated as the petitioners,
were paid in Philippine pesos of the value in foreign currency of their
terminal leave credits earned abroad at the rate of exchange at the time of
payments thereof, then it will not only discriminate against but also cause
injustice to petitioners to be paid in Philippine pesos the money value in US
dollars of their terminal leave credits earned abroad at the rate of exchange
then prevailing at the time of their retirements.

Premises considered, the Court Resolved to ORDER
respondent Budget Secretary Carague to release to the Department of Foreign
Affairs the sum of P306,141.00 for the payment of the balance due petitioners
on their claims for terminal leave pay.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Bidin, Grino-Aquino,
Medialdea, Regalado, and Nocon, JJ., concur.

Melencio-Herrera, Feliciano, and
Davide, Jr., JJ., join J. Romero in her
dissenting opinion.

Padilla, J., no part.