ARCO METAL PRODUCTS, CO., G.R. No.

170734
INC., and MRS. SALVADOR UY,
Petitioners,
Present:

- versus -

QUISUMBING, J.,
Chairperson,
TINGA,
VELASCO, and
BRION, JJ.

SAMAHAN NG MGA MANGGAGAWA

SA ARCO METAL-NAFLU (SAMARMNAFLU),
Promulgated:
Respondent.
May 14, 2008
x---------------------------------------------------------------------------x
DECISION
TINGA, J.:

This treats of the Petition for Review[1] of the Resolution[2] and

Decision[3] of the Court of Appeals dated 9 December 2005 and 29 September 2005,
respectively in CA-G.R. SP No. 85089 entitled

Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal

Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,
[4]
which ruled that the 13th month pay, vacation leave and sick leave conversion to cash shall be
paid in full to the employees of petitioner regardless of the actual service they rendered within a
year.
Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioners rank and file employees. Sometime in December
2003, petitioner paid the 13th month pay, bonus, and leave encashment of three union members in
amounts proportional to the service they actually rendered in a year, which is less than a full
twelve (12) months. The employees were:

1. Rante Lamadrid
2. Alberto Gamban
3. Rodelio Collantes

Sickness
27 August 2003 to 27 February 2004
Suspension 10 June 2003 to 1 July 2003
Sickness
August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner
did not prorate the payment of the same benefits to seven (7) employees who had not served
for the full 12 months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and
2004. According to respondent, the prorated payment violates the rule against diminution of
benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the National
Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary
arbitration.
The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that
the giving of the contested benefits in full, irrespective of the actual service rendered within one
year has not ripened into a practice. He noted the affidavit of Joselito Baingan, manufacturing
group head of petitioner, which states that the giving in full of the benefit was a mere error. He
also interpreted the phrase for each year of service found in the pertinent CBA provisions to
mean that an employee must have rendered one year of service in order to be entitled to the full
benefits provided in the CBA.[5]
Unsatisfied, respondent filed a Petition for Review[6] under Rule 43 before the Court of
Appeals, imputing serious error to Mangabats conclusion. The Court of Appeals ruled that the
CBA did not intend to foreclose the application of prorated payments of leave benefits to covered
employees. The appellate court found that petitioner, however, had an existing voluntary
practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim
that petitioner erred in paying full benefits to its seven employees. The appellate court
noted that aside from the affidavit of petitioners officer, it has not presented any evidence in
support of its position that it has no voluntary practice of granting the contested benefits in full
and without regard to the service actually rendered within the year. It also questioned why it
took petitioner eleven (11) years before it was able to discover the alleged error. The dispositive
portion of the courts decision reads:
WHEREFORE, premises considered, the instant petition is
hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M.
Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is
hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus,

vacation leave and sick leave conversions to cash shall be paid to the employees in
full, irrespective of the actual service rendered within a year.[7]

Petitioner moved for the reconsideration of the decision but its motion was denied, hence this
petition.
Petitioner submits that the Court of Appeals erred when it ruled that the grant of
13 month pay, bonus, and leave encashment in full regardless of actual service rendered
constitutes voluntary employer practice and, consequently, the prorated payment of the said
benefits does not constitute diminution of benefits under Article 100 of the Labor Code.[8]
The petition ultimately fails.
th

First, we determine whether the intent of the CBA provisions is to grant full benefits
regardless of service actually rendered by an employee to the company. According to petitioner,
there is a one-year cutoff in the entitlement to the benefits provided in the CBA which is evident
from the wording of its pertinent provisions as well as of the existing law.
We agree with petitioner on the first issue. The applicable CBA provisions read:
ARTICLE XIV-VACATION LEAVE
Section 1. Employees/workers covered by this agreement who have
rendered at least one (1) year of service shall be entitled to sixteen (16) days
vacation leave with pay for each year of service. Unused leaves shall not be
cumulative but shall be converted into its cash equivalent and shall become due
and payable every 1st Saturday of December of each year.
However, if the 1st Saturday of December falls in December 1, November
30 (Friday) being a holiday, the management will give the cash conversion of
leaves in November 29.
Section 2. In case of resignation or retirement of an employee, his vacation
leave shall be paid proportionately to his days of service rendered during the year.
ARTICLE XV-SICK LEAVE

Section 1. Employees/workers covered by this agreement who have

rendered at least one (1) year of service shall be entitled to sixteen (16) days of
sick leave with pay for each year of service. Unused sick leave shall not be
cumulative but shall be converted into its cash equivalent and shall become due
and payable every 1st Saturday of December of each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified
by the Company physician or by a licensed physician.
Section 3. All commutable earned leaves will be paid proportionately upon
retirement or separation.
ARTICLE XVI EMERGENCY LEAVE, ETC.
Section 1. The Company shall grant six (6) days emergency leave to
employees covered by this agreement and if unused shall be converted into cash
and become due and payable on the 1st Saturday of December each year.
Section 2. Employees/workers covered by this agreement who have
rendered at least one (1) year of service shall be entitled to seven (7) days of
Paternity Leave with pay in case the married employees legitimate spouse gave
birth. Said benefit shall be non-cumulative and non-commutative and shall be
deemed in compliance with the law on the same.
Section 3. Maternity leaves for married female employees shall be in
accordance with the SSS Law plus a cash grant of P1,500.00 per month.
xxx
ARTICLE XVIII- 13TH MONTH PAY & BONUS
Section 1. The Company shall grant 13th Month Pay to all employees
covered by this agreement. The basis of computing such pay shall be the basic
salary per day of the employee multiplied by 30 and shall become due and payable
every 1st Saturday of December.
Section 2. The Company shall grant a bonus to all employees as practiced
which shall be distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand
Five Hundred Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.
[9]
(Underscoring ours)
There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of
vacation and sick leave, one must have rendered at least one year of service. The clear wording
of the provisions does not allow any other interpretation. Anent the 13th month pay and bonus,
we agree with the findings of Mangabat that the CBA provisions did not give any meaning
different from that given by the law, thus it should be computed at 1/12 of the total
compensation which an employee receives for the whole calendar year. The bonus is also
equivalent to the amount of the 13th month pay given, or in proportion to the actual service
rendered by an employee within the year.
On the second issue, however, petitioner founders.
As a general rule, in petitions for review under Rule 45, the Court, not being a trier of
facts, does not normally embark on a re-examination of the evidence presented by the contending
parties during the trial of the case considering that the findings of facts of the Court of Appeals
are conclusive and binding on the Court.[10] The rule, however, admits of several exceptions, one
of which is when the findings of the Court of Appeals are contrary to that of the lower
tribunals. Such is the case here, as the factual conclusions of the Court of Appeals differ from
that of the voluntary arbitrator.
Petitioner granted, in several instances, full benefits to employees who have not served a
full year, thus:
Name
1. Percival Bernas
2. Cezar Montero
3. Wilson Sayod
4. Nomer Becina
5. Ronnie Licuan
6. Guilbert Villaruel
7. Melandro Moque

Reason
Sickness
Sickness
Sickness
Suspension
Sickness
Sickness
Sickness

Duration
July 1992 to November 1992
21 Dec. 1992 to February 1993
May 1994 to July 1994
1 Sept. 1996 to 5 Oct. 1996
8 Nov. 1999 to 9 Dec. 1999
23 Aug. 2002 to 4 Feb. 2003
29 Aug. 2003 to 30 Sept. 2003[11]

Petitioner claims that its full payment of benefits regardless of the length of service to the
company does not constitute voluntary employer practice. It points out that the payments had
been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999,
2002 and 2003. According to petitioner, it was only in 2003 that the accounting department

discovered the error when there were already three (3) employees involved with prolonged
absences and the error was corrected by implementing the pro-rata payment of benefits pursuant
to law and their existing CBA.[12] It adds that the seven earlier cases of full payment of
benefits went unnoticed considering the proportion of one employee

concerned (per year) vis vis the 170 employees of the company. Petitioner describes the
situation as a clear oversight which should not be taken against it.[13] To further bolster its case,
petitioner argues that for a grant of a benefit to be considered a practice, it should have been
practiced over a long period of time and must be shown to be consistent, deliberate and
intentional, which is not what happened in this case. Petitioner tries to make a case out of the
fact that the CBA has not been modified to incorporate the giving of full benefits regardless of
the length of service, proof that the grant has not ripened into company practice.
We disagree.
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer.[14] The principle of non-diminution of benefits is
founded on the Constitutional mandate to "protect the rights of workers and promote their
welfare,[15] and to afford labor full protection.[16] Said mandate in turn is the basis of Article 4
of the Labor Code which states that all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of employees to benefits which
were voluntarily given by the employer and which ripened into company practice. Thus
in Davao Fruits Corporation v. Associated Labor Unions, et al.[17] where an employer had freely
and continuously included in the computation of the 13th month pay those items that were
expressly excluded by the law, we held that the act which was favorable to the employees
though not conforming to law had thus ripened into a practice and could not be withdrawn,
reduced, diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana,[18]we
ruled that the employers act of including non-basic benefits in the computation of the 13th month
pay was a voluntary act and had ripened into a company practice which cannot be peremptorily
withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez,[19] the Court
ordered the payment of the cash equivalent of the unenjoyed sick leave benefits to its intermittent
workers after finding that said workers had received these benefits for almost four years until the
grant was stopped due to a different interpretation of the CBA provisions. We held that the
employer cannot unilaterally withdraw the existing privilege of commutation or conversion
to cash given to said workers, and as also noted that the employer had in fact granted and paid
said cash equivalent of the unenjoyed portion of the sick leave benefits to some intermittent
workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of
freely, voluntarily and consistently granting full benefits to its employees regardless of the
length of service rendered. True, there were only a total of seven employees who benefited from
such a practice, but it was an established practice nonetheless. Jurisprudence has not laid down
any rule specifying a minimum number of years within which a company practice must be
exercised in order to constitute voluntary company practice.[20] Thus, it can be six (6) years,
[21]
three (3) years,[22] or even as short as two (2) years.[23] Petitioner cannot shirk away from its
responsibility by merely claiming that it was a mistake or an error, supported only by an
affidavit of its manufacturing group head portions of which read:
5. 13th month pay, bonus, and cash conversion of unused/earned vacation
leave, sick leave and emergency leave are computed and paid in full to employees
who rendered services to the company for the entire year and proportionately to
those employees who rendered service to the company for a period less than one
(1) year or twelve (12) months in accordance with the CBA provision relative
thereto.
6. It was never the intention much less the policy of the management to
grant the aforesaid benefits to the employees in full regardless of whether or not
the employee has rendered services to the company for the entire year, otherwise,
it would be unjust and inequitable not only to the company but to other employees
as well.[24]

In cases involving money claims of employees, the employer has the

burden of proving that the employees did receive the wages and benefits and that the sa
me were paid in accordance with law.[25]
Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have
easily presented other proofs, such as the names of other employees who did not fully serve for
one year and thus were given prorated benefits. Experientially, a perfect attendance in the
workplace is always the goal but it is seldom achieved. There must have been other employees
who had reported for work less than a full year and who, as a consequence received
only prorated benefits. This could have easily bolstered petitioners theory of mistake/error, but
sadly, no evidence to that effect was presented.
IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 85089 dated 29 September 2005 is and its Resolution dated 9 December
2005 are hereby AFFIRMED.

SO ORDERED.

[G.R. No. 112963. July 20, 1999.]

PHILIPPINE WIRELESS INC. (Pocketbell) and/or JOSE LUIS SANTIAGO, Petitioners,
v. NATIONAL LABOR RELATIONS COMMISSION and GOLDWIN
LUCILA, Respondents.
DECISION
PARDO, J.:
This petition for certiorari is to set aside the decision of the National Labor Relations
Commission 1 on the ground that it was rendered with grave abuse of its discretion. The
dispositive portion of the decision reads as follows:chanroblesvirtuallawlibrary
"WHEREFORE, finding the appeal to be meritorious the decision appealed from is hereby
REVERSED AND SET ASIDE and a new one ENTERED, declaring that the complainant has
been constructively dismissed and ordering the respondent to pay him backwages from his
dismissal on December 28, 1990 up to the date of the promulgation of this Resolution. And in
lieu of reinstatement, respondent is likewise hereby ordered to pay complainant his separation
pay at the rate of one (1) month pay for every year of service.
No Cost.
SO ORDERED."cralaw virtua1aw library
"(s/t) EDNA BONITO-PEREZ
"Presiding Commissioner" 2
The facts are as follows:chanrobles lawlibrary : rednad
On January 8, 1976, petitioner Philippine Wireless Inc. hired respondent Goldwin Lucila as

operator/encoder. On January 7, 1979, he was promoted as Head Technical and Maintenance

Department of the Engineering Department. On September 11, 1987, he was promoted as
Supervisor, Technical Services of the same department. On October 1, 1990, he was again
promoted as Superintendent, Project Management.
On December 28, 1990, he tendered his resignation.
On December 3, 1991, he filed with the Arbitration Branch, National Labor Relations
Commission, a complaint for illegal/constructive dismissal. He alleged that he was
constructively dismissed inasmuch as his promotion from Supervisor, Technical Services to
Superintendent, Project Management is demeaning, illusory and humiliating. The basis of his
allegation was the fact that he was not given any secretary, assistant and/or subordinates.
On June 29, 1992, Labor Arbiter Benigno Villarente Jr. rendered a decision declaring that
respondent actually resigned and dismissed the complaint for lack of merit. 3chanrobles law
library
On June 15, 1993, public respondent NLRC reversed the findings of the labor arbiter, and
ordered respondents reinstatement with back wages or separation pay.
On August 27, 1993 petitioners filed a motion for reconsideration which the National Labor
Relations Commission denied for lack of merit in a resolution dated November 16, 1993.
Hence, this petition.
At issue is whether or not petitioner was constructively dismissed from the petitioners
employment.
We find the petition meritorious.chanrobles virtual lawlibrary
The Court has held that constructive dismissal is "an involuntary resignation resorted to when
continued employment is rendered impossible, unreasonable or unlikely; when there is a
demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee." 4 In this particular case,
respondent voluntarily resigned from his employment. He was not pressured into resigning.
Voluntary resignation is defined as the act of an employee who "finds himself in a situation
where he believes that personal reasons cannot be sacrificed in favor of the exigency of the
service and he has no other choice but to disassociate himself from his employment." 5
Respondent considered his transfer/promotion as a demotion due to the fact that he had no
support staff to assist him in his work and whom he could supervise. There is no demotion where
there is no reduction in position, rank or salary as a result of such transfer. 6 In fact, respondent
Goldwin Lucila was promoted three (3) times from the time he was hired until his resignation
from work.chanroblesvirtual|awlibrary

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the National
Labor Relations Commission, dated June 15, 1993, is SET ASIDE. The decision of the Labor
Arbiter dated June 29, 1992, is REINSTATED and AFFIRMED.
No costs.
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan and Ynares-Santiago, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 154689

November 25, 2004

UNICORN SAFETY GLASS, INC., LILY YULO and HILARIO YULO, petitioners,
vs.
RODRIGO BASARTE, JAIMELITO FLORES, TEODOLFO LOR, RONNIE DECIO,
ELMER SULTORA and JOSELITO DECIO, respondents.
YNARES-SANTIAGO, J.:
This is a Petition for Review on Certiorari seeking to set aside the Decision1 of the Court of
Appeals dated October 18, 2001 and its subsequent Resolution dated August 7, 2002, which
reversed the decisions of the Labor Arbiter and the National Labor Relations Commission
(NLRC).
Respondents were regular employees of petitioner Unicorn Safety Glass Incorporated, a
company engaged in the business of glass manufacturing. Respondents normally worked six (6)
times a week, from Monday to Saturday, and were paid on a weekly basis. They were likewise
officers of the organized union in petitioner company, owned and managed by the Spouses Lily
and Hilario Yulo.

On March 2, 1998, Hilario Yulo, as general manager of Unicorn, issued a

Memorandum2 informing respondents that effective April 13, 1998, their workdays shall be
reduced due to economic considerations. Yulo cited several factors such as decrease in sales,
increase in the cost of production, devaluation of the peso and increase in minimum wage, which
contributed to the current economic state of the company. In a letter dated March 12, 1998,
respondents registered their protest to the proposed reduction of working days and expressed
doubts on the reasons offered by the company.3 Respondents also surmised that the management
was merely getting back at them for forming a union especially since only the union officers
were affected by the work reduction.
On April 6, 1998, Hilario Yulo issued another Memorandum4 announcing the implementation of
a work rotation schedule to take effect from April 13, 1998 to April 30, 1998, which will
effectively reduce respondents' workdays to merely three days a week. A copy of the planned
rotation scheme was sent to the Department of Labor and Employment. Respondents wrote
another letter of protest dated April 7, 19985 expressing their frustrations at the apparent lack of
willingness on the part of petitioner company's management to address their concerns and
objections. On the same day, respondents met with the Spouses Yulo and inquired as to the
reasons for the imposition of the reduced workweek. They were told that it was management's
prerogative to do so.6
On April 13, 1998, instead of reporting for work, respondents filed a complaint against petitioner
company with the National Labor Relations Commission, docketed as NLRC Case No. NCR-0004-03277-98, for constructive dismissal and unfair labor practice, i.e., union busting, nonpayment of five days service incentive leave pay and payment of moral and exemplary damages
as well as attorney's fees. Respondents prayed for reinstatement and payment of full backwages.
Meanwhile, since respondents failed to report for work, petitioners sent each of them a telegram
directing them to do so. On April 18, 1998, respondents sent Yulo a letter informing him that, in
view of the management's apparent indifference to their plight and blatant violation of their
rights, a complaint was lodged against petitioner company for constructive dismissal. Moreover,
given the working environment they were subjected to, they decided not to report for work at
all.7 Petitioner company replied by asking them to explain why they have not been reporting for
work. However, respondents neither reported for work nor replied to petitioner company's
telegrams.
On January 26, 1999, Labor Arbiter Felipe Pati rendered judgment finding that respondents were
not constructively terminated by petitioner company. Thus:
Complainants claim that they were constructively terminated. However, evidence extant
do not support this contention. What we see on records are the telegrams, letters and
memoranda sent by respondents to complainants ordering the latter to report for work.
Despite due receipt by the complainants of these communications, they simply ignored
respondents' plea. Complainants deliberate refusal to report for work is very much
evident from the number of letters they received from respondents which were all
ignored.

It is true that complainants have sent to respondent a joint letter-reply dated April 18,
1998 (Annexes 35, Respondents Position Paper). However, said joint letter reinforces the
fact that complainants were not terminated by respondents. In fact complainants admitted
in this joint letter-reply that they have decided not to report for work because they did not
agree with the report rotation adopted by respondents. From this admission and statement
of complainant, we feel that the charge of illegal dismissal they filed against respondents
is misplaced. If complainants strongly opposed the rotation adopted by respondents, they
could have initiated an illegal rotation and not illegal dismissal case against respondents.
As "good soldiers" complainants could initiate this case while they are reporting for work
based on the adopted work rotation and let the Court decides whether or not this rotation
is valid and legal. Certainly refusal to report for work is not a proper remedy.8
The Labor Arbiter likewise dismissed the charge of unfair labor practice for lack of legal and
factual basis. Nonetheless, the Labor Arbiter ordered petitioner company to pay the respondents'
claim for unpaid service incentive leave pay. The Labor Arbiter disposed of the case, thus:
WHEREFORE, the instant case is hereby dismissed for lack of merit. Respondents
however, are ordered to pay complainants the total amount of P5,110.00 for unpaid
service incentive leave pay as alluded in the above computation.
On the grounds of amicable settlement and subsequent withdrawals of their complaints,
the cases of PAQUITO MANONGSONG and ELMER SULTORA are hereby dismissed
with prejudice.
SO ORDERED.9
The case was appealed to the NLRC. During the pendency of the appeal, however, petitioner
company filed a Motion to Dismiss alleging that respondents Basarte, Flores, Decio and Lor
entered into amicable settlements and executed a "Waiver, Release & Quitclaim."10 Respondents'
representative filed an Opposition thereto alleging that the "Waiver, Release & Quitclaim"
executed by respondents were entered into without his knowledge and not in the presence of the
Labor Arbiter; and that the amounts received by respondents were unconscionably inadequate.
In a decision dated October 31, 2000, the NLRC sustained the findings of the Labor Arbiter. On
the issue of the amicable settlements, the NLRC stated:
We are not convinced that the amicable settlement entered into by complainants were
involuntary and that the consideration thereof are unconscionable.
It is to be stressed that the complainants were the ones who went to the office of
respondent for settlement. They acknowledged having signed the "Waiver, Release and
Quitclaim" and brought the same before a Notary Public. Given these factual
circumstances, it is hard to believe that there was involuntariness on the part of the
complainant when they settled their claims with respondent. In fact, almost a year have
already lapsed since then. It is only now that complainants are claiming that their
settlement was involuntary.

Anent complainants' claim that the consideration of settlement is unconscionable suffice

it to state that the amount granted by way of settlement to complainants Rodrigo Basarte,
Jaimelito Flores, Joselito Decio including that of complainant Teodolfo Lor (Records, p.
179) are more than the judgment award.11
The dispositive portion of the NLRC's decision states:
PREMISES CONSIDERED, the appeal from the Decision dated January 26, 1999 is
hereby DISMISSED for lack of merit and the Decision is AFFIRMED.
Further, the motions to dismiss filed by respondents with respect to complainants Rodrigo
Basarte, Jaimelito Flores, Joselito Decio and Teodolfo Lor are hereby GRANTED. Thus,
insofar as said complainants are concerned their cases are dismissed with prejudice, as
prayed for by respondents.
SO ORDERED.12
Unrelenting, the respondents filed a petition for certiorari with the Court of Appeals, which
found respondents' case partly meritorious.
However, it declined to make a contrary finding on the charge of unfair labor practice for lack of
clear-cut and convincing evidence. The dispositive portion of the Court of Appeals' decision is as
follows:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the petition is substantially
GRANTED. Private respondents are hereby ordered to reinstate to their former positions
Rodrigo Basarte, Jaimelito Flores and Ronnie Decio, without loss of seniority rights and
privileges, and to pay these three their full backwages from April 13, 1998 until their
reinstatement. Or, to award them separation pay, in case reinstatement is no longer
feasible or possible. Private respondents are further sentenced to pay the aforenamed
petitioners ten per cent (10%) of the total awards by way of attorney's fees. Costs shall
also be taxed against private respondents.
SO ORDERED.13
Its Motion for Reconsideration having been denied, petitioners are before us on Petition for
Review on Certiorari, raising the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE RULING
OF THE LABOR ARBITER A QUO WHICH WAS AFFIRMED BY THE NLRC
HOLDING THAT PRIVATE RESPONDENTS WERE NOT ILLEGALLY DISMISSED
FROM THEIR EMPLOYMENT.
II.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE

RELEASE, WAIVER AND QUITCLAIMS EXECUTED BY PRIVATE
RESPONDENTS RODRIGO BASARTE AND JAIMELITO FLORES NULL AND
VOID.14
The petition lacks merit.
Constructive dismissal or a constructive discharge has been defined as quitting because
continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank and a diminution in pay.15Constructive dismissal, however, does not always
take the form of a diminution. In several cases, we have ruled that an act of clear discrimination,
insensibility, or disdain by an employer may become so unbearable on the part of the employee
so as to foreclose any choice on his part except to resign from such employment. This constitutes
constructive dismissal.16
In the case at bar, we agree with the Court of Appeals that petitioners' bare assertions on the
alleged reason for the rotation plan as well as its failure to refute respondents' contention that
they were targeted due to their union activities, merit the reversal of the Labor Arbiter's decision.
It was incumbent upon petitioners to prove that the rotation scheme was a genuine business
necessity and not meant to subdue the organized union. The reasons enumerated by petitioners in
their Memoranda dated March 2, 1998 were factors too general to actually substantiate the need
for the scheme. Petitioners cite the reduction in their electric consumption as proof of an
economic slump. This may be true to an extent. But it does not, by itself, prove that the rotation
scheme was the most reasonable alternative to remedy the company's problems.
The petitioners' unbending stance on the implementation of the rotation scheme was an
indication that the rotation plan was being implemented for reasons other than business necessity.
It appears that respondents attempted on more than one occasion to have a dialogue with
petitioner Hilario Yulo to discuss the work reduction. Good faith should have prompted Yulo to
hear the side of the respondents, to come up with a scheme amenable to both parties or attempt to
convince the employees concerned that there was no other viable option. However, petitioners
ignored the letters sent by respondents, which compelled the latter to seek redress with the Labor
Arbiter.
We are mindful that every business strives to keep afloat during these times when prevailing
economic situations turns such endeavor into a near struggle. With as much latitude as our laws
would allow, the Court has always respected a company's exercise of its prerogative to devise
means to improve its operations. Thus, we have held that management is free to regulate,
according to its own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be followed,
supervision of workers, working regulations, transfer of employees, work supervision, lay off of
workers and discipline, dismissal and recall of workers.17 Further, management retains the
prerogative, whenever exigencies of the service so require, to change the working hours of its
employees.18

However, the exercise of management prerogative is not absolute. By its very nature,
encompassing as it could be, management prerogative must be exercised in good faith and with
due regard to the rights of laborverily, with the principles of fair play at heart and justice in
mind. While we concede that management would best know its operational needs, the exercise of
management prerogative cannot be utilized as an implement to circumvent our laws and oppress
employees. The prerogative accorded management cannot defeat the very purpose for which our
labor laws exist: to balance the conflicting interests of labor and management, not to tilt the scale
in favor of one over the other, but to guaranty that labor and management stand on equal footing
when bargaining in good faith with each other.19
In the case at bar, the manner by which petitioners exercised their management prerogative
appears to be an underhanded circumvention of the law. Petitioners were keen on summarily
implementing the rotation plan, obviously singling out respondents who were all union officers.
The management's apparent lack of interest to hear what the respondents had to say, created an
uncertain situation where reporting for work was tantamount to an acquiescence in an unjust
situation.
Petitioners argued that they "exerted diligent and massive efforts" to make respondents return to
work, highlighting the telegrams and memoranda sent to respondents.20 It is well established that
to constitute abandonment, two elements must concur: (1) the failure to report for work or
absence without valid or justifiable reason, and (2) a clear intention to sever the employeremployee relationship, with the second element as the more determinative factor and being
manifested by some overt acts. Abandoning one's job means the deliberate, unjustified refusal of
the employee to resume his employment and the burden of proof is on the employer to show a
clear and deliberate intent on the part of the employee to discontinue employment.21
However, petitioners' charge of abandonment of work by respondents does not hold water when
taken in light of the complaint for constructive dismissal. We have held that a charge of
abandonment is totally inconsistent with the filing of a complaint for constructive dismissal
and with reason.22 Respondents cannot be said to have abandoned their jobs when precisely, the
root cause of their protest is their demand to maintain their regular work hours. What is more,
respondents even prayed for reinstatement and backwages. Clearly, these are incompatible with
the proposition that respondents sought to abandon their work.
Anent the issue of the validity of the waivers and quitclaims executed by some of the
respondents, petitioners argue that while admittedly, the amounts indicated therein were not
substantial, it does not necessarily follow that these were executed under duress. Moreover, the
waivers and quitclaims were executed when the complaint for illegal dismissal was already
dismissed by the Labor Arbiter. Thus, the waivers and quitclaims were executed under valid
circumstances.
We do not agree. To be sure, the law looks with disfavor upon quitclaims and releases by
employees who are inveigled or pressured into signing them by unscrupulous employers seeking
to evade their legal responsibilities. We have clarified the standards for determining the validity
of quitclaim or waiver in the case of Periquet v. National Labor Relations Commission,23 to wit:

If the agreement was voluntarily entered into and represents a reasonable settlement, it is
binding on the parties and may not later be disowned simply because of a change of
mind. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on its face,
that the law will step in to annul the questionable transaction. But where it is shown that
the person making the waiver did so voluntarily, with full understanding of what he was
doing, and the consideration for the quitclaim is credible and reasonable, the transaction
must be recognized as a valid and binding undertaking.
In the instant case, while it is true that the complaint for illegal dismissal filed by respondents
with the Labor Arbiter has been dismissed, their appeal before the NLRC was still pending. In
fact, petitioners even filed a Motion to Dismiss with the NLRC on the very ground that the
respondents, or at least most of them, have executed said "Waivers, Releases and Quitclaims."
Petitioners cannot therefore deny that it was in their interest to have respondents execute the
quitclaims.
Furthermore, the considerations received by respondents Basarte and Flores were grossly
inadequate considering the length of time that they were employed in petitioner company. As
correctly pointed out by the Court of Appeals, Basarte worked for petitioner company for 21
years, that is, from 1976 to 1998, while Flores worked from 1991 to 1998. Basarte and Flores
only received P10,000.00 and P3,000.00, respectively. In contrast, Manongsong and Soltura, two
workers who opted to settle their respective cases earlier on, both started in 1993 only, but were
able to take home P16,434.00 each after executing their waivers.
Article 279 of the Labor Code provides that an employee who is unjustly dismissed from work is
entitled to reinstatement without loss of seniority rights and other privileges, and to his full
backwages, inclusive of allowances, and to the other benefits or their monetary equivalent
computed from the time of his actual reinstatement. However, if reinstatement is no longer
possible, the employer has the alternative of paying the employee his separation pay in lieu of
reinstatement.
WHEREFORE, the instant petition is DENIED, and the decision of the Court of Appeals of
October 18, 2001 in CA-G.R. SP No. 63577 is AFFIRMED in toto. Costs against petitioners.
SO ORDERED.
Quisumbing, Carpio, and Azcuna, JJ., concur.
Davide, Jr., C.J. (Chairman), on official leave.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 154503

February 29, 2008

UNIWIDE SALES WAREHOUSE CLUB and VIVIAN M. APDUHAN, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and AMALIA P.
KAWADA, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed
by Uniwide Sales Warehouse Club (Uniwide) and Vivian M. Apduhan (Apduhan) seeking to
annul the Decision1 dated November 23, 2001 and the Resolution2 dated July 23, 2002 of the
Court of Appeals (CA) in CA-G.R. SP No. 64581.
The facts of the case:
Amalia P. Kawada (private respondent) started her employment with Uniwide sometime in 1981
as a saleslady. Over the years, private respondent worked herself within Uniwide's corporate
ladder until she attained the rank of Full Assistant Store Manager with a monthly compensation
of P13,000.00 in 1995.
As a Full Assistant Store Manager, private respondent's primary function was to manage and
oversee the operation of the Fashion and Personal Care, GSR Toys, and Home Furnishing
Departments of Uniwide, to ensure its continuous profitability as well as to see to it that the
established company policies and procedures were properly complied with and implemented in
her departments.3
Sometime in 1998, Uniwide received reports from the other employees regarding some problems
in the departments managed by the private respondent.4 Thus, on March 15, 1998, Uniwide,
through Store Manager Apduhan, issued a Memorandum addressed to the private respondent
summarizing the various reported incidents signifying unsatisfactory performance on the latter's
part which include the commingling of good and damaged items, sale of a voluminous quantity
of damaged toys and ready-to-wear items at unreasonable prices, and failure to submit inventory
reports. Uniwide asked private respondent for concrete plans on how she can effectively perform
her job.5 In a letter6 dated March 23, 1998, private respondent answered all the allegations
contained in the March 15, 1998 Memorandum.

Unsatisfied, Apduhan sent another Memorandum7 dated March 30, 1998 to private respondent
where Apduhan claimed that the answers given by the private respondent in her March 23, 1998
letter were all hypothetical and did not answer directly the allegations attributed to her.8 Apduhan
elaborated the incidents contained in the March 15, 1998 Memorandum.
On June 30, 1998, Apduhan sent another Memorandum9 seeking from the private respondent an
explanation regarding the incidents reported by Uniwide employees and security personnel for
alleged irregularities committed by the private respondent such as allowing the entry of
unauthorized persons inside a restricted area during non-office hours, falsification of or inducing
another employee to falsify personnel or company records, sleeping and allowing a nonemployee to sleep inside the private office, unauthorized search and bringing out of company
records, purchase of damaged home furnishing items without the approval from superior, taking
advantage of buying damaged items in large quantity, alteration of approval slips for the
purchase of damaged items and abandonment of work.10 In a letter11 dated July 9, 1998, private
respondent answered the allegations made against her.
On July 27, 1998, private respondent sought medical help from the company physician, Dr.
Marivelle C. Zambrano (Dr. Zambrano), due to complaints of dizziness.12 Finding private
respondent to be suffering from hypertension, Dr. Zambrano advised her to take five days sick
leave.13
On July 30, 1998, private respondent was able to obtain from Dr. Zambrano a certificate of
fitness to work,14which she presented to Apduhan the following day.15 It turned out that Dr.
Zambrano inadvertently wrote "Menia," the surname of the company nurse, in the medical
certificate instead of private respondent's surname.16Thereafter, private respondent claims that
Apduhan shouted at her and prevented her from resuming work because she was not the person
referred to in the medical certificate.17 After private respondent left Apduhan's office, a certain
Evelyn Maigue, Apduhan's assistant, approached the private respondent to get the certification so
that it may be photocopied. When she refused to give the certification, private respondent claims
that Apduhan once again shouted at her which caused her hypertension to recur and eventually
caused her to collapse. Private respondent's head hit the edge of the table before she fell down on
the ground for which she suffered contusions at the back of her head, as evidenced by the
medical certificate18 issued by Dr. George K. C. Cheu of the Chinese General Hospital &
Medical Center.19
On August 1, 1998, private respondent reported the confrontation between her and Apduhan to
the Central Police District.20 Likewise, private respondent was able to obtain from Dr. Zambrano
the corrected certification21together with the clarification that the name "Amalia Menia" written
on the July 30, 1998 certification referred to Amalia Kawada.22
Thereafter, counsel for private respondent sent a letter23 dated August 1, 1998 to Apduhan stating
that the latter's alleged continued harassment and vexation against private respondent created a
hostile work environment which had become life threatening, and that they had no alternative but
to bring the matter to the proper forum.24

On August 2, 1998, Apduhan issued a Memorandum,25 received on the same day by Edgardo
Kawada, the husband of private respondent, advising the latter of a hearing scheduled on August
12, 1998 to be held at the Uniwide Office in Quirino Highway, and warning her that failure to
appear shall constitute as waiver and the case shall be submitted for decision based on available
papers and evidence.26
On August 3, 1998, private respondent filed a case for illegal dismissal before the Labor Arbiter
(LA).27
Counsel for private respondent sent a letter28 dated August 8, 1998 to Apduhan claiming that the
August 2, 1998 Memorandum was a mere afterthought, in an attempt to justify private
respondent's dismissal; and that on August 3, 1998, private respondent had already filed charges
against Uniwide and Apduhan (petitioners).
On August 8, 1998, Apduhan sent a letter addressed to private respondent, which the latter
received on even date, advising private respondent to report for work, as she had been absent
since August 1, 1998; and warning her that upon her failure to do so, she shall be considered to
have abandoned her job.29
On September 1, 1998, Apduhan issued a Memorandum30 stating that since private respondent
was unable to attend the scheduled August 12, 1998 hearing, the case was evaluated on the basis
of the evidence on record; and enumerating the pieces of evidence of the irregularities and
violations of company rules committed by private respondent, the latter's defenses and the
corresponding findings by Uniwide. Portions of the Memorandum read:
VIOLATIONS:
1. Allowing entry of Unauthorized person inside a Restricted Area during non-office
hours (night-time)
xxxx
FINDINGS:
Towards these evidence, Ms. A. Kawada only raised questions as to the propriety of the
entries on the logbook, but the offense itself was not even denied categorically by the
employee concerned. Hence, the fact remains that the employee concerned indeed
allowed the entries of Mr. Ed Kawada on different occasions. The Security personnel
when asked why they did not report those incidents immediately, answered: They
hesitated to report them because they were afraid as the employee concerned is a
manager, whom they thought knows better then them.
*Violation - No. 9 Type C, Code of Discipline*
2. Falsification of or Inducing another employee to falsify personnel or company records.

xxxx
FINDINGS:
In her answer, Ms. A. Kawada again only questioned the propriety of the entries on the
logbook, but there were clear indications that the violation was indeed committed as
shown by the abovestated pieces of evidence.
The testimonies by the witnesses' are very explicit of what really transpired, specifically
security guard Dennis Venancio, who just performs his duty of reporting any unusual
incident that occurred within his jurisdiction. The fact that they failed to report it at an
earlier time, in understandable, since they were hesitant, that the manager might get back
at them, or simply because of their respect for Ms. A. Kawada, as a Manager.
*Violation - No. 8 Type F, Code of Discipline*
3. Sleeping during overnight work last August 17, 1997.
xxxx
FINDINGS:
Based on the records and reports submitted, there is no doubt that the concerned
employee committed such an offense. The witnesses stated their testimonies only in
accordance with what they have seen and witnessed during those stated periods.
*Violation - No. 7 Type D, Code of Discipline*
4. Unauthorized Search, Bringing Out and taking of Company Records, March 18, 1998
and March 20, 1998.
xxxx
FINDINGS:
It is established that 15 approval slips were taken by the employee concerned, however,
only 11 approval slips were surrendered or returned.
*Violation - No. 1 Type F, Code of Discipline*
5. Purchases of Dented or Sub-standard items of Home Furnishing without approval
from authorized Supervisor, February 3, 1998.
xxxx
FINDINGS:

Towards this accusation subject employee countered that she only asked Ms. Melanie
Laag why she was not able to sign said approval slip but not for the purpose of letting her
sign it. By this, it only means that indeed the said approval slip does not contain the
necessary approval prior to the purchase. This could be related to the other charge against
the subject employee on unauthorized search and bringing out of company records, for
based on the circumstances there was such a search conducted to look for and retrieve
approval slips of subject employee, as there are really approval slips of subject employee
which does not bear the necessary approval. The search must have been probably made to
cover up and/or suppress such evidence against her.
6. Altering Approval slips dated January 17, 1998.
a) #1 original quantity - 7 pieces changed to 2 pieces - amount was altered from Php14.00
to Php10.00.
b) #2 erasures on the number of quantity whether 15, 5 or 7 pieces.
xxxx
FINDINGS:
Towards this accusation Ms. A. Kawada submitted no plausible explanation, indicating
that said employee concerned might have really committed the acts complained of.
Violation of Company Rules on the proper procedure in selling of dented merchandise.
7. Making Reservations of Dented Items - January to February 1998.
xxxx
FINDINGS:
There was no direct explanation submitted by Ms. A. Kawada on this. Thus, it becomes
clear that Ms. Kawada had violated the company rule on No Reservation.
8. Conduct unbecoming of a manager in cornering and/or bringing large quantity of
damaged items (toys, furniture, RTW, appliances and Home Furnishing items), causing
demoralization among the store crew and tainting management's image to its personnel.
xxxx
FINDINGS:
The report that were submitted by the witnesses proved that Ms. Kawada made those
purchases of dented or sub-standard items that were under her assigned area, without
regard for the rest of the employees who wanted to buy also, thus, using and taking

advantage of her position, to the detriment of the other employees and painting a bad
image of the company's managers.
9. Abandonment of work or absence for five (5) consecutive days without prior notice
from any authorized company officer or higher authority.
FINDINGS:
Despite notice for subject employee to report to work or else be considered as having
abandoned her job, it appears that subject employee continuously failed to report for
work without any explanation.
*Violation - No. 2, Sec. A*
Based on all the foregoing it seems clear and convincing, that you have indeed committed
the violations imputed on you. The aforementioned violations per se deserves termination
as a penalty, not to mention that they also constitute willful breach of the trust reposed on
you as a manager. Thus, we have no other alternative but to terminate your service
with the Company, effective September 1, 1998, on the grounds of violations of
Company Rules, Abandonment of Work and loss of trust and confidence.
You are hereby directed to surrender all other documents and papers pertaining to your
job, which you may have acquired and have come into your possession as a result of your
employment with the company.
Please be guided. thank you.31 (Emphasis supplied)
On March 9, 1999 the LA32 dismissed the complaint for lack of merit.33 Private respondent
appealed the LA's decision to the National Labor Relations Commission (NLRC).
In its Decision34 dated December 27, 2000, the NLRC ruled in favor of private respondent,
reversing the LA, to wit:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE.
Complainant is declared constructively dismissed by respondents. Respondents Uniwide
Sales Warehouse Club and Vivian Apduhan are jointly and severally ordered to pay
complainant the following sums:
Separation Pay:
November 1981 -July 3, 1998
P13,000.00 x 16.8 yrs. = P218,400.00
Backwages:

July 31, 1998-up to the present

Moral Damages = P100,000.00
Exemplary Damages P100,000.00
Attorney's fees computed at ten percent (10%) of the total award.
SO ORDERED. 35
According to the NLRC, private respondent was subjected to inhuman and anti-social treatment
oppressive to labor. Private respondent received successive memoranda from Apduhan accusing
the former of different infractions, some of which offenses complainant was informed of only a
year after the alleged commission. Further, Apduhan's ill will and motive to edge private
respondent out of her employ was displayed by Apduhan's stubborn refusal to allow private
respondent to continue her work on the flimsy excuse that the medical certificate did not bear her
correct surname, while Apduhan knew for a fact that the same could not have referred to another
person but to private respondent.36
Also, the NLRC observed that private respondent was not afforded due process by petitioners
because the former was not given an opportunity to a fair hearing in that the investigation was
conducted after private respondent had been constructively dismissed; and that there was no
point for private respondent to still attend the investigation set on August 12, 1998 after her
constructive dismissal on July 31, 1998 and after she had already filed her complaint.
Feeling aggrieved, petitioners appealed the NLRC Decision to the CA. In the assailed
Decision37 dated November 23, 2001, the CA affirmed in toto the NLRC Decision.
Hence, the present petition.38
The sole issue raised before the Court is:
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN
SUSTAINING THE NLRC'S FINDING THAT PRIVATE RESPONDENT WAS
CONSTRUCTIVELY DISMISSED.39
It is a well-settled rule that the jurisdiction of the Supreme Court in petitions for review
on certiorari under Rule 45 of the Rules of Court is limited to reviewing errors of law, not of
fact.40 The Court is not a trier of facts. In the exercise of its power of review, the findings of fact
of the CA are conclusive and binding and consequently, it is not the Court's function to analyze
or weigh evidence all over again.41
The foregoing rule, however, is not absolute. The Court, in Dusit Hotel Nikko v. National Union
of Workers in Hotel, Restaurant and Allied Industries (NUWHRAIN),42 held that the factual
findings of the NLRC as affirmed by the CA, are accorded high respect and finality unless the
factual findings and conclusions of the LA clash with those of the NLRC and the CA in which

case the Court will have to review the records and the arguments of the parties to resolve the
factual issues and render substantial justice to the parties.43
The present case is clouded by conflict of factual perceptions. Consequently, the Court is
constrained to review the factual findings of the CA which contravene the findings of facts of the
LA.
The Court's Ruling
The petition is meritorious. After a thorough examination of the conflicting positions of the
parties, the Court finds the records bereft of evidence to substantiate the conclusions of the
NLRC and the CA that private respondent was constructively dismissed from employment.
Case law defines constructive dismissal as a cessation of work because continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in
pay or both; or when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to the employee.44
The test of constructive dismissal is whether a reasonable person in the employee's position
would have felt compelled to give up his position under the circumstances.45 It is an act
amounting to dismissal but made to appear as if it were not. In fact, the employee who is
constructively dismissed may be allowed to keep on coming to work. Constructive dismissal is
therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the employer.46
In the present case, private respondent claims that from the months of February to June 1998, she
had been subjected to constant harassment, ridicule and inhumane treatment by Apduhan, with
the hope that the latter can get the private respondent to resign.47 The harassment allegedly came
in the form of successive memoranda which private respondent would receive almost every
week, enumerating a litany of offenses and maligning her reputation and spreading rumors
among the employees that private respondent shall be dismissed soon.48 The last straw of the
imputed harassment was the July 31, 1998 incident wherein private respondent's life was put in
danger when she lost consciousness due to hypertension as a result of Apduhan's alleged hostility
and shouting.49
The Court finds that private respondent's allegation of harassment is a specious statement which
contains nothing but empty imputation of a fact that could hardly be given any evidentiary
weight by this Court.50 Private respondent's bare allegations of constructive dismissal, when
uncorroborated by the evidence on record, cannot be given credence.51
The sending of several memoranda addressed to a managerial or supervisory employee
concerning various violations of company rules and regulations, committed on different
occasions, are not unusual. The alleged February to June 1998 series of memoranda given by
petitioners to private respondent asking the latter to explain the alleged irregular acts should not
be construed as a form of harassment but merely an exercise of management's prerogative to
discipline its employees.

The right to impose disciplinary sanctions upon an employee for just and valid cause, as well as
the authority to determine the existence of said cause in accordance with the norms of due
process, pertains in the first place to the employer.52 Precisely, petitioners gave private
respondent successive memoranda so as to give the latter an opportunity to controvert the
charges against her. Clearly, the memoranda are not forms of harassment, but petitioners'
compliance with the requirements of due process.
The July 31, 1998 confrontation where Apduhan allegedly shouted at private respondent which
caused the latter's hypertension to recur and eventually caused her to collapse cannot by itself
support a finding of constructive dismissal by the NLRC and the CA. Even if true, the act of
Apduhan in shouting at private respondent was an isolated outburst on the part of Apduhan that
did not show a clear discrimination or insensibility that would render the working condition of
private respondent unbearable.
Moreover, the finding of the NLRC that Apduhan knew for a fact that the certification presented
by private respondent referred to the latter and not to another person is a mere conjecture. There
is no evidence to sustain the same. This Court has consistently held that litigations cannot be
properly resolved by suppositions, deductions, or even presumptions, with no basis in evidence,
for the truth must have to be determined by the hard rules of admissibility and proof.53
Self-serving and unsubstantiated declarations are insufficient to establish a case before quasijudicial bodies. Well-entrenched is the rule that the quantum of evidence required to establish a
fact in quasi-judicial bodies is substantial evidence. Substantial evidence is such amount of
relevant evidence which a reasonable mind might accept as adequate to support a conclusion,
even if other equally reasonable minds might opine otherwise.54
On petitioners' claim of abandonment by private respondent, well-settled is the rule that to
constitute abandonment of work, two elements must concur: (1) the employee must have failed
to report for work or must have been absent without valid or justifiable reason, and (2) there
must have been a clear intention on the part of the employee to sever the employer-employee
relationship manifested by some overt act. The employer has the burden of proof to show the
employee's deliberate and unjustified refusal to resume his employment without any intention of
returning. Mere absence is not sufficient. There must be an unequivocal intent on the part of the
employee to discontinue his employment.55
Private respondent's failure to report for work despite the August 8, 1998 letter sent by Apduhan
to private respondent advising the latter to report for work is not sufficient to constitute
abandonment. It is a settled rule that failure to report for work after a notice to return to work has
been served does not necessarily constitute abandonment.56
Private respondent mistakenly believed that the successive memoranda sent to her from March
1998 to June 1998 constituted discrimination, insensibility or disdain which was tantamount to
constructive dismissal. Thus, private respondent filed a case for constructive dismissal against
petitioners and consequently stopped reporting for work.

In the case of Lemery Savings & Loan Bank v. National Labor Relations Commission,57 the Court
held:
It is true that the Constitution has placed a high regard for the welfare of the labor sector.
However, social and compassionate justice does not contemplate a situation whereby the
management stands to suffer for certain misconceptions created in the mind of an
employee. x x x
Nevertheless, the mistaken belief on the part of the employee should not lead to a
drastic conclusion that he has chosen to abandon his work. x x x We cannot readily
infer abandonment even if, sometime during the pendency of this case, he refused to heed
the warning given him by petitioner Dimailig while believing that he was dismissed
through no fault of his.58 (Emphasis supplied)
The Court finds that petitioners were not able to establish that private respondent deliberately
refused to continue her employment without justifiable reason. To repeat, the Court will not
make a drastic conclusion that private respondent chose to abandon her work on the basis of her
mistaken belief that she had been constructively dismissed by Uniwide.
Nonetheless, the Court agrees with the findings of the LA that the termination of private
respondent was grounded on the existence of just cause under Article 282 (c) of the Labor
Code59 or willful breach by the employee of the trust reposed on him by his employer or a duly
authorized representative.60
Private respondent occupies a managerial position. As a managerial employee, mere existence of
a basis for believing that such employee has breached the trust of his employer would suffice for
his dismissal.61
In Caoile v. National Labor Relations Commission,62 the Court distinguished the treatment of
managerial employees from that of rank-and-file personnel, insofar as the application of the loss
of trust and confidence is concerned. The Court held:
Thus, with respect to rank-and-file personnel, loss of trust and confidence as ground for
valid dismissal requires proof of involvement in the alleged events in question, and that
mere uncorroborated assertions and accusations by the employer will not be
sufficient.63 But, as regards a managerial employee, mere existence of a basis for
believing that such employee has breached the trust of his employer would suffice
for his dismissal. Hence, in the case of managerial employees, proof beyond
reasonable doubt is not required, it being sufficient that there is some basis for such
loss of confidence, such as when the employer has reasonable ground to believe that
the employee concerned is responsible for the purported misconduct, and the nature
of his participation therein renders him unworthy of trust and confidence demanded
by his position.64 (Emphasis supplied).
In order to give private respondent an opportunity to explain the several violations of company
rules she allegedly committed, private respondent was given several memoranda, to which she

initially responded. Also, to give private respondent an opportunity to be heard, defend herself,
confront the witnesses against her as well as to present her own evidence, Apduhan scheduled a
hearing on August 12, 1998, notice of which was sent on August 2, 1998 and duly received by
private respondent's husband on the same day.65 This fact alone would have indicated to private
respondent that there was no intention on the part of petitioners to effect her constructive
dismissal. However, private respondent opted to file the complaint for illegal dismissal the next
day; and not to attend the scheduled hearing on August 12, 1998. Thus, petitioners were justified
to decide the case on the basis of the records at hand.66
The irregularities and offenses committed by private respondent, corroborated by the various
pieces of evidence supporting such charges, i.e. records, reports and testimonies of Uniwide
employees,67 in the mind of the Court, constitute substantial evidence that private respondent is
in fact responsible for the alleged charges.
To disprove the charges against her, private respondent presented a letter68 dated July 29, 1998
from a former Uniwide employee, Luisa Astrologo (Astrologo), stating that the latter was urged
by her manager, a certain Ralph Galang, to testify against private respondent for improper
behavior concerning the "dented product for which private respondent is abusing her power of
reserving and picking the best product she can afford to dispatch."69The letter, however, does not
state that the charges Astrologo imputed to private respondent were false. The letter merely states
that Astrologo "does not see anything wrong about the matter."70 Moreover, in her
Memorandum,71 filed with the Court, private respondent merely cited inconsistencies in the
reports regarding the charges imputed to her without denying the said allegations.
It is true that private respondent had risen from the ranks, from being a saleslady in 1981 to a
Full Assistant Store Manager in 1995. She worked for Uniwide for almost 17 years with a clean
bill of record. However, these facts are not sufficient to overcome the findings of petitioners that
the private respondent is guilty of the charges imputed to her.
Finally, the NLRC and the CA erred in finding that private respondent was denied due process.
Private respondent claims that she lost the opportunity to be heard when she was constructively
dismissed on July 31, 1998,72 and that it was only after she filed a complaint for illegal dismissal
with the NLRC on August 3, 1998 that petitioners notified the private respondent of the
investigation which will be conducted on August 12, 1998 concerning her alleged offenses. The
Memorandum dated August 2, 199873 completely demolishes such claims. It shows on its face
that private respondent received the Memorandum on August 2, 1998, a day before she filed the
complaint for illegal dismissal against petitioners; and that private respondent was notified that
the hearing was scheduled on August 12, 1998 and explicitly warned her that her failure to
appear thereat shall mean a waiver to be heard, and the case shall then be submitted for decision
based on available papers and evidence.
In reality, private respondent, as found earlier was not terminated on July 31, 1998. There was no
constructive dismissal. Again, the successive memoranda presented by private respondent and
the alleged July 31, 1998 shouting incident are not sufficient to establish her claim of
harassment.

However, as to the September 1, 1998 Memorandum where the private complainant was
dismissed for loss of trust and confidence, the Court finds the notice of the scheduled August 12,
1998 hearing sufficient compliance with the due process requirement.
The essence of due process is simply an opportunity to be heard, or as applied to administrative
proceedings, a fair and reasonable opportunity to explain one's side.74 It is not the denial of the
right to be heard but denial of the opportunity to be heard that constitutes violation of due
process of law.75 In the instant case, private respondent was again notified of the August 12, 1998
hearing through a letter76 dated August 8, 1998 which was received by private respondent
herself.77 Clearly, private respondent was given an opportunity to be heard. However, private
respondent chose not to attend the scheduled hearing because of her mistaken belief that she had
already been constructively dismissed.
At this point, the Court agrees with and adopts the findings of the LA in his Decision:78
We cannot, with due respect, subscribe to complainant's [herein private respondent]
position for it simply lacks evidence and that all that there is to it is seemingly a general
allegation. We examined the record and as we have done it we find no acts or incidents
constituting complainant's alleged "constructive dismissal". On the contrary, what is
generally existing thereat is that complainant was dismissed by the respondents [Uniwide
and Apduhan] for an array of violations consisting of, but not limited to the following:
allowing entry of unauthorized personnel inside a company restricted area; falsification
of or inducing another employee to falsify personnel or company records; sleeping during
overnight work; unauthorized search and bringing out of company records; unauthorized
purchase of damaged items; alteration of approval slips for the purchase of damaged
items; unduly reserving and buying of damaged items; and abandonment of work.
In fact, as it even appears the "constructive dismissal" allegedly committed on
complainant looks simply an excuse to avoid and/or evade the investigation and
consequences of the violations imputed against her while employed and/or acting as
respondent's assistant store manager. As shown on an earlier setting on the
investigation of her case, she filed a sick leave, thus causing the hearing/investigation to
be rescheduled. Again, upon rescheduling, complainant despite notice failed to appear or
did not appear, this time coming up with the excuse that she had been already
"constructively dismissed". This evasive attitude of her more than enough supports the
impression that complainant could be guilty or is guilty of the charges against her and
believes that she might not be able to defend herself. This is even bolstered by the
information that complainant called on several of the witnesses against her, simply to
influence them and their testimonies. x x x Thus, viewed the foregoing finding, we
opined that complainant could not have been "constructively dismissed."79 (Emphasis
supplied)
It should be remembered that the Philippine Constitution, while inexorably committed towards
the protection of the working class from exploitation and unfair treatment, nevertheless mandates
the policy of social justice so as to strike a balance between an avowed predilection for labor, on
the one hand, and the maintenance of legal rights of capital, the proverbial hen that lays the

golden egg, on the other. Indeed, we should not be unmindful of the legal norm that justice is in
every case for the deserving, to be dispensed with in light of established facts, the applicable law,
and existing jurisprudence.80
WHEREFORE, the instant petition is GRANTED. The Decision dated November 23, 2001 and
Resolution dated July 23, 2002 of the Court of Appeals in CA-G.R. SP No. 64581 together with
the Decision dated December 27, 2000 of the National Labor Relations Commission
are REVERSED and SET ASIDE. The complaint of private respondent Amalia P. Kawada
is DISMISSED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 152988

August 24, 2004

CHIANG KAI SHEK COLLEGE, and CHIEN YIN SHAO, petitioners,

vs.
HON. COURT OF APPEALS; HON. NATIONAL LABOR RELATIONS COMMISSION;
HON. COMMISSIONER VICTORIANO R. CALAYLAY, HON. PRESIDING
COMMISSIONER RAUL T. AQUINO, and HON. COMMISSIONER ANGELITA A.
GACUTAN; and MS. DIANA P. BELO, respondents.

DECISION

DAVIDE, JR., C.J.:

Assailed in this petition is the decision1 of 12 October 2001, as well as the resolution2 of 11 April
2002, of the Court Appeals in CA-G.R. SP No. 59996, which affirmed the decision3 of 29
February 2000 of the National Labor Relations Commission (NLRC) declaring that Diana P.
Belo was illegally dismissed as a teacher of petitioner Chiang Kai Shek College (CKSC).
The controversy began on 8 June 1992, when Ms. Belo, a teacher of CKSC since 1977, applied
for a leave of absence for the school year 1992-1993 because her children of tender age had
no yaya to take care of them. The then principal, Mrs. Joan Sy Cotio, approved her application.
However, on 15 June 1992, Ms. Belo received a letter dated 9 June 1992 of Mr. Chien Yin Shao,
President of CKSC, informing her of the schools existing policy; thus:
Regarding your letter of request for leave of absence dated June 8, 1992, we would like to
inform you of the existing policy of our school:
(1) We could not assure you of any teaching load should you decide to return in the
future.
(2) Only teachers in service may enjoy the privilege and benefits provided by our school.
Hence, your children are no longer entitled to free tuition starting school year 19921993.4
Ms. Belo, nonetheless, took her leave of absence. On 8 July 1992, she learned that Laurence, one
of her three children studying at the CKSC, was sent out of the examination room because his
tuition fees were not paid. This embarrassing incident impelled Ms. Belo to pay, allegedly under
protest, all the school fees of her children.5
In May 1993, after her one-year leave of absence, Ms. Belo presented herself to Ms. Cotio and
signified her readiness to teach for the incoming school year 1993-1994. She was, however,
denied and not accepted by Ms. Cotio. She then relayed the denial to Mr. Chien on 17 May 1993.

On 21 July 1993, she received the reply of Mr. Chien dated 1 July 1993 informing her that her
confirmation to teach was filed late and that there was no available teaching load for her because
as early as April 21 of that year, the school had already hired non-permanent teachers.6
Adversely affected by the development, Ms. Belo filed with the Labor Arbitration Office a
complaint for illegal dismissal; non-payment of salaries, 13th month pay, living allowance,
teacher's day pay; loss of income; and moral damages.
In his decision7 of 18 October 1995, Labor Arbiter Donato G. Quinto, Jr., dismissed the
complaint, reasoning that Ms. Belo was not dismissed but that there was simply no available
teaching load for her. When in May 1993 she signified her intention to teach, the school had
already acted on the applications or re-applications to teach of probationary teachers. The
schools policies, which were articulated in Mr. Chiens letter of 9 June 1992 to Ms. Belo, were
management prerogatives which did not amount to her dismissal. Said policies were also the
consequences of her leave of absence and were not even questioned by her. The Labor Arbiter
thus offered a Solomonic solution by directing the petitioners to give her a teaching load in the
ensuing year 1996-1997 and the succeeding years without loss of seniority rights.8
On appeal9 by the private respondent, the NLRC reversed the decision of the Labor Arbiter. It
considered as misplaced the Labor Arbiters utter reliance on Mr. Chiens letter to Ms. Belo
enunciating the questioned school policies. It reasoned that if the school policy was to extend
free tuition fees to children of teachers in school, then the petitioners must have considered her
"already not in school or summarily dismissed or separated the very moment [she] applied for
leave," for, otherwise, her children would have been granted that privilege. Thus, it directed the
petitioners to immediately reinstate Ms. Belo to her former position with full back wages from
the time of her dismissal up to her actual reinstatement. It, however, dismissed Ms. Belo's prayer
for moral and exemplary damages and attorney's fees for lack of evidence that the petitioners
acted in bad faith and malice.
Their motion for reconsideration having been denied,10 the petitioners filed a petition
for certiorari with the Court of Appeals contending that the NLRC gravely abused its discretion
amounting to lack of jurisdiction in (a) overturning the factual determination of the Labor Arbiter
despite the fact that Ms. Belo stated in her Notice of Appeal that she was appealing only on a
pure question of law; (b) holding that Ms. Belo was constructively dismissed by the petitioners
despite the uncontroverted evidence that she was not illegally dismissed; and (c) granting Ms.
Belo monetary awards.
On 12 October 2001, the Court of Appeals found that far from abusing its discretion, the NLRC
acted correctly when it ascertained that Ms. Belo was constructively dismissed. It declared as
illegal, for being violative of Ms. Belos right to security of tenure, the school policy that a
teacher who goes on leave cannot be assured of a teaching load. The school should have set aside
a teaching load for her after the expiration of her leave of absence. It would have been a different
story, one indeed ripe for termination of her employment, had Ms. Belo failed to report for work.
As for the schools contention that the NLRC was barred from resolving factual issues because
of Ms. Belo's statement that she was appealing the case on a pure question of law, the Court of

Appeals declared that such statement was a simple mistake in terminology, which is insufficient
to deny an employee of her rights under the law.
In its resolution dated 11 April 2002, the Court of Appeals denied the motion for reconsideration
for lack of merit.
Hence, on 11 June 2002,11 petitioner CKSC and its president Mr. Chien filed the present petition.
They claim that the Court of Appeals erred in affirming the NLRC decision which reversed the
factual findings of the Labor Arbiter even if the said findings were amply supported by clear and
uncontroverted evidence and had already attained finality, as Ms. Belo had appealed merely on a
question of law. The Court of Appeals also erred in upholding the NLRC decision which failed to
point out specifically the alleged particular portions of the records of the case, parties respective
position papers, and pleadings, much less particular testimonial and documentary evidence, that
warrant the patently erroneous and baseless conclusion that there was a "clear case of
constructive dismissal." The NLRC decision is in complete violation of Section 14, Article VIII
of the Constitution, which provides: "No decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the laws on which it is based." Likewise,
the Court of Appeals has not only completely and arbitrarily ignored and disregarded the facts
and issues raised as an issue before it, but also decided on the illegality of the schools policy,
which was never raised before it or in any of the forums below. Anent the free tuition fee benefit
extended to children of teachers in service in petitioner school, the same is a privilege granted
not by law, but voluntarily by the said school. Hence, the petitioner school could determine the
conditions under which said privilege may be enjoyed, such as, that only teachers in actual
service can enjoy the privilege.
Amidst the convolution of issues proffered by the petitioners, the only issue that needs to be
determined and on which hinges the resolution of the other issues is whether the Court of
Appeals erred in affirming the NLRC decision that Ms. Belo was constructively, nay, illegally
dismissed and is, therefore, entitled to reinstatement and back wages.
It must be noted at the outset that Ms. Belo had been a full-time teacher in petitioner CKSC
continuously for fifteen years or since 1977 until she took a leave of absence for the school year
1992-1993. Under the Manual of Regulations for Private Schools, for a private school teacher to
acquire a permanent status of employment and, therefore, be entitled to a security of tenure, the
following requisites must concur: (a) the teacher is a full-time teacher; (b) the teacher must have
rendered three consecutive years of service; and (c) such service must have been satisfactory.12
Since Ms. Belo has measured up to these standards, she therefore enjoys security of tenure. The
fundamental guarantees of security of tenure and due process dictate that no worker shall be
dismissed except for just and authorized cause provided by law and after due notice and
hearing.13
We agree with the Court of Appeals that the NLRC did not commit any grave abuse of discretion
in finding that Ms. Belo was constructively dismissed when the petitioners, in implementing
their policies, effectively barred her from teaching for the school year 1993-1994. The three
policies are (1) the non-assurance of a teaching load to a teacher who took a leave of absence; (2)

the hiring of non-permanent teachers in April to whom teaching loads were already assigned
when Ms. Belo signified in May 1993 her intention to teach; and (3) the non-applicability to
children of teachers on leave of the free tuition fee benefits extended to children of teachers in
service.
Case law defines constructive dismissal as a cessation from work because continued employment
is rendered impossible, unreasonable, or unlikely; when there is a demotion in rank or a
diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee.14
When in the school year 1992-1993, the petitioners already applied to Ms. Belos children the
policy of extending free tuition fee benefits only to children of teachers in service, Ms. Belo was
clearly discriminated by them. True, the policy was made known to Ms. Belo in a letter dated 9
June 1992, but, this only additionally and succinctly reinforced the clear case of discrimination.
Notably, petitioners statements of policies dated 13 March 1992 for the school year 1992-1993
did not include that policy; thus:
To : All Teachers and Staff of Chiang Kai Shek College
From : The President
Pursuant to laws, rules and regulations promulgated by the proper government authorities
of the Philippines, the following procedure are hereby issued for proper compliance of all
concerned:
1. All teachers and staff who have rendered satisfactory service for a period of more than
three (3) full consecutive years (e.g. those who started working in June, 1988 or before)
are considered permanent employees and therefore need not re-apply for the forthcoming
school year 1992-1993.
2. However, should any teacher or staff of permanent status wish to resign or to retire
after this school year 1991-1992, he/she must file his/her written resignation or retirement
application on or before March 28, 1992, so that the school will have sufficient time to
make the necessary adjustments. Failure to file formal application on the part of the
permanent employee shall be construed as consent to work for another school year.
3. All probationary employees (e.g. those who started working after June, 1988) who
wish to continue their services in our school shall re-apply. Reapplications must be
submitted on or before March 28, 1992. Failure to submit reapplication shall be construed
as not interested to work for Chiang Kai Shek College in the coming school year 19921993.
4. All reapplications shall be acted upon and the decision of the administration will be
conveyed to the employees concerned on or before April 21, 1992. 15

It can be argued that the extension of free tuition fees to children of teachers in service was an
informal policy or custom. If it were so, there would have been no need to include this policy in
the schools written statement of policies dated 12 March 1993, which reads:
To : All Teachers and Staff of Chiang Kai Shek College
From : The Office of the President
Pursuant to laws, rules and regulations promulgated by the proper government authorities
of the Philippines, the following procedure are hereby issued for proper compliance of all
concerned:
1. All teachers and staff who have rendered satisfactory service for a period of more than
three (3) full consecutive years (e.g. those who started working in June, 1989 or before)
are considered permanent employees and therefore need not re-apply for the forthcoming
school year 1993-1994.
2. However, should any teacher or staff of permanent status wish to resign, to retire, or to
take a leave of absence after this school year 1992-1993, he/she must file his/her written
application on or before March 27, 1993, so that the school will have sufficient time to
make the necessary adjustments. Failure to file formal application on the part of the
permanent employee shall be construed as consent to work for another school year.
In accordance with our school policy, employees not in service are not entitled to any
benefit extended by our school.
3. All probationary employees (e.g. those who started working after June 1989) who wish
to continue their services in our school shall re-apply. Reapplications must be submitted
on or before March 27, 1993. Failure to submit reapplication shall be construed as not
interested to work for Chiang Kai Shek College in the coming school year 1993-1994.
4. All reapplications shall be acted upon and the decision of the administration will be
conveyed to the employees concerned on or before April 21, 1993.16
A cursory analysis of the petitioners statements of policies dated 13 March 1992 and 12 March
1993 reveals that the lists of policies are essentially the same. Both are addressed to all teachers
and staff of petitioner school. However, the policy "that employees not in service are not entitled
to any benefit extended by the school" was not listed in the written statement of policies dated 13
March 1992. The policy made its maiden appearance in petitioners statement of policies one
year after or on 12 March 1993. It was, therefore, the policy of extending free tuition fees to
children of teachers of the school, whether on service or on leave, which existed as a matter of
custom and practice. That is why the school modified the privilege in written form.
Thus, when the petitioners retroactively applied the modified written policy to Ms. Belo, they
considered her already a teacher not in service. The NLRC was correct when it reasoned as
follows: "[I]f the school policy is to extend free tuition fees to children of teachers in school,

then respondents [petitioners herein] have considered [Ms. Belo] already not in school or
summarily dismissed or separated the very moment the latter applied for leave. Otherwise, [her]
children should have been granted the on-going privileges and benefits on free tuition fees,
among others."
Ms. Belo was definitely singled out in the implementation of a future policy. This is grossly
unfair and unjust. The petitioners did not take heed of the principle enshrined in our labor laws
that policies should be adequately known to the employees and uniformly implemented to the
body of employees as a whole and not in isolation.
The continued employment of Ms. Belo was also rendered unlikely by the insistence of the
petitioners in implementing the alleged policy that a teacher who goes on leave for one year is
not assured of a teaching load. While this alleged policy was mentioned in Mr. Chiens letter of 9
June 1992, it was not included in the schools written statement of policies dated 13 March 1992.
Hence, it was then a non-existent policy. When a non-existent policy is implemented and, in this
case, only to Ms. Belo, it constitutes a clear case of discrimination.
Even if the policy of non-assurance of a teaching load existed as a matter of practice and custom,
it still glaringly contradicts petitioners written statement of policies dated 12 March 1993.
Crystal clear therefrom is the fact that only permanent teachers who wished "to resign, to retire,
or to take a leave of absence after the school year 1992-1993 must file their written application in
March 1993." Those who failed to file an application were expressly considered by the school as
consenting to teach for the succeeding school year. Additionally, the petitioners did not require
permanent teachers with satisfactory service to re-apply.
It, therefore, blows our mind why the petitioners would require Ms. Belo, a permanent teacher
since 1977 with a satisfactory service record, to signify her intention to teach in March 1993.
Plainly, the petitioners violated their avowed policies. Since Ms. Belo was not retiring, resigning
or filing another leave of absence after the school year 1992-1993, the petitioners should have
considered her as consenting to teach for the incoming school year 1993-1994. In fact, they
should not have required her to re-apply to teach. In accordance with the written statement of
policies dated 12 March 1993, only probationary teachers are required by the petitioners to reapply in March. Failure of probationary teachers to re-apply in March is an indication of their
lack of interest to teach again at the school.
Petitioners invocation of the third policy that of giving teaching assignments to probationary
teachers in April to justify their refusal to provide Ms. Belo a teaching load is, therefore, a lame
excuse that rings of untruth and dishonesty. Patently clear is the illegal manner by which the
petitioners eased out Ms. Belo from the teaching corps.
Thus, the Court of Appeals justification in upholding the NLRC ruling attains an added judicial
and logical sting:
When respondent Belo reported for work after the termination of her one-year leave of
absence, it was obligatory for petitioner school to give her a teaching load. It was
improper for petitioner school to farm out subjects of respondent Belo to provisionary

[sic] teacher [sic]. The petitioner school should have assumed that respondent Belo was
returning for work after the expiration of her leave. It would have been a different story,
if after the start of classes, respondent Belo failed to report for work, then the school had
a right to institute the necessary proceeding for the termination of her employment.17
Likewise, we do not find merit in petitioners assertion that the Court of Appeals should not have
passed upon the illegality of the school policy of non-assurance of a teaching load, since the
alleged illegality was never raised as an issue before the respondent court or in the forums below.
As pointed out by the private respondent, that policy was part of the defense invoked by the
petitioners in the Arbiter level, in the NLRC, and in the respondent court to the charge of illegal
dismissal; and, hence, it must necessarily be passed upon and scrutinized. Besides, that policy is
intimately intertwined with the main issue of whether Ms. Belo was illegally dismissed.
We reject petitioners contention that "the NLRC decision failed to point out specifically the
alleged particular portions of the records of the case, parties respective position papers, and
pleadings, much less particular testimonial and documentary evidence, that warrant the patently
erroneous and baseless conclusion that there is a clear case of constructive dismissal." In fact, the
NLRC considered the same policies that the petitioners insist as their bases for maintaining that
Ms. Belo was not dismissed. It seems that the petitioners could only be persuaded if the
reviewing bodies unearthed a document that explicitly states that Ms. Belo was being
constructively dismissed. This phantom paper chase unveils the unsubstantiated and contrived
claim of the petitioners. They need only to look, for example, at the letter dated 9 June 1992 to
Ms. Belo. The "policies" therein stated are discernibly non-existent, or if existing as a matter of
custom they grossly transgressed petitioners formal written policies dated 13 March 1992 and 12
March 1993. Clear, therefore, is the fact that the written formal policies apply to all teachers and
staff except Ms. Belo.
Hence, there is no need to belabor the point that the NLRC decision clearly complied with the
requirement expressed under Section 14, Article VIII of the Constitution. The decision speaks for
itself.
Suffice it is to say, this case is an exception to the general rule that the factual findings and
conclusions of the Labor Arbiter are accorded weight and respect on appeal, and even finality.
For one thing, the findings of the NLRC and the Labor Arbiter are contrary to each other; hence,
the reviewing court may delve into the records and examine for itself the questioned findings.18
Further, we do not find merit in petitioners claim that Ms. Belos judicial admission that she was
appealing on a "pure question of law" precludes the review and reversal of the Labor Arbiters
factual finding that she was not illegally dismissed. Such claim is belied by the Notice of Appeal
itself,19 wherein Ms. Belo declared that she was appealing the decision of the Labor Arbiter to the
NLRC "on a pure question of law and for being contrary to law and jurisprudence applicable [to]
the case and the evidence on record, and rendered with grave abuse of discretion."20
Oddly, even the petitioners themselves maintain that to prove grave abuse of discretion, "it is
necessary to bring out questions of fact." Thus, in their own justification in resorting to both

Rules 45 and 65 of the Rules of Court for the review and the nullification of the decision of the
Court of Appeals, they contend:
Clearly, petitioners remedy is two-fold under Rule 45 and 65. Under Rule 45, only
questions of law may be raised. Perhaps, respondents can now understand why petitioners
have used both Rules 45 and 65. And this is simply because by invoking said two rules,
they are not limited to raising questions of law, but they can raise both questions of fact
and law. To show that grave abuse of discretion has been committed under Rule 65,
it is necessary to bring out questions of fact, which was precisely done in the issues
raised in page 2 of the petition.21
Indeed, Ms. Belo questioned the legality of her dismissal and the denial of her monetary claims,
as well as her claim for damages. Both are essentially factual issues, since their determination
necessitates an evaluation of proof and not only a consideration of the applicable statutory and
case laws.
Basic is the distinction between legal and factual issues. A question of law exists when the doubt
or controversy concerns the correct application of law or jurisprudence to a certain set of facts; or
when the issue does not call for an examination of probative value of the evidence presented, the
truth or falsehood of facts being admitted. A question of fact exists when the doubt or difference
arises as to the truth or falsehood of facts or when the query invites calibration of the whole
evidence considering mainly the credibility of witnesses, the existence and relevancy of specific
surrounding circumstances, as well as their relation to each other and to the whole, and the
probability of the situation.22
More importantly, the Labor Arbiters conclusions are baseless, bereft of any rational basis,
unsupported by evidence on record, and glaringly erroneous. The decisions of the NLRC and the
Court of Appeals are the ones in harmony with the evidence on record.
In sum, we are convinced that Ms. Belo was unceremoniously and constructively dismissed by
the petitioners without just cause and without observing the twin requirements of due process,
i.e., due notice and hearing, in violation of the tenets of equity and fair play. Ms. Belo is,
therefore, entitled to reinstatement and back wages in accordance with the questioned Court of
Appeals and NLRC decisions.
the petition is DENIED. The decision of 12 October 2001 and resolution of 11 April 2002 of the
Court of Appeals in CA-GR. SP No. 59996 are hereby AFFIRMED.
Costs against the petitioners.
SO ORDERED.
Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.
Carpio, J. on official leave.

GLOBE TELECOM, INC., DELFIN LAZARO, JR., and ROBERTO

GALANG, petitioners, vs. JOAN FLORENDO-FLORES, respondent.
DECISION
BELLOSILLO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking to annul and set
aside the Decision[1] of the Court of Appeals of 25 May 2001 in CA-G.R. SP No. 60284 which
affirmed the Decision of the National Labor Relations Commission of 28 January 2000 in NLRC
RAB-CAR 05-0170-98, NLRC NCR CA No. 020270-99.[2]
Petitioner GLOBE TELECOM, INC. (GLOBE) is a corporation duly organized and existing
under the laws of the Philippines. Petitioners Delfin Lazaro Jr. was its President and Roberto
Galang its former Director-Regional Sales. Respondent Joan Florendo-Flores was the Senior
Account Manager for Northern Luzon.
On 1 July 1998 Joan Florendo-Flores filed with the Regional Arbitration Branch of the
National Labor Relations Commission (NLRC) an amended complaint for constructive dismissal
against GLOBE, Lazaro, Galang, and Cacholo M. Santos, her immediate superior, Luzon HeadRegional Sales. In her affidavit submitted as evidence during the arbitration proceedings,
Florendo-Flores bared that Cacholo M. Santos never accomplished and submitted her

performance evaluation report thereby depriving her of salary increases, bonuses and other
incentives which other employees of the same rank had been receiving; reduced her to a houseto-house selling agent (person-to-person sales agent or direct sales agent) of company products
("handyphone") despite her rank as supervisor of company dealers and agents; never supported
her in the sales programs and recommendations she presented; and, withheld all her other
benefits, i.e., gasoline allowance, per diems, representation allowance, and car maintenance, to
her extreme pain and humiliation.[3]
GLOBE and its co-petitioners claimed that after receiving her salary in the second week of
May 1998 Florendo-Flores went AWOL (Absent Without Leave) without signifying through
letter or any other means that she was resigning from her position; that notwithstanding her
absence and the filing of her case, respondent Florendo-Flores' employment was not terminated
as shown by the fact that salary was still provided her until July 1998 to be released upon her
presentation of the attendance-record sheet indicating that she already returned and reported for
work; that she continued to have the use a of company car and company "handyphone" unit; that
she was replaced only when her absence became indefinite and intolerable as the marketing
operations in Northern Luzon began to suffer; that during the pre-trial conference it was learned
that Florendo-Flores' complaint rested on her alleged personal and private disagreement with her
immediate superior Cacholo M. Santos; that there was no official act from GLOBE or from other
officers of the company, including respondents Lazaro and Galang, which called for FlorendoFlores' termination, diminution in rank, seniority and benefits, or would imply, even remotely,
any of the same; and, that Florendo-Flores filed the complaint without going through the
grievance process of GLOBE's Human Resources Department and without informing its officers
of her problems with Cacholo M. Santos.
Labor Arbiter Monroe C. Tabingan declared Florendo-Flores to have been illegally
dismissed and ordered petitioners to reinstate her without loss of seniority rights and full
benefits; and to pay full back wages, inclusive of basic pay, allowances and bonuses as prayed
for in the complaint amounting to P307,625.00, exemplary damages in the sum of P200,000.00,
and ten percent (10%) of the total monetary award as attorney's fees. However, the Labor Arbiter
set aside the claim of abandonment as the company failed to send the requisite notice to
Florendo-Flores,[4] hence, there was no adherence to procedural due process. Although he
recognized that the problem brewed and eventually boiled over due to the acts of Cacholo M.
Santos, GLOBE's former Head of Regional Sales, Luzon Area, the Labor Arbiter found the
company negligent in monitoring all its key personnel, and thus assessed against it exemplary
damages at the same time deleting actual and moral damages.[5]
Petitioners appealed the decision to the NLRC which modified the judgment of the Labor
Arbiter. The NLRC ruled that petitioners did not dismiss Florendo-Flores but that the latter
actually abandoned her employment because of a disagreement with her immediate superior
which she failed to bring to the attention of GLOBE and its officers, particularly petitioners

Lazaro and Galang.[6] However, the NLRC declared that if only as an act of grace for the latter's
past services with the company, GLOBE, Lazaro and Galang should be held accountable for the
back wages of Florendo-Flores amounting to P307,625.00 minus the amount of P63,000.00 for
the value of the company car in Florendo-Flores' possession, or the net amount ofP244,625.00.[7]
Both parties elevated the NLRC decision to the Court of Appeals, each side through a
petition for certiorari. In its Resolution of 2 September 2000 the appellate court dismissed the
petition of Florendo-Flores for failure to append the required verification and certification of
non-forum shopping,[8] while it gave due course to the petition of GLOBE, Lazaro and Galang.
In their petition before the appellate court, GLOBE, Lazaro and Galang averred that the
NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction when it
ordered them to pay Florendo-Flores full back wages and damages despite its express finding
that they did not cause the dismissal of Florendo-Flores as the latter had actually abandoned her
employment on account of her personal differences with her superior.
In its Decision of 25 May 2001 the Court of Appeals found that Florendo-Flores was
constructively dismissed and that payment of back wages and damages was in order. On 21 June
2001 GLOBE, Lazaro and Galang filed a motion for reconsideration but the motion was denied
in the appellate court's Resolution of 19 September 2001.
Petitioners pose the following questions in this petition: In a special civil action for certiorari
where factual findings are deemed to be final and conclusive, can the Court of Appeals alter or
substitute the findings of fact of the lower court/tribunal? In the face of the finding of the NLRC
that respondent abandoned her employment because of a personal squabble with her immediate
superior, and that petitioners had nothing to do with the severance of Flores' employment, can
petitioners be held legally liable for back wages while the guilty party Cacholo M. Santos is
legally absolved of liability?
Petitioners submit that the answers to both questions must be in the negative. They argue
that the appellate court can neither alter nor substitute the factual findings of the NLRC as they
are legally deemed to be final and conclusive in a certiorari proceeding. They contend that a
special civil action for certiorari is an extraordinary remedy created not to correct mistakes in the
factual findings or conclusions of the lower court or tribunal, but a remedy intended to rectify
jurisdictional errors and grave abuse of discretion. Thus, the Court of Appeals cannot make its
own factual findings and substitute them for the factual findings of the NLRC, and on such basis
render a decision.
Petitioners further note that the appellate court failed to address the issues raised in their
petition. They reiterate their position that they cannot be held liable for payment of back wages
as an act of grace in view of the express finding by the NLRC that respondent abandoned her

employment because of a personal rift with her immediate superior and not due to any act
attributable to them. They stress that there can be no liability in the absence of any wrongful act.
Invoking the principle of res inter alios acta declaring that the rights of a party cannot be
prejudiced by the act, declaration or omission of another, petitioners insist that since the NLRC
found that respondent's problems arose from the acts and deeds of Santos, he alone should be
held liable. Petitioners find special exception to the NLRC's application of the concept of "act of
grace" to justify the award since an "act of grace is not a source of demandable obligation. They
argue that it is not within the power of any judicial or administrative agency to compel an
employer to be liberal.
In the review of an NLRC decision through a special civil action for certiorari, resolution is
confined only to issues of jurisdiction and grave abuse of discretion on the part of the labor
tribunal.[9] Hence, the Court refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC. Occasionally, however, the Court
is constrained to delve into factual matters where, as in the instant case, the findings of the
NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the records
of the case and re-examine the questioned findings.[10] As a corollary, this Court is clothed with
ample authority to review matters, even if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary to arrive at a just decision of the case.[11] The same
principles are now necessarily adhered to and are applied by the Court of Appeals in its expanded
jurisdiction over labor cases elevated through a petition for certiorari; thus, we see no error on its
part when it made anew a factual determination of the matters and on that basis reversed the
ruling of the NLRC.
Glaring however is the discrepancy between the text of the decision of the appellate court
which declares that respondent Florendo-Flores "was unlawfully constructively dismissed" from
employment,[12] and its dispositive portion which declares that "the assailed judgment is
affirmed."[13] It should be noted that the "assailed judgment" referred to the NLRC Decision
which declared that respondent was not illegally dismissed but that she abandoned her
employment. Even in the award of back wages and exemplary damages the two (2) decisions are
at odds: The award of back wages made by the NLRC was a gratuity or an act of grace from
petitioners while the award made by the Court of Appeals could be assumed to be anchored on
its finding of illegal dismissal. How should the inconsistency be reconciled?
Where there is conflict between the dispositive portion of the decision and the body thereof,
the dispositive portion controls irrespective of what appears in the body.[14] While the body of the
decision, order or resolution might create some ambiguity in the manner the court's reasoning
preponderates, it is the dispositive portion thereof that finally invests rights upon the parties, sets

conditions for the exercise of those rights, and imposes the corresponding duties or obligations.
[15]
Hence, for the Court of Appeals to have affirmed the assailed judgment is to adopt and uphold
the NLRC finding of abandonment and its award of full back wages to respondent as an "act of
grace" from petitioners.
However, we believe this is not the proper view as the records reveal that respondent was
constructively dismissed from service.
Constructive dismissal exists where there is cessation of work because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion
in rank and a diminution in pay."[16] All these are discernible in respondent's situation. She was
singularly edged out of employment by the unbearable or undesirable treatment she received
from her immediate superior Cacholo M. Santos who discriminated against her without reason not preparing and submitting her performance evaluation report that would have been the basis
for her increased salary; not forwarding her project proposals to management that would have
been the source of commendation; diminishing her supervisor stature by assigning her to houseto-house sales or direct sales; and withholding from her the enjoyment of bonuses, allowances
and other similar benefits that were necessary for her efficient sales performance.Although
respondent continued to have the rank of a supervisor, her functions were reduced to a mere
house-to-house sales agent or direct sales agent. This was tantamount to a demotion. She might
not have suffered any diminution in her basic salary but petitioners did not dispute her allegation
that she was deprived of all benefits due to another of her rank and position, benefits which she
apparently used to receive.
Far from pointing to Santos alone as the source of her woes, respondent attributes her
degraded state to petitioners as well. Florendo-Flores cited petitioners' apathy or indifference to
her plight as she was twice left out in a salary increase in August 1987 and May 1998, without
petitioners giving her any reason.[17] It eludes belief that petitioners were entirely in the dark as
the salary increases were granted to all employees across-the-board but respondent was the only
one left receiving a P19,100.00 per month basic salary while the rest received a basic salary of
almost P35,000.00 per month.[18] It is highly improbable that the exclusion of respondent had
escaped petitioners' notice. The absence of an evaluation report from Santos should have been
noted by petitioners and looked into for proper action to have been made. If a salary increase was
unwarranted, then it should have been sufficiently explained by petitioners to respondent.
Petitioners argue that respondent Florendo-Flores could have brought to their attention the
deplorable treatment she received from Santos by resorting to the company's grievance
machinery so that the problems in her relationship with Santos could then have been easily
ironed out, but she did not. It remains uncontroverted that respondent had inquired from
petitioners the reason why her other benefits had been withheld and sought clarification for her
undeserved treatment but petitioner company and Santos remained mum.[19]

Thus, contrary to the observation of the NLRC, the dispute was not a mere private spat
between respondent Florendo-Flores and her immediate superior Santos. Granting that this was
the case, it had exceeded the periphery of simple personal affairs that overflowed into the realm
of respondent's employment.
Respondent narrates that sometime in June 1997 Santos wrote her a baseless accusatory
letter, and he together with GLOBE Sales Director Roberto Galang, one of petitioners herein,
verbally told her that she should resign from her job, but she refused.[20] Thereafter, in July 1997
and the months subsequent thereto all of respondent's other benefits were withheld without any
reason nor explanation from the company.[21] Even as petitioners endeavored to lay the blame on
Santos alone, he would not have been able to single-handedly mastermind the entire affair as to
influence Sales Director Galang and manipulate the payroll. It only stands to reason that Santos
was acting pursuant to a management directive, or if not, then petitioners had condoned it, or at
the very least, were negligent in supervising all of their employees. As aptly observed by the
Labor Arbiter x x x x it would appear however that the respondent company was negligent in monitoring all its
key personnel. For it is the bounden duty of the corporate officialdom to constantly monitor their
managerial staff if only to ascertain the smooth flow of work and operations, which includes the
inter-personal relations of each and every key segment of the corporate machinery. For such, it
must be assessed with just and reasonable exemplary damages.[22]
The unauthorized absence of respondent should not lead to the drastic conclusion that she
had chosen to abandon her work. To constitute abandonment, there must be: (a) failure to report
for work or absence without valid or justifiable reason; and, (b) a clear intention, as manifested
by some overt act, to sever the employer-employee relationship,[23] requisites that are negated by
the immediate filing by respondent Florendo-Flores of a complaint for constructive dismissal
against petitioners. A charge of abandonment is totally inconsistent with theimmediate filing of a
complaint for illegal dismissal; more so, when it includes a prayer for reinstatement.[24]
The reduction of respondent's functions which were originally supervisory in nature to a
mere house-to-house sales agent or direct sales agent constitutes a demotion in rank. For this act
of illegal dismissal, she deserves no less than full back wages starting from the time she had been
illegally dismissed until her actual reinstatement to her former position without loss of seniority
rights and other benefits - earned, accrued and demandable. She shall continue to enjoy her
benefits, privileges and incentives including the use of the company car and"handyphone."
The managerial prerogative to transfer personnel must be exercised without grave abuse of
discretion. It must always bear in mind the basic elements of justice and fair play. Having the
right should not be confused with the manner that right is exercised. Thus, it cannot be used as a
subterfuge by the employer to rid himself of an undesirable worker.[25]

In constructive dismissal, the employer has the burden of proving that the transfer and
demotion of an employee are for just and valid grounds such as genuine business necessity.
[26]
The employer must be able to show that the transfer is not unreasonable, inconvenient, or
prejudicial to the employee. It must not involve a demotion in rank or a diminution of salary and
other benefits. If the employer cannot overcome this burden of proof, the employee's demotion
shall be tantamount to unlawful constructive dismissal.
It should be noted that the award of back wages in the instant case is justified upon the
finding of illegal dismissal, and not under the principle of "act of grace" for past services
rendered. There are occasions when the Court exercises liberality in granting financial awards to
employees, but even then they contemplate only the award of separation pay and/or financial
assistance, and only as a measure of social justice when the circumstances of the case so warrant,
such as instances of valid dismissal for causes other than serious misconduct or those reflecting
on the employees' moral character.[27] Proper regard for the welfare of the labor sector should not
dissuade us from protecting the rights of management such that an award of back wages should
be forthcoming only when valid grounds exist to support it.
An award of actual and moral damages is not proper as the dismissal is not shown to be
attended by bad faith, or was oppressive to labor, or done in a manner contrary to morals, good
customs or public policy.[28] Exemplary damages are likewise not proper as these are imposed
only if moral, temperate, liquidated or compensatory damages are awarded.[29]
WHEREFORE, the judgment appealed from is MODIFIED. The Decision of the Court of
Appeals of 25 May 2001 in CA-G.R. SP No. 60284 affirming the Decision of the National Labor
Relations Commission of 28 January 2000 declaring that respondent Joan Florendo-Flores had
abandoned her work is SET ASIDE. Petitioners Globe Telecom, Inc., Delfin Lazaro, Jr., and
Roberto Galang are ordered to pay respondent Joan Florendo-Flores full back wages from the
time she was constructively dismissed on 15 May 1998 until the date of her effective
reinstatement, without qualification or deduction. Accordingly, petitioners are ordered to cause
the immediate reinstatement of respondent to her former position, without loss of seniority rights
and other benefits. No pronouncement as to costs.
SO ORDERED.
Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.
Mendoza, J., on official leave.
PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner, vs. THE COURT
OF APPEALS, THE HONORABLE SECRETARY OF LABOR BIENVENIDO E.
LAGUESMA and UNITED PHILACOR WORKERS UNION-NAFLU, respondents.

DECISION
YNARES-SANTIAGO, J.:
Before us is an appeal by certiorari under Rule 45 of the Rules of Court which seeks to set
aside the decision[1] of the Court of Appeals in CA-G.R. SP No. 59011, denying due course to
petitioner Philippine Appliance Corporations partial appeal, as well as the Resolution[2] of the
same court, dated August 10, 2001, denying the motion for reconsideration.
Petitioner is a domestic corporation engaged in the business of manufacturing refrigerators,
freezers and washing machines. Respondent United Philacor Workers Union-NAFLU is the duly
elected collective bargaining representative of the rank-and-file employees of petitioner. During
the collective bargaining negotiations between petitioner and respondent union in 1997 (for the
last two years of the collective bargaining agreement covering the period of July 1,
1997 to August 31, 1999), petitioner offered the amount of four thousand pesos (P4,000.00) to
each employee as an early conclusion bonus. Petitioner claims that this bonus was promised as a
unilateral incentive for the speeding up of negotiations between the parties and to encourage
respondent union to exert their best efforts to conclude a CBA. Upon conclusion of the CBA
negotiations, petitioner accordingly gave this early signing bonus.[3]
In view of the expiration of this CBA, respondent union sent notice to petitioner of its desire
to negotiate a new CBA. Petitioner and respondent union began their negotiations. OnOctober
22, 1999, after eleven meetings, respondent union expressed dissatisfaction at the outcome of the
negotiations and declared a deadlock. A few days later, on October 26, 1999, respondent union
filed a Notice of Strike with the National Conciliation and Mediation Board (NCMB), Region IV
in Calamba, Laguna, due to the bargaining deadlock.[4]
A conciliation and mediation conference was held on October 30, 1999 at the NCMB in
Imus, Cavite, before Conciliator Jose L. Velasco. The conciliation meetings started with eighteen
unresolved items between petitioner and respondent union. At the meeting on November 20,
1999, respondent union accepted petitioners proposals on fourteen items,[5] leaving the following
items unresolved: wages, rice subsidy, signing, and retroactive bonus.[6]
Petitioner and respondent union failed to arrive at an agreement concerning these four
remaining items. On January 18, 2000, respondent union went on strike at the petitioners plant at
Barangay Maunong, Calamba, Laguna and at its washing plant at Paraaque, Metro Manila. The
strike lasted for eleven days and resulted in the stoppage of manufacturing operations as well as
losses for petitioner, which constrained it to file a petition before the Department of Labor and
Employment (DOLE). Labor Secretary Bienvenido Laguesma assumed jurisdiction over the
dispute and, on January 28, 2000, ordered the striking workers to return to work within twentyfour hours from notice and directed petitioner to accept back the said employees.[7]

On April 14, 2000, Secretary Laguesma issued the following Order:[8]

In view of the foregoing, we fix the wage increases at P30 per day for the first year and P25 for
the second year.
The rice subsidy and retroactive pay base are maintained at their existing levels and rates.
Finally, this Office rules in favor of Companys proposal on signing bonus. We believe that a
P3,000 bonus is fair and reasonable under the circumstances.
WHEREFORE, premises considered, Philippine Appliance Corporation and United Philacor
Workers Union-NAFLU are hereby directed to conclude a Collective Bargaining Agreement for
the period July 1, 1999 to June 30, 2001. The agreement is to incorporate the disposition set forth
above and includes other items already agreed upon in the course of negotiation and conciliation.
SO ORDERED. (Emphasis supplied)
On April 27, 2000, petitioner filed a Partial Motion for Reconsideration[9] stating that while
it accepted the decision of Secretary Laguesma, it took exception to the award of the signing
bonus. Petitioner argued that the award of the signing bonus was patently erroneous since it was
not part of the employees salaries or benefits or of the collective bargaining agreement. It is not
demandable or enforceable since it is in the nature of an incentive. As no CBA was concluded
through the mutual efforts of the parties, the purpose for the signing bonus was not
served. On May 22, 2000, Secretary Laguesma issued an Order[10] denying petitioners motion. He
ruled that while the bargaining negotiations might have failed and the signing of the agreement
was delayed, this cannot be attributed solely to respondent union. Moreover, the Secretary noted
that the signing bonus was granted in the previous CBA.
On June 2, 2000, petitioner filed a Petition for Certiorari with the Court of Appeals docketed
as CA-G.R. SP No. 59011 which was dismissed. The Labor Secretarys award of the signing
bonus was affirmed since petitioner itself offered the same as an incentive to expedite the CBA
negotiations. This offer was not withdrawn and was still outstanding when the dispute reached
the DOLE. As such, petitioner can no longer adopt a contrary stand and dispute its own offer.
Petitioner filed a Motion for Reconsideration but the same was denied. Hence this petition
for review raising a lone issue, to wit:
THE HONORABLE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION WHEN IT RENDERED A DECISION NOT IN ACCORD WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT, SPECIFICALLY THE CALTEX
DOCTRINE OF 1997.

The petition is meritorious.

Petitioner invokes the doctrine laid down in the case of Caltex v. Brillantes,[11] where it was
held that the award of the signing bonus by the Secretary of Labor was erroneous. The said case
involved similar facts concerning the CBA negotiations between Caltex (Philippines), Inc. and
the Caltex Refinery Employees Association (CREA). Upon referral of the dispute to the DOLE,
then Labor Secretary Brillantes ruled, inter alia:
Fifth, specifically on the issue of whether the signing bonus is covered under the maintenance of
existing benefits clause, we find that a clarification is indeed imperative. Despite the expressed
provision for a signing bonus in the previous CBA, we uphold the principle that the award for a
signing bonus should partake the nature of an incentive and premium for peaceful negotiations
and amicable resolution of disputes which apparently are not present in the instant case. Thus,
we are constrained to rule that the award of signing bonus is not covered by the maintenance of
existing benefits clause.
On appeal to this Court, it was held:
Although proposed by [CREA], the signing bonus was not accepted by [Caltex Philippines,
Inc.]. Besides, a signing bonus is not a benefit which may be demanded under the law. Rather, it
is now claimed by petitioner under the principle of maintenance of existing benefits of the old
CBA. However, as clearly explained by [Caltex], a signing bonus may not be demanded as a
matter of right. If it is not agreed upon by the parties or unilaterally offered as an additional
incentive by [Caltex], the condition for awarding it must be duly satisfied. In the present case,
the condition sine qua non for its granta non-strike was not complied with.
In the case at bar, two things militate against the grant of the signing bonus: first, the nonfulfillment of the condition for which it was offered, i.e., the speedy and amicable conclusion of
the CBA negotiations; and second, the failure of respondent union to prove that the grant of the
said bonus is a long established tradition or a regular practice on the part of petitioner.Petitioner
admits, and respondent union does not dispute, that it offered an early conclusion bonus or an
incentive for a swift finish to the CBA negotiations. The offer was first made during the 1997
CBA negotiations and then again at the start of the 1999 negotiations. The bonus offered is
consistent with the very concept of a signing bonus.
In the case of MERALCO v. The Honorable Secretary of Labor,[12] we stated that the signing
bonus is a grant motivated by the goodwill generated when a CBA is successfully negotiated and
signed between the employer and the union. In that case, we sustained the argument of the
Solicitor General, viz:

When negotiations for the last two years of the 1992-1997 CBA broke down and the parties
sought the assistance of the NCMB, but which failed to reconcile their differences, and when
petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the resolution
of the labor dispute, whatever goodwill existed between petitioner MERALCO and respondent
union disappeared. . . .
Verily, a signing bonus is justified by and is the consideration paid for the goodwill that
existed in the negotiations that culminated in the signing of a CBA.[13]
In the case at bar, the CBA negotiation between petitioner and respondent union failed
notwithstanding the intervention of the NCMB. Respondent union went on strike for eleven days
and blocked the ingress to and egress from petitioners two work plants. The labor dispute had to
be referred to the Secretary of Labor and Employment because neither of the parties was willing
to compromise their respective positions regarding the four remaining items which stood
unresolved. While we do not fault any one party for the failure of the negotiations, it is apparent
that there was no more goodwill between the parties and that the CBA was clearly not signed
through their mutual efforts alone. Hence, the payment of the signing bonus is no longer justified
and to order such payment would be unfair and unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is not a demandable and enforceable
obligation.[14] True, it may nevertheless be granted on equitable considerations as when the giving
of such bonus has been the companys long and regular practice.[15] To be considered a regular
practice, however, the giving of the bonus should have been done over a long period of time, and
must be shown to have been consistent and deliberate.[16] The test or rationale of this rule on long
practice requires an indubitable showing that the employer agreed to continue giving the benefits
knowing fully well that said employees are not covered by the law requiring payment thereof.
[17]
Respondent does not contest the fact that petitioner initially offered a signing bonus only
during the previous CBA negotiation. Previous to that, there is no evidence on record that
petitioner ever offered the same or that the parties included a signing bonus among the items to
be resolved in the CBA negotiation. Hence, the giving of such bonus cannot be deemed as an
established practice considering that the same was given only once, that is, during the 1997 CBA
negotiation.
WHEREFORE, premises considered, the instant petition is GRANTED. The decision of
the Court of Appeals in CA-G.R. SP No. 59011 affirming the Order of the Secretary of Labor
and Employment, directing petitioner Philippine Appliance Corporation to pay each of its
employees a signing bonus in the amount of Three Thousand Pesos (P3,000.00), is hereby
REVERSED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.

Davide, Jr., C.J., (Chairman), Carpio, and Azcuna, JJ., concur.

Panganiban, J., in the result.

G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP,
respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether
supervisory employees, as defined in Article 212 (m), Book V of the Labor Code, should be
considered as officers or members of the managerial staff under Article 82, Book III of the same
Code, and hence are not entitled to overtime rest day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully
owned and controlled by the Government, operates three (3) sugar refineries located at
Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant
to Proclamation No. 50. 1 Private respondent union represents the former supervisors of the
NASUREFCO Batangas Sugar Refinery, namely, the Technical Assistant to the Refinery
Operations Manager, Shift Sugar Warehouse Supervisor, Senior Financial/Budget Analyst,
General Accountant, Cost Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift
Boiler Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services
Supervisor, Instrumentation Supervisor, Community Development Officer, Employment and
Training Supervisor, Assistant Safety and Security Officer, Head and Personnel Services, Head
Nurse, Property Warehouse Supervisor, Head of Inventory Control Section, Shift Process
Supervisor, Day Maintenance Supervisor and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees,
from rank-and-file to department heads. The JE Program was designed to rationalized the duties
and functions of all positions, reestablish levels of responsibility, and recognize both wage and
operational structures. Jobs were ranked according to effort, responsibility, training and working
conditions and relative worth of the job. As a result, all positions were re-evaluated, and all
employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE Program, the members of
respondent union were treated in the same manner as rank-and file employees. As such, they
used to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93
and 94 of the Labor Code as amended. With the implementation of the JE Program, the following
adjustments were made: (1) the members of respondent union were re-classified under levels S-5
to S-8 which are considered managerial staff for purposes of compensation and benefits; (2)
there was an increase in basic pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap (P1,269.00 per month) in basic pay
compared to the highest paid rank-and-file employee; (3) longevity pay was increased on top of

alignment adjustments; (4) they were entitled to increased company COLA of P225.00 per
month; (5) there was a grant of P100.00 allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was
organized pursuant to Republic Act NO. 6715 allowing supervisory employees to form their own
unions, as the bargaining representative of all the supervisory employees at the NASUREFCO
Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990, the
members of herein respondent union filed a complainant with the executive labor arbiter for nonpayment of overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor
Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as
follows:
"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is
hereby directed to
1. pay the individual members of complainant union the usual overtime pay, rest day pay and
holiday pay enjoyed by them instead of the P100.00 special allowance which was implemented
on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value between the
P100.00 special allowance and the overtime pay, rest day pay and holiday pay that they ought to
have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along span of time
during which the benefits were being paid to the supervisors has accused the payment thereof to
ripen into contractual obligation; at the complainants cannot be estopped from questioning the
validity of the new compensation package despite the fact that they have been receiving the
benefits therefrom, considering that respondent union was formed only a year after the
implementation of the Job Evaluation Program, hence there was no way for the individual
supervisors to express their collective response thereto prior to the formation of the union; and
the comparative computations presented by the private respondent union showed that the
P100.00 special allowance given NASUREFCO fell short of what the supervisors ought to
receive had the overtime pay rest day pay and holiday pay not been discontinued, which
arrangement, therefore, amounted to a diminution of benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent
National Labor Relations Commission (NLRC) affirmed the decision of the labor arbiter on the
ground that the members of respondent union are not managerial employees, as defined under
Article 212 (m) of the Labor Code and, therefore, they are entitled to overtime, rest day and
holiday pay. Respondent NLRC declared that these supervisory employees are merely exercising
recommendatory powers subject to the evaluation, review and final action by their department
heads; their responsibilities do not require the exercise of discretion and independent judgment;
they do not participate in the formulation of management policies nor in the hiring or firing of
employees; and their main function is to carry out the ready policies and plans of the corporation.
3 Reconsideration of said decision was denied in a resolution of public respondent dated August
30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public
respondent commission committed a grave abuse of discretion in refusing to recognized the fact
that the members of respondent union are members of the managerial staff who are not entitled
to overtime, rest day and holiday pay; and in making petitioner assume the "double burden" of
giving the benefits due to rank-and-file employees together with those due to supervisors under
the JE Program.
We find creditable merit in the petition and that the extraordinary writ of certiorari shall
accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent union are
entitled to overtime, rest day and holiday pay. Before this can be resolved, however it must of
necessity be ascertained first whether or not the union members, as supervisory employees, are to
be considered as officers or members of the managerial staff who are exempt from the coverage
of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as defined
employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations,
which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign
or discipline employees. Supervisory employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not
falling within any of those above definitions are considered rank-and-file employees of this
Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and
holiday pay, and in ruling that the latter are not managerial employees, adopted the definition
stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the members of
respondent union are entitled to overtime, rest day and holiday pay, said employees should be
considered as "officers or members of the managerial staff" as defined under Article 82, Book III
of the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I,
Book III of the Rules to Implement the Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to employees in all establishments
and undertakings whether for profit or not, but not to government employees, managerial
employees, field personnel, members of the family of the employer who are dependent on him
for support, domestic helpers, persons in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff." (Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply to the following persons if they
qualify for exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status
of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:

(1) The primary duty consists of the performance of work directly related to management
policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof;
or (ii) execute under general supervision work along specialized or technical lines requiring
special training, experience, or knowledge; or (iii) execute under general supervision special
assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which
are not directly and closely related to the performance of the work described in paragraphs (1),
(2), and above."
It is the submission of petitioner that while the members of respondent union, as supervisors,
may not be occupying managerial positions, they are clearly officers or members of the
managerial staff because they meet all the conditions prescribed by law and, hence, they are not
entitled to overtime, rest day and supervisory employees under Article 212 (m) should be made
to apply only to the provisions on Labor Relations, while the right of said employees to the
questioned benefits should be considered in the light of the meaning of a managerial employee
and of the officers or members of the managerial staff, as contemplated under Article 82 of the
Code and Section 2, Rule I Book III of the implementing rules. In other words, for purposes of
forming and joining unions, certification elections, collective bargaining, and so forth, the union
members are supervisory employees. In terms of working conditions and rest periods and
entitlement to the questioned benefits, however, they are officers or members of the managerial
staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every labor dispute will be automatically decided in
favor of labor. Management also has its own rights which, as such, are entitled to respect and
enforcement in the interest of simple fair play. Out of its concern for those with less privileges in
life, this Court has inclined more often than not toward the worker and upheld his cause in his
conflicts with the employer. Such favoritism, however, has not blinded us to the rule that justice
is in every case for the deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of the employer.
The question whether a given employee is exempt from the benefits of the law is a factual one
dependent on the circumstances of the particular case, In determining whether an employee is

within the terms of the statutes, the criterion is the character of the work performed, rather than
the title of the employee's position. 6
Consequently, while generally this Court is not supposed to review the factual findings of
respondent commission, substantial justice and the peculiar circumstances obtaining herein
mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily
show that these supervisory employees are under the direct supervision of their respective
department superintendents and that generally they assist the latter in planning, organizing,
staffing, directing, controlling communicating and in making decisions in attaining the
company's set goals and objectives. These supervisory employees are likewise responsible for
the effective and efficient operation of their respective departments. More specifically, their
duties and functions include, among others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes employee
shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends disciplinary
action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more
productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary
action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when
necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of service
and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and followed by
all NASUREFCO employees, recommends revisions or modifications to said rules when deemed
necessary, and initiates and prepares reports for any observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions to
subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge duties and
responsibilities which ineluctably qualify them as officers or members of the managerial staff, as
defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.:
(1) their primary duty consists of the performance of work directly related to management
policies of their employer; (2) they customarily and regularly exercise discretion and
independent judgment; (3) they regularly and directly assist the managerial employee whose
primary duty consist of the management of a department of the establishment in which they are
employed (4) they execute, under general supervision, work along specialized or technical lines
requiring special training, experience, or knowledge; (5) they execute, under general supervision,
special assignments and tasks; and (6) they do not devote more than 20% of their hours worked
in a work-week to activities which are not directly and clearly related to the performance of their
work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that the union
members should be considered as officers and members of the managerial staff and are,
therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to overtime,
rest day and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union members are
managerial employees, to determine the latter's entitlement to the questioned benefits, is
misplaced and inappropriate. It is admitted that these union members are supervisory employees
and this is one instance where the nomenclatures or titles of their jobs conform with the nature of
their functions. Hence, to distinguish them from a managerial employee, as defined either under
Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually

involved here seeks a determination of whether or not these supervisory employees ought to be
considered as officers or members of the managerial staff. The distinction, therefore, should have
been made along that line and its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the
questioned benefits to the union members has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being supervisors, received benefits
similar to the rank-and-file employees such as overtime, rest day and holiday pay, simply
because they were treated in the same manner as rank-and-file employees, and their basic pay
was nearly on the same level as those of the latter, aside from the fact that their specific functions
and duties then as supervisors had not been properly defined and delineated from those of the
rank-and-file. Such fact is apparent from the clarification made by petitioner in its motion for
reconsideration 8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated
August 16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE Program. Those
positions formerly classified as 'supervisory' and found after the JE Program to be rank-and-file
were classified correctly and continue to receive overtime, holiday and restday pay. As to them,
the practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties
re-defined and in most cases their organizational positions re-designated to confirm their superior
rank and duties. Thus, after the JE program, complainants cannot be said to occupy the same
positions." 9
It bears mention that this positional submission was never refuted nor controverted by
respondent union in any of its pleadings filed before herein public respondent or with this Court.
Hence, it can be safely concluded therefrom that the members of respondent union were paid the
questioned benefits for the reason that, at that time, they were rightfully entitled thereto. Prior to
the JE Program, they could not be categorically classified as members or officers of the
managerial staff considering that they were then treated merely on the same level as rank-andfile. Consequently, the payment thereof could not be construed as constitutive of voluntary
employer practice, which cannot be now be unilaterally withdrawn by petitioner. To be
considered as such, it should have been practiced over a long period of time, and must be shown
to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that the
employer agreed to continue giving the benefits knowingly fully well that said employees are not
covered by the law requiring payment thereof. 11 In the case at bar, respondent union failed to

sufficiently establish that petitioner has been motivated or is wont to give these benefits out of
pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of private
respondent union were re-classified under levels S-5 S-8 which were considered under the
program as managerial staff purposes of compensation and benefits, that they occupied reevaluated positions, and that their basic pay was increased by an average of 50% of their basic
salary prior to the JE Program. In other words, after the JE Program there was an ascent in
position, rank and salary. This in essence is a promotion which is defined as the advancement
from one position to another with an increase in duties and responsibilities as authorized by law,
and usually accompanied by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer entitled to the
benefits which attach and pertain exclusively to their positions. Entitlement to the benefits
provided for by law requires prior compliance with the conditions set forth therein. With the
promotion of the members of respondent union, they occupied positions which no longer met the
requirements imposed by law. Their assumption of these positions removed them from the
coverage of the law, ergo, their exemption therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue receiving
the benefits which attach to their former positions, there was nothing to prevent them from
refusing to accept their promotions and their corresponding benefits. As the sating goes by, they
cannot have their cake and eat it too or, as petitioner suggests, they could not, as a simple matter
of law and fairness, get the best of both worlds at the expense of NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of
management, provided it is done in good faith. In the case at bar, private respondent union has
miserably failed to convince this Court that the petitioner acted implementing the JE Program.
There is no showing that the JE Program was intended to circumvent the law and deprive the
members of respondent union of the benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion and judgment,
all aspects of employment. This flows from the established rule that labor law does not authorize
the substitution of the judgment of the employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long as it is exercised in good faith
for the advancement of the employer's interest and not for the purpose of defeating on
circumventing the rights of employees under special laws or valid agreement and are not
exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or
spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations
Commission promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby
ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of
discretion, and the basic complaint of private respondent union is DISMISSED.
Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 152456

April 28, 2004

SEVILLA TRADING COMPANY, petitioner,

vs.
A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNION
SUPER, respondents.
DECISION
PUNO, J.:
On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 63086 dated 27
November 2001 sustaining the Decision2 of Accredited Voluntary Arbitrator Tomas E. Semana
dated 13 November 2000, as well as its subsequent Resolution3 dated 06 March 2002 denying
petitioners Motion for Reconsideration.
The facts of the case are as follows:
For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla
Trading, for short), a domestic corporation engaged in trading business, organized and
existing under Philippine laws, added to the base figure, in its computation of the 13th-

month pay of its employees, the amount of other benefits received by the employees
which are beyond the basic pay. These benefits included:
(a) Overtime premium for regular overtime, legal and special holidays;
(b) Legal holiday pay, premium pay for special holidays;
(c) Night premium;
(d) Bereavement leave pay;
(e) Union leave pay;
(f) Maternity leave pay;
(g) Paternity leave pay;
(h) Company vacation and sick leave pay; and
(i) Cash conversion of unused company vacation and sick leave.
Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the
computation and payment of the 13th-month pay and other benefits. When it changed its person
in charge of the payroll in the process of computerizing its payroll, and after audit was
conducted, it allegedly discovered the error of including non-basic pay or other benefits in the
base figure used in the computation of the 13th-month pay of its employees. It cited the Rules
and Regulations Implementing P.D. No. 851 (13th-Month Pay Law), effective December 22,
1975, Sec. 2(b) which stated that:
"Basic salary" shall include all remunerations or earnings paid by an employer to an
employee for services rendered but may not include cost-of-living allowances granted
pursuant to P.D. No. 525 or Letter of Instruction No. 174, profit-sharing payments, and all
allowances and monetary benefits which are not considered or integrated as part of the
regular or basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.
Petitioner then effected a change in the computation of the thirteenth month pay, as follows:
net basic pay
13th-month pay

=
12 months

where:
net basic pay

gross pay (non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenth month pay are the
following:
a) Overtime premium for regular overtime, legal and special holidays;
b) Legal holiday pay, premium pay for special holidays;
c) Night premium;
d) Bereavement leave pay;
e) Union leave pay;
f) Maternity leave pay;
g) Paternity leave pay;
h) Company vacation and sick leave pay; and
i) Cash conversion of unused vacation/sick leave.
Hence, the new computation reduced the employees thirteenth month pay. The daily piece-rate
workers represented by private respondent Sevilla Trading Workers Union SUPER (Union, for
short), a duly organized and registered union, through the Grievance Machinery in their
Collective Bargaining Agreement, contested the new computation and reduction of their
thirteenth month pay. The parties failed to resolve the issue.
On March 24, 2000, the parties submitted the issue of "whether or not the exclusion of leaves
and other related benefits in the computation of 13th-month pay is valid" to respondent
Accredited Voluntary Arbitrator Tomas E. Semana (A.V.A. Semana, for short) of the National
Conciliation and Mediation Board, for consideration and resolution.
The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of
employees benefits as provided for in Art. 100 of the Labor Code, as amended. They claimed
that paid leaves, like sick leave, vacation leave, paternity leave, union leave, bereavement leave,
holiday pay and other leaves with pay in the CBA should be included in the base figure in the
computation of their 13th-month pay.
On the other hand, petitioner insisted that the computation of the 13th-month pay is based on
basic salary, excluding benefits such as leaves with pay, as per P.D. No. 851, as amended. It
maintained that, in adjusting its computation of the 13th-month pay, it merely rectified the
mistake its personnel committed in the previous years.
A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision reads as
follows:

WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:

1. The company is hereby ordered to include sick leave and vacation leave,
paternity leave, union leave, bereavement leave and other leave with pay in the
CBA, premium for work done on rest days and special holidays, and pay for
regular holidays in the computation of the 13th-month pay to all covered and
entitled employees;
2. The company is hereby ordered to pay corresponding backwages to all covered
and entitled employees arising from the exclusion of said benefits in the
computation of 13th-month pay for the year 1999.
Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000. It filed before
the Court of Appeals, a "Manifestation and Motion for Time to File Petition for Certiorari" on
January 19, 2001. A month later, on February 19, 2001, it filed its Petition for Certiorari under
Rule 65 of the 1997 Rules of Civil Procedure for the nullification of the Decision of the
Arbitrator. In addition to its earlier allegations, petitioner claimed that assuming the old
computation will be upheld, the reversal to the old computation can only be made to the extent of
including non-basic benefits actually included by petitioner in the base figure in the computation
of their 13th-month pay in the prior years. It must exclude those non-basic benefits which, in the
first place, were not included in the original computation. The appellate court denied due course
to, and dismissed the petition.
Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:
1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD
COMPUTATION OF THE 13th-MONTH PAY ON THE BASIS THAT THE OLD
COMPUTATION HAD RIPENED INTO PRACTICE IS WITHOUT LEGAL BASIS.
2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT
ERRORS IN COMPUTATION WHICH WILL CAUSE GRAVE AND IRREPARABLE
DAMAGE TO EMPLOYERS.4
First, we uphold the Court of Appeals in ruling that the proper remedy from the adverse decision
of the arbitrator is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, not a
petition for certiorari under Rule 65. Section 1 of Rule 43 states:
RULE 43
Appeals from the Court of Tax Appeals and
Quasi-Judicial Agencies to the Court of Appeals
SECTION 1. Scope. This Rule shall apply to appeals from judgments or final orders
of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions.
Among these agencies are the Civil Service Commission, Central Board of Assessment

Appeals, Securities and Exchange Commission, Office of the President, Land

Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of
Patents, Trademarks and Technology Transfer, National Electrification Administration,
Energy Regulatory Board, National Telecommunications Commission, Department of
Agrarian Reform under Republic Act No. 6657, Government Service Insurance System,
Employees Compensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and voluntary arbitrators authorized
by law. [Emphasis supplied.]
It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a
substitute for an appeal, where the latter remedy is available, as it was in this case. Petitioner
Sevilla Trading failed to file an appeal within the fifteen-day reglementary period from its notice
of the adverse decision of A.V.A. Semana. It received a copy of the decision of A.V.A. Semana
on December 20, 2000, and should have filed its appeal under Rule 43 of the 1997 Rules of Civil
Procedure on or before January 4, 2001. Instead, petitioner filed on January 19, 2001 a
"Manifestation and Motion for Time to File Petition for Certiorari," and on February 19, 2001, it
filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Clearly,
petitioner Sevilla Trading had a remedy of appeal but failed to use it.
A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely
file a petition for review on certiorari under Rule 45 (Rule 43, in the case at bar) of the Rules of
Court. Rule 65 is an independent action that cannot be availed of as a substitute for the lost
remedy of an ordinary appeal, including that under Rule 45 (Rule 43, in the case at bar),
especially if such loss or lapse was occasioned by ones own neglect or error in the choice of
remedies.5
Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla
Trading filed its petition for certiorari on February 19, 2001. More particularly, the decision of
A.V.A. Semana became final and executory upon the lapse of the fifteen-day reglementary
period to appeal, or on January 5, 2001. Hence, the Court of Appeals is correct in holding that it
no longer had appellate jurisdiction to alter, or much less, nullify the decision of A.V.A. Semana.
Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure is a proper action, we still find no grave abuse of discretion amounting to lack or
excess of jurisdiction committed by A.V.A. Semana. "Grave abuse of discretion" has been
interpreted to mean "such capricious and whimsical exercise of judgment as is equivalent to lack
of jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner
by reason of passion or personal hostility, and it must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law."6 We find nothing of that sort in the case at bar.
On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in accord with
law and jurisprudence. A.V.A. Semana is correct in holding that petitioners stance of mistake or
error in the computation of the thirteenth month pay is unmeritorious. Petitioners submission of
financial statements every year requires the services of a certified public accountant to audit its

finances. It is quite impossible to suggest that they have discovered the alleged error in the
payroll only in 1999. This implies that in previous years it does not know its cost of labor and
operations. This is merely basic cost accounting. Also, petitioner failed to adduce any other
relevant evidence to support its contention. Aside from its bare claim of mistake or error in the
computation of the thirteenth month pay, petitioner merely appended to its petition a copy of the
1997-2002 Collective Bargaining Agreement and an alleged "corrected" computation of the
thirteenth month pay. There was no explanation whatsoever why its inclusion of non-basic
benefits in the base figure in the computation of their 13th-month pay in the prior years was
made by mistake, despite the clarity of statute and jurisprudence at that time.
The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs.
NLRC,7 which petitioner Sevilla Trading invokes. In that case, this Court decided on the proper
computation of the cost-of-living allowance (COLA) for monthly-paid employees. Petitioner
Corporation, pursuant to Wage Order No. 6 (effective 30 October 1984), increased the COLA of
its monthly-paid employees by multiplying the P3.00 daily COLA by 22 days, which is the
number of working days in the company. The Union disagreed with the computation, claiming
that the daily COLA rate of P3.00 should be multiplied by 30 days, which has been the practice
of the company for several years. We upheld the contention of the petitioner corporation. To
answer the Unions contention of company practice, we ruled that:
Payment in full by Petitioner Corporation of the COLA before the execution of the CBA
in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June
1984), should not be construed as constitutive of voluntary employer practice, which
cannot now be unilaterally withdrawn by petitioner. To be considered as such, it should
have been practiced over a long period of time, and must be shown to have been
consistent and deliberate . . . The test of long practice has been enunciated thus:
. . . Respondent Company agreed to continue giving holiday pay knowing fully
well that said employees are not covered by the law requiring payment of holiday
pay." (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, 94 SCRA 270
[1979])
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of the Wage Orders. It was only when the Rules Implementing Wage
Order No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily
allowance to its monthly equivalent was laid down.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for
erroneous application of the law . . .
In the above quoted case, the grant by the employer of benefits through an erroneous application
of the law due to absence of clear administrative guidelines is not considered a voluntary act
which cannot be unilaterally discontinued. Such is not the case now. In the case at bar, the Court
of Appeals is correct when it pointed out that as early as 1981, this Court has held in San Miguel
Corporation vs. Inciong8 that:

Under Presidential Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th-month pay. Any
compensations or remunerations which are deemed not part of the basic pay is excluded
as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and
Letter of Instruction No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as
part of the regular basic salary of the employee at the time of the promulgation of
the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential
Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and
other remunerations are excluded as part of the basic salary and in the computation of the
13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of
Instruction No. 174 and profit sharing payments indicate the intention to strip basic salary
of other payments which are properly considered as "fringe" benefits. Likewise, the
catch-all exclusionary phrase "all allowances and monetary benefits which are not
considered or integrated as part of the basic salary" shows also the intention to strip basic
salary of any and all additions which may be in the form of allowances or "fringe"
benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree
851 is even more empathic in declaring that earnings and other remunerations which are
not part of the basic salary shall not be included in the computation of the 13th-month
pay.
While doubt may have been created by the prior Rules and Regulations Implementing
Presidential Decree 851 which defines basic salary to include all remunerations or
earnings paid by an employer to an employee, this cloud is dissipated in the later and
more controlling Supplementary Rules and Regulations which categorically, exclude
from the definition of basic salary earnings and other remunerations paid by employer to
an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto
been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the former rules to
include all remunerations and earnings within the definition of basic salary.

The all-embracing phrase "earnings and other remunerations" which are deemed not part
of the basic salary includes within its meaning payments for sick, vacation, or maternity
leaves, premium for works performed on rest days and special holidays, pay for regular
holidays and night differentials. As such they are deemed not part of the basic salary and
shall not be considered in the computation of the 13th-month pay. If they were not so
excluded, it is hard to find any "earnings and other remunerations" expressly excluded in
the computation of the 13th-month pay. Then the exclusionary provision would prove to
be idle and with no purpose.
In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the
construction or application of the law. When petitioner Sevilla Trading still included over the
years non-basic benefits of its employees, such as maternity leave pay, cash equivalent of unused
vacation and sick leave, among others in the computation of the 13th-month pay, this may only
be construed as a voluntary act on its part. Putting the blame on the petitioners payroll personnel
is inexcusable.
In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:9
The "Supplementary Rules and Regulations Implementing P.D. No. 851" which put to
rest all doubts in the computation of the thirteenth month pay, was issued by the Secretary
of Labor as early as January 16, 1976, barely one month after the effectivity of P.D. No.
851 and its Implementing Rules. And yet, petitioner computed and paid the thirteenth
month pay, without excluding the subject items therein until 1981. Petitioner continued
its practice in December 1981, after promulgation of the aforequoted San Migueldecision
on February 24, 1981, when petitioner purportedly "discovered" its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the
computation of its employees thirteenth month pay, without the payments for sick, vacation and
maternity leave, premium for work done on rest days and special holidays, and pay for regular
holidays. The considerable length of time the questioned items had been included by petitioner
indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of
mistake.
A company practice favorable to the employees had indeed been established and the payments
made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by
the employer, by virtue of Sec. 10 of the Rules and Regulations Implementing P.D. No. 851, and
Art. 100 of the Labor Code of the Philippines which prohibit the diminution or elimination by
the employer of the employees existing benefits. [Tiangco vs. Leogardo, Jr., 122 SCRA 267
(1983)]
With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold
that jurisprudence has not laid down any rule requiring a specific minimum number of years. In
the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions,10 the
company practice lasted for six (6) years. In another case,Davao Integrated Port Stevedoring

Services vs. Abarquez,11 the employer, for three (3) years and nine (9) months, approved the
commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. While in Tiangco vs. Leogardo, Jr.,12 the employer carried on the practice
of giving a fixed monthly emergency allowance from November 1976 to February 1980, or three
(3) years and four (4) months. In all these cases, this Court held that the grant of these benefits
has ripened into company practice or policy which cannot be peremptorily withdrawn. In the
case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as
paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay
for at least two (2) years. This, we rule likewise constitutes voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall
be construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.
IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in CAG.R. SP No. 63086 dated 27 November 2001 and its Resolution dated 06 March 2002 are
hereby AFFIRMED.
SO ORDERED.
Quisumbing, Austria-Martinez, Callejo, Sr.*, and Tinga, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SPECIAL FIRST DIVISION
G.R. No. 127598

February 22, 2000

MANILA ELECTRIC COMPANY, petitioner,

vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO
EMPLOYEES and WORKERS ASSOCIATION (MEWA), respondent.
RESOLUTION
YNARES-SANTIAGO, J.:
In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:
WHEREFORE, the petition is granted and the orders of public respondent Secretary of
Labor dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth
above. The parties are directed to execute a Collective Bargaining Agreement
incorporating the terms and conditions contained in the unaffected portions of the
Secretary of Labor's orders of August 19, 1996 and December 28, 1996, and the
modifications set forth above. The retirement fund issue is remanded to the Secretary of
Labor for reception of evidence and determination of the legal personality of the
MERALCO retirement fund.1
The modifications of the public respondent's resolutions include the following:
January 27, 1999 decision

Secretary's resolution

Wages

- P1,900.00 for 1995-96

P2,200.00

X'mas bonus

- modified to one month

2 months

Retirees

- remanded to the Secretary

granted

Loan to coops

- denied

granted

GHSIP, HMP and

Housing loans

- granted up to P60,000.00

granted

Signing bonus

- denied

granted

Union leave

- 40 days (typo error)

30 days

High voltage/pole

- not apply to those who are

not exposed to the risk

members of a team

Collectors

- no need for cash bond, no

need to reduce quota and MAPL

CBU

- exclude confidential employees

include

Union security

- maintenance of membership

closed shop

Contracting out

- no need to consult union

consult first

All benefits

- existing terms and conditions

all terms

Retroactivity

- Dec. 28, 1996-Dec. 27, 199(9)

from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for
brevity) filed a motion for intervention and a motion for reconsideration of the said Decision. A
separate intervention was likewise made by the supervisor's union (FLAMES2) of petitioner
corporation alleging that it has bona fide legal interest in the outcome of the case.3 The Court
required the "proper parties" to file a comment to the three motions for reconsideration but the
Solicitor-General asked that he be excused from filing the comment because the "petition filed in
the instant case was granted" by the Court.4 Consequently, petitioner filed its own consolidated
comment. An "Appeal Seeking Immediate Reconsideration" was also filed by the alleged newly
elected president of the Union.5 Other subsequent pleadings were filed by the parties and
intervenors.
The issues raised in the motions for reconsideration had already been passed upon by the Court
in the January 27, 1999 decision. No new arguments were presented for consideration of the
Court. Nonetheless, certain matters will be considered herein, particularly those involving the
amount of wages and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral
awards.
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is
allowed, it would simply pass the cost covering such increase to the consumers through an
increase in the rate of electricity. This is a non sequitur. The Court cannot be threatened with
such a misleading argument. An increase in the prices of electric current needs the approval of
the appropriate regulatory government agency and does not automatically result from a mere
increase in the wages of petitioner's employees. Besides, this argument presupposes that
petitioner is capable of meeting a wage increase. The All Asia Capital report upon which the
Union relies to support its position regarding the wage issue cannot be an accurate basis and
conclusive determinant of the rate of wage increase. Section 45 of Rule 130 Rules of Evidence
provides:
Commercial lists and the like. Evidence of statements of matters of interest to persons
engaged in an occupation contained in a list, register, periodical, or other published
compilation is admissible as tending to prove the truth of any relevant matter so stated if
that compilation is published for use by persons engaged in that occupation and is
generally used and relied upon by them therein.

Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted
only "if that compilation is published for use by persons engaged in that occupation and is
generally used and relied upon by them therein." As correctly held in our Decision dated January
27, 1999, the cited report is a mere newspaper account and not even a commercial list. At most, it
is but an analysis or opinion which carries no persuasive weight for purposes of this case as no
sufficient figures to support it were presented. Neither did anybody testify to its accuracy. It
cannot be said that businessmen generally rely on news items such as this in their occupation.
Besides, no evidence was presented that the publication was regularly prepared by a person in
touch with the market and that it is generally regarded as trustworthy and reliable. Absent
extrinsic proof of their accuracy, these reports are not admissible.6 In the same manner,
newspapers containing stock quotations are not admissible in evidence when the source of the
reports is available.7 With more reason, mere analyses or projections of such reports cannot be
admitted. In particular, the source of the report in this case can be easily made available
considering that the same is necessary for compliance with certain governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1
billion.8 An estimate by the All Asia financial analyst stated that petitioner's net operating income
for the same year was about P5.7 billion, a figure which the Union relies on to support its claim.
Assuming without admitting the truth thereof, the figure is higher than the P4.171 billion
allegedly suggested by petitioner as its projected net operating income. The P5.7 billion which
was the Secretary's basis for granting the P2,200.00 is higher than the actual net income of P5.1
billion admitted by petitioner. It would be proper then to increase this Court's award of P1,900.00
to P2,000.00 for the two years of the CBA award. For 1992, the agreed CBA wage increase for
rank-and-file was P1,400.00 and was reduced to P1,350.00; for 1993; further reduced to
P1,150.00 for 1994. For supervisory employees, the agreed wage increase for the years 19921994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing figures, the
P2,000.00 increase for the two-year period awarded to the rank-and-file is much higher than the
highest increase granted to supervisory employees.9 As mentioned in the January 27, 1999
Decision, the Court does "not seek to enumerate in this decision the factors that should affect
wage determination" because collective bargaining disputes particularly those affecting the
national interest and public service "requires due consideration and proper balancing of the
interests of the parties to the dispute and of those who might be affected by the dispute."10 The
Court takes judicial notice that the new amounts granted herein are significantly higher than the
weighted average salary currently enjoyed by other rank-and-file employees within the
community. It should be noted that the relations between labor and capital is impressed with
public interest which must yield to the common good.11 Neither party should act oppressively
against the other or impair the interest or convenience of the public.12 Besides, matters of salary
increases are part of management prerogative.13
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin
in the renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period thereof is
concerned. When the Secretary of Labor assumed jurisdiction and granted the arbitral awards,
there was no question that these arbitral awards were to be given retroactive effect. However, the
parties dispute the reckoning period when retroaction shall commence. Petitioner claims that the
award should retroact only from such time that the Secretary of Labor rendered the award,

invoking the 1995 decision in Pier 8 case14 where the Court, citing Union of Filipino Employees
v. NLRC,15 said:
The assailed resolution which incorporated the CBA to be signed by the parties was
promulgated on June 5, 1989, the expiry date of the past CBA. Based on the provision of
Section 253-A, its retroactivity should be agreed upon by the parties. But since no
agreement to that effect was made, public respondent did not abuse its discretion in
giving the said CBA a prospective effect. The action of the public respondent is within
the ambit of its authority vested by existing law.
On the other hand, the Union argues that the award should retroact to such time granted by the
Secretary, citing the 1993 decision of St. Luke's.16
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the
expiration of the previous CBA, contrary to the position of petitioner. Under the
circumstances of the case, Article 253-A cannot be properly applied to herein case. As
correctly stated by public respondent in his assailed Order of April 12, 1991 dismissing
petitioner's Motion for Reconsideration
Anent the alleged lack of basis for the retroactivity provisions awarded; we would
stress that the provision of law invoked by the Hospital, Article 253-A of the
Labor Code, speaks of agreements by and between the parties, and not arbitral
awards . . .
Therefore, in the absence of a specific provision of law prohibiting retroactivity of the
effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g)
of the Labor Code, such as herein involved, public respondent is deemed vested with
plenary and discretionary powers to determine the effectivity thereof.
In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:
In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA
negotiations between management and the union. The Secretary of Labor assumed
jurisdiction and ordered the retroaction of the CBA to the date of expiration of the
previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused
its discretion in making his award retroactive. In dismissing this contention this Court
held:
Therefore, in the absence of a specific provision of law prohibiting retroactive of
the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
Article 263(g) of the Labor Code, such as herein involved, public respondent is
deemed vested with plenary and discretionary powers to determine the effectivity
thereof.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period
of 2 years counted from December 28, 1996 up to December 27, 1999." Parenthetically, this

actually covers a three-year period. Labor laws are silent as to when an arbitral award in a labor
dispute where the Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor
Code shall retroact. In general, a CBA negotiated within six months after the expiration of the
existing CBA retroacts to the day immediately following such date and if agreed thereafter, the
effectivity depends on the agreement of the parties.18 On the other hand, the law is silent as to the
retroactivity of a CBA arbitral award or that granted not by virtue of the mutual agreement of the
parties but by intervention of the government. Despite the silence of the law, the Court rules
herein that CBA arbitral awards granted after six months from the expiration of the last CBA
shall retroact to such time agreed upon by both employer and the employees or their union.
Absent such an agreement as to retroactivity, the award shall retroact to the first day after the sixmonth period following the expiration of the last day of the CBA should there be one. In the
absence of a CBA, the Secretary's determination of the date of retroactivity as part of his
discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered
into by the parties because it requires the interference and imposing power of the State thru the
Secretary of Labor when he assumes jurisdiction. However, the arbitral award can be considered
as an approximation of a collective bargaining agreement which would otherwise have been
entered into by the parties.19 The terms or periods set forth in Article 253-A pertains explicitly to
a CBA. But there is nothing that would prevent its application by analogy to an arbitral award by
the Secretary considering the absence of an applicable law. Under Article 253-A: "(I)f any such
agreement is entered into beyond six months, the parties shall agree on the duration of
retroactivity thereof." In other words, the law contemplates retroactivity whether the agreement
be entered into before or after the said six-month period. The agreement of the parties need not
be categorically stated for their acts may be considered in determining the duration of
retroactivity. In this connection, the Court considers the letter of petitioner's Chairman of the
Board and its President addressed to their stockholders, which states that the CBA "for the rankand-file employees covering the period December 1, 1995 to November 30, 1997 is still with the
Supreme Court,"20 as indicative of petitioner's recognition that the CBA award covers the said
period. Earlier, petitioner's negotiating panel transmitted to the Union a copy of its proposed
CBA covering the same period inclusive.21 In addition, petitioner does not dispute the allegation
that in the past CBA arbitral awards, the Secretary granted retroactivity commencing from the
period immediately following the last day of the expired CBA. Thus, by petitioner's own actions,
the Court sees no reason to retroact the subject CBA awards to a different date. The period is
herein set at two (2) years from December 1, 1995 to November 30, 1997.
On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's
claim that it is no different from housing loans granted by the employer. The award of loans for
housing is justified because it pertains to a basic necessity of life. It is part of a privilege
recognized by the employer and allowed by law. In contrast, providing seed money for the
establishment of the employee's cooperative is a matter in which the employer has no business
interest or legal obligation. Courts should not be utilized as a tool to compel any person to grant
loans to another nor to force parties to undertake an obligation without justification. On the
contrary, it is the government that has the obligation to render financial assistance to
cooperatives and the Cooperative Code does not make it an obligation of the employer or any
private individual.22

Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to
avoid any confusion, it is herein declared that the union leave is only thirty (30) days as granted
by the Secretary of Labor and affirmed in the Decision of this Court.
The added requirement of consultation imposed by the Secretary in cases of contracting out for
six (6) months or more has been rejected by the Court. Suffice it to say that the employer is
allowed to contract out services for six months or more. However, a line must be drawn between
management prerogatives regarding business operations per se and those which affect the rights
of employees, and in treating the latter, the employer should see to it that its employees are at
least properly informed of its decision or modes of action in order to attain a harmonious labormanagement relationship and enlighten the workers concerning their rights.23 Hiring of workers
is within the employer's inherent freedom to regulate and is a valid exercise of its management
prerogative subject only to special laws and agreements on the matter and the fair standards of
justice.24 The management cannot be denied the faculty of promoting efficiency and attaining
economy by a study of what units are essential for its operation. It has the ultimate determination
of whether services should be performed by its personnel or contracted to outside agencies.
While there should be mutual consultation, eventually deference is to be paid to what
management decides.25 Contracting out of services is an exercise of business judgment or
management prerogative.26 Absent proof that management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer.27 As
mentioned in the January 27, 1999 Decision, the law already sufficiently regulates this
matter.28 Jurisprudence also provides adequate limitations, such that the employer must be
motivated by good faith and the contracting out should not be resorted to circumvent the law or
must not have been the result of malicious or arbitrary actions.29 These are matters that may be
categorically determined only when an actual suit on the matter arises.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed
Decision is MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995
to November 30, 1997; and (2) the award of wage is increased from the original amount of One
Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the years
1995 and 1996. This Resolution is subject to the monetary advances granted by petitioner to its
rank-and-file employees during the pendency of this case assuming such advances had actually
been distributed to them. The assailed Decision is AFFIRMED in all other respects.1wphi1.nt
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner,
vs.
ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file
workers/employees of DAVAO FRUITS CORPORATION and NATIONAL LABOR
RELATIONS COMMISSION, respondents.
Dominguez & Paderna Law Offices for petitioners.
The Solicitor General for public respondents.

QUIASON, J.:
This is a petition for certiorari to set aside the resolution of the National Labor Relations
Commission (NLRC), dismissing for lack of merit petitioner's appeal from the decision of the
Labor Arbiter in NLRC Case No. 1791-MC-X1-82.
On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the
rank-and-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MCXI-82) before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao
City, against petitioner, for "Payment of the Thirteenth-Month Pay Differentials." Respondent
ALU sought to recover from petitioner the thirteenth month pay differential for 1982 of its rankand-file employees, equivalent to their sick, vacation and maternity leaves, premium for work
done on rest days and special holidays, and pay for regular holidays which petitioner, allegedly
in disregard of company practice since 1975, excluded from the computation of the thirteenth
month pay for 1982.
In its answer, petitioner claimed that it erroneously included items subject of the complaint in the
computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult
question of law. According to petitioner, this mistake was discovered only in 1981 after the
promulgation of the Supreme Court decision in the case of San Miguel Corporation v.
Inciong (103 SCRA 139).
A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of
respondent ALU. The dispositive portion of the decision reads as follows:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby
rendered ordering respondent to pay the 1982 13th month pay differential to all
its rank-and-file workers/employees herein represented by complainant Union
(Rollo, p. 32).
Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said
decision accordingly dismissed the appeal for lack of merit.
Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised
Rules of Court. This error notwithstanding and in the interest of justice, this Court resolved to
treat the instant petition as a special civil action for certiorari under Rule 65 of the Revised
Rules of Court (P.D. No. 1391, Sec. 5; Rules Implementing P.D. No. 1391, Rule II, Sec. 7; Cando
v. National Labor Relations Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc.
v. National Labor Relations Commission, 182 SCRA 446 [1990]).

The crux of the present controversy is whether in the computation of the thirteenth month pay
given by employers to their employees under P.D.
No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days
and special holidays, and pay for regular holidays may be excluded in the computation and
payment thereof, regardless of long-standing company practice.
Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay
their employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2
of the "Rules and Regulations Implementing Presidential Decree No. 851," thus:
SECTION 2. . . .
(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year.
(b) "Basic Salary" shall include all renumerations or earnings paid by an employer
to an employee for services rendered but may not include cost of living
allowances granted pursuant to Presidential Decree No. 525 or Letter of
Instructions No. 174, profit-sharing payments, and all allowances and monetary
benefits which are not considered or integrated as part of the regular or basic
salary of the employee at the time of the promulgation of the Decree on December
16, 1975.
The Department of Labor and Employment issued on January 16, 1976 the "Supplementary
Rules and Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines
the term "basic salary," thus:
4. Overtime pay, earnings and other renumerations which are not part of the basic
salary shall not be included in the computation of the 13th month pay.
Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to
employee, but excludes cost-of-living allowances, profit-sharing payments, and all allowances
and monetary benefits which have not been considered as part of the basic salary of the
employee as of December 16, 1975. The exclusion of cost-of-living allowances and profit
sharing payments shows the intention to strip "basic salary" of payments which are otherwise
considered as "fringe" benefits. This intention is emphasized in the catch all phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic
salary." Basic salary, therefore does not merely exclude the benefits expressly mentioned but all
payments which may be in the form of "fringe" benefits or allowances (San Miguel Corporation
v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations Implementing

P.D. No. 851 are very emphatic in declaring that overtime pay, earnings and other renumerations
shall be excluded in computing the thirteenth month pay.
In other words, whatever compensation an employee receives for an eight-hour work daily or the
daily wage rate in the basic salary. Any compensation or remuneration other than the daily wage
rate is excluded. It follows therefore, that payments for sick, vacation and maternity leaves,
premium for work done on rest days special holidays, as well as pay for regular holidays, are
likewise excluded in computing the basic salary for the purpose of determining the thirteen
month pay.
Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the
opinions, orders and rulings rendered by then Acting Labor Secretary Amado C. Inciong,
expressly including the subject items in computing the thirteenth month pay. The inclusion of
these items is clearly not sanctioned under P.D. No. 851, the governing law and its implementing
rules, which speak only of "basis salary" as the basis for determining the thirteenth month pay.
Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the
Supplementary Rules and Regulations which clarified the definition of "basic salary."
As pointed out in San Miguel Corporation v. Inciong, (supra):
While doubt may have been created by the prior Rules and Regulations and
Implementing Presidential Decree 851 which defines basic salary to include all
remunerations or earnings paid by an employer to an employee, this cloud is
dissipated in the later and more controlling Supplementary Rules and Regulations
which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets
of Rules indicates that what has hitherto been the subject of broad inclusion is
now a subject of broad exclusion. The Supplementary Rules and Regulations cure
the seeming tendency of the former rules to include all remunerations and
earnings within the definition of basic salary.
The all-embracing phrase "earnings and other remunerations which are deemed
not part of the basic salary includes within its meaning payments for sick,
vacation, or maternity leaves, premium for work performed on rest days and
special holidays, pay for regular holidays and night differentials. As such they are
deemed not part of the basic salary and shall not be considered in the computation
of the 13th-month pay. If they were not so excluded, it is hard to find any
"earnings and other remunerations" expressly excluded in computation of the 13th
month-pay. Then the exclusionary provision would prove to be idle and with
purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all
doubts in the computation of the thirteenth month pay, was issued by the Secretary of Labor as
early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its
Implementing Rules. And yet, petitioner computed and paid the thirteenth month pay, without
excluding the subject items therein until 1981. Petitioner continued its practice in December
1981, after promulgation of the afore-quoted San Miguel decision on February 24, 1981, when
petitioner purportedly "discovered" its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the
computation of its employees' thirteenth month pay, the payments for sick, vacation and
maternity leaves, premiums for work done on rest days and special holidays, and pay for regular
holidays. The considerable length of time the questioned items had been included by petitioner
indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of
mistake.
A company practice favorable to the employees had indeed been established and the payments
made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by
the employer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851,
and Article 100 of the labor of the Philippines, which prohibit the diminution or elimination by
the employer of the employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267,
[1983]).
Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not
applicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the
obligor whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and
2155). Petitioner in the instant case, does not demand the return of what it paid respondent ALU
from 1975 until 1981; it merely wants to "rectify" the error it made over these years by excluding
unilaterally from the thirteenth month pay in 1982 the items subject of litigation. Solutio indebiti,
therefore, is not applicable to the instant case.
WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is
hereby DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED
accordingly.
Cruz, Grio-Aquino, Davide, Jr. and Bellosillo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-57636 May 16, 1983
REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor and
Employment, AURELIO ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO
CARABIO, JESUS GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA,
CLEMENTE VILLARUEL, RUSTOM OFQUERIA, ERNESTO DIONG, GRACIANO
DURANA, AGUEDO MARABE, SOLOMON CLARIN, ALCAFONE ESGANA, JUAN
CASTRO, ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL CABRERA,
ROBERTO BAYON-ON, ELIAS ESCARAN, ERNESTO BATOY, EDDIE
BATOBALANOS, TOMAS CAPALAR, JUAN GIHAPON, JOSE OFQUERIA, FRUTO
GIHAPON, PEPITO BATOY, and SERAFIO YADAWON, respondents.
Florencio Pineda for petitioners.
The Solicitor General for respondents.

CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction and/or restraining order, to
annul and set aside the order of the respondent Deputy Minister of Labor which modified and
affirmed the order of Director of the National Capitol Region of the Ministry of Labor directing
the petitioners to pay the private respondents their legal holiday pay, service incentive pay, and
differentials in their emergency cost of living allowances.

The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo Tiangco Fishing
Company and a fleet of fishing vessels engaged in deep-sea fishing which operates from
Navotas, Rizal. His business is capitalized at P2,000,000.00, 1 while the petitioner, Victoria
Tiangco, is a fish broker whose business is capitalized at P100,000.00. 2
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham
Gilbuena, Rustom Ofqueria, Ernesto Diong, Jesus Gilbuena, Clemente (Emerenciano) Villaruel,
Dominador Lacerna, and Graciano Durana, are batillos engaged by the petitioner Reynaldo
Tiangco to unload the fish catch from the vessels and take them to the Fish Stall of the petitioner
Victoria Tiangco. The private respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio
Laylay, Fruto Gihapon, Solomon Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan
Castro, Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio Yadawon,
Juan Gihapon, Elias Escaran and Roberto Bayon-on, were batillos engaged by Victoria
Tiangco. 3 The work of these batillos were limited to days of arrival of the fishing vessels and
their working days in a month are comparatively few. Their working hours average four (4)
hours a day.
On April 8, 1980, the private respondents filed a complaint against the petitioners with the
Ministry of Labor and Employment for non-payment of their legal holiday pay and service
incentive leave pay, as well as underpayment of their emergency cost of living allowances which
used to be paid in full irrespective of their working days, but which were reduced effective
February, 1980, in contravention of Article 100 of the new Labor Code which prohibits the
elimination or diminution of existing benefits. 4
The petitioners denied the laborers' contention, claiming that the laborers were all given, in
addition to their regular daily wage, a daily extra pay in amounts ranging from 30 centavos to 10
pesos which are sufficient to offset the laborers' claim for service incentive leave and legal
holiday pay. As regards the claim for emergency allowance differentials, the petitioners admitted
that they discontinued their practice of paying their employees a fixed monthly allowance, and
effective February, 1980, they no longer paid allowances for non-working days. They argued,
however, that no law was violated as their refusal to pay allowances for non-working days is in
consonance with the principle of "no work, no allowance"; and that they could not pay private
respondents a fixed monthly allowance without risking the viability of their business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor and
Employment ruled that the daily extra pay given to private respondents was a ,'production
incentive benefit", separate and distinct from the service incentive leave pay and legal holiday
pay, payment of which cannot be used to offset a benefit provided by law, and ordered the
petitioners to pay the private respondents their service incentive leave pay and legal holiday pay.
However, he denied the laborers' claim for differentials in the emergency cost of living
allowance for the reason that the emergency cost of living allowance accrues only when the
laborers actually work following the principle of "no work, no pay," and private respondents are
not entitled to a fixed monthly allowance since they work on a part time basis which average
only four (4) days a week. The private respondents should not be paid their allowances during
non-working days. 6

From this order, both parties appealed.

On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified the order
and directed the petitioners to restore and pay the individual respondents their fixed monthly
allowance from March, 1980 and to pay them the amount of P58,860.00, as underpayment of
their living allowance from May, 1977 to February 21, 1980. 7
When their motion for the reconsideration of the above order was denied, the petitioners
interposed the present recourse.
The petitioners claim that the respondent Deputy Minister of Labor and Employment acted in
excess of jurisdiction, or with grave abuse of discretion in ordering them to pay the private
respondents a fixed monthly allowance from March, 1980, despite the "no work, no pay," law;
the private respondents' consent to receive an allowance for days worked for, as stated in their
appeal; and the findings of the Director of the National Capitol Region that private respondents
work for other employers and are part-time employees of the petitioners.
Indeed, the record shows that the private respondents work for the petitioners on a part-time
basis and their work average only four (4) days a week. It is not also disputed that the private
respondents work for more than one employer so that the private respondents should be paid
their living allowance only for the days they actually worked in a week or month and all the
employers of the employee shall share proportionately in the payment of the allowance of the
employee. Section 12 of the Rules and Regulations implementing P.D. 525 which made
mandatory the payment of emergency cost of living allowances to workers in the private section,
provides, as follows:
Section 12. Allowance on Daily Paid & Part Time employees. Employees
who are paid on a daily basis shall be paid their allowances for the number of
days they actually worked in a week or month, on the basis of the scales provided
in Section 7 hereof.
In case of part-time employment, the allowances shall be paid in the amount
proportionate to the time worked by the employee, or higher. If employed by
more than one employer, all employers of such employee shall share
proportionately in the payment of the allowance of the employee.
Section 11 of the Rules implementing P.D. 1123, increasing the emergency
allowance under P.D. 525, also provides, as follows:
Section 11. Allowances of full-time and part-time employees. Employees shall
be paid in full the monthly allowances on the basis of the scales provided in
Section 3 hereof, regardless of the number of their regular working days, if they
incur no absence during the month. If they incur absences, the amounts
corresponding to their absences may be deducted from the monthly allowance.

In case of part-time employment, the allowance to be paid shall be proportionate

to the time worked by the employee. This requirement shall apply to any
employee with more than one employer.
However, the respondent Deputy Minister of Labor and Employment correctly ruled that since
the petitioners had been paying the private respondents a fixed monthly emergency allowance
since November, 1976 up to February, 1980, as a matter of practice and/or verbal agreement
between the petitioners and the private respondents, the discontinuance of the practice and/or
agreement unilaterally by the petitioners contravened the provisions of the Labor Code,
particularly Article 100 thereof which prohibits the elimination or diminution of existing
benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also prohibits the
diminution of any benefit granted to the employees under existing laws, agreements, and
voluntary employer practice. Section 15 of the Rules on P.D. 525 provides, as follows:
Section 15. Relation to Agreement. Nothing herein shall prevent the employer
and his employees from entering into any agreement with terms more favorable to
the employees than those provided therein, or be construed to sanction the
diminution of any benefit granted to the employees under existing laws,
agreements, and voluntary employer practice.
Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It
provides, as follows:
Section 16. Relation to other agreements. Nothing herein shall prevent
employers from granting allowances to their employees in excess of those
provided under the Decree and the Rules nor shall it be construed to countenance
any reduction of benefits already being enjoyed.
The petitioners further claim that the respondent Deputy Minister of Labor and Employment
erred in ordering them to pay the amount of P58,860.00 to the private respondents as
underpayment of respondents' allowances from May, 1977 to February 20, 1980. The petitioners
contend that the emergency cost of living allowances of the private respondents had been paid in
full.
We find no merit in the contention. However, a revision of the amount due the private
respondents is in order for the reason that the respondent Deputy Minister of Labor and
Employment failed to take into consideration, in computing the amount due each worker, the fact
that the private respondents are employed by two different individuals whose businesses are
divergent and capitalized at various amounts, contrary to the provisions of P.D. 525 and
subsequent amendatory decrees, wherein the amount of the emergency cost of living allowance
to be paid to a worker is made to depend upon the capitalization of the business of his employer
or its total assets, whichever is higher. Thus, Section 7 of the Rules and Regulations
implementing P.D. 525 reads, as follows:

Section 7. Amount of Allowances. Every covered employer shall give to each

of his employees who is receiving less than P600.00 a month not less than the
following allowances;
(a) P50.00 where the authorized capital stock or total assets, whichever is
applicable and higher, is 71 million or more;
(b) P30.00 where the authorized capital stock or total assets, whichever is
applicable and higher is at least P100,000.00 but less than P 1miilion and
(c) P15.00 where the authorized capital stock or total assets, whichever is
applicable and higher, is less than P100,000.00.
Nothing herein shall prevent employers from granting allowances to their
employees who will receive more than P600.00 a month, including the
allowances. An employer, however, may grant his employees an allowance which
if added to their monthly salary, will not yield to them more than P600.00 a
month.
In this case, the private respondents admit that only ten (10) of them, namely: Aurelio
Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofquiera, Ernesto
Diong, Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and Graciano Durana, were
employees of the petitioner Reynaldo Tiangco, while the remaining seventeen (17) were
employed by the petitioner Victoria Tiangco. 8 Accordingly, the workers of the petitioner Victoria
Tiangco, whose business as fish broker is capitalized at P100,000.00, 9 should receive a lesser
amount of allowance (P30.00) than those workers employed by the petitioner Reynaldo Tiangco
whose business, as a fishing operator with a fleet of fishing vessels, is capitalized at more than
P2,000,000.00, and are entitled to receive a fixed monthly allowance of P50.00 a month, each.
After P.D. 525, the following amendatory decrees, directing the payment of additional
allowances to employees, were promulgated:
1. P.D. 1123. providing for an across-the-board increase of P60.00 a month
effective May 1, 1977;
2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective
April 1, 1979;
3. P.D. 1634, which provided for the payment of an additional P60.00 a month
effective September 1, 1979, and another P30.00 a month beginning January 1,
1980; and
4. P.D. 1678,which directed the payment of an additional P2.00 a day from
February 21, 1980.

Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria Tiangco
should pay her workers a fixed monthly allowance of P 30.00, while the workers of the petitioner
Reynaldo Tiangco were entitled to a fixed monthly allowance of P50.00, each. The record shows
that during this period, the petitioner Victoria Tiangco was paying her workers a monthly
allowance of P30.00 each. 10 Accordingly, there was no underpayment for this period insofar as
her batillos are concerned. The petitioner Reynaldo Tiangco, however, paid his employees
P30.00, instead of P50.00, as mandated by law. 11 Therefore, there was an underpayment of
P20.00 a month for each batillo under his employ. For the 6-month period, he should pay his
workers differentials in the amount of P120.00 each.
For the period from May, 1977 to March 1979, the workers of the petitioner Victoria Tiangco
were entitled to a fixed monthly allowance of P90.00 in view of the promulgation of P.D. 1123
which granted an across-the-board increase of P60.00 a month in their allowances. For this
period, however, the said petitioner paid her workers only P60.00 a month, or a difference of
P30.00 a month. 12 There was, therefore, an underpayment of P690.00 for everybatillo under her
employ for the 23-month period.
With the addition of P60.00 across-the-board increase in their allowances, the workers of the
petitioner Reynaldo Tiangco were entitled to receive a fixed monthly allowance of P110.00.
However, the record shows that his workers were only paid P60.00 a month, 13 or a difference of
P50.00 a month. Consequently, each batillo hired by him should be paid a differential of
P1,150.00 for the 23-month period.
For the period from April, 1979 to August, 1979, the employees of the petitioner Victoria
Tiangco were entitled to a fixed monthly allowance of P150.00 while the workers employed by
the petitioner Reynaldo Tiangco were entitled to an allowance of P170.00, pursuant to P.D. 1614.
The record shows, however, that both petitioners paid their workers only P120.00 a
month. 14 There was a difference of P30.00 a month in the case of the petitioner Victoria Tiangco,
and P50.00, a month, in the case of the petitioner Reynaldo Tiangco. Hence, for this period, the
petitioner Victoria Tiangco should pay the amount of P150.00 to each batillo in her employ,
while the petitioner Reynaldo Tiangco should pay the amount of P250.00, as differentials in the
cost of living allowances of the workers under his employ.
Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a month
effective September, 1979 and another P30.00 effective January 1, 1980, the workers of the
petitioner Victoria Tiangco were entitled to receive a fixed monthly allowance of P210.00 a
month from September, 1979, and P340.00, a month beginning January, 1980. The workers of
the petitioner Reynaldo Tiangco, upon the other hand, were entitled to a monthly allowance of
P230.00, effective September, 1979, and P260.00, a month beginning January, 1980. The record
shows, however, that both petitioners paid their workers the amounts of P180.00 a month for the
months of September to December, 1979, 15 and P210.00 a month for the months of January and
February, 1980. 16 There was underpayment, therefore, in the allowances of the workers of the
petitioner Victoria Tiangco in the amount of P30.00, a month, for the months of September, 1979
to February, 1980, or P180.00 for each batillo in her employ. The private respondents hired by
the petitioner Reynaldo Tiangco, upon the other hand, are entitled to differentials in the amount
of P50.00 a month for the same period, or P300.00 each.

Then, beginning February, 21, 1980, the workers should be paid an additional P2.00, a day,
pursuant to P.D. 1678. The record shows that the petitioners had complied with this
requirement. 17 The petitioners, however, failed to pay the fixed monthly allowance of their
workers which was P240.00, in the case of the workers employed by the petitioner Victoria
Tiangco, and P260.00, in the case of the workers of the petitioner Reynaldo Tiangco. Thus, for
the month of March, 1980, the petitioner Victoria Tiangco paid her workers varying amounts, the
lowest of which was P30.00, paid to Eddie Batobalanos and Fruto Gihapon, and the highest of
which was P210.00, paid to Juan Gihapon and Roberto Bayonon.18 Hence, there was
underpayment in their emergency cost of living allowances. But, since, the respondents
employed by Victoria Tiangco are wining to accept P50.00 a month as differentials for the
months of March, 1980 to May, 1980, 19 the workers employed by her should be paid P50.00,
each, for the month of March, 1980, except Juan Gihapon and Roberto Bayon-on who should be
paid P30.00, each, for the said month, having received the amount of P210.00, each as allowance
for that month.
For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid varying
amounts ranging from P120.00 to P210.00. 20 Hence, there was also underpayment in their
allowances. Accordingly, they should be paid the amount of P50.00, each, except for Juan
Gihapon, Antonio Gilbuena, Juan Castro, and Aguedo Marabe, who should be paid P40.00, each,
and Solomon Clarin, Daniel Cabrera, and Gregorio Laylay who should be paid P30.00 each.
For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying amounts
less that what was provided for by law. 21 Hence, they should be paid the amount of P50.00, each,
for this month.
The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging from
P210.00 to P250.00, as emergency cost of living allowance, for the month of March, 22,
1980. 22 Since they were entitled to a fixed monthly allowance of P260.00, each, there was
underpayment in their cost of living allowances. Accordingly, the petitioner should pay the
respondent Pepito Gilbuena the amount of P50.00; the respondents Dominador Lacerna and
Graciano Durano, the amount of P40.00, each; the respondent Ernesto Diong, the amount of
P30.00; the respondents Rustom Ofqueria and Aurelio Ilustrisimo, the amount of P20.00, each;
and the respondents Abraham Gilbuena, Jesus Gilbuena, Rogelio Carabio, and Emerenciano
Villaruel, the amount of P10.00 each.
For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not also paid
their emergency cost of living allowance in full. 23 Hence, the said petitioner should pay his
workers the amount of P30.00 each, except for Pepito Gilbuena, who should be paid the amount
of P50.00, and Rustom Ofqueria, Jesus Gilbuena, and Graciano Durano, who are entitled to only
P40.00 each.
The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living allowance
for the month of May, 1980. The workers were paid varying amounts of P130.00 to P150.00,
instead of P260.00, as required by law. 24 Hence, they should be paid the amunt of P50.00 each
for the month of May, 1980.

WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as they are
hereby, ordered to PAY the private respondents the following amounts as differentials in their
emergency cost of living allowance:
Petitioner Victoria Tiangco:

Eddie
Batobalan
os............
.

P
l
,
1
7
0
.
0
0

2.

Aguedo
Morabe...
..............

1
,
1
6
0
.
0
0

3.

Gregorio
Laylay.....
.............

1
,
1
5
0
.
0
0

4.

Fruto
Gihapon..
................
...

1
,
1
7
0

.
0
0

5.

Solomon
Clarin .....
..............

1
,
1
5
0
.
0
0

6.

Pepito
Batoy......
................
..

1
,
1
7
0
.
0
0

7.

Jose
Ofqueria..
................
.....

1
,
1
7
0
.
0
0

8.

Daniel
Cabrera...
................
..

1
,
1
5
0
.
0

9.

Juan
Castro.....
................
.....

1
,
1
6
0
.
0
0

10.

Alcafone
Esgana....
.............

1
,
1
7
0
.
0
0

11.

Tomas
Capalar ..
................
..

1
,
1
7
0
.
0
0

12.

Antonio
Gilbuena.
...............

1
,
1
6
0
.
0
0

13.

Ernesto
Batoy......
................

1
,
1
7
0
.
0
0

14.

Serapio
Yadawon.
...............

1
,
1
5
0
.
0
0

15.

Juan
Gihapon..
................
.....

1
,
1
4
0
.
0
0

16.

Elias
Escaran ..
................
....

1
,
1
5
0
.
0
0

17.

Roberto
Bayon-

1
,

on............
..

1
3
0
.
0
0

Petitioner Reynaldo Tiangco:

Aurelio
Ilustrisimo............

P
l,920.00

2.

Pepito
Gilbuena.................

1,970.0
0

3.

Rogelio
Carabio.................

1,910.0
0

4.

Abraham
Gilbuena.............

1,910.0
0

5.

Rustom
Ofqueria................

1,930.0
0

6.

Ernesto
Diong....................

1,930.0
0

7.

Jesus
Gilbuena.................
..

1,920.0
0

8.

Emerenciano
Villaruel........

1,910.0
0

9.

Dominador
Lacerna............

1,940.0
0

10
.

Graciano
Durano.................

1,950.0
0

With this modification, the judgment appealed from is AFFIRMED in all other respects. With
costs against the petitioners.
SO ORDERED.
STANDARD CHARTERED BANK,
Petitioner,

G.R. No. 165550

Present:

- versus STANDARD CHARTERED BANK

EMPLOYEES UNION (SCBEU),
Respondent.

PUNO, C.J., Chairperson,

CARPIO,
AZCUNA,
REYES,* and
LEONARDO-DE CASTRO, JJ.
Promulgated:
October 8, 2008

x-------------------------------------------------------------------------------------------------------------------x
DECISION
LEONARDO-DE CASTRO, J.:
* Additional Member as per Special Order No. 520.
Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of
Court of Standard Chartered Bank assailing the Decision[1] dated July 1, 2004 as well as

the Resolution[2] dated September 23, 2004 of the Court of Appeals (CA) in CA-G.R. SP No.
71448. The questioned Decision and Resolution of the appellate court affirmed
the Orders[3] dated March 11, 2002 and April 29, 2002 of the Department of Labor and
Employment (DOLE) which sustained the outpatient medicine reimbursements of the employees
of petitioner as well as the maternity benefits of the spouses of its male employees. Respondent
Standard Chartered Bank Employees Union (SCBEU) filed itsComment (to the petition)
[4]
on March 28, 2005 and petitioner filed its Reply[5] thereto on June 21, 2005.
The facts are culled from the records of the case.
On August 25, 1998, petitioner Standard Chartered Bank entered into a Collective
Bargaining Agreement[6] (CBA) with respondent Standard Chartered Bank Employees Union
(SCBEU), which provided, among others, for medical benefits. Under Article XI, Section 1 of
the CBA, petitioner committed to continue to cover all its employees with a group
hospitalization and major surgical insurance plan including maternity benefits.[7] At the time of
the signing of the said CBA, the group hospitalization insurance plan in force was Group Policy
No. P-1620 issued by the Philippine American Life (Philamlife) Insurance Company with an
effective date of March 3, 1977.[8]
After the signing of the CBA, petitioner changed its insurance provider from Philamlife
to Maxicare, a Health Maintenance Organization, to allegedly provide its employees with
improved medical benefits under the CBA.
Subsequently, respondent charged petitioner with unfair labor practice before the DOLE
for alleged gross violation of the economic provisions of the CBA and diminution or removal of
benefits. Respondent contested, among others, the exclusion of the outpatient medicine
reimbursements of the employees and the maternity benefits granted to the spouses of the male
employees of petitioner in the new insurance policy provided by Maxicare.
In support of its allegations, respondent presented a letter addressed to petitioners
Personnel Manager from the Group Marketing Officer of Philamlife and documents indicating
reimbursements for outpatient services to prove that the petitioners employees had been enjoying
outpatient medicine reimbursements. Respondent also cited Schedule L of the CBA and
affidavits of employees to prove that the spouses of the male employees of petitioner were
entitled to maternity benefits.
Petitioner, in turn, argued that there was no diminution of benefits as the insurance policy
issued by Maxicare contained similar benefits to those contained in the previous Philamlife
policy. Petitioner alleged that outpatient medicine reimbursement was not expressly provided for
in the Philamlife insurance policy and that this was precisely the reason petitioners employees
were provided with a medicine allowance under the CBA. Petitioner also contended that the
maternity benefits as provided in the CBA were exclusive to its female employees and that the
past practices cited by the respondent were malpractices which it seeks to curtail and correct.
In a Decision dated May 31, 2001, the DOLE gave credit to the claims of respondent. It
ruled that the outpatient benefit [had] been a regular feature of the [petitioners] medical coverage
and as a regular feature, cannot be withdrawn unilaterally.[9] The insurance policy issued by

Philamlife allowed outpatient benefits as claims against maximum disablement, notwithstanding

the lack of an express provision regarding outpatient benefits. Moreover, the DOLE found that
petitioner acknowledged, without disapproval or objection, employees requests for
reimbursement of outpatient medical expenses under the old insurance plan. The DOLE also held
that the spouses of the male employees of petitioner were entitled to maternity benefits as a
matter of practice. This finding was supported by the claims for reimbursement of maternity
expenses of the spouses of bank employees covering the period from 1984 to 1998. The 1984
claims indicated that the same were approved by petitioner and that there was no showing that it
disapproved or challenged the other claims. The DOLE said that these circumstances negated
petitioners contention that there was a mistake in the processing of claims for the said maternity
benefits.
In an Order[10] dated October 5, 2001, the DOLE acted on the separate motions for
reconsideration of the parties and sustained its earlier findings but reversed its ruling that the
maternity benefits granted by petitioner extend to the spouses of its male employees. Respondent
allegedly failed to dispute the assertion of petitioner that there were only three out of four claims
covering the period of twenty years that were processed by Philamlife. The DOLE was
convinced that there was no voluntary practice of giving said maternity benefits to spouses of
male employees.
Respondent filed a second motion for reconsideration[11] and contended that it submitted
documentary evidence showing that there were nine claims of the subject maternity benefits that
were processed and approved. These were in addition to the four affidavits of bank employees
attesting to the fact that the medical hospitalization plan of Philamlife included such maternity
benefits. Respondent further pointed out that these benefits were even integrated in the CBA.
In the assailed Order dated March 11, 2002, the DOLE reverted to its original ruling that
the spouses of male employees of petitioner were entitled to maternity benefits.Petitioner
disagreed and filed a second motion for reconsideration to this ruling and a motion for
clarification regarding the grant of outpatient benefits to the employees. In a
subsequent Order dated April 29, 2002, the DOLE denied the said motion and clarified that the
grant of outpatient benefits includes medicine reimbursements.
Petitioner elevated this case before the appellate court through a special civil action for
certiorari under Rule 65 of the Rules of Court. The said court dismissed the petition and affirmed
the assailed Orders dated March 11, 2002 and April 29, 2002 of the DOLE and held that the
basis for the grant of the subject maternity benefits was Schedule L of the CBA of the
parties. The appellate court likewise denied petitioners motion for reconsideration thereto for
lack of merit.
Hence, the instant petition for review on certiorari.
Petitioner assails the rulings of the appellate court on the ground that the same are not in
accord with evidence, law, and the applicable decisions of this Court and raises the following
issues:
ISSUES

A. Whether or not, on the basis of evidence on record, the appellate court is

correct in ruling that spouses of male employees are entitled to maternity
benefits despite its own finding that there was no established company
practice of granting maternity benefits to male employees spouses; and
B. Whether or not, on the basis of the evidence on record, the appellate court is
correct in ruling that there is an established company practice of granting
outpatient medicine reimbursements to petitioners employees.
Anent the first issue, petitioner claims that the spouses of its male employees are not
entitled to maternity benefits as these are exclusively intended for its female employees. It is
petitioners view that the CA erred in finding that Schedule L of the CBA obligates it to pay
maternity benefits to spouses of its male employees, despite ruling that there is no company
practice granting maternity benefits to such persons.
According to petitioner, the literal interpretation of Schedule L of the CBA is not the real
intention of the parties to the contract. Such an interpretation is purportedly iniquitous to the
bank as the same will also mean (a) that the children of married employees and the mothers of
single employees will enjoy the same benefits and (b) that the spouses of the male employees
who also happen to be employed in the bank or any other company will benefit twice. Schedule
L of the CBA should instead be read compatibly with the provisions of the contract itself to
determine the real intention of the parties thereto.
Petitioner points out Section 1 of Article XI of the CBA and claims that this provision
shows that the maternity benefits provided in Schedule L extend only to its employees, thus, the
spouses of its male employees are not entitled to these benefits. Petitioner asserts that the CBA
would have stated expressly that spouses of male employees are entitled to the said benefit had
this been the intention of the parties, similar to the provision granting of advances and medicine
allowances to the employees and their dependents. Moreover, the CA allegedly erred in applying
Article 4 of the Labor Code in interpreting Schedule L of the CBA instead of Articles 1370-1379
of the Civil Code.
Petitioner adds that its previous medical insurance policy which was provided by
Philamlife granted insurance benefits only to its regular, full-time employees and that there is
nothing in the said policy granting maternity benefits to the spouses of its male
employees. Hence, petitioner asserts that the CA, having correctly ruled that petitioner had no
company practice of extending such benefits to the spouses of its male employees, should not
have granted such benefits on the basis of Schedule L of the CBA.
Anent the second issue, petitioner claims that the appellate court erred in ruling that its
employees are entitled to outpatient medicine reimbursements distinct and separate from the
medicine allowances granted in the CBA. This would allegedly result in the unjust enrichment of
the employees at the expense of petitioner.
In its Comment, respondent contends that the instant petition must fail as it raises
questions of fact when it should be limited to questions of law. Respondent adds that there is no
real and material conflict between the findings of fact of the DOLE and the appellate court so as
to claim that this case is an exception to the rule that only questions of law are elevated to this

Court under Rule 45 of the Rules of Court. The appellate court allegedly shares the conclusion of
the DOLE that the maternity benefits granted to the employees extend to the spouses of the male
employees of petitioner although the basis for the ruling is not anchored on an established
company practice but rather on the basis of Schedule L of the CBA.
In its Reply, petitioner claims that when the facts are undisputed, then the question of
whether or not the conclusion drawn therefrom by the Court of Appeals is correct is a question of
law. [12] The issues before this Court are thus questions of law because petitioner seeks the review
of the evidence on record and the conclusion drawn by the appellate court.
In the alternative, petitioner further asserts that assuming the issues raised are questions
of fact, this Court is still not precluded from taking cognizance of the case as the same falls
within the exceptions laid in the case of Fuentes v. Court of Appeals.[13] The factual findings of
the CA may be reviewed by this Court (i) when the appellate court fails to notice certain relevant
facts which will justify a different conclusion; and (ii) when the findings of fact are
conflicting. Petitioner points out that the appellate court erroneously concluded that the spouses
of its male employees are entitled to maternity benefits on the basis of Schedule L of the CBA
despite finding that there is no company practice of granting the said benefit. Petitioner adds that
this finding is consistent with the finding of the DOLE that the said company practice does not
exist.
The petition is bereft of merit.
With respect to the procedural issue, we agree with respondent that the issues raised by
the bank are essentially questions of fact that cannot be the subject of this petition for review
on certiorari. Section 1 of Rule 45 of the Rules of Court provides that only questions of law may
be raised on appeal by certiorari. Well-settled in our jurisprudence is the principle that this Court
is not a trier of facts and that it is neither the function of this Court to analyze or weigh the
evidence of the parties all over again.[14] The ruling inMicrosoft Corporation v. Maxicorp, Inc.
[15]
elucidates the distinction of a question of law and a question of fact as follows:
A question of law exists when the doubt or difference centers on what the law is
on a certain state of facts. A question of fact exists if the doubt centers on the truth
or falsity of the alleged facts.

xxx xxx xxx

There is a question of law if the issue raised is capable of being resolved
without need of reviewing the probative value of the evidence. The resolution of
the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact. If the query requires a reevaluation of the credibility of witnesses, or the existence or relevance of

surrounding circumstances and their relation to each other, the issue in that query
is factual. Our ruling in Paterno v. Paterno is illustrative on this point:
Such questions as whether certain items of evidence
should be accorded probative value or weight, or rejected as
feeble or spurious, or whether or not the proofs on one side or
the other are clear and convincing and adequate to establish a
proposition in issue, are without doubt questions of
fact. Whether or not the body of proofs presented by a party,
weighed and analyzed in relation to contrary evidence submitted
by adverse party, may be said to be strong, clear and convincing;
whether or not certain documents presented by one side should be
accorded full faith and credit in the face of protests as to their
spurious character by the other side; whether or not inconsistencies
in the body of proofs of a party are of such gravity as to justify
refusing to give said proofs weight all these are issues of
fact. [Emphasis supplied]
Petitioner wants this Court to determine if (i) the maternity benefits provided to its female
employees extend to the spouses of its male employees and if (ii) its employees are entitled to
outpatient medicine reimbursements as a matter of company practice. Indeed, petitioner, in
phrasing the issues in this Petition, urges this Court to scrutinize the evidence based on
record. Such language militates against petitioners contention that the Petition involves purely
questions of law.
We disagree with petitioner that the conclusion drawn by the appellate court from the
evidence based on record is a question of law. This is the opposite definition of a question of
law. Petitioners reliance on the ruling in Commissioner of Immigration v. Garcia[16] that when the
facts are undisputed, then the question of whether or not the conclusion drawn therefrom by the
Court of Appeals is correct is a question of law is misplaced. In the present case, the facts are
disputed. Respondent claims that there is an existing company practice entitling petitioners
employees to outpatient medicine reimbursements and entitling the spouses of its male
employees to maternity benefits. Petitioner persistently argues the contrary. Both parties point to
their CBA and various documents inclined to prove or disprove their respective factual
contentions.
This case likewise does not fall within any of exceptions to the rule that only questions of
law are proper in a petition for review on certiorari under Rule 45 of the Rules of Court. The
findings and conclusions of the appellate court show that the evidence and the arguments of the
parties had all been carefully considered and passed upon. There are no relevant facts that will
justify a different conclusion which the said court failed to consider. There are likewise no
factual conclusions of the CA and the DOLE which are in conflict.
In any event, even if this Court evaluates petitioners arguments on the merits, we still find
no reason to disturb the findings of the CA on the basis of the records of this case, particularly
the attachments to the Petition.

With respect to the first issue, the CA ruled in this wise:

xxx
Indeed, it has been held that for benefits to be considered as voluntary
employer practice which cannot later on be unilaterally withdrawn by the
employer under Article 100, Labor Code, it must be shown that the practice has
been, for a long period of time, consistently and deliberately made by the
employer.
The Court finds that the element of consistency in the alleged practice
of giving maternity benefits to spouses of petitioners male employees is
lacking in this case.
In its motion for reconsideration of public respondents Order dated March
11, 2002, petitioner enumerated names of twenty (20) male employees whose
spouses gave birth during the alleged period of entitlement (1984-1998) but who
did not avail of maternity benefits. In its comment on the motion for
reconsideration, while private respondent disputed the names of ten (10)
employees, it did not contest the rest of the names mentioned in the list. This only
shows that the granting of maternity benefits to spouses of male employees was
not consistently practiced by petitioner.
Nonetheless, the Court still sustains the grant of maternity benefits to
spouses of male employees on the basis of Schedule L of the 1998-2000 CBA,
explicitly providing the coverage of the Group Hospitalization Benefits
(which include maternity benefits), to include married staff and spouses and
eligible children.
Schedule L, referred to in Article XI of the CBA, provides:
Basic Medical PHP
Room & Board (31) 750
Hospital Service 7,500
Surgical Benefit 15,000
Doctors Call (31) 600
Maternity Benefits
Normal Delivery 10,000
Miscarriage 10,000
Caesarian 20,000

xxx xxx xxx

Coverage
Married staff and spouse and eligible children as
defined in the plan. Single staff and one parent who has
not reached 65 year of age.
Petitioner, however, gives a different interpretation of the foregoing
provision and claims that the persons enumerated in Schedule L refer only to
those who are covered by the insurance in case of hospitalization due to ill
health considering that in such a circumstance, immediate dependents are
likewise covered. The claim cannot prevail over the specific provision of said
coverage of benefits. If ever the provision is capable of two interpretations,
the same must be resolved in favor of labor. Nonetheless, since the grant of
maternity benefits to spouses of male employees of petitioner is premised on the
CBA, the same may be the subject of future renegotiation. As held in Globe
Mackay Cable and Radio Corp. vs. NLRC, 163 SCRA 71 (1988), the CBA is the
law between the parties and, if not acceptable, can be the subject of future
renegotiation.[17] (emphasis and underscoring supplied)
xxx
Petitioner exhorts this Court to interpret Schedule L of the CBA in relation to Section 1, Article
XI of the CBA which provides:
Section 1. Group Hospitalization Insurance
The BANK shall continue to cover all its employees with a group hospitalization
and major surgical insurance plan including maternity benefits with a disablement
maximum amount of PHP100,000.00 per illness per year. All employees will be
furnished with a copy of the booklet explaining the coverage of the Plan (See
Schedule L).
The BANK shall continue extending advances to staff members (or their
dependents as defined in the insurance plan), who have been hospitalized due to
ill health. The amount advanced will be the amount fully reimbursable under the
Group Hospitalization Plan less Medicare but including the twenty percent (20%)
deductible under the plan which absorbed by the BANK. Any shortfall is to be
met by the employee.[18]

Petitioner argues that the above-quoted provision expressly limits the grant of benefits,
specifically maternity benefits, under the group hospitalization insurance plan to its own
employees and that dependents of employees are only entitled to benefits for hospitalization due
to ill-health. In addition, petitioner stresses that there is nothing in the group hospitalization
insurance plan which expressly provides for maternity benefits for spouses of its male
employees. Thus, petitioner asserts that maternity benefits under the CBA should be deemed
granted only to petitioners female employees.
We are unconvinced by petitioners reasoning. A reading of Section 1, Article XI of the
CBA shows that at the time the CBA was signed there was already an existing group
hospitalization insurance plan and petitioner was committing under the CBA to continue the
same. It is undisputed that the plan referred to in said provision is Philamlifes Group Policy No.
P-1620, a copy of which was attached to the Petition as Annex O. In determining the coverage of
the benefits under the said plan, it is the provisions of the plan itself that govern. In the said plan,
the term dependent includes a members spouse who is not more than 65 years of age.[19] The plan
further provides that [u]nless dependents are excluded in any particular Insurance Schedule the
term insured person shall be deemed to include any dependent insured under the Policy.[20] In
other words, dependents enjoy the same benefits as the insured person unless they are expressly
excluded in the Insurance Schedules of benefits. This Court notes that there is nothing in the
Insurance Schedules or the plan itself which excludes dependents from availing of the
maternity benefits granted under the plan. Thus, Schedule L appears to accurately summarize
the provisions of the existing group hospitalization insurance plan with respect to the types of
benefits under the plan and the persons who may avail them. The CA did not err in relying on
Schedule L in finding that the spouses of petitioners male employees may avail of maternity
benefits.
Neither can petitioner believably claim that it had no intention to extend maternity
benefits to the spouses of its male employees under the CBA. Under the same Section 1, Article
XI of the CBA, petitioner also committed to furnish all employees with a booklet explaining the
coverage of the group hospitalization insurance plan. A copy of that booklet called the Standard
Chartered Bank Employee Medical Insurance Plan was attached to the Petition as Annex P.
[21]
Petitioner points to the following passage in Appendix B of the booklet to bolster its position
that only female employees can avail of maternity benefits:
Do I qualify for Maternity Benefits even if I am pregnant at the time I
become eligible?
If you are a female employee and your pregnancy commences prior to
your eligibility date for this insurance, you can claim for the benefits stated in the
Schedule of Medical Insurance Benefits provided you apply for this insurance
within 31 days from the date you become eligible for this insurance. However,
the dependent of an insured employee can only claim under this benefit after
the insured dependent has been continuously insured for a period of 9
months. (emphasis supplied)

In its pleadings, petitioner conveniently omits the second sentence of the foregoing quote
but this Court is not misled by such dissembling tactic. It is undeniable from the full text of
petitioners explanation of maternity benefits that the dependent of an insured employee can
claim maternity benefits subject only to the condition that she has been continuously insured
for a period of nine months. This booklet appears to be a publication solely of petitioner and it is
clear evidence that petitioner itself interprets Philamlife Group Policy No. P-1620 as authorizing
the grant of maternity benefits to dependents of its employees. Having knowingly and voluntarily
incorporated by reference the provisions of its Philamlife group hospitalization insurance plan in
the CBA (as can be seen in Article XI, Section 1 thereof in relation to Schedule L), petitioner
cannot now assert that it never intended to extend maternity benefits to the spouses of its male
employees under the CBA.
Anent the second issue, the Court likewise finds no reason to deviate from the factual
finding of both the DOLE and the CA that there is an established company practice of
reimbursement of outpatient services, including medicine reimbursement, despite the absence of
a provision in the group hospitalization insurance plan regarding outpatient benefits.
Petitioner admits that outpatient benefits, as a matter of practice, were paid by Philamlife
as claims against the disablement maximum. However, petitioner is not assailing the payment of
outpatient benefits in the present case but only assailing the inclusion of outpatient medicine
reimbursements in the term outpatient benefits.
In this regard, we find well-taken the following excerpt from the DOLEs Order[22] dated
April 29, 2002, attached as Annex N of the Petition:
xxx
Insofar as the outpatient benefit is concerned, it must be stressed that this
Office directed the Bank to continue with the outpatient benefit under the old
insurance plan and to carry it over to the new health care plan. This means that the
components of the old health insurance scheme on this particular benefit should
be the same component under the new health plan. In the Decision dated 31 May
2001, this Office made particular mention of the claims for reimbursement
appearing as Annex O of the Unions Position Paper as basis for its directive to
the Bank to continue with the outpatient benefits. These claims refer not only to
x-ray services but also to reimbursement of prescription drugs. The existence
of these benefits were further buttressed in the Unions Reply to SCBs Motion for
Reconsideration (dated 11 July 2001) where the Union submitted copies of
claims for doctors fees, prescription drugs and laboratory fees processed,
approved and paid. These should provide ample guidance to the parties in the
grant of outpatient benefits, which includes medicine reimbursements as earlier
practised [sic].
In making this clarification, we are not unaware of the Banks position that
medicine reimbursement is not part of the HMO package but was unilaterally
granted by the service provider.Even if this were so, however, we do not believe
that the grant by the service provider was without the conformity of the Bank in
light of the exhibits submitted by the Union in its Reply to the SCBs Motion for

Reconsideration (dated 11 July 2001, Annexes B-86-1 to B-99-1, covering the

period 1986 to 1999). Thus, viewed from another angle, a conclusion similar to
the spousal maternity benefit obtains, i.e., that a practice on medicine
reimbursement has similarly developed which the Bank cannot now
unilaterally withdraw. (emphasis supplied)
xxx
We see no reversible error in the CAs adoption of said findings of the DOLE. It is
elementary that factual findings of labor officials, who are deemed to have acquired expertise in
matters within their jurisdiction, are accorded not only respect but finality.[23] In a recent case, it
was similarly held that where the factual findings of the labor tribunals or agencies conform to,
and are affirmed by, the CA, the same are accorded respect and finality, and are binding upon
this Court.[24]
WHEREFORE, in view of the foregoing, the instant petition is hereby DENIED for lack of
merit and the Decision dated July 1, 2004 of the Court of Appeals in CA-G.R. SP No. 71448 is
hereby AFFIRMED.
Costs against petitioner.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and
JESUS SANTIAGO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY
EMPLOYEES UNION and EDA CONCEPCION, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners.
Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin
respondents from enforcing the Decision of 10 March 1986 of the National Labor Relations

Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees
Union, et al., vs. Globe Mackay Cable & Radio Corporation, et al.," the dispositive portion of
which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby SET
ASIDE and another one issued:
1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions
of cost-of-living allowance;
2. Ordering respondents-appellees to pay complainants-appellants their back
allowances reckoned from the time of illegal deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances
of complainants-appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while
Commissioner Cleto T. Villaltuya dissented and voted to affirm in toto the Labor Arbiter's
Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from
enforcing the assailed Decision. On 2 September 1987, we gave due course to the petition and
required the submittal of memoranda, by the parties, which has been complied with.
The facts follow:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance
of non-agricultural workers in the private sector. Petitioner corporation complied with the said
Wage Order by paying its monthly-paid employees the mandated P3.00 per day COLA.
However, in computing said COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by
22 days, which is the number of working days in the company.
Respondent Union disagreed with the computation of the monthly COLA claiming that the daily
COLA rate of P3.00 should be multiplied by 30 days to arrive at the monthly COLA rate. The
union alleged furthermore that prior to the effectivity of Wage Order No. 6, Petitioner
Corporation had been computing and paying the monthly COLA on the basis of thirty (30) days
per month and that this constituted an employer practice, which should not be unilaterally
withdrawn.

After several grievance proceedings proved futile, the Union filed a complaint against Petitioner
Corporation, its President, F. White, and Vice-President, J. Santiago, for illegal deduction,
underpayment, unpaid allowances, and violation of Wage Order No. 6. Petitioners White and
Santiago were sought to be held personally liable for the money claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding
that since the individual petitioners acted in their corporate capacity they should not have been
impleaded; and that the monthly COLA should be computed on the basis of twenty two (22)
days, since the evidence showed that there are only 22 paid days in a month for monthly-paid
employees in the company. His reasoning, inter alia, was as follows:
To compel the respondent company to use 30 days in a month to compute the
allowance and retain 22 days for vacation and sick leave, overtime pay and other
benefits is inconsistent and palpably unjust. If 30 days is used as divisor, then it
must be used for the computation of all benefits, not just the allowance. But this is
not fair to complainants, not to mention that it will contravene the provision of the
parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner
Corporation was guilty of illegal deductions, upon the following considerations: (1) that the
P3.00 daily COLA under Wage Order No. 6 should be paid and computed on the basis of thirty
(30) days instead of twenty-two (22) days since workers paid on a monthly basis are entitled to
COLA on Saturdays, Sundays and legal holidays "even if unworked;" (2) that the full allowance
enjoyed by Petitioner Corporation's monthly-paid employees before the CBA executed between
the parties in 1982 constituted voluntary employer practice, which cannot be unilaterally
withdrawn; and (3) that petitioners White and Santiago were properly impleaded as respondents
in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their daily living allowance during the
days that they are paid their basic wage, even if unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is being
paid. In other words, the payment of COLA is mandated only for the days that the employees are
paid their basic wage, even if said days are unworked. So that, on the days that employees are

not paid their basic wage, the payment of COLA is not mandated. As held in University of
Pangasinan Faculty Union vs. University of Pangasinan, L-63122, February 20, 1984, 127
SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment
of basic wages. Hence, we have the principle of 'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a month, they
are deemed paid their basic wages for all those days and they should be entitled to their COLA
on those days "even if unworked," as the NLRC had opined. Peculiar to this case, however, is the
circumstance that pursuant to the Collective Bargaining Agreement (CBA) between Petitioner
Corporation and Respondent Union, the monthly basic pay is computed on the basis of five (5)
days a week, or twenty two (22) days a month. Thus, the pertinent provisions of that Agreement
read:
Art. XV(a)Eight net working hours shall constitute the regular work day for
five days.
Art. XV(b)Forty net hours of work, 5 working days, shall constitute the regular
work week.
Art. XVI, Sec. 1(b)All overtime worked in excess of eight net hours daily or in
excess of 5 days weekly shall be computed on hourly basis at the rate of time and
one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for
purposes of computing overtime pay, the monthly wage is divided by the number of actual work
days in a month and then, by eight (8) working hours. If a monthly-paid employee renders
overtime work, he is paid his basic salary rate plus one-half thereof. For example, after
examining the specimen payroll of employee Jesus L. Santos, the Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid
base pay plus 50% premium. This is over and above his monthly basic pay as
supported by the fact that base pay was paid. If the 6th and 7th days of the week
are deemed paid even if unworked and included in the monthly salary, Santos
should not have been paid his base pay for Saturday and Sunday but should have
received only the 50% overtime premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed
that in computing the vacation and sick leaves of the employees, Petitioner Corporation
consistently used twenty-two (22) days.

Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day
work week, it will have to be held that the COLA should be computed on the basis of twenty two
(22) days, which is the period during which the monthly-paid employees of Petitioner
Corporation receive their basic wage. The CBA is the law between the parties and, if not
acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in
1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should
not be construed as constitutive of voluntary employer practice, which cannot now be
unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced
over a long period of time, and must be shown to have been consistent and deliberate. Adequate
proof is wanting in this respect. The test of long practice has been enunciated thus:
... Respondent Company agreed to continue giving holiday pay knowing fully
well that said employees are not covered by the law requiring payment of holiday
pay.' (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, L-50568,
November 7, 1979, 94 SCRA 270). (Emphasis ours)
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of the Wage Orders. It was only when the Rules Implementing Wage Order No.
4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its
monthly equivalent was laid down, thus:
Section 3. Application of Section 2-xxx xxx xxx
(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634,
1678 and 1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on Saturdays and
Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time, when applied to a
company like respondent which observes a 5-day work week (or where 2 days in
a week, not necessarily Saturday and Sunday, are not considered paid), the

monthly equivalent of a daily allowance is arrived at by multiplying the daily

allowance by 262 divided by 12. This formula results in the equivalent of 21.8
days in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law." (Article 2155, 1 in relation
to Article 2154 2 of the Civil Code). Since it is a past error that is being corrected, no vested right
may be said to have arisen nor any diminution of benefit under Article 100 of the Labor
Code 3 may be said to have resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to discuss the liability of the officers
of Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission,
dated 10 March 1986, is SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985,
is hereby REINSTATED. The Temporary Restraining Order heretofore issued is hereby made
permanent.
SO ORDERED.
Yap, C.J., Paras, and Sarmiento, JJ., concur.
Padilla, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 131247 January 25, 1999
PRUBANKERS ASSOCIATION, petitioner,
vs.
PRUDENTIAL BANK & TRUST COMPANY, respondent.
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation of the lower ranks in an office
hierarchy wirhout a corresponding raise for higher-tiered employees in the same region of the
country, resulting in the elimination or the severe diminution of the distinction between the two
groups. Such distortion does not arise when a wage order gives employees in one branch of a
bank higher compensation than that given to their counterparts in other regions occupying
the same pay scale, who are not covered by said wage order. In short, the implementation of
wage orders in one region but not in others does not in itself necessarily result in wage distortion.
The Case
Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision 1 of
the Court of Appeals in CA-GR SP No. 42525. The dispositive portion of the challenged
Decision reads:
WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary
Arbitration Committee dated June 18, 1996 is hereby REVERSED and SET
ASIDE for having been issued with grave abuse of discretion tantamount to lack
of or excess of jurisdiction, and a new judgment is rendered finding that no wage
distortion resulted from the petitioner's separate and regional implementation of
Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario.

The June 18, 1996 Decision of the Voluntary Arbitration Commitee, 2 which the Court of Appeals
reversed and set aside, disposed as follows:
WHEREFORE, it is hereby ruled that the Bank's separate and regional
implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario
branches created a wage distortion in the Bank nationwide which should be
resolved in accordance with Art. 124 of the Labor Code. 3
The Facts
The facts of the case are summarized by the Court of Appeals thus:
On November 18, 1993, the Regional Tripartite Wages and Productivity Board of
Region V issued Wage Order No. RB 05-03 which provided for a Cost of Living
Allowance (COLA) to workers in the private sector who ha[d] rendered service
for at least three (3) months before its effectivity, and for the same period
[t]hereafter, in the following categories: SEVENTEEN PESOS AND FIFTY
CENTAVOS (P17.50) in the cities of Naga and Legaspi; FIFTEEN PESOS AND
FIFTY CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga, Pili and the
city of Iriga; and TEN PESOS (P10.00) for all other areas in the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite Wages and
Productivity Board of Region VII issued Wage Order No. RB VII-03, which
directed the integration of the COLA mandated pursuant to Wage Order No. RO
VII-02-A into the basic pay of all workers. It also established an increase in the
minimum wage rates for all workers and and employees in the private sector as
follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue and Lapulapu;
Five Pesos (P5.00) in the municipalities of Compostela, Liloan, Consolacion,
Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete,
Bais, Canlaon and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its employees at its Naga
Branch, the only branch covered by Wage Order No. RB 5-03, and integrated the
P150.00 per month COLA into the basic pay of its rank-and-file employees at its
Cebu, Mabolo and P. del Rosario branches, the branches covered by Wage Order
No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the petitioner
requesting that the Labor Management Committee be immediately convened to
discuss and resolve the alleged wage distortion created in the salary structure
upon the implementation of the said wage orders. Respondent Association then
demanded in the Labor Management Committee meetings that the petitioner
extend the application of the wage orders to its employees outside Regions V and
VII, claiming that the regional implementation of the said orders created a wage
distortion in the wage rates of petitioner's employees nationwide. As the grievance
could not be settled in the said meetings, the parties agreed to submit the matter to

voluntary arbitration. The Arbitration Committee formed for that purpose was
composed of the following: public respondent Froilan M. Bacungan as Chairman,
with Attys. Domingo T. Anonuevo and Emerico O. de Guzman as members. The
issue presented before the Committee was whether or not the bank's separate and
regional implementation of Wage Order No. 5-03 at its Naga Branch and Wage
Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches, created a wage
distortion in the bank nationwide.
The Arbitration Committee on June 18, 1996 rendered questioned decision. 4
Ruling of the Court of Appeals
In ruling that there was no wage distortion, the Court of Appeals held that the variance in the
salary rates of employees in different regions of the country was justified by RA 6727. It noted
that "the underlying considerations in issuing the wage orders are diverse, based on the
distinctive situations and needs existing in each region. Hence, there is no basis to apply the
salary increases imposed by Wage Order No. VII-03 to employees outside of Region VII."
Furthermore, the Court of Appeals ruled that "the distinctions between each employee group in
the region are maintained, as all employees were granted an increase in minimum wage rate. 5
The Issues
In its Memorandum, petitioner raises the following issues: 6
I
Whether or not the Court of Appeals departed from the usual course of judicial
procedure when it disregarded the factual findings of the Voluntary Arbitration
Committee as to the existence of wage distortion.
II
Whether or not the Court of Appeals committed grave error in law when it ruled
that wage distortion exists only within a region and not nationwide.
III
Whether or not the Court of Appeals erred in implying that the term
"establishment" as used in Article 125 of the Labor Code refers to the regional
branches of the bank and not to the bank as a whole.
The main issue is whether or not a wage distortion resulted from respondent's implementation of
the aforecited Wage Orders. As a preliminary matter, we shall also take up the question of forumshopping.
The Court's Ruling

The petition is devoid of merit. 7

Preliminary Issue: Forum-Shopping
Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forumshopping. It maintains that petitioner failed to comply with Section 2 of Rule 42 of the Rules of
Court, which requires that parties must certify under oath that they have not commenced any
other action involving the same issues in the Supreme Court, the Court of Appeals, or different
divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, they
must state the status of the same; and if they should thereafter learn that a similar action or
proceeding has been filed or is pending before the said courts, they should promptly inform the
aforesaid courts or any other tribunal or agency within five days therefrom. Specifically,
petitioner accuses respondent of failing to inform this Court of the pendency of NCMB-NCRRVA-O4-012-97 entitled "In Re: Voluntary Arbitration between Prudential Bank and Prubankers
Association" (hereafter referred to as "voluntary arbitration case"), an action involving issues
allegedly similar to those raised in the present controversy.
In its Reply, petitioner effectively admits that the voluntary arbitration case was already pending
when it filed the present petition. However, it claims no violation of the rule against forumshopping, because there is no identity of causes of action and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the
Interim Rules and Guidelines issued by this Court on January 11, 1983, which imposed a
sanction in this wise: "A violation of the rule shall constitute contempt of court and shall be a
cause for the summary dismissal of both petitions, without prejudice to the taking of appropriate
action against the counsel or party concerned." Thereafter, the Court restated the rule in Revised
Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule was embodied in
the 1997 amendments to the Rules of Court.
As explained by this Court in First Philippine International Bank v. Court of Appeals, 8 forumshopping exists where the elements of litis pendentia are present, and where a final judgment in
one case will amount to res judicata in the other. Thus, there is forum-shopping when, between
an action pending before this Court and another one, there exist: "a) identity of parties, or at least
such parties as represent the same interests in both actions, b) identity of rights asserted and
relief prayed for, the relief being founded on the same facts, and c) the identity of the two
preceding particulars is such that any judgement rendered in the other action, will, regardless of
which party is successful amount to res judicata in the action under consideration; said requisites
also constitutive of the requisites for auter action pendant or lis pendens." 9 Another case
elucidates the consequence of forum-shopping: "[W]here a litigant sues the same party against
whom another action or actions for the alleged violation of the same right and the enforcement of
the same relief is/are still pending, the defense of litis pendentia in one case is a bar to the others;
and, a final judgment in one would constitute res judicata and thus would cause the dismissal of
the rest." 10
The voluntary arbitration case involved the issue of whether the adoption by the Bank of
regionalized hiring rates was valid and binding. On the other hand, the issue now on hand

revolves around the existence of a wage distortion arising from the Bank's separate and regional
implementation of the two Wage Orders in the affected branches. A closer look would show that,
indeed, the requisites of forum-shopping are present.
First, there is identity of parties. Both cases are between the Bank and the Association acting on
behalf of all its members. Second, although the respective issues and reliefs prayed for in the two
cases are stated differently, both actions boil down to one single issue: the validity of the Bank's
regionalization of its wage structure based on RA 6727. Even if the voluntary arbitration case
calls for striking, down the Bank's regionalized hiring scheme while the instant petition calls for
the correction of the alleged wage distortion caused by the regional implementation of Wage
Order No. VII-03, the ultimate relief prayed for in both cases is the maintenance of the Bank's
national wage structure. Hence, the final disposition of one would constitute res judicata in the
other. Thus, forum-shopping is deemed to exist and, on this basis, the summary dismissal of both
actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its
importance.
Main Issue: Wage Distortion
The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended
by Republic Act No. 6727, which reads:
Art. 124. Standards/Criteria for Minimum Wage Fixing . . .
As used herein, a wage distortion shall mean a situation where an increase in
prescribed wage results in the elimination of severe contraction of intentional
quantitative differences in wage or salary rates between and among employee
groups in an establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or other logical bases of
differentiation.
Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a
classification of positions and ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in terms of wages and other
emoluments. Where a significant change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the hierarchy of positions, negating as
a result thereof the distinction between one level of position from the next higher level, and
resulting in a parity between the lowest level and the next higher level or rank, between new
entrants and old hires, there exists a wage distortion. . . . . The concept of a wage distortion
assumes an existing grouping or classification of employees which establishes distinctions
among such employees on some relevant or legitimate basis. This classification is reflected in a
differing wage rate for each of the existing classes of employees" 11
Wage distortion involves four elements:

1. An existing hierarchy of positions with corresponding salary rates

2. A significant change in the salary rate of a lower pay class without a
concomitant increase in the salary rate of a higher one
3. The elimination of the distinction between the two levels
4. The existence of the distortion in the same region of the country
In the present case, it is clear that no wage distortion resulted when respondent implemented the
subject Wage Orders in the covered branches. In the said branches, there was an increase in the
salary rates of all pay classes. Furthermore, the hierarchy of positions based on skills, lengh of
service and other logical bases of differentiation was preserved. In other words, the quantitative
difference in compensation between different pay classes remained the same in all branches in
the affected region. Put differently, the distinction between Pay Class 1 and Pay Class 2, for
example, was not eliminated as a result of the implementation of the two Wage Orders in the said
region. Hence, it cannot be said that there was a wage distortion.
Petitioner argues that a wage distortion exists, because the implementation of the two Wage
Orders has resulted in the discrepancy in the compensation of employees of similar pay
classification in different regions. Hence, petitioner maintains that, as a result of the two Wage
Orders, the employees in the affected regions have higher compensation than their counterparts
of the same level in other regions. Several tables are presented by petitioner to illustrate that the
employees in the regions covered by the Wage Orders are receiving more than their counterparts
in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees in different rungs, is not at issue
here, but a wage disparity between employees in the same rung but located in different regions of
the country.
Contrary to petitioner's postulation, a disparity in wages between employees holding similar
positions but in different regions does not constitute wage distortion as contemplated by law. As
previously enunciated, it is the hierarchy of positions and the disparity of their corresponding
wages and other emoluments that are sought to be preserved by the concept of wage distortion.
Put differently, a wage distortion arises when a wage order engenders wage parity between
employees in different rungs of the organizational ladder of the same establishment. It bears
emphasis that wage distortion involves a parity in the salary rates of different pay classes which,
as a result, eliminates the distinction between the different ranks in the same region.
Different Regional Wages
Mandated by RA 6727
Petitioner's claim of wage distortion must also be denied for one other reason. The difference in
wages between employees in the same pay scale in different regions is not the mischief sought to

be banished by the law. In fact, Republic Act No. 6727 (the Wage Rationalization Act),
recognizes "existing regional disparities in the cost of living." Section 2 of said law provides:
Sec 2. It is hereby declared the policy of the State to rationalize the fixing of
minimum wages and to promote productivity-improvement and gain-sharing
measures to ensure a decent standard of living for the workers and their families;
to guarantee the rights of labor to its just share in the fruits of production; to
enhance employment generation in the countryside through industry dispersal;
and to allow business and industry reasonable returns on investment, expansion
and growth.
The State shall promote collective bargaining as the primary mode of settling
wages and other terms and conditions of employment; and whenever necessary,
the minimum wage rates shall be adjusted in a fair and equitable manner,
considering existing regional disparities in the cost of living and other socioeconomic factors and the national economic and social development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional
minimum wages to be established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the minimum standards of living
necessary for the health, efficiency and general well-being of the employees
within the frame work of the national economic and social development program.
In the determination of such regional minimum wages, the Regional Board shall,
among other relevant factors, consider the following:
a. The demand for living wages;
b. Wage adjustment vis-a-vis the consumer price index;
c. The cost of living and changes or increases therein;
d. The needs of workers and their families;
e. The need to induce industries to invest in the countryside;
f. Improvements in standards of living;
g. The prevailing wage levels;
h. Fair return of the capital invested and capacity to pay of employers;
I.

Effects on employment generation and family income; and

II.

The equitable distribution of income and wealth along the imperatives of social
and economic development.

From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in
wages between employees with similar positions in different regions is necessarily expected. In
insisting that the employees of the same pay class in different regions should receive the same
compensation, petitioner has apparently misunderstood both the meaning of wage distortion and
the intent of the law to regionalize wage rates.
It must be understood that varying in each region of the country are controlling factors such as
the cost of living; supply and demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore the necessity of the law. Wages in
some areas may be increased in order to prevent migration to the National Capital Region and,
hence, to decongest the metropolis. Therefore, what the petitioner herein bewails is precisely
what the law provides in order to achieve its purpose.
Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant to RA
6727 do not have the authority to issue wage orders based on the distinctive situations and needs
existing in each region. So also, . . . it does not insist that the [B]ank should not implement
regional wage orders. Neither does it seek to penalize the Bank for following Wage Order VII03. . . . What it simply argues is that it is wrong for the Bank to peremptorily abandon a national
wage structure and replace the same with a regionalized structure in violation of the principle of
equal pay for equal work. And, it is wrong to say that its act of abandoning its national wage
structure is mandated by law."
As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not
objecting, on the one hand, to the right of the regional wage boards to impose a regionalized
wage scheme; while insisting, on the other hand, on a national wage structure for the whole
Bank. To reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.
The objective of the law also explains the wage disparity in the example cited by petitioner:
Armae Librero, though only in Pay Class 4 in Mabolo, was, as a result of the Wage Order,
receiving more than Bella Cristobal, who was already in Pay Class 5 in Subic. 12 RA 6727
recognizes that there are different needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region does not necessarily mean that he
or she is better off than a person receiving less in another region. We must consider, among
others, such factors as cost of living, fulfillment of national economic goals, and standard of
living. In any event, this Court, in its decisions, merely enforces the law. It has no power to pass
upon its wisdom or propriety.
Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage Order in only one region violates the
equal-pay-for-equal-work principle. This is not correct. At the risk of being repetitive, we stress
that RA 6727 mandates that wages in every region must be set by the particular wage board of
that region, based on the prevailing situation therein. Necessarily, the wages in different regions

will not be uniform. Thus, under RA 6727, the minimum wage in Region 1 may be different
from that in Region 13, because the socioeconomic conditions in the two regions are different.
Meaning of "Establishment"
Petitioner further contends that the Court of Appeals erred in interpreting the meaning of
"establishment" in relation to wage distortion. It quotes the RA 6727 Implementing Rules,
specifically Section 13 thereof which speaks of "workers working in branches or agencies of
establishments in or outside the National Capital Region." Petitioner infers from this that the
regional offices of the Bank do not themselves constitute, but are simply branches of, the
establishment which is the whole bank. In effect, petitioner argues that wage distortion covers
the pay scales even of employees in different regions, and not only those of employees in the
same region or branch. We disagree.
Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of
establishments in or outside the National Capital Region shall be those applicable in the place
where they are sanctioned" The last part of the sentence was omitted by petitioner in its
argument. Given the entire phrase, it is clear that the statutory provision does not support
petitioner's view that "establishment" includes all branches and offices in different regions.
Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992) entitled "Revised
Guidelines on Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance
Increases Granted by the Regional Tripartite Wages and Productivity Board," which states that
"establishment" "refers to an economic unit which engages in one or predominantly one kind of
economic activity with a single fixed location."
Management Practice
Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the
status of an established management practice; thus, it is estopped from implementing a wage
order for a specific region only. We are not persuaded. Said nationwide uniform wage policy of
the Bank had been adopted prior to the enactment of RA 6727. After the passage of said law, the
Bank was mandated to regionalize its wage structure. Although the Bank implemented Wage
Order Nos. NCR-01 and NCR-02 nationwide instead of regionally even after the effectivity of
RA 6727, the Bank at the time was still uncertain about how to follow the new law. In any event,
that single instance cannot be constitutive of "management practice."
WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against
petitioner.1wphi1.nt
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 145561

June 15, 2005

HONDA PHILS., INC., petitioner,

vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 seeks the reversal of the Court of Appeals decision1 dated
September 14, 20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP No. 59052. The
appellate court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator
who ruled that petitioner Honda Philippines, Inc.s (Honda) pro-rated payment of the 13th and
14th month pay and financial assistance to its employees was invalid.
As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement
(CBA) forged between petitioner Honda and respondent union Samahan ng Malayang
Manggagawa sa Honda (respondent union) which contained the following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the implementation [of] the 13th month
pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of
13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial
assistance to covered employees in December of each year, of not less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties started renegotiations for the fourth and fifth years of their CBA. When the talks between the parties
bogged down, respondent union filed a Notice of Strike on the ground of bargaining deadlock.

Thereafter, Honda filed a Notice of Lockout. On March 31, 1999, then Department of Labor and
Employment (DOLE) Secretary Laguesma assumed jurisdiction over the labor dispute and
ordered the parties to cease and desist from committing acts that would aggravate the situation.
Both parties complied accordingly.
On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of
unfair labor practice alleging that Honda illegally contracted out work to the detriment of the
workers. Respondent union went on strike and picketed the premises of Honda on May 19, 1999.
On June 16, 1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the
case and certified the same to the National Labor Relations Commission (NLRC) for compulsory
arbitration. The striking employees were ordered to return to work and the management accepted
them back under the same terms prior to the strike staged.
On November 22, 1999, the management of Honda issued a memorandum4 announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the
thirty-one (31)-day long strike shall be considered unworked days for purposes of computing
said benefits. As per the companys new formula, the amount equivalent to 1/12 of the
employees basic salary shall be deducted from these bonuses, with a commitment however that
in the event that the strike is declared legal, Honda shall pay the amount deducted.
Respondent union opposed the pro-rated computation of the bonuses in a letter dated November
25, 1999. Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue. In
a letter dated January 4, 2000,5 the BWC agreed with the pro-rata payment of the 13th month pay
as proposed by Honda.
The matter was brought before the Grievance Machinery in accordance with the parties existing
CBA but when the issue remained unresolved, it was submitted for voluntary arbitration. In his
decision6 dated May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Hondas
computation, to wit:
WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is
hereby ruled that the Companys implementation of pro-rated 13th Month pay, 14th Month pay
and Financial Assistance [is] invalid. The Company is thus ordered to compute each provision in
full month basic pay and pay the amounts in question within ten (10) days after this Decision
shall have become final and executory.
The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.
SO ORDERED.7

Hondas Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000.
Thus, a petition was filed with the Court of Appeals, however, the petition was dismissed for lack
of merit.
Hence, the instant petition for review on the sole issue of whether the pro-rated computation of
the 13th month pay and the other bonuses in question is valid and lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit.8 As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they may deem convenient provided
these are not contrary to law, morals, good customs, public order or public policy.9 Thus, where
the CBA is clear and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law.10
In some instances, however, the provisions of a CBA may become contentious, as in this case.
Honda wanted to implement a pro-rated computation of the benefits based on the "no work, no
pay" rule. According to the company, the phrase "present practice" as mentioned in the CBA
refers to the manner and requisites with respect to the payment of the bonuses, i.e., 50% to be
given in May and the other 50% in December of each year. Respondent union, however, insists
that the CBA provisions relating to the implementation of the 13th month pay necessarily relate
to the computation of the same.
We agree with the findings of the arbitrator that the assailed CBA provisions are far from being
unequivocal. A cursory reading of the provisions will show that they did not state categorically
whether the computation of the 13th month pay, 14th month pay and the financial assistance
would be based on one full months basic salary of the employees, or pro-rated based on the
compensation actually received. The arbitrator thus properly resolved the ambiguity in favor of
labor as mandated by Article 1702 of the Civil Code.11 The Court of Appeals affirmed the
arbitrators finding and added that the computation of the 13th month pay should be based on the
length of service and not on the actual wage earned by the worker.
We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor
officials, who are deemed to have acquired expertise in matters within their respective
jurisdiction, are generally accorded not only respect but even finality, and bind us when
supported by substantial evidence. It is not our function to assess and evaluate the evidence all
over again, particularly where the findings of both the arbiter and the Court of Appeals
coincide.12

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all
employers to pay their employees a 13th month pay, was issued to protect the level of real wages
from the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted
that there had been no increase in the minimum wage since 1970 and the Christmas season was
an opportune time for society to show its concern for the plight of the working masses so that
they may properly celebrate Christmas and New Year.13
Under the Revised Guidelines on the Implementation of the 13th month pay issued on November
16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided
that the minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of
the total basic salary earned by an employee within a calendar year. The guidelines pertinently
provides:
The "basic salary" of an employee for the purpose of computing the 13th month pay shall include
allremunerations or earnings paid by his employer for services rendered but does not include
allowances and monetary benefits which are not considered or integrated as part of the regular or
basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime
premium, night differential and holiday pay, and cost-of-living allowances.14 (Emphasis
supplied)
For employees receiving regular wage, we have interpreted "basic salary" to mean, not the
amount actually received by an employee, but 1/12 of their standard monthly wage multiplied by
their length of service within a given calendar year. Thus, we exclude from the computation of
"basic salary" payments for sick, vacation and maternity leaves, night differentials, regular
holiday pay and premiums for work done on rest days and special holidays.15 In Hagonoy Rural
Bank v. NLRC,16 St. Michael Academy v. NLRC,17 Consolidated Food Corporation v. NLRC,18 and
similar cases, the 13th month pay due an employee was computed based on the employees basic
monthly wage multiplied by the number of months worked in a calendar year prior to separation
from employment.
The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation
or separation from work. As the rules state, under these circumstances, an employee is entitled to
a pay in proportion to the length of time he worked during the year, reckoned from the time he
started working during the calendar year.19 The Court of Appeals thus held that:
Considering the foregoing, the computation of the 13th month pay should be based on the length
of service and not on the actual wage earned by the worker. In the present case, there being no
gap in the service of the workers during the calendar year in question, the computation of the
13th month pay should not be pro-rated but should be given in full.20 (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the
13th month pay before the instant case. Honda did not adduce evidence to show that the
13th month, 14th month and financial assistance benefits were previously subject to deductions or
pro-rating or that these were dependent upon the companys financial standing. As held by the
Voluntary Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to
adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M
substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is
an implicit acceptance that prior to the strike, a full month basic pay computation was the
"present practice" intended to be maintained in the CBA.21
The memorandum dated November 22, 1999 which Honda issued shows that it was the first time
a pro-rating scheme was to be implemented in the company. It was a convenient coincidence for
the company that the work stoppage held by the employees lasted for thirty-one (31) days or
exactly one month. This enabled them to devise a formula using 11/12 of the total annual salary
as base amount for computation instead of the entire amount for a 12-month period.
That a full month payment of the 13th month pay is the established practice at Honda is further
bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that
when they were absent from work due to motorcycle accidents, and after they have exhausted all
their leave credits and were no longer receiving their monthly salary from Honda, they still
received the full amount of their 13th month, 14th month and financial assistance pay.22
The case of Davao Fruits Corporation v. Associated Labor Unions, et al.23 presented an example
of a voluntary act of the employer that has ripened into a company practice. In that case, the
employer, from 1975 to 1981, freely and continuously included in the computation of the
13th month pay those items that were expressly excluded by the law. We have held that this act,
which was favorable to the employees though not conforming to law, has ripened into a practice
and therefore can no longer be withdrawn, reduced, diminished, discontinued or eliminated.
Furthermore, in Sevilla Trading Company v. Semana,24 we stated:
With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold
that jurisprudence has not laid down any rule requiring a specific minimum number of years. In
the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the company
practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs.
Abarquez, the employer, for three (3) years and nine (9) months, approved the commutation to
cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers.
While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a fixed monthly
emergency allowance from November 1976 to February 1980, or three (3) years and four (4)

months. In all these cases, this Court held that the grant of these benefits has ripened into
company practice or policy which cannot be peremptorily withdrawn. In the case at bar,
petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves
for unused sick leave and vacation leave in the computation of their 13th-month pay for at least
two (2) years. This, we rule likewise constitutes voluntary employer practice which cannot be
unilaterally withdrawn by the employer without violating Art. 100 of the Labor
Code.25 (Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the
underlying principle for the grant of this benefit. It is primarily given to alleviate the plight of
workers and to help them cope with the exorbitant increases in the cost of living. To allow the
pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law and the
mandate that the workingmans welfare should be the primordial and paramount
consideration.26 What is more, the factual milieu of this case is such that to rule otherwise
inevitably results to dissuasion, if not a deterrent, for workers from the free exercise of their
constitutional rights to self-organization and to strike in accordance with law.27
WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of
Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No.
59052, affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby
AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-24632

October 26, 1968

LEXAL LABORATORIES and/or JOSE ANGELES, Manager, petitioners,

vs.
NATIONAL CHEMICAL INDUSTRIES WORKERS UNION-PAFLU (Lexal Laboratories
Chapter) and THE COURT OF INDUSTRIAL RELATIONS, respondents.
Matias, Liboro & Benitez for petitioners.
F. M. de los Reyes for respondents.
SANCHEZ, J.:
Condensed, the question before us is this: Are per diems included in backpay? This problem
came about because of the implementation of the decision of the Court of Industrial Relations
(CIR) of June 29, 19631directing petitioner Lexal Laboratories (Lexal) to reinstate Guillermo
Ponseca, a dismissed employee, to his former position "with full back wages from the day of his
dismissal up to the time he is actually reinstated without loss of his seniority rights and of such
other rights and privileges enjoyed by him prior to his lay-off."
CIR, confirming the report of its Chief Examiner and Economist, ruled in its order of February
16, 1965 that Ponseca was entitled to back wages from November 5, 1958 when he ceased
reporting for work, to November 24, 1963 a day prior to his reinstatement on November 25,
1963; and that for the number of days that he was supposed to be in Manila, he was to earn P4.50
a day, and during the periods when he should have been in the provinces, P4.50 a day plus a per
diem of P4.00 or a total of P8.50 daily. This order was subsequently modified by CIR's resolution
of May 22, 1965 which directed the deduction of P5,000.00 previously paid Ponseca under the
judgment and P610.00 which Ponseca earned from other sources during his lay-off.
Petitioners vigorously objected to the inclusion of the P4.00 per diem in the computation of
Ponseca's back wages because the latter "did not actually spend for his meals and lodgings for he
was all the time in Manila, his station." CIR brushed this contention aside. Whereupon,
petitioners appealed to this Court from the order of February 16, 1965 and the resolution of May
22, 1965.2
1. Our attention has not been drawn to a rule of law or jurisprudence which holds that per
diems are integral parts of regular wages or salaries. Neither is it suggested in the record that per
diems formed part of the terms of employment between petitioners and respondent union (of
which Ponseca is a member), or with Ponseca himself for that matter. Nor was pronouncement
made either in the original decision or in the questioned order and resolution of CIR that per
diems are part of back wages. CIR simply hit upon the idea that per diems should be paid as part
of the back wages because they were "paid to him regularly."
Per diem, the dictionary definition tells us, is "a daily allowance" given "for each day he (an
officer or employee) was away from his home base".3 It would seem to us that per diem is
intended to cover the cost of lodging and subsistence of officers and employees when the latter
are on duty outside of their permanent station.4 Lexal concedes that whenever its employee,

Guillermo Ponseca, was out of Manila, he was allowed a per diem of P4.00 broken down as
follows: P1.00 for breakfast; P1.00 for lunch; P1.00 for dinner; and P1.00 for lodging. Ponseca
during the period involved did not leave Manila. Therefore, he spent nothing for meals and
lodging outside of Manila. Because he spent nothing, there is nothing to be reimbursed.
Since per diems are in the nature of reimbursement, Ponseca should not be entitled to per diems.
Besides, back wages are what an employee has lost "in the way of wages" due to his dismissal.
So that, because Ponseca earned P4.50 a day, "then that is the amount which he lost daily by
reason of his dismissal, nothing more nothing less:"5
We, accordingly, rule that CIR erred in including per diems in the back wages due and payable to
Guillermo Ponseca.
2. The rest is a matter of mathematical computation but first to the facts. The union's evidence is
that since the last part of October, 1958 Ponseca had been reporting everyday to the bodega of
respondents.6 Anyway, prior to Ponseca's dismissal, he worked daily either in Manila or in the
provinces.7
But the order of February 15, 1965 credits Ponseca with 1,856 days for the period from
November 5, 1958 to November 24, 1963. We checked the accuracy of this figure. We found that
there should only be 1,846 days from November 5, 1958 to November 24, 1963, viz:

November 5, 1958 to December 31,

1958

57 days

January 1, 1959 to December 31, 1959

365 days

January 1, 1960 to December 31, 1960

366 days

January 1, 1961 to December 31, 1961

365 days

January 1, 1962 to December 31, 1962

365 days

January 1, 1963 to November 24, 1963

328 days

T O TAL

1,846 days

This brings us to the total amount due from Lexa1 to Guillermo Ponseca, as follows: .

1,846 days

P4.50

P8,307.00

Less:
Advance
payment

P5,000.00

Earnings from other

sources

P610.00

NET BACKPAY

P5,610.008

P2,697.00 .

For the foregoing reasons, the order of February 16, 1965, and the resolution of May 22, 1965,
both of the Court of Industrial Relations, in its Case No. 2002-ULP, entitled "National Chemical
Industries Workers Union-PAFLU (Lexal Laboratories Chapter), Complainant, versus Lexal
Laboratories and Jose Angeles, its Manager, Respondents", are hereby modified; and
Judgment is hereby rendered ordering petitioner Lexal Laboratories to pay Guillermo Ponseca,
by way of net backpay, the sum of P2,697.00.
No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Angeles, Fernando and Capistrano,
JJ., concur.
Zaldivar, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 58094-95 March 15, 1989
MAMERTO B. ASIS, petitioner,
vs.
MINISTER OF LABOR AND EMPLOYMENT, CENTRAL AZUCARERA DE PILAR,
and EMMANUEL JAVELLANA, respondents.
Belo, Ermitano Abiera & Associates for petitioner.
Yolanda, Quisumbing-Javellana & Associates for respondent Emmanuel Q. Javellana.
V. Veloso & Associates for respondent Central Azucarera

NARVASA, J.:

The facts of this case depict a picture that is hardly edifying: avidity trying to wear the mantle of
right. The facts raise a twofold issue: whether a company which has been haled to court by its
own in-house counsel is obliged to continue his employment and entrust its legal affairs to him,
specially when his cause of action has been shown to be devoid of merit; and whether a firm is
bound to retain in its service a personnel manager who has incited the very employees under his
supervision and control to file complaints against it. Asserting a right to sue his employer for a
legitimate grievance without meriting retaliatory action, the petitioner claims that his dismissal
for such conduct or on the ground, essentially, of loss of confidence, was illegal; and he asks this
Court to annul the judgment of the respondent Commission, which upheld the termination of his
services in respondent company. Said claim finds no support in either the law or the established
facts and must, therefore, be rejected.
The petitioner was appointed Legal Counsel of the Central Azucarera de Pilar 1 Later,
concurrently with his position as Legal Counsel, he was named Head of its Manpower and
Services Department.
In addition to his basic salaries and other fringe benefits, his employer granted him, and a few
other officials of the company, a monthly ration of 200 liters of gasoline and a small tank of
liquefied petroleum gas (LPG). 2 This monthly ration was temporarily revoked some five (5)
years later as a cost reduction measure of the Central .3 The petitioner and the other officials
adversely affected moved for reconsideration. Their plea was denied.
The petitioner then commenced an action against the Central with the Regional Office of the
Ministry of Labor and Employment, seeking restoration of his monthly ration of gasoline and
LPG which, as aforesaid, had been temporarily suspended. The case was docketed as LRD Case
No. 1632.
Shortly afterwards, he filed another action against his employer, docketed as LRD Case No.
1685, this time complaining against the Central's memorandum ordaining his relief (by being
placed on leave of absence) as the Central's Legal Counsel and Head of the Manpower Services
Department, impleaded by the petitioner as co-respondent was Emmanuel Q. Javellana, the
Finance Manager and Comptroller of the Central, who had signed the memorandum for his
relief. 4 The petitioner theorized that he had in effect been dismissed, illegally. 5
The two cases were jointly heard and decided by the Regional Director. The latter's
judgments 6 was for the petitioner's reinstatement to his former positions without loss of
seniority, benefits and other privileges, the payment to him of back wages from date of his relief
up to time of reinstatement, and the delivery to him of the monthly benefits from the time of their
temporary revocation up to actual restoration or, at his option, the money equivalent thereof. 7
The Deputy Minister of Labor however reversed this decision of the Regional Director, on
appeal taken by the Central; the Deputy Minister ordered the dismissal of the petitioner's
complaint. 8 The Deputy Minister found that the evidence satisfactorily established that the
Central's suspension of the petitioner's and others' monthly ration of gasoline and LPG, had been
caused by unavoidable financial constraints; that such a suspension, in line with its conservation
and cost-saving policy, did not in truth effect any significant diminution of said benefits, since

the petitioner was nevertheless entitled to reimbursement of the actual amount of gas consumed;
that petitioner had encouraged his co-employees to file complaints against the Central over the
rations issue, and this, as well as his institution of his own actions, had created an atmosphere of
enmity in the Central, and caused the loss by the Central of that trust and confidence in him so
essential in a lawyer-client relationship as that theretofore existing between them; and that under
the circumstances, petitioner's discharge as the Central's Legal Counsel and Head of the
Manpower & Services Department was justified. The Deputy Minister's order of dismissal was
however subsequently modified, at the petitioner's instance, by decreeing the payment to the
latter of separation pay equivalent to one month's salary for every year of service rendered. 9
The petitioner theorizes that apart from the fact that the Deputy Minister lacked jurisdiction to
entertain the Central's appeal from the decision of the Regional Director, he had gravely abused
his discretion in reaching his factual conclusions, pejoratively described as guesswork and
speculation.
The petitioner's theory of the Deputy Minister's lack of jurisdiction, founded on the tardy
payment by the Central of the appeal fee of P 25.00, is quickly disposed of by simply adverting
to our holding in Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 10 to wit:
It may be that, as held in Acda vs. MOLE, 119 SCRA 306 [1982], payment of the appeal fee is by
no means a mere technicality but is an essential requirement in the perfection of an appeal.
However, where as in this case, the fee had been paid, unlike in the Acda case, although payment
was delayed, the broader interest of justice and the desired objective of resolving controversies
on the merits demanded that the appeal be given course as, in fact, it was so given by the NLRC.
Besides, it was within the inherent power of the NLRC to have allowed the late payment of the
appeal fee.
As regards the temporary revocation of the petitioner's monthly ration of fuel, suffice it to point
out that, as the Solicitor General stresses, this bad been occasioned by force of circumstances
affecting the Central's business. The monthly ration was not a part of his basic salary, and is not
indeed found in any of the management payroll vouchers pertinent to the
petitioner. 11 Moreover, the adverse consequences of the suspension of the monthly rations had
been largely if not entirely negated by the Central's undertaking to reimburse the petitioner for
his actual consumption of fuel during the period of suspension. These facts are entirely distinct
from those obtaining in the case of States Marine Corporation and Royal Line, Inc. v. Cebu
Seamen's Association, Inc., 12 invoked by petitioner and thus preclude application of the ruling
therein laid down to the case at bar.
A review of the record demonstrates that there is substantial evidence supporting the factual
findings of the respondent Deputy Minister. Said findings, as well as the legal conclusions
derived therefrom, cannot be said to have been rendered with grave abuse of discretion, and will
thus be affirmed. In fine, and as petitioner could not but have realized from the outset, neither he
nor any other employee similarly situated had any legitimate grievance against the Central.
WHEREFORE, the petition is DISMISSED for lack of merit, with costs against petitioner.

Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G. R. No. 158149

February 9, 2006

BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF COMMERCE), Petitioner,

vs.
PERLA P. MANALO and CARLOS MANALO, JR., Respondents.

DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 47458 affirming, on appeal, the Decision2 of the Regional Trial Court (RTC) of
Quezon City, Branch 98, in Civil Case No. Q-89-3905.
The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the
Xavierville Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the
property into residential lots, which was then offered for sale to individual lot buyers.3
On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The
Overseas Bank of Manila (OBM), as vendee, executed a "Deed of Sale of Real Estate" over
some residential lots in the subdivision, including Lot 1, Block 2, with an area of 907.5 square
meters, and Lot 2, Block 2, with an area of 832.80 square meters. The transaction was subject to
the approval of the Board of Directors of OBM, and was covered by real estate mortgages in
favor of the Philippine National Bank as security for its account amounting to P5,187,000.00,
and the Central Bank of the Philippines as security for advances amounting
to P22,185,193.74.4 Nevertheless, XEI continued selling the residential lots in the subdivision as
agent of OBM.5
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos
Manalo, Jr. who was in business of drilling deep water wells and installing pumps under the
business name Hurricane Commercial, Inc. For P34,887.66, Manalo, Jr. installed a water pump at
Ramos residence at the corner of Aurora Boulevard and Katipunan Avenue, Quezon City.
Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the Xavierville
subdivision, and offered as part of the downpayment the P34,887.66 Ramos owed him. XEI,
through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested Manalo, Jr. to
choose which lots he wanted to buy so that the price of the lots and the terms of payment could
be fixed and incorporated in the conditional sale.6 Manalo, Jr. met with Ramos and informed him
that he and his wife Perla had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square
meters.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots.
He also pegged the price of the lots at P200.00 per square meter, or a total of P348,060.00, with a
20% down payment of the purchase price amounting to P69,612.00 less the P34,887.66 owing
from Ramos, payable on or before December 31, 1972; the corresponding Contract of
Conditional Sale would then be signed on or before the same date, but if the selling operations of

XEI resumed after December 31, 1972, the balance of the downpayment would fall due then, and
the spouses would sign the aforesaid contract within five (5) days from receipt of the notice of
resumption of such selling operations. It was also stated in the letter that, in the meantime, the
spouses may introduce improvements thereon subject to the rules and regulations imposed by
XEI in the subdivision. Perla Manalo conformed to the letter agreement.7
The spouses Manalo took possession of the property on September 2, 1972, constructed a house
thereon, and installed a fence around the perimeter of the lots.
In the meantime, many of the lot buyers refused to pay their monthly installments until they were
assured that they would be issued Torrens titles over the lots they had purchased.8 The spouses
Manalo were notified of the resumption of the selling operations of XEI.9 However, they did not
pay the balance of the downpayment on the lots because Ramos failed to prepare a contract of
conditional sale and transmit the same to Manalo for their signature. On August 14, 1973, Perla
Manalo went to the XEI office and requested that the payment of the amount representing the
balance of the downpayment be deferred, which, however, XEI rejected. On August 10, 1973,
XEI furnished her with a statement of their account as of July 31, 1973, showing that they had a
balance ofP34,724.34 on the downpayment of the two lots after deducting the account of Ramos,
plus P3,819.6810 interest thereon from September 1, 1972 to July 31, 1973, and that the interests
on the unpaid balance of the purchase price of P278,448.00 from September 1, 1972 to July 31,
1973 amounted to P30,629.28.11 The spouses were informed that they were being billed for said
unpaid interests.12
On January 25, 1974, the spouses Manalo received another statement of account from XEI,
inclusive of interests on the purchase price of the lots.13 In a letter dated April 6, 1974 to XEI,
Manalo, Jr. stated they had not yet received the notice of resumption of Leis selling operations,
and that there had been no arrangement on the payment of interests; hence, they should not be
charged with interest on the balance of the downpayment on the property.14 Further, they
demanded that a deed of conditional sale over the two lots be transmitted to them for their
signatures. However, XEI ignored the demands. Consequently, the spouses refused to pay the
balance of the downpayment of the purchase price.15
Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house.
In a letter dated June 17, 1976, XEI informed Manalo, Jr. that business signs were not allowed
along the sidewalk. It demanded that he remove the same, on the ground, among others, that the
sidewalk was not part of the land which he had purchased on installment basis from
XEI.16 Manalo, Jr. did not respond. XEI reiterated its demand on September 15, 1977.17
Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots
already contracted and those yet to be sold.18 On December 8, 1977, OBM warned Manalo, Jr.,
that "putting up of a business sign is specifically prohibited by their contract of conditional sale"

and that his failure to comply with its demand would impel it to avail of the remedies as provided
in their contract of conditional sale.19
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title
(TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor
of the OBM.20 The lien in favor of the Central Bank of the Philippines was annotated at the
dorsal portion of said title, which was later cancelled on August 4, 1980.21
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from
OBM. CBM wrote Edilberto Ng, the president of Xavierville Homeowners Association that, as
of January 31, 1983, Manalo, Jr. was one of the lot buyers in the subdivision.22 CBM reiterated in
its letter to Ng that, as of January 24, 1984, Manalo was a homeowner in the subdivision.23
In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going
construction on the property since it (CBM) was the owner of the lot and she had no permission
for such construction.24 She agreed to have a conference meeting with CBM officers where she
informed them that her husband had a contract with OBM, through XEI, to purchase the
property. When asked to prove her claim, she promised to send the documents to CBM.
However, she failed to do so.25 On September 5, 1986, CBM reiterated its demand that it be
furnished with the documents promised,26 but Perla Manalo did not respond.
On July 27, 1987, CBM filed a complaint27 for unlawful detainer against the spouses with the
Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No. 51618. CBM
claimed that the spouses had been unlawfully occupying the property without its consent and that
despite its demands, they refused to vacate the property. The latter alleged that they, as vendors,
and XEI, as vendee, had a contract of sale over the lots which had not yet been rescinded.28
While the case was pending, the spouses Manalo wrote CBM to offer an amicable settlement,
promising to abide by the purchase price of the property (P313,172.34), per agreement with XEI,
through Ramos. However, on July 28, 1988, CBM wrote the spouses, through counsel, proposing
that the price of P1,500.00 per square meter of the property was a reasonable starting point for
negotiation of the settlement.29 The spouses rejected the counter proposal,30 emphasizing that
they would abide by their original agreement with XEI. CBM moved to withdraw its
complaint31 because of the issues raised.32
In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its
complaint against the spouses Manalo, the latter filed a complaint for specific performance and
damages against the bank before the Regional Trial Court (RTC) of Quezon City on October 31,
1989.

The plaintiffs alleged therein that they had always been ready, able and willing to pay the
installments on the lots sold to them by the defendants remote predecessor-in-interest, as might
be or stipulated in the contract of sale, but no contract was forthcoming; they constructed their
house worth P2,000,000.00 on the property in good faith; Manalo, Jr., informed the defendant,
through its counsel, on October 15, 1988 that he would abide by the terms and conditions of his
original agreement with the defendants predecessor-in-interest; during the hearing of the
ejectment case on October 16, 1988, they offered to pay P313,172.34 representing the balance on
the purchase price of said lots; such tender of payment was rejected, so that the subject lots could
be sold at considerably higher prices to third parties.
Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the
execution and delivery of a Deed of Absolute Sale covering the subject lots, sufficient in form
and substance to transfer title thereto free and clear of any and all liens and encumbrances of
whatever kind and nature.33 The plaintiffs prayed that, after due hearing, judgment be rendered in
their favor, to wit:
WHEREFORE, it is respectfully prayed that after due hearing:
(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over
subject lots in favor of the plaintiffs after payment of the sum of P313,172.34, sufficient
in form and substance to transfer to them titles thereto free and clear of any and all liens
and encumbrances of whatever kind or nature;
(b) The defendant should be held liable for moral and exemplary damages in the amounts
of P300,000.00 and P30,000.00, respectively, for not promptly executing and delivering
to plaintiff the necessary Contract of Sale, notwithstanding repeated demands therefor
and for having been constrained to engage the services of undersigned counsel for which
they agreed to pay attorneys fees in the sum of P50,000.00 to enforce their rights in the
premises and appearance fee of P500.00;
(c) And for such other and further relief as may be just and equitable in the premises.34
In its Answer to the complaint, the defendant interposed the following affirmative defenses: (a)
plaintiffs had no cause of action against it because the August 22, 1972 letter agreement between
XEI and the plaintiffs was not binding on it; and (b) "it had no record of any contract to sell
executed by it or its predecessor, or of any statement of accounts from its predecessors, or
records of payments of the plaintiffs or of any documents which entitled them to the possession
of the lots."35 The defendant, likewise, interposed counterclaims for damages and attorneys fees
and prayed for the eviction of the plaintiffs from the property.36

Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an amicable
settlement of the case by paying P942,648.70, representing the balance of the purchase price of
the two lots based on the current market value.37 However, the defendant rejected the same and
insisted that for the smaller lot, they payP4,500,000.00, the current market value of the
property.38 The defendant insisted that it owned the property since there was no contract or
agreement between it and the plaintiffs relative thereto.
During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional Sale
executed between XEI and Alberto Soller;39 Alfredo Aguila,40 and Dra. Elena Santos-Roque41 to
prove that XEI continued selling residential lots in the subdivision as agent of OBM after the
latter had acquired the said lots.
For its part, defendant presented in evidence the letter dated August 22, 1972, where XEI
proposed to sell the two lots subject to two suspensive conditions: the payment of the balance of
the downpayment of the property, and the execution of the corresponding contract of conditional
sale. Since plaintiffs failed to pay, OBM consequently refused to execute the corresponding
contract of conditional sale and forfeited the P34,877.66 downpayment for the two lots, but did
not notify them of said forfeiture.42 It alleged that OBM considered the lots unsold because the
titles thereto bore no annotation that they had been sold under a contract of conditional sale, and
the plaintiffs were not notified of XEIs resumption of its selling operations.
On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the defendant.
The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant
(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and 2,
Block 2 of the Xavierville Estate Subdivision after payment of the sum of P942,978.70
sufficient in form and substance to transfer to them titles thereto free from any and all
liens and encumbrances of whatever kind and nature.
(b) Ordering the defendant to pay moral and exemplary damages in the amount
of P150,000.00; and
(c) To pay attorneys fees in the sum of P50,000.00 and to pay the costs.
SO ORDERED.43
The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs,
the parties had a "complete contract to sell" over the lots, and that they had already partially
consummated the same. It declared that the failure of the defendant to notify the plaintiffs of the
resumption of its selling operations and to execute a deed of conditional sale did not prevent the

defendants obligation to convey titles to the lots from acquiring binding effect. Consequently,
the plaintiffs had a cause of action to compel the defendant to execute a deed of sale over the lots
in their favor.
Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a) not
concluding that the letter of XEI to the spouses Manalo, was at most a mere contract to sell
subject to suspensive conditions, i.e., the payment of the balance of the downpayment on the
property and the execution of a deed of conditional sale (which were not complied with); and (b)
in awarding moral and exemplary damages to the spouses Manalo despite the absence of
testimony providing facts to justify such awards.44
On September 30, 2002, the CA rendered a decision affirming that of the RTC with modification.
The fallo reads:
WHEREFORE, the appealed decision is AFFIRMED with MODIFICATIONS that (a) the figure
"P942,978.70" appearing [in] par. (a) of the dispositive portion thereof is changed to
"P313,172.34 plus interest thereon at the rate of 12% per annum from September 1, 1972 until
fully paid" and (b) the award of moral and exemplary damages and attorneys fees in favor of
plaintiffs-appellees is DELETED.
SO ORDERED.45
The appellate court sustained the ruling of the RTC that the appellant and the appellees had
executed a Contract to Sell over the two lots but declared that the balance of the purchase price
of the property amounting toP278,448.00 was payable in fixed amounts, inclusive of precomputed interests, from delivery of the possession of the property to the appellees on a monthly
basis for 120 months, based on the deeds of conditional sale executed by XEI in favor of other
lot buyers.46 The CA also declared that, while XEI must have resumed its selling operations
before the end of 1972 and the downpayment on the property remained unpaid as of December
31, 1972, absent a written notice of cancellation of the contract to sell from the bank or notarial
demand therefor as required by Republic Act No. 6552, the spouses had, at the very least, a 60day grace period from January 1, 1973 within which to pay the same.
Boston Bank filed a motion for the reconsideration of the decision alleging that there was no
perfected contract to sell the two lots, as there was no agreement between XEI and the
respondents on the manner of payment as well as the other terms and conditions of the sale. It
further averred that its claim for recovery of possession of the aforesaid lots in its Memorandum
dated February 28, 1994 filed before the trial court constituted a judicial demand for rescission
that satisfied the requirements of the New Civil Code. However, the appellate court denied the
motion.

Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA
rulings. It maintains that, as held by the CA, the records do not reflect any schedule of payment
of the 80% balance of the purchase price, or P278,448.00. Petitioner insists that unless the parties
had agreed on the manner of payment of the principal amount, including the other terms and
conditions of the contract, there would be no existing contract of sale or contract to
sell.47 Petitioner avers that the letter agreement to respondent spouses dated August 22, 1972
merely confirmed their reservation for the purchase of Lot Nos. 1 and 2, consisting of 1,740.3
square meters, more or less, at the price of P200.00 per square meter (or P348,060.00), the
amount of the downpayment thereon and the application of the P34,887.00 due from Ramos as
part of such downpayment.
Petitioner asserts that there is no factual basis for the CA ruling that the terms and conditions
relating to the payment of the balance of the purchase price of the property (as agreed upon by
XEI and other lot buyers in the same subdivision) were also applicable to the contract entered
into between the petitioner and the Respondents. It insists that such a ruling is contrary to law, as
it is tantamount to compelling the parties to agree to something that was not even discussed, thus,
violating their freedom to contract. Besides, the situation of the respondents cannot be equated
with those of the other lot buyers, as, for one thing, the respondents made a partial payment on
the downpayment for the two lots even before the execution of any contract of conditional sale.
Petitioner posits that, even on the assumption that there was a perfected contract to sell between
the parties, nevertheless, it cannot be compelled to convey the property to the respondents
because the latter failed to pay the balance of the downpayment of the property, as well as the
balance of 80% of the purchase price, thus resulting in the extinction of its obligation to convey
title to the lots to the Respondents.
Another egregious error of the CA, petitioner avers, is the application of Republic Act No. 6552.
It insists that such law applies only to a perfected agreement or perfected contract to sell, not in
this case where the downpayment on the purchase price of the property was not completely paid,
and no installment payments were made by the buyers.
Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the
respondents of cancellation or rescission of the contract to sell, or notarial demand therefor.
Petitioner insists that its August 5, 1986 letter requiring respondents to vacate the property and its
complaint for ejectment in Civil Case No. 51618 filed in the Metropolitan Trial Court amounted
to the requisite demand for a rescission of the contract to sell. Moreover, the action of the
respondents below was barred by laches because despite demands, they failed to pay the balance
of the purchase price of the lots (let alone the downpayment) for a considerable number of years.
For their part, respondents assert that as long as there is a meeting of the minds of the parties to a
contract of sale as to the price, the contract is valid despite the parties failure to agree on the

manner of payment. In such a situation, the balance of the purchase price would be payable on
demand, conformably to Article 1169 of the New Civil Code. They insist that the law does not
require a party to agree on the manner of payment of the purchase price as a prerequisite to a
valid contract to sell. The respondents cite the ruling of this Court in Buenaventura v. Court of
Appeals48 to support their submission.
They argue that even if the manner and timeline for the payment of the balance of the purchase
price of the property is an essential requisite of a contract to sell, nevertheless, as shown by their
letter agreement of August 22, 1972 with the OBM, through XEI and the other letters to them, an
agreement was reached as to the manner of payment of the balance of the purchase price. They
point out that such letters referred to the terms of the terms of the deeds of conditional sale
executed by XEI in favor of the other lot buyers in the subdivision, which contained uniform
terms of 120 equal monthly installments (excluding the downpayment, but inclusive of precomputed interests). The respondents assert that XEI was a real estate broker and knew that the
contracts involving residential lots in the subdivision contained uniform terms as to the manner
and timeline of the payment of the purchase price of said lots.
Respondents further posit that the terms and conditions to be incorporated in the "corresponding
contract of conditional sale" to be executed by the parties would be the same as those contained
in the contracts of conditional sale executed by lot buyers in the subdivision. After all, they
maintain, the contents of the corresponding contract of conditional sale referred to in the August
22, 1972 letter agreement envisaged those contained in the contracts of conditional sale that XEI
and other lot buyers executed. Respondents cite the ruling of this Court in Mitsui Bussan Kaisha
v. Manila E.R.R. & L. Co.49
The respondents aver that the issues raised by the petitioner are factual, inappropriate in a
petition for review on certiorari under Rule 45 of the Rules of Court. They assert that petitioner
adopted a theory in litigating the case in the trial court, but changed the same on appeal before
the CA, and again in this Court. They argue that the petitioner is estopped from adopting a new
theory contrary to those it had adopted in the trial and appellate courts. Moreover, the existence
of a contract of conditional sale was admitted in the letters of XEI and OBM. They aver that they
became owners of the lots upon delivery to them by XEI.
The issues for resolution are the following: (1) whether the factual issues raised by the petitioner
are proper; (2) whether petitioner or its predecessors-in-interest, the XEI or the OBM, as seller,
and the respondents, as buyers, forged a perfect contract to sell over the property; (3) whether
petitioner is estopped from contending that no such contract was forged by the parties; and (4)
whether respondents has a cause of action against the petitioner for specific performance.
The rule is that before this Court, only legal issues may be raised in a petition for review on
certiorari. The reason is that this Court is not a trier of facts, and is not to review and calibrate the

evidence on record. Moreover, the findings of facts of the trial court, as affirmed on appeal by
the Court of Appeals, are conclusive on this Court unless the case falls under any of the
following exceptions:
(1) when the conclusion is a finding grounded entirely on speculations, surmises and conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a
grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings
went beyond the issues of the case and the same is contrary to the admissions of both appellant
and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings
of fact are conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondents; and (10) when the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted by the evidence on record.50
We have reviewed the records and we find that, indeed, the ruling of the appellate court
dismissing petitioners appeal is contrary to law and is not supported by evidence. A careful
examination of the factual backdrop of the case, as well as the antecedental proceedings
constrains us to hold that petitioner is not barred from asserting that XEI or OBM, on one hand,
and the respondents, on the other, failed to forge a perfected contract to sell the subject lots.
It must be stressed that the Court may consider an issue not raised during the trial when there is
plain error.51Although a factual issue was not raised in the trial court, such issue may still be
considered and resolved by the Court in the interest of substantial justice, if it finds that to do so
is necessary to arrive at a just decision,52 or when an issue is closely related to an issue raised in
the trial court and the Court of Appeals and is necessary for a just and complete resolution of the
case.53 When the trial court decides a case in favor of a party on certain grounds, the Court may
base its decision upon some other points, which the trial court or appellate court ignored or
erroneously decided in favor of a party.54
In this case, the issue of whether XEI had agreed to allow the respondents to pay the purchase
price of the property was raised by the parties. The trial court ruled that the parties had perfected
a contract to sell, as against petitioners claim that no such contract existed. However, in
resolving the issue of whether the petitioner was obliged to sell the property to the respondents,
while the CA declared that XEI or OBM and the respondents failed to agree on the schedule of
payment of the balance of the purchase price of the property, it ruled that XEI and the
respondents had forged a contract to sell; hence, petitioner is entitled to ventilate the issue before
this Court.

We agree with petitioners contention that, for a perfected contract of sale or contract to sell to
exist in law, there must be an agreement of the parties, not only on the price of the property sold,
but also on the manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional,
one of the contracting parties obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. A
contract of sale is perfected at the moment there is a meeting of the minds upon the thing which
is the object of the contract and the price. From the averment of perfection, the parties are bound,
not only to the fulfillment of what has been expressly stipulated, but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.55 On the
other hand, when the contract of sale or to sell is not perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties.56
A definite agreement as to the price is an essential element of a binding agreement to sell
personal or real property because it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and enforceable contract of sale. The
fixing of the price can never be left to the decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.57
It is not enough for the parties to agree on the price of the property. The parties must also agree
on the manner of payment of the price of the property to give rise to a binding and enforceable
contract of sale or contract to sell. This is so because the agreement as to the manner of payment
goes into the price, such that a disagreement on the manner of payment is tantamount to a failure
to agree on the price.58
In a contract to sell property by installments, it is not enough that the parties agree on the price as
well as the amount of downpayment. The parties must, likewise, agree on the manner of payment
of the balance of the purchase price and on the other terms and conditions relative to the sale.
Even if the buyer makes a downpayment or portion thereof, such payment cannot be considered
as sufficient proof of the perfection of any purchase and sale between the parties. Indeed, this
Court ruled in Velasco v. Court of Appeals59 that:
It is not difficult to glean from the aforequoted averments that the petitioners themselves admit
that they and the respondent still had to meet and agree on how and when the down-payment and
the installment payments were to be paid. Such being the situation, it cannot, therefore, be said
that a definite and firm sales agreement between the parties had been perfected over the lot in
question. Indeed, this Court has already ruled before that a definite agreement on the manner of
payment of the purchase price is an essential element in the formation of a binding and
enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent
the sum ofP10,000.00 as part of the downpayment that they had to pay cannot be considered as

sufficient proof of the perfection of any purchase and sale agreement between the parties herein
under article 1482 of the New Civil Code, as the petitioners themselves admit that some essential
matter the terms of payment still had to be mutually covenanted.60
We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the
records, of the schedule of payment of the balance of the purchase price on the property
amounting to P278,448.00. We have meticulously reviewed the records, including Ramos
February 8, 1972 and August 22, 1972 letters to respondents,61 and find that said parties confined
themselves to agreeing on the price of the property (P348,060.00), the 20% downpayment of the
purchase price (P69,612.00), and credited respondents for theP34,887.00 owing from Ramos as
part of the 20% downpayment. The timeline for the payment of the balance of the downpayment
(P34,724.34) was also agreed upon, that is, on or before XEI resumed its selling operations, on
or before December 31, 1972, or within five (5) days from written notice of such resumption of
selling operations. The parties had also agreed to incorporate all the terms and conditions relating
to the sale, inclusive of the terms of payment of the balance of the purchase price and the other
substantial terms and conditions in the "corresponding contract of conditional sale," to be later
signed by the parties, simultaneously with respondents settlement of the balance of the
downpayment.
The February 8, 1972 letter of XEI reads:
Mr. Carlos T. Manalo, Jr.
Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City
Dear Mr. Manalo:
We agree with your verbal offer to exchange the proceeds of your contract with us to form as a
down payment for a lot in our Xavierville Estate Subdivision.
Please let us know your choice lot so that we can fix the price and terms of payment in
ourconditional sale.
Sincerely yours,
XAVIERVILLE ESTATE, INC.
(Signed)
EMERITO B. RAMOS, JR.
President
CONFORME:

(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling62
The August 22, 1972 letter agreement of XEI and the respondents reads:
Mrs. Perla P. Manalo
1548 Rizal Avenue Extensionbr>Caloocan City
Dear Mrs. Manalo:
This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-subdivision
plan as amended, consisting of 1,740.3 square meters more or less, at the price of P200.00 per
square meter or a total price of P348,060.00.
It is agreed that as soon as we resume selling operations, you must pay a down payment of 20%
of the purchase price of the said lots and sign the corresponding Contract of Conditional Sale, on
or before December 31, 1972, provided, however, that if we resume selling after December 31,
1972, then you must pay the aforementioned down payment and sign the aforesaid
contract within five (5) days from your receipt of our notice of resumption of selling operations.
In the meanwhile, you may introduce such improvements on the said lots as you may desire,
subject to the rules and regulations of the subdivision.
If the above terms and conditions are acceptable to you, please signify your conformity by
signing on the space herein below provided.
Thank you.
Very truly yours,
XAVIERVILLE ESTATE, INC. CONFORME:
By:
(Signed)
EMERITO B. RAMOS, JR.
President Buyer63

(Signed)
PERLA P. MANALO

Based on these two letters, the determination of the terms of payment of the P278,448.00 had yet
to be agreed upon on or before December 31, 1972, or even afterwards, when the parties sign the
corresponding contract of conditional sale.
Jurisprudence is that if a material element of a contemplated contract is left for future
negotiations, the same is too indefinite to be enforceable.64 And when an essential element of a
contract is reserved for future agreement of the parties, no legal obligation arises until such
future agreement is concluded.65
So long as an essential element entering into the proposed obligation of either of the parties
remains to be determined by an agreement which they are to make, the contract is incomplete
and unenforceable.66 The reason is that such a contract is lacking in the necessary qualities of
definiteness, certainty and mutuality.67
There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after
December 31, 1972, on the terms of payment of the balance of the purchase price of the property
and the other substantial terms and conditions relative to the sale. Indeed, the parties are in
agreement that there had been no contract of conditional sale ever executed by XEI, OBM or
petitioner, as vendor, and the respondents, as vendees.68
The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because
the issue of the manner of payment of the purchase price of the property was not raised therein.
We reject the submission of respondents that they and Ramos had intended to incorporate the
terms of payment contained in the three contracts of conditional sale executed by XEI and other
lot buyers in the "corresponding contract of conditional sale," which would later be signed by
them.69 We have meticulously reviewed the respondents complaint and find no such allegation
therein.70 Indeed, respondents merely alleged in their complaint that they were bound to pay the
balance of the purchase price of the property "in installments." When respondent Manalo, Jr.
testified, he was never asked, on direct examination or even on cross-examination, whether the
terms of payment of the balance of the purchase price of the lots under the contracts of
conditional sale executed by XEI and other lot buyers would form part of the "corresponding
contract of conditional sale" to be signed by them simultaneously with the payment of the
balance of the downpayment on the purchase price.
We note that, in its letter to the respondents dated June 17, 1976, or almost three years from the
execution by the parties of their August 22, 1972 letter agreement, XEI stated, in part, that
respondents had purchased the property "on installment basis."71 However, in the said letter, XEI
failed to state a specific amount for each installment, and whether such payments were to be
made monthly, semi-annually, or annually. Also, respondents, as plaintiffs below, failed to
adduce a shred of evidence to prove that they were obliged to pay the P278,448.00 monthly,

semi-annually or annually. The allegation that the payment of the P278,448.00 was to be paid in
installments is, thus, vague and indefinite. Case law is that, for a contract to be enforceable, its
terms must be certain and explicit, not vague or indefinite.72
There is no factual and legal basis for the CA ruling that, based on the terms of payment of the
balance of the purchase price of the lots under the contracts of conditional sale executed by XEI
and the other lot buyers, respondents were obliged to pay the P278,448.00 with pre-computed
interest of 12% per annum in 120-month installments. As gleaned from the ruling of the appellate
court, it failed to justify its use of the terms of payment under the three "contracts of conditional
sale" as basis for such ruling, to wit:
On the other hand, the records do not disclose the schedule of payment of the purchase price, net
of the downpayment. Considering, however, the Contracts of Conditional Sale (Exhs. "N," "O"
and "P") entered into by XEI with other lot buyers, it would appear that the subdivision lots sold
by XEI, under contracts to sell, were payable in 120 equal monthly installments (exclusive of the
downpayment but including pre-computed interests) commencing on delivery of the lot to the
buyer.73
By its ruling, the CA unilaterally supplied an essential element to the letter agreement of XEI and
the Respondents. Courts should not undertake to make a contract for the parties, nor can it
enforce one, the terms of which are in doubt.74 Indeed, the Court emphasized in Chua v. Court of
Appeals75 that it is not the province of a court to alter a contract by construction or to make a new
contract for the parties; its duty is confined to the interpretation of the one which they have made
for themselves, without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into contract words which it does not contain.
Respondents, as plaintiffs below, failed to allege in their complaint that the terms of payment of
the P278,448.00 to be incorporated in the "corresponding contract of conditional sale" were
those contained in the contracts of conditional sale executed by XEI and Soller, Aguila and
Roque.76 They likewise failed to prove such allegation in this Court.
The bare fact that other lot buyers were allowed to pay the balance of the purchase price of lots
purchased by them in 120 or 180 monthly installments does not constitute evidence that XEI also
agreed to give the respondents the same mode and timeline of payment of the P278,448.00.
Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain thing
at one time is not admissible to prove that he did the same or similar thing at another time,
although such evidence may be received to prove habit, usage, pattern of conduct or the intent of
the parties.

Similar acts as evidence. Evidence that one did or did not do a certain thing at one time is not
admissible to prove that he did or did not do the same or a similar thing at another time; but it
may be received to prove a specific intent or knowledge, identity, plan, system, scheme, habit,
custom or usage, and the like.
However, respondents failed to allege and prove, in the trial court, that, as a matter of business
usage, habit or pattern of conduct, XEI granted all lot buyers the right to pay the balance of the
purchase price in installments of 120 months of fixed amounts with pre-computed interests, and
that XEI and the respondents had intended to adopt such terms of payment relative to the sale of
the two lots in question. Indeed, respondents adduced in evidence the three contracts of
conditional sale executed by XEI and other lot buyers merely to prove that XEI continued to sell
lots in the subdivision as sales agent of OBM after it acquired said lots, not to prove usage, habit
or pattern of conduct on the part of XEI to require all lot buyers in the subdivision to pay the
balance of the purchase price of said lots in 120 months. It further failed to prive that the trial
court admitted the said deeds77 as part of the testimony of respondent Manalo, Jr.78
Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must
contend with the caveat that, before they admit evidence of usage, of habit or pattern of conduct,
the offering party must establish the degree of specificity and frequency of uniform response that
ensures more than a mere tendency to act in a given manner but rather, conduct that is semiautomatic in nature. The offering party must allege and prove specific, repetitive conduct that
might constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on inference of systematic conduct. Mere similarity
of contracts does not present the kind of sufficiently similar circumstances to outweigh the
danger of prejudice and confusion.
In determining whether the examples are numerous enough, and sufficiently regular, the key
criteria are adequacy of sampling and uniformity of response. After all, habit means a course of
behavior of a person regularly represented in like circumstances.79 It is only when examples
offered to establish pattern of conduct or habit are numerous enough to lose an inference of
systematic conduct that examples are admissible. The key criteria are adequacy of sampling and
uniformity of response or ratio of reaction to situations.80
There are cases where the course of dealings to be followed is defined by the usage of a
particular trade or market or profession. As expostulated by Justice Benjamin Cardozo of the
United States Supreme Court: "Life casts the moulds of conduct, which will someday become
fixed as law. Law preserves the moulds which have taken form and shape from life."81 Usage
furnishes a standard for the measurement of many of the rights and acts of men.82 It is also wellsettled that parties who contract on a subject matter concerning which known usage prevail,
incorporate such usage by implication into their agreement, if nothing is said to be contrary.83

However, the respondents inexplicably failed to adduce sufficient competent evidence to prove
usage, habit or pattern of conduct of XEI to justify the use of the terms of payment in the
contracts of the other lot buyers, and thus grant respondents the right to pay the P278,448.00 in
120 months, presumably because of respondents belief that the manner of payment of the said
amount is not an essential element of a contract to sell. There is no evidence that XEI or OBM
and all the lot buyers in the subdivision, including lot buyers who pay part of the downpayment
of the property purchased by them in the form of service, had executed contracts of conditional
sale containing uniform terms and conditions. Moreover, under the terms of the contracts of
conditional sale executed by XEI and three lot buyers in the subdivision, XEI agreed to grant 120
months within which to pay the balance of the purchase price to two of them, but granted one
180 months to do so.84 There is no evidence on record that XEI granted the same right to buyers
of two or more lots.
Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be
considered certain if it be so with reference to another thing certain. It is sufficient if it can be
determined by the stipulations of the contract made by the parties thereto85 or by reference to an
agreement incorporated in the contract of sale or contract to sell or if it is capable of being
ascertained with certainty in said contract;86 or if the contract contains express or implied
provisions by which it may be rendered certain;87 or if it provides some method or criterion by
which it can be definitely ascertained.88 As this Court held in Villaraza v. Court of Appeals,89 the
price is considered certain if, by its terms, the contract furnishes a basis or measure for
ascertaining the amount agreed upon.
We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no direct
or implied reference to the manner and schedule of payment of the balance of the purchase price
of the lots covered by the deeds of conditional sale executed by XEI and that of the other lot
buyers90 as basis for or mode of determination of the schedule of the payment by the respondents
of the P278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light
Company91 is not applicable in this case because the basic price fixed in the contract was P9.45
per long ton, but it was stipulated that the price was subject to modification "in proportion to
variations in calories and ash content, and not otherwise." In this case, the parties did not fix in
their letters-agreement, any method or mode of determining the terms of payment of the balance
of the purchase price of the property amounting to P278,448.00.
It bears stressing that the respondents failed and refused to pay the balance of the downpayment
and of the purchase price of the property amounting to P278,448.00 despite notice to them of the
resumption by XEI of its selling operations. The respondents enjoyed possession of the property
without paying a centavo. On the other hand, XEI and OBM failed and refused to transmit a
contract of conditional sale to the Respondents. The respondents could have at least consigned

the balance of the downpayment after notice of the resumption of the selling operations of XEI
and filed an action to compel XEI or OBM to transmit to them the said contract; however, they
failed to do so.
As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected
contract to sell the two lots; hence, respondents have no cause of action for specific performance
against petitioner. Republic Act No. 6552 applies only to a perfected contract to sell and not to a
contract with no binding and enforceable effect.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court
of Appeals in CA-G.R. CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial
Court of Quezon City, Branch 98 is ordered to dismiss the complaint. Costs against the
Respondents.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 166647

March 31, 2006

PAG-ASA STEEL WORKS, INC., Petitioner,

vs.
COURT OF APPEALS, FORMER SIXTH DIVISION and PAG-ASA STEEL WORKERS
UNION (PSWU),Respondent.
DECISION
CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CAG.R. SP No. 65171 ordering Pag-Asa Steel Works, Inc. to pay the members of Pag-Asa Steel
Workers Union (Union) the wage increase prescribed under Wage Order No. NCR-08. Also
assailed in this petition is the CA Resolution denying the corporations motion for
reconsideration.
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under
Philippine laws and is engaged in the manufacture of steel bars and wire rods. Pag-Asa Steel
Workers Union is the duly authorized bargaining agent of the rank-and-file employees of
petitioner.
On January 8, 1998, the Regional Tripartite Wages and Productivity Board (Wage Board) of the
National Capital Region (NCR) issued Wage Order No. NCR-06.2 It provided for an increase
of P13.00 per day in the salaries of employees receiving the minimum wage, and a consequent
increase in the minimum wage rate to P198.00 per day. Petitioner and the Union negotiated on
how to go about the wage adjustments. Petitioner forwarded a letter3dated March 10, 1998 to the
Union with the list of the salary adjustments of the rank-and-file employees after the
implementation of Wage Order No. NCR-06, and the notation that said "adjustments [were] in
accordance with the formula [they] have discussed and [were] designed so as no distortion shall
result from the implementation of Wage Order No. NCR-06."
NAME

DATE
PRESENT ADJUST
NEW
REGULAR RATE
EFF 2/6/98 RATE

1. PEPINO EMMANUEL

08.01.97

191.00

13.00

204.00

2. SEVANDRA RODOLFO

01.17.98

192.00

13.00

205.00

3. BERNABE ALFREDO

10.24.97

200.00

13.00

213.00

4. UMBAL ADOLFO

08.18.97

215.00

12.00

227.00

5. AQUINO JONAS

08.25.97

215.00

12.00

227.00

6. AGCAOILI JAIME

01.08.98

220.00

11.00

231.00

7. BERMEJO JIMMY JR.

04.01.97

221.00

11.00

232.00

8. EDRADAN ELDEMAR P.

04.17.97

221.00

11.00

232.00

9. REBOTON RONILO

05.14.97

221.00

11.00

232.00

10. TABAOG ALBERT

04.10.97

221.00

11.00

232.00

11. SALEN EDILBERTO

02.10.97

221.00

11.00

232.00

13. PAEZ REYNALDO

02.27.97.

235.00

11.00

246.00

14. HERNANDEZ ALFREDO

03.23.96

246.00

10.00

256.00

15. BANIA LUIS JR.

12.08.95

246.00

10.00

256.00

16. MAGBOO VICTOR

05.25.96

246.00

10.00

256.00

17. NINORA BONIFACIO

03.22.96

246.00

10.00

256.00

18. ALANCADO RODERICK

11.10.95

246.00

10.00

256.00

19. PUTONG PASCUAL

06.23.96

246.00

10.00

256.00

20. PAR EULOGIO JR.

08.16.95

246.00

10.00

256.00

21. SALON FONDADOR

11.16.95

246.00

10.00

256.00

22. RODA GEORGE

10.11.95

246.00

10.00

256.00

23. RIOJA JOSEPH

12.28.95

246.00

10.00

256.00

24. RAYMUNDO ANTONIO

06.05.96

246.00

10.00

256.00

25. BUGTAI ROBERTO

04.10.96

246.00

10.00

256.00

26. RELATO RAMON

07.07.96

265.00

10.00

275.00

27. REGACHUELO DENNIS

11.30.95

265.00

10.00

275.00

28. ORNOPIA REYNALDO

08.09.94

268.00

10.00

278.00

29. PULPULAAN JAIME

01.18.96

275.00

10.00

285.00

30. PANLAAN FERDINAND

01.18.96

275.00

10.00

285.00

31.BAGASBAS EULOGIO JR.

01.18.96

275.00

10.00

285.00

32. ALEJANDRO OLIVER

12.03.95

275.00

10.00

285.00

33. PRIELA DANILO

11.30.95

280.00

10.00

290.00

34. NOBELJAS EDGAR

07.10.95

283.00

10.00

293.00

35. SAJOT RONNIE

10.02.93

288.00

10.00

298.00

36. WHITING JOEL

09.30.93

288.00

10.00

298.00

37. SURINGA FRANKLIN

12.19.93

288.00

10.00

298.00

38. SIBOL MICHAEL

12.11.93

288.00

10.00

298.00

39. SOLO JOSE

02.20.94

288.00

10.00

298.00

40. TIZON JOEL

12.23.93

288.00

10.00

298.00

41. SABATIN GILBERT

04.19.94

288.00

10.00

298.00

42. REYES RONALDO

04.14.94

288.00

10.00

298.00

43. AMANIA WILFREDO

01.06.94

288.00

10.00

298.00

44. QUIDATO ARISTON

12.12.93

288.00

10.00

298.00

45. LAROGA CLAUDIO JR.

10.13.93

288.00

10.00

298.00

46. MORALES LUIS

09.30.93

288.00

10.00

298.00

47. ANTOLO DANILO

12.26.93

288.00

10.00

298.00

48. EXMUNDO HERCULES

05.13.94

288.00

10.00

298.00

49. AMPER VALENTINO

08.02.93

288.00

10.00

298.00

50. BAYO-ANG ALDEN JR.

07.14.93

288.00

10.00

298.00

51. BASCONES NELSON

02.26.94

288.00

10.00

298.00

52. DECENA LAURO

09.18.93

288.00

10.00

298.00

53. CHUA MARLONITO

10.20.93

288.00

10.00

298.00

54. CATACUTAN JUNE

03.02.94

288.00

10.00

298.00

55.DE LOS SANTOS REYNALDO

12.23.93

288.00

10.00

298.00

56. REYES EFREN

10.23.93

288.00

10.00

298.00

57. CAGOMOC DANILO

01.13.94

288.00

10.00

298.00

58. DOROL ERWIN

09.16.93

288.00

10.00

298.00

59. CURAMBAO TIRSO

09.23.93

288.00

10.00

298.00

60. VENTURA FERDINAND

09.20.94

292.00

10.00

302.00

61. ALBANO JESUS

01.06.94

297.00

10.00

307.00

62. CALLEJA JOSEPH

05.10.93

303.00

10.00

313.00

63. PEREZ DANILO

03.01.93

303.00

10.00

313.00

64. BATOY ERNIE

06.15.93

305.00

10.00

315.00

65. SAMPAGA EDGARDO

06.07.93

307.00

10.00

317.00

66. SOLON ROBINSON

05.10.94

315.00

10.00

325.00

67. ELEDA FULGENIO

06.07.93

322.00

10.00

332.00

68. CASCARA RODRIGO

06.07.93

322.00

10.00

332.00

69. ROMANOS ARNULFO

06.07.93

322.00

10.00

332.00

70. LUMANSOC MARIANO

06.07.93

322.00

10.00

332.00

71. RAMOS GRACIANO

06.07.93

322.00

10.00

332.00

72. MAZON NESTOR

07.24.90

330.00

10.00

340.00

73. BRIN LUCENIO

07.26.90

330.00

10.00

340.00

74. SE FREDIE

03.25.90

340.00

10.00

350.00

75. RONCALES DIOSDADO

04.30.90

340.00

10.00

350.00

76. DISCAYA EDILBERTO

09.06.89

340.00

10.00

350.00

77. SUAREZ LUISTO

06.10.92

347.00

10.00

357.00

78. CASTRO PEDRO

10.30.92

348.00

10.00

358.00

79. CLAVECILLA AMBROSIO

09.09.88

351.00

10.00

361.00

80. YSON ROMEO

09.11.88

351.00

10.00

361.00

81. JUMAWAN URBANO JR.

12.20.87

354.00

10.00

364.00

82. MARASIGAN GRACIANO

05.20.88

354.00

10.00

364.00

83. MAGLENTE ROLANDO

09.03.87

354.00

10.00

364.00

84. NEBRIA CALIX

02.25.88

354.00

10.00

364.00

85. BARBIN DANIEL

09.03.87

354.00

10.00

364.00

86. CAMAING CARLITO

12.22.87

354.00

10.00

364.00

87. BUBAN JONATHAN

10.22.87

354.00

10.00

364.00

88. GUEVARRA ARNOLD

10.04.87

354.00

10.00

364.00

89. MALAPO MARCOS JR.

08.04.87

354.00

10.00

364.00

90. ZUNIEGA CARLOS

02.19.88

354.00

10.00

364.00

91. SABORNIDO JULITO

12.20.87

354.00

10.00

364.00

92. DALUYO LOTERIO

04.02.88

354.00

10.00

364.00

93. AGUILLON GRACIANO

05.27.87

359.00

10.00

369.00

94. CRISTY EMETERIO

04.06.87

359.50

10.00

369.50

95. FULGUERAS DOMINGO

01.25.87

362.00

10.00

372.00

96. ZIPAGAN NELSON

02.07.84

370.00

10.00

380.00

97. LAURIO JESUS

06.01.82

371.00

10.00

381.00

98. ACASIO PEDRO

11.21.79

372.00

10.00

382.00

99. MACALISANG EPIFANIO

02.01.88

372.00

10.00

382.00

100. OFILAN ANTONIO

03.12.79

374.50

10.00

384.50

101. SEVANDRA ALFREDO

05.02.69

374.50

10.00

384.50

102. VILLAMER JOEY

11.04.81

374.50

10.00

384.50

103. GRIPON GIL

01.17.76

374.75

10.00

384.75

104. CARLON HERMINIGILDO, JR. 04.17.87

375.00

10.00

385.00

105. MANLABAO HEROHITO

04.14.81

375.00

10.00

385.00

106. VILLANUEVA DOMINGO

12.01.77

375.50

10.00

385.50

107. APITAN NAZARIO

09.04.79

376.00

10.00

386.00

108. SALAMEDA EDUARDO

02.13.79

377.00

10.00

387.00

109. ARNALDO LOPE

05.02.69

378.50

10.00

388.50

110. SURIGAO HERNANDO

12.29.79

379.00

10.00

389.00

111. DE LA CRUZ CHARLIE

07.14.76

379.00

10.00

389.00

112. ROSAURO JUAN

07.15.76

379.50

10.00

389.50

113 HILOTIN ARLEN

10.10.77

383.00

10.00

393.004

On September 23, 1999, petitioner and the Union entered into a Collective Bargaining
Agreement (CBA), effective July 1, 1999 until July 1, 2004. Section 1, Article VI (Salaries and
Wage) of said CBA provides:
Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant all the workers, who are
already regular and covered by this AGREEMENT at the effectivity of this AGREEMENT, a
general wage increase as follows:
July 1, 1999 . . . . . . . . . . . P15.00 per day per employee
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee

The aforesaid wage increase shall be implemented across the board. Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted to above. However, if no wage increase is given by the Wage Board
within six (6) months from the signing of this AGREEMENT, the Management is willing to give
the following increases, to wit:
July 1, 1999 . . . . . . . . . . . P20.00 per day per employee
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee
The difference of the first year adjustment to retroact to July 1, 1999.
The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be
subject for a re-opening or renegotiation as provided for by Republic Act No. 6715.5
For the first year of the CBAs effectivity, the salaries of Union members were increased as
follows:
NAME

WAGE

NAME

WAGE

1. Pedro Acasio

P427.00

53. Nestor Mazon

P385.00

2. Roderick Alancado

301.00

54. Luis Morales

343.00

3. Jesus Albano

352.00

55. Calix Nebria

409.00

4. Oliver Alejandro

330.00

56. Bonifacio Ninora Jr.

301.00

5. Welfredo Amania

343.00

57. Edgar Noblejas

338.00

6. Valentino Amper

343.00

58. Antonio Ofilan

429.50

7. Danilo Antolo

343.00

59. Reynaldo Ornopia

323.00

8. Nazario Apitan

431.00

60. Reynaldo Paez

291.00

9. Jonas Aquino

272.00

61. Ferdinand Panlaan

330.00

10. Eulogio Bagasbas, Jr.

330.00

62. Eulogio Par Jr.

301.00

11. Luis Bania, Jr.

301.00

63. Marvin Peco

223.00

12. Daniel Barbin

409.00

64. Emmanuel Pepino

249.00

13. Nelson Bascones

343.00

65. Danilo Perez

358.00

14. Alden Bayo-ang, Jr.

343.00

66. Jaime Pulpulaan

330.00

15. Jimmy Bermejo

277.00

67. Ariston Quidato

343.00

16. Alfredo Bernabe

258.00

68. Graciano Ramos Jr.

377.00

17. Lucenio Brin

385.00

69. Antonio Raymundo

301.00

18. Jonathan Buban

409.00

70. Ronilo Reboton

277.00

19. Roberto Bugtai

301.00

71. Ramon Relato

320.00

20. Danilo Cagomoc

343.00

72. Efren Reyes

343.00

21. Joseph Calleja

358.00

73. Ronaldo Reyes

343.00

22. Carlito Camaing

409.00

74. Joseph Rioja

301.00

23. Hermenigildo Carlon, Jr. 430.00

75. George Roda

301.00

24. June Catacutan

343.00

76. Diosdado Roncales

395.00

25. Marlonito Chua

343.00

77. Gilbert Sabatin

343.00

26. Ambrocio Clavecilla

406.00

78. Julito Sabornido

409.00

27. Emeterio Cristy

414.50

79. Ronnie Sajot

343.00

28. Tirso Curambao

343.00

80. Eduardo Salameda

432.00

29. Loterio Daluyo

409.00

81. Edilberto Salen

277.00

30. Lauro Decena

343.00

82. Fundador Salon

301.00

31. Charlie dela Cruz

434.00

83. Edgar Sampaga

362.00

32. Raynaldo delos Santos

343.00

84. Fredie Se

395.00

33. Edilberto Discaya

395.00

85. Rodolfo Sevandra

250.00

34. Erwin Dorol

343.00

86. Jose Solo

343.00

35. Eldemar Edradan

277.00

87. Robinson Solon

370.00

36. Fulgencio Eleda

377.00

88. Luisito Suarez

402.00

37. Hercules Exmundo

343.00

89. Jeriel Suico

223.00

38. Domingo Fulgueras

417.00

90. Hernando Surigao

434.00

39. Federico Garcia

277.00

91. Franklin Suringa

343.00

40. Gil Gripon

429.75

92. Albert Tabaog

277.00

41. Arnold Guevarra

409.00

93. Joel Tizon

343.00

42. Arlen Hilotin

438.00

94. Alfredo Umbal

272.00

43. Urbano Jumawan, Jr.

409.00

95. Ferdinand Ventura

347.00

44. Ronilo Lacandoze

265.00

96. Joey Villamer

429.50

45. Claudio Laroga, Jr.

343.00

97.Domingo Villanueva

430.50

46. Jesus Laurio

426.00

98. Joel Whiting

343.00

47. Mariano Lumansoc

377.00

99. Romeo Yson

406.00

48. Victor Magboo

301.00

100. Carlos Zuniega

409.00

49. Rolando Maglente

409.00

101. Nelson Zipagan

425.00

50. Marcos Malapo Jr.

409.00

102. Michael Sibol

343.00

51. Herohito Manlabao

430.00

103. Renante Tangian

223.00

52. Graciano Marasigan

409.00

104. Rodrigo Cascara

377.006

On October 14, 1999, Wage Order No. NCR-077 was issued, and on October 26, 1999, its
Implementing Rules and Regulations. It provided for a P25.50 per day increase in the salary of
employees receiving the minimum wage and increased the minimum wage to P223.50 per day.
Petitioner paid the P25.50 per day increase to all of its rank-and-file employees.
On July 1, 2000, the rank-and-file employees were granted the second year increase provided in
the CBA in the amount of P25.00 per day.8
On November 1, 2000, Wage Order No. NCR-089 took effect. Section 1 thereof provides:
Section 1. Upon the effectivity of this Wage Order, private sector workers and employees in the
National Capital Region receiving the prescribed daily minimum wage rate of P223.50 shall
receive an increase of TWENTY SIX PESOS and FIFTY CENTAVOS (P26.50) per day, thereby
setting the new minimum wage rate in the National Capital Region at TWO HUNDRED FIFTY
PESOS (P250.00) per day.10

Then Union president Lucenio Brin requested petitioner to implement the increase under Wage
Order No. NCR-08 in favor of the companys rank-and-file employees. Petitioner rejected the
request, claiming that since none of the employees were receiving a daily salary rate lower
than P250.00 and there was no wage distortion, it was not obliged to grant the wage increase.
The Union elevated the matter to the National Conciliation and Mediation Board. When the
parties failed to settle, they agreed to refer the case to voluntary arbitration. In the Submission
Agreement, the parties agreed that the sole issue is "[w]hether or not the management is obliged
to grant wage increase under Wage Order No. NCR #8 as a matter of practice,"11 and that the
award of the Voluntary Arbitrator (VA) shall be final and binding.12
In its Position Paper, the Union alleged that it has been the companys practice to grant a wage
increase under a government-issued wage order, aside from the yearly wage increases in the
CBA. It averred that petitioner paid the salary increases provided under the previous wage orders
in full (aside from the yearly CBA increases), regardless of whether there was a resulting wage
distortion, or whether Union members salaries were above the minimum wage rate. Wage Order
No. NCR-06, where rank-and-file employees were given different wage increases ranging
from P10.00 to P13.00, was an exception since the adjustments were the result of the formula
agreed upon by the Union and the employer after negotiations. The Union averred that all of their
CBAs with petitioner had a "collateral agreement" where petitioner was mandated to pay the
equivalent of the wage orders across-the-board, or at least to negotiate how much will be paid. It
pointed out that an established practice cannot be discontinued without running afoul of Article
100 of the Labor Code on non-diminution of benefits.13
For its part, petitioner alleged that there is no such company practice and that it complied with
the previous wage orders (Wage Order Nos. NCR-01-05) because some of its employees were
receiving wages below the minimum prescribed under said orders. As for Wage Order No. NCR07, petitioner alleged that its compliance was in accordance with its verbal commitment to the
Union during the CBA negotiations that it would implement any wage order issued in 1999.
Petitioner further averred that it applied the wage distortion formula prescribed under Wage
Order Nos. NCR-06 and NCR-07 because an actual distortion occurred as a result of their
implementation. It asserted that at present, all its employees enjoy regular status and that none
receives a daily wage lower than the P250.00 minimum wage rate prescribed under Wage Order
No. NCR-08.14
In reply to the Unions position paper, petitioner contended that the full implementation of the
previous wage orders did not give rise to a company practice as it was not given to the workers
within the bargaining unit on a silver platter, but only per request of the Union and after a series
of negotiations. In fact, during CBA negotiations, it steadfastly rejected the following proposal of
the Unions counsel, Atty. Florente Yambot, to include an across-the-board implementation of the
wage orders:15

x x x To supplement the above wage increases, the parties agree that additional wage increases
equal to the wage orders shall be paid across-the-board whenever the Regional Tripartite Wage
and Productivity Board issues wage orders. It is understood that these additional wage increases
will be paid not as wage orders but as agreed additional salary increases using the wage orders
merely as a device to fix or determine how much the additional wage increases shall be paid.16
The Union, however, insisted that there was such a company practice. It pointed out that despite
the fact that all the employees were already receiving salaries above the minimum wage, the
CBA still provided for the payment of a wage increase using wage orders as the yardstick. It
claimed that the parties intended that petitioner-employer would pay the additional increases
apart from those in the CBA.17 The Union further asserted that the CBA did not include all the
agreements of the parties; hence, to determine the true intention of the parties, parol evidence
should be resorted to. Thus, Atty. Yambots version of the wage adjustment provision should be
considered.18
On June 6, 2001, the VA rendered judgment in favor of the company and ordered the case
dismissed.19 It held that there was no company practice of granting a wage order increase to
employees across-the-board, and that there is no provision in the CBA that would oblige
petitioner to grant the wage increase under Wage Order No. NCR08 across-the-board.20
The Union filed a petition for review with the CA under Rule 43 of the Rules of Court. It defined
the issue for resolution as follows:
The principal issue in the present petition is whether or not the wage increase of P26.50 under
Wage Order No. NCR-08 must be paid to the union members as a matter of practice and whether
or not parol evidence can be resorted to in proving or explaining or elucidating the existence of a
collateral agreement/company practice for the payment of the wage increase under the wage
order despite that the employees were already receiving wages way above the minimum wage
of P250.00/day as prescribed by Wage Order No. NCR-08 and irrespective of whether wage
distortion exists.21
On September 23, 2004, the CA rendered judgment in favor of the Union and reversed that of the
VA. The fallo of the decision reads:
WHEREFORE, the assailed Decision dated June 6, 2001 of public respondent Voluntary
Arbitrator is REVERSED and SET ASIDE. Private respondent Pag-Asa Steel Works, Inc. is
ordered to pay the members of the petitioner union the P26.50 daily wage by applying the wage
increase prescribed under Wage Order No. NCR-08. Costs against private respondent.
SO ORDERED.22

The CA stressed that the CBA constitutes the law between the employer and the Union. It held
that the CBA is plain and clear, and leaves no doubt as to the intention of the parties, that is, to
grant a wage increase that may be ordered by the Wage Board in addition to the CBA-mandated
salary increases regardless of whether the employees are already receiving wages way above the
minimum wage. The appellate court further held that the employer has no valid reason not to
implement the wage increase mandated by Wage Order No. NCR-08 because prior thereto, it had
been paying the wage increase provided for in the CBA even though the employees concerned
were already receiving wages way above the applicable minimum wage.23 Petitioner filed a
motion for reconsideration which the CA denied for lack of merit on January 11, 2005.24
Petitioner then filed the instant petition in which it raises the following issues:
I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR
UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED AS A MATTER OF RIGHT BY
THE RESPONDENT UNDER THE 1999 CBA, in that:
a) Issue not averred in the complaint nor raised during the trial cannot be raised for the
first time on appeal; and
b) The Rules of Statutory Construction, in relation to Article 1370 and 1374 of the New
Civil Code, as well as Section 11 of the Rules of Court, requires that contract must be
read in its entirety and the various stipulations in a contract must be read together to give
effect to all.
II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR
UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED BY THE RESPONDENT UNION
AS A MATTER OF PRACTICE.25
Petitioner points out that the only issue agreed upon during the voluntary arbitration proceedings
was whether or not the company was obliged to grant the wage increase under Wage Order No.
NCR-08 as a matter of practice. It posits that the respondent did not anchor its claim for such
wage increase on the CBA but on an alleged company practice of granting the increase pursuant
to a wage order. According to petitioner, respondent Union changed its theory on appeal when it
claimed before the CA that the CBA is ambiguous.26 Petitioner contends that respondent Union
was precluded from raising this issue as it was not raised during the voluntary arbitration. It
insists that an issue cannot be raised for the first time on appeal.27
Petitioner further argues that there is no ambiguity in the CBA. It avers that Section 1, Article VI
of the CBA should be read in its entirety.28 From the said provision, it is clear that the CBA

contemplated only the implementation of a wage order issued within six months from the
execution of the CBA, and not every wage order issued during its effectivity. Hence, petitioner
complied with Wage Order No. NCR-07 which was issued 28 days from the execution of the
CBA. Petitioner emphasizes that this was implemented not because it was a matter of practice
but because it was agreed upon in the CBA.29 It alleges that respondent Union in fact realized
that it could not invoke the provisions of the CBA to enforce Wage Order No. NCR-08, which is
why it agreed to limit the issue for voluntary arbitration to whether respondent Union is entitled
to the wage increase as a matter of practice. The fact that the "Yambot proposals" were left out in
the final document simply means that the parties never agreed to them.30
In any case, petitioner avers that respondent Union is not entitled to the wage increase provided
under Wage Order No. NCR-08 as a matter of practice. There is no company practice of granting
a wage-order-mandated increase in addition to the CBA-mandated wage increase. It points out
that, as admitted by respondent Union, the previous wage orders were not automatically
implemented and were made applicable only after negotiations. Petitioner argues that the
previous wage orders were implemented because at that time, some employees were receiving
salaries below the minimum wage and the resulting wage distortion had to be remedied.31
For its part, respondent Union avers that the provision "[a]ny Wage Order to be implemented by
the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase
adverted to above" referred to a company practice of paying a wage increase whenever the
government issues a wage order even if the employees salaries were above the minimum wage
and there is no resulting wage distortion. According to respondent, the CBA contemplated all the
salary increases that may be mandated by wage orders to be issued in the future. Since the wage
order was only a device to determine exactly how much and when the increase would be given,
these increases are, in effect, CBA-mandated and not wage order increases. 32 Respondent further
avers that the ambiguity in the wage adjustment provision of the CBA can be clarified by
resorting to parol evidence, that is, Atty. Yambots version of said provision.33
The petition is meritorious. We rule that petitioner is not obliged to grant the wage increase under
Wage Order No. NCR-08 either by virtue of the CBA, or as a matter of company practice.
On the procedural issue, well-settled is the rule, also applicable in labor cases, that issues not
raised below cannot be raised for the first time on appeal.34 Points of law, theories, issues and
arguments not brought to the attention of the lower court need not be, and ordinarily will not be,
considered by the reviewing court, as they cannot be raised for the first time at that late stage.
Basic considerations of due process impel this rule.35
We agree with petitioners contention that the issue on the ambiguity of the CBA and its failure
to express the true intention of the parties has not been expressly raised before the voluntary
arbitration proceedings. The parties specifically confined the issue for resolution by the VA to

whether or not the petitioner is obliged to grant an increase to its employees as a matter of
practice. Respondent did not anchor its claim for an across-the-board wage increase under Wage
Order No. NCR-08 on the CBA. However, we note that it raised before the CA two issues,
namely:
x x x whether or not the wage increase of P26.50 under Wage Order No. NCR-08 must be paid to
the union members as a matter of practice and whether or not parol evidence can be resorted to in
proving or explaining or elucidating the existence of a collateral agreement/company practice for
the payment of the wage increase under the wage order despite that the employees were already
receiving wages way above the minimum wage ofP250.00/day as prescribed by Wage Order No.
NCR-08 and irrespective of whether wage distortion exists.36
Petitioner, in its Comment on the petition, delved into these issues and elaborated on its
contentions. By so doing, it thereby agreed for the CA to take cognizance of such issues as
defined by respondent (petitioner therein). Moreover, a perusal of the records shows that the
issue of whether or not the CBA is ambiguous and does not reflect the true agreement of the
parties was, in fact, raised before the voluntary arbitration proceedings. Despite the submission
agreement confining the issue to whether petitioner was obliged to grant an increase pursuant to
Wage Order No. NCR-08 as a matter of practice, respondent Union nevertheless raised the same
issues in its pleadings. In its Position Paper, it asserted that the CBA consistently contained a
collateral agreement to pay the equivalent of the wage orders across-the-board; in its Reply, it
claimed that such provision clearly provided that petitioner would pay the additional increases
apart from the CBA and that the wage order serves only as a measure of said increase. These
assertions indicate that respondent Union also relied on the CBA to support its claim for the
wage increase.
Central to the substantial issue is Article VI, Section I, of the CBA of the parties, dated
September 23, 1999, viz:
SALARIES AND WAGE
Section 1. WAGE ADJUSTMENT The COMPANY agrees to grant to all workers who are
already regular and covered by this AGREEMENT at the effectivity of this AGREEMENT a
general wage increase as follows:
July 1, 1999 . P15.00 per day per employee
July 1, 2000 . P25.00 per day per employee
July 1, 2001 . P 30.00 per day per employee

The aforesaid wage increase shall be implemented across the board. Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted to above. However, if no wage increase is given by the Wage Board
within six (6) months from the signing of this AGREEMENT, the Management is willing to give
the following increases, to wit:
July 1, 1999 . P 20.00 per day per employee
July 1, 2000 . P 25.00 per day per employee
July 1, 2001 P 30.00 per day per employee
The difference of the first year adjustment to retroact to July 1, 1999.
The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be
subject for a reopening or renegotiation as provided for by Republic Act No. 6715.37
On the other hand, Wage Order No. NCR-08 specifically provides that only those in the private
sector in the NCR receiving the prescribed daily minimum wage rate of P223.00 per day would
receive an increase of P26.50 a day, thereby setting the new minimum wage rate in said region
to P250.00 per day. There is no dispute that, when the order was issued, the lowest paid
employee of petitioner was receiving a wage higher than P250.00 a day. As such, its employees
had no right to demand for an increase under said order. As correctly ruled by the VA:
We now come to the core of this case. Is [petitioner] under an obligation to grant wage increase
to its workers under W.O. No. NCR-08 as a matter of practice? It is submitted that employers
(unless exempt) in Metro Manila (including the [petitioner]) are mandated to implement the said
wage order but limited to those entitled thereto. There is no legal basis to implement the same
across-the-board. A perusal of the record shows that the lowest paid employee before the
implementation of Wage Order #8 is P250.00/day and none was receiving belowP223.50
minimum. This could only mean that the union can no longer demand for any wage distortion
adjustment. Neither could they insist for an adjustment of P26.50 increase under Wage Order #8.
The provision of wage order #8 and its implementing rules are very clear as to who are entitled
to the P26.50/day increase, i.e., "private sector workers and employees in the National Capital
Region receiving the prescribed daily minimum wage rate of P223.50 shall receive an increase of
Twenty-Six Pesos and Fifty Centavos (P26.50) per day," and since the lowest paid
is P250.00/day the company is not obliged to adjust the wages of the workers.
With the above narration of facts and with the union not having effectively controverted the
same, we find no merit to the complainants assertion of such a company practice in the grant of
wage order increase applied across-the-board. The fact that it was shown the increases granted

under the Wage Orders were obtained thru request and negotiations because of the existence of
wage distortion and not as company practice as what the union would want.
Neither do we find merit in the argument that under the CBA, such increase should be
implemented across-the-board. The provision in the CBA that "Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted above" cannot be interpreted in support of an across-the-board increase.
If such were the intentions of this provision, then the company could have simply accepted the
original demand of the union for such across-the-board implementation, as set forth in their
original proposal (Annex "2" union[]s counsel proposal). The fact that the company rejected this
proposal can only mean that it was never its intention to agree, to such across-the-board
implementation. Thus, the union will have to be contented with the increase of P30.00 under the
CBA which is due on July 31, 2001 barely a month from now.38
The error of the CA lies in its considering only the CBA in interpreting the wage adjustment
provision, without taking into account Wage Order No. NCR-08, and the fact that the members
of respondent Union were already receiving salaries higher than P250.00 a day when it was
issued. The CBA cannot be considered independently of the wage order which respondent Union
relied on for its claim.
Wage Order No. NCR-08 clearly states that only those employees receiving salaries below the
prescribed minimum wage are entitled to the wage increase provided therein, and not all
employees across-the-board as respondent Union would want petitioner to do. Considering
therefore that none of the members of respondent Union are receiving salaries below the P250.00
minimum wage, petitioner is not obliged to grant the wage increase to them.
The ruling of the Court in Capitol Wireless, Inc. v. Bate39 is instructive on how to construe a
CBA vis--vis a wage order. In that case, the company and the Union signed a CBA with a
similar provision: "[s]hould there be any government mandated wage increases and/or
allowances, the same shall be over and above the benefits herein granted."40 Thereafter, the Wage
Board of the NCR issued several wage orders providing for an across-the-board increase in the
minimum wage of all employees in the private sector. The company implemented the wage
increases only to those employees covered by the wage orders - those receiving not more than
the minimum wage. The Union protested, contending that, pursuant to said provision, any and all
government-mandated increases in salaries and allowance should be granted to all employees
across-the-board. The Court held as follows:
x x x The wage orders did not grant across-the-board increases to all employees in the National
Capital Region but limited such increases only to those already receiving wage rates not more
than P125.00 per day under Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day
under Wage Order No. NCR-02. Since the wage orders specified who among the employees are

entitled to the statutory wage increases, then the increases applied only to those mentioned
therein. The provisions of the CBA should be read in harmony with the wage orders, whose
benefits should be given only to those employees covered thereby. (Emphasis added)41
In this case, as gleaned from the pleadings of the parties, respondent Union relied on a collateral
agreement between it and petitioner, an agreement extrinsic of the CBA based on an alleged
established practice of the latter as employer. The VA rejected this claim:
Complainant Pag-Asa Steel Workers Union additionally advances the arguments that "there exist
a collateral agreement to pay the equivalent of wage orders across the board or at least to
negotiate how much will be paid" and that "parol evidence is now applicable to show or explain
what the unclean provisions of the CBA means regarding wage adjustment." The respondent
cites Article XXVII of the CBA in effect, as follows:
"The parties acknowledged that during the negotiation which resulted in this AGREEMENT,
each had the unlimited right & opportunity to make demands, claims and proposals of every kind
and nature with respect to any subject or matter not removed by law from the Collective
Bargaining and the understanding and agreements arrived at by the parties after the exercise of
that right & opportunity are set forth in this AGREEMENT. Therefore, the COMPANY and the
UNION, for the life of this AGREEMENT, agrees that neither party shall not be obligated to
bargain collectively with respect to any subject matter not specifically referred to or covered in
this AGREEMENT, and furthermore, that each party voluntarily & unqualifiedly waives such
right even though such subject may not have been within the knowledge or contemplation of
either or both of the parties at the time they signed this AGREEMENT."
From the said CBA provision and upon an appreciation of the entire CBA, we find it to have
more than amply covered all aspects of the collective bargaining. To allow alleged collateral
agreements or parol/oral agreements would be violative of the CBA provision afore-quoted.42
We agree with petitioners contention that the rule excluding parol evidence to vary or contradict
a written agreement, does not extend so far as to preclude the admission of extrinsic evidence, to
show prior or contemporaneous collateral parol agreements between the parties. Such evidence
may be received regardless of whether or not the written agreement contains reference to such
collateral agreement.43 As the Court ruled in United Kimberly-Clark Employees Union, et al. v.
Kimberly-Clark Philippines, Inc.:44
A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the
draftsmen cannot wholly anticipate. It covers the whole employment relationship and prescribes
the rights and duties of the parties. It is a system of industrial self-government with the grievance
machinery at the very heart of the system. The parties solve their problems by molding a system

of private law for all the problems which may arise and to provide for their solution in a way
which will generally accord with the variant needs and desires of the parties.
If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall prevail. However, if, in a CBA, the parties stipulate that
the hirees must be presumed of employment qualification standards but fail to state such
qualification standards in said CBA, the VA may resort to evidence extrinsic of the CBA to
determine the full agreement intended by the parties. When a CBA may be expected to speak on
a matter, but does not, its sentence imports ambiguity on that subject. The VA is not merely to
rely on the cold and cryptic words on the face of the CBA but is mandated to discover the
intention of the parties. Recognizing the inability of the parties to anticipate or address all future
problems, gaps may be left to be filled in by reference to the practices of the industry, and the
step which is equally a part of the CBA although not expressed in it. In order to ascertain the
intention of the contracting parties, their contemporaneous and subsequent acts shall be
principally considered. The VA may also consider and rely upon negotiating and contractual
history of the parties, evidence of past practices interpreting ambiguous provisions. The VA has
to examine such practices to determine the scope of their agreement, as where the provision of
the CBA has been loosely formulated. Moreover, the CBA must be construed liberally rather
than narrowly and technically and the Court must place a practical and realistic construction
upon it.45
However, just like any other fact, habits, customs, usage or patterns of conduct must be proved.
Thus was the ruling of the Court in Bank of Commerce v. Manalo, et al.:46
Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must
contend with the caveat that, before they admit evidence of usage, of habit or pattern of conduct,
the offering party must establish the degree of specificity and frequency of uniform response that
ensures more than a mere tendency to act in a given manner but rather, conduct that is semiautomatic in nature. The offering party must allege and prove specific, repetitive conduct that
might constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on inference of systematic conduct. Mere similarity
of contracts does not present the kind of sufficiently similar circumstances to outweigh the
danger of prejudice and confusion.
In determining whether the examples are numerous enough, and sufficiently regular, the key
criteria are adequacy of sampling and uniformity of response. After all, habit means a course of
behavior of a person regularly represented in like circumstances. It is only when examples
offered to establish pattern of conduct or habit are numerous enough to lose an inference of
systematic conduct that examples are admissible. The key criteria are adequacy of sampling and
uniformity of response or ratio of reaction to situations.

We have reviewed the records meticulously and find no evidence to prove that the grant of a
wage-order-mandated increase to all the employees regardless of their salary rates on an
agreement collateral to the CBA had ripened into company practice before the effectivity of
Wage Order No. NCR-08. Respondent Union failed to adduce proof on the salaries of the
employees prior to the issuance of each wage order to establish its allegation that, even if the
employees were receiving salaries above the minimum wage and there was no wage distortion,
they were still granted salary increase. Only the following lists of salaries of respondent Unions
members were presented in evidence: (1) before Wage Order No. NCR-06 was issued; (2) after
Wage Order No. NCR-06 was implemented; (3) after the grant of the first year increase under the
CBA; (4) after Wage Order No. NCR-07 was implemented; and (5) after the second year increase
in the CBA was implemented.
The list of the employees salaries before Wage Order No. NCR-06 was implemented belie
respondent Unions claim that the wage-order-mandated increases were given to employees
despite the fact that they were receiving salaries above the minimum wage. This list proves that
some employees were in fact receiving salaries below theP198.00 minimum wage rate prescribed
by the wage order two rank-and-file employees in particular. As petitioner explains, a wage
distortion occurred as a result of granting the increase to those employees who were receiving
salaries below the prescribed minimum wage. The wage distortion necessitated the upward
adjustment of the salaries of the other employees and not because it was a matter of company
practice or usage. The situation of the employees before Wage Order No. NCR-08, however, was
different. Not one of the members of respondent Union was then receiving less than P250.00 per
day, the minimum wage requirement in said wage order.
The only instance when petitioner admittedly implemented a wage order despite the fact that the
employees were not receiving salaries below the minimum wage was under Wage Order No.
NCR-07. Petitioner, however, explains that it did so because it was agreed upon in the CBA that
should a wage increase be ordered within six months from its signing, petitioner would give the
increase to the employees in addition to the CBA-mandated increases. Respondents isolated act
could hardly be classified as a "company practice" or company usage that may be considered an
enforceable obligation.
Moreover, to ripen into a company practice that is demandable as a matter of right, the giving of
the increase should not be by reason of a strict legal or contractual obligation, but by reason of an
act of liberality on the part of the employer. Hence, even if the company continuously grants a
wage increase as mandated by a wage order or pursuant to a CBA, the same would not
automatically ripen into a company practice. In this case, petitioner granted the increase under
Wage Order No. NCR-07 on its belief that it was obliged to do so under the CBA.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 65171 and Resolution dated January 11, 2005 are REVERSED and
SET ASIDE. The Decision of the Voluntary Arbitrator is REINSTATED. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 88168 August 30, 1990
TRADERS ROYAL BANK, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK
EMPLOYEES UNION, respondents.
San Juan, Gonzalez, San Agustin & Sinense for petitioner.
E.N.A. Cruz, Enfero & Associates for private respondent.

GRIO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of
the National Labor Relations Commission, which found the petitioner, Traders Royal Bank (or

TRB), guilty of diminution of benefits due the private respondents and ordered it to pay the said
employees' claims for differentials in their holiday, mid-year, and year-end bonuses.
On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB
with the Conciliation Division of the Bureau of Labor Relations claiming that:
First, the management of TRB per memo dated October 10, 1986 paid the
employees their HOLIDAY PAY, but has withheld from the Union the basis of
their computation.
Second, the computation in question, has allegedly decreased the daily salary rate
of the employees. This diminution of existing benefits has decreased our overtime
rate and has affected the employees' take home pay.
Third, the diminution of benefits being enjoyed by the employees since time
immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2)
months basic and year-end bonus from three (3) months gross to only two (2)
months.
Fourth, the refusal by management to recall active union members from the
branches which were being transferred without prior notice, solely at the instance
of the branch manager. (p. 26, Rollo.)
In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau of Labor
Relations, had jurisdiction over the money claims of the employees.
On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of
the following issues raised by the complainants:
l) The Management of TRB per memo dated October 10, 1986 paid the
employees their holiday pay but has withheld from the union the basis of their
computation.
2) The computation in question has allegedly decreased the daily salary rate of the
employees. This diminution of existing benefits has decreased our overtime rate
and has affected the employees' take home pay.
3) The diminution of benefits being enjoyed by the employees since the (sic)
immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2)
months basic and year-end bonus from three (3) months gross to only two (2)
months.

4) The refusal by management to recall active union members from the branches
which were being transferred without prior notice, solely at the instance of the
branch, manager. (p. 28, Rollo.)
In the meantime, the parties who had been negotiating for a collective bargaining agreement,
agreed on the terms of the CBA, to wit:
1. The whole of the bonuses given in previous years is not demandable, i.e., there
is no diminution, as to be liable for a differential, if the bonus given is less than
that in previous years.
2. Since only two months bonus is guaranteed, only to that extent are bonuses
deemed part of regular compensation.
3. As regards the third and fourth bonuses, they are entirely dependent on the
income of the bank, and not demandable as part of compensation. (pp. 6768, Rollo.)
Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the
CBA would apply prospectively only to claims arising after its effectivity.
Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of
giving them bonuses at year's end, would depend on how profitable the operation of the bank had
been. Generally, the bonus given was two (2) months basic mid-year and two (2) months gross
end-year.
On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioner and
ordering respondent bank to pay petitioner members-employees the following:
1. Holiday differential for the period covering l983-1986 as embodied in
Resolution No. 4984-1986 of respondent's Board of Directors but to start from
November 11, 1983 and using the Divisor 251 days in determining the daily rate
of the employees;
2. Mid-year bonus differential representing the difference between two (2) months
gross pay and two (2) months basic pay and end-year bonus differential of one (1)
month gross pay for 1986.

The claim for holiday differential for the period earlier than November 11, 1983 is
hereby dismissed, the same having prescribed.
Likewise, the charge of unfair labor practice against the respondent company is
hereby dismissed for lack of merit. (pp. 72-73, Rollo.)
A motion for reconsideration was filed by TRB but it was denied. Hence, this petition
for certiorari.
There is merit in the petitioner's contention that the NLRC gravely abused its discretion in
ordering it to pay mid-year/year-end bonus differential for 1986 to its employees.
A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand
as a matter of right" (Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is something
given in addition to what is ordinarily received by or strictly due the recipient." The granting of a
bonus is basically a management prerogative which cannot be forced upon the employer "who
may not be obliged to assume the onerous burden of granting bonuses or other benefits aside
from the employee's basic salaries or wages" . . . (Kamaya Point Hotel vs. National Labor
Relations Commission, Federation of Free Workers and Nemia Quiambao, G.R. No. 75289,
August 31, 1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its
employees. The matter of giving them bonuses over and above their lawful salaries and
allowances is entirely dependent on the profits, if any, realized by the Bank from its operations
during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986,
the income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2)
months basic mid-year and two months gross year-end bonuses. The petitioner pointed out,
however, that the Bank weakened considerably after 1986 on account of political developments
in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under
sequestration by the present administration and is now managed by the Presidential Commission
on Good Government (PCGG).
In the light of these submissions of the petitioner, the contention of the Union that the granting of
bonuses to the employees had ripened into a company practice that may not be adjusted to the
prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition
having declined, the Bank may not be forced to distribute bonuses which it can no longer afford
to pay and, in effect, be penalized for its past generosity to its employees.

Private respondent's contention, that the decrease in the midyear and year-end bonuses
constituted a diminution of the employees' salaries, is not correct, for bonuses are not part of
labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave
benefits, which are provided by the Labor Code.
WHEREFORE, the petition for certiorari is granted. The decision of the National Labor
Relations Commission is modified by deleting the award of bonus differentials to the employees
for 1986. In other respects, the decision is affirmed. Costs against the respondent union.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 112658 March 16, 1995
INTERNATIONAL SCHOOL OF SPEECH and/or WILMA CRUZ TAPALLA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MA. CORAZON D.
MAMUYAC, respondents.

REGALADO, J.:
The instant case was precipitated by a complaint, dated April 18, 1990, filed by private
respondent Ma. Corazon D. Mamuyac against petitioners International School of Speech and/or
Wilma Cruz Tapalla, charging the latter with unfair labor practice; illegal deduction; nonpayment of wages, overtime pay, legal holiday pay, premium pay for holiday and rest day; and
violation of Presidential Decrees Nos. 525, 851 and 928. 1
On June 20, 1990, petitioners filed a counter-complaint charging private respondent with
abandonment and violation of contract, with a prayer for P150,000.00 as actual damages,
P50,000.00 as moral damages and P50,000.00 for exemplary damages. 2
It appears that sometime in June, 1989, private respondent was hired as an English teacher paid
on an hourly basis, and she served as such up to March 15, 1990. She avers that petitioners
committed acts constitutive of unfair labor practice, that is, by preventing employees of the
school from socializing with each other for fear that a labor organization might be formed, not
furnishing her a copy of her contract, imposing stiff penalties for tardiness, imposing inhuman
and unbearable working conditions such as lunch-break of only 15 minutes, violating labor

standard laws, prohibiting stay-in employees from eating in adjoining restaurants, and hitting a
teacher for allegedly refusing to sign a contract. 3
She likewise cited several unauthorized deductions made from her salary, namely, P1,000.00 for
cash bond, P460.00 for books, and P1,500.00 for alleged tardiness. 4
On unpaid wages, she claimed that she was not compensated from March 15 up to September 15
(the year was not specified but, based on the records, it was in 1990) at the agreed sum of
P3,000.00 per month, or a total sum of P21,000.00. She further asseverates that she was
constructively dismissed from the service when she was divested of her assigned load of
subjects. Finally, she was allegedly not paid for services she rendered on weekends and legal
holidays. 5
On their part, petitioners contended that private respondent abandoned her job when she failed to
report for work in the summer of 1990 contrary to their agreement, hence they prayed for an
award of damages in their favor. 6
After a careful evaluation of the position papers of the contending parties, labor arbiter found
that only the claims for illegal deduction, 13th month pay, unpaid wages, and legal holiday pay
were meritorious. Accordingly, petitioners were ordered to pay private respondent the aggregate
sum of P11,335.96 and attorney's fees in the amount of P1,133.60 while petitioners' countercomplaint was dismissed. 7
For the ratio decidendi of said ruling, we reproduce with approval the following discussion in the
decision of the labor arbiter:
. . . This Branch cannot give due course to the alleged illegal dismissal. In the first
place, illegal dismissal was not among the causes of action cited in the complaint.
The complainant is not permitted by the rules to implead additional causes of
action in her position paper without first amending her complaint. To allow her
such stance would unduly prejudice the respondents who are entitled to due
process inasmuch as under the ordinary course of procedure summons must first
be issued before additional causes of action could be cited against the
respondents. Besides, how could there be illegal dismissal when it was the
complainant who ceased reporting for work on April 12, 1990? The reason
advanced by the complainant in support of her alleged illegal dismissal is that her
subject loads were withdrawn from her. Granting that her subject loads as an
English Teacher were withdrawn, it appears that when that was done, complainant
yielded without any remonstrance as in fact she agreed to work as Course Adviser
instead during the summer time.

Regarding the claim of unfair labor practice, the acts complained of and being
attributed to the respondents as hereinbefore discussed cannot be categorized as
unfair labor practice acts as understood and contemplated by the Labor Code, as
amended, particularly Art. 248, paragraph (a) to (i), inclusive. The alleged
attempts of the respondents not to let (sic) the employees to socialize for fear of
the organization of a labor union is just a mere conclusion of fact not supported
by the evidence.
Anent the alleged violations of PD 525 and PD 928, these charges do not have
merit. PD 525 refers to emergency living allowance already integrated into the
basic wage sometime in 1980. PD 928 refers to wage increase granted sometime
in 1982 not applicable to the case the complainant.
With respect to the claim for overtime pay, it appears from the evidence (Exh. "3b" to "3-j") that the complainant being paid on per hour basis did not render any
overtime work or services beyond eight (8) hours everyday. Most of the time, her
teaching loads did not keep her at work to no (sic) more than four (4) hours
everyday.
On legal holiday pays, it appears from the evidence that complainant reported for
work on November 30 and December 30, 1989, at four (4) hours each. Being
legal holidays, complainant is entitled to an additional 100% of her daily rate
which was P30.00 per hour. Thus, complainant for the total eight (8) hours for the
two (2) legal holidays, she must be paid P240.00.
On unpaid wages, it appears that complainant was paid P500.00 only for the
period from March 15, 1990 up to April 12, 1990 instead of the P3,500.00 per
month as agreed upon between her and the respondents. Thus, the respondents
must pay the balance in the sum of P3,000.00. The complainant's claim for unpaid
salaries from April 15, 1990 up to September 15, 1990 cannot be granted where it
appears that she was already out of work starting April 12, 1990.
Regarding the complainant's claim for illegal deduction, the alleged deduction of
P460.00 for books was admitted by the respondents. Said deduction without any
written authorization from the complainant cannot be made. Besides, there was no
agreement before complainant was hired that she had to buy books from the
respondents. Hence, respondent must reimburse the complainant the said sum of
P460.00. This Branch also awards the claim of P1,000.00 to complainant by way
of reimbursement of what was also deducted as cash bond. As between the
affirmative declaration of the complainant and the negative denial of the
respondents, the former deserves more evidentiary weight. Besides, in case of

doubt in case of two (2) unsubstantiated but opposing assertions, such doubt must
be resolved in favor of workingmen.
On the claim for 13th month pay (violation of PD 851), it appears from the
evidence submitted by the respondents that no such payment by way of
proportionate 13th month pay for 1990 and 1989 was paid to the complainant.
From July, 1989 up to December 31, 1989, the complainant received a total
compensation amounting to P7,319.00, then, from January 1, 1990 up to April,
1990, she received a total of P10,205.00. Thus, her proportionate 13th month pay
is computed, follows:
1989
6 mos. x P7,319.00 = P3,659.50

12
1990
3.5 x P10,205.00 = P2,976.46

12
TOTAL 13TH MONTH PAY = P6,635.96
With respect to the counter-complaint that respondents filed against the
complainant for damages, for want of basis the same, is dismissed. The
complainant has been forced to be absent on account of the failure of the
respondents to pay her salaries. In fact, for that reason and her other money claims
against the respondents, complainant without further delay instituted her suit
against the respondents in less than a week after she absented herself. The
complainant cannot be faulted. Part of the blame is imputable to the respondents.
It has been said that one who comes to court must do so with clean hands. The
respondents do not belong to this category. Apart from their non-observance of
certain labor standard laws as hereinabove discussed, it even appears that they do
not keep the required payrolls, daily time records, and pay slips as required by
Book III, Rule X, Section 6,
to 12, the Implementing Rules and Regulations of the Labor Code, as amended. 8

Dissatisfied with the aforequoted ruling, both petitioners and private respondent lodged separate
appeals before the National Labor Relations Commission (NLRC). The latter affirmed the
appealed decisions, 9 hence the instant petition.
In this action for certiorari, petitioners assail the public respondent's judgment on two
points, viz.: (1) in awarding 13th month pay in the amount of P6,635.96 in favor of private
respondent, and (2) in dismissing its counter-complaint. 10
The appeal with regard to the first issue is meritorious. The NLRC, as earlier illustrated, adopted
the labor arbiter's computation of private respondent's 13th month pay as follows:
1989
6 mos. x P7,319.00 = P3,659.50

12
1990
3.5 mos. x P10,205.00 = P2,976.46

12
TOTAL 13TH MONTH PAY = P6,635.96 11
According to No. 4(a) of the Revised Guidelines on the implementation of the 13th Month Pay
Law (Presidential Decree No. 851) dated November 16, 1987, the 13th month pay of an
individual is (not less than) one-twelfth (1/12) of the total basic salary earned by an employee
within a calendar year. Moreover, in No. 6 thereof, it is provided that an employee who has
resigned or whose services were terminated at any time before the time for payment of the 13th
month pay is entitled to this monetary benefit in proportion to the length of time he worked
during the year, reckoned from the time he started working during the calendar year up to the
time of his resignation or termination from the service. Thus, if he worked only from January up
to September, his proportionate 13th month pay should be equivalent to the total basic salary he
earned during that period.

Since no evidence was adduced by private respondent that petitioners observe a different formula
in the computation of the 13th month pay for their employees, the aforementioned mode of
computation should be applied.
Thus, considering that in 1989 private respondent rendered service for only 6 months, her 13th
month pay should be one-twelfth (1/12) of the total compensation she received for that year, that
is, P7,319.00. Consequently her 13th month pay for the year 1989 should be P610.00.
Following the same formula, private respondent should receive a 13th month pay of P850,00 for
the year 1990 for services rendered for three months wherein she received a total compensation
of P10,205.00, that is, P10,205.00 divided by 12 equals P850.00.
On this particular aspect, therefore, the Court takes exception to the rule that the findings on
technical matters by administrative bodies like respondent NLRC are accorded respect and
finality on appeal, 12 since it is clear that a palpable and demonstrable mistake has been
committed and should be rectified. Petitioners should, therefore, pay private respondent the total
amount of P1,460,00, instead or P6,635.96, as her 13th month pay for 1989 and 1990.
With regard to the second issue, on whether or not petitioners are entitled to damages in view of
private respondent's abandonment of her job, the Court upholds and approvingly quotes
respondent NLRC's ruling on this matter which affirmed that of the labor arbiter, to wit:
As regards respondents' counterclaim on the allegation that complainant is guilty
of having abandoned her job, we likewise vote for a dismissal thereof. It is a wellsettled rule that to constitute abandonment, there must be a deliberate unjustified
refusal of the employee to resume his employment. This circumstance does not
however exist in complainant's case, the assertions in her testimony given during
the hearing standing unrebutted, and which is hereunder quoted as:
THE LABOR ARBITER
(to witness)
What did you do as Course Adviser?
THE WITNESS
(answering)
A As Course Adviser whenever there are enrollees, we advise them
on the course that they have to take.
THE LABOR ARBITER
(to witness)

Q So, after you agreed with Mrs. Tapalla, did you report for the
two month period, April and May, 1990 as Course Adviser?
THE WITNESS
(answering)
A As Course Adviser, yes, Your Honor.
THE LABOR ARBITER
(to witness)
Q For the two month period April and May?
THE WITNESS
(answering)
A Not for the two month period. I was not able to finish since
when I waited for the salary, there were two fifteen that were not
given.
THE LABOR ARBITER
(to witness)
Q In other words, there were two (2) pay periods that you were not
paid?
THE WITNESS
(answering)
A Yes, Your Honor.
THE LABOR ARBITER
(to witness)
Q What in particular were the periods involved?
THE WITNESS
(answering)
A The first month.

THE LABOR ARBITER

(to witness)
Q You mean April?
THE WITNESS
(answering)
A Yes, Your Honor, March 15 to April 15.
xxx xxx xxx
THE LABOR ARBITER
(to witness)
Q In other words, your agreement involving rendition of your
services as Course Adviser started March 15, 1990?
THE WITNESS
(answering)
A Yes, Your Honor.
THE LABOR ARBITER
(to witness)
Q And according to you, you were not paid your salary for March
15 up to March 31?
THE WITNESS
(answering)
A Yes, Your Honor.
THE LABOR ARBITER
(to witness)
Q And also from April 1 to April 15 because according to you two
pay periods?
THE WITNESS
(answering)

A Yes, Your Honor.

xxx xxx xxx
THE LABOR ARBITER
(to witness)
Q All right, after that conference with Mrs. Tapalla, did you still
report for work as Course Adviser?
THE WITNESS
(answering)
A I wasn't able to report anymore because I don't have any money.
In fact I borrowed money from people without my husband's
knowledge.
THE LABOR ARBITER
(to witness)
Q Did you inform Mrs. Tapalla About the fact that you will no
longer report anymore to your work?
THE WITNESS
(answering)
A I was not able to inform her since they sent me a letter at once.
So, they did not give me any chance to call them up because I
received a letter the following day, and I think that is a Sunday.
xxx xxx xxx
Had respondents been free from any participation in the adverted cause for
complainant's failure to report for work, this Commission could have taken a
different course from that of the Labor Arbiter. It appears, however, that
respondents are not free from any wrong as it is also clear from the records of the
case that they have been remiss in fully observing the letter of the law concerning
labor standards provisions. As such, we concur with the Labor Arbiter in invoking
the principle in equity that he who comes to court must do so with "clean hands."
Accordingly, respondents do not deserve the remedial relief asked. 13

WHEREFORE, as MODIFIED by awarding private respondent her 13th month pay for 1989 and
1990 in the reduced total amount of P1,460.00, the assailed decision of respondent National
Labor Relations Commission is hereby AFFIRMED in all other respects.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and
ANTONIO V. BALINANG,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN
BANK and TRUST COMPANY, respondents.
Gilbert P. Lorenzo for petitioners.
Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALUTUCP (MBTCEU) and its president, Antonio V. Balinang, raise the issue of whether or not the
implementation by the Metropolitan Bank and Trust Company of Republic Act No. 6727,
mandating an increase in pay of P25 per day for certain employees in the private sector, created a
distortion that would require an adjustment under said law in the wages of the latter's other
various groups of employees.
On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU,
granting a monthly P900 wage increase effective 01 January 1989, P600 wage increase 01
January 1990, and P200 wage increase effective 01 January 1991. The MBTCEU had also
bargained for the inclusion of probationary employees in the list of employees who would
benefit from the first P900 increase but the bank had adamantly refused to accede thereto.
Consequently, only regular employees as of 01 January 1989 were given the increase to the
exclusion of probationary employees.
Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage
policy determination be establishing the mechanism and proper standards thereof, . . . fixing new
wage rates, providing wage incentives for industrial dispersal to the countryside, and for other
purposes," took effect. Its provisions, pertinent to this case, state:
Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of
all workers and employees in the private sector, whether agricultural or nonagricultural, shall be increased by twenty-five pesos (P25) per day, . . .: Provided,
That those already receiving above the minimum wage rates up to one hundred
pesos(P100.00) shall also receive an increase of twenty-five pesos (P25.00) per
day, . . .
xxx xxx xxx
(d) If expressly provided for and agreed upon in the collective bargaining
agreements, all increase in the daily basic wage rates granted by the employers
three (3) months before the effectivity of this Act shall be credited as compliance
with the increases in the wage rates prescribed herein, provided that, where such
increases are less than the prescribed increases in the wage rates under this Act,
the employer shall pay the difference. Such increase shall not include anniversary
wage increases, merit wage increase and those resulting from the regularization or
promotion of employees.
Where the application of the increases in the wage rates under this Section results
in distortions as defined under existing laws in the wage structure within an
establishment and gives rise to a dispute therein, such dispute shall first be settled

voluntarily between the parties and in the event of a deadlock, the same shall be
finally resolved through compulsory arbitration by the regional branches of the
National Labor Relations Commission (NLRC) having jurisdiction over the
workplace.
It shall be mandatory for the NLRC to conduct continous hearings and decide any
dispute arising under this Section within twenty (20) calendar days from the time
said dispute is formally submitted to it for arbitration. The pendency of a dispute
arising from a wage distortion shall not in any way delay the applicability of the
increase in the wage rates prescribed under this Section.
Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its
probationary employees and to those who had been promoted to regular or permanent status
before 01 July 1989 but whose daily rate was P100 and below. The bank refused to give the same
increase to its regular employees who were receiving more than P100 per day and recipients of
the P900 CBA increase.
Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of
the employees into (a) the probationary employees as of 30 June 1989 and regular employees
receiving P100 or less a day who had been promoted to permanent or regular status before 01
July 1989, and (b) the regular employees as of 01 July 1989, whose pay was over P100 a day,
and that, between the two groups, there emerged a substantially reduced salary gap, the
MBTCEU sought from the bank the correction of the alleged distortion in pay. In order to avert
an impeding strike, the bank petitioned the Secretary of Labor to assume jurisdiction over the
case or to certify the same to the National Labor Relations Commission (NLRC) under Article
263 (g) of the Labor Code. 1The parties ultimately agreed to refer the issue for compulsory
arbitration to the NLRC.
The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991,
the labor arbiter disregard with the bank's contention that the increase in its implementation of
Republic Act 6727 did not constitute a distortion because "only 143 employees or 6.8% of the
bank's population of a total of 2,108 regular employees" benefited. He stressed that "it is not
necessary that a big number of wage earners within a company be benefited by the mandatory
increase before a wage distortion may be considered to have taken place," it being enough, he
said, that such increase "result(s) in the severe contraction of an intentional quantitative
difference in wage between employee groups."
The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary
rates between and among groups of employees is not based purely on skills or length of service
but also on "other logical bases of differentiation, a P900.00 wage gap intentionally provided in a
collective bargaining agreement as a quantitative difference in wage between those who WERE

regular employees as of January 1, 1989 and those who WERE NOT as of that date, is definitely
a logical basis of differentiation (that) deserves protection from any distorting statutory wage
increase." Otherwise, he added, "a minimum wage statute that seek to uplift the economic
condition of labor would itself destroy the mechanism of collective bargaining which, with
perceived stability, has been labor's constitutional and regular source of wage increase for so
long a time now." Thus, since the "subjective quantitative difference" between wage rates had
been reduced from P900.00 to barely P150.00, correction of the wage distortion pursuant to
Section 4(c) of the Rules Implementing Republic Act 6727 should be made.
The labor arbiter disposed of the case, thus:
WHEREFORE, premises considered, the respondent is hereby directed to restore
to complainants and their members the Nine Hundred (P900.00) Pesos CBA wage
gap they used to enjoy over non-regular employees as of January 1, 1989 by
granting them a Seven Hundred Fifty (P750.00) Pesos monthly increase effective
July 1, 1989.
SO ORDERED. 2
The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to
1, reversed the decision of the Labor Arbiter. Speaking, through Commissioners Rustico L.
Diokno and Domingo H. Zapanta, the NLRC said:
. . . a wage distortion can arise only in a situation where the salary structure is
characterized by intentional quantitative differences among employee groups
determined or fixed on the basis of skills, length of service, or other logical basis
of differentiation and such differences or distinction are obliterated (In Re: Labor
Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89, Secretary
of Labor and Employment, February 18, 1991).
As applied in this case, We noted that in the new wage salary structure, the wage
gaps between Level 6 and 7 levels 5 and 6, and levels 6 and 7 (sic) were
maintained. While there is a noticeable decrease in the wage gap between levels 2
and 3, Levels 3 and 4, and Levels 4 and 5, the reduction in the wage gaps between
said levels is not significant as to obliterate or result in severe contraction of the
intentional quantitative differences in salary rates between the employees groups.
For this reason, the basis requirement for a wage in this case. Moreover, there is
nothing in the law which would justify an across-the-board adjustment of P750.00
as ordered by the labor Arbiter.

WHEREFORE, premises considered, the appealed decision is hereby set aside

and a new judgment is hereby entered, dismissing the complaint for lack of merit.
SO ORDERED. 3
In her dissent, Presiding Commissioner Edna Bonto-Perez opined:
There may not be an obliteration nor elimination of said quantitative
distinction/difference aforecited but clearly there is a contraction. Would such
contraction be severe as to warrant the necessary correction sanctioned by the law
in point, RA 6727? It is may considered view that the quantitative intended
distinction in pay between the two groups of workers in respondent company was
contracted by more than fifty (50%) per cent or in particular by more or less
eighty-three (83%) per cent hence, there is no doubt that there is an evident severe
contraction resulting in the complained of wage distortion.
Nonetheless, the award of P750.00 per month to all of herein individual
complainants as ordered by the Labor Arbiter below, to my mind is not the most
equitable remedy at bar, for the same would be an across the board increase which
is not the intention of RA 6727. For that matter, herein complainants cannot by
right claim for the whole amount of P750.00 a month or P25.00 per day granted to
the workers covered by the said law in the sense that they are not covered by the
said increase mandated by RA 6727. They are only entitled to the relief granted by
said law by way of correction of the pay scale in case of distortion in wages by
reason thereof.
Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on
21 May 1991 by the Regional Tripartite Wages and Productivity Commission for
correction of pay scale structures in case of wage distortion as in the case at bar
which is:
Minimum Wage = % x Prescribed = Distortion
Increased Adjustment
Actual Salary
would be the most equitable and fair under the circumstances obtaining in this
case.
For this very reason, I register my dissent from the majority opinion and opt for
the modification of the Labor Arbiter's decision as afore-discussed. 4

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been
denied, the MBTCEU and its president filed the instant petition for certiorari, charging the
NLRC with gave abuse of discretion by its refusal (a) "to acknowledge the existence of a wage
distortion in the wage or salary rates between and among the employee groups of the respondent
bank as a result of the bank's partial implementation" of Republic Act 6727 and (b) to give due
course to its claim for an across-the-board P25 increase under Republic Act No. 6727. 5
We agree with the Solicitor General that the petition is impressed with merit. 6
The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:
(p) Wage Distortion means a situation where an increase in prescribed wage rates
results in the elimination or severe contradiction of intentional quantitative
differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of
differentiation.
The issue of whether or not a wage distortion exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by and large, a question of fact the determination of
which is the statutory function of the NLRC. 7 Judicial review of labor cases, we may add, does
not go beyond the evaluation of the sufficiency of the evidence upon which the labor official's
findings rest. 8 As such, factual findings of the NLRC are generally accorded not only respect but
also finality provided that its decision are supported by substantial evidence and devoid of any
taint of unfairness of arbitrariness. 9 When, however, the members of the same labor tribunal are
not in accord on those aspects of a case, as in this case, this Court is well cautioned not to be as
so conscious in passing upon the sufficiency of the evidence, let alone the conclusions derived
therefrom.
In this case, the majority of the members of the NLRC, as well as its dissenting member, agree
that there is a wage distortion arising from the bank's implementation of the P25 wage increase;
they do differ, however, on the extent of the distortion that can warrant the adoption of corrective
measures required by law.
The definition of "wage distortion," 10 aforequoted, shows that such distortion can so exist when,
as a result of an increase in the prescribed wage rate, an "elimination or severe contraction of
intentional quantitative differences in wage or salary rates" would occur "between and among
employee groups in an establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or other logical bases of differentiation."
In mandating an adjustment, the law did not require that there be an elimination or total
abrogation of quantitative wage or salary differences; a severe contraction thereof is enough. As

has been aptly observed by Presiding Commissioner Edna Bonto-Perez in her dissenting opinion,
the contraction between personnel groupings comes close to eighty-three (83%), which cannot,
by any stretch of imagination, be considered less than severe.
The "intentional quantitative differences" in wage among employees of the bank has been set by
the CBA to about P900 per month as of 01 January 1989. It is intentional as it has been arrived at
through the collective bargaining process to which the parties are thereby concluded. 11 The
Solicitor General, in recommending the grant of due course to the petition, has correctly
emphasized that the intention of the parties, whether the benefits under a collective bargaining
agreement should be equated with those granted by law or not, unless there are compelling
reasons otherwise, must prevail and be given effect. 12
In keeping then with the intendment of the law and the agreement of the parties themselves,
along with the often repeated rule that all doubts in the interpretation and implementation of
labor laws should be resolved in favor of labor, 13 we must approximate an acceptable
quantitative difference between and among the CBA agreed work levels. We, however, do not
subscribe to the labor arbiter's exacting prescription in correcting the wage distortion. Like the
majority of the members of the NLRC, we are also of the view that giving the employees an
across-the-board increase of P750 may not be conducive to the policy of encouraging "employers
to grant wage and allowance increases to their employees higher than the minimum rates of
increases prescribed by statute or administrative regulation," particularly in this case where both
Republic Act 6727 and the CBA allow a credit for voluntary compliance. As the Court, through
Associate Justice Florentino Feliciano, also pointed out in Apex Mining Company,
Inc. v. NLRC: 14
. . . . (T)o compel employers simply to add on legislated increases in salaries or
allowances without regard to what is already being paid, would be to penalize
employers who grant their workers more than the statutorily prescribed minimum
rates of increases. Clearly, this would be counter-productive so far as securing the
interests of labor is concerned. . . .
We find the formula suggested then by Commissioner Bonto-Perez, which has also been the
standard considered by the regional Tripartite Wages and Productivity Commission for the
correction of pay scale structures in cases of wage distortion, 15 to well be the appropriate
measure to balance the respective contentions of the parties in this instance. We also view it as
being just and equitable.
WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE
PROCESS, the questioned NLRC decision is hereby SET ASIDE and the decision of the labor
arbiter is REINSTATED subject to the MODIFICATION that the wage distortion in question be

corrected in accordance with the formula expressed in the dissenting opinion of Presiding
Commissioner Edna Bonto-Perez. This decision is immediately executory.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 154985

August 24, 2004

KAR ASIA, INC. and/or CELESTINO S. BARETTO, petitioners,

vs.
MARIO CORONA, RICKY HEPGANO, JOHNNY COLLADOS, CONSTANTINO
LAGARAS, RANEL BALANSAG, ARNOLD AVILA, PETER ARCENAL, ARNOLD
CABAHUG, BERNARD BETE, RUPERTO RESTAURO, WILLY CRUZ, RANDY
BASNILLO, ARMAN BASTE, ERNESTO ESPINA, PATRICIO AGUDELA, IRENEO

BANGOY, PALERMO AUTENTICO, GEORGE TAGAYTAY, BENITO MATUGAS, and

WILFREDO ESPINA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
February 28, 2002 Decision1 of the Court of Appeals2 in CA-G.R. SP No. 57972, and its August
9, 2002 Resolution denying petitioners motion for reconsideration.
The undisputed facts are as follows:
Respondents, regular employees of petitioner KAR ASIA, Inc., an automotive dealer in Davao
City, filed on September 24, 1997 a complaint3 for underpayment of wages and attorneys fees
before Branch XI, Regional Arbitration Branch of Davao City. They claimed that they were not
paid their cost of living allowance (COLA), as mandated by the Regional Tripartite and Wages
Productivity Board (RTWPB) XI Wage Order No. 3, for the months of December 1993 and
December 1994, and prayed that petitioner be ordered to pay the same with 1% interest per
month, as well as attorneys fees equivalent to 10% of the total monetary award.
Petitioner company and its president Celestino Barretto countered that the complaint was false
and malicious; that respondents had already been paid their COLA for the said periods; and that
respondents scared off potential customers and caused a substantial reduction in the income of
the petitioner company estimated at, more or less, P1,000,000.00 when they picketed and put up
streamers with insulting and derogatory slogans. Petitioners presented in evidence the payrolls
for December 1993 and December 1994 showing that the respondents acknowledged in writing
the receipt of their COLA, and the affidavits of Ermina Daray and Cristina Arana, cashiers of
KAR ASIA, refuting respondents claim that they were made to sign blank pieces of paper.
On August 31, 1998, the Labor Arbiter rendered a decision in favor of petitioners, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Ordering the complainants jointly and severally to pay respondents the sum of
P50,000.00 representing attorneys fee of respondents;
2. Ordering complainants jointly and severally to pay respondent Celestino S. Barretto
the sum of P150,000.00 in concept of moral damages;
3. Ordering the complainants jointly and severally to pay respondents the sum of
P5,000.00 as litigation expenses.
SO ORDERED.4

Respondents appealed to the NLRC, which affirmed the decision of the Labor Arbiter but deleted
the award of moral damages, attorneys fees, and litigation expenses for lack of sufficient basis in
a Resolution5 dated August 23, 1999.
Respondents filed a petition for certiorari with the Court of Appeals, which reversed the decision
of the NLRC and ordered petitioner company to pay the respondents the P25.00 per day COLA
for the period December 1 to 31, 1994, plus interest thereon at the rate of 1% per month
computed from the time the same was withheld from respondents up to the time they were
actually paid the respective sums due them.
In support of its decision, the appellate court stated:6
As aforesaid, the claim for the December 01 to 31, 1993 COLA had already prescribed at the
time the complaint for underpayment was filed with the labor arbiter. However, there appears to
be insufficient evidence in the records to justify a finding that COLA for the period December 01
to 31, 1994 had already been paid. The December 01 to 15 and 16 to 31, 1994 payroll adduced as
evidence of payment does not meet the "substantial evidence" test. The same does not bear the
signatures of the respondent companys employees acknowledging receipt of the same amount.
Moreover, the same was signed by Ermina I. Daray, the paymaster and private respondent
Celestino S. Barretto, the president cum C.E.O. of respondent company and the same was not
covered by any affidavit of either signatory that the required COLA had already been actually
paid, the payroll presented being merely the copy approved for payment, and not the copy
disclosing actual payment.
Hence this petition for review based on the following grounds:
1. IN ITS ASSAILED DECISION, THE HONORABLE COURT OF APPEALS MADE
A MISAPPREHENSION OF FACTS AND IT PREMISED ITS FINDING OF FACT ON
A SUPPOSED ABSENCE OF EVIDENCE BUT THIS IS CONTRADICTED BY THE
EVIDENCE ON RECORD CONSIDERING THAT:
a. THE PRESIDENT AND CEO EXECUTED THE POSITION PAPER UNDER
OATH WHERE THE PAYROLL EVIDENCING PAYMENT OF THE
DECEMBER 1994 COLA, WHICH HE ALSO SIGNED, WAS ANNEXED AND
ATTACHED, HENCE THERE WAS NO NEED FOR HIM TO MAKE A
SEPARATE AFFIDAVIT;
b. THE PAYMASTER CERTIFIED IN EACH PAGE OF THE PAYROLL THAT
SHE HAD ACTUALLYPAID THE AMOUNTS TO THE PERSONS LISTED IN
THE DECEMBER 1994 PAYROLL THAT INCLUDED HEREIN
RESPONDENTS. HENCE, THE PAYROLL IS NOT MERELY
AN APPROVALFOR PAYMENT BUT IS AN EVIDENCE
THAT ACTUAL PAYMENT WAS MADE.
c. THE LABOR ARBITER CONDUCTED A CLARIFICATORY HEARING
WHEREIN THE CASHIERS OF PETITIONER, ONE OF WHOM WAS THE

PAYMASTER REFERRED TO ABOVE, CONFIRMED THAT THEY HAVE

ACTUALLY PAID THE RESPONDENTS THEIR ALLEGED UNPAID COLA.
2. THE HONORABLE COURT OF APPEALS EXCEEDED THE LIMITS OF ITS
POWER TO REVIEW THE ACTS OF THE LABOR ARBITER AND THE NLRC BY
NOT CONFINING ITSELF IN DETERMINING WHETHER THE SAID QUASIJUDICIAL BODIES LACKED OR ACTED IN EXCESS OF JURISDICTION OR
COMMITTED GRAVE ABUSE OF DISCRETION BUT PROCEEDED TO INQUIRE
ON THE CORRECTNESS OF THE EVALUATION OF EVIDENCE BY THE SAID
AGENCIES WHICH IS BEYOND THE OFFICE OF AN EXTRAORDINARY WRIT
OF CERTIORARI.7
In support of the first assigned error, petitioners argue that the factual findings of the Court of
Appeals are in conflict with the evidence on record and those of the Labor Arbiter and the
NLRC. They contend that the proceedings and pleadings before the Labor Arbiter and the NLRC
showed that the respondents have abandoned their claim for non-payment of the December 1994
COLA. They insist that in their position paper and Memorandum on Appeal, the respondents
only demanded the payment of the December 1993 COLA but not the December 1994 COLA.
They further insist that there is sufficient evidence that the respondents had already been paid
their COLA.
Anent the second assigned error, petitioners argue that the respondents having filed a petition
for certiorari under Rule 65 of the Rules of Court, the Court of Appeals should have limited the
exercise of its judicial review to issues of want of jurisdiction and/or grave abuse of discretion on
the part of the Labor Arbiter and the NLRC, instead of evaluating the correctness and sufficiency
of the evidence upon which the labor tribunals based their decisions.
The issue is simple: whether or not the petitioner company paid the respondents the COLA for
December 1993 and December 1994 as mandated by RTWPB XI Wage Order No. 3.
We find merit in the petition.
A close scrutiny of the payroll for the December 1993 COLA8 readily disclose the signatures of
the respondents opposite their printed names and the numeric value of P654.00. Respondents
averment that the petitioner company harassed them into signing the said payroll without giving
them its cash equivalent cannot be given credence. Their self-serving and unsubstantiated
declarations cannot overturn the evidentiary weight of the signatures. The allegations of
harassment are inadmissible as self-serving statements and therefore cannot be repositories of
truth. He who asserts not he who denies must prove; unfortunately, the respondents miserably
failed to discharge this burden. We also agree with the observation of the Labor Arbiter that in
1993 there was no labor dispute since the labor unrest took place only in the later part of 1997.
Hence, there was no reason for management to harass its employees.
More importantly, the unreasonable length of time in pursuing respondents claim for the
December 1993 COLA militates against its grant. Article 291 of the Labor Code requires that all
money claims arising from employer-employee relations shall be filed within 3 years from the

time that the cause of action accrued; otherwise they shall be barred forever. In the present case,
the respondents filed the complaint for underpayment of wage on September 24, 1997. Thus, the
action for the payment of the December 1993 COLA has already prescribed.
With respect to the December 1994 COLA, we find that the respondents alleged its non-payment
only in the complaint. Subsequent pleadings reveal that they opted to pursue their demand only
for December 1993 COLA and forego that of the December 1994. Even assuming that the
neglect by the respondents in asserting their claim for the December 1994 COLA does not
amount to an abandonment on the ground that they should not be deprived of their rightful
monetary claims if they were so entitled, still the paucity of evidence to substantiate their bare
assertions negates such an award.
The payrolls9 for December 1 to 15, 1994 and December 16 to 31, 1994 indicate an allowance of
P327.00 for each period, or a total of P654.00 for the entire month. However, a casual
observation of the payroll for the December 1993 COLA will also show that the respondents
signed for the amount of P654.00. Also, the allowances appearing in the two separate
payslips10 for December 1 to 15, 1994 and December 16 to 31, 1994 sum up to a total of
P654.00. Although the numeric figures in the December 1994 payroll and the payslips for the
same period were denominated merely as allowances while those in the December 1993 payroll
were specifically identified as COLA, the fact that they add up to the same figure, i.e., P654.00,
is not a coincidence. Whether designated merely as an allowance or COLA, it is unmistakable
that they all represent the cost of living allowance for the given periods under RTWPB XI Wage
Order No. 3.
Moreover, the affidavits of Ermina Daray and Cristita Arana, whose verity we find no reason to
suspect, confirmed the truthfulness of the entries in the payrolls and affirmed the receipt by the
respondents of their full compensation. Entries in the payroll, being entries in the course of
business, enjoy the presumption of regularity under Rule 130, Section 43 of the Rules of Court.
It is therefore incumbent upon the respondents to adduce clear and convincing evidence in
support of their claim. Unfortunately, respondents naked assertions without proof in
corroboration will not suffice to overcome the disputable presumption.
In disputing the probative value of the payrolls for December 1994, the appellate court observed
that the same contain only the signatures of Ermina Daray and Celestino Barreto, the paymaster
and the president, respectively. It further opined that the payrolls presented were only copies of
the approved payment, and not copies disclosing actual payment.
The December 1994 payrolls11 contain a computation of the amounts payable to the employees
for the given period, including a breakdown of the allowances and deductions on the amount
due, but the signatures of the respondents are conspicuously missing. Ideally, the signatures of
the respondents should appear in the payroll as evidence of actual payment. However, the
absence of such signatures does not necessarily lead to the conclusion that the December 1994
COLA was not received. It appears that the payslips12 for the same period bear the signatures of
the respondents plus a certification that they received the full compensation for the services
rendered. While ordinarily a payslip is only a statement of the gross monthly income of the
employee, his signature therein coupled by an acknowledgement of full compensation alter the

legal complexion of the document. The payslip becomes a substantial proof of actual payment.
Moreover, there is no hard-and-fast rule requiring that the employees signature in the payroll is
the only acceptable proof of payment. By implication, the respondents, in signing the payslips
with their acknowledgement of full compensation, unqualifiedly admitted the receipt thereof,
including the COLA for December 1994. The Court of Appeals erred when it placed undue
reliance on the unsigned payrolls and disregarded the signed payslips.
Factual findings by quasi-judicial agencies, such as the National Labor Relations Commission,
which have acquired expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect but even finality.13
WHEREFORE, based on the foregoing, the petition is GRANTED. The February 28, 2002
decision of the Court of Appeals in CA-G.R. SP No. 57972 is REVERSED and SET ASIDE. The
Decision of the NLRC dated August 23, 1999 dismissing respondents claims of unpaid COLA
for December 1993 and December 1994, and deleting the awards for moral damages, attorneys
fees and litigation expenses for lack of sufficient basis, is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

[G.R. No. 140495. April 15, 2005]

G & M (Phils.), Inc., petitioner, vs. EPIFANIO CRUZ, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
The well-entrenched rule, especially in labor cases, is that findings of fact of quasi-judicial
bodies, like the National Labor Relations Commission (NLRC), are accorded with respect, even
finality, if supported by substantial evidence. Particularly when passed upon and upheld by the
Court of Appeals, they are binding and conclusive upon the Supreme Court and will not normally
be disturbed.[1]
The Court finds no reason in this case to depart from such doctrine.
Petitioner G & M (Phils.), Inc. recruited respondent Cruz as trailer driver for its foreign
principal, Salim Al Yami Est., for a period of two years, and with a stipulated monthly salary of
US$625, starting June 6, 1990. Respondent alleged that when he arrived in the Kingdom of
Saudi Arabia, he was made to sign an employment contract in blank and his salary was reduced
to SR604.00. Seven months into employment, his employer deported him on December 28,
1990. According to respondent, the cause for his dismissal was his complaint for sub-human
working conditions, non-payment of wages and overtime pay, salary deduction and change of
employer. Hence, he filed with the Labor Arbiter an Affidavit/Complaint against petitioner for
illegal dismissal, underpayment and non-payment of wages, and refund of transportation
expenses. Respondent claims that he was only paid in an amount equivalent to five months salary
and he did not receive his salary for the last two months. Respondent submitted a copy of his pay
slip showing the amount of SR604.00 as his basic salary.[2]
Petitioner contends that respondent abandoned his job when he joined an illegal strike and
refused to report for work, constituting a breach of his employment contract and a valid cause for
termination of employment. Petitioner also claims that the pay slip submitted by respondent is
inadmissible because the original copy was not presented and that its existence, due execution,
genuineness and authenticity were not established.[3]

The Labor Arbiter found merit in petitioners claim that respondent abandoned his job, but
nevertheless granted respondents claim for underpayment of wages and two months unpaid
salary. The dispositive portion of the Labor Arbiters decision reads:
WHEREFORE, premises considered, the charge of illegal dismissal is hereby denied for lack of
merit. However, respondent G & M (Phils.), Inc., is hereby ordered to pay within ten (10) days
from receipt hereof, herein complainant Epifanio Cruz, the sums of P77,455.00 to be adjusted as
earlier stated, and US$1,250.00 or its peso equivalent at the time of payment.
SO ORDERED.[4]
On partial appeal to the NLRC, the same was dismissed per Resolution dated June 10, 1998,
with the following dispositive portion:
WHEREFORE, the appeal is Dismissed for lack of merit. Respondent G & M (Phils.) Inc., and
Salim Al Yami Est., are hereby ordered jointly and severally liable to pay complainant Epifanio
Cruz the Philippine Peso equivalent at the time of actual payment of the following sums:
a) THREE THOUSAND ONE HUNDRED TWENTY FIVE US DOLLARS (US$3,125.00) less
THREE THOUSAND TWENTY SAUDI RIYALS (SR3,020.000) representing salary
differentials for five months; and
b) ONE THOUSAND TWO HUNDRED FIFTY US DOLLARS (US$1,250.00) representing
unpaid salaries for two (2) months.
Other dispositions of the appealed Decision stand AFFIRMED.
SO ORDERED.[5]
Petitioner filed a special civil action for certiorari in the Court of Appeals, docketed as CAG.R. SP No. 49729, but it was dismissed for lack of merit.[6]
Hence, this petition for review on certiorari under Rule 45 of the Rules of Court, based on
the following grounds:
THE COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT WITH THE
RESPONDENTS ADMISSION OF RECEIPT OF THE PAYMENTS OF HIS SALARIES
ALTHOUGH ALLEGEDLY SHORT OF WHAT WAS STIPULATED IN HIS CONTRACT THE BURDEN OF EVIDENCE IS NOW SHIFTED UPON HIM TO SHOW CONCRETE
PROOF THAT INDEED HE WAS SHORT-CHANGED OF HIS SALARIES.

CONTRARY TO THE COURT OF APPEALS [sic] CONCLUSION, THE PAYROLL ISSUE IS

OF GREAT IMPORTANCE IN THE DETERMINATION OF THE ISSUES IN THE CASE AT
BAR INASMUCH AS IT IS THE RESPONDENT WHO HAS THE BURDEN OF
PRESENTING EVIDENCE OF SHORT PAYMENT AFTER HAVING ADMITTED TO HAVE
RECEIVED CERTAIN AMOUNTS FOR HIS SALARIES.[7]
This petition mainly involves factual issues, i.e., whether or not there is evidence on record
to support the findings of the Labor Arbiter, the NLRC and the Court of Appeals that respondent
is entitled to the payment of salary differential and unpaid wages. This calls for a re-examination
of the evidence, which the Court cannot entertain. As stated earlier, factual findings of labor
officials, who are deemed to have acquired expertise in matters within their respective
jurisdiction, are generally accorded not only respect but even finality, and bind the Court when
supported by substantial evidence. It is not the Courts function to assess and evaluate the
evidence all over again, particularly where the findings of both the Arbiter and the Court of
Appeals concur.[8]
Nevertheless, even if the Court delves into the issues posed by petitioner, there is still no
reason to grant the petition.
It was the finding of the Court of Appeals that it is the burden of petitioner to prove that the
salaries paid by its foreign principal complied with the contractual stipulations of their agencyworker agreement. Since petitioner failed to discharge such burden, then it was correct for the
NLRC to rely on respondents claim of underpayment.[9]
The Court of Appeals also ruled that since the positive testimony of respondent, as creditor,
is sufficient to prove non-payment even without the indefinite testimony of petitioner, as debtor,
then the payroll (pay slip), presented by respondent to prove that he only received the amount of
SR604.00 as basic monthly salary, is immaterial.[10]
Petitioner, however, insists that since respondent already admitted that his employer paid
him, albeit short of what was stipulated upon, then petitioner has no more obligation to show that
respondent was paid, and it now rests upon respondent to prove underpayment, and the pay slip
submitted by respondent, which is of questionable authenticity, is not enough to prove the same.
[11]

The rule is that the burden of proving payment of monetary claims rests on the employer,
in this case, herein petitioner, it being the employment agency or recruitment entity, and agent
of the foreign principal, Salim Al Yami Est.,[13] which recruited respondent. In Jimenez vs. NLRC,
[14]
which involves a claim for unpaid wages/commissions, separation pay and damages against
an employer, the Court ruled that where a person is sued for a debt admits that the debt was
originally owed, and pleads payment in whole or in part, it is incumbent upon him to prove such
[12]

payment. This is based on the principle of evidence that each party must prove his affirmative
allegations. Since petitioner asserts that respondent has already been fully paid of his stipulated
salary, the burden is upon petitioner to prove such fact of full payment.
In this case, while respondent may have admitted that he has actually been paid the amount
of SR604.00 as monthly salary, it does not discharge petitioner from proving full payment of the
stipulated monthly salary of US$625.00 based on the Agency-Worker Agreement. Respondents
admission that some payments have been made does not change the burden of proof. Petitioner
still has the burden of establishing payments beyond those admitted by respondent.[15]
Thus, it was stated in the Jimenez case that:
As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff
must allege non-payment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of
showing with legal certainty that the obligation has been discharged by payment.
When the existence of a debt is fully established by the evidence contained in the record, the
burden of proving that it has been extinguished by payment devolves upon the debtor who offers
such a defense to the claim of the creditor. Where the debtor introduces some evidence of
payment, the burden of going forward with the evidence - as distinct from the general burden of
proof - shifts to the creditor, who is then under a duty of producing some evidence to show nonpayment.
Petitioner merely denied respondents claim of underpayment. It did not present any
controverting evidence to prove full payment. Hence, the findings of the Labor Arbiter, the
NLRC and the Court of Appeals that respondent was not fully paid of his wages stand.
The positive testimony of a creditor may be sufficient of itself to show non-payment, even when
met by indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be
sufficient to show payment, but, where his testimony is contradicted by the other party or by a
disinterested witness, the issue may be determined against the debtor since he has the burden of
proof. The testimony of the debtor creating merely an inference of payment will not be regarded
as conclusive on that issue.
Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense
and in effect admitted the allegations of private respondents.[16]
With regard to the admissibility of the pay slips, both the Labor Arbiter and the NLRC found
that it was admissible as evidence. As a general rule, the Court is not duty-bound to delve into
the accuracy of the NLRCs factual findings in the absence of a clear showing that these were

arbitrary and bereft of any rational basis.[17] In the present case, petitioner failed to demonstrate
any arbitrariness or lack of rational basis on the part of the NLRC.[18]
Article 221 of the Labor Code provides that proceedings before the NLRC are not covered
by the technical rules of evidence and procedure. The probative value of the copy of the pay slips
is aptly justified by the NLRC, as follows:
the payslips are original duplicates of computerized payslips issued by the employer, Salim Al
Yami Est., to its workers which contain entries such as pay date, employees I.D. number,
employee name, category, basic rate, overtime hours and other relevant information, including an
itemization of earnings (basic pay, overtime pay, meal allowance for the period covered) and
deductions. The fact that the payslips are not authenticated will not militate against complainants
claim, considering that in presenting the payslips, complainant has established the fact of
underpayment, and the burden has shifted to the respondent to prove that complainant was totally
compensated for actual services rendered.[19] (Emphasis supplied)
WHEREFORE, the petition is DENIED for lack merit.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 146530

January 17, 2005

PEDRO CHAVEZ, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and
ALVIN LEE, Plant Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated December 15,
2000 of the Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP
No. 52485. The assailed resolution reinstated the Decision dated July 10, 1998 of the National
Labor Relations Commission (NLRC), dismissing the complaint for illegal dismissal filed by
herein petitioner Pedro Chavez. The said NLRC decision similarly reversed its earlier Decision
dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the petitioner had
been illegally dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons
and other packaging materials for export and distribution. It engaged the services of the
petitioner, Pedro Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked
to deliver the respondent companys products from its factory in Mariveles, Bataan, to its various
customers, mostly in Metro Manila. The respondent company furnished the petitioner with a
truck. Most of the petitioners delivery trips were made at nighttime, commencing at 6:00 p.m.
from Mariveles, and returning thereto in the afternoon two or three days after. The deliveries
were made in accordance with the routing slips issued by respondent company indicating the
order, time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip.

This was later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner
was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant
manager, his (the petitioners) desire to avail himself of the benefits that the regular employees
were receiving such as overtime pay, nightshift differential pay, and 13th month pay, among
others. Although he promised to extend these benefits to the petitioner, respondent Lee failed to
actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional
Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be
heard, respondent company terminated the services of the petitioner. Consequently, on May 25,
1995, the petitioner filed an amended complaint against the respondents for illegal dismissal,
unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month
pay, among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship
between the respondent company and the petitioner. They averred that the petitioner was an
independent contractor as evidenced by the contract of service which he and the respondent
company entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and
the Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs,
accepts the services to be rendered to the Principal, under the following terms and covenants
heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the contractor
to the principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise,
any change to this travel route shall be subject to further agreement by the parties
concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport
services fully rendered by the Contractor shall be on a per trip basis depending on the size
or classification of the truck being used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the
payment on a per trip basis from Mariveles to Metro Manila shall be THREE
HUNDRED PESOS (P300.00) and EFFECTIVE December 15, 1984.

b) If the hauling or delivery service require a truck of ten wheeler, the payment on
a per trip basis, following the same route mentioned, shall be THREE HUNDRED
FIFTY (P350.00) Pesos and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least
two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the Principal for
the cost of any damage to, loss of any goods, cargoes, finished products or the like, while
the same are in transit, or due to reckless [sic] of its men utilized for the purpose above
mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men
working for him subject to this agreement, and that the Contractor shall hold the Principal
free and harmless from any liability or claim that may arise by virtue of the Contractors
non-compliance to the existing provisions of the Minimum Wage Law, the Employees
Compensation Act, the Social Security System Act, or any other such law or decree that
may hereafter be enacted, it being clearly understood that any truck drivers, helpers or
men working with and for the Contractor, are not employees who will be indemnified by
the Principal for any such claim, including damages incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to
renewal on a year-to-year basis.2
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on
July 10, 1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms
of the contracts were substantially the same. The relationship of the respondent company and the
petitioner was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by
which his work was accomplished. He paid the wages of his helpers and exercised control over
them. As such, the petitioner was not entitled to regularization because he was not an employee
of the respondent company. The respondents, likewise, maintained that they did not dismiss the
petitioner. Rather, the severance of his contractual relation with the respondent company was due
to his violation of the terms and conditions of their contract. The petitioner allegedly failed to
observe the minimum degree of diligence in the proper maintenance of the truck he was using,
thereby exposing respondent company to unnecessary significant expenses of overhauling the
said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision
dated February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter

declared that the petitioner was a regular employee of the respondent company as he was
performing a service that was necessary and desirable to the latters business. Moreover, it was
noted that the petitioner had discharged his duties as truck driver for the respondent company for
a continuous and uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted a
circumvention of the constitutional provision affording full protection to labor and security of
tenure. The Labor Arbiter found that the petitioners dismissal was anchored on his insistent
demand to be regularized. Hence, for lack of a valid and just cause therefor and for their failure
to observe the due process requirements, the respondents were found guilty of illegal dismissal.
The dispositive portion of the Labor Arbiters decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent
SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address
at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay
complainant his separation pay equivalent to one (1) month pay per year of service based on the
average monthly pay of P10,800.00 in lieu of reinstatement as his reinstatement back to work
will not do any good between the parties as the employment relationship has already become
strained and full backwages from the time his compensation was withheld on February 23, 1995
up to January 31, 1997 (cut-off date) until compliance, otherwise, his backwages shall continue
to run. Also to pay complainant his 13th month pay, night shift differential pay and service
incentive leave pay hereunder computed as follows:
a) Backwages .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys
fees.
SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was
dismissed by the NLRC in its Decision4 dated January 27, 1998, as it affirmed in toto the
decision of the Labor Arbiter. In the said decision, the NLRC characterized the contract of
service between the respondent company and the petitioner as a "scheme" that was resorted to by

the respondents who, taking advantage of the petitioners unfamiliarity with the English language
and/or legal niceties, wanted to evade the effects and implications of his becoming a regularized
employee.5
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting
thereon, the NLRC rendered another Decision6 dated July 10, 1998, reversing its earlier decision
and, this time, holding that no employer-employee relationship existed between the respondent
company and the petitioner. In reconsidering its earlier decision, the NLRC stated that the
respondents did not exercise control over the means and methods by which the petitioner
accomplished his delivery services. It upheld the validity of the contract of service as it pointed
out that said contract was silent as to the time by which the petitioner was to make the deliveries
and that the petitioner could hire his own helpers whose wages would be paid from his own
account. These factors indicated that the petitioner was an independent contractor, not an
employee of the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the
Labor Code on the regularization of employees. Said contract, including the fixed period of
employment contained therein, having been knowingly and voluntarily entered into by the
parties thereto was declared valid citing Brent School, Inc. v. Zamora.7 The NLRC, thus,
dismissed the petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the
NLRC in its Resolution dated September 7, 1998. He then filed with this Court a petition for
certiorari, which was referred to the CA following the ruling in St. Martin Funeral Home v.
NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998
Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the
CA ruled that the petitioner was a regular employee of the respondent company because as its
truck driver, he performed a service that was indispensable to the latters business. Further, he
had been the respondent companys truck driver for ten continuous years. The CA also reasoned
that the petitioner could not be considered an independent contractor since he had no substantial
capital in the form of tools and machinery. In fact, the truck that he drove belonged to the
respondent company. The CA also observed that the routing slips that the respondent company
issued to the petitioner showed that it exercised control over the latter. The routing slips indicated
the chronological order and priority of delivery, the urgency of certain deliveries and the time
when the goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job noting
that he just filed a complaint for regularization. This actuation of the petitioner negated the
respondents allegation that he abandoned his job. The CA held that the respondents failed to

discharge their burden to show that the petitioners dismissal was for a valid and just cause.
Accordingly, the respondents were declared guilty of illegal dismissal and the decision of the
Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent
company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from
attaining the status of regular employment, it is but necessary for the courts to scrutinize with
extreme caution their legality and justness. Where from the circumstances it is apparent that a
contract has been entered into to preclude acquisition of tenurial security by the employee, they
should be struck down and disregarded as contrary to public policy and morals. In this case, the
"contract of service" is just another attempt to exploit the unwitting employee and deprive him of
the protection of the Labor Code by making it appear that the stipulations of the parties were
governed by the Civil Code as in ordinary transactions.9
However, on motion for reconsideration by the respondents, the CA made a complete turn
around as it rendered the assailed Resolution dated December 15, 2000 upholding the contract of
service between the petitioner and the respondent company. In reconsidering its decision, the CA
explained that the extent of control exercised by the respondents over the petitioner was only
with respect to the result but not to the means and methods used by him. The CA cited the
following circumstances: (1) the respondents had no say on how the goods were to be delivered
to the customers; (2) the petitioner had the right to employ workers who would be under his
direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was,
according to the CA, of no moment because his status was determined not by the length of
service but by the contract of service. This contract, not being contrary to morals, good customs,
public order or public policy, should be given the force and effect of law as between the
respondent company and the petitioner. Consequently, the CA reinstated the July 10, 1998
Decision of the NLRC dismissing the petitioners complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution
of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO
THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE
RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES

WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT

NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND
REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS
THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE
EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH IS
CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.10
The threshold issue that needs to be resolved is whether there existed an employer-employee
relationship between the respondent company and the petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employers power to control the employees conduct.11 The most important element is the
employers control of the employees conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish it.12 All the four elements are present in this
case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.
Second. Wages are defined as "remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission
basis, or other method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done, or for service
rendered or to be rendered."13 That the petitioner was paid on a per trip basis is not significant.
This is merely a method of computing compensation and not a basis for determining the
existence or absence of employer-employee relationship. One may be paid on the basis of results
or time expended on the work, and may or may not acquire an employment status, depending on
whether the elements of an employer-employee relationship are present or not.14 In this case, it
cannot be gainsaid that the petitioner received compensation from the respondent company for
the services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll.15 The payroll should show, among other things, the employees

rate of pay, deductions made, and the amount actually paid to the employee. Interestingly, the
respondents did not present the payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that its presentation would be
adverse to their case.16
Third. The respondents power to dismiss the petitioner was inherent in the fact that they
engaged the services of the petitioner as truck driver. They exercised this power by terminating
the petitioners services albeit in the guise of "severance of contractual relation" due allegedly to
the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the
"control test" is the most important. Compared to an employee, an independent contractor is one
who carries on a distinct and independent business and undertakes to perform the job, work, or
service on its own account and under its own responsibility according to its own manner and
method, free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.17 Hence, while an independent
contractor enjoys independence and freedom from the control and supervision of his principal, an
employee is subject to the employers power to control the means and methods by which the
employees work is to be performed and accomplished.18
Although the respondents denied that they exercised control over the manner and methods by
which the petitioner accomplished his work, a careful review of the records shows that the latter
performed his work as truck driver under the respondents supervision and control. Their right of
control was manifested by the following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used
exclusively to deliver respondent companys goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park the truck
in either of two specific places only, to wit: at its office in Metro Manila at 2320 Osmea
Street, Makati City or at BEPZ, Mariveles, Bataan;20 and
4. Respondents determined how, where and when the petitioner would perform his task
by issuing to him gate passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the chronological order
and priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that
the petitioner had to deliver the same according to the order of priority indicated
therein.

b. The routing slips, likewise, showed whether the goods were to be delivered
urgently or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be
delivered to the customers as, for example, the words "tomorrow morning" was
written on slip no. 2776.
These circumstances, to the Courts mind, prove that the respondents exercised control over the
means and methods by which the petitioner accomplished his work as truck driver of the
respondent company. On the other hand, the Court is hard put to believe the respondents
allegation that the petitioner was an independent contractor engaged in providing delivery or
hauling services when he did not even own the truck used for such services. Evidently, he did not
possess substantial capitalization or investment in the form of tools, machinery and work
premises. Moreover, the petitioner performed the delivery services exclusively for the respondent
company for a continuous and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier
discussed indubitably establish the existence of an employer-employee relationship between the
respondent company and the petitioner. It bears stressing that the existence of an employeremployee relationship cannot be negated by expressly repudiating it in a contract and providing
therein that the employee is an independent contractor when, as in this case, the facts clearly
show otherwise. Indeed, the employment status of a person is defined and prescribed by law and
not by what the parties say it should be.22
Having established that there existed an employer-employee relationship between the respondent
company and the petitioner, the Court shall now determine whether the respondents validly
dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just
cause.23 In this case, the respondents failed to prove any such cause for the petitioners dismissal.
They insinuated that the petitioner abandoned his job. To constitute abandonment, these two
factors must concur: (1) the failure to report for work or absence without valid or justifiable
reason; and (2) a clear intention to sever employer-employee relationship.24Obviously, the
petitioner did not intend to sever his relationship with the respondent company for at the time
that he allegedly abandoned his job, the petitioner just filed a complaint for regularization, which
was forthwith amended to one for illegal dismissal. A charge of abandonment is totally
inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it
includes a prayer for reinstatement.25
Neither can the respondents claim that the petitioner was guilty of gross negligence in the proper
maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence

implies a want or absence of or failure to exercise slight care or diligence, or the entire absence
of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid
them.26 The negligence, to warrant removal from service, should not merely be gross but
also habitual.27 The single and isolated act of the petitioners negligence in the proper
maintenance of the truck alleged by the respondents does not amount to "gross and habitual
neglect" warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was not dismissed
from the service but due to complainants breach of their contractual relation, i.e., his violation of
the terms and conditions of the contract, we are very much inclined to believe complainants
story that his dismissal from the service was anchored on his insistent demand that he be
considered a regular employee. Because complainant in his right senses will not just abandon for
that reason alone his work especially so that it is only his job where he depends chiefly his
existence and support for his family if he was not aggrieved by the respondent when he was told
that his services as driver will be terminated on February 23, 1995.28
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his
dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is
entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment
of full backwages, inclusive of allowances, and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.29 However, as found by the Labor Arbiter, the circumstances obtaining in this case
do not warrant the petitioners reinstatement. A more equitable disposition, as held by the Labor
Arbiter, would be an award of separation pay equivalent to one month for every year of service
from the time of his illegal dismissal up to the finality of this judgment in addition to his full
backwages, allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of
the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is
REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in
NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of illegally terminating the
employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
SPECIAL
SECOND DIVISION

PHILIPPINE AIRLINES, INC.,

Petitioner,

G.R. No. 146408

- versus -

Present:

ENRIQUE LIGAN, EMELITO SOCO,

CARPIO, J., Acting Chairperson,
ALLAN PANQUE, JOLITO OLIVEROS,
CARPIO MORALES,
RICHARD GONCER, NONILON
CORONA,*
PILAPIL, AQUILINO YBANEZ,
TINGA, and
BERNABE SANDOVAL, RUEL GONCER,
VELASCO, JR., JJ.
VIRGILIO P. CAMPOS, JR., ARTHUR M.
CAPIN, RAMEL BERNARDES,
LORENZO BUTANAS, BENSON
CARISUSA, JEFFREY LLENES, ROQUE
PILAPIL, ANTONIO M. PAREJA,
CLEMENTE R. LUMAYNO, NELSON
Promulgated:
TAMPUS, ROLANDO TUNACAO,
CHERIE ALEGRES, BENEDICTO
AUXTERO, EDUARDO
April 30, 2009
MAGDADARAUG, NELSON M. DULCE
and ALLAN BENTUZAL,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - x
R ES OLUTIO N
CARPIO MORALES, J.:
Before the Court are petitioners Motion for Reconsideration and respondents Motion for
Clarification and/or Reconsideration of the Courts February 29, 2008 Decision in light of
incidents bearing on the present case which were not brought to light by them before the Court
promulgated said Decision.
The Decision of the Court affirmed with modification the appellate courts September 29,
2000 Decision and directed petitioner Philippine Airlines, Inc. to:
(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN
PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON
PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL
GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL
BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R.

LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE

ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and
ALLAN BENTUZAL as its regular employees in their same or substantially
equivalent positions, and pay the wages and benefits due them as regular
employees plus salary differential corresponding to the difference between
the wages and benefits given them and those granted to petitioners other
regular employees of the same rank; and
(b) pay respondent BENEDICTO AUXTERO salary
differential; backwages from the time of his dismissal until the finality of
this decision; and separation pay, in lieu of reinstatement, equivalent to one
(1) month pay for every year of service until the finality of this decision.
There being no data from which this Court may determine the monetary
liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for
that purpose.
SO ORDERED.[1]
Synergy Services Corporation (Synergy) having been found to be a labor-only contractor,
respondents were consequently declared as petitioners regular employees who are entitled to the
salaries, allowances, and other employment benefits under the pertinent Collective Bargaining
Agreement.
Petitioner prays for a reconsideration of the Decision, maintaining its position that respondents
were employed by Synergy, and to reinstate respondents as regular employees is iniquitous since
it would be compelled to employ personnel more than what its operations require. It adds that the
Court should declare that reinstatement is no longer an appropriate relief in view of the long
period of time that had elapsed.
For their part, respondents, deducing from the Decision that their termination was found to be
illegal, posit that the portion of the Decision ordering petitioner to accept them should also mean
to reinstate them with backwages.[2] Respondents additionally pray for the award to them of
attorneys fees, albeit they admit that they failed to raise it as an issue.
Both parties point out that the Courts Decision presupposes or was based on the erroneous
assumption that respondents are still in the actual employ of petitioner.
Respondents disclose that except for those who have either died, accepted settlement
earlier, or declared as employee of Synergy, the remaining respondents have all been terminated
in the guise of retrenchment. Joining such account, petitioner reveals that 13 out of the 25
respondents filed an illegal dismissal case, which is pending before the appellate court stationed
at Cebu City as CA-G.R. SP No. 00922.[3]

Respondents add that the appellate court, by Resolution of April 22, 2008, held the illegal
dismissal case in abeyance until after this Court rules on the present case.[4]
Petitioner also urges the Court to examine the cases of respondents Roque Pilapil (Pilapil) and
Benedicto Auxtero (Auxtero) in light of the following information, viz: Pilapilentered petitioners
pool of regular employees on September 1, 1991[5] but was later terminated for submitting
falsified academic credentials. Pilapils complaint for illegal dismissal was dismissed by the labor
arbiter, whose decision was reinstated with modification by the appellate court by Decision
of March 7, 2001 in CA-G.R. SP No. 50578. On Pilapils appeal, this Court, by Resolution
of September 19, 2001 in G.R. No. 147853, declared the case terminated when Pilapil failed to
file his intended petition.
Given its information in the immediately foregoing paragraph, petitioner claims that it
already complied with the judgment awarding separation pay representing financial assistance to
Pilapil on September 23, 2003, during the pendency of the present case.[6] Respondents do not
dispute petitioners information.[7]
Petitioner also informs the Court that Auxtero already secured a favorable judgment from this
Court in G.R. No. 158710 which effectively affirmed the appellate courts Decision of February
26, 2003 in CA-G.R. SP No. 50480.[8] It appears from the Joint Declaration of Satisfaction
of Judgment[9] with Release and Quitclaim and Waiver,[10] both dated November 29, 2007, that
petitioner already satisfied the judgment rendered in said G.R. No. 158710 in favor of Auxtero in
the amount of P1.3 Million, and that Auxtero had waived reinstatement. Respondents essentially
corroborate this information of petitioner.[11]
In light of these recent manifestations-informations of the parties, the Court finds that a
modification of the Decision is in order, the claims with respect to Pilapil and Auxtero having
been deemed extinguished even before the promulgation of the Decision. That Pilapil was a
regular employee yields to the final finding of a valid dismissal in the supervening case
involving his own misconduct, while Auxteros attempt at forum-shopping should not be
countenanced.
IN ALL OTHER RESPECTS, the Court finds no sufficient reason to deviate from its Decision,
but proceeds, nonetheless, to clarify a few points.
While this Courts Decision ruled on the regular status of respondents, it must be deemed to
be without prejudice to the resolution of the issue of illegal dismissal in the proper case. The
Decision thus expressly stated:
Finally, it must be stressed that respondents, having been declared to be regular
employees of petitioner, Synergy being a mere agent of the latter, had acquired
security of tenure. As such, they could only be dismissed by petitioner, the real
employer, on the basis of just or authorized cause, and with observance of
procedural due process.[12] (Underscoring supplied)

Notably, subject of the Decision was respondents complaints[13] for regularization and
under-/non-payment of benefits. The Court did not and could not take cognizance of the validity
of the eventual dismissal of respondents because the matter of just or authorized cause is beyond
the issues of the case. That is why the Court did not order reinstatement for such relief
presupposes a finding of illegal dismissal[14] in the proper case which, as the parties now
manifest, pends before the appellate court.
Respecting petitioners allegation of financial woes that led to the June 30, 1998 lay-off of
respondents, as the Court held in its Decision, petitioner failed to establish such economic losses
which rendered impossible the compliance with the order to accept respondent as regular
employees. Thus the Decision reads:
Other than its bare allegations, petitioner presented nothing to substantiate
its impossibility of compliance. In fact, petitioner waived this defense by failing to
raise it in its Memorandum filed onJune 14, 1999 before the Court of Appeals. x
x x[15] (Underscoring supplied)
Petitioner, for the first time, revealed the matter of termination and the allegation of financial
woes in its Motion for Reconsideration of October 10, 2000 before the appellate court,[16] not by
way of defense to a charge of illegal dismissal but to manifest that supervening events have
rendered it impossible for petitioner to comply with the order to accept respondents as regular
employees.[17] Moreover, the issue of economic losses as a ground for dismissing respondents is
factual in nature, hence, it may be determined in the proper case.
All told, the pending illegal dismissal case in CA-G.R. SP No. 00922 may now take its
course. The Courts finding that respondents are regular employees of petitioner neither frustrates
nor preempts the appellate courts proceedings in resolving the issue of retrenchment as an
authorized cause for termination. If an authorized cause for dismissal is later found to exist,
petitioner would still have to pay respondents their corresponding benefits and salary differential
up to June 30, 1998. Otherwise, if there is a finding of illegal dismissal, an order for
reinstatement with full backwages does not conflict with the Courts declaration of the regular
employee status of respondents.
As to the belated plea of respondents for attorneys fees, suffice it to state that parties who have
not appealed cannot obtain from the appellate court any affirmative reliefs other than those
granted, if any, in the decision of the lower tribunal.[18] Since respondents did not file a motion
for reconsideration of the appellate courts decision, much less appeal therefrom, they can
advance only such arguments as may be necessary to defeat petitioners claims or to uphold the
appealed decision, and cannot ask for a modification of the judgment in their favor in order to
obtain other positive reliefs.[19]
WHEREFORE, the Decision of February 29, 2008 is, in light of the foregoing
discussions, MODIFIED. As MODIFIED, the dispositive portion of the Decision reads:

WHEREFORE, the Court of Appeals Decision of September 29, 2000 is

AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC.,
is ORDERED to recognize respondents ENRIQUE LIGAN, EMELITO SOCO,
ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON
PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER,
VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES,
LORENZO BUTANAS, BENSON CARISUSA, JEFFREY LLENES, ANTONIO
M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO
TUNACAO, CHERIE ALEGRES, EDUARDO MAGDADARAUG, NELSON
M. DULCE and ALLAN BENTUZAL as its regular employees in their same or
substantially equivalent positions, and pay the wages and benefits due them as
regular employees plus salary differential corresponding to the difference between
the wages and benefits given them and those granted to petitioners other regular
employees of the same or substantially equivalent rank, up to June 30, 1998,
without prejudice to the resolution of the illegal dismissal case.
There being no data from which this Court may determine the monetary liabilities of
petitioner, the case is REMANDED to the Labor Arbiter solely for that purpose.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
WILHELMINA S. OROZCO,
Petitioner,

G.R. No. 155207

Present:

- versus -

THE FIFTH DIVISION OF THE HONORABLE

COURT OF APPEALS, PHILIPPINE DAILY
INQUIRER, and LETICIA JIMENEZ
MAGSANOC,
Respondents.

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
August 13, 2008

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

The case before this Court raises a novel question never before decided in our jurisdiction
whether a newspaper columnist is an employee of the newspaper which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure,
petitioner Wilhelmina S. Orozco assails the Decision[1] of the Court of Appeals (CA) in CA-G.R.
SP No. 50970 dated June 11, 2002 and its Resolution[2] dated September 11, 2002 denying her
Motion for Reconsideration. The CA reversed and set aside the Decision[3] of the National Labor
Relations Commission (NLRC), which in turn had affirmed the Decision[4] of the Labor Arbiter
finding that Orozco was an employee of private respondent Philippine Daily Inquirer (PDI) and
was illegally dismissed as columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a weekly column for its
Lifestyle section. She religiously submitted her articles every week, except for a six-month stint
in New York City when she, nonetheless, sent several articles through mail. She received
compensation of P250.00 later increased to P300.00 for every column published.[5]
On November 7, 1992, petitioners column appeared in the PDI for the last time.
Petitioner claims that her then editor, Ms. Lita T. Logarta,[6] told her that respondent Leticia
Jimenez Magsanoc, PDI Editor in Chief, wanted to stop publishing her column for no reason at
all and advised petitioner to talk to Magsanoc herself. Petitioner narrates that when she talked to
Magsanoc, the latter informed her that it was PDI Chairperson Eugenia Apostol who had asked
to stop publication of her column, but that in a telephone conversation with Apostol, the latter
said that Magsanoc informed her (Apostol) that the Lifestyle section already had many
columnists.[7]
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle
section editor to discuss how to improve said section. They agreed to cut down the number of
columnists by keeping only those whose columns were well-written, with regular feedback and
following. In their judgment, petitioners column failed to improve, continued to be superficially
and poorly written, and failed to meet the high standards of the newspaper. Hence, they decided
to terminate petitioners column.[8]
Aggrieved by the newspapers action, petitioner filed a complaint for illegal dismissal,
backwages, moral and exemplary damages, and other money claims before the NLRC.
On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of
petitioner, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be

an employee of respondent company; ordering respondent company to reinstate
her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13th month pay and service
incentive leave pay.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.[9]

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and
method by which complainants work that of a regular columnist had to be
accomplished. This control might not be found in an instruction, verbal or oral,
given to complainant defining the means and method she should write her
column. Rather, this control is manifested and certained (sic) in respondents
admitted prerogative to reject any article submitted by complainant for
publication.
By virtue of this power, complainant was helplessly constrained to adopt
her subjects and style of writing to suit the editorial taste of her editor. Otherwise,
off to the trash can went her articles.
Moreover, this control is already manifested in column title, Feminist Reflection
allotted complainant. Under this title, complainants writing was controlled and
limited to a womans perspective on matters of feminine interests. That respondent
had no control over the subject matter written by complainant is strongly belied
by this observation. Even the length of complainants articles were set by
respondents.
Inevitably, respondents would have no control over when or where complainant
wrote her articles as she was a columnist who could produce an article in thirty
(3) (sic) months or three (3) days, depending on her mood or the amount of
research required for an article but her actions were controlled by her obligation
to produce an article a week. If complainant did not have to report for work eight
(8) hours a day, six (6) days a week, it is because her task was mainly mental.
Lastly, the fact that her articles were (sic) published weekly for three (3) years
show that she was respondents regular employee, not a once-in-a-blue-moon
contributor who was not under any pressure or obligation to produce regular
articles and who wrote at his own whim and leisure.[10]

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC
Second Division dismissed the appeal thereby affirming the Labor Arbiters Decision. The NLRC
initially noted that PDI failed to perfect its appeal, under Article 223 of the Labor Code, due to
non-filing of a cash or surety bond. The NLRC said that the reason proffered by PDI for not
filing the bond that it was difficult or impossible to determine the amount of the bond since the
Labor Arbiter did not specify the amount of the judgment award was not persuasive. It said that
all PDI had to do was compute based on the amount it was paying petitioner, counting the
number of weeks from November 7, 1992 up to promulgation of the Labor Arbiters decision.[11]
The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiters
findings of fact and law. It sustained the Labor Arbiters reasoning that respondent PDI exercised
control over petitioners work.
PDI then filed a Petition for Review[12] before this Court seeking the reversal of the
NLRC Decision. However, in a Resolution[13] dated December 2, 1998, this Court referred the
case to the Court of Appeals, pursuant to our ruling in St. Martin Funeral Homes v. National
Labor Relations Commission.[14]
The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision
and dismissed petitioners Complaint. It held that the NLRC misappreciated the facts and
rendered a ruling wanting in substantial evidence. The CA said:
The Court does not agree with public respondent NLRCs conclusion. First,
private respondent admitted that she was and [had] never been considered by
petitioner PDI as its employee. Second, it is not disputed that private respondent
had no employment contract with petitioner PDI. In fact, her engagement to
contribute articles for publication was based on a verbal agreement between her
and the petitioners Lifestyle Section Editor. Moreover, it was evident that private
respondent was not required to report to the office eight (8) hours a day. Further, it
is not disputed that she stayed in New York for six (6) months without petitioners
permission as to her leave of absence nor was she given any disciplinary action
for the same. These undisputed facts negate private respondents claim that she is
an employee of petitioner.
Moreover, with regards (sic) to the control test, the public respondent
NLRCs ruling that the guidelines given by petitioner PDI for private respondent
to follow, e.g. in terms of space allocation and length of article, is not the form of
control envisioned by the guidelines set by the Supreme Court. The length of the
article is obviously limited so that all the articles to be featured in the paper can be
accommodated. As to the topic of the article to be published, it is but logical that

private respondent should not write morbid topics such as death because she is
contributing to the lifestyle section. Other than said given limitations, if the same
could be considered limitations, the topics of the articles submitted by private
respondent were all her choices. Thus, the petitioner PDI in deciding to publish
private respondents articles only controls the result of the work and not the means
by which said articles were written.
As such, the above facts failed to measure up to the control test necessary
for an employer-employee relationship to exist.[15]

Petitioners Motion for Reconsideration was denied in a Resolution dated September 11,
2002. She then filed the present Petition for Review.
In a Resolution dated April 29, 2005, the Court, without giving due course to the petition,
ordered the Labor Arbiter to clarify the amount of the award due petitioner and, thereafter,
ordered PDI to post the requisite bond. Upon compliance therewith, the petition would be given
due course. Labor Arbiter Amansec clarified that the award under the Decision amounted
to P15,350.00. Thus, PDI posted the requisite bond on January 25, 2007.[16]
We shall initially dispose of the procedural issue raised in the Petition.
Petitioner argues that the CA erred in not dismissing outright PDIs Petition
for Certiorari for PDIs failure to post a cash or surety bond in violation of Article 223 of the
Labor Code.
This issue was settled by this Court in its Resolution dated April 29, 2005.[17] There, the
Court held:
But while the posting of a cash or surety bond is jurisdictional and is a
condition sine qua non to the perfection of an appeal, there is a plethora of
jurisprudence recognizing exceptional instances wherein the Court relaxed the
bond requirement as a condition for posting the appeal.
xxxx
In the case of Taberrah v. NLRC, the Court made note of the fact that the
assailed decision of the Labor Arbiter concerned did not contain a computation of
the monetary award due the employees, a circumstance which is likewise present
in this case. In said case, the Court stated,

As a rule, compliance with the requirements for the

perfection of an appeal within the reglamentary (sic) period is
mandatory and jurisdictional. However, in National Federation of
Labor Unions v. Ladrido as well as in several other cases, this
Court relaxed the requirement of the posting of an appeal bond
within the reglementary period as a condition for perfecting the
appeal. This is in line with the principle that substantial justice is
better served by allowing the appeal to be resolved on the merits
rather than dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that petitioner
was entitled to backwages, 13th month pay and service incentive leave pay without
however including a computation of the alleged amounts.
xxxx
In the case of NFLU v. Ladrido III, this Court postulated that private
respondents cannot be expected to post such appeal bond equivalent to the amount
of the monetary award when the amount thereof was not included in the decision
of the labor arbiter. The computation of the amount awarded to petitioner not
having been clearly stated in the decision of the labor arbiter, private respondents
had no basis for determining the amount of the bond to be posted.
Thus, while the requirements for perfecting an appeal must be strictly
followed as they are considered indispensable interdictions against needless
delays and for orderly discharge of judicial business, the law does admit of
exceptions when warranted by the circumstances. Technicality should not be
allowed to stand in the way of equitably and completely resolving the rights and
obligations of the parties. But while this Court may relax the observance of
reglementary periods and technical rules to achieve substantial justice, it is not
prepared to give due course to this petition and make a pronouncement on the
weighty issue obtaining in this case until the law has been duly complied with and
the requisite appeal bond duly paid by private respondents.[18]

Records show that PDI has complied with the Courts directive for the posting of the
bond; thus, that issue has been laid to rest.
[19]

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the
answer be in the affirmative, whether she was illegally dismissed.
We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of fact.

Factual findings of quasi-judicial agencies like the NLRC are generally accorded respect
and finality if supported by substantial evidence.[21]
[20]

Considering, however, that the CAs findings are in direct conflict with those of the Labor
Arbiter and NLRC, this Court must now make its own examination and evaluation of the facts of
this case.
It is true that petitioner herself admitted that she was not, and [had] never been considered
respondents employee because the terms of works were arbitrarily decided upon by the
respondent.[22] However, the employment status of a person is defined and prescribed by law and
not by what the parties say it should be.[23]
This Court has constantly adhered to the four-fold test to determine whether there exists
an employer-employee relationship between parties.[24] The four elements of an employment
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employers power to control the employees conduct.[25]
Of these four elements, it is the power of control which is the most crucial[26] and most
determinative factor,[27] so important, in fact, that the other elements may even be disregarded.
[28]
As this Court has previously held:
the significant factor in determining the relationship of the parties is the presence
or absence of supervisory authority to control the method and the details of
performance of the service being rendered, and the degree to which the principal
may intervene to exercise such control.[29]

In other words, the test is whether the employer controls or has reserved the right to
control the employee, not only as to the work done, but also as to the means and methods by
which the same is accomplished.[30]
Petitioner argues that several factors exist to prove that respondents exercised control
over her and her work, namely:

a.
As to the Contents of her Column The PETITIONER had to
insure that the contents of her column hewed closely to the objectives of its
Lifestyle Section and the over-all principles that the newspaper projects itself to
stand for. As admitted, she wanted to write about death in relation to All Souls
Day but was advised not to.
b.
As to Time Control The PETITIONER, as a columnist, had
to observe the deadlines of the newspaper for her articles to be published. These
deadlines were usually that time period when the Section Editor has to close the
pages of the Lifestyle Section where the column in located. To close the pages
means to prepare them for printing and publication.
As a columnist, the PETITIONERs writings had a definite day on which it
was going to appear. So she submitted her articles two days before the designated
day on which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill the
newspapers obligations to the readers with regard to timeliness and freshness of
ideas.
c.
As to Control of Space The PETITIONER was told to
submit only two or three pages of article for the column, (sic) Feminist
Reflections per week. To go beyond that, the Lifestyle editor would already chop
off the article and publish the rest for the next week. This shows that PRIVATE
RESPONDENTS had control over the space that the PETITIONER was assigned
to fill.
d.
As to Discipline Over time, the newspaper readers eyes are
trained or habituated to look for and read the works of their favorite regular
writers and columnists. They are conditioned, based on their daily purchase of the
newspaper, to look for specific spaces in the newspapers for their favorite writeups/or opinions on matters relevant and significant issues aside from not being
late or amiss in the responsibility of timely submission of their articles.
The PETITIONER was disciplined to submit her articles on highly
relevant and significant issues on time by the PRIVATE RESPONDENTS who
have a say on whether the topics belong to those considered as highly relevant and
significant, through the Lifestyle Section Editor. The PETITIONER had to discuss
the topics first and submit the articles two days before publication date to keep her
column in the newspaper space regularly as expected or without miss by its
readers.[31]

Given this discussion by petitioner, we then ask the question: Is this the form of control
that our labor laws contemplate such as to establish an employer-employee relationship between
petitioner and respondent PDI?

It is not.
Petitioner has misconstrued the control test, as did the Labor Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. Rules which serve as general guidelines towards the achievement of the
mutually desired result are not indicative of the power of control.[32] Thus, this Court has
explained:
It should, however, be obvious that not every form of control that the hiring party
reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must
be drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result, create no employeremployee relationship unlike the second, which address both the result and the
means used to achieve it. x x x.[33]

The main determinant therefore is whether the rules set by the employer are meant to control not
just the results of the work but also the means and method to be used by the hired party in order
to achieve such results. Thus, in this case, we are to examine the factors enumerated by petitioner
to see if these are merely guidelines or if they indeed fulfill the requirements of the control test.
Petitioner believes that respondents acts are meant to control how she executes her work.
We do not agree. A careful examination reveals that the factors enumerated by the petitioner are
inherent conditions in running a newspaper. In other words, the so-called control as to time,
space, and discipline are dictated by the very nature of the newspaper business itself.
We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is

widely read throughout the country. As such, public interest dictates that every
article appearing in the newspaper should subscribe to the standards set by the
Inquirer, with its thousands of readers in mind. It is not, therefore, unusual for the
Inquirer to control what would be published in the newspaper. What is important
is the fact that such control pertains only to the end result, i.e., the submitted
articles. The Inquirer has no control over [petitioner] as to the means or method
used by her in the preparation of her articles. The articles are done by [petitioner]
herself without any intervention from the Inquirer.[34]

Petitioner has not shown that PDI, acting through its editors, dictated how she was to
write or produce her articles each week. Aside from the constraints presented by the space
allocation of her column, there were no restraints on her creativity; petitioner was free to write
her column in the manner and style she was accustomed to and to use whatever research method
she deemed suitable for her purpose. The apparent limitation that she had to write only on
subjects that befitted the Lifestyle section did not translate to control, but was simply a logical
consequence of the fact that her column appeared in that section and therefore had to cater to the
preference of the readers of that section.
The perceived constraint on petitioners column was dictated by her own choice of her
columns perspective. The column title Feminist Reflections was of her own choosing, as she
herself admitted, since she had been known as a feminist writer.[35] Thus, respondent PDI, as well
as her readers, could reasonably expect her columns to speak from such perspective.
Contrary to petitioners protestations, it does not appear that there was any actual restraint
or limitation on the subject matter within the Lifestyle section that she could write about.
Respondent PDI did not dictate how she wrote or what she wrote in her column. Neither did
PDIs guidelines dictate the kind of research, time, and effort she put into each column. In fact,
petitioner herself said that she received no comments on her articlesexcept for her to shorten
them to fit into the box allotted to her column. Therefore, the control that PDI exercised over
petitioner was only as to the finished product of her efforts, i.e., the column itself, by way of
either shortening or outright rejection of the column.
The newspapers power to approve or reject publication of any specific article she wrote
for her column cannot be the control contemplated in the control test, as it is but logical that one
who commissions another to do a piece of work should have the right to accept or reject the

product. The important factor to consider in the control test is still the element of control over
how the work itself is done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or her work for the
newspaper. We note the common practice in the newspaper business of assigning its regular
reporters to cover specific subjects, geographical locations, government agencies, or areas of
concern, more commonly referred to as beats. A reporter must produce stories within his or her
particular beat and cannot switch to another beat without permission from the editor. In most
newspapers also, a reporter must inform the editor about the story that he or she is working on
for the day. The story or article must also be submitted to the editor at a specified time.
Moreover, the editor can easily pull out a reporter from one beat and ask him or her to cover
another beat, if the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she
was not precluded from submitting her column ahead of time or from submitting columns to be
published at a later time. More importantly, respondents did not dictate upon petitioner the
subject matter of her columns, but only imposed the general guideline that the article should
conform to the standards of the newspaper and the general tone of the particular section.
Where a person who works for another performs his job more or less at his own pleasure,
in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee
relationship exists.[36]
Aside from the control test, this Court has also used the economic reality test. The
economic realities prevailing within the activity or between the parties are examined, taking into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties.[37] This is especially appropriate when, as in this case, there is no written
agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of
economic reality in analyzing possible employment relationships for purposes of applying the
Labor Code ought to be the economic dependence of the worker on his employer.[38]
Petitioners main occupation is not as a columnist for respondent but as a womens rights
advocate working in various womens organizations.[39] Likewise, she herself admits that she also
contributes articles to other publications.[40] Thus, it cannot be said that petitioner was dependent
on respondent PDI for her continued employment in respondents line of business.[41]

The inevitable conclusion is that petitioner was not respondent PDIs employee but an
independent contractor, engaged to do independent work.
There is no inflexible rule to determine if a person is an employee or an independent
contractor; thus, the characterization of the relationship must be made based on the particular
circumstances of each case.[42] There are several factors[43] that may be considered by the courts,
but as we already said, the right to control is the dominant factor in determining whether one is
an employee or an independent contractor.[44]
In our jurisdiction, the Court has held that an independent contractor is one who carries
on a distinct and independent business and undertakes to perform the job, work, or service on
ones own account and under ones own responsibility according to ones own manner and method,
free from the control and direction of the principal in all matters connected with the performance
of the work except as to the results thereof.[45]
On this point, Sonza v. ABS-CBN Broadcasting Corporation[46] is enlightening. In that
case, the Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not an
employee of ABS-CBN, but an independent contractor. Sonza was hired by ABS-CBN due to his
unique skills, talent and celebrity status not possessed by ordinary employees, a circumstance
that, the Court said, was indicative, though not conclusive, of an independent contractual
relationship. Independent contractors often present themselves to possess unique skills, expertise
or talent to distinguish them from ordinary employees.[47] The Court also found that, as to
payment of wages, Sonzas talent fees were the result of negotiations between him and ABSCBN.[48] As to the power of dismissal, the Court found that the terms of Sonzas engagement were
dictated by the contract he entered into with ABS-CBN, and the same contract provided that
either party may terminate the contract in case of breach by the other of the terms thereof.
[49]
However, the Court held that the foregoing are not determinative of an employer-employee
relationship. Instead, it is still the power of control that is most important.
On the power of control, the Court found that in performing his work, Sonza only needed
his skills and talent how he delivered his lines, appeared on television, and sounded on radio
were outside ABS-CBNs control.[50] Thus:
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZAs work. ABS-CBN did not instruct

SONZA how to perform his job.ABS-CBN merely reserved the right to modify
the program format and airtime schedule for more effective programming. ABSCBNs sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods
of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves
ABS-CBNs power over the means and methods of the performance of his
work. Although ABS-CBN did have the option not to broadcast SONZAs show,
ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if ABSCBN was completely dissatisfied with the means and methods of SONZAs
performance of his work, or even with the quality or product of his work, ABSCBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is
not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in
full.
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it
was by the obligation to continue paying in full SONZAs talent fees, did not
amount to control over the means and methods of the performance of SONZAs
work. ABS-CBN could not terminate or discipline SONZA even if the means and
methods of performance of his work - how he delivered his lines and appeared on
television - did not meet ABS-CBNs approval. This proves that ABS-CBNs
control was limited only to the result of SONZAs work, whether to broadcast the
final product or not. In either case, ABS-CBN must still pay SONZAs talent fees
in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of
Appeals ruled that vaudeville performers were independent contractors although
the management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of
the skills of the artists, it could only control the result of the work by deleting
objectionable features.
SONZA further contends that ABS-CBN exercised control over his work
by supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the Mel & Jay
programs. However, the equipment, crew and airtime are not the tools and
instrumentalities SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his
appearance. Even though ABS-CBN provided SONZA with the place of work and
the necessary equipment, SONZA was still an independent contractor since ABSCBN did not supervise and control his work. ABS-CBNs sole concern was for
SONZA to display his talent during the airing of the programs.
A radio broadcast specialist who works under minimal supervision is an
independent contractor. SONZAs work as television and radio program host

required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over
how SONZA utilized his skills and talent in his shows.[51]

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent,
skill, experience, and her unique viewpoint as a feminist advocate. How she utilized all these in
writing her column was not subject to dictation by respondent. As in Sonza, respondent PDI was
not involved in the actual performance that produced the finished product. It only reserved the
right to shorten petitioners articles based on the newspapers capacity to accommodate the same.
This fact, we note, was not unique to petitioners column. It is a reality in the newspaper business
that space constraints often dictate the length of articles and columns, even those that regularly
appear therein.
Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she
needed to perform her work. Petitioner only needed her talent and skill to come up with a column
every week. As such, she had all the tools she needed to perform her work.
Considering that respondent PDI was not petitioners employer, it cannot be held guilty of
illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are
hereby AFFIRMED.
SO ORDERED.

SECOND DIVISION
JEROMIE D. ESCASINAS and EVAN
RIGOR SINGCO,
Petitioners,

G.R. No. 178827

Present:

QUISUMBING, J., Chairperson,

CARPIO MORALES,
- versus -

NACHURA,*
BRION, and
PERALTA,** JJ.

SHANGRI-LAS MACTAN ISLAND

RESORT and DR. JESSICA J.R.
PEPITO,

Promulgated:
March 4, 2009

Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO MORALES, J.:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were
engaged in 1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to
work in her clinic at respondent Shangri-las Mactan Island Resort (Shangri-la) in Cebu of which
she was a retained physician.

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC)
Regional Arbitration Branch No. VII (NLRC-RAB No. VII) a complaint[1] for regularization,
underpayment of wages, non-payment of holiday pay, night shift differential and 13th month pay
differential against respondents, claiming that they are regular employees of Shangri-la. The case
was docketed as RAB Case No. 07-11-2089-02.

Shangri-la claimed, however, that petitioners were not its employees but of respondent
doctor whom it retained via Memorandum of Agreement (MOA)[2] pursuant to Article 157 of the
Labor Code, as amended.

Respondent doctor for her part claimed that petitioners were already working for the
previous retained physicians of Shangri-la before she was retained by Shangri-la; and that she
maintained petitioners services upon their request.

By Decision[3] of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be

regular employees of Shangri-la. The Arbiter thus ordered Shangri-la to grant them the wages
and benefits due them as regular employees from the time their services were engaged.

In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they
usually perform work which is necessary and desirable to Shangri-las business; that they observe
clinic hours and render services only to Shangri-las guests and employees; that payment for their
salaries were recommended to Shangri-las Human Resource Department (HRD); that respondent
doctor was Shangri-las in-house physician, hence, also an employee; and that the MOA between
Shangri-la and respondent doctor was an insidious mechanism in order to circumvent [the
doctors] tenurial security and that of the employees under her.

Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with
respect to the non-award to them of some of the benefits they were claiming.

By Decision[4] dated March 31, 2005, the NLRC granted Shangri-las and respondent doctors
appeal and dismissed petitioners complaint for lack of merit, it finding that no employeremployee relationship exists between petitioner and Shangri-la. In so deciding, the NLRC held
that the Arbiter erred in interpreting Article 157 in relation to Article 280 of the Labor Code, as
what is required under Article 157 is that the employer should provide the services of medical
personnel to its employees, but nowhere in said article is a provision that nurses are required to
be employed; that contrary to the finding of the Arbiter, even if Article 280 states that if a worker
performs work usually necessary or desirable in the business of the employer, he cannot be
automatically deemed a regular employee; and that the MOA amply shows that respondent
doctor was in fact engaged by Shangri-la on a retainer basis, under which she could hire her own
nurses and other clinic personnel.

Brushing aside petitioners contention that since their application for employment was
addressed to Shangri-la, it was really Shangri-la which hired them and not respondent doctor, the
NLRC noted that the applications for employment were made by persons who are not parties to
the case and were not shown to have been actually hired by Shangri-la.

On the issue of payment of wages, the NLRC held that the fact that, for some months,
payment of petitioners wages were recommended by Shangri-las HRD did not prove that it was
Shangri-la which pays their wages. It thus credited respondent doctors explanation that the
recommendations for payment were based on the billings she prepared for salaries
of additional nurses during Shangri-las peak months of operation, in accordance with the
retainership agreement, the guests payments for medical services having been paid directly to
Shanrgi-la.

Petitioners thereupon brought the case to the Court of Appeals which, by

Decision[5] of May 22, 2007, affirmed the NLRC Decision that no employer-employee
relationship exists between Shangri-la and petitioners. The appellate court concluded that all
aspects of the employment of petitioners being under the supervision and control of respondent
doctor and since Shangri-la is not principally engaged in the business of providing medical or
healthcare services, petitioners could not be regarded as regular employees of Shangri-la.

Petitioners motion for reconsideration having been denied by Resolution[6] of July 10,
2007, they interposed the present recourse.
Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire
a full-time registered nurse, apart from a physician, hence, their engagement should be deemed
as regular employment, the provisions of the MOA notwithstanding; and that the MOA is
contrary to public policy as it circumvents tenurial security and, therefore, should be struck down
as being void ab initio. At most, they argue, the MOA is a mere job contract.

And petitioners maintain that respondent doctor is a labor-only contractor for she has no
license or business permit and no business name registration, which is contrary to the
requirements under Sec. 19 and 20 of the Implementing Rules and Regulations of the Labor
Code on sub-contracting.

Petitioners add that respondent doctor cannot be a legitimate

independent contractor, lacking as she does in substantial capital, the clinic having been set-up
and already operational when she took over as retained physician; that respondent doctor has no
control over how the clinic is being run, as shown by the different orders issued by officers of
Shangri-la forbidding her from receiving cash payments and several purchase orders for
medicines and supplies which were coursed thru Shangri-las Purchasing Manager, circumstances
indubitably showing that she is not an independent contractor but a mere agent of Shangri-la.

In its Comment,[7] Shangri-la questions the Special Powers of Attorneys (SPAs) appended
to the petition for being inadequate. On the merits, it prays for the disallowance of the petition,
contending that it raises factual issues, such as the validity of the MOA, which were never raised
during the proceedings before the Arbiter, albeit passed upon by him in his Decision; that Article
157 of the Labor Code does not make it mandatory for a covered establishment to employ health
personnel; that the services of nurses is not germane nor indispensable to its operations; and that
respondent doctor is a legitimate individual independent contractor who has the power to hire,
fire and supervise the work of the nurses under her.

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis
a vis Art. 280 and the provisions on permissible job contracting of the Labor Code, as amended.

The Court holds that, contrary to petitioners postulation, Art. 157 does not require the
engagement of full-time nurses as regular employees of a company employing not less than
50 workers. Thus, the Article provides:

ART. 157. Emergency medical and dental services. It shall be the duty of
every employer to furnish his employees in any locality with free medical and
dental attendance and facilities consisting of:

(a)

The services of a full-time registered nurse when the

number of employees exceeds fifty (50) but not more
than two hundred (200) except when the employer does
not maintain hazardous workplaces, in which case the
services of a graduate first-aider shall be provided for the
protection of the workers, where no registered nurse is
available. The Secretary of Labor shall provide by
appropriate regulations the services that shall be required
where the number of employees does not exceed fifty (50)
and shall determine by appropriate order hazardous
workplaces for purposes of this Article;

(b)

The services of a full-time registered nurse, a parttime physician and dentist, and an emergency clinic,

when the number of employees exceeds two hundred

(200) but not more than three hundred (300); and

(c)

The services of a full-time physician, dentist and fulltime registered nurse as well as a dental clinic, and an
infirmary or emergency hospital with one bed capacity for
every one hundred (100) employees when the number of
employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services

of a physician or dentist who cannot stay in the premises of the establishment for
at least two (2) hours, in the case of those engaged on part-time basis, and not less
than eight (8) hours in the case of those employed on full-time basis. Where the
undertaking is nonhazardous in nature, the physician and dentist may be
engaged on retained basis, subject to such regulations as the Secretary of
Labor may prescribe to insure immediate availability of medical and dental
treatment and attendance in case of emergency. (Emphasis and underscoring
supplied)

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is
mandated to furnish its employees with the services of a full-time registered nurse, a part-time
physician and dentist, and an emergency clinic which means that it should provide or make
available such medical and allied services to its employees, not necessarily to hire or employ
a service provider. As held in Philippine Global Communications vs. De Vera:[8]

x x x while it is true that the provision requires

employers to engage the services of medical practitioners in
certain establishments depending on the number of their
employees, nothing is there in the law which says that medical
practitioners so engaged be actually hired as employees,
adding that the law, as written, only requires the employer to
retain, not employ, a part-time physician who needed to stay in the

premises of the non-hazardous workplace for two (2) hours.

(Emphasis and underscoring supplied)

The term full-time in Art. 157 cannot be construed as referring to the type of employment
of the person engaged to provide the services, for Article 157 must not be read alongside Art.
280[9] in order to vest employer-employee relationship on the employer and the person so
engaged. So De Vera teaches:

x x x For, we take it that any agreement may provide that

one party shall render services for and in behalf of another, no
matter how necessary for the latters business,even without being
hired as an employee. This set-up is precisely true in the case of
an independent contractorship as well as in an agency
agreement. Indeed, Article 280 of the Labor Code, quoted by
the appellate court, is not the yardstick for determining the
existence of an employment relationship. As it is, the provision
merely distinguishes between two (2) kinds of employees, i.e.,
regular and casual. x x x[10] (Emphasis and underscoring supplied)

The phrase services of a full-time registered nurse should thus be taken to refer to the kind of
services that the nurse will render in the companys premises and to its employees, not the
manner of his engagement.

As to whether respondent doctor can be considered a legitimate independent contractor,

the pertinent sections of DOLE Department Order No. 10, series of 1997, illuminate:

Sec. 8. Job contracting. There is job contracting permissible under the

Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes the

contract work on his own account under his own responsibility according to his
own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to
the results thereof; and

(2) The contractor has substantial capital or investment in the form of

tools, equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:

(1) Does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other materials; and

(2) The workers recruited and placed by such persons are performing
activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the

person acting as contractor shall be considered merely as an agent or intermediary
of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out of labor

is permissible in the light of the circumstances of each case and after considering
the operating needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure the protection
and welfare of the workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally

established by considering the following determinants: whether the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and duration
of the relationship; the right to assign the performance of a specified piece of work; the control
and supervision of the work to another; the employer's power with respect to the hiring, firing
and payment of the contractor's workers; the control of the premises; the duty to supply the
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.[11]

On the other hand, existence of an

employer- employee relationship is established by the presence of the following
determinants: (1) the selection and engagement of theworkers; (2) power of dismissal; (3)
the payment of wages by whatever means; and (4) the power to control the worker's conduct,
with the latter assuming primacy in the overall consideration.[12]

Against the above-listed determinants, the Court holds that respondent doctor is a
legitimate independent contractor. That Shangri-la provides the clinic premises and medical
supplies for use of its employees and guests does not necessarily prove that respondent doctor
lacks substantial capital and investment. Besides, the maintenance of a clinic and provision of
medical services to its employees is required under Art. 157, which are not directly related to
Shangri-las principal business operation of hotels and restaurants.

As to payment of wages, respondent doctor is the one who underwrites the

following: salaries, SSS contributions and other benefits of the staff[13]; group life, group
personal accident insurance and life/death insurance[14] for the staff with minimum benefit
payable at 12 times the employees last drawn salary, as well as value added taxes and
withholding taxes, sourced from her P60,000.00 monthly retainer fee and 70% share of the

service charges from Shangri-las guests who avail of the clinic services. It is unlikely that
respondent doctor would report petitioners as workers, pay their SSS premium as well as their
wages if they were not indeed her employees.[15]

With respect to the supervision and control of the nurses and clinic staff, it is not disputed
that a document, Clinic Policies and Employee Manual[16] claimed to have been prepared by
respondent doctor exists, to which petitioners gave their conformity[17] and in which they
acknowledged their co-terminus employment status. It is thus presumed that said document, and
not the employee manual being followed by Shangri-las regular workers, governs how they
perform their respective tasks and responsibilities.

Contrary to petitioners contention, the various office directives issued by Shangri-las

officers do not imply that it is Shangri-las management and not respondent doctor who exercises
control over them or that Shangri-la has control over how the doctor and the nurses perform their
work. The letter[18] addressed to respondent doctor dated February 7, 2003 from a certain Tata L.
Reyes giving instructions regarding the replenishment of emergency kits is, at most,
administrative in nature, related as it is to safety matters; while the letter[19] dated May 17, 2004
from Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from
receiving cash payments from the resorts guests is a matter of financial policy in order to ensure
proper sharing of the proceeds, considering that Shangri-la and respondent doctor share in the
guests payments for medical services rendered. In fine, as Shangri-la does not control how the
work should be performed by petitioners, it is not petitioners employer.
WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals
dated May 22, 2007 and the Resolution dated July 10, 2007 are AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 74965 November 9, 1994

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, DEPUTY CITY SHERIFF
CARMELO V. CACHERO, MARITIME COMPANY OF THE PHILIPPINES,
DOMINGO C. NIANGAR, DANIEL C. SABINO, FERNANDO S. TULIAO and TULMAR
TRADING CORPORATION, respondents.
Reynaldo L. Libanan for respondent deputy sheriff.
Joaquin G. Chung, Jr. Law Office for respondent Tulmar Trading Corp.
Eliodoro C. Cruz & Arsenio P. Dizon for Maritime Co. of the Philippines.

MENDOZA, J.:
This is a petition for certiorari to set aside the resolution dated April 4, 1986 1 of the National
Labor Relations Commission in NLRC Case No. NCR-12-4233-84 (Domingo C. Niangar v.
Maritime Company of the Philippines), affirming the denial by the Labor Arbiter 2 of petitioner's
motion to annul the sheriff's sale of four barges or, in the alternative, to order him to remit the
proceeds of his sale to the Bureau of the Internal Revenue for the satisfaction of the tax liabilities
of private respondent Maritime Company of the Philippines.
The facts are as follows:
On January 12, 1984 the Commissioner of the Internal Revenue sent two letters 3 of demand to
the respondent Maritime Company of the Philippines for deficiency common carrier's tax, fixed
tax, 6% Commercial Broker's tax, documentary stamp tax, income tax and withholding taxes in
the total amount of P17,284,882.45.
The assessment became final and executory as private respondent did not contest it. But as
private respondent did not pay its tax liability either, the Commissioner of Internal Revenue
issued warrants of distraint of personal property and levy of real property of private respondent.
Copies of the warrants, both dated January 23, 1985, were served on January 28, 1985 on Yoly T.
Petrache, private respondent's accountant. 4

On April 16, 1985 a "Receipt for Goods, Articles, and Things Seized 5 under Authority of the
National Internal Revenue Code" was executed, covering, among other things, six barges
identified as MCP-1,2,3,4,5 and 6. This receipt is required by 303 (now 206) of the NIRC as
proof of the constructive distraint of property. It is an undertaking by the taxpayer or person in
possession of the property covered that he will preserve the property and deliver it upon order of
the court or the Internal Revenue Commissioner.
The receipt was prepared by the BIR for the signature of a representative of respondent Maritime
Company of the Philippines, but it was not in fact signed. Petitioner later explained that the
individuals who had possession of the barges had refused to sign the receipt.
This circumstance has given rise to the question in this case as it appears that four of the barges
placed under constructive distraint were levied upon execution by respondent deputy sheriff of
Manila on July 20, 1985 to satisfy a judgment for unpaid wages and other benefits of employees
of respondent Maritime Company of the Philippines. More specifically, the question in this case
is the validity of the warrant of distraint served by the Revenue Seizure Officer against the writ
of execution subsequently levied upon the same property by the deputy sheriff of Manila to
satisfy the claims of employees in NLRC Case No. NCR-12-4233-84 (Domingo C. Niangar, et
al. v. Maritime Company of the Philippines) for P490,749.21.
The four barges were sold by respondent deputy sheriff at a public auction on August 12, 1985.
The highest bidder, Daniel C. Sabino, subsequently sold them to private respondents Fernando S.
Tuliao and Tulmar Trading Corporation.
On September 4, 1985, petitioner asked the Labor Arbiter to annul the sale and to enjoin the
sheriff from disposing of the proceeds of the sale or, in the alternative, to remit them to the
Bureau of Internal Revenue so that the amount could be applied to the payment of private
respondent Maritime Company's tax liabilities.
In an order dated September 30, 1985, Labor Arbiter Ceferina Diosana denied the motion on the
ground that petitioner Commissioner of Internal Revenue failed to show that the barges which
were levied upon in execution and sold at public auction had been validly placed under
constructive distraint. 6 The Labor Arbiter likewise rejected petitioner's contention that the
government's claim for taxes was preferred under Art. 2247, in relation to Art. 2241(1) of the
Civil Code, on the ground that under this provisions only taxes and fees which are due on
specific movables enjoy preference, whereas the taxes claimed by petitioner were not due on the
four barges in question.
The order was appealed to the NLRC, which in resolution dated April 4, 1986, affirmed the
denial of the Internal Revenue Commissioner's motion. Hence this petition for certiorari.

For reasons to be presently stated, the petition is granted.

The National Internal Revenue Code provides for the collection of delinquent taxes by any of the
following remedies: (a) distraint of personal property or levy of real property of the delinquent
taxpayer and (b) civil or criminal action.
With respect to the four barges in question, petitioner resorted to constructive distraint pursuant
to 303 (now 206) of the NLRC. This provisions states:
Constructive distraint of the property of a taxpayer. To safeguard the interest
of the Government, the Commissioner of Internal Revenue may place under
constructive distraint the property of a delinquent taxpayer or any taxpayer who,
in his opinion, is retiring from any business subject to tax, or intends to leave the
Philippines, or remove his property therefrom, or hide or conceal his property, or
perform any act tending to obstruct the proceedings, for collecting the tax due or
which may be due from him.
The constructive distraint of personal property shall be effected by requiring the
taxpayer or any person having possession or control of such property to sign a
receipt covering the property distrained and obligate himself to preserve the same
intact and unaltered and not to dispose of the same in any manner whatever
without the express authority of the Commissioner of Internal Revenue.
In case the taxpayer or the person having the possession and control of the
property sought to be placed under constructive distraint refuses or fails to sign
the receipt herein referred to, the revenue officer effecting the constructive
distraint shall proceed to prepare a list of such property and in the presence of two
witnesses leave a copy thereof in the premises where the property distrained is
located, after which the said property shall be deemed to have been placed under
constructive distraint..
Although the warrant of distraint in this case had been issued earlier (January 23,1985) than the
levy on execution in the labor case on July 20, 1985, the Labor Arbiter nevertheless held that
there was no valid distraint of personal property on the ground that the receipt of property
distrained had not been signed by the taxpayer as required above. In her order, which the NLRC
affirmed in toto, the Labor Arbiter said:
It is claimed by the Commissioner of the Internal Revenue that on January 23,
1984, he issued a warrant of distraint of personal property on respondent to satisfy
the collection of the deficiency taxes in the aggregate sum of P17,284,882.45 and
a copy of said warrant was served upon Maritime Company on January 28, 1985

and pursuant to the warrant, the Commissioner, through Revenue Seizure Agent
Roland L. Bombay, issued on April 16, 1985, to Maritime Company a receipt for
goods, articles and things seized pursuant to authority granted to him under the
National Internal Revenue Code. Such personal properties seized includes, among
others, "Six (6) units of barges MCI-6 . . . " However, his own receipts for goods
attached to his motions does not show that it was received by Maritime; neither
does it show any signature of any of Maritime's Officers.
Apart from the foregoing, in his affidavit of 11 September 1985, Sheriff Cachero
stated that before he sold the subject four barges at public auction, he conducted
an investigation on the ownership of the said four barges. In brief, he found out
that the said four barges were purchased by respondent through Makati Leasing
and that the whole purchase price has been paid by respondent. In fact, the
corresponding deed of sale has already been signed. He did not find any lien or
encumbrance on any of the said four barges. Thus it cannot be true that the
Commissioner effected a valid warrant of distraint of personal property on the
four barges in question. 7
However, this case arose out of the same facts involved in Republic v. Enriquez, 8 in which we
sustained the validity of the distraint of the six barges, which included the four involved in this
case, against the levy on execution made by another deputy sheriff of Manila in another case
filed against Maritime Company. Two barges (MCP-1 and MCP-4) were the subject of a levy in
the case. There we found that the "Receipt for Goods, Articles and Things Seized under
Authority of the National Internal Revenue Code" covering the six barges had been duly
executed, with the Headquarters, First Coast Guard District, Farola Compound Binondo, Manila
acknowledging receipt of several barges, vehicles and two (2) bodegas of spare parts belonging
to Maritime Company of the Philippines.
Apparently, what had been attached to the petitioner's motion filed by the government with the
Labor Arbiter in this case was a copy, not the original one showing the rubber stamp of the Coast
Guard and duly signed by its representative. A xerox copy of this signed receipt was submitted in
the prior case. 9 This could be due to the fact that, except for Solicitor Erlinda B. Masakayan, the
government lawyers who prepared the petition in the prior case were different from those who
filed the present petition. They admitted that the receipt of property distrained had not been
signed by the taxpayer or person in possession of the taxpayer's property allegedly because they
had refused to do so. What apparently they did not know is that the receipt had been
acknowledged by the Coast Guard which obviously had the barges in its possession.
In addition to the receipt duly acknowledged by the Coast Guard, the record of the prior case also
shows that on October 4, 1985, the Commissioner of the Internal Revenue issued a "Notice of
Seizure of Personal Property" stating that the goods and chattels listed on its reverse side, among

which were the four barges (MCP-2, MCP-3, MCP-5, and MCP-6), had been distrained by the
Commissioner of Internal Revenue. 10
The "Notice of Seizure of Personal Property," a copy of which was received by Atty. Redentor R.
Melo in behalf of Maritime Company of the Philippines, together with the receipt of the Coast
Guard, belies the claim of respondent deputy sheriff that when he levied upon the four barges
there was no indication that the barges had previously been placed under distraint by the
Commissioner of Internal Revenue.
Accordingly, what we said in the prior case 11 in upholding the validity of distraint of two of the
six barges (MCP Nos. 1 and 4), fully applies in this case:
It is settled that the claim of the government predicated on a tax lien is superior to
the claim of a private litigant predicated on a judgment. The tax lien attaches not
only from the service of the warrant of distraint of personal property but from the
time the tax became due and payable. Besides, the distraint on the subject
properties of the Maritime Company of the Philippines as well as the notice of
their seizure were made by petitioner, through the Commissioner of the Internal
Revenue, long before the writ of the execution was issued by the Regional Trial
Court of Manila, Branch 31. There is no question then that at the time the writ of
execution was issued, the two (2) barges, MPC-1 and MCP-4, were no longer
properties of the Maritime Company of the Philippines. The power of the court in
execution of judgments extends only to properties unquestionably belonging to
the judgment debtor. Execution sales affect the rights of the judgment debtor only,
and the purchaser in an auction sale acquires only such right as the judgment
debtor had at the time of sale. It is also well-settled that the sheriff is not
authorized to attach or levy on property not belonging to the judgment debtor.
Nor is there any merit in the contention of the NLRC that taxes are absolutely preferred claims
only with respect to movable or immovable properties on which they are due and that since the
taxes sought to be collected in this case are not due on the barges in question the government's
claim cannot prevail over the claims of employees of the Maritime Company of the Philippines
which, pursuant to Art. 110 of the Labor Code, "enjoy first preference."
In Republic v. Peralta 12 this Court rejected a similar contention. Through Mr. Justice Feliciano
we held:
. . . [T]he claim of the Bureau of Internal Revenue for unpaid tobacco inspection
fees constitutes a claim for unpaid internal revenue taxes which gives rise to a tax
lien upon all the properties and assets, movable or immovable, of the insolvent as
taxpayer. Clearly, under Articles 2241 No. 1, 2242 No. 1, and 2246-2249 of the

Civil Code, this tax claim must be given preference over any other claim of any
other creditor, in respect of any and all properties of the insolvent.
xxx xxx xxx
Article 110 of the Labor Code does not purport to create a lien in favor of workers
or employees for unpaid wages either upon all of the properties or upon any
particular property owned by their employer. Claims for unpaid wages do not
therefore fall at all within the category of specially preferred claims established
under Articles 2241 and 2242 of the Civil Code, except to the extent that such
claims for unpaid wages are already covered by Article 2241, number 6: "claims
for laborer's wages, on the goods manufactured or the work done," or by Article
2242, number 3: "claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and other works, upon
said buildings, canals or other works." To the extent that claims for unpaid wages
fall outside the scope of Article 2241, number 6 and 2242, number 3, they would
come with the ambit of the category of ordinary preferred credits under Article
2244.
Applying Article 2241, number 6 to the instant case, the claims of the Unions for
separation pay of their members constitute liens attaching to the processed leaf
tobacco, cigars and cigarettes and other products produced or manufactured by the
Insolvent, but not to other assets owned by the Insolvent. And even in respect of
such tobacco and tobacco products produced by the Insolvent, the claims of the
Unions may be given effect only after the Bureau of Internal Revenue's claim for
unpaid tobacco inspection fees shall have been satisfied out of the products so
manufactured by the Insolvent.
Article 2242, number 3, also creates a lien or encumbrance upon a building or
other real property of the Insolvent in favor of workmen who constructed or
repaired such building or other real property. Article 2242, number 3, does not
however appear relevant in the instant case, since the members of the Unions to
whom separation pay is due rendered services to the Insolvent not (so far as the
record of this case would show) in the construction or repair of buildings or other
real property, but rather, in the regular course of the manufacturing operations of
the Insolvent. The Unions' claims do not therefore constitute a lien or
encumbrance upon any immovable property owned by the insolvent, but rather, as
already indicated, upon the Insolvent's existing inventory (if any) of processed
tobacco and tobacco products.

In addition, we have held 13 that Art. 110 of the Labor Code applies only in case of bankruptcy or
judicial liquidation of the employer. This is clear from the text of the law.
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy
or liquidation of an employer's business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claims
to a share in the assets of the employer.
This case does not involve the liquidation of the employer's business.
WHEREFORE, the petition for certiorari is GRANTED and the resolution dated April 4, 1986
of respondent NLRC in NLRC Case No. NCR-12-4233-84 is SET ASIDE insofar as it denies the
government's claim for taxes, and respondent deputy sheriff Carmelo V. Cachero or his successor
is ORDERED to remit the proceeds of the auction sale to the Bureau of Internal Revenue to be
applied as part payment of respondent Maritime Company's tax liabilities.
SO ORDERED.
Narvasa, C.J., Regalado and Puno, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 96149 February 16, 1994

CONCHITA S. HAUTEA, in Substitution of JOSE H. HAUTEA (Deceased), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ASSET PRIVATIZATION TRUST
AND PHILIPPINE NATIONAL BANK, respondents.
Eugenio S. Hautea and Salvador A. Altura, Jr. for petitioners.
Jose M. Suratos, Jr. for Asset Privatization Trust.

NOCON, J.:
Petitioner entreats this Court to nullify the decision dated August 13, 1990 of respondent
National Labor Relations Commission (NLRC) in Injunction cases Nos. 1457 and 1469, entitled
"Asset Privatization Trust/Philippine National Bank v. Jose Hautea and Rodolfo G. Layoc,
Executive Labor Arbiter, Arbitration Branch, Region IV, NLRC, Iloilo City."
The questioned decision annulled the decision dated March 12, 1987 of the Labor Arbiter in
RAB Case No. VI-0007-87 which ordered Calinog-Lambunao Sugar Mill, Inc. (CLSM) to pay
Jose H. Hautea separation pay/retirement benefits, moral damages and attorney's fees amounting
to P276,000.00, insofar as said Labor Arbiter's decision affected Philippine National Bank
(PNB). The questioned decision of the NLRC also ordered the writ of execution issued on April
23, 1987 and the order of the Labor Arbiter dated May 22, 1987 vacated and set aside and the
levy on the properties of PNB lifted.
Petitioner imputes grave abuse of discretion on the part of public respondent in annulling the
decision of the labor arbiter insofar as it affected PNB on the grounds that PNB, though
impleaded as party-respondent was never properly served with summons and that no execution

can be maintained against the properties foreclosed by PNB pursuant to the case of Development
Bank of the Philippines v. NLRC. 1
The facts show that on January, 1967, Jose Hautea was hired by the Calinog-Lambunao
Sugarmill, Inc. (CLSMI). In December, 1984, he retired from his employment with CLSMI. On
December 2, 1986, the PNB extrajudicially foreclosed the real and personal mortgaged to it by
CLSMI and at the auction sale it was the sole bidder.
On January 12, 1987, Jose Hautea filed with the public respondent a complaint for separation
pay/retirement benefits against CLSMI and/or PNB. On January 29, 1987, the complaint was
amended to include damages and attorney's fees. The respondents CLSMI and/or PNB were
furnished with copies of the complaint and amended complaint through CLSMI at its offices at
Calinog, Iloilo. All notices of hearing were likewise sent to CLSMI at its offices. For failure to
appear during the scheduled hearings, CLSMI and PNB were declared in default.
On February 27, 1987, the properties of CLSMI foreclosed by PNB were transferred and
assigned in favor of the Government of the Republic of the Philippines thru the Asset
Privatization Trust (APT), by virtue of Proclamation No. 50, as amended, and the Deed of
Transfer.
On March 12, 1987, the Labor Arbiter rendered a decision in favor of Jose Hautea and against
CLSMI and PNB. On April 1, 1987, copy of the decision was sent to CLSMI and PNB at the
offices of CLSMI in Calinog, Iloilo.
On April 20, 1987, Jose Hautea filed a motion for execution. Acting on the motion, the Labor
Arbiter issued on April 23, 1987 the necessary writ of execution. Sheriff Adorico Dadivas levied
on the property of CLSMI worth more or less P1,500,000.00 which APT/PNB acquired through
foreclosure of mortgage.
On May 5, 1987, the APT filed a third party claim with the Labor Arbiter, and later joined PNB
in a petition for relief with application for preliminary injunction originally filed with the Labor
Arbiter and later elevated to the NLRC (4th Division) at Cebu City.
On July 31, 1987, Jose Hautea died and he was substituted by his wife, Conchita S. Hautea,
petitioner herein.
In a Decision 2 dated August 13, 1990, respondent NLRC found for APT and PNB. The
dispositive portion of decision reads:
WHEREFORE, in view of all the foregoing, the petition to annul the decision in
RAB CASE No. VI-0007-87 insofar as it affects petitioner Philippine National
Bank is GRANTED and the decision in said case is MODIFIED accordingly. The

Writ of Execution issued on April 23, 1987 and the Order of the Labor Arbiter
dated May 22, 1987 are VACATED and SET ASIDE. The levy on the properties
of petitioner pursuant to the Writ of Execution is lifted.
SO ORDERED. 3
On September 21, 1990, Conchita S. Hautea filed a motion for reconsideration which was denied
on October 29, 1990.
Aggrieved, petitioner comes to us and raises the following issues:
I. WHETHER OR NOT THE RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION ERRED IN APPLYING
STRICTLY THE PROVISION OF THE RULES OF COURT ON THE SERVICE
OF SUMMONS TO THE DETRIMENT OF THE INTEREST OF
EXPEDITIOUS LABOR JUSTICE, PRACTICABILITY AND CONVENIENCE.
II. WHETHER OR NOT THE RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION ERRED IN HOLDING THAT
JOSE H. HAUTEA CANNOT LIKEWISE CLAIM COVERAGE UNDER
SECTION 27 OF PROCLAMATION NO. 50 BECAUSE AS SPECIFICALLY
PROVIDED UNDER SECTION 27 OF SAID PROCLAMATION WORK
RELATED BENEFITS WILL ONLY BE EXTENDED TO EMPLOYEES OF
COMPANIES WHO ARE OR WILL BE TERMINATED FROM
EMPLOYMENT BY REASON OF SALE OR DISPOSITION OF THE
COMPANIES' ASSETS. 4
In setting aside the decision of the Labor Arbiter, public respondent held that PNB was not
properly served with summons, hence, it cannot be held liable for the claim of Jose H. Hautea.
The question of validity of the service of summons of PNB is, however, immaterial. An
examination of the dispositive portion of the Labor Arbiter's decision shows that PNB has not
been adjudged to pay the judgment debt, to wit:
WHEREFORE, premises considered, respondent Calinog-Lambunao Sugarmill,
Inc. is hereby ordered to pay herein complainant the amount of P126,000.00 as
separation pay, P125,000.00 as moral damages and P25,000.00 as attorney's fees.
SO ORDERED. 5
Although PNB was impleaded as party respondent, it was not held liable for the claim of Jose H.
Hautea. Correctly so, because it was not the employer of Hautea. It was dragged into the case
because it has in its possession, property of the employer CLSMI which it had acquired through

foreclosure of mortgage. Thus, as pointed out by the Solicitor General, its liability attached
through the levy on the property which it had foreclosed. In this regard, the validity of the
decision of the public respondent nullifying the decision of the Labor Arbiter based on the
jurisdictional defect of lack of summons need not be discussed.
The second issue raises the question of whether the public respondent erred in not holding that
Jose H. Hautea can claim coverage under Section 27 of Proclamation No. 50, which provides:
Sec. 27. Automatic Termination of Employer-Employee Relations. Upon the sale
or other disposition of the ownership and/or controlling interest of the government
in a corporation held by the Trust, or all or substantially all of the assets of such
corporation, the employer-employee relations between the government and other
offices and the personnel of such corporations shall terminate by operation of law.
None of such officers or employees shall retain any vested right to future
employment in the privatized or disposed corporation, and the new owners or
controlling interest holders thereof shall have full and absolute discretion to retain
or dismiss said officers and employees and to hire the replacement or
replacements of any one or all of them as the pleasure and confidence of such
owners or controlling interest holders may dictate.
Nothing in this section shall, however, be construed to deprive said officers and
employees of their vested entitlements in accrued or due compensation and other
benefits incident to their employment or attaching to termination under applicable
employment contracts, collective bargaining agreements, and applicable
legislation.
Clearly evident is that the foregoing provision speaks of entitlement to employment benefits of
officers and employees of government corporations whose employment is terminated when the
corporations are transferred to the Asset Privatization Trust. It does not support petitioner's
submission that the award of employment benefits in her husband's favor can be satisfied from
the properties of the corporation subject to a lien superior to that of the workers' preference of
credit. Nevertheless, the question whether Jose H. Hautea is entitled to the benefits he had
claimed is now beyond question. The judgment ordering CLSMI to pay him separation pay had
become final and the only problem at hand is the enforcement of said judgment.
Thus, the relevant issue in this case is whether said judgment can be enforced against APT/PNB
as mortgagee of the foreclosed properties of CLSMI.
Article 110 of the Labor Code, prior to its amendment by Republic Act No. 6715 reads:

Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy

or liquidation of an employer's business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claim
to a share in the assets of the employer.
As amended by Republic Act 6715, Article 110 now reads:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy
or liquidation of an employer's business, his workers shall enjoy first preference
as regards their unpaid wages and other monetary claims, any provision of law to
the contrary notwithstanding. Such unpaid wages and monetary claims shall be
paid in full before the claims of the Government and other creditors may be paid.
In the 1990 Development Bank of the Philippines v. NLRC case (supra) involving the former
employees of Lirag Textile Mills, Inc., this Court, En Banc, noted that the amendment expands
worker preference to cover not only unpaid wages but also other monetary claims to which even
claims of the Government must be deemed subordinate. Despite the elimination of the terms
"declaration" of bankruptcy or "judicial" liquidation, this Court opined that liquidation
proceedings have not been done away with. In the event of insolvency, there must be some
proceedings where notice to all of the insolvent's creditors may be given and where the claims of
preferred creditors may be bindingly adjudicated.
This Court emphasized therein that DBP's lien on Lirag's properties, being a mortgage credit, is a
special preferred credit under Article 2241 of the Civil Code while the workers' preference is an
ordinary preferred credit, to wit:
. . . A mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted (Article 2176, Civil Code). It creates a real right
which is enforceable against the whole world. It is a lien on an identified
immovable property, which a preference is not.
A recorded mortgage credit is a special preferred credit under Article 2242(5) of
the Civil Code on classification of credits. The preference given by Article 110,
when not falling within Article 2241(6) and Article 2242(3) of the Civil Code and
not attached to any specific property, is an ordinary preferred credit although its
impact is to move it from second priority to first in the order of preference
established by Article 2244 of the Civil Code (Republic vs. Peralta, supra). 6

In the 1993 Development Bank of the Philippines v. NLRC case 7 involving claims for separation
pay of employees of Republic Hardwood, Inc., the Third Division of this Court also emphasized
that DBP's lien on
Republic Hardwood, Inc.'s mortgage credit is a special preferred credit under Article 2242 of the
Civil Code while the workers' preference is an ordinary preferred credit under Article 2242.
While the decision had expressed that under the new Article 110 of the Labor Code, even
mortgage credits are subordinate to worker's claims, the statement, however, was merely
anobiter. Furthermore,
RA 6715 amending Article 110 took effect only on March 21, 1989. The amendment cannot,
therefore, be retroactively applied to, nor can it affect, the mortgage credit which was secured by
the petitioner several years prior to its effectivity. In the 1990 Development Bank of the
Philippines v. NLRC case, this Court enunciated the prospective application of the law, to wit:
Even if Article 110 and its Implementing Rule, as amended, should be interpreted
to mean "absolute preference", the same should be given only prospective effect
in line with the cardinal rule that laws shall have no retroactive effect, unless the
contrary is provided (Article 4, Civil Code). Thereby, any infringement on the
constitutional guarantee on
non-impairment of the obligation of contracts (Section 10, Article III, 1987
Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by
several years the amendatory law, RA No. 6715. To give Article 110 retroactive
effect would be to wipe out the mortgage in DBP's favor and expose it to risk
which it sought to protect itself against by requiring a collateral in the form of real
property. 8
Considering that in the case at bar, PNB had extrajudicially foreclosed the properties of
CLSMI on December 2, 1986, it is evident that the
mortgage credit of PNB also antedated by several years the amendatory law, RA No.
6715 which became effective on March 21, 1989.
WHEREFORE, in view of the foregoing reasons, the questioned decision of public respondent
National Labor Relations Commission is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Feliciano, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason and
Vitug, JJ., concur.
Kapunan, J., took no part.

Separate Opinions
CRUZ, J., dissenting:
I dissent for the reasons given in my dissents in Republic v. Peralta, 150 SCRA 37,
and Development Bank of the Philippines v. NLRC, 183 SCRA 328, where I submitted, as I still
do, that the Labor Code gives absolute preference to the worker's claims pursuant to the social
justice policy.
PADILLA, J., dissenting:
The majority opinion would deny the right of petitioner Conchita S. Hautea to enjoy her
husband's earned benefits from his employer by ruling that petitioner has no right to CSLMI's
assets superior to the preferred credit of private respondents. The majority has opted to follow
the Court's 1990 DBP ruling 1 and refuses to recognize the absolute preference of workers' claims
to unpaid wages and monetary benefits, established by Republic Act No. 6715 in amending
Article 110 of the Labor Code.
I, therefore, reiterate my dissenting opinion delivered in said DBP case. For reasons stated in said
dissent, the workers' claims should not have been relegated then; it should not again be relegated
now because
1. The distinction made between a preference of credit and a lien does not, in my view, negate the
clear intent of the law (Rep. Act No. 6715) in giving absolute preference to unpaid wages and
other monetary claims of workers over all other claims including those of the Government.
It should be recalled that Article 110 of the Labor Code as amended by Republic Act No. 6715
states:
Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an the event of bankruptcy or liquidation of an employer's business,
his workers shall enjoy first preference as regards their wages and other monetary
claims, any provisions of law to the contrary notwithstanding. Such unpaid wages
and monetary claims shall be paid in full before claims of the government and
other creditors may be paid. (Emphasis supplied)
It is to be noted that the law gives absolute preference to workers' claims for unpaid wages and
monetary benefits, subordinating even claims of the government. The clear legislative intent is to
give life to Article II, Section 18 of the Constitution which protects the rights of workers and
promotes their welfare.

2. Neither can the argument in the DBP case that a mortgage credit is a "special preferred credit"
under Article 2242(5) of the Civil Code be used to support the conclusion of the majority, for the
law expressly and unqualifiedlystates that workers' claims are given first preference over all other
claims, any provision of law to the contrary notwithstanding. This, to me, is the only logical
interpretation that can be made from the letter, intent and spirit of the law and the Constitution.
To give any claim other than those of workers first preference would plainly violate that letter,
intent and spirit of the law and the Constitution.
3. That Republic Act No. 6715 which amended Article 110 of the Labor Code cannot be applied
retroactively provides no argument, in my opinion, for denying the execution the execution of
the judgment in favor of petitioner Hautea.
It should be stressed that Jose Hautea retired from his employment with CLSMI in December
1984 after almost twenty (20) years of service. Hautea, therefore, from the time he retired,
acquired the right to receive retirement benefits and separation pay from CLSMI. This was two
(2) years before PNB foreclosed the properties of CLSMI. It does not appear that it was through
Hautea's fault that he failed to receive the benefits before PNB foreclosed on CLSMI's
properties. On the contrary, the filing of the complaint for separation pay/retirement benefits with
the labor arbiter on 12 January 1987 indicates that it was CLSMI which failed or refused to pay
the retirement benefits after more than two (2) years. Thus, even without the benefit of the
amendment to Article 110 introduced by Republic Act No. 6715, the claim of petitioner Hautea
would still enjoy preference. The amendment of Article 110 giving the claims of workers
absolute preference only reinforces the argument that Hautea should be allowed to claim against
the Asset Privatization Trust (APT).
I, therefore, vote to GRANT petitioner Hautea's claim for her husband's unpaid benefits earned
during his employment with CLSMI.
# Separate Opinions
CRUZ, J., dissenting:
I dissent for the reasons given in my dissents in Republic v. Peralta, 150 SCRA 37,
and Development Bank of the Philippines v. NLRC, 183 SCRA 328, where I submitted, as I still
do, that the Labor Code gives absolute preference to the worker's claims pursuant to the social
justice policy.
PADILLA, J., dissenting:
The majority opinion would deny the right of petitioner Conchita S. Hautea to enjoy her
husband's earned benefits from his employer by ruling that petitioner has no right to CSLMI's

assets superior to the preferred credit of private respondents. The majority has opted to follow
the Court's 1990 DBP ruling 1 and refuses to recognize the absolute preference of workers' claims
to unpaid wages and monetary benefits, established by Republic Act No. 6715 in amending
Article 110 of the Labor Code.
I, therefore, reiterate my dissenting opinion delivered in said DBP case. For reasons stated in said
dissent, the workers' claims should not have been relegated then; it should not again be relegated
now because
1. The distinction made between a preference of credit and a lien does not, in my view, negate the
clear intent of the law (Rep. Act No. 6715) in giving absolute preference to unpaid wages and
other monetary claims of workers over all other claims including those of the Government.
It should be recalled that Article 110 of the Labor Code as amended by Republic Act No. 6715
states:
Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an the event of bankruptcy or liquidation of an employer's business,
his workers shall enjoy first preference as regards their wages and other monetary
claims, any provisions of law to the contrary notwithstanding. Such unpaid wages
and monetary claims shall be paid in full before claims of the government and
other creditors may be paid. (Emphasis supplied)
It is to be noted that the law gives absolute preference to workers' claims for unpaid wages and
monetary benefits, subordinating even claims of the government. The clear legislative intent is to
give life to Article II, Section 18 of the Constitution which protects the rights of workers and
promotes their welfare.
2. Neither can the argument in the DBP case that a mortgage credit is a "special preferred credit"
under Article 2242(5) of the Civil Code be used to support the conclusion of the majority, for the
law expressly and unqualifiedlystates that workers' claims are given first preference over all other
claims, any provision of law to the contrary notwithstanding. This, to me, is the only logical
interpretation that can be made from the letter, intent and spirit of the law and the Constitution.
To give any claim other than those of workers first preference would plainly violate that letter,
intent and spirit of the law and the Constitution.
3. That Republic Act No. 6715 which amended Article 110 of the Labor Code cannot be applied
retroactively provides no argument, in my opinion, for denying the execution the execution of
the judgment in favor of petitioner Hautea.

It should be stressed that Jose Hautea retired from his employment with CLSMI in December
1984 after almost twenty (20) years of service. Hautea, therefore, from the time he retired,
acquired the right to receive retirement benefits and separation pay from CLSMI. This was two
(2) years before PNB foreclosed the properties of CLSMI. It does not appear that it was through
Hautea's fault that he failed to receive the benefits before PNB foreclosed on CLSMI's
properties. On the contrary, the filing of the complaint for separation pay/retirement benefits with
the labor arbiter on 12 January 1987 indicates that it was CLSMI which failed or refused to pay
the retirement benefits after more than two (2) years. Thus, even without the benefit of the
amendment to Article 110 introduced by Republic Act No. 6715, the claim of petitioner Hautea
would still enjoy preference. The amendment of Article 110 giving the claims of workers
absolute preference only reinforces the argument that Hautea should be allowed to claim against
the Asset Privatization Trust (APT).
I, therefore, vote to GRANT petitioner Hautea's claim for her husband's unpaid benefits earned
during his employment with CLSMI.
#Footnotes
1 G.R. Nos. 82-763-64, 183 SCRA 328 (1990).
2 Penned by Presiding Commissioner Ernesto G. Ladrido III and Commissioners
Irenea E. Ceniza and Bernabe S. Batuhan.

THIRD DIVISION
ABUNDIO BARAYOGA and G.R. No. 160073
BISUDECO-PHILSUCOR
CORFARM WORKERS UNION Present:
(PACIWU CHAP-TPC),
Petitioners, Panganiban, J., Chairman,
Sandoval-Gutierrez,
Corona,
- versus - Carpio Morales, and

Garcia, JJ
ASSET PRIVATIZATION Promulgated:
TRUST,*
Respondent. October 24, 2005

x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- -- -- x
DECISION
PANGANIBAN, J.:
Responsibility for the liabilities of a mortgagor towards its employees cannot be transferred via
an auction sale to a purchaser who is also the mortgagee-creditor of the foreclosed assets and
chattels. Clearly, the mortgagee-creditor has no employer- __________________
* The Privatization and Management Office has succeeded APT. Comment, p. 1; rollo, p. 480.
employee relations with the mortgagors workers. The mortgage constitutes a lien on the
determinate properties of the employer-debtor, because it is a specially preferred credit to
which the workers monetary claims is deemed subordinate.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the
January 30, 2003 Decision[2] and the August 27, 2003 Resolution[3]of the Court of Appeals (CA),
in CA-GR SP No. 58813. The disposition or fallo of the questioned Decision reads as follows:

IN VIEW OF ALL THE FOREGOING, the instant petition

is GRANTED and the assailed NLRC Decision dated February 18, 2000 is
hereby RECALLED and SET ASIDE insofar as herein petitioner APT is
concerned. No cost.[4]

The reversed Decision[5] of the National Labor Relations Commission

(NLRC) disposed as follows:
WHEREFORE, premises considered, the decision appealed from is AFFIRMED with
modifications as follows:
1. Complainants are awarded their monetary claims for
underpayment of salaries and payment of allowances per their
computation on pp. 97-99 and 142-144 of the records;
2. Complainants are declared to have been illegally
dismissed and should be paid their backwages from 01 May 1991
to 30 October 1992.[6]
The challenged August 27, 2003 Resolution denied petitioners Motion for
Reconsideration.
The Facts
The CA summarized the antecedents in this portion of its Decision, which we quote:
Bisudeco-Philsucor Corfarm Workers Union is composed of workers of
Bicolandia Sugar Development Corporation (BISUDECO), a sugar plantation
mill located in Himaao, Pili, Camarines Sur.

On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a

public trust was created under Proclamation No. 50, as amended, mandated to
take title to and possession of, conserve, provisionally manage and dispose of
non-performing assets of the Philippine government identified for privatization or
disposition.

Pursuant to Section 23 of Proclamation No. 50, former President Corazon

Aquino issued Administrative Order No. 14 identifying certain assets of
government institutions that were to be transferred to the National Government.
Among the assets transferred was the financial claim of the Philippine National

Bank against BISUDECO in the form of a secured loan. Consequently, by virtue

of a Trust Agreement executed between the National Government and APT on
February 27, 1987, APT was constituted as trustee over BISUDECOs account
with the PNB.

Sometime later, on August 28, 1988, BISUDECO contracted the services

of Philippine Sugar Corporation (Philsucor) to take over the management of the
sugar plantation and milling operations until August 31, 1992.

Meanwhile, because of the continued failure of BISUDECO to pay its

outstanding loan with PNB, its mortgaged properties were foreclosed and
subsequently sold in a public auction to APT, as the sole bidder. On April 2, 1991,
APT was issued a Sheriffs Certificate of Sale.

On July 23, 1991, the union filed a complaint for unfair labor practice,
illegal dismissal, illegal deduction and underpayment of wages and other labor
standard benefits plus damages.

In the meantime, on July 15, 1992, APTs Board of Trustees issued a

resolution accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to
buy the sugar plantation and mill. Again, on September 23, 1992, the board
passed another resolution authorizing the payment of separation benefits to
BISUDECOs employees in the event of the companys privatization. Then, on
October 30, 1992, BAPCI purchased the foreclosed assets of BISUDECO from
APT and took over its sugar milling operations under the trade name Peafrancia
Sugar Mill (Pensumil).

On December 17, 1992, the union filed a similar complaint, later to be

consolidated with its earlier complaint and docketed as RAB V Case No. 0700184-91.

On March 2, 1993, it filed an amended complaint, impleading as

additional party respondents APT and Pensumil.

In their Position Paper, the union alleged that when Philsucor initially took
over the operations of the company, it retained BISUDECOs existing personnel
under the same terms and conditions of employment. Nonetheless, at the start of
the season sometime in May 1991, Philsucor started recalling workers back to
work, to the exception of the union members. Management told them that they
will be re-hired only if they resign from the union. Just the same, thereafter, the
company started to employ the services of outsiders under the pakyaw system.

BISUDECO, Pensumil and APT all interposed the defense of lack of

employer-employee relationship.
xxxxxxxxx
After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T.
Aurellano disposed as follows:
WHEREFORE, premises considered, respondent APT is hereby
ordered to pay herein complainants of the mandated employment
benefits provided for under Section 27 of Proclamation No. 50
which benefits had been earlier extended to other employees
similarly situated.
SO ORDERED.
Both the union and APT elevated the labor arbiters decision before
NLRC.

[7]

The NLRC affirmed APTs liability for petitioners money claims. While
no employer-employee relationship existed between members of the petitioner
union and APT, at the time of the employees illegal dismissal, the assets of
BISUDECO had been transferred to the national government through APT.
Moreover, the NLRC held that APT should have treated petitioners claim as a lien
on the assets of BISUDECO. The Commission opined that APT should have done
so, considering its awareness of the pending complaint of petitioners at the time
BISUDECO sold its assets to BAPCI, and APT started paying separation pay to
the workers.

Finding their computation to be in order, the NLRC awarded to petitioners their money claims
for underpayment, labor-standard benefits, and ECOLA. It also awarded them their back wages,
computed at the prevailing minimum wage, for the period May 1, 1991 (the date of their illegal
dismissal) until October 30, 1992 (the sale of BISUDECO assets to the BAPCI). On the other
hand, the NLRC ruled that petitioners were not entitled to separation pay because of the huge
business losses incurred by BISUDECO, which had resulted in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of
Court.
Ruling of the Court of Appeals
The CA ruled that APT should not be held liable for petitioners claims for unfair labor practice,
illegal dismissal, illegal deduction and underpayment of wages, as well as other labor-standard
benefits plus damages. As found by the NLRC, APT was not the employer of petitioners, but was
impleaded only for possessing BISUDECOs mortgaged properties as trustee and, later, as the
highest bidder in the foreclosure sale of those assets.
Citing Batong Buhay Gold Mines v. Dela Serna,[8] the CA concluded that petitioners
claims could not be enforced against APT as mortgagee of the foreclosed properties of
BISUDECO.
Hence, this Petition.[9]
Issues
In their Memorandum, petitioners raise the following issues for our consideration:

I. Whether or not the Court of Appeals erred in ruling that Respondent Asset
Privatization Trust (APT) should not be held liable for the petitioner unions claim for
unfair labor practice, illegal dismissal, illegal deduction and underpayment of wages and
other labor standard benefits plus damages.
II. Whether or not the claims of herein petitioners cannot be enforced against APT/PNB
as mortgagee of the foreclosed properties of BISUDECO.
III. Whether or not the entitlement of petitioners upon their claims against Respondent
APT is recognized under the law.[10]
In brief, the main issue raised is whether Respondent APT is liable for petitioners
monetary claims.
The Courts Ruling
The Petition has no merit.
Main Issue:
Whether APT Is Liable for the Claims of
Petitioners Against Their Former Employer
It should be stressed at the outset that, pursuant to Administrative Order No. 14, Series
of 1987,[11] PNBs assets, loans and receivables from its borrowers were transferred to APT as
trustee of the national government. Among the liabilities transferred to APT was PNBs financial
claim against BISUDECO, not the latters assets and chattel. Contrary to petitioners assertions,
BISUDECO remained the owner of the mortgaged properties in August 1988, when the
Philippine Sugar Corporation (Philsucor) undertook the operation and management of the sugar
plantation until August 31, 1992, under a so-called Contract of Lease between the two
corporations. At the time, APT was merely a secured creditor of BISUDECO.[12]
It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO
because of the latters continued failure to pay outstanding loan obligations to PNB/APT. The

properties were sold at public auction to APT, the highest bidder, as indicated in the Sheriffs
Certificate of Sale issued on April 2, 1991. It was only in September 1992 (after the expiration of
the lease/management Contract with Philsucor in August 1992), however, when APT took over
BISUDECO assets, preparatory to the latters privatization.

In the present case, petitioner-unions members who were not recalled to work by
Philsucor in May 1991 seek to hold APT liable for their monetary claims and allegedly illegal
dismissal. Significantly, prior to the actual sale of BISUDECO assets to BAPCI on October 30,
1992, the APT board of trustees had approved a Resolution on September 23, 1992. The
Resolution authorized the payment of separation benefits to the employees of the corporation in
the event of its privatization. Not included in the Resolution, though, were petitioner-unions
members who had not been recalled to work in May 1991.
The question now before the Court is whether APT is liable to pay petitioners monetary
claims, including back wages from May 1, 1991, to October 30, 1992 (the date of the sale of
BISUDECO assets to BAPCI).
We rule in the negative. The duties and liabilities of BISUDECO, including its monetary
liabilities to its employees, were not all automatically assumed by APT as purchaser of the
foreclosed properties at the auction sale. Any assumption of liability must be specifically and
categorically agreed upon. In Sundowner Development Corp. v. Drilon,[13] the Court ruled that,
unless expressly assumed, labor contracts like collective bargaining agreements are not
enforceable against the transferee of an enterprise. Labor contracts are in personam and thus
binding only between the parties.

No succession of employment rights and obligations can be said to have taken place
between the two. Between the employees of BISUDECO and APT, there is no privity of contract
that would make the latter a substitute employer that should be burdened with the obligations of
the corporation. To rule otherwise would result in unduly imposing upon APT an unwarranted
assumption of accounts not contemplated in Proclamation No. 50 or in the Deed of Transfer
between the national government and PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or
substantially all, the properties of the seller or transferor is not obliged to absorb the latters
employees.[14] The most that the purchasing company may do, for reasons of public policy and
social justice, is to give preference of reemployment to the selling companys qualified separated
employees, who in its judgment are necessary to the continued operation of the business
establishment.[15]
In any event, the national government (in whose trust APT previously held the mortgage credits
of BISUDECO) is not the employer of petitioner-unions members, who had been dismissed
sometime in May 1991, even before APT took over the assets of the corporation. Hence, under
existing law and jurisprudence, there is no reason to expect any kind of bailout by the national
government.[16] Even the NLRC found that no employer-employee relationship existed between
APT and petitioners. Thus, the Commission gravely abused its discretion in nevertheless holding
that APT, as the transferee of the assets of BISUDECO, was liable to petitioners.
Petitioners also contend that in Central Azucarera del Danao v. Court of Appeals,[17] this
Court supposedly ruled that the sale of a business of a going concern does not ipso

facto terminate the employer-employee relations insofar as the successor-employer is concerned,

and that change of ownership or management of an establishment or company is not one of the
just causes provided by law for termination of employment[.][18]
A careful reading of the Courts Decision in that case plainly shows that it does not
contain the words quoted by counsel for petitioners. At this juncture, we admonish their
counsel[19] of his bounden duty as an officer of the Court to refrain from misquoting or
misrepresenting the text of its decisions.[20] Ever present is the danger that, if not faithfully and
exactly quoted, they may lose their proper and correct meaning, to the detriment of other courts,
lawyers and the public who may thereby be misled.[21]
In that case, contrary to the assertions of petitioners, the Court held as follows:
There can be no controversy for it is a principle well-recognized, that it is within the
employers legitimate sphere of management control of the business to adopt economic
policies or make some changes or adjustments in their organization or operations that
would insure profit to itself or protect the investment of its stockholders. As in the
exercise of such management prerogative, the employer may merge or consolidate its
business with another, or sell or dispose all or substantially all of its assets and properties
which may bring about the dismissal or termination of its employees in the process. Such
dismissal or termination should not however be interpreted in such a manner as to permit
the employer to escape payment of termination pay. x x x.
In a number of cases on this point, the rule has been laid down that the sale or disposition
must be motivated by good faith as an element of exemption from liability. Indeed, an
innocent transferee of a business establishment has no liability to the employees of the
transferor to continue employing them. Nor is the transferee liable for past unfair labor
practices of the previous owner, except, when the liability therefor is assumed by the new
employer under the contract of sale, or when liability arises because of the new owners
participation in thwarting or defeating the rights of the employees.[22] (Citations omitted.)
In other words, the liabilities of the previous owner to its employees are not enforceable
against the buyer or transferee, unless (1) the latter unequivocally assumes them; or (2)
the sale or transfer was made in bad faith. Thus, APT cannot be held responsible for the
monetary claims of petitioners who had been dismissed even before it actually took over
BISUDECOs assets.

Moreover, it should be remembered that APT merely became a transferee of BISUDECOs assets
for purposes of conservation because of its lien on those assets -- a lien it assumed as assignee of
the loan secured by the corporation from PNB. Subsequently, APT, as the highest bidder in the
auction sale, acquired ownership of the foreclosed properties.

Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act
No. 6715, which reads:
Article 110. Workers preference in case of bankruptcy. In the event of bankruptcy
or liquidation of the employers business, his workers shall enjoy first preference
as regards their unpaid wages and other monetary claims shall be paid in
full before the claims of the Government and other creditors may be paid.[23]

This Court has ruled in a long line of cases[24] that under Articles 2241 and 2242 of the
Civil Code, a mortgage credit is a special preferred credit that enjoys preference with respect to a
specific/determinate property of the debtor. On the other hand, the workers preference under
Article 110 of the Labor Code is an ordinary preferred credit. While this provision raises the
workers money claim to first priority in the order of preference established under Article 2244 of
the Civil Code, the claim has no preference over special preferred credits.

Thus, the right of employees to be paid benefits due them from the properties of their
employer cannot have any preference over the latters mortgage credit. In other words, being a
mortgage credit, APTs lien on BISUDECOs mortgaged assets is a special preferred lien that must
be satisfied first before the claims of the workers.

Development Bank of the Philippines v. NLRC[25] explained the rationale of this ruling as
follows:
x x x. A preference applies only to claims which do not attach to specific
properties. A lien creates a charge on a particular property. The right of first
preference as regards unpaid wages recognized by Article 110 does not constitute
a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method
adopted to determine and specify the order in which credits should be paid in the
final distribution of the proceeds of the insolvents assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor. x x x
Furthermore, workers claims for unpaid wages and monetary benefits cannot be
paid outside of a bankruptcy or judicial liquidation proceedings against the
employer.[26] It is settled that the application of Article 110 of the Labor Code is
contingent upon the institution of those proceedings, during which all creditors
are convened, their claims ascertained and inventoried, and their preferences
determined.[27] Assured thereby is an orderly determination of the preference
given to creditors claims; and preserved in harmony is the legal scheme of
classification, concurrence and preference of credits in the Civil Code, the
Insolvency Law, and the Labor Code.

The Court hastens to add that the present Petition was brought against APT alone. In
holding that the latter, which has never really been an employer of petitioners, is not liable for
their claims, this Court is not reversing or ruling upon their entitlement to back wages and other
unpaid benefits from their previous employer.
On the basis of the foregoing clarification, the Court finds no reversible error in the
questioned CA Decision, which set aside the February 8, 2000 Decision of the NLRC. As a mere
transferee of the mortgage credit and later as the purchaser in a public auction of BISUDECOs
foreclosed properties, APT cannot be held liable for petitioners claims against BISUDECO:
illegal dismissal, unpaid back wages and other monetary benefits.

WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.

SECOND DIVISION
REMINGTON INDUSTRIAL SALES G.R. Nos. 169295-96
CORPORATION,
Petitioner,
Present:
PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
- versus - CORONA,
AZCUNA, and
GARCIA, JJ.

Promulgated:
ERLINDA CASTANEDA,
Respondent. November 20, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
PUNO, J.:
Before this Court is the Petition for Review on Certiorari[1] filed by Remington Industrial
Sales Corporation to reverse and set aside the Decision[2] of the Fourth Division of the Court of
Appeals in CA-G.R. SP Nos. 64577 and 68477, dated January 31, 2005, which dismissed
petitioners consolidated petitions for certiorari, and its subsequent Resolution,[3] dated August
11, 2005, which denied petitioners motion for reconsideration.
The antecedent facts of the case, as narrated by the Court of Appeals, are as follows:
The present controversy began when private respondent, Erlinda
Castaneda (Erlinda) instituted on March 2, 1998 a complaint for illegal dismissal,
underpayment of wages, non-payment of overtime services, non-payment of
service incentive leave pay and non-payment of 13th month pay against
Remington before the NLRC, National Capital Region, Quezon City. The
complaint impleaded Mr. Antonio Tan in his capacity as the Managing Director of
Remington.
Erlinda alleged that she started working in August 1983 as company cook
with a salary of Php 4,000.00 for Remington, a corporation engaged in the trading
business; that she worked for six (6) days a week, starting as early as 6:00 a.m.
because she had to do the marketing and would end at around 5:30 p.m., or even
later, after most of the employees, if not all, had left the company premises; that
she continuously worked with Remington until she was unceremoniously
prevented from reporting for work when Remington transferred to a new site in
Edsa, Caloocan City. She averred that she reported for work at the new site
in Caloocan City on January 15, 1998, only to be informed that Remington no
longer needed her services. Erlinda believed that her dismissal was illegal because
she was not given the notices required by law; hence, she filed her complaint for
reinstatement without loss of seniority rights, salary differentials, service
incentive leave pay, 13th month pay and 10% attorneys fees.
Remington denied that it dismissed Erlinda illegally. It posited that Erlinda
was a domestic helper, not a regular employee; Erlinda worked as a cook and this
job had nothing to do with Remingtons business of trading in construction or

hardware materials, steel plates and wire rope products. It also contended that
contrary to Erlindas allegations that the (sic) she worked for eight (8) hours a day,
Erlindas duty was merely to cook lunch and merienda, after which her time was
hers to spend as she pleased. Remington also maintained that it did not exercise
any degree of control and/or supervision over Erlindas work as her only concern
was to ensure that the employees lunch and merienda were available and served at
the designated time. Remington likewise belied Erlindas assertion that her work
extended beyond 5:00 p.m. as she could only leave after all the employees had
gone. The truth, according to Remington, is that Erlinda did not have to punch
any time card in the way that other employees of Remington did; she was free to
roam around the company premises, read magazines, and to even nap when not
doing her assigned chores. Remington averred that the illegal dismissal complaint
lacked factual and legal bases. Allegedly, it was Erlinda who refused to report for
work when Remington moved to a new location in Caloocan City.
In a Decision[4] dated January 19, 1999, the labor arbiter dismissed the complaint and
ruled that the respondent was a domestic helper under the personal service of Antonio Tan,
finding that her work as a cook was not usually necessary and desirable in the ordinary course of
trade and business of the petitioner corporation, which operated as a trading company, and that
the latter did not exercise control over her functions. On the issue of illegal dismissal, the labor
arbiter found that it was the respondent who refused to go with the family of Antonio Tan when
the corporation transferred office and that, therefore, respondent could not have been illegally
dismissed.
Upon appeal, the National Labor Relations Commission (NLRC) rendered a Decision,
[5]
dated November 23, 2000, reversing the labor arbiter, ruling, viz:
We are not inclined to uphold the declaration below that complainant is a
domestic helper of the family of Antonio Tan. There was no allegation by
respondent that complainant had ever worked in the residence of Mr. Tan. What is
clear from the facts narrated by the parties is that complainant continuously did
her job as a cook in the office of respondent serving the needed food for lunch and
merienda of the employees. Thus, her work as cook inured not for the benefit of
the family members of Mr. Tan but solely for the individual employees of
respondent.
Complainant as an employee of respondent company is even bolstered by
no less than the certification dated May 23, 1997 issued by the corporate secretary
of the company certifying that complainant is their bonafide employee. This is a
solid evidence which the Labor Arbiter simply brushed aside. But, such error
would not be committed here as it would be at the height of injustice if we are to
declare that complainant is a domestic helper.

Complainants work schedule and being paid a monthly salary

of P4,000.00 are clear indication that she is a company employee who had been
employed to cater to the food needed by the employees which were being
provided by respondent to form part of the benefit granted them.
With regard to the issue of illegal dismissal, we believe that there is more
reason to believe that complainant was not dismissed because allegedly she was
the one who refused to work in the new office of respondent. However,
complainants refusal to join the workforce due to poor eyesight could not be
considered abandonment of work or voluntary resignation from employment.
Under the Labor Code as amended, an employee who reaches the age of
sixty years old (60 years) has the option to retire or to separate from the service
with payment of separation pay/retirement benefit.
In this case, we notice that complainant was already 60 years old at the
time she filed the complaint praying for separation pay or retirement benefit and
some money claims.
Based on Article 287 of the Labor Code as amended, complainant is
entitled to be paid her separation pay/retirement benefit equivalent to one-half
(1/2) month for every year of service.The amount of separation pay would be
based on the prescribed minimum wage at the time of dismissal since she was
then underpaid. In as much as complainant is underpaid of her wages, it behooves
that she should be paid her salary differential for the last three years prior to
separation/retirement.
xxx xxx xxx
WHEREFORE, premises considered, the assailed decision is hereby, SET
ASIDE, and a new one is hereby entered ordering respondents to pay complainant
the following:
1. Salary
differential - P12,021.12 2. Service
Incentive
Leave
th
Pay - 2,650.00 3. 13 Month Pay differential - 1,001.76 4. Separation
Pay/retirement benefit - 36,075.00
Total - P51,747.88
SO ORDERED.
Petitioner moved to reconsider this decision but the NLRC denied the motion. This denial
of its motion prompted petitioner to file a Petition for Certiorari[6] with the Court of Appeals,
docketed as CA-G.R. SP No. 64577, on May 4, 2001, imputing grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the NLRC in (1) reversing in toto the

decision of the labor arbiter, and (2) awarding in favor of respondent salary differential, service
incentive leave pay, 13th month pay differential and separation benefits in the total sum
of P51,747.88.
While the petition was pending with the Court of Appeals, the NLRC rendered another
Decision[7] in the same case on August 29, 2001. How and why another decision was rendered is
explained in that decision as follows:
On May 17, 2001, complainant filed a Manifestation praying for a
resolution of her Motion for Reconsideration and, in support thereof, alleges that,
sometime December 18, 2000, she mailed her Manifestation and Motion for
Reconsideration registered as Registered Certificate No. 188844; and that the said
mail was received by the NLRC, through a certain Roland Hernandez,
on December 26, 2000. Certifications to this effect was issued by the Postmaster
of the Sta. Mesa Post Office bearing the date May 11, 2001 (Annexes A and B,
Complainants Manifestation).
Evidence in support of complainants having actually filed a Motion for
Reconsideration within the reglementary period having been sufficiently
established, a determination of its merits is thus, in order.
On the merits, the NLRC found respondents motion for reconsideration meritorious
leading to the issuance of its second decision with the following dispositive portion:
WHEREFORE, premises considered, the decision dated November 23,
2000, is MODIFIED by increasing the award of retirement pay due the
complainant in the total amount of SIXTY TWO THOUSAND FOUR
HUNDRED THIRTY-SEVEN and 50/100 (P62,437.50). All other monetary relief
so adjudged therein are maintained and likewise made payable to the complainant.
SO ORDERED.
Petitioner challenged the second decision of the NLRC, including the resolution denying
its motion for reconsideration, through a second Petition for Certiorari[8] filed with the Court of
Appeals, docketed as CA-G.R. SP No. 68477 and dated January 8, 2002, this time imputing
grave abuse of discretion amounting to lack of or excess of jurisdiction on the part of the NLRC
in (1) issuing the second decision despite losing its jurisdiction due to the pendency of the first
petition for certiorari with the Court of Appeals, and (2) assuming it still had jurisdiction to issue
the second decision notwithstanding the pendency of the first petition for certiorari with the
Court of Appeals, that its second decision has no basis in law since respondents motion for

reconsideration, which was made the basis of the second decision, was not filed under oath in
violation of Section 14, Rule VII[9] of the New Rules of Procedure of the NLRC and that it
contained no certification as to why respondents motion for reconsideration was not decided on
time as also required by Section 10, Rule VI[10] and Section 15, Rule VII[11] of the aforementioned
rules.
Upon petitioners motion, the Court of Appeals ordered the consolidation of the two (2) petitions,
on January 24, 2002, pursuant to Section 7, par. b(3), Rule 3 of the Revised Rules of the Court of
Appeals. It summarized the principal issues raised in the consolidated petitions as follows:
1.
2.

Whether respondent is petitioners regular employee or a domestic helper;

Whether respondent was illegally dismissed; and

3.
Whether the second NLRC decision promulgated during the pendency of the
first petition for certiorari has basis in law.
On January 31, 2005, the Court of Appeals dismissed the consolidated petitions for lack of merit,
finding no grave abuse of discretion on the part of the NLRC in issuing the assailed decisions.
On the first issue, it upheld the ruling of the NLRC that respondent was a regular
employee of the petitioner since the former worked at the company premises and catered not
only to the personal comfort and enjoyment of Mr. Tan and his family, but also to that of the
employees of the latter. It agreed that petitioner enjoys the prerogative to control respondents
conduct in undertaking her assigned work, particularly the nature and situs of her work in
relation to the petitioners workforce, thereby establishing the existence of an employer-employee
relationship between them.
On the issue of illegal dismissal, it ruled that respondent has attained the status of a regular
employee in her service with the company. It noted that the NLRC found that no less than the
companys corporate secretary certified that respondent is a bonafide company employee and that
she had a fixed schedule and routine of work and was paid a monthly salary of P4,000.00; that
she served with petitioner for 15 years starting in 1983, buying and cooking food served to
company employees at lunch and merienda; and that this work was usually necessary and
desirable in the regular business of the petitioner. It held that as a regular employee, she enjoys
the constitutionally guaranteed right to security of tenure and that petitioner failed to discharge

the burden of proving that her dismissal on January 15, 1998 was for a just or authorized cause
and that the manner of dismissal complied with the requirements under the law.
Finally, on petitioners other arguments relating to the alleged irregularity of the second
NLRC decision, i.e., the fact that respondents motion for reconsideration was not under oath and
had no certification explaining why it was not resolved within the prescribed period, it held that
such violations relate to procedural and non-jurisdictional matters that cannot assume primacy
over the substantive merits of the case and that they do not constitute grave abuse of discretion
amounting to lack or excess of jurisdiction that would nullify the second NLRC decision.
The Court of Appeals denied petitioners contention that the NLRC lost its jurisdiction to
issue the second decision when it received the order indicating the Court of Appeals initial action
on the first petition for certiorari that it filed. It ruled that the NLRCs action of issuing a decision
in installments was not prohibited by its own rules and that the need for a second decision was
justified by the fact that respondents own motion for reconsideration remained unresolved in the
first decision. Furthermore, it held that under Section 7, Rule 65 of the Revised Rules of Court,
[12]
the filing of a petition for certiorari does not interrupt the course of the principal case unless a
temporary restraining order or a writ of preliminary injunction has been issued against the public
respondent from further proceeding with the case.
From this decision, petitioner filed a motion for reconsideration on February 22, 2005,
which the Court of Appeals denied through a resolution dated August 11, 2005.
Hence, the present petition for review.
The petitioner raises the following errors of law: (1) the Court of Appeals erred in
affirming the NLRCs ruling that the respondent was petitioners regular employee and not a
domestic helper; (2) the Court of Appeals erred in holding that petitioner was guilty of illegal
dismissal; and (3) the Court of Appeals erred when it held that the issuance of the second NLRC
decision is proper.
The petition must fail. We affirm that respondent was a regular employee of the petitioner
and that the latter was guilty of illegal dismissal.
Before going into the substantive merits of the present controversy, we shall first resolve
the propriety of the issuance of the second NLRC decision.

The petitioner contends that the respondents motion for reconsideration, upon which the
second NLRC decision was based, was not under oath and did not contain a certification as to
why it was not decided on time as required under the New Rules of Procedure of the NLRC.
[13]
Furthermore, the former also raises for the first time the contention that respondents motion
was filed beyond the ten (10)-calendar day period required under the same Rules, [14] since the
latter received a copy of the first NLRC decision on December 6, 2000, and respondent filed her
motion only on December 18, 2000. Thus, according to petitioner, the respondents motion for
reconsideration was a mere scrap of paper and the second NLRC decision has no basis in law.
We do not agree.
It is well-settled that the application of technical rules of procedure may be relaxed to
serve the demands of substantial justice, particularly in labor cases. [15] Labor cases must be
decided according to justice and equity and the substantial merits of the controversy. [16] Rules of
procedure are but mere tools designed to facilitate the attainment of justice. [17] Their strict and
rigid application, which would result in technicalities that tend to frustrate rather than promote
substantial justice, must always be avoided.[18]
This Court has consistently held that the requirement of verification is formal, and not
jurisdictional. Such requirement is merely a condition affecting the form of the pleading, noncompliance with which does not necessarily render it fatally defective. Verification is simply
intended to secure an assurance that the allegations in the pleading are true and correct and not
the product of the imagination or a matter of speculation, and that the pleading is filed in good
faith.[19] The court may order the correction of the pleading if verification is lacking or act on the
pleading although it is not verified, if the attending circumstances are such that strict compliance
with the rules may be dispensed with in order that the ends of justice may thereby be served.[20]
Anent the argument that respondents motion for reconsideration, on which the NLRCs
second decision was based, was filed out of time, such issue was only brought up for the first
time in the instant petition where no new issues may be raised by a party in his pleadings without
offending the right to due process of the opposing party.
Nonetheless, the petitioner asserts that the respondent received a copy of the NLRCs first
decision on December 6, 2000, and the motion for reconsideration was filed only on December
18, 2000, or two (2) days beyond the ten (10)-calendar day period requirement under the New
Rules of Procedure of the NLRC and should not be allowed.[21]

This contention must fail.

Under Article 223[22] of the Labor Code, the decision of the NLRC shall be final and
executory after ten (10) calendar days from the receipt thereof by the parties.
While it is an established rule that the perfection of an appeal in the manner and within
the period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an
appeal has the effect of rendering the judgment final and executory, it is equally settled that the
NLRC may disregard the procedural lapse where there is an acceptable reason to excuse
tardiness in the taking of the appeal. [23] Among the acceptable reasons recognized by this Court
are (a) counsel's reliance on the footnote of the notice of the decision of the Labor Arbiter that
"the aggrieved party may appeal. . . within ten (10) working days"; [24] (b) fundamental
consideration of substantial justice;[25] (c) prevention of miscarriage of justice or of unjust
enrichment, as where the tardy appeal is from a decision granting separation pay which was
already granted in an earlier final decision; [26]and (d) special circumstances of the case combined
with its legal merits[27] or the amount and the issue involved.[28]
We hold that the particular circumstances in the case at bar, in accordance with
substantial justice, call for a liberalization of the application of this rule. Notably, respondents
last day for filing her motion for reconsideration fell on December 16, 2000, which was a
Saturday. In a number of cases,[29] we have ruled that if the tenth day for perfecting an appeal fell
on a Saturday, the appeal shall be made on the next working day. The reason for this ruling is that
on Saturdays, the office of the NLRC and certain post offices are closed. With all the more
reason should this doctrine apply to respondents filing of the motion for reconsideration of her
cause, which the NLRC itself found to be impressed with merit. Indeed, technicality should not
be permitted to stand in the way of equitably and completely resolving the rights and obligations
of the parties for the ends of justice are reached not only through the speedy disposal of cases
but, more importantly, through a meticulous and comprehensive evaluation of the merits of a
case.
Finally, as to petitioners argument that the NLRC had already lost its jurisdiction to
decide the case when it filed its petition for certiorari with the Court of Appeals upon the denial
of its motion for reconsideration, suffice it to state that under Section 7 of Rule 65 [30] of the
Revised Rules of Court, the petition shall not interrupt the course of the principal case unless a
temporary restraining order or a writ of preliminary injunction has been issued against the public
respondent from further proceeding with the case. Thus, the mere pendency of a special civil

action for certiorari, in connection with a pending case in a lower court, does not interrupt the
course of the latter if there is no writ of injunction. [31] Clearly, there was no grave abuse of
discretion on the part of the NLRC in issuing its second decision which modified the first,
especially since it failed to consider the respondents motion for reconsideration when it issued its
first decision.
Having resolved the procedural matters, we shall now delve into the merits of the petition
to determine whether respondent is a domestic helper or a regular employee of the petitioner, and
whether the latter is guilty of illegal dismissal.
Petitioner relies heavily on the affidavit of a certain Mr. Antonio Tan and contends that
respondent is the latters domestic helper and not a regular employee of the company since Mr.
Tan has a separate and distinct personality from the petitioner. It maintains that it did not exercise
control and supervision over her functions; and that it operates as a trading company and does
not engage in the restaurant business, and therefore respondents work as a cook, which was not
usually necessary or desirable to its usual line of business or trade, could not make her its regular
employee.
This contention fails to impress.
In Apex Mining Company, Inc. v. NLRC,[32] this Court held that a househelper in the
staff houses of an industrial company was a regular employee of the said firm. We ratiocinated
that:
Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the
terms househelper or domestic servant are defined as follows:
The term househelper as used herein is synonymous to the term domestic
servant and shall refer to any person, whether male or female, who renders
services in and about the employers home and which services are usually
necessary or desirable for the maintenance and enjoyment thereof, and ministers
exclusively to the personal comfort and enjoyment of the employers family.
The foregoing definition clearly contemplates such househelper or
domestic servant who is employed in the employers home to minister exclusively
to the personal comfort and enjoyment of the employers family. Such definition
covers family drivers, domestic servants, laundry women, yayas, gardeners,
houseboys and similar househelps.
xxx xxx xxx

The criteria is the personal comfort and enjoyment of the family of the
employer in the home of said employer. While it may be true that the nature of the
work of a househelper, domestic servant or laundrywoman in a home or in a
company staffhouse may be similar in nature, the difference in their
circumstances is that in the former instance they are actually serving the family
while in the latter case, whether it is a corporation or a single proprietorship
engaged in business or industry or any other agricultural or similar pursuit,
service is being rendered in the staffhouses or within the premises of the business
of the employer. In such instance, they are employees of the company or
employer in the business concerned entitled to the privileges of a regular
employee.
Petitioner contends that it is only when the househelper or domestic
servant is assigned to certain aspects of the business of the employer that such
househelper or domestic servant may be considered as such an employee. The
Court finds no merit in making any such distinction. The mere fact that the
househelper or domestic servant is working within the premises of the
business of the employer and in relation to or in connection with its
business, as in its staffhouses for its guest or even for its officers and
employees, warrants the conclusion that such househelper or domestic
servant is and should be considered as a regular employee of the
employer and not as a mere family househelper or domestic servant as
contemplated in Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended.
In the case at bar, the petitioner itself admits in its position paper [33] that respondent worked at the
company premises and her duty was to cook and prepare its employees lunch
and merienda. Clearly, the situs, as well as the nature of respondents work as a cook, who caters
not only to the needs of Mr. Tan and his family but also to that of the petitioners employees,
makes her fall squarely within the definition of a regular employee under the doctrine enunciated
in the Apex Mining case. That she works within company premises, and that she does not cater
exclusively to the personal comfort of Mr. Tan and his family, is reflective of the existence of the
petitioners right of control over her functions, which is the primary indicator of the existence of
an employer-employee relationship.
Moreover, it is wrong to say that if the work is not directly related to the employer's business,
then the person performing such work could not be considered an employee of the latter. The
determination of the existence of an employer-employee relationship is defined by law according
to the facts of each case, regardless of the nature of the activities involved. [34] Indeed, it would be
the height of injustice if we were to hold that despite the fact that respondent was made to cook
lunch and merienda for the petitioners employees, which work ultimately redounded to the
benefit of the petitioner corporation, she was merely a domestic worker of the family of Mr. Tan.

We note the findings of the NLRC, affirmed by the Court of Appeals, that no less than the
companys corporate secretary has certified that respondent is a bonafide company employee;
[35]
she had a fixed schedule and routine of work and was paid a monthly salary of P4,000.00;
[36]
she served with the company for 15 years starting in 1983, buying and cooking food served to
company employees at lunch and merienda, and that this service was a regular feature of
employment with the company.[37]
Indubitably, the Court of Appeals, as well as the NLRC, correctly held that based on the
given circumstances, the respondent is a regular employee of the petitioner.
Having determined that the respondent is petitioners regular employee, we now proceed to
ascertain the legality of her dismissal from employment.
Petitioner contends that there was abandonment on respondents part when she refused to
report for work when the corporation transferred to a new location in CaloocanCity, claiming
that her poor eyesight would make long distance travel a problem. Thus, it cannot be held guilty
of illegal dismissal.
On the other hand, the respondent claims that when the petitioner relocated, she was no
longer called for duty and that when she tried to report for work, she was told that her services
were no longer needed. She contends that the petitioner dismissed her without a just or
authorized cause and that she was not given prior notice, hence rendering the dismissal illegal.
We rule for the respondent.
As a regular employee, respondent enjoys the right to security of tenure under Article
279[38] of the Labor Code and may only be dismissed for a just [39] or authorized[40] cause,
otherwise the dismissal becomes illegal and the employee becomes entitled to reinstatement and
full backwages computed from the time compensation was withheld up to the time of actual
reinstatement.
Abandonment is the deliberate and unjustified refusal of an employee to resume his
employment.[41] It is a form of neglect of duty; hence, a just cause for termination of employment
by the employer under Article 282 of the Labor Code, which enumerates the just causes for
termination by the employer.[42] For a valid finding of abandonment, these two factors should be
present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a

clear intention to sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be deduced that the
employee has no more intention to work. [43] The intent to discontinue the employment must be
shown by clear proof that it was deliberate and unjustified. [44] This, the petitioner failed to do in
the case at bar.
Alongside the petitioners contention that it was the respondent who quit her employment
and refused to return to work, greater stock may be taken of the respondents immediate filing of
her complaint with the NLRC. Indeed, an employee who loses no time in protesting her layoff
cannot by any reasoning be said to have abandoned her work, for it is well-settled that the filing
of an employee of a complaint for illegal dismissal with a prayer for reinstatement is proof
enough of her desire to return to work, thus, negating the employers charge of abandonment.[45]
In termination cases, the burden of proof rests upon the employer to show that the
dismissal is for a just and valid cause; failure to do so would necessarily mean that the dismissal
was illegal.[46] The employers case succeeds or fails on the strength of its evidence and not on the
weakness of the employees defense.[47] If doubt exists between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter.[48]
IN VIEW WHEREOF, the petition is DENIED for lack of merit. The assailed Decision
dated January 31, 2005, and the Resolution dated August 11, 2005, of the Court of Appeals in
CA-G.R. SP Nos. 64577 and 68477 are AFFIRMED. Costs against petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 118978 May 23, 1997

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE
GUZMAN, respondents.

REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and
Telephone Company (hereafter, PT & T) invokes the alleged concealment of civil status and
defalcation of company funds as grounds to terminate the services of an employee. That
employee, herein private respondent Grace de Guzman, contrarily argues that what really
motivated PT & T to terminate her services was her having contracted marriage during her
employment, which is prohibited by petitioner in its company policies. She thus claims that she
was discriminated against in gross violation of law, such a proscription by an employer being
outlawed by Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary
Project Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F.

Tenorio who went on maternity leave. 1 Under the Reliever Agreement which she signed with
petitioner company, her employment was to be immediately terminated upon expiration of the
agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August
8, 1991, private respondent's services as reliever were again engaged by petitioner, this time in
replacement of one Erlinda F. Dizon who went on leave during both periods. 2 After August 8,
1991, and pursuant to their Reliever Agreement, her services were terminated.
On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form
that was furnished her to be filled up for the purpose, she indicated in the portion for civil status
therein that she was single although she had contracted marriage a few months earlier, that is, on
May 26, 1991. 3
It now appears that private respondent had made the same representation in the two successive
reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner
supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial,
sent to private respondent a memorandum dated January 15, 1992 requiring her to explain the
discrepancy. In that memorandum, she was reminded about the company's policy of not
accepting married women for employment. 4
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of
PT&T's policy regarding married women at the time, and that all along she had not deliberately
hidden her true civil status. 5Petitioner nonetheless remained unconvinced by her explanations.
Private respondent was dismissed from the company effective January 29, 1992, 6 which she
readily contested by initiating a complaint for illegal dismissal, coupled with a claim for nonpayment of cost of living allowances (COLA), before the Regional Arbitration Branch of the
National Labor Relations Commission in Baguio City.
At the preliminary conference conducted in connection therewith, private respondent volunteered
the information, and this was incorporated in the stipulation of facts between the parties, that she
had failed to remit the amount of P2,380.75 of her collections. She then executed a promissory
note for that amount in favor of petitioner 7. All of these took place in a formal proceeding and
with the agreement of the parties and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring
that private respondent, who had already gained the status of a regular employee, was illegally
dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and
COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that
the ground relied upon by petitioner in dismissing private respondent was clearly insufficient,
and that it was apparent that she had been discriminated against on account of her having
contracted marriage in violation of company rules.

On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld
the labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had
indeed been the subject of an unjust and unlawful discrimination by her employer, PT & T.
However, the decision of the labor arbiter was modified with the qualification that Grace de
Guzman deserved to be suspended for three months in view of the dishonest nature of her acts
which should not be condoned. In all other respects, the NLRC affirmed the decision of the labor
arbiter, including the order for the reinstatement of private respondent in her employment with
PT & T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC
in its resolution of November 9, 1994, hence this special civil action assailing the aforestated
decisions of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love and
respect but, through the ages, men have responded to that injunction with indifference, on the
hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against
womankind been so pervasive as in the field of labor, especially on the matter of equal
employment opportunities and standards. In the Philippine setting, women have traditionally
been considered as falling within the vulnerable groups or types of workers who must be
safeguarded with preventive and remedial social legislation against discriminatory and
exploitative practices in hiring, training, benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between men and women in almost all
phases of social and political life, provides a gamut of protective provisions. To cite a few of the
primordial ones, Section 14, Article II 8on the Declaration of Principles and State Policies,
expressly recognizes the role of women in nation-building and commands the State to ensure, at
all times, the fundamental equality before the law of women and men. Corollary thereto, Section
3 of Article XIII 9 (the progenitor whereof dates back to both the 1935 and 1973 Constitution)
pointedly requires the State to afford full protection to labor and to promote full employment and
equality of employment opportunities for all, including an assurance of entitlement to tenurial
security of all workers. Similarly, Section 14 of Article XIII 10 mandates that the State shall
protect working women through provisions for opportunities that would enable them to reach
their full potential.
2. Corrective labor and social laws on gender inequality have emerged with more frequency in
the years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442,
largely due to our country's commitment as a signatory to the United Nations Convention on the
Elimination of All Forms of Discrimination Against Women (CEDAW). 11
Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits
discrimination against women with respect to terms and conditions of employment, promotion,

and training opportunities; Republic Act No. 6955 13 which bans the "mail-order-bride" practice
for a fee and the export of female labor to countries that cannot guarantee protection to the rights
of women workers; Republic Act No. 7192 14 also known as the "Women in Development and
Nation Building Act," which affords women equal opportunities with men to act and to enter into
contracts, and for appointment, admission, training, graduation, and commissioning in all
military or similar schools of the Armed Forces of the Philippines and the Philippine National
Police; Republic Act No. 7322 15 increasing the maternity benefits granted to women in the
private sector; Republic Act No. 7877 16 which outlaws and punishes sexual harassment in the
workplace and in the education and training environment; and Republic Act No. 8042, 17 or the
"Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as a matter of
policy, inter alia, the deployment of migrant workers, with emphasis on women, only in
countries where their rights are secure. Likewise, it would not be amiss to point out that in the
Family Code, 18 women's rights in the field of civil law have been greatly enhanced and
expanded.
In the Labor Code, provisions governing the rights of women workers are found in Articles 130
to 138 thereof. Article 130 involves the right against particular kinds of night work while Article
132 ensures the right of women to be provided with facilities and standards which the Secretary
of Labor may establish to ensure their health and safety. For purposes of labor and social
legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar
establishments shall be considered as an employee under Article 138. Article 135, on the other
hand, recognizes a woman's right against discrimination with respect to terms and conditions of
employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136
explicitly prohibits discrimination merely by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of
protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua
non prior to severance of the employment ties of an individual under his employ, to convincingly
establish, through substantial evidence, the existence of a valid and just cause in dispensing with
the services of such employee, one's labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls within the
so-called management prerogatives, which prescriptions encompass the matter of hiring,
supervision of workers, work assignments, working methods and assignments, as well as
regulations on the transfer of employees, lay-off of workers, and the discipline, dismissal, and
recall of employees. 19 As put in a case, an employer is free to regulate, according to his
discretion and best business judgment, all aspects of employment, "from hiring to firing," except
in cases of unlawful discrimination or those which may be provided by law. 20
In the case at bar, petitioner's policy of not accepting or considering as disqualified from work
any woman worker who contracts marriage runs afoul of the test of, and the right against,

discrimination, afforded all women workers by our labor laws and by no less than the
Constitution. Contrary to petitioner's assertion that it dismissed private respondent from
employment on account of her dishonesty, the record discloses clearly that her ties with the
company were dissolved principally because of the company's policy that married women are not
qualified for employment in PT & T, and not merely because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia M.
Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that
"you're fully aware that the company is not accepting married women employee (sic), as it was
verbally instructed to you." 21 Again, in the termination notice sent to her by the same branch
supervisor, private respondent was made to understand that her severance from the service was
not only by reason of her concealment of her married status but, over and on top of that, was her
violation of the company's policy against marriage ("and even told you that married women
employees are not applicable [sic] or accepted in our company.") 22 Parenthetically, this seems to
be the curious reason why it was made to appear in the initiatory pleadings that petitioner was
represented in this case only by its said supervisor and not by its highest ranking officers who
would otherwise be solidarily liable with the corporation. 23
Verily, private respondent's act of concealing the true nature of her status from PT & T could not
be properly characterized as willful or in bad faith as she was moved to act the way she did
mainly because she wanted to retain a permanent job in a stable company. In other words, she
was practically forced by that very same illegal company policy into misrepresenting her civil
status for fear of being disqualified from work. While loss of confidence is a just cause for
termination of employment, it should not be simulated. 24 It must rest on an actual breach of duty
committed by the employee and not on the employer's caprices. 25 Furthermore, it should never
be used as a subterfuge for causes which are improper, illegal, or unjustified. 26
In the present controversy, petitioner's expostulations that it dismissed private respondent, not
because the latter got married but because she concealed that fact, does have a hollow ring. Her
concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in
her which justified her dismissal.
Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless
takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial
distinctions, perturbs the Court since private respondent may well be minded to claim that the
imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy against
its female employees contracting marriage, what could be an act of insubordination was
inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the
same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In

other words, PT & T says it gives its blessings to its female employees contracting marriage,
despite the maternity leaves and other benefits it would consequently respond for and which
obviously it would have wanted to avoid. If that employee confesses such fact of marriage, there
will be no sanction; but if such employee conceals the same instead of proceeding to the
confessional, she will be dismissed. This line of reasoning does not impress us as reflecting its
true management policy or that we are being regaled with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of propositions
which confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it
was its unlawful policy against married women, both on the aspects of qualification and
retention, which compelled private respondent to conceal her supervenient marriage. It was,
however, that very policy alone which was the cause of private respondent's secretive conduct
now complained of. It is then apropos to recall the familiar saying that he who is the cause of the
cause is the cause of the evil caused.
Finally, petitioner's collateral insistence on the admission of private respondent that she
supposedly misappropriated company funds, as an additional ground to dismiss her from
employment, is somewhat insincere and self-serving. Concededly, private respondent admitted in
the course of the proceedings that she failed to remit some of her collections, but that is an
altogether different story. The fact is that she was dismissed solely because of her concealment of
her marital status, and not on the basis of that supposed defalcation of company funds. That the
labor arbiter would thus consider petitioner's submissions on this supposed dishonesty as a mere
afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of experience
in labor cases. For, there was no showing that private respondent deliberately misappropriated
the amount or whether her failure to remit the same was through negligence and, if so, whether
the negligence was in nature simple or grave. In fact, it was merely agreed that private
respondent execute a promissory note to refund the same, which she did, and the matter was
deemed settled as a peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular status at the time of her dismissal.
When she was served her walking papers on January 29, 1992, she was about to complete the
probationary period of 150 days as she was contracted as a probationary employee on September
2, 1991. That her dismissal would be effected just when her probationary period was winding
down clearly raises the plausible conclusion that it was done in order to prevent her from earning
security of tenure. 27 On the other hand, her earlier stints with the company as reliever were
undoubtedly those of a regular employee, even if the same were for fixed periods, as she
performed activities which were essential or necessary in the usual trade and business of PT &
T. 28 The primary standard of determining regular employment is the reasonable connection
between the activity performed by the employee in relation to the business or trade of the
employer. 29

As an employee who had therefore gained regular status, and as she had been dismissed without
just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and
to full back wages, inclusive of allowances and other benefits or their monetary
equivalent. 30 However, as she had undeniably committed an act of dishonesty in concealing her
status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month
suspension imposed by respondent NLRC must be upheld to obviate the impression or inference
that such act should be condoned. It would be unfair to the employer if she were to return to its
fold without any sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her compensation was
withheld up to the time of her actual reinstatement, shall be reduced by deducting therefrom the
amount corresponding to her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT & T. The Labor Code state, in no uncertain terms, as follows:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to
require as a condition of employment or continuation of employment that a
woman shall not get married, or to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely
by reason of marriage.
This provision had a studied history for its origin can be traced to Section 8 of Presidential
Decree No. 148, 31better known as the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled
"An Act to Regulate the Employment of Women and Children, to Provide Penalties for
Violations Thereof, and for Other Purposes." The forerunner to Republic Act No. 679, on the
other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the
employment of women and children in shops, factories, industrial, agricultural, and mercantile
establishments and other places of labor in the then Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et
al. vs. Philippine Air Lines,33 a decision that emanated from the Office of the President. There, a
policy of Philippine Air Lines requiring that prospective flight attendants must be single and that
they will be automatically separated from the service once they marry was declared void, it being
violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination
against married women. Thus:
Of first impression is the incompatibility of the respondent's policy or regulation
with the codal provision of law. Respondent is resolute in its contention that
Article 136 of the Labor Code applies only to women employed in ordinary

occupations and that the prohibition against marriage of women engaged in

extraordinary occupations, like flight attendants, is fair and reasonable,
considering the pecularities of their chosen profession.
We cannot subscribe to the line of reasoning pursued by respondent. All along, it
knew that the controverted policy has already met its doom as early as March 13,
1973 when Presidential Decree No. 148, otherwise known as the Women and
Child Labor Law, was promulgated. But for the timidity of those affected or their
labor unions in challenging the validity of the policy, the same was able to obtain
a momentary reprieve. A close look at Section 8 of said decree, which amended
paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the
same provision reproduced verbatim in Article 136 of the Labor Code, which was
promulgated on May 1, 1974 to take effect six (6) months later, or on November
1, 1974.
It cannot be gainsaid that, with the reiteration of the same provision in the new
Labor Code, all policies and acts against it are deemed illegal and therefore
abrogated. True, Article 132 enjoins the Secretary of Labor to establish standards
that will ensure the safety and health of women employees and in appropriate
cases shall by regulation require employers to determine appropriate minimum
standards for termination in special occupations, such as those of flight attendants,
but that is precisely the factor that militates against the policy of respondent. The
standards have not yet been established as set forth in the first paragraph, nor has
the Secretary of Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which
are as yet to be established, the policy of respondent against marriage is patently
illegal. This finds support in Section 9 of the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full employment and
equality in employment, ensure equal work opportunities regardless of sex, race,
or creed, and regulate the relations between workers and employees. The State
shall assure the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work . . . .
Moreover, we cannot agree to the respondent's proposition that termination from
employment of flight attendants on account of marriage is a fair and reasonable
standard designed for their own health, safety, protection and welfare, as no basis
has been laid therefor. Actually, respondent claims that its concern is not so much
against the continued employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather on the consequence of

marriage-pregnancy. Respondent discussed at length in the instant appeal the

supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been
adequately explained by the Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as
invoking the provisions of Articles 52 and 216 of the New Civil Code on the
preservation of marriage as an inviolable social institution and the family as a
basic social institution, respectively, as bases for its policy of non-marriage. In
both instances, respondent predicates absence of a flight attendant from her home
for long periods of time as contributory to an unhappy married life. This is pure
conjecture not based on actual conditions, considering that, in this modern world,
sophisticated technology has narrowed the distance from one place to another.
Moreover, respondent overlooked the fact that married flight attendants can
program their lives to adapt to prevailing circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary
occupations, or it should have categorically expressed so. The sweeping
intendment of the law, be it on special or ordinary occupations, is reflected in the
whole text and supported by Article 135 that speaks of non-discrimination on the
employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation 34considered as void a policy of the same nature. In said case, respondent, in
dismissing from the service the complainant, invoked a policy of the firm to consider female
employees in the project it was undertaking as separated the moment they get married due to lack
of facilities for married women. Respondent further claimed that complainant was employed in
the project with an oral understanding that her services would be terminated when she gets
married. Branding the policy of the employer as an example of "discriminatory chauvinism"
tantamount to denying equal employment opportunities to women simply on account of their sex,
the appellate court struck down said employer policy as unlawful in view of its repugnance to the
Civil Code, Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which establish employer preference or
conditions relating to the marital status of an employee are categorized as a "sex-plus"
discrimination where it is imposed on one sex and not on the other. Further, the same should be
evenly applied and must not inflict adverse effects on a racial or sexual group which is protected
by federal job discrimination laws. Employment rules that forbid or restrict the employment of
married women, but do not apply to married men, have been held to violate Title VII of the
United States Civil Rights Act of 1964, the main federal statute prohibiting job discrimination
against employees and applicants on the basis of, among other things, sex. 35

Further, it is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not against married
men, the variable is sex and the discrimination is unlawful. 36 Upon the other hand, a requirement
that a woman employee must remain unmarried could be justified as a "bona fide occupational
qualification," or BFOQ, where the particular requirements of the job would justify the same, but
not on the ground of a general principle, such as the desirability of spreading work in the
workplace. A requirement of that nature would be valid provided it reflects an inherent quality
reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage rule
applicable to both male and female flight attendants, was regarded as unlawful since the
restriction was not related to the job performance of the flight attendants. 37
5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code
on the right of a woman to be free from any kind of stipulation against marriage in connection
with her employment, but it likewise assaults good morals and public policy, tending as it does to
deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in
the individual as an intangible and inalienable right. 38 Hence, while it is true that the parties to a
contract may establish any agreements, terms, and conditions that they may deem convenient, the
same should not be contrary to law, morals, good customs, public order, or public
policy. 39 Carried to its logical consequences, it may even be said that petitioner's policy against
legitimate marital bonds would encourage illicit or common-law relations and subvert the
sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that the relations between
the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so
much public interest that the same should yield to the common good. 40 It goes on to intone that
neither capital nor labor should visit acts of oppression against the other, nor impair the interest
or convenience of the public. 41 In the final reckoning, the danger of just such a policy against
marriage followed by petitioner PT & T is that it strikes at the very essence, ideals and purpose
of marriage as an inviolable social institution and, ultimately, of the family as the foundation of
the nation. 42 That it must be effectively interdicted here in all its indirect, disguised or
dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in
order but imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone
Company is hereby DISMISSED for lack of merit, with double costs against petitioner.
SO ORDERED.
Romero, Puno, Mendoza and Torres, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162994

September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A.

TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones,
involving the validity of the policy of a pharmaceutical company prohibiting its employees from
marrying employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc.
(Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and
orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he
agrees to study and abide by existing company rules; to disclose to management any existing or
future relationship by consanguinity or affinity with co-employees or employees of competing
drug companies and should management find that such relationship poses a possible conflict of
interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to
inform management of any existing or future relationship by consanguinity or affinity with coemployees or employees of competing drug companies. If management perceives a conflict of
interest or a potential conflict between such relationship and the employees employment with
the company, the management and the employee will explore the possibility of a "transfer to

another department in a non-counterchecking position" or preparation for employment outside

the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte
sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay.
She supervised the district managers and medical representatives of her company and prepared
marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager
regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a
conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which one
of them would resign from their jobs, although they told him that they wanted to retain him as
much as possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship
with an employee of a competitor company. He explained that Astra, Bettsys employer, was
planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the
redundancy package to be offered by Astra. With Bettsys separation from her company, the
potential conflict of interest would be eliminated. At the same time, they would be able to avail
of the attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999,
Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a
milk division, the potential conflict of interest would be eliminated. His application was denied
in view of Glaxos "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur
sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos
Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until
February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and
continued acting as medical representative in the Camarines Sur-Camarines Norte sales area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was not
issued samples of products which were competing with similar products manufactured by Astra.
He was also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted
the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month
pay for every year of service, or a total of P50,000.00 but he declined the offer. On November
15, 2000, the National Conciliation and Mediation Board (NCMB) rendered
its Decision declaring as valid Glaxos policy on relationships between its employees and
persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to
another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for
Review on the ground that the NCMB did not err in rendering its Decision. The appellate court
held that Glaxos policy prohibiting its employees from having personal relationships with
employees of competitor companies is a valid exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was
denied by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in
affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying
an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not
finding that Tecson was constructively dismissed when he was transferred to a new sales
territory, and deprived of the opportunity to attend products seminars and training sessions.6
Petitioners contend that Glaxos policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They claim that the policy restricts
the employees right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following
circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the
Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from
attending seminars and training sessions for medical representatives, and (4) he was prohibited
from promoting respondents products which were competing with Astras products.8

In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees
from having a relationship with and/or marrying an employee of a competitor company is a valid
exercise of its management prerogatives and does not violate the equal protection clause; and
that Tecsons reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan
City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it
has a genuine interest in ensuring that its employees avoid any activity, relationship or interest
that may conflict with their responsibilities to the company. Thus, it expects its employees to
avoid having personal or family interests in any competitor company which may influence their
actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also
aimed at preventing a competitor company from gaining access to its secrets, procedures and
policies.10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or
future relationships with employees of competitor companies, and is therefore not violative of
the equal protection clause. It maintains that considering the nature of its business, the
prohibition is based on valid grounds.11
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and
potential conflict of interest. Astras products were in direct competition with 67% of the
products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case
was a valid exercise of its management prerogatives.12 In any case, Tecson was given several
months to remedy the situation, and was even encouraged not to resign but to ask his wife to
resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed company policy because
when he signed his contract of employment, he was aware that such policy was stipulated
therein. In said contract, he also agreed to resign from respondent if the management finds that
his relationship with an employee of a competitor company would be detrimental to the interests
of Glaxo.14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from
seminars regarding respondents new products did not amount to constructive dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines SurCamarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area.
Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons family.
Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to Butuan City,
Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be

favorable to him and his family as he would be relocating to a familiar territory and minimizing
his travel expenses.15
In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new antiasthma drug was due to the fact that said product was in direct competition with a drug which
was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him.
Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up created by
his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new
sales area instead of Naga City because the supplier thought he already transferred to Butuan).16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in
ruling that Glaxos policy against its employees marrying employees from competitor companies
is valid, and in not holding that said policy violates the equal protection clause of the
Constitution; (2) Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners
provides:

10. You agree to disclose to management any existing or future relationship you may
have, either by consanguinity or affinity with co-employees or employees of competing
drug companies. Should it pose a possible conflict of interest in management discretion,
you agree to resign voluntarily from the Company as a matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of
Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee
Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run
counter to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any
competitor supplier or other businesses which may consciously or unconsciously

influence their actions or decisions and thus deprive Glaxo Wellcome of

legitimate profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of
Company plans to advance their outside personal interests, that of their relatives,
friends and other businesses.
c. To avoid outside employment or other interests for income which would impair
their effective job performance.
d. To consult with Management on such activities or relationships that may lead to
conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity with
co-employees of competing drug companies are expected to disclose such relationship to
the Management. If management perceives a conflict or potential conflict of interest,
every effort shall be made, together by management and the employee, to arrive at a
solution within six (6) months, either by transfer to another department in a non-counter
checking position, or by career preparation toward outside employment after Glaxo
Wellcome. Employees must be prepared for possible resignation within six (6) months, if
no other solution is feasible.19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy
prohibiting an employee from having a relationship with an employee of a competitor company
is a valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and
other confidential programs and information from competitors, especially so that it and Astra are
rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxos employees is reasonable under the circumstances because relationships
of that nature might compromise the interests of the company. In laying down the assailed
company policy, Glaxo only aims to protect its interests against the possibility that a competitor
company will gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than
the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect
its right to reasonable returns on investments and to expansion and growth.20 Indeed, while our
laws endeavor to give life to the constitutional policy on social justice and the protection of

labor, it does not mean that every labor dispute will be decided in favor of the workers. The law
also recognizes that management has rights which are also entitled to respect and enforcement in
the interest of fair play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business
confidentiality and protect a competitive position by even-handedly disqualifying from jobs male
and female applicants or employees who are married to a competitor. Consequently, the court
ruled than an employer that discharged an employee who was married to an employee of an
active competitor did not violate Title VII of the Civil Rights Act of 1964.23The Court pointed
out that the policy was applied to men and women equally, and noted that the employers
business was highly competitive and that gaining inside information would constitute a
competitive advantage.
The challenged company policy does not violate the equal protection clause of the Constitution
as petitioners erroneously suggest. It is a settled principle that the commands of the equal
protection clause are addressed only to the state or those acting under color of its
authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the
equal protection clause erects no shield against merely private conduct, however, discriminatory
or wrongful.25 The only exception occurs when the state29 in any of its manifestations or actions
has been found to have become entwined or involved in the wrongful private
conduct.27 Obviously, however, the exception is not present in this case. Significantly, the
company actually enforced the policy after repeated requests to the employee to comply with the
policy. Indeed, the application of the policy was made in an impartial and even-handed manner,
with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee
handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships
between its employees and those of competitor companies. Its employees are free to cultivate
relationships with and marry persons of their own choosing. What the company merely seeks to
avoid is a conflict of interest between the employee and the company that may arise out of such
relationships. As succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the
company remains free to marry anyone of his or her choosing. The policy is not aimed at
restricting a personal prerogative that belongs only to the individual. However, an
employees personal decision does not detract the employer from exercising management
prerogatives to ensure maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part of
respondents Employee Code of Conduct and of its contracts with its employees, such as that
signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was

aware of that restriction when he signed his employment contract and when he entered into a
relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of
employment with Glaxo, the stipulations therein have the force of law between them and, thus,
should be complied with in good faith."29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners contention that Tescon was constructively dismissed
when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan CitySurigao City-Agusan del Sur sales area, and when he was excluded from attending the
companys seminar on new products which were directly competing with similar products
manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation
resorted to when continued employment becomes impossible, unreasonable, or unlikely; when
there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee.30 None of these conditions are
present in the instant case. The record does not show that Tescon was demoted or unduly
discriminated upon by reason of such transfer. As found by the appellate court, Glaxo properly
exercised its management prerogative in reassigning Tecson to the Butuan City sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in
keeping with the policy of the company in avoidance of conflict of interest, and thus
validNote that [Tecsons] wife holds a sensitive supervisory position as Branch
Coordinator in her employer-company which requires her to work in close coordination
with District Managers and Medical Representatives. Her duties include monitoring sales
of Astra products, conducting sales drives, establishing and furthering relationship with
customers, collection, monitoring and managing Astras inventoryshe therefore takes
an active participation in the market war characterized as it is by stiff competition among
pharmaceutical companies. Moreover, and this is significant, petitioners sales territory
covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her
employer in Albay. The proximity of their areas of responsibility, all in the same Bicol
Region, renders the conflict of interest not only possible, but actual, as learning by one
spouse of the others market strategies in the region would be inevitable. [Managements]
appreciation of a conflict of interest is therefore not merely illusory and wanting in
factual basis31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a
complaint filed by a medical representative against his employer drug company for illegal
dismissal for allegedly terminating his employment when he refused to accept his reassignment
to a new area, the Court upheld the right of the drug company to transfer or reassign its employee
in accordance with its operational demands and requirements. The ruling of the Court therein,
quoted hereunder, also finds application in the instant case:

By the very nature of his employment, a drug salesman or medical representative is

expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to areas
where the need for pushing its products is great. More so if such reassignments are part of
the employment contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave
Tecson several chances to eliminate the conflict of interest brought about by his relationship with
Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo
constantly reminded him about its effects on his employment with the company and on the
companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by
either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed
its desire to retain Tecson in its employ because of his satisfactory performance and suggested
that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated
requests for more time to resolve the conflict of interest. When the problem could not be resolved
after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different
from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from
employment but only reassigned him to another area where his home province, Agusan del Sur,
was included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons
family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of
Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 164774

April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN

CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
DECISION

PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer banning
spouses from working in the same company violates the rights of the employee under the
Constitution and the Labor Code or is a valid exercise of management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated
August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations
Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally
of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration
Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N.
Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company.1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco
advised the couple that should they decide to get married, one of them should resign pursuant to
a company policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to
[the] 3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then decided
to get married, one of them should resign to preserve the policy stated above.3
Simbol resigned on June 20, 1998 pursuant to the company policy.4
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee,
whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company
policy, one must resign should they decide to get married. Comia resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly
could have terminated her services due to immorality but she opted to resign on December 21,
1999.6

The respondents each signed a Release and Confirmation Agreement. They stated therein that
they have no money and property accountabilities in the company and that they release the latter
of any claim or demand of whatever nature.7
Respondents offer a different version of their dismissal. Simbol and Comia allege that they did
not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to
respondent Estrella, she alleges that she had a relationship with co-worker Zuiga who
misrepresented himself as a married but separated man. After he got her pregnant, she discovered
that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to
the company policy. On November 30, 1999, she met an accident and was advised by the doctor
at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on
December 21, 1999 but she found out that her name was on-hold at the gate. She was denied
entry. She was directed to proceed to the personnel office where one of the staff handed her a
memorandum. The memorandum stated that she was being dismissed for immoral conduct. She
refused to sign the memorandum because she was on leave for twenty-one (21) days and has not
been given a chance to explain. The management asked her to write an explanation. However,
after submission of the explanation, she was nonetheless dismissed by the company. Due to her
urgent need for money, she later submitted a letter of resignation in exchange for her thirteenth
month pay.8
Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation
pay and attorneys fees. They averred that the aforementioned company policy is illegal and
contravenes Article 136 of the Labor Code. They also contended that they were dismissed due to
their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of
merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation perceived as
management prerogative. This management prerogative is quite broad and encompassing for it
covers hiring, work assignment, working method, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and recall of
workers. Except as provided for or limited by special law, an employer is free to regulate,
according to his own discretion and judgment all the aspects of employment.9 (Citations
omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January
11, 2002. 10

Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as
follows:
(1) Declaring illegal, the petitioners dismissal from employment and ordering private
respondents to reinstate petitioners to their former positions without loss of seniority
rights with full backwages from the time of their dismissal until actual reinstatement; and
(2) Ordering private respondents to pay petitioners attorneys fees amounting to 10% of
the award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards
marriage and the family of employees and of Article 136 of the Labor Code; and
2. x x x respondents resignations were far from voluntary.14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the following
provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with
law. They shall be entitled to security of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the right of
enterprises to reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore,
such contracts are subject to the special laws on labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor
of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar
involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman
employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege that its
policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new
meaning if read together with the first paragraph of the rule. The rule does not require the woman
employee to resign. The employee spouses have the right to choose who between them should
resign. Further, they are free to marry persons other than co-employees. Hence, it is not the
marital status of the employee, per se, that is being discriminated. It is only intended to carry out
its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of the
prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from working in the same
company takes the nature of an anti-nepotism employment policy. Companies adopt these
policies to prevent the hiring of unqualified persons based on their status as a relative, rather than
upon their ability.17 These policies focus upon the potential employment problems arising from
the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment policies
specifically prohibiting spouses from working for the same company. We note that two types of
employment policies involve spouses: policies banning only spouses from working in the same

company (no-spouse employment policies), and those banning all immediate family members,
including spouses, from working in the same company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there
are twenty state statutes20 in the United States prohibiting marital discrimination. Some state
courts21 have been confronted with the issue of whether no-spouse policies violate their laws
prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants utilize
two theories of employment discrimination: the disparate treatment and the disparate impact.
Under the disparate treatment analysis, the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies requiring an employee of
a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an
employment policy prohibiting the employer from hiring wives of male employees, but not
husbands of female employees, is discriminatory on its face.22
On the other hand, to establish disparate impact, the complainants must prove that a facially
neutral policy has a disproportionate effect on a particular class. For example, although most
employment policies do not expressly indicate which spouse will be required to transfer or leave
the company, the policy often disproportionately affects one sex.23
The state courts rulings on the issue depend on their interpretation of the scope of marital status
discrimination within the meaning of their respective civil rights acts. Though they agree that the
term "marital status" encompasses discrimination based on a person's status as either married,
single, divorced, or widowed, they are divided on whether the term has a broader meaning.
Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as married,
single, divorced, or widowed reason that if the legislature intended a broader definition it would
have either chosen different language or specified its intent. They hold that the relevant inquiry is
if one is married rather than to whom one is married. They construe marital status discrimination
to include only whether a person is single, married, divorced, or widowed and not the "identity,
occupation, and place of employment of one's spouse." These courts have upheld the questioned
policies and ruled that they did not violate the marital status discrimination provision of their
respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it encompassed the
identity, occupation and employment of one's spouse. They strike down the no-spouse
employment policies based on the broad legislative intent of the state statute. They reason that
the no-spouse employment policy violate the marital status provision because it arbitrarily
discriminates against all spouses of present employees without regard to the actual effect on the

individual's qualifications or work performance.27 These courts also find the no-spouse
employment policy invalid for failure of the employer to present any evidence of business
necessity other than the general perception that spouses in the same workplace might adversely
affect the business.28 They hold that the absence of such a bona fide occupational
qualification29 invalidates a rule denying employment to one spouse due to the current
employment of the other spouse in the same office.30 Thus, they rule that unless the employer can
prove that the reasonable demands of the business require a distinction based on marital status
and there is no better available or acceptable policy which would better accomplish the business
purpose, an employer may not discriminate against an employee based on the identity of the
employees spouse.31 This is known as the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an employers
no-spouse rule, the exception is interpreted strictly and narrowly by these state courts. There
must be a compelling business necessity for which no alternative exists other than the
discriminatory practice.32 To justify a bona fide occupational qualification, the employer must
prove two factors: (1) that the employment qualification is reasonably related to the essential
operation of the job involved; and, (2) that there is a factual basis for believing that all or
substantially all persons meeting the qualification would be unable to properly perform the duties
of the job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We
employ the standard ofreasonableness of the company policy which is parallel to the bona fide
occupational qualification requirement. In the recent case of Duncan Association of DetailmanPTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity
of the policy of a pharmaceutical company prohibiting its employees from marrying employees
of any competitor company. We held that Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other confidential programs and information
from competitors. We considered the prohibition against personal or marital relationships with
employees of competitor companies upon Glaxos employeesreasonable under the
circumstances because relationships of that nature might compromise the interests of Glaxo. In
laying down the assailed company policy, we recognized that Glaxo only aims to protect its
interests against the possibility that a competitor company will gain access to its secrets and
procedures.35
The requirement that a company policy must be reasonable under the circumstances to qualify
as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine
Telegraph and Telephone Company v. NLRC.36 In said case, the employee was dismissed in
violation of petitioners policy of disqualifying from work any woman worker who contracts
marriage. We held that the company policy violates the right against discrimination afforded all
women workers under Article 136 of the Labor Code, but established a permissible
exception, viz.:

[A] requirement that a woman employee must remain unmarried could be justified as a "bona
fide occupational qualification," or BFOQ, where the particular requirements of the job would
justify the same, but not on the ground of a general principle, such as the desirability of
spreading work in the workplace. A requirement of that nature would be valid provided it reflects
an inherent quality reasonably necessary for satisfactory job performance.37 (Emphases
supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must
be clearly established to uphold the questioned employment policy. The employer has the burden
to prove the existence of a reasonable business necessity. The burden was successfully
discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners sole contention that "the company did not just want to have two (2) or more of its
employees related between the third degree by affinity and/or consanguinity"38 is lame. That the
second paragraph was meant to give teeth to the first paragraph of the questioned rule39 is
evidently not the valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were found fit for
the job, but were asked to resign when they married a co-employee. Petitioners failed to show
how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an
employee of the Repacking Section, could be detrimental to its business operations. Neither did
petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a
Production Helper in the Selecting Department, who married Howard Comia, then a helper in the
cutter-machine. The policy is premised on the mere fear that employees married to each other
will be less efficient. If we uphold the questioned rule without valid justification, the employer
can create policies based on an unproven presumption of a perceived danger at the expense of an
employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-employee,
but they are free to marry persons other than co-employees. The questioned policy may not
facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under
the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners
to prove a legitimate business concern in imposing the questioned policy cannot prejudice the
employees right to be free from arbitrary discrimination based upon stereotypes of married
persons working together in one company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction
cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and

extensive that we cannot prudently draw inferences from the legislatures silence41 that married
persons are not protected under our Constitution and declare valid a policy based on a prejudice
or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business
necessity, we rule that the questioned policy is an invalid exercise of management prerogative.
Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has
become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact
that her resignation letter was written in her own handwriting. Both ruled that her resignation
was voluntary and thus valid. The respondent court failed to categorically rule whether Estrella
voluntarily resigned but ordered that she be reinstated along with Simbol and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in dire need
of money. We examined the records of the case and find Estrellas contention to be more in
accord with the evidence. While findings of fact by administrative tribunals like the NLRC are
generally given not only respect but, at times, finality, this rule admits of exceptions,42 as in the
case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her
alleged immoral conduct. At first, she did not want to sign the termination papers but she was
forced to tender her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got impregnated
by a married man and she could not stand being looked upon or talked about as immoral43 is
incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have
gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the employee is compelled by personal
reason(s) to dissociate himself from employment. It is done with the intention of relinquishing an
office, accompanied by the act of abandonment. 44 Thus, it is illogical for Estrella to resign and
then file a complaint for illegal dismissal. Given the lack of sufficient evidence on the part of
petitioners that the resignation was voluntary, Estrellas dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated
August 3, 2004 isAFFIRMED.1avvphil.net
SO ORDERED