VOL.

18, SEPTEMBER 29, 1966 183

Cariño vs. Agricultural Credit and Cooperative
Financing A dministration

No. L-19808. September 29, 1966.

ELDO J. CARIÑO, ARSENIO C. MIGUEL, JOHNNY

F. ILAR, SoTERO M. DE CASTRO, GUSTAVO
1
E.
ESPINO, and LICERIO D. ESPINOSA, petitioners
and appellants, vs. AGRICULTURAL CREDIT AND2
COOPERATIVE FINANCING ADMINISTRATION,
ERNESTO T. JIMENEZ, Administrator and

_______________

1 Petitioner Licerio D. Espinosa withdrew his petition because he

was reinstated by respondents (R.A., pp. 21, 51). His withdrawal was
approved by the lower court on February 14, 1959 (Record below, p.
25). The remaining petitioners-appellants therefore are Eldo J.
Cariño, Arsenio C. Miguel, Johnny F. Ilar, Sotero M. de Castro and
Gustavo E. Espino.
2 Hereinafter referred to merely as the ACCFA. Pursuant to the
resolution of this Court dated August 18, 1966, the Agricultural
Credit Administration, successor to ACCFA, was substituted in the
latter's place as respondent.

184

184 SUPREME COURT REPORTS ANNOTATED

Cariño vs. Agricultural Credit and Cooperative
/
 Financing A dministration

Chairman of the Board of Governors, ACCFA;

NICOLAS T. ENCISO, ARCADIO MATELA,
HILARIO DE PEDRO, JOAQUIN ORTEGA and
3
ARTURO MIRANDA, Members, Board of Governors,
ACCFA; DOROTEO TOLEDO, Treasurer, ACCFA;
FRANCISCO A. LASA, Cashier, ACCFA; and PEDRO
T. TORNEROS, Auditor, ACCFA, respondents and
appellees,

Public officers; Civil Service; Administrative law; Where

the positions were abolished in bad faith, the dismissed
employees are entitled to reinstatement and back salaries.—
Petitioners' positions were abolished allegedly for reasons of
economy. Shortly after the abolition, however, appointments
to many positions involving higher salaries were extended to
new appointees. True, these appointments were given
designations different from those abolished; but the work
involved was the same work performed by the petitioners who
were removed. This is no more than the abolition, of
petitioners themselves, not their positions. The result is that
petitioners were separated from the service without cause.
Bad faith taints such removal. Since petitioners are permanent
employees, it is the court's duty to restore them to their
positions and to direct payment of their salaries from
separation to their reinstatement.
Same; Primarily confidential positions; Removal must be
for cause.—That petitioners' positions are "primarily
confidential" is immaterial Section 1, Article XII of the
Constitution merely excepts primarily confidential positions 'f
rom the coverage of ''the rule requiring appointments in the
Civil Service to be made on the basis of merit and fitness as
determined from competitive examinations" (citing Jover vs.
Borra, 93 Phil. 506) but does not exempt such positions from
the operation of the principle that "No off icer 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), and which recognizes no exception." (Corpus
vs. Cuaderno, L-23721, March 21, 1965),
Same; Exhaustion of administrative remedies; When
appeal to Civil Service Board is not necessary.—Petitioners
have, in substance, exhausted all administrative remedies. The
Civil Service Commissioner sat on their petition for
reinstatement. That stopped them from appealing to the Civil
Service Board. Besides, the appeal to the Civil Service Board
becomes a useless

_______________

3 Case against respondent Arturo Miranda was definitely dismissed by

order of the lower court dated March 8, 1961. R.A. pp. 48-49.

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VOL. 18, SEPTEMBER 29, 1966 185

Cariño vs. Agricultural Credit and Cooperative Financing A

dministration

ceremony. The fact is that the Office of the President had

closed the door thereto—no action could be taken on
petitioners' plight because of the alleged retrenchment policy.
Same; Exceptions to the rule on exhaustion of
administrative remedies.—Exhaustion of administrative
remedies is not a hard and fast rule. It admits of exceptions.
Amongst these are that (1) the question in dispute is "purely a
legal one" and (2) the controverted act is "patently illegal".
(Gonzales vs. Hechanova, 60 O.G. 802, 806), The question
involved here is purely one of law. Petitioners' dismissal, too,

/
was patently illegal. No necessity there was to resort to
administrative remedies.
Same; Effect of acceptance of separation pay and
terminal leave benefits.—Acceptance of separation pay and
terminal leave benefits by the petitioners would not amount to
estoppel. The employer drove the petitioners to the wall. Out
of job, they had to face the harsh necessities of life. They thus
found themselves in no position to resist money proffered.
Theirs, then, is a case of adherence, not of choice. One thing
sure, however, is that they did not relent on their claim. They
pressed it. They are deemed not to have waived any of their
rights, (Phil-ippine Sugar Institute vs. Court of Industrial
Relations, L-13475, September 29, 1960; Urgelio vs. Osmeña,
L-14903, February 28, 1964),
Same; When moral damages cannot be recovered
against government officials sued in their official capacity.—
The respondents, who composed the Agricultural Credit and
Cooperative Financing Administration (ACCFA), were sued
in their official capacities as government officials. They
cannot be held person-ally liable because, as private
individuals—as contradistinguished from their being ACCFA
officials—they are not parties to this suit. Besides, moral
damages are "already included in, if not absorbed by, the back
salaries" to which petitioners are entitled. (Corpus vs.
Cuaderno, supra.) Award for moral damages is not proper.
Same; When employer is not liable for attorney's fees.—
Petitioners' contract with their counsel is that each of the 'f
ormer should pay the latter P2,000. Petitioners' employer, a
third party, is not bound by such arrangement. (C rpus vs.
Cuaderno, supra).
Same; Court has discretion to fix attorney's fees.—The
determination of attorney’s fees rests on the sound discretion
of the court. Here, however, the court below reduced the
amount to P500, apparently because the amount there
recovered was insignif icant, and the case in the main was
dismissed. Adverting, however, to the efforts exerted by
counsel for petitioners, the questions involved, and the
/
benefits resulting from the services of counsel (Sec. 12,
Canons of Legal Ethics), a total

186

186 SUPREME COURT REPORTS ANNOTATED

Cariño vs. Agricultural Credit and Cooperative Financing A

dministration

award of P1,000 for all the petitioners is fair and reasonable.

APPEAL from a judgment of the Court of First

Instance of Manila.
The facts are stated in the opinion of the Court.
       Celso 'A'. Fernandez Law Office for petitioners
and appellants.
          Deogracias E. Lerma for respondents and
appellees.

SANCHEZ, J.:
4
Appeal by petitioners on "purely questions of law"
from a 5 judgment of the Court of First Instance of
Manila, as follows:

"WHEREFORE, the petition is dismissed but the respondent

ACCFA is hereby ordered to pay the petitioners separation
pay equivalent to one month pay or 15 days pay for every
year of service, whichever is greater, a fraction of at least six
months being considered as one whole year (Republic Act
No. 1052, as amended by Republic Act No. 1787), plus
attorneys’ fees which the court fixes in the sum of P500 and
costs."

Petitioners-appellants appointed permanent employees

of the ACCFA. Their positions, salaries and dates of
appointment are, as follows:
/
 Annual      Date of
Name Position Salary Appointment
Eldo J. Cariño Confidential P2,400 July 1, 1955
     (Lawyer) Agent 2,760 July 1, 1956
    2,940 July 1, 1957
Gustavo E. Confidential 2,400 Sept. 19,
Espino 1955
     (First Grade, Agent 2,580 July 1956
     Civil Service)   2,760 July 1, 1957
Arsenio C. Confidential 2,400 July 1, 1955
Miguel
     (Lawyer) Agent 2,760 July 1, 1956
    2,940 July 1, 1957
Sotero M. de Confidential 3,120 July 13,
Castro 1955
     (Lawyer) Investigator 3,300 July 1, 1956
    3,480 July 1, 1957
Johnny F. Ilar Confidential    
(Lawyer) Investigator 2,407.20 April 15,
1958

The foregoing petitioners are all first grade eligibles.

Except Gustavo E. Espino, they are all lawyers.
Originally, they were assigned to the Special Operations

_______________

4 R.A., p. 57.
5 Civil Case No. 38588, for mandamus; R.A., pp. 56-57.

187

VOL. 18, SEPTEMBER 29, 1966 187

/
 Cariño vs. Agricultural Credit and Cooperative
Financing Administration

Service unit of the ACCFA. Their duties consisted of

conducting investigations of charges of irregularities in
any branch of the ACCFA and appearing as witnesses
in court. De Castro, Miguel and Ilar were, on August
11, 1958, transferred to the Office of General Counsel,
6
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. Consequently, their services were
terminated. Hence, the present suit for mandamus to
compel reinstatement, payment of back salaries, moral
damages, attorneys' fees and costs.
1. Ostensibly, petitioners' positions were abolished
for reasons of economy. Well did the trial court say that
such 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, as the court correctly pointed out/ shortly after
the abolition, "appointments to many positions
involving higher salaries were extended to new
appointees". True, these new appointments were
designations different from "confidential investigator"
or "confidential agents"; but the “work involved in said
appointments was the same work performed by the
7
employees (petitioners) who were removed."
2. The economy reason out of the way, the result is
that petitioners were separated from the service without
cause, They have not lost the confidence of their
superiors. On the contrary, four of them deserved
progressivelymerited promotion in pay. The fourth
(Ilar) was but a recent employee. Ironically enough, all
of them were thrown out of job. Their positions were
written off. But the same offices tagged with other
names were promptly restored, only to be occupied by
new and different appointees. 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.
Petitioners are permanent employees. The courts' duty
is to restore them to their positions, to direct

_______________

6 Exhibit PP, Folder of Exhibits, p. 64.

7 Records on Appeal, p. 55.

188

188 SUPREME COURT REPORTS ANNOTATED

Cariño vs. Agricultural Credit and Cooperative
Financing Administration

payment of their salaries from separation to their

8
reinstatement.
3. We see no necessity to pass on respondents' claim
(Appellees' brief, p. 2), that petitioners' positions are
"primarily confidential". For it is immaterial to the
present inquiry. Section 1, Article XII of the
Constitution, on this point reads:

"Section 1. A Civil Service embracing all branches and

subdivisions of the Government shall be provided by law.
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
9
examination."

This Court recently ruled that the foregoing-

constitutional precept merely excepts primarily
confidential positions from the coverage of "the rule
requiring appointments in the Civil Service to be made
on the basis of merit and fitness as determined from
/
competitive examinations" (citing Jover vs. Borra, 40
O.G. [No. 7] 2755), but that "the Constitution does not
exempt such positions 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
10
recognizes no exception."

_______________

8 Briones, etc., et al. vs. Osmeña, etc., et al., 55 O.G. No. 11, pp.
1920-23; Gacho, et al. vs. Osmeña, etc., et al., 55 O.G., No. 48, pp.
10079, 10090; Mangubat vs. Osmeña, L-12837, April 30, 1959;
Gonzales vs. Osmeña, L-15901, December 30, 1961; Urgelio, et al.
vs. Osmeña, et al., L-14908, October 31, 1963; Abanilla, et al. vs,
Ticao, etc., et al., L-22271, July 26, 1966,
9 Italics supplied.
10 Corpus vs. Cuaderno, et al., L-23721, March 31, 1965. Our
position on this point has been reiterated in Hernandez, etc., et al. vs.
Villegas, et al., L-17287, June 30, 1965 (citing with approval the
Corpus case), as follows: "For our purposes, we do not need to
consider the position involved in this case as primarily confidential,
because, even assuming the position to be, it is nevertheless subject to
the Constitutional provision that 'No officer or employee in the Civil
Service shall be removed or suspended except for cause/ (Phil.
Const., Art. XII, sec. 4). Villegas' removal is, therefore, concededly
without cause." See also Sections '2 and 5, of the Civil Service Act of
1949.

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Cariño vs. Agricultural Credit and Cooperative
Financing A dministration

/
Again, we state that petitioners are entitled to
reinstatement.
4. The lower court's decision dismissing the petition
is grounded upon petitioners' alleged failure to exhaust
all administrative remedies.
Here are the facts bearing on this point: On October
23, 1958, upon learning of their separation from
service, petitioners wrote the ACCFA Board of
Governors. Petitioners underscored civil service
eligibility, efficiency and permanence of their positions,
and requested reinstatement. On October 28, 1958,
petitioner Gustavo E. Espino (and one Rafael Pedroche)
wrote the Commissioner of Civil Service, brought to his
attention their separation, sought clarification and
advice. On October 30, 1958, instead of resolving their
problem, the Commissioner of Civil Service referred
the matter to the ACCFA Administrator. On November
21. 1958, ACCFA's administrator justified the action
taken by its board, upon the grounds that the abolition
was for purposes of economy; that petitioners’ positions
were conf idential in nature, and that their tenure
depended upon the appointing power. Follow-up letter
of Espino dated December 12, 1958 merited no reply
from the Civil Service Commissioner.
On December 15, 1958, Espino, on behalf of
petitioners, -wrote Major Federico Salcedo of the
PCAPE. He complained against their separation and
prayed for presidential intervention. Major Salcedo—on
behalf of the Off ice of the President of the Philippines
—. answered that no action could be taken on their
cases "in view of the policy of retrenchment enunciated
11
by the ACCFA Board of Governors".
In our opinion, petitioners have, in substance,
exhausted all administrative remedies. The Civil
Service Commissioner sat on their petition. That
stopped them from appealing to the Civil Service
Board. Besides, the appeal to the Civil Service Board

/
becomes a useless ceremony. The fact is that the Office
of the President had closed

_______________

11 R.A., p. 24; Decision, R.A., 54; Exhibit X, Folder of Exhibits, p.

35.

190

190 SUPREME COURT REPORTS ANNOTATED

Cariño vs. Agricultural Credit and Cooperative
Financing A dminis tration

the door thereto—no action could be taken on

petitioners' plight because of the alleged retrenchment
policy.
At any rate, exhaustion of administrative remedies is
not a hard and fast rule. It admits of exceptions,
Amongst these are that (1) the question in dispute is
"purely illegal one" and (2) the controverted act is
12
"patently illegal". The question involved here is purely
one of law. Petitioners' dismissal, too, was patently
illegal. The present case fits into the foregoing legal
precepts. No necessity there was to resort first to
administrative remedies.
5. Respondents now urge upon us the argument that
petitioners are in estoppel. They aver that petitioners
accepted13 their separation pay and terminal leave
benefits. After suit was filed herein, petitioners Sotero
M. de Castro and Eldo J. Cariño collected one-month
separation
14
pay; all of them received terminal leave
pay, except Johnny F. Ilar.
Acceptance of those benefits would not amount to
estoppel. The reason is plain. Employer and employee,
obviously do not stand on the same footing. The
employer drove the employee to the wall. The latter
must have to get hold of money. Because, out of job, be /
had to face the harsh necessities of life. He thus found
himself in no position to resist money proffered. 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
15
waived any of their rights. Renuntiatio non
praesumitur.
6. Petitioners seek moral damages in the sum of
P15,000 for each of them. Respondents who composed
the ACCFA board were sued in their official capacities
as government officials. They cannot be held personally
liable because,

_______________

12 Gonzales vs. Hechanova, etc., et al., 60 O.G., No. 6, pp. 802,

806, and cases cited,
13 Appellees' brief, p. 11.
14 Exhibits 16-22, Folder of Exhibits, pp. 92-98.
15 See Philippine Sugar Institute vs. Court of Industrial Relations,
et al., L-13475, September 29, 1960; Urgelio, et al. vs. Osmeña, etc.,
et al., L-14908, February 28, 1964 (on reconsideration).

191

VOL. 18, SEPTEMBER 29, 1966 191

Cariño vs. Agricultural Credit and Cooperative
Financing Administration

as private individuals—as contradistinguished from

their being ACCFA officials—they are not parties to
this suit. Besides as we have observed a few years back,
moral damages are "already included in, if not absorbed
16
by, the back salaries" to which petitioners are entitled.
Equitable considerations stop us 'f rom, breaking away
from this rule. Award for moral damages is not proper.
7. We now come to attorneys' fees. The award below
is for P500.00. Petitioners ask that this amount be /
raised to P2,000 for each of the petitioners. The Civil
Code '[Article 2208] allows recovery of attorneys' fees.
It is true that petitioners' contract with their counsel17 is
that each of the former should pay the latter P2,000. It
is quite clear though that ACCFA, a third party, is not to
18
be bound by such arrangement.
The fixation of attorneys' fees rests on the sound
discretion of the court: Here, however, the court below
reduced the amount to P500, apparently because the
amount there recovered was insignificant, and the case
on the main was dismissed. Adverting, however, to the
eff orts exerted by counsel for petitioners, the questions
involved, and the benefits resulting from the services of
19
counsel, we are confident that a total award of P1,000
for all the petitioners is fair and reasonable.
8. Petitioners have been unlawfully dismissed in
September, 1958. A long time—eight years—has since
passed. Some of them might have made adjustments in
life. And this, because they were thrown out of work.
What if readjustment by a return to the job becomes
impractical, or should entail difficulty? So it is, that the
employees' right to backpay and the employer's
obligation to pay them should be balanced in one
equation. We rule that those of petitioners who decide
not to return should be entitled to backpay up to the
date the judgment herein becomes final.
Upon the premises, the judgment appealed from is
here-

_______________

16 Diaz, et al. vs. Amante, December 26, 1958, 55 O.G., No. 41,
pp. 8643; 8646.
17 Exhibit NN, R.A., pp. 26-27, Folder of Exhibits, p. 53.
18 Corpus vs. Cuaderno, supra.
19 Section 12, Canons of Legal Ethics.

192
/
192 SUPREME COURT REPORTS ANNOTATED
Cariño vs. Agricultural Credit and Cooperative
Financing A dministration

by modified and, in consequence.

Judgment is hereby rendered—
1. Ordering respondent Agricultural Credit
Administration [successor to respondent Agricultural
Credit and Cooperative Financing Administration] and
its Board of Governors [now the National Land Reform
Council] to reinstate the remaining petitioners to their
positions;
2. Ordering said respondent Agricultural Credit
Administration to pay their respective back salaries
from September 17, 1958, the date of their dismissal, to
the date they are reinstated, as follows:

Eldo J. Cariño, at P2,940 per annum;

Gustavo E. Espino, at P2,760 per annum;
Arsenio C. Miguel, at P2,940 per annum;
Sotero M. de Castro, at P3,480 per annum; and
Johnny F. Ilar, at P2,407.20 per annum,

less the amounts they received as separation and/or

terminal leave pay: Provided, That in the event any of
petitioners should elect not to be reinstated, his back
salary shall be computed up' to the time this judgment
becomes final; and
3. Ordering respondent Agricultural Credit
Administration to pay petitioners the sum 'of P1,000 by
way of attorneys' fees.
Costs against Agricultural Credit Administration. So
ordered.

          Concepcion, C.J., Reyes, J.B.L., Barrera,

Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and
Castro, JJ., concur.

Judgment modified. /
 Notes.—As to illegal abolition of positions of
market sweepers in city budget, see Guillergan vs.
Ganzon, L-20818, May 28, 1966, 17 Supreme Court
Reports Annotated 257. Illegal abolition of positions,
which was tantamount to a violation of the Civil
Service Law, is, illustrated in Briones vs. Osmeña, 55
O.G. 1920; Abanilla vs. Ticao, L-22271, July 26, 1966,
17 Supreme Court Reports Annotated 652; Gacho vs.
Osmeña, 55 O.G. 10079, 10090; Mangubat vs. Osmeña,
L-12837, April 30, 1959; Gonzales vs. Osmeña, L-
15901, Dec. 30, 1961; Urgelio vs. Osmeña, L-14908,

193

VOL. 18, SEPTEMBER 29, 1966 193

De Borja vs. Mencias

Oct. 31, 1963.

In Llanto vs. Dimaporo, L-21905, March 31, 1966,
16 Supreme Court Reports Annotated 599, it was held
that under the Local Autonomy Act (Rep. Act No.
2264), the approval of the Secretary of Finance is not
required for the abolition of positions in the provincial,
city or municipal governments.
In Maza vs. Ochave, L-22336, May 23, 1967, 20
Supreme Court Reports Annotated 142, the abolition of
a clerical position in the municipal treasurer's office
was held to have been done in good faith.
But in Ocampo vs. Duque, L-23812, April 30, 1966,
16 Supreme Court Reports Annotated 962, the abolition
of the positions of special counsel in the office of the
Provincial Fiscal of Pangasinan was held to have been
effected in bad faith.

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/
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