1

LABREV
[G.R. No. 47800. December 2, 1940.]
1.MAXIMO CALALANG, Petitioner, v. A. D.
WILLIAMS, ET AL., Respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF
COMMONWEALTH ACT No. 648; DELEGATION OF
LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF
PUBLIC WORKS AND SECRETARY OF PUBLIC
WORKS AND COMMUNICATIONS TO PROMULGATE
RULES AND REGULATIONS. The provisions of
section 1 of Commonwealth Act No. 648 do not
confer legislative power upon the Director of Public
Works and the Secretary of Public Works and
Communications. The authority therein conferred
upon them and under which they promulgated the
rules and regulations now complained of is not to
determine what public policy demands but merely
to carry out the legislative policy laid down by the
National Assembly in said Act, to wit, "to promote
safe transit upon, and avoid obstructions on, roads
and streets designated as national roads by acts of
the National Assembly or by executive orders of
the President of the Philippines" and to close them
temporarily to any or all classes of traffic
"whenever the condition of the road or the traffic
thereon makes such action necessary or advisable
in the public convenience and interest." The
delegated power, if at all, therefore, is not the
determination of what the law shall be, but merely
the ascertainment of the facts and circumstances
upon which the application of said law is to be
predicated. To promulgate rules and regulations on
the use of national roads and to determine when
and how long a national road should be closed to
traffic, in view of the condition of the road or the
traffic thereon and the requirements of public
convenience and interest, is an administrative
function which cannot be directly discharged by
the National Assembly. It must depend on the
discretion of some other government official to
whom is confided the duty of determining whether
the proper occasion exists for executing the law.
But it cannot be said that the exercise of such
discretion is the making of the law.
2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY;
GOVERNMENTAL AUTHORITY. Commonwealth
Act No. 548 was passed by the National Assembly
in the exercise of the paramount police power of
the state. Said Act, by virtue of which the rules and
regulations complained of were promulgated, aims
to promote safe transit upon and avoid
obstructions on national roads, in the interest and

convenience of the public. In enacting said law,

therefore, the National Assembly was prompted by
considerations of public convenience and welfare.
It was inspired by a desire to relieve congestion of
traffic, which is, to say the least, a menace to
public safety. Public welfare, then, lies at the
bottom of the enactment of said law, and the state
in order to promote the general welfare may
interfere with personal liberty, with property, and
with business and occupations. Persons and
property may be subjected to all kinds of restraints
and burdens, in order to secure the general
comfort, health, and prosperity of the state (U.S. v.
Gomer Jesus, 31 Phil., 218). To this fundamental
aim of our Government the rights of the individual
are subordinated. Liberty is a blessing without
which life is a misery, but liberty should not be
made to prevail over authority because then
society will fall into anarchy. Neither should
authority be made to prevail over liberty because
then the individual will fall into slavery. The citizen
should achieve the required balance of liberty and
authority in his mind through education and,
personal discipline, so that there may be
established the resultant equilibrium, which means
peace and order and happiness for all. The
moment greater authority is conferred upon the
government, logically so much is withdrawn from
the residuum of liberty which resides in the people.
The paradox lies in the fact that the apparent
curtailment of liberty is precisely the very means
of insuring its preservation.
3. ID.; ID.; SOCIAL JUSTICE. Social justice is
"neither communism, nor despotism, nor atomism,
nor anarchy," but the humanization of laws and the
equalization of social and economic forces by the
State so that justice in its rational and objectively
secular conception may at least be approximated.
Social justice means the promotion of the welfare
of all the people, the adoption by the Government
of measures calculated to insure economic stability
of all the competent elements of society, through
the maintenance of a proper economic and social
equilibrium in the interrelations of the members of
the community, constitutionally, through the
adoption of measures legally justifiable, or extraconstitutionally, through the exercise of powers
underlying the existence of all governments on the
time-honored principle of salus populi est suprema
lex. Social justice, therefore, must be founded on
the recognition of the necessity of
interdependence among divers and diverse units
of a society and of the protection that should be
equally and evenly extended to all groups as a
combined force in our social and economic life,
consistent with the fundamental and paramount

2
objective of the state of promoting the health,
comfort, and quiet of all persons, and of bringing
about "the greatest good to the greatest number."
DECISION
LAUREL, J.:
Maximo Calalang, in his capacity as a private
citizen and as a taxpayer of Manila, brought before
this court this petition for a writ of prohibition
against the respondents, A. D. Williams, as
Chairman of the National Traffic Commission;
Vicente Fragante, as Director of Public Works;
Sergio Bayan, as Acting Secretary of Public Works
and Communications; Eulogio Rodriguez, as Mayor
of the City of Manila; and Juan Dominguez, as
Acting Chief of Police of Manila.
It is alleged in the petition that the National Traffic
Commission, in its resolution of July 17, 1940,
resolved to recommend to the Director of Public
Works and to the Secretary of Public Works and
Communications that animal-drawn vehicles be
prohibited from passing along Rosario Street
extending from Plaza Calderon de la Barca to
Dasmarias Street, from 7:30 a.m. to 12:30 p.m.
and from 1:30 p.m. to 5:30 p.m.; and along Rizal
Avenue extending from the railroad crossing at
Antipolo Street to Echague Street, from 7 a.m. to
11 p.m., from a period of one year from the date of
the opening of the Colgante Bridge to traffic; that
the Chairman of the National Traffic Commission,
on July 18, 1940 recommended to the Director of
Public Works the adoption of the measure
proposed in the resolution aforementioned, in
pursuance of the provisions of Commonwealth Act
No. 548 which authorizes said Director of Public
Works, with the approval of the Secretary of Public
Works and Communications, to promulgate rules
and regulations to regulate and control the use of
and traffic on national roads; that on August 2,
1940, the Director of Public Works, in his first
indorsement to the Secretary of Public Works and
Communications, recommended to the latter the
approval of the recommendation made by the
Chairman of the National Traffic Commission as
aforesaid, with the modification that the closing of
Rizal Avenue to traffic to animal-drawn vehicles be
limited to the portion thereof extending from the
railroad crossing at Antipolo Street to Azcarraga
Street; that on August 10, 1940, the Secretary of
Public Works and Communications, in his second
indorsement addressed to the Director of Public

Works, approved the recommendation of the latter

that Rosario Street and Rizal Avenue be closed to
traffic of animal-drawn vehicles, between the
points and during the hours as above indicated, for
a period of one year from the date of the opening
of the Colgante Bridge to traffic; that the Mayor of
Manila and the Acting Chief of Police of Manila
have enforced and caused to be enforced the rules
and regulations thus adopted; that as a
consequence of such enforcement, all animaldrawn vehicles are not allowed to pass and pick up
passengers in the places above-mentioned to the
detriment not only of their owners but of the riding
public as well.
It is contended by the petitioner that
Commonwealth Act No. 548 by which the Director
of Public Works, with the approval of the Secretary
of Public Works and Communications, is authorized
to promulgate rules and regulations for the
regulation and control of the use of and traffic on
national roads and streets is unconstitutional
because it constitutes an undue delegation of
legislative power. This contention is untenable. As
was observed by this court in Rubi v. Provincial
Board of Mindoro (39 Phil, 660, 700), "The rule has
nowhere been better stated than in the early Ohio
case decided by Judge Ranney, and since followed
in a multitude of cases, namely: The true
distinction therefore is between the delegation of
power to make the law, which necessarily involves
a discretion as to what it shall be, and conferring
an authority or discretion as to its execution, to be
exercised under and in pursuance of the law. The
first cannot be done; to the latter no valid
objection can be made. (Cincinnati, W. & Z. R. Co.
v. Commrs. Clinton County, 1 Ohio St., 88.)
Discretion, as held by Chief Justice Marshall in
Wayman v. Southard (10 Wheat., 1) may be
committed by the Legislature to an executive
department or official. The Legislature may make
decisions of executive departments or subordinate
officials thereof, to whom it has committed the
execution of certain acts, final on questions of fact.
(U.S. v. Kinkead, 248 Fed., 141.) The growing
tendency in the decisions is to give prominence to
the necessity of the case."cralaw virtua1aw
library
Section 1 of Commonwealth Act No. 548 reads as
follows:jgc:chanrobles.com.ph
"SECTION 1. To promote safe transit upon, and
avoid obstructions on, roads and streets
designated as national roads by acts of the
National Assembly or by executive orders of the
President of the Philippines, the Director of Public

3
Works, with the approval of the Secretary of Public
Works and Communications, shall promulgate the
necessary rules and regulations to regulate and
control the use of and traffic on such roads and
streets. Such rules and regulations, with the
approval of the President, may contain provisions
controlling or regulating the construction of
buildings or other structures within a reasonable
distance from along the national roads. Such roads
may be temporarily closed to any or all classes of
traffic by the Director of Public Works and his duly
authorized representatives whenever the condition
of the road or the traffic thereon makes such
action necessary or advisable in the public
convenience and interest, or for a specified period,
with the approval of the Secretary of Public Works
and Communications."cralaw virtua1aw library
The above provisions of law do not confer
legislative power upon the Director of Public Works
and the Secretary of Public Works and
Communications. The authority therein conferred
upon them and under which they promulgated the
rules and regulations now complained of is not to
determine what public policy demands but merely
to carry out the legislative policy laid down by the
National Assembly in said Act, to wit, "to promote
safe transit upon and avoid obstructions on, roads
and streets designated as national roads by acts of
the National Assembly or by executive orders of
the President of the Philippines" and to close them
temporarily to any or all classes of traffic
"whenever the condition of the road or the traffic
makes such action necessary or advisable in the
public convenience and interest." The delegated
power, if at all, therefore, is not the determination
of what the law shall be, but merely the
ascertainment of the facts and circumstances upon
which the application of said law is to be
predicated. To promulgate rules and regulations on
the use of national roads and to determine when
and how long a national road should be closed to
traffic, in view of the condition of the road or the
traffic thereon and the requirements of public
convenience and interest, is an administrative
function which cannot be directly discharged by
the National Assembly. It must depend on the
discretion of some other government official to
whom is confided the duty of determining whether
the proper occasion exists for executing the law.
But it cannot be said that the exercise of such
discretion is the making of the law. As was said in
Lockes Appeal (72 Pa. 491): "To assert that a law
is less than a law, because it is made to depend on
a future event or act, is to rob the Legislature of
the power to act wisely for the public welfare
whenever a law is passed relating to a state of

affairs not yet developed, or to things future and

impossible to fully know." The proper distinction
the court said was this: "The Legislature cannot
delegate its power to make the law; but it can
make a law to delegate a power to determine
some fact or state of things upon which the law
makes, or intends to make, its own action depend.
To deny this would be to stop the wheels of
government. There are many things upon which
wise and useful legislation must depend which
cannot be known to the law-making power, and,
must, therefore, be a subject of inquiry and
determination outside of the halls of legislation."
(Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmea,
G.R. Nos. 46076 and 46077, promulgated June 12,
1939, and in Pangasinan Transportation v. The
Public Service Commission, G.R. No. 47065,
promulgated June 26, 1940, this Court had
occasion to observe that the principle of
separation of powers has been made to adapt
itself to the complexities of modern governments,
giving rise to the adoption, within certain limits, of
the principle of "subordinate legislation," not only
in the United States and England but in practically
all modern governments. Accordingly, with the
growing complexity of modern life, the
multiplication of the subjects of governmental
regulations, and the increased difficulty of
administering the laws, the rigidity of the theory of
separation of governmental powers has, to a large
extent, been relaxed by permitting the delegation
of greater powers by the legislative and vesting a
larger amount of discretion in administrative and
executive officials, not only in the execution of the
laws, but also in the promulgation of certain rules
and regulations calculated to promote public
interest.
The petitioner further contends that the rules and
regulations promulgated by the respondents
pursuant to the provisions of Commonwealth Act
No. 548 constitute an unlawful interference with
legitimate business or trade and abridge the right
to personal liberty and freedom of locomotion.
Commonwealth Act No. 548 was passed by the
National Assembly in the exercise of the
paramount police power of the state.
Said Act, by virtue of which the rules and
regulations complained of were promulgated, aims
to promote safe transit upon and avoid
obstructions on national roads, in the interest and
convenience of the public. In enacting said law,
therefore, the National Assembly was prompted by
considerations of public convenience and welfare.

4
It was inspired by a desire to relieve congestion of
traffic. which is, to say the least, a menace to
public safety. Public welfare, then, lies at the
bottom of the enactment of said law, and the state
in order to promote the general welfare may
interfere with personal liberty, with property, and
with business and occupations. Persons and
property may be subjected to all kinds of restraints
and burdens, in order to secure the general
comfort, health, and prosperity of the state (U.S. v.
Gomez Jesus, 31 Phil., 218). To this fundamental
aim of our Government the rights of the individual
are subordinated. Liberty is a blessing without
which life is a misery, but liberty should not be
made to prevail over authority because then
society will fall into anarchy. Neither should
authority be made to prevail over liberty because
then the individual will fall into slavery. The citizen
should achieve the required balance of liberty and
authority in his mind through education and
personal discipline, so that there may be
established the resultant equilibrium, which means
peace and order and happiness for all. The
moment greater authority is conferred upon the
government, logically so much is withdrawn from
the residuum of liberty which resides in the people.
The paradox lies in the fact that the apparent
curtailment of liberty is precisely the very means
of insuring its preservation.
The scope of police power keeps expanding as
civilization advances. As was said in the case of
Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L.
ed. 169), "the right to exercise the police power is
a continuing one, and a business lawful today may
in the future, because of the changed situation,
the growth of population or other causes, become
a menace to the public health and welfare, and be
required to yield to the public good." And in People
v. Pomar (46 Phil., 440), it was observed that
"advancing civilization is bringing within the police
power of the state today things which were not
thought of as being within such power yesterday.
The development of civilization, the rapidly
increasing population, the growth of public opinion,
with an increasing desire on the part of the masses
and of the government to look after and care for
the interests of the individuals of the state, have
brought within the police power many questions
for regulation which formerly were not so
considered."cralaw virtua1aw library
The petitioner finally avers that the rules and
regulations complained of infringe upon the
constitutional precept regarding the promotion of
social justice to insure the well-being and
economic security of all the people. The promotion

of social justice, however, is to be achieved not

through a mistaken sympathy towards any given
group. Social justice is "neither communism, nor
despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social
and economic forces by the State so that justice in
its rational and objectively secular conception may
at least be approximated. Social justice means the
promotion of the welfare of all the people, the
adoption by the Government of measures
calculated to insure economic stability of all the
competent elements of society, through the
maintenance of a proper economic and social
equilibrium in the interrelations of the members of
the community, constitutionally, through the
adoption of measures legally justifiable, or extraconstitutionally, through the exercise of powers
underlying the existence of all governments on the
time-honored principle of salus populi est suprema
lex.
Social justice, therefore, must be founded on the
recognition of the necessity of interdependence
among divers and diverse units of a society and of
the protection that should be equally and evenly
extended to all groups as a combined force in our
social and economic life, consistent with the
fundamental and paramount objective of the state
of promoting the health, comfort, and quiet of all
persons, and of bringing about "the greatest good
to the greatest number."cralaw virtua1aw library
In view of the foregoing, the writ of prohibition
prayed for is hereby denied, with costs against the
petitioner. So ordered.
Avancea, C.J., Imperial, Diaz. and Horrilleno. JJ.
concur.
2. ADELAIDA B. AQUINO, G.R. No. 149256
Petitioner,
Present:
PUNO, J., Chairperson,
- v e r s u s - SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and
GARCIA, JJ.
SOCIAL SECURITY SYSTEM and
U.S. NAVAL COMMISSARY
STORE, Subic Bay,
Respondents. Promulgated:
July 21, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

5
DECISION
CORONA, J.:
At bar is an appeal by certiorari under Rule 45 of
the 1997 Rules of Civil Procedure assailing the
decision of the Court of Appeals (CA) in CA-G.R. SP
No. 60726, entitled Adelaida B. Aquino v. Social
Security System, dismissing
petitioner Adelaida Aquinos claim under
Presidential Decree (PD) No. 626 (the Employees
Compensation Act).
Petitioners husband, Jaime Aquino, worked as
grocery man for the US Navy
Commissary, Subic Bay, Olongapo City from 1970
to 1977. He performed the following tasks: (1)
checked the availability of stocks before they were
turned over to the supervisor of the store; (2) piled
items in shelves and display cases and assisted
patrons in locating them; (3) processed retail price
changes by conducting inventories of items and (4)
operated the forklift.
On February 2, 2000 or about 23 years after his
separation from employment, he died of
congestive heart failure. Petitioner filed a claim for
surviving spouses compensation benefits under PD
626 with respondent Social Security System (SSS).
The latter denied the claim.
Petitioner then appealed the case to the
Employees Compensation Commission (ECC) which
affirmed SSSs dismissal of the claim on the ground
that the cause of death of petitioners husband was
not attributable to the nature of his work as a
grocery man in the Commissary. He was no longer
connected with the store at that time.
Aggrieved, petitioner went to the CA seeking the
reversal of the ECCs decision. There, petitioner
insisted that the cause of her husbands death was
traceable to the nature of his job at the
commissary store. The CA dismissed her appeal.
[1] Petitioner sought reconsideration of the CA
decision[2] but it was denied, hence, this petition.
In this petition, petitioner essentially faults the CA
for not finding that the ailment causing her
husbands death was compensable under PD 626.
[3]
The petition will not prosper.
Under the law, the beneficiary of an employee is
entitled to death benefits if the cause of death is
(1) an illness accepted as an occupational disease

by the ECC or (2) any other illness caused by

employment, subject to proof that the risk of
contracting the same was increased by the
working conditions.[4]
Stated otherwise, a claimant must prove that the
illness is listed as an occupational disease by the
ECC; otherwise, he must present substantial
evidence showing that the nature of the work
increased the risk of contracting it.
In the case of Panangui v. Employees
Compensation Commission,[5] the Court explained
congestive heart failure as:
a clinical syndrome which develops eventually in
50-60% of all patients with organic cardiovascular
disease. It is defined as the clinical state resulting
from the inability of the heart to expel sufficient
blood for the metabolic demands of the body.
Heart failure may therefore be present when the
cardiac output is high, normal or low, regardless of
the absolute level, the cardiac output is reduced to
metabolic demands
Under the Rules on Employees Compensation,
particularly Annex A thereof which contains the list
of occupational diseases, congestive heart failure
is not included. Hence, petitioner should have
shown proof that the working conditions in the
commissary store where her husband worked
aggravated the risk of contracting the ailment.
[6] Petitioner should have adduced evidence of a
reasonable connection between the work of her
deceased husband and the cause of his death, or
that the progression of the disease was brought
about largely by the conditions in her husbands job
as grocery man at the commissary store.[7] Failing
in this aspect, we are constrained to rule that her
husbands illness which eventually caused his
demise was not compensable.
Moreover, even if we were to construe the ailment
of petitioners husband as cardiovascular disease
compensable under ECC Resolution No. 432, the
petition will still not prosper. To be compensable,
the cardiovascular (or heart) disease of
Jaime Aquino must have occurred under any of the
following conditions:
(a)
[i]f the heart disease was known to
have been present during employment[,] there
must be proof that an acute exacerbation clearly
precipitated by the unusual strain by reason of the
nature of his work;

6
(b)
[t]he strain of work that [brought]
about an acute attack must be of sufficient
severity and must be followed within twenty-four
(24) hours by clinical signs of a cardiac insult to
constitute causal relationship;
(c)
[i]f a person who was apparently
symptomatic before subjecting himself to strain at
work showed signs and symptoms of cardiac injury
during the performance of his work and such
symptoms and signs persisted, it [was] reasonable
to claim a causal relationship.[8]

Clearly, the circumstances of the present case do

not fall under any of the foregoing conditions.
In addition, granting petitioners claim will set a
bad precedent considering that 23 years elapsed
from the time her husband stopped working at the
commissary store up to the time he died. If we
were to grant it, we might unduly burden the funds
of the ECC and jeopardize it with a flood of
unsubstantiated claims. Besides, the Court cannot
remain oblivious to the possibility that, within that
23-year period, other factors intervened to cause
the death of petitioners husband. Petitioner was
thus under an even greater compulsion to proffer
evidence to negate this possibility and establish
the causal connection between her husbands work
and his death. The 23-year gap between his
separation from employment in 1977 and his
death in 2000 was a gaping hole in petitioners
claim.
Furthermore, well-entrenched is the rule that
findings of fact of administrative officials who have
acquired expertise on account of their specialized
jurisdiction are accorded by the Courts not only
respect but, most often, with finality.
Lastly, while it is true that PD 626 operates on the
principle of social justice, sympathy for the workers
should also be placed in a sensible equilibrium
with the stability of the ECC trust fund.
WHEREFORE, the assailed decision of the Court of
Appeals in CA-G.R. SP No. 60726 is
hereby AFFIRMED. Accordingly, the petition
isDENIED.
No costs.
SO ORDERED.
3. G.R. No. 85985 August 13, 1993

PHILIPPINE AIRLINES, INC. (PAL), petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR
ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION
(PALEA), respondents.
Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.
MELO, J.:
In the instant petition for certiorari, the Court is
presented the issue of whether or not the
formulation of a Code of Discipline among
employees is a shared responsibility of the
employer and the employees.
On March 15, 1985, the Philippine Airlines, Inc.
(PAL) completely revised its 1966 Code of
Discipline. The Code was circulated among the
employees and was immediately implemented,
and some employees were forthwith subjected to
the disciplinary measures embodied therein.
Thus, on August 20, 1985, the Philippine Airlines
Employees Association (PALEA) filed a complaint
before the National Labor Relations Commission
(NLRC) for unfair labor practice (Case No. NCR-72051-85) with the following remarks: "ULP with
arbitrary implementation of PAL's Code of
Discipline without notice and prior discussion with
Union by Management" (Rollo, p. 41). In its
position paper, PALEA contended that PAL, by its
unilateral implementation of the Code, was guilty
of unfair labor practice, specifically Paragraphs E
and G of Article 249 and Article 253 of the Labor
Code. PALEA alleged that copies of the Code had
been circulated in limited numbers; that being
penal in nature the Code must conform with the
requirements of sufficient publication, and that the
Code was arbitrary, oppressive, and prejudicial to
the rights of the employees. It prayed that
implementation of the Code be held in abeyance;
that PAL should discuss the substance of the Code
with PALEA; that employees dismissed under the
Code be reinstated and their cases subjected to
further hearing; and that PAL be declared guilty of
unfair labor practice and be ordered to pay
damages (pp. 7-14, Record.)
PAL filed a motion to dismiss the complaint,
asserting its prerogative as an employer to
prescibe rules and regulations regarding
employess' conduct in carrying out their duties and
functions, and alleging that by implementing the
Code, it had not violated the collective bargaining
agreement (CBA) or any provision of the Labor
Code. Assailing the complaint as unsupported by
evidence, PAL maintained that Article 253 of the
Labor Code cited by PALEA reffered to the
requirements for negotiating a CBA which was

7
inapplicable as indeed the current CBA had been
negotiated.
In its reply to PAL's position paper, PALEA
maintained that Article 249 (E) of the Labor Code
was violated when PAL unilaterally implemented
the Code, and cited provisions of Articles IV and I
of Chapter II of the Code as defective for,
respectively, running counter to the construction of
penal laws and making punishable any offense
within PAL's contemplation. These provisions are
the following:
Sec. 2. Non-exclusivity. This Code does not
contain the entirety of the rules and regulations of
the company. Every employee is bound to comply
with all applicable rules, regulations, policies,
procedures and standards, including standards of
quality, productivity and behaviour, as issued and
promulgated by the company through its duly
authorized officials. Any violations thereof shall be
punishable with a penalty to be determined by the
gravity and/or frequency of the offense.
Sec. 7. Cumulative Record. An employee's
record of offenses shall be cumulative. The penalty
for an offense shall be determined on the basis of
his past record of offenses of any nature or the
absence thereof. The more habitual an offender
has been, the greater shall be the penalty for the
latest offense. Thus, an employee may be
dismissed if the number of his past offenses
warrants such penalty in the judgment of
management even if each offense considered
separately may not warrant dismissal. Habitual
offenders or recidivists have no place in PAL. On
the other hand, due regard shall be given to the
length of time between commission of individual
offenses to determine whether the employee's
conduct may indicate occasional lapses (which
may nevertheless require sterner disciplinary
action) or a pattern of incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case
called the parties to a conference but they failed to
appear at the scheduled date. Interpreting such
failure as a waiver of the parties' right to present
evidence, the labor arbiter considered the case
submitted for decision. On November 7, 1986, a
decision was rendered finding no bad faith on the
part of PAL in adopting the Code and ruling that no
unfair labor practice had been committed.
However, the arbiter held that PAL was "not totally
fault free" considering that while the issuance of
rules and regulations governing the conduct of
employees is a "legitimate management
prerogative" such rules and regulations must meet
the test of "reasonableness, propriety and
fairness." She found Section 1 of the Code
aforequoted as "an all embracing and all
encompassing provision that makes punishable

any offense one can think of in the company";

while Section 7, likewise quoted above, is
"objectionable for it violates the rule against
double jeopardy thereby ushering in two or more
punishment for the same misdemeanor." (pp. 3839, Rollo.)
The labor arbiter also found that PAL "failed to
prove that the new Code was amply circulated."
Noting that PAL's assertion that it had furnished all
its employees copies of the Code is unsupported
by documentary evidence, she stated that such
"failure" on the part of PAL resulted in the
imposition of penalties on employees who thought
all the while that the 1966 Code was still being
followed. Thus, the arbiter concluded that "(t)he
phrase ignorance of the law excuses no one from
compliance . . . finds application only after it has
been conclusively shown that the law was
circulated to all the parties concerned and efforts
to disseminate information regarding the new law
have been exerted. (p. 39, Rollo.) She thereupon
disposed:
WHEREFORE, premises considered, respondent PAL
is hereby ordered as follows:
1. Furnish all employees with the new Code of
Discipline;
2. Reconsider the cases of employees meted with
penalties under the New Code of Discipline and
remand the same for further hearing; and
3. Discuss with PALEA the objectionable provisions
specifically tackled in the body of the decision.
All other claims of the complainant union (is) [are]
hereby, dismissed for lack of merit.
SO ORDERED. (p. 40, Rollo.)
PAL appealed to the NLRC. On August 19, 1988,
the NLRC through Commissioner Encarnacion, with
Presiding Commissioner Bonto-Perez and
Commissioner Maglaya concurring, found no
evidence of unfair labor practice committed by PAL
and affirmed the dismissal of PALEA's charge.
Nonetheless, the NLRC made the following
observations:
Indeed, failure of management to discuss the
provisions of a contemplated code of discipline
which shall govern the conduct of its employees
would result in the erosion and deterioration of an
otherwise harmonious and smooth relationship
between them as did happen in the instant case.
There is no dispute that adoption of rules of
conduct or discipline is a prerogative of
management and is imperative and essential if an
industry, has to survive in a competitive world. But
labor climate has progressed, too. In the Philippine
scene, at no time in our contemporary history is
the need for a cooperative, supportive and smooth
relationship between labor and management more
keenly felt if we are to survive economically.

8
Management can no longer exclude labor in the
deliberation and adoption of rules and regulations
that will affect them.
The complainant union in this case has the right to
feel isolated in the adoption of the New Code of
Discipline. The Code of Discipline involves security
of tenure and loss of employment a property
right! It is time that management realizes that to
attain effectiveness in its conduct rules, there
should be candidness and openness by
Management and participation by the union,
representing its members. In fact, our Constitution
has recognized the principle of "shared
responsibility" between employers and workers
and has likewise recognized the right of workers to
participate in "policy and decision-making process
affecting their rights . . ." The latter provision was
interpreted by the Constitutional Commissioners to
mean participation in "management"' (Record of
the Constitutional Commission, Vol. II).
In a sense, participation by the union in the
adoption of the code if conduct could have
accelerated and enhanced their feelings of
belonging and would have resulted in cooperation
rather than resistance to the Code. In fact, labormanagement cooperation is now "the thing." (pp.
3-4, NLRC Decision ff. p. 149, Original Record.)
Respondent Commission thereupon disposed:
WHEREFORE, premises considered, we modify the
appealed decision in the sense that the New Code
of Discipline should be reviewed and discussed
with complainant union, particularly the disputed
provisions [.] (T)hereafter, respondent is directed
to furnish each employee with a copy of the
appealed Code of Discipline. The pending cases
adverted to in the appealed decision if still in the
arbitral level, should be reconsidered by the
respondent Philippine Air Lines. Other dispositions
of the Labor Arbiter are sustained.
SO ORDERED. (p. 5, NLRC Decision.)
PAL then filed the instant petition
for certiorari charging public respondents with
grave abuse of discretion in: (a) directing PAL "to
share its management prerogative of formulating a
Code of Discipline"; (b) engaging in quasi-judicial
legislation in ordering PAL to share said
prerogative with the union; (c) deciding beyond the
issue of unfair labor practice, and (d) requiring PAL
to reconsider pending cases still in the arbitral
level (p. 7, Petition; p. 8,Rollo.)
As stated above, the Principal issue submitted for
resolution in the instant petition is whether
management may be compelled to share with the
union or its employees its prerogative of
formulating a code of discipline.
PAL asserts that when it revised its Code on March
15, 1985, there was no law which mandated the

sharing of responsibility therefor between

employer and employee.
Indeed, it was only on March 2, 1989, with the
approval of Republic Act No. 6715, amending
Article 211 of the Labor Code, that the law
explicitly considered it a State policy "(t)o ensure
the participation of workers in decision and policymaking processes affecting the rights, duties and
welfare." However, even in the absence of said
clear provision of law, the exercise of management
prerogatives was never considered boundless.
Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it
was held that management's prerogatives must be
without abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO)
vs. Ople (170 SCRA 25 [1989]), we upheld the
company's right to implement a new system of
distributing its products, but gave the following
caveat:
So long as a company's management prerogatives
are exercised in good faith for the advancement of
the employer's interest and not for the purpose of
defeating or circumventing the rights of the
employees under special laws or under valid
agreements, this Court will uphold them.
(at p. 28.)
All this points to the conclusion that the exercise of
managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a
collective bargaining agreement, or the general
principles of fair play and justice (University of Sto.
Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover,
as enunciated in Abbott Laboratories (Phil.), vs.
NLRC (154 713 [1987]), it must be duly established
that the prerogative being invoked is clearly a
managerial one.
A close scrutiny of the objectionable provisions of
the Code reveals that they are not purely businessoriented nor do they concern the management
aspect of the business of the company as in
the San Miguel case. The provisions of the Code
clearly have repercusions on the employee's right
to security of tenure. The implementation of the
provisions may result in the deprivation of an
employee's means of livelihood which, as correctly
pointed out by the NLRC, is a property right
(Callanta, vs Carnation Philippines, Inc., 145 SCRA
268 [1986]). In view of these aspects of the case
which border on infringement of constitutional
rights, we must uphold the constitutional
requirements for the protection of labor and the
promotion of social justice, for these factors,
according to Justice Isagani Cruz, tilt "the scales of
justice when there is doubt, in favor of the worker"
(Employees Association of the Philippine American
Life Insurance Company vs. NLRC, 199 SCRA 628
[1991] 635).

9
Verily, a line must be drawn between management
prerogatives regarding business operations per
se and those which affect the rights of the
employees. In treating the latter, management
should see to it that its employees are at least
properly informed of its decisions or modes action.
PAL asserts that all its employees have been
furnished copies of the Code. Public respondents
found to the contrary, which finding, to say the
least is entitled to great respect.
PAL posits the view that by signing the 1989-1991
collective bargaining agreement, on June 27, 1990,
PALEA in effect, recognized PAL's "exclusive right
to make and enforce company rules and
regulations to carry out the functions of
management without having to discuss the same
with PALEA and much less, obtain the
latter'sconformity thereto" (pp. 11-12, Petitioner's
Memorandum; pp 180-181, Rollo.) Petitioner's view
is based on the following provision of the
agreement:
The Association recognizes the right of the
Company to determine matters of management it
policy and Company operations and to direct its
manpower. Management of the Company includes
the right to organize, plan, direct and control
operations, to hire, assign employees to work,
transfer employees from one department, to
another, to promote, demote, discipline, suspend
or discharge employees for just cause; to lay-off
employees for valid and legal causes, to introduce
new or improved methods or facilities or to change
existing methods or facilities and the right to make
and enforce Company rules and regulations to
carry out the functions of management.
The exercise by management of its prerogative
shall be done in a just reasonable, humane and/or
lawful manner.
Such provision in the collective bargaining
agreement may not be interpreted as cession of
employees' rights to participate in the deliberation
of matters which may affect their rights and the
formulation of policies relative thereto. And one
such mater is the formulation of a code of
discipline.
Indeed, industrial peace cannot be achieved if the
employees are denied their just participation in the
discussion of matters affecting their rights. Thus,
even before Article 211 of the labor Code (P.D.
442) was amended by Republic Act No. 6715, it
was already declared a policy of the State, "(d) To
promote the enlightenment of workers concerning
their rights and obligations . . . as employees." This
was, of course, amplified by Republic Act No 6715
when it decreed the "participation of workers in
decision and policy making processes affecting
their rights, duties and welfare." PAL's position that

it cannot be saddled with the "obligation" of

sharing management prerogatives as during the
formulation of the Code, Republic Act No. 6715 had
not yet been enacted (Petitioner's Memorandum,
p. 44; Rollo, p. 212), cannot thus be sustained.
While such "obligation" was not yet founded in law
when the Code was formulated, the attainment of
a harmonious labor-management relationship and
the then already existing state policy of
enlightening workers concerning their rights as
employees demand no less than the observance of
transparency in managerial moves affecting
employees' rights.
Petitioner's assertion that it needed the
implementation of a new Code of Discipline
considering the nature of its business cannot be
overemphasized. In fact, its being a local monopoly
in the business demands the most stringent of
measures to attain safe travel for its patrons.
Nonetheless, whatever disciplinary measures are
adopted cannot be properly implemented in the
absence of full cooperation of the employees. Such
cooperation cannot be attained if the employees
are restive on account, of their being left out in the
determination of cardinal and fundamental matters
affecting their employment.
WHEREFORE, the petition is DISMISSED and the
questioned decision AFFIRMED. No special
pronouncement is made as to costs.
SO ORDERED.
4. G.R. No. 108031 March 1, 1995
DEVELOPMENT BANK OF THE
PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
LEONOR A ANG, respondents.
BELLOSILLO, J.:
Is declaration of bankruptcy or judicial liquidation
required before the worker's preference may be
invoked under Art. 110 of the Labor Code?
On 21 March 1977 private respondent Leonor A.
Ang started employment as Executive Secretary
with Tropical Philippines Wood Industries, Inc.
(TPWII), a corporation engaged in the manufacture
and sale of veneer, plywood and sawdust panel
boards. In 1982 she was promoted to the position
of Personnel Officer.
In September 1983 petitioner Development Bank
of the Philippines, as mortgagee of TPWII,
foreclosed its plant facilities and equipment.
Nevertheless TPWII continued its business
operations interrupted only by brief shutdowns for
the purpose of servicing its plant facilities and
equipment. In January 1986 petitioner took
possession of the foreclosed properties. From then
on the company ceased its operations. As a

10
consequence private respondent was on 15 April
1986 verbally terminated from the service.
On 14 December 1987 aggrieved by the
termination of her employment, private
respondent filed with the Labor Arbiter a complaint
for separation pay, 13th month pay, vacation and
sick leave pay, salaries and allowances against
TPWII, its General Manager, and petitioner.
After hearing the Labor Arbiter found TPWII
primarily liable to private respondent but only for
her separation pay and vacation and sick leave
pay because her claims for unpaid wages and 13th
month pay were later paid after the complaint was
filed. 1 The General Manager was absolved of any
liability. But with respect to petitioner, it was held
subsidiarily liable in the event the company failed
to satisfy the judgment. The Labor Arbiter
rationalized that the right of an employee to be
paid benefits due him from the properties of his
employer is superior to the right of the latter's
mortgage, citing this Court's resolution in PNB
v. Delta Motor Workers Union. 2
On 16 November 1992 public respondent National
Labor Relations Commission affirmed the ruling of
the Labor Arbiter. 3
The issue now before us is whether public
respondent committed grave abuse of discretion in
holding that Art. 110 of the Labor Code, as
amended, which refers to worker preference in
case of bankruptcy or liquidation of an employer's
business is applicable to the present case
notwithstanding the absence of any formal
declaration of bankruptcy or judicial liquidation of
TPWII.
Petitioner argues that the decision of public
respondent runs counter to the consistent rulings
of this Court in a long line of cases emphasizing
that the application of Art. 110 of the Labor Code is
contingent upon the institution of bankruptcy or
judicial liquidation proceedings against the
employer.
We hold that public respondent gravely abused its
discretion in affirming the decision of the Labor
Arbiter. Art. 110 should not be treated apart from
other laws but applied in conjunction with the
pertinent provisions of the Civil Code and the
Insolvency Law to the extent that piece-meal
distribution of the assets of the debtor is avoided.
Art. 110, then prevailing, provides:
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 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.
Complementing Art. 110, Sec. 10, Rule VIII, Book
III, of the Revised Rules and Regulations
Implementing the Labor Code provides:
Sec. 10. Payment of wages in case of bankruptcy.
Unpaid wages earned by the employees before
the declaration of bankruptcy or judicial liquidation
of the employer's business shall be given first
preference and shall be paid in full before other
creditors may establish any claim to a share in the
assets of the employer.
We interpreted this provision in Development Bank
of the Philippines v. Santos 4 to mean that
. . . a declaration of bankruptcy or a judicial
liquidation must be present before the worker's
preference may be enforced. Thus, Article 110 of
the Labor Code and its implementing rule cannot
be invoked by the respondents in this case absent
a formal declaration of bankruptcy or a liquidation
order . . . . (Emphasis supplied).
The rationale is that to hold Art. 110 to be
applicable also to extrajudicial proceedings would
be putting the worker in a better position than the
State which could only assert its own prior
preference in case of a judicial proceeding. 5 Art.
110, which was amended by R.A. 6715 effective 21
March 1989, 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.
Obviously, the amendment expanded the concept
of "worker preference" to cover not only unpaid
wages but also other monetary claims to which
even claims of the Government must be deemed
subordinate. The Rules and Regulations
Implementing R.A. 6715, approved 24 May 1989,
also amended the corresponding implementing
rule, and now reads:
Sec. 10. Payment of wages and other monetary
claims in case of bankruptcy. In case of
bankruptcy or liquidation of the employer's
business, the unpaid wages and other monetary
claims of the employees shall be given first
preference and shall be paid in full before the
claims of government and other creditors may be
paid.
Although the terms "declaration" (of bankruptcy)
or "judicial" (liquidation) have been notably
eliminated, still inDevelopment Bank of the
Philippines v. NLRC, 6 this Court did not alter its

11
original position that the right to preference given
to workers under Art. 110 cannot exist in any
effective way prior to the time of its presentation
in distribution proceedings. In effect, we reiterated
our previous interpretation in Development Bank
of the Philippines v. Santos where we said:
It (worker preference) will find application when, in
proceedings such as insolvency, such unpaid
wages shall be paid in full before the "claims of the
Government and other creditors" may be paid. But,
for an orderly settlement of a debtor's assets, all
creditors must be convened, their claims
ascertained and inventoried, and thereafter the
preferences determined. In the course of judicial
proceedings which have for their object the
subjection of the property of the debtor to the
payment of his debts or other lawful obligations.
Thereby, an orderly determination of preference of
creditors' claims is assured (Philippine Savings
Bank vs. Lantin, No. L-33929, September 2, 1983,
124 SCRA 476); the adjudication made will be
binding on all parties-in-interest since those
proceedings are proceedings in rem; and the legal
scheme of classification, concurrence and
preference of credits in the Civil Code, the
Insolvency Law, and the Labor Code is preserved in
harmony. 7
In ruling, as we did, in Development Bank of the
Philippines v. Santos, we took into account the
following pronouncements:
In the event of insolvency, a principal objective
should be to effect an equitable distribution of the
insolvents property among his creditors. To
accomplish this there must first be some
proceeding where notice to all of the insolvent's
creditors may be given and where the claims of
preferred creditors may be bindingly adjudicated.
(De Barreto v. Villanueva, No.
L-14938, December 29, 1962, 6 SCRA 928). The
rationale therefore has been expressed in the
recent case of DBP v. Secretary of Labor (G.R. No.
79351, 28 November 1989), which we quote:
A preference of credit bestows upon the preferred
creditor an advantage of having his credit satisfied
first ahead of other claims which may be
established against the debtor. Logically, it
becomes material only when the properties and
assets of the debtors are insufficient to pay his
debts in full; for if the debtor is amply able to pay
his various creditors in full, how can the necessity
exist to determine which of his creditors shall be
paid first or whether they shall be paid out of the
proceeds of the sale (of) the debtor's specific
property. Indubitably, the preferential right of
credit attains significance only after the properties
of the debtor have been inventoried and
liquidated, and the claims held by his various

creditors have been established (Kuenzle & Sheriff

(Ltd.) v. Villanueva, 41 Phil. 611 [1916]; Barretto v.
Villanueva, G.R. No. 14938, 29 December 1962, 6
SCRA 928; Philippine Savings Bank v. Lantin, G.R.
No. 33929, 2 September 1983, 124 SCRA 476).
In the present case, there is as yet no declaration
of bankruptcy nor judicial liquidation of TPWII.
Hence, it would be premature to enforce the
worker's preference.
The additional ratiocination of public respondent
that "under Article 110 of the Labor Code
complainant enjoys a preference of credit over the
properties of TPWII being held in possession by
DBP," is a dismal misconception of the nature of
preference of credit, a subject matter which we
have already discussed in clear and simple terms
and even distinguished from a lien in Development
Bank of the Philippines v. NLRC 8
. . . 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 insolvent's
assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor . . .
In the words of Republic v. Peralta, supra: 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 laborers: 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 and other
works . . . . To the extent that claims for unpaid
wages fall outside the scope of Article 2241,
number 6, and 22421 number 3, they would come
within the ambit of the category of ordinary
preferred credits under Article 2244.
The DBP anchors its claim on a mortgage credit. 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

12
(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 1l0, when not falling
within Article 2241 (6) and Article 2242 (3), of the
Civil Code and not attached to any specific
property, is all ordinary preferred credit although
its impact is to move it from second priority to first
priority in the order of preference established by
Article 2244 of the Civil Code.
The present controversy could have been easily
settled by public respondent had it referred to
ample jurisprudence which already provides the
solution. Stare decisions et non quiet
movere. Once a case is decided by this Court as
the final arbiter of any justifiable controversy one
way, then another case involving exactly the same
point at issue should be decided in the same
manner. Public respondent had no choice on the
matter. It could not have ruled any other way. This
Court having spoken in a string of cases against
public respondent, its duty is simply to obey
judicial precedents. 9 Any further disregard, if not
defiance, of our rulings will be considered a ground
to hold public respondent in contempt.
WHEREFORE, the petition is GRANTED. The
decision of public respondent National Labor
Relations Commission affirming the decision of the
Labor Arbiter insofar as it held petitioner
Development Bank of the Philippines liable for the
monetary claims of private respondent Leonor A.
Ang is SET ASIDE. The temporary restraining order
we issued on 8 February 1993 10 enjoining the
execution of the decision of public respondent
against petitioner is made PERMANENT.
SO ORDERED.
5. G.R. No. 77859 May 25, 1988
CENTURY TEXTILE MILLS, INC. and ALFREDO T.
ESCAO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON.
LABOR ARBITER FELIPE P. PATI, and EDUARDO
CALANGI, respondents.
Melanio L. Zoreta for petitioners.
The Solicitor General for public respondent.
Alfonso P. Ancheta, Jr. for private respondent.
FELICIANO, J.:
Since 13 December 1974, private respondent
Eduardo Calangi had been employed at the factory
of petitioner Century Textile Mills, Inc. where he
worked initially as an apprentice and later on as a
machine operator in the Finishing Department.
Effective 10 June 1983, however, petitioner

Corporation, acting through its company

officers, 1 placed him under preventive suspension
and, on 27 July 1983, completely terminated his
services with the company. Private respondent
Calangi was accused of having masterminded a
criminal plot against Melchor Meliton and Antonio
Santos, two of his supervisors at his place of work.
The events that led to private respondent's
dismissal are as follows:
According to Rodolfo Marin (a factory co-worker of
private respondent Calangi), at around 12:15 a.m.
on 4 June 1983 and within company premises, he
chanced upon "Gatchie" Torrena (a machine
operator at petitioner's factory) and noticed the
latter mixing some substance with the drinking
water contained in a pitcher from which Meliton
and Santos regularly drank. Before anyone could
take a drink from the pitcher, Marin reported what
he had observed to Meliton who, in turn, informed
Santos of the same. Soon after, Meliton and Santos
took possession of the pitcher of water and filed a
formal report of the incident with company
management. 2 The contents of the pitcher were
subsequently brought to and analyzed by chemists
at the Philippine Constabulary Crime Laboratory at
Camp Crame, Quezon City who found the presence
of a toxic chemical (formaldehyde) therein. 3
In the police investigation that followed, Torrena
confessed that private respondent Calangi
personally instructed him, and he agreed, to place
formaldehyde in the pitcher of water. Torrena also
admitted that he and private respondent were
then motivated by a desire to avenge themselves
upon Meliton and Santos, both of whom had
instigated their (i.e., Torrena's and private
respondent's) suspension from work several times
in the past. 4 These circumstances moved
petitioner Corporation preventively to suspend
Torrena and private respondent Calangi, and
eventually to dismiss them from its employ.
Additionally, criminal charges for attempted
murder were filed against these two employees
with the Office of the Provincial Fiscal of Rizal.
On 11 October 1983, private respondent Calangi
filed a Complaint 5 for illegal dismissal (docketed
as Case No. NLRC-NCR-10-4518-83) with the
Arbitration Branch, National Capital Region, of the
then Ministry of Labor and Employment. Among
other things, private respondent alleged in his
complaint that "[p]rior to his preventive
suspension neither the company nor any of its
officers furnished him [with] a copy of their
charges, if any, nor afforded him the opportunity to
answer the same and defend himself." Hence,
private respondent claimed entitlement to the
following:

13
P50,000.00 Court on 3 April 1987. The Court issued a
Temporary Restraining Orders 8 on 8 April 1987
and, on 24 August 1987, issued a
Actual damages
Resolution 9 giving due course to the Petition and
directing the parties to submit their respective
a) Wages for 3 years
P6,520.80
memoranda.
b) ECOLA for 3 years
3, 841.60
The Petition at bar raises the following issues for
consideration: (1) whether or not private
c) 13th month pay for
respondent Calangi was illegally dismissed from
his job as machine operator; and (2) assuming he
3 years
903.60
was illegally dismissed, whether or not petitioner
Corporation can be ordered legally (a) to reinstate
d) Vacation and Sick
private respondent Calangi to his former position
Leave of 15 days
627.00
11,893.00 in the company, with full backwages and without
loss of seniority rights and other benefits,
each
considering that such relief had not been sought
Exemplary damages
25,000.00 by private respondent in his complaint, and (b) to
pay private respondent an amount for actual
Attorney's fees
17,398.60 damages in excess of what had been claimed by
the latter in his Complaint.
TOTAL
P104,291.60We sustain the ruling of public respondent
Commission that private respondent Calangi had
A prayer for "such other reliefs and remedies
been dismissed without just cause from his
consequent upon the premises" was likewise set
employment by petitioner Corporation.
out in the complaint.
Public respondent Commission found that private
In a Decision 6 dated 16 August 1984, the Labor
respondent Calangi was effectively denied his right
Arbiter dismissed private respondent's Complaint.
to due process in that, prior to his preventive
The Labor Arbiter found that not only was the
suspension and the termination of his services, he
evidence against private respondent Calangi "so
had not been given the opportunity either to affirm
overwhelming" and "sufficient enough" to justify
or refute the charges proferred against him by
his dismissal, but that private respondent had
petitioner Corporation. Petitioners allege however
himself failed inexplicably to deny or controvert
that private respondent Calangi had been
the charges against him.
previously informed of and given the chance to
An appeal was brought by private respondent
answer the company's accusations against him,
Calangi before the public respondent National
but that he had "kept silent" all the while. The
Labor Relations Commission, which agency, on 3
following Memorandum issued by petitioner's
December 1985, rendered a Decision, 7 the
Personnel Manager on 10 June 1983 (Calangi's first
dispositive portion of which reads:
day of preventive suspension) was cited in this
WHEREFORE, with all the foregoing considerations,
connection:
let the appealed decision dated 27 August 1984
MEMO: TO ALL CONCERNED
be, as it is hereby REVERSED. Accordingly,
SUBJ.: Under Preventive Suspension Employees.
complainant's dismissal is hereby declared to be
illegal, and consequently, respondents [petitioners] Please be advised that the following employees
are under preventive suspension (indefinite)
are hereby ordered to reinstate Eduardo Calangi to
namely:
his former or equivalent position without loss of
1. Eduardo Calangi--effective June 10, 1983
seniority and other benefits, with full backwages
2. Gatchie Torrena--effective June 10, 1983
from 27 July 1983 until he is actually reinstated.
GROUND
SO ORDERED.
Policy Instruction No. 10 of the New Labor Code of
Petitioner Corporations' Motion for Reconsideration
the Philippines, Revised Edition 1982.
was denied on 4 April 1986. Sometime in
NOTE: Decision about the indebtedness suspension
November of 1986, the Labor Arbiter issued a writ
of concerned employees was reached after the
of execution directing petitioners to pay private
meeting between the union and the management.
respondent Calangi the amount
Be guided accordingly.
ofP54,747.74 representing the latter's backwages,
MANAGEMENT
13th month pay, living allowance, and vacation
(SGD.) Jovencio G. Tolentino
and sick leave i.e., actual damages.
Personnel Manager
The present Petition for certiorari with Preliminary
Injunction or Restraining Order was filed with this
A. Moral damages

14
Petitioners contend that the above Memorandum
"clearly shows that prior investigation and
consultation with the union was made," and "will
therefore negate the theory of respondents that
respondent Calangi was not afforded the chance to
present his side for the memo itself speaks
otherwise."
The procedure that an employer wishing to
terminate the services of an employee must follow,
is spelled out in the Labor Code:
ART. 278. Miscellaneous provisions.
xxx xxx xxx
However, the employer shall fumish the worker
whose employment is sought to be terminated a
written notice containing a statement of the
causes for termination and shall afford the latter
ample opportunity to be heard and to defend
himself with the assistance of his representative if
he so desires in accordance with company rules
and regulations promulgated pursuant to
guidelines set by the [Department] of Labor and
Employment. Any decision taken by the employer
shall be without prejudice to the right of the worker
to contest the validity and legality of his dismissing
by filing a complaint with the regional branch of
the National Labor Relations Commission. The
burden of proving that the termination was for a
valid or authorized cause shall rest on the
employer. The [Department] may suspend the
effects of the termination pending resolution of the
case in the event of a prima facie finding by the
Ministry that the termination may cause a serious
labor dispute or is in implementation of a mass layoff.
xxx xxx xxx
(Emphasis supplied)
Rule XIV, Book V of the Rules and Regulations
Implementing the Labor Code reiterates the above
requirements:
xxx xxx xxx
Sec. 2. Notice of dismissal. Any employer who
seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or
omission constituting the grounds for his dismissal.
In case of abandomment of work, the notice shall
be served at the worker's last known address.
xxx xxx xxx
Sec. 5. Answer and hearing. The worker may
answer the allegations stated against him in the
notice of dismissal within a reasonable period from
receipt of such notice. The employer shall afford
the worker ample opportunity to be heard and to
defend himself with the assistance of his
representative, if he so desires.
SEC. 6. Decision to dismiss. The employer shall
immediately notify a worker in writing of a decision
to dismiss him stating clearly the reasons therefor.

xxx xxx xxx

(Emphasis supplied)
The twin requirements of notice and hearing
constitute essential elements of due process in
cases of employee dismissal: the requirement of
notice is intended to inform the employee
concerned of the employer's intent to dismiss and
the reason for the proposed dismissal; upon the
other hand, the requirement of hearing affords the
employee an opportunity to answer his employer's
charges against him and accordingly to defend
himself therefrom before dismissal is effected.
Neither of these two requirements can be
dispensed with without running afoul of the due
process requirement of the 1987 Constitution.
The record of this case is bereft of any indication
that a hearing or other gathering was in fact held
where private respondent Calangi was given a
reasonable opportunity to confront his accuser(s)
and to defend against the charges made by the
latter. Petitioner Corporation's "prior consultation"
with the labor union with which private respondent
Calangi was affiliated, was legally insufficient. So
far as the record shows, neither petitioner nor the
labor union actually advised Calangi of the matters
at issue. The Memorandum of petitioner's
Personnel Manager certainly offered no helpful
particulars. It is important to stress that the rights
of an employee whose services are sought to be
terminated to be informed beforehand of his
proposed dismissal (or suspension) as well as of
the reasons therefor, and to be afforded an
adequate opportunity to defend himself from the
charges levelled against him, are rights personal to
the employee. Those rights were not satisfied by
petitioner Corporation's obtaining the consent of or
consulting with the labor union; such consultation
or consent was not a substitute for actual
observance of those rights of private respondent
Calangi. The employee can waive those rights, if
he so chooses, but the union cannot waive them
for him. That the private respondent simply 'kept
silent" all the while, is not adequate to show an
effective waiver of his rights. Notice and
opportunity to be heard must be accorded by an
employer even though the employee does not
affirmatively demand them.
Investigation of the alleged attempt to poison the
drinking water of the two (2) supervisors of the
private respondent was conducted by the Cainta
police authorities. These authorities interrogated
and took the sworn statements of Messrs. Marin,
Torrena, Meliton and Santos who, in one way or
another, had been involved in such incident.
Petitioners argue that the decision to place private
respondent Calangi under preventive suspension
and subsequently to terminate his services was

15
arrived at only after the incident complained of,
and Mr. Calangi, had been investigated by the
company. There is, once again, nothing in the
record to show that private respondent Calangi
been interrogated by the Cainta police authorities
or by anyone else; indeed, it appears that
practically everybody, save Calangi, was so
interrogated by the police. If petitioner Corporation
did notify and investigate private respondent and
did hold a hearing, petitioners have succeeded in
keeping such facts off the record. It needs no
documentation, but perhaps it should be stressed,
that this Court can act only on the basis of matters
which have been submitted in evidence and made
part of the record.
Additionally, the Court notes that the application
filed by petitioner Corporation with the Ministry of
Labor and Employment for clearance to suspend or
terminate the services of Mr. Calangi, cited as
ground therefor "[Calangi's] frustrated plan to
poison Mr. Antonio Santos and Mr. Melchor Meliton
last June 5, 1983." This ground, so far as can be
gathered from the allegations of petitioners in their
pleadings and from the evidence of record, both in
the public respondent Commission and in this
Court, is anchored mainly, if not wholly on Mr.
Torrena's sworn statement, given to the Cainta
police authorities, that both he (Torrena) and
private respondent had conspired with each other
to inflict physical harm upon the persons of
Messrs. Meliton and Santos. A finding of private
respondent's participation in the alleged criminal
conspiracy cannot, however, be made to rest
solely on the unilateral declaration of Mr. Torrena
himself a confirmed "co-conspirator." Such
declaration must be corroborated by other
competent and convincing evidence. In. the
absence of such other evidence, Mr. Torrena's
"confession" implicating Mr. Calangi must be
received with considerable caution. The very least
that petitioner Corporation should have done was
to confront private respondent with Torrena's
sworn statement; the record does not show that
petitioner Corporation did so. The burden of
showing the existence of a just cause for
terminating the services of private respondent
Calangi lay on the petitioners. Petitioners have not
discharged that burden.
It remains only to note that the criminal complaint
for attempted murder against Mr. Calangi was
dismissed by the Provincial Fiscal of Rizal. 10
Coming now to the second issue raised by
petitioners in their Pleadings, Article 280 of the
Labor Code, as amended states:
Art. 280. -Security of Tenure. In case of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or

when authorized by this Title. An employee who is

unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
to his backwages computed from the time his
compensation was withheld from him up to the
time of his reinstatement. (Emphasis supplied)
We have held in the past that both reinstatement,
without loss of seniority rights, and payment of
backwages are the normal consequences of a
finding that an employee has been illegaly
dismissed, and which remedies together make the
dismissed employee whole. 11 A finding of illegal
dismissal having been correctly made in this case
by public respondent Commission, private
respondent is, as a matter of right, entitled to
receive both types of relief made available in
Article 280 of the Labor Code, as amended. It
matters not that private respondent Calangi had
omitted in his complaint filed in Case No. NLRCNCR-10-4518-83 a claim for reinstatement without
loss of seniority rights for he is entitled to such
relief as the facts alleged and proved warrant. 12
In view of the finding of illegal dismissal in this
case, petitioner Corporation is liable to private
respondent Calangi for payment of the latter's
backwages for three (3) years, without
qualification and deduction. Considering the
circumstances of this case, however, the Court
beheves that reinstatement of private respondent
to his former positionor to any other equivalent
position in the company will not serve the best
interests of the parties involved. Petitioner
Corporation should not be compelled to take back
in its fold an employee who, at least in the minds
of his employers, poses a significant threat to the
lives and safety of company workers.
Consequently, we hold that private respondent
should be given his separation pay in lieu of such
reinstatement. The amount of separation pay shall
be equal to private respondent's one-half (1/2)
month's salary for every year of service, to be
computed from 13 December 1974 (date of first
employment) until 10 June 1986 (three years after
date of illegal dismissal). 13
WHEREFORE, the Petition for certiorari is
DISMISSED. The Temporary Restraining Order and
the Resolutions issued on 8 April 1987 and 24
August 1987, respectively, by the Court in this
case are WITHDRAWN. The Decision of public
rAshville respondent Commission in Case No.
NLRC-NCR-10-4518-83 is hereby AFFIRMED,
subject the the modifications that petitioners shall
pay private respondent Calangi: (a) three (3) years
backwages without qualification or deduction, and
(b) separation pay, computed as above indicated,
in lieu of reinstatement. No pronouncement as to
costs.

16
SO ORDERED.
6. G.R. No. L-22723 April 30, 1970
CONFEDERATION OF UNIONS IN GOVERNMENT
CORPORATIONS AND OFFICES (CUGCO) and
GERONIMO Q. QUADRA, petitioners,
vs.
ABELARDO SUBIDO, Acting Commissioner of Civil
Service, TOMAS P. MATIC, JR., Government
Corporate Counsel, PEDRO M. GIMENEZ, Auditor
General and PHILIPPINE CHARITY SWEEPSTAKES
OFFICE (PCSO),respondents.
Jose C. Espinas for petitioner.
Geronimo Q. Quadra in his own behalf.
Francisco L. Cuevas for respondent Philippine
Charity Sweepstakes Office.
Office of the Solicitor General Arturo A. Alafriz,
Assistant Solicitor General Francisco J. Bautista and
Special Attorney Raymundo R. Villones for
respondent Abelardo Subido.
Government Corporate Counsel Tomas P. Matic, Jr.
for himself.
DIZON, J.:
This is an original petition for prohibition, with a
prayer for the issuance of a writ of preliminary
injunction filed by (1) Confederation of Unions in
Government Corporations and Offices (CUGCO), (2)
Philippine Charity Sweepstakes Employees
Association (PCSEA-CUGCO) and (3) Geronimo Q.
Quadra, against Abelardo Subido in his capacity as
Acting Commissioner of Civil Service, Tomas P.
Matic, Jr., Government Corporate Counsel, Pedro M.
Gimenez, Auditor General, and Philippine Charity
Sweepstakes Office (PCSO), Praying that, upon the
reasons therein set forth and after due
proceedings, judgment be rendered as follows:
(a) Give due course to this PETITION.
(b) That an order be issued commanding the
respondent Government Corporate Counsel to
desist from proceeding in the administrative
investigation instituted against petitioner
GERONIMO Q. QUADRA to be conducted on April
23, 1964 and for respondents from further
proceeding administratively against the members
of the petitioner unions who are employed in the
Legal and Auditing Departments of the Philippine
Charity Sweepstakes Office, and in the other
government-owned or controlled corporations
during the pendency of this petition.
(c) That after hearing on the merits, to command
the respondents to desist from proceeding with the
administrative investigation that has been
commenced against petitioner GERONIMO Q.
QUADRA and against the members of the
petitioner unions who are employed in the legal
and Auditing Departments of the Philippine Charity
Sweepstakes Office and other government-owned

or controlled corporations who have refused to

resign their membership from the petitioner unions
or to renounce the benefits they are receiving and
enjoying under the Collective Bargaining
Agreements.
The petitioners pray for any other remedy as may
be just and equitable in the premises.
The Philippine Charity Sweepstakes Employees
Association (PCSEA-CUGCO), however, filed on July
21, 1965 a motion to be allowed to withdraw as
party-petitioner. Said motion was granted in our
resolution of August 5 of the same year.
On April 30, 1964 ACA WORKERS ASSOCIATION
and ACA SUPERVISORS ASSOCIATION filed a
motion praying that they be allowed to intervene.
Finding the reasons alleged in support thereof to
be sufficient, their intervention was allowed.
While the petition was given due course, no writ of
preliminary injunction was issued. Moreover, on
July 16, 1965 petitioner Quadra filed an urgent
petition for the issuance of a writ of preliminary
prohibitory and mandatory injunction to prohibit
the respondents from enforcing the decision of the
Commissioner of Civil Service rendered on July 14,
1965 in AC No. R-28341 against him, and/or to
compel said respondents to reinstate him, if said
decision had already been enforced. This motion
was denied in our resolution of July 20 of the same
year.
The facts upon which the remaining petitioners
base their right to the reliefs prayed for in the
petition are set forth in the latter as follows:
5. That the respondent PCSO as early as August
18, 1956, and up to the filing of this PETITION, has
recognized the petitioner PCSEA (CUGCO)
represented by petitioner GERONIMO Q. QUADRA,
as PCSEA (CUGCO) President and CUGCO General
Secretary, as the sole and exclusive bargaining
agent for all personnel of the PCSO who are
eligible for membership with the petitioner PCSEA
(CUGCO) with respect to all matters involving
terms and conditions of employment, especially on
salaries and/or rates of pay, a copy of the latest
Collective Bargaining Agreement entered into
between the PCSO and the PCSEA (CUGCO) is
hereto attached as ANNEX "A" of this petition.
6. That on March 23, 1964, the respondent
Abelardo Subido, Acting Commissioner of Civil
Service, issued a Memorandum-Circular to the
"AUDITOR GENERAL, THE GOVERNMENT
CORPORATE COUNSEL, AND ALL CHAIRMEN OF
BOARDS AND GENERAL MANAGERS OF
GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS PERFORMING PROPRIETARY
FUNCTIONS,"RULING that under Rep. Act Nos. 2266
and 2327, the Auditor General and the
Government Corporate Counsel are considered the

17
employers of the personnel employed in the
Auditing as well as in the Legal Departments of
government-owned and controlled corporations
although they perform proprietary functions and
that in view thereof he directs and orders the
Auditor General, the Government Corporate
Counsel, and all the Chairmen of the Boards, and
General Managers of Government-owned or
controlled corporations performing proprietary
functions to require all union members of the
petitioner unions employed in the Auditing and
Legal Departments of said government
corporations to sever their membership from the
legitimate local employees' unions therein and to
renounce all collective bargaining benefits or face
disciplinary actions, the severest penalty of which
shall be dismissal from the service. A copy of this
Memorandum-Circular is hereto attached as
ANNEX "B" of this petition.
7. That on April 1, 1964 the respondent Auditor
General in Memorandum-Circular No. 487,
ORDERED "ALL CHAIRMEN OF THE BOARDS OF
DIRECTORS, MANAGING HEADS AND AUDITORS OF
GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS PERFORMING PROPRIETARY
FUNCTIONS, AND OTHERS CONCERNED" to comply
with the aforesaid Memorandum-Circular No. 15 of
the respondent Acting Commissioner of Civil
Service.
8. That on April 2, 1964, the respondent
Government Corporate Counsel, wrote a letter to
the Board of Directors and General Manager of the
Philippine Charity Sweepstakes Office, inviting
their attention to the Memorandum-Circular No. 15
of the respondent Acting Commissioner of Civil
Service and DIRECTING all lawyers employed in the
Legal Department of the PCSO to sever their
membership with the petitioner PCSEA (CUGCO)
and to renounce at once all benefits said lawyers
are receiving and enjoying under the collective
bargaining agreement entered into between the
PCSO and the PCSEA (CUGCO) and failure to
secede from the union or to renounce the benefits
they are receiving and enjoying under the
Collective Bargaining Agreement shall be a ground
for disciplinary action, the severest penalty of
which shall be dismissal from the service. A copy
of this letter is hereto attached as ANNEX "C" of
this petition.
9. That on April 10, 1964, the Corporate Auditor of
the Philippine Charity Sweepstakes Office wrote a
letter to the President of the Philippine Charity
Sweepstakes Employees Association requiring
compliance with the Memorandum-Circular of the
Auditor General. A copy of this Circular and letter
are hereto attached as ANNEXES "D" and "D-1" of
this petition.

10. That on April 13, 1964, the petitioners sent to

the Board of Directors, thru the Acting General
Manager of the Philippine Charity Sweepstakes
Office and the Auditor General thru the PCSO
Corporation Auditor, a reply protesting to the
actuations of the respondent Acting Commissioner
of Civil Service, the Auditor General and the
Government Corporate Counsel. A copy of said
letter-memorandum is hereto attached and
integrated as ANNEXES "E" and "E-1" of this
petition.
11. That notwithstanding said protest the
Government Corporate Counsel thru his assistant
on the same date, instead initiated administrative
proceedings against the petitioner GERONIMO Q.
QUADRA, and for him to appear and submit for
investigation, the hearing of which is scheduled to
be held at the Office of the Government Corporate
Counsel on April 23, 1964. A copy of this Order and
complaint is hereto attached as ANNEXES "F" and
"F-1" of this petition.
12. That in view of the above-stated Circulars of
the respondents, members of the affiliate local
unions of the CUGCO who are employed in the
Auditing and Legal Departments in the various
government-owned or controlled corporations
performing proprietary functions, stand to lose
their employment (let alone all the benefits that
would be lost which they are now receiving and
enjoying under a Collective Bargaining Agreement
as well as the other resultant benefits and
incidents of union membership), UNLESS they
follow the directives of the respondents requiring
them to sever their membership with the local
employees' unions and to renounce all the benefit
they are now enjoying under the Collective
Bargaining Agreement within seventy-two (72)
hours from receipt of notification to that effect as
contained in the circulars of the respondents
Acting Commissioner of Civil Service, Auditor
General and the Government Corporate Counsel
above-mentioned.
In the PCSO alone, there are about ONE HUNDRED
TWENTY (120) members of the petitioner unions
employed in the Legal and Auditing Departments
of the said Office who are adversely affected by
the directives of the respondents.
13. That because of the Memorandum-Circular of
Abelardo Subido, the respondent Government
Corporate Counsel Tomas P. Matic, Jr. is subjecting
petitioner GERONIMO Q. QUADRA, the principal
leader of the aforementioned petitioner unions to
an administrative proceeding in connection with
his union activities as PCSEA (CUGCO) President
and as General Secretary of the CUGCO where he
appeared in the Court of Industrial Relations in
Case No. 2701-ULP, PCSEA (CUGCO-KMP) vs. PCSO,

18
Case No. 3442-ULP, CUGCO & PCSEA vs. PCSO &
IGNACIO SANTOS DIAZ, and Case No. 3076-ULP,
MAGALIT, ET AL. vs. PCSEA, ET AL. of which the
latter now is pending consideration on appeal
before this Honorable Tribunal in G.R. No. L-20448,
entitledMAGALIT, et al. vs. CIR, PCSEA, QUADRA, et
al.
14. That the proceedings of the respondents
Government Corporate Counsel and Auditor
General occasioned by the Memorandum Circular
of the Acting Commissioner of Civil Service to
subject members of the petitioner unions and
petitioner GERONIMO Q. QUADRA to administrative
proceedings is without jurisdiction, in excess of
their jurisdiction and conducted with grave abuse
of discretion.
From the above facts and the prayer for relief
contained in the petition, it appears that
petitioners' main objective is to prohibit
respondents, particularly the Government
Corporate Counsel, from proceeding with the
administrative investigation against petitioner
Quadra, and to prohibit them further from taking
any administrative or punitive action against the
personnel of the auditing and legal staffs of
government owned or controlled corporations who
had not complied with Memorandum Circular No.
15, series of 1964 of respondent Commissioner of
the Civil Service by severing their connection with
the Unions existing in said corporations affiliated
with CUGCO.
It is not disputed that on March 23, 1964 the
respondent, the Acting Commissioner of Civil
Service, issued Memorandum Circular No. 15,
series of 1964, whose pertinent portion reads as
follows:
In view of the foregoing, all personnel of the
General Auditing Office as well as of the legal
staffs of all government-owned or controlled
corporations are hereby declared to be embraced
in the Civil Service and they belong either to the
classified or unclassified service unless otherwise
provided by law. They are therefore not within the
coverage of Memorandum Circular Nos. 1 and 3,
current series, of this Office. Appointments of
these personnel should be forwarded to this Office
for approval in accordance with the Civil Service
Law and Rules.
The said personnel may belong to any labor
organization which does not impose the obligation
to strike or to join strikes. If any of these personnel
have previously joined any labor union which
imposes the obligation to strike or to join strikes,
he should sever his membership within seventytwo (72) hours from receipt of this Memorandum
Circular by the corporations concerned. Moreover,
if any member of the legal staff of said

corporations is receiving benefits under a

collective bargaining contract entered into
between management and the union, he should
renounce such benefit at once. Failure to secede
from the union which imposes the obligation to
strike or to join strikes or to renounce the benefits
of the collective bargaining agreements shall be a
ground for disciplinary action for conduct
prejudicial to the best interest of the service, the
severest penalty of which shall be dismissal from
the service.
New appointments should be issued to employees
who have renounced benefits under a collective
bargaining contract, which must conform with the
Civil Service Law and Rules, and submitted to this
Office for approval.
A list of personnel covered by this Memorandum
Circular should be submitted to this Office within
thirty (30) days from receipt hereof by the
corporations concerned.
Neither is it questioned that on April 1, 1964 the
Auditor General issued his own Memorandum
Circular No. 487 ordering all chairmen of the board
of directors, managing heads and auditors of
government owned or controlled corporations
performing proprietary functions, and others
concerned, to comply with Memorandum Circular
No. 15 mentioned heretofore, and that sometime
prior to April 23, 1964 the Government Corporate
Counsel initiated administrative proceedings
against petitioner Quadra for misconduct in office
and/or conduct prejudicial to the service.
In so far as the present action was intended to
prohibit the respondent Government Corporate
Counsel and the respondent Commissioner of Civil
Service from continuing with the administrative
investigation against Quadra (AC No. R-28341), the
same has practically become moot and academic
because on July 14, 1965 the aforesaid
Commissioner of Civil Service rendered judgment
in said case finding Quadra "guilty as charged",
and imposed upon him "the penalty of dismissal
from the service effective upon receipt of this
decision" (record pp. 134 and 137). Moreover, from
the facts stated in said decision, it appears that
the charges investigated in that administrative
case have no bearing upon Memorandum Circular
No. 15 because they involved Quadra's actuations
as Chief Legal Officer of the Philippine Charity
Sweepstakes Office. Specifically he was charged
with having represented in several particular cases
interests adverse to the Philippine Charity
Sweepstakes Office of which he was the Chief
Legal Officer; with neglect of duty and practicing
his profession as lawyer without permission from
competent authority; all in violation of pertinent

19
provisions of the Civil Service Law, rules and
regulations.
The above notwithstanding, of course, the main
question raised in the petition remains, and it is
whether Memorandum Circular No. 15, series of
1964, issued by the respondent Commissioner of
Civil Service, is valid. While, on the one hand,
petitioners claim that said respondent had no
authority nor jurisdiction to issue said circular; that
the provisions thereof are in violation of the
Constitution and of pertinent laws guaranteeing
their right to form associations or societies for
purposes not contrary to law and the right of
government employees and workers to form, join
and assist labor unions of their own choosing for
the purpose of collective bargaining, and to
engage in concerted activities to secure and effect
changes or modifications in their terms and
conditions of employment, on the other hand, the
respondents contend that the questioned
memorandum circular was issued to give life to the
civil service law and related legislations,
particularly Republic Act No. 2266, affecting the
auditing personnel in government owned or
controlled corporations, and Republic Act No. 2337,
as amended by Republic Act No. 3838, affecting
the legal staffs of said corporations.
We agree with respondents' view.
Under the provisions of Republic Act 2266 the
Auditor General appoints and fixes the salaries and
the number of the personnel to assist his
representative in government owned and
controlled corporations, although the expenses for
the maintenance and operation of the Auditing
Office are to be borne by the corporations. On the
other hand, under Section 1 of Republic Act 2327,
as amended by Republic Act No. 3838, the position
of Government Corporate Counsel is made
"distinct and separate from the office of the
Solicitor General" and is made the principal law
officer of all government owned or controlled
corporations, and exercises control and supervision
over all legal divisions maintained separately by
said corporations.
Clearly deducible from the foregoing is that the
personnel of the auditing staff in the different
government owned or controlled corporations are
under the office of the Auditor General, while those
of the legal staff of said corporations are under the
office of the Government Corporate Counsel, and
that all of them are embraced and covered by the
civil service law, whether they belong to the
classified or the unclassified service. This view is in
line with our ruling in National Marketing
Corporation, etc. vs. CIR and PRISCO Workers
Union, et al. (G.R. No. L-17004, January 31, 1963)
where We held as follows:

We agree with appellants that members of the

auditing force cannot be regarded as employees of
PRISCO in matters relating to their compensation.
They are appointed and supervised by the Auditor
General, have an independent tenure, and work
subject to his orders and instructions, and not to
those of the management of appellants. Above all,
the nature of their functions and duties, for the
purpose of fiscal control of appellants' operations,
imperatively demands, as a matter of policy, their
positions be completely independent from
interference or inducement on the part of the
supervised management, in order to assure a
maximum of impartiality in the auditing functions.
Both independence and impartiality require that
the employees in question be utterly free from
apprehension as to their tenure and from
expectancy of benefits resulting from any action of
the management, since in either case there would
be an influence at work that could possibly lead, if
not be positive malfeasance, to laxity and
indifference that would gradually erode and
endanger the critical supervision entrusted to
these auditing employees.
While the ruling cited above affected members of
the auditing force working in government owned or
controlled corporations, it should likewise apply to
the case of the personnel of the legal staffs or
divisions of the same corporations, for obvious
reasons.
But petitioners claim that the questioned circular is
unconstitutional because it violates their right to
form or join associations or labor unions of their
choice. We believe otherwise. It is worth
remembering that the right to form and join
associations and unions is not absolute or
unlimited. Thus, if a person accepts employment
that falls under the civil service law and his
employer performs governmental functions such
as the General Auditing Office and the Government
Corporate Counsel's Office he may not resort to
and exercise the right to strike, because that is
prohibited by law. Having accepted the
employment freely and being chargeable with
knowledge of the fact that he has no right to resort
to strike to enforce his demands against his
employer, his only recourse is either to respect and
comply with that condition or resign.
IN VIEW OF ALL THE FOREGOING, the writ prayed
for is denied and the petition for prohibition under
consideration is dismissed, with costs.
7. G.R. No. 75662 September 15, 1989
MERCURY DRUG CORPORATION, petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION, NLRC
SHERIFF and CESAR E. LADISLA, respondents.
Veronica G. de Vera for petitioner.

20
David B. Agoncillo for private respondent.
FERNAN, C.J.:
Petitioner assails in this petition for review
on certiorari the Resolution dated July 24, 1986 of
the National Labor Relations Commission in NLRC
Case No. RB-IV-19301-78-T denying petitioner's
motion for reconsideration of its decision dated
April 30, 1986 which reversed the decision of Labor
Arbiter Ceferina J. Diosana and ordered the
reinstatement of private respondent Cesar E.
Ladisla to his former position with full backwages.
Records show that private respondent Cesar E.
Ladisla was employed by petitioner Mercury Drug
Corporation as a Stock Analyst at its Claro M. Recto
Branch. He had been with the company for two
years and nine months when on August 15, 1977
he was apprehended by representatives of Mercury
Drug while in the act of pilfering company property
consisting of three (3) bottles of Persantin and one
(1) bottle of Valoron at 100 tablets per bottle with
a total value of P272.00. He admitted his guilt to
the investigating representatives of petitioner
company and executed a handwritten admission.
Said admission was repeated verbally at the police
station before the arresting officer as shown in the
Booking Sheet and Arrest Report which was signed
and authenticated by Ladisla. 1 Thus, on August
19, 1977, petitioner, while simultaneously placing
private respondent on preventive suspension, filed
before the Department of Labor an application for
the termination of private respondent's
employment on grounds of dishonesty and breach
of trust.
Private respondent opposed the aforesaid
application for clearance to terminate his services
alleging among others, that his suspension and
proposed dismissal were unfounded and baseless
being premised on the machinations and
incriminatory acts of Ms. Leonora Suarez and
Edgardo Imperial, Manager and Retail Supervisor,
respectively, of petitioner's Claro M. Recto Branch;
and that he was not given the opportunity to be
heard nor allowed to explain his side before he was
summarily suspended.
The parties were then required by the Arbitration
Branch of the Department of Labor to file their
respective position papers. While the case was
being heard by Labor Arbiter Ceferina J. Diosana
petitioner filed a criminal complaint for attempted
qualified theft against private respondent before
the Fiscal's Office of Manila but this was dismissed
by the court before the arraignment of the
accused. However, the case was refiled and
docketed as Criminal Case No. 43096 before Judge
Pedro A. Ramirez of the then Court of First

Instance, subsequently the Regional Trial Court of

Manila, Branch XXX.
In a decision dated November 8, 1979. 2 Labor
Arbiter Ceferina J. Diosana sustained the validity of
private respondent's dismissal and granted
petitioner's application for clearance to terminate,
the services of the former. Private respondent
appealed his aforesaid dismissal to the National
Labor Relations Commission. Pending resolution of
the appeal, herein petitioner filed a Manifestation
with said Commission notifying the latter of the
ongoing trial in Criminal Case No. 43096 against
private respondent. On September 15, 1983,
judgment was rendered in Criminal Case No.
43096, finding private respondent accused guilty
of the crime of simple theft. 3 No appeal was taken
from the decision in the subject criminal case,
private respondent having availed himself of the
benefits of the Probation Law. He was eventually
discharged from probation on December 27, 1984,
after complying with the terms and conditions
thereof. 4
On April 30, 1986, public respondent National
Labor Relations Commission reversed the decision
of the Labor Arbiter because it found no
substantial evidence establishing the charge
against private respondent Ladisla stating thus:
WHEREFORE, the Decision appealed from is hereby
set aside and a new one entered ordering
respondent to immediately reinstate him in (sic)
his former position with full back wages.
SO ORDERED. 5
Petitioner filed a motion for reconsideration of the
aforementioned decision, which was denied by
public respondent Commission in its resolution
dated July 24, 1986. 6 Hence, this petition assailing
the latter's reversal of the labor arbiter's decision
and its order for the reinstatement with full back
wages of private respondent.
Petitioner submits that it was serious legal error on
the part of public respondent to order the
reinstatement of private respondent who was
convicted of the crime of simple theft by Judge
Pedro Ramirez in Criminal Case No. 43096 filed by
petitioner against said private respondentemployee involving the same facts obtaining in the
present case for termination. On the other hand,
private respondent maintains that he was a victim
of revenge and incriminatory machinations as the
charge of qualified theft of company property was
a frame-up.
We hold that public respondent National Labor
Relations Commission committed a grave abuse of
discretion amounting to lack of jurisdiction in
finding no substantial evidence to sustain the
charge against private respondent. This conclusion
is in complete and utter disregard of the Regional

21
Trial Court's conviction of private respondent for
the crime of simple theft which decision was
rendered prior to its own assailed decision. It must
be remembered that proceedings in criminal cases
such as that held in the subject criminal case
require proof beyond reasonable doubt to establish
the guilt of the accused and findings of fact of the
trial court on this matter are generally accorded
great weight by appellate courts most especially
where no appeal had been filed thereafter, thus
rendering the said findings final. As mentioned
earlier, private respondent did not appeal from the
decision of the lower court but instead availed
himself of the benefits of the probation law which
was correspondingly granted by the Regional Trial
Court.
Dismissal of a dishonest employee is to the best
interest not only of management but also of labor.
As a measure of self-protection against acts
inimical to its interest, a company has the right to
dismiss its erring employees. An employer cannot
be compelled to continue in employment an
employee guilty of acts inimical to its interest,
justifying loss of confidence in him. The law does
not impose unjust situations on either labor or
management. 7We therefore find justification in
the termination of private respondent Cesar E.
Ladisla's employment by petitioner Mercury Drug
Corporation.
Under Article 282(c) of the Labor Code, an
employer may terminate an employment for "fraud
or willful breach by the employee of the trust
reposed in him by his employer or his duly
authorized representative." Loss of confidence is
established as a valid ground for the dismissal of
an employee. The law does not require proof
beyond reasonable doubt of the employee's
misconduct to invoke such a justification. It is
sufficient that there is some basis for the loss of
trust or that the employer has reasonable grounds
to believe that the employee is responsible for the
misconduct and his participation therein renders
him unworthy of the trust and confidence
demanded of his position. 8
Private respondent's admission of his guilt as
earlier stated, his subsequent conviction in
Criminal Case No. 43096 and his acceptance of the
same as implied in the absence of an appeal
therefrom and his subsequent application for
probation established beyond reasonable doubt his
guilt for the crime of simple theft. It was this same
act which gave rise to his conviction by the trial
court that was the basis for the termination of his
employment by petitioner.
We have held that the eventual conviction of the
employee who is prosecuted for his misconduct is
not indispensable to warrant his dismissal by his

employer. 9 More specifically, an employee who

has been exonerated from a criminal charge of
theft of gasoline on the basis of technicality may
still be dismissed from employment if the
employer has ample reason to mistrust him. 10 If
acquittal from the criminal charge does not negate
the existence of a ground for loss of trust and
confidence, with more reason should conviction for
such criminal charge fortify said mistrust.
Anent private respondent's claim of summary
suspension without being given the opportunity to
be heard, the Court takes note that, in addition to
the fact that his suspension was merely preventive
pending approval by the Department of Labor of its
application for clearance to terminate the services
of private respondent, the latter was given the
chance to defend himself in several instances: at
the Police Precinct No. III, Western Police District,
Metro Manila where he was brought for
investigation or questioning immediately after the
occurrence of the alleged pilferage of medicines
and where he was given the opportunity to state
his defenses, and thereafter, before the arbitration
branch of the Department of Labor where he was
required and did submit his position paper.
The law in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction
of the employer.11 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, the Supreme
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 the Court to the rule that justice is in every
case for the deserving, to be dispensed in the light
of the established facts and applicable law and
doctrine . 12
WHEREFORE, the assailed resolution of the
National Labor Relations Commission is reversed
and set aside and the Labor Arbiter's decision of
November 8, 1979 dismissing Cesar E. Ladisla as
petitioner's stock analyst is hereby reinstated. No
costs.
SO ORDERED.
8. ANGELINA FRANCISCO, G.R. No. 170087
Petitioner,
Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and

22
Chico-Nazario, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x
--------------------------------------------------------------------------------------- x
DECISION

petitioner was assigned to handle recruitment of

all employees and perform management
administration functions; represent the company in
all dealings with government agencies, especially
with the Bureau of Internal Revenue (BIR), Social
Security System (SSS) and in the city government
of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant
which is owned and operated by Kasei Corporation.
[7]
For five years, petitioner performed the duties of
Acting Manager. As of December 31, 2000 her
salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei
Corporation.[8]

YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45
of the Rules of Court seeks to annul and set aside
the Decision and Resolution of the Court of Appeals
dated October 29, 2004[1] and October 7, 2005,
[2] respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal
filed by herein petitioner Angelina Francisco. The
appellate court reversed and set aside the
Decision of the National Labor Relations
Commission (NLRC) dated April 15, 2003,[3] in
NLRC NCR CA No. 032766-02 which affirmed with
modification the decision of the Labor Arbiter
dated July 31, 2002,[4] in NLRC-NCR Case No. 3010-0-489-01, finding that private respondents were
liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation
during its incorporation stage. She was designated
as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the
company. She was also designated as Liaison
Officer to the City of Makati to secure business
permits, construction permits and other licenses
for the initial operation of the company.[5]
Although she was designated as Corporate
Secretary, she was not entrusted with the
corporate documents; neither did she attend any
board meeting nor required to do so.She never
prepared any legal document and never
represented the company as its Corporate
Secretary. However, on some occasions, she was
prevailed upon to sign documentation for the
company.[6]
In 1996, petitioner was designated Acting
Manager. The corporation also hired Gerry Nino as
accountant in lieu of petitioner. As Acting Manager,

In January 2001, petitioner was replaced by Liza R.

Fuentes as Manager. Petitioner alleged that she
was required to sign a prepared resolution for her
replacement but she was assured that she would
still be connected with Kasei Corporation. Timoteo
Acedo, the designated Treasurer, convened a
meeting of all employees of Kasei Corporation and
announced that nothing had changed and that
petitioner was still connected with Kasei
Corporation as Technical Assistant to Seiji Kamura
and in charge of all BIR matters.[9]
Thereafter, Kasei Corporation reduced her salary
by P2,500.00 a month beginning January up to
September 2001 for a total reduction of
P22,500.00 as of September 2001.Petitioner was
not paid her mid-year bonus allegedly because the
company was not earning well. On October 2001,
petitioner did not receive her salary from the
company. She made repeated follow-ups with the
company cashier but she was advised that the
company was not earning well.[10]
On October 15, 2001, petitioner asked for her
salary from Acedo and the rest of the officers but
she was informed that she is no longer connected
with the company.[11]
Since she was no longer paid her salary, petitioner
did not report for work and filed an action for
constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not
an employee of Kasei Corporation. They alleged
that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and
act concurrently as Corporate Secretary. As
technical consultant, petitioner performed her
work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no

23
daily time record and she came to the office any
time she wanted. The company never interfered
with her work except that from time to time, the
management would ask her opinion on matters
relating to her profession. Petitioner did not go
through the usual procedure of selection of
employees, but her services were engaged
through a Board Resolution designating her as
technical consultant. The money received by
petitioner from the corporation was her
professional fee subject to the 10% expanded
withholding tax on professionals, and that she was
not one of those reported to the BIR or SSS as one
of the companys employees.[12]

g. Moral and exemplary damages 100,000.00

h. 10% Attorneys fees 87,076.50
P957,742.50

Petitioners designation as technical consultant

depended solely upon the will of management. As
such, her consultancy may be terminated any time
considering that her services were only temporary
in nature and dependent on the needs of the
corporation.

PREMISES CONSIDERED, the Decision of July 31,

2002 is hereby MODIFIED as follows:

To prove that petitioner was not an employee of

the corporation, private respondents submitted a
list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was
not among the employees reported to the BIR, as
well as a list of payees subject to expanded
withholding tax which included petitioner. SSS
records were also submitted showing that
petitioners latest employer was Seiji Corporation.
[13]
The Labor Arbiter found that petitioner was
illegally dismissed, thus:

If reinstatement is no longer feasible, respondents

are ordered to pay complainant separation pay
with additional backwages that would accrue up to
actual payment of separation pay.
SO ORDERED.[14]
On April 15, 2003, the NLRC affirmed with
modification the Decision of the Labor Arbiter, the
dispositive portion of which reads:

1) Respondents are directed to pay complainant

separation pay computed at one month per year of
service in addition to full backwages from October
2001 to July 31, 2002;
2) The awards representing moral and exemplary
damages and 10% share in profit in the respective
accounts of P100,000.00 and P361,175.00 are
deleted;
3) The award of 10% attorneys fees shall be based
on salary differential award only;
4) The awards representing salary differentials,
housing allowance, mid year bonus and
13th month pay are AFFIRMED.
SO ORDERED.[15]

WHEREFORE, premises considered, judgment is

hereby rendered as follows:
1. finding complainant an employee of respondent
corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant
to her former position without loss of seniority
rights and jointly and severally pay complainant
her money claims in accordance with the following
computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001
09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00

On appeal, the Court of Appeals reversed the NLRC

decision, thus:
WHEREFORE, the instant petition is hereby
GRANTED. The decision of the National Labor
Relations Commissions dated April 15, 2003 is
hereby REVERSED and SET ASIDE and a new one is
hereby rendered dismissing the complaint filed by
private respondent against Kasei Corporation, et
al. for constructive dismissal.
SO ORDERED.[16]
The appellate court denied petitioners motion for
reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1)
whether there was an employer-employee
relationship between petitioner and private
respondent Kasei Corporation; and if in the

24
affirmative, (2) whether petitioner was illegally
dismissed.

the worker over the period of the latters

employment.

Considering the conflicting findings by the Labor

Arbiter and the National Labor Relations
Commission on one hand, and the Court of Appeals
on the other, there is a need to reexamine the
records to determine which of the propositions
espoused by the contending parties is supported
by substantial evidence.[17]

The control test initially found application in the

case of Viaa v. Al-Lagadan and Piga,[19] and lately
in Leonardo v. Court of Appeals,[20] where we held
that there is an employer-employee relationship
when the person for whom the services are
performed reserves the right to control not only
the end achieved but also the manner and means
used to achieve that end.

We held in Sevilla v. Court of Appeals[18] that in

this jurisdiction, there has been no uniform test to
determine the existence of an employer-employee
relation. Generally, courts have relied on the socalled right of control test where the person for
whom the services are performed reserves a right
to control not only the end to be achieved but also
the means to be used in reaching such end. In
addition to the standard of right-of-control, the
existing economic conditions prevailing between
the parties, like the inclusion of the employee in
the payrolls, can help in determining the existence
of an employer-employee relationship.
However, in certain cases the control test is not
sufficient to give a complete picture of the
relationship between the parties, owing to the
complexity of such a relationship where several
positions have been held by the worker. There are
instances when, aside from the employers power
to control the employee with respect to the means
and methods by which the work is to be
accomplished, economic realities of the
employment relations help provide a
comprehensive analysis of the true classification of
the individual, whether as employee, independent
contractor, corporate officer or some other
capacity.
The better approach would therefore be to adopt a
two-tiered test involving: (1) the putative
employers power to control the employee with
respect to the means and methods by which the
work is to be accomplished; and (2) the underlying
economic realities of the activity or relationship.
This two-tiered test would provide us with a
framework of analysis, which would take into
consideration the totality of circumstances
surrounding the true nature of the relationship
between the parties. This is especially appropriate
in this case where there is no written agreement or
terms of reference to base the relationship on; and
due to the complexity of the relationship based on
the various positions and responsibilities given to

In Sevilla v. Court of Appeals,[21] we observed the

need to consider the existing economic conditions
prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the
employee in the payrolls, to give a clearer picture
in determining the existence of an employeremployee relationship based on an analysis of the
totality of economic circumstances of the worker.
Thus, the determination of the relationship
between employer and employee depends upon
the circumstances of the whole economic activity,
[22] such as: (1) the extent to which the services
performed are an integral part of the employers
business; (2) the extent of the workers investment
in equipment and facilities; (3) the nature and
degree of control exercised by the employer; (4)
the workers opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight
required for the success of the claimed
independent enterprise; (6) the permanency and
duration of the relationship between the worker
and the employer; and (7) the degree of
dependency of the worker upon the employer for
his continued employment in that line of business.
[23]
The proper standard of economic dependence is
whether the worker is dependent on the alleged
employer for his continued employment in that line
of business.[24] In the United States, the
touchstone of economic reality in analyzing
possible employment relationships for purposes of
the Federal Labor Standards Act is dependency.
[25] By analogy, the benchmark of economic
reality in analyzing possible employment
relationships for purposes of the Labor Code ought
to be the economic dependence of the worker on
his employer.
By applying the control test, there is no doubt that
petitioner is an employee of Kasei Corporation
because she was under the direct control and
supervision of Seiji Kamura, the corporations
Technical Consultant. She reported for work

25
regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with
substantially the same job functions, that is,
rendering accounting and tax services to the
company and performing functions necessary and
desirable for the proper operation of the
corporation such as securing business permits and
other licenses over an indefinite period of
engagement.
Under the broader economic reality test, the
petitioner can likewise be said to be an employee
of respondent corporation because she had served
the company for six years before her dismissal,
receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses
and allowances, as well as deductions and Social
Security contributions from August 1, 1999 to
December 18, 2000.[26] When petitioner was
designated General Manager, respondent
corporation made a report to the SSS signed by
Irene Ballesteros. Petitioners membership in the
SSS as manifested by a copy of the SSS specimen
signature card which was signed by the President
of Kasei Corporation and the inclusion of her name
in the on-line inquiry system of the SSS evinces
the existence of an employer-employee
relationship between petitioner and respondent
corporation.[27]
It is therefore apparent that petitioner is
economically dependent on respondent
corporation for her continued employment in the
latters line of business.
In Domasig v. National Labor Relations
Commission,[28] we held that in a business
establishment, an identification card is provided
not only as a security measure but mainly to
identify the holder thereof as a bona fide employee
of the firm that issues it. Together with the cash
vouchers covering petitioners salaries for the
months stated therein, these matters constitute
substantial evidence adequate to support a
conclusion that petitioner was an employee of
private respondent.
We likewise ruled in Flores v. Nuestro[29] that a
corporation who registers its workers with the SSS
is proof that the latter were the formers
employees. The coverage of Social Security Law is
predicated on the existence of an employeremployee relationship.
Furthermore, the affidavit of Seiji Kamura dated
December 5, 2001 has clearly established that
petitioner never acted as Corporate Secretary and

that her designation as such was only for

convenience. The actual nature of petitioners job
was as Kamuras direct assistant with the duty of
acting as Liaison Officer in representing the
company to secure construction permits, license to
operate and other requirements imposed by
government agencies. Petitioner was never
entrusted with corporate documents of the
company, nor required to attend the meeting of
the corporation. She was never privy to the
preparation of any document for the corporation,
although once in a while she was required to sign
prepared documentation for the company.[30]
The second affidavit of Kamura dated March 7,
2002 which repudiated the December 5, 2001
affidavit has been allegedly withdrawn by Kamura
himself from the records of the case.
[31] Regardless of this fact, we are convinced that
the allegations in the first affidavit are sufficient to
establish that petitioner is an employee of Kasei
Corporation.
Granting arguendo, that the second affidavit
validly repudiated the first one, courts do not
generally look with favor on any retraction or
recanted testimony, for it could have been secured
by considerations other than to tell the truth and
would make solemn trials a mockery and place the
investigation of the truth at the mercy of
unscrupulous witnesses.[32] A recantation does
not necessarily cancel an earlier declaration, but
like any other testimony the same is subject to the
test of credibility and should be received with
caution.[33]
Based on the foregoing, there can be no other
conclusion that petitioner is an employee of
respondent Kasei Corporation. She was selected
and engaged by the company for compensation,
and is economically dependent upon respondent
for her continued employment in that line of
business. Her main job function involved
accounting and tax services rendered to
respondent corporation on a regular basis over an
indefinite period of engagement. Respondent
corporation hired and engaged petitioner for
compensation, with the power to dismiss her for
cause. More importantly, respondent corporation
had the power to control petitioner with the means
and methods by which the work is to be
accomplished.
The corporation constructively dismissed petitioner
when it reduced her salary by P2,500 a month
from January to September 2001. This amounts to
an illegal termination of employment, where the

26
petitioner is entitled to full backwages. Since the
position of petitioner as accountant is one of trust
and confidence, and under the principle of strained
relations, petitioner is further entitled to separation
pay, in lieu of reinstatement.[34]
A diminution of pay is prejudicial to the employee
and amounts to constructive
dismissal. Constructive dismissal is an involuntary
resignation resulting in cessation of work resorted
to when continued employment becomes
impossible, unreasonable or unlikely; when there is
a demotion in rank or a diminution in pay; or when
a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee.
[35] In Globe Telecom, Inc. v. Florendo-Flores,
[36] we ruled that where an employee ceases to
work due to a demotion of rank or a diminution of
pay, an unreasonable situation arises which
creates an adverse working environment rendering
it impossible for such employee to continue
working for her employer. Hence, her severance
from the company was not of her own making and
therefore amounted to an illegal termination of
employment.
In affording full protection to labor, this Court must
ensure equal work opportunities regardless of sex,
race or creed. Even as we, in every case, attempt
to carefully balance the fragile relationship
between employees and employers, we are
mindful of the fact that the policy of the law is to
apply the Labor Code to a greater number of
employees. This would enable employees to avail
of the benefits accorded to them by law, in line
with the constitutional mandate giving maximum
aid and protection to labor, promoting their welfare
and reaffirming it as a primary social economic
force in furtherance of social justice and national
development.
WHEREFORE, the petition is GRANTED. The
Decision and Resolution of the Court of Appeals
dated October 29, 2004 and October 7, 2005,
respectively, in CA-G.R. SP No. 78515
are ANNULLED and SET ASIDE. The Decision of the
National Labor Relations Commission dated April
15, 2003 in NLRC NCR CA No. 032766-02,
isREINSTATED. The case is REMANDED to the Labor
Arbiter for the recomputation of petitioner
Angelina Franciscos full backwages from the time
she was illegally terminated until the date of
finality of this decision, and separation pay
representing one-half month pay for every year of
service, where a fraction of at least six months
shall be considered as one whole year.
SO ORDERED.

9. JENNY M. AGABON and G.R. No. 158693

VIRGILIO C. AGABON,
Petitioners, Present:
Davide, Jr., C.J.,
Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
- versus - Carpio,
Austria-Martinez,
Corona,
Carpio-Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario, and
Garcia, JJ.
NATIONAL LABOR RELATIONS
COMMISSION (NLRC), RIVIERA
HOME IMPROVEMENTS, INC. Promulgated:
and VICENTE ANGELES,
Respondents. November 17, 2004
x
--------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the
decision[1] of the Court of Appeals dated January
23, 2003, in CA-G.R. SP No. 63017, modifying the
decision of National Labor Relations Commission
(NLRC) in NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements,
Inc. is engaged in the business of selling and
installing ornamental and construction materials. It
employed petitioners Virgilio Agabon and Jenny
Agabon as gypsum board and cornice installers on
January 2, 1992[2] until February 23, 1999 when
they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal
dismissal and payment of money claims[3] and on
December 28, 1999, the Labor Arbiter rendered a
decision declaring the dismissals illegal and
ordered private respondent to pay the monetary
claims. The dispositive portion of the decision
states:
WHEREFORE, premises considered, We find the
termination of the complainants illegal.

27
Accordingly, respondent is hereby ordered to pay
them their backwages up to November 29, 1999 in
the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their
separation pay of one (1) month for every year of
service from date of hiring up to November 29,
1999.
Respondent is further ordered to pay the
complainants their holiday pay and service
incentive leave pay for the years 1996, 1997 and
1998 as well as their premium pay for holidays and
rest days and Virgilio Agabons 13th month pay
differential amounting to TWO THOUSAND ONE
HUNDRED FIFTY (P2,150.00) Pesos, or the
aggregate amount of ONE HUNDRED TWENTY ONE
THOUSAND SIX HUNDRED SEVENTY EIGHT &
93/100 (P121,678.93) Pesos for Jenny Agabon, and
ONE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED TWENTY EIGHT & 93/100 (P123,828.93)
Pesos for Virgilio Agabon, as per attached
computation of Julieta C. Nicolas, OIC, Research
and Computation Unit, NCR.
SO ORDERED.[4]
On appeal, the NLRC reversed the Labor Arbiter
because it found that the petitioners had
abandoned their work, and were not entitled to
backwages and separation pay. The other money
claims awarded by the Labor Arbiter were also
denied for lack of evidence.[5]
Upon denial of their motion for reconsideration,
petitioners filed a petition for certiorari with the
Court of Appeals.
The Court of Appeals in turn ruled that the
dismissal of the petitioners was not illegal because
they had abandoned their employment but
ordered the payment of money claims. The
dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor
Relations Commission is REVERSED only insofar as
it dismissed petitioners money claims. Private
respondents are ordered to pay petitioners holiday
pay for four (4) regular holidays in 1996, 1997, and
1998, as well as their service incentive leave pay
for said years, and to pay the balance of petitioner
Virgilio Agabons 13th month pay for 1998 in the
amount of P2,150.00.
SO ORDERED.[6]

Hence, this petition for review on the sole issue of

whether petitioners were illegally dismissed.[7]
Petitioners assert that they were dismissed
because the private respondent refused to give
them assignments unless they agreed to work on
a pakyaw basis when they reported for duty on
February 23, 1999. They did not agree on this
arrangement because it would mean losing
benefits as Social Security System (SSS) members.
Petitioners also claim that private respondent did
not comply with the twin requirements of notice
and hearing.[8]
Private respondent, on the other hand, maintained
that petitioners were not dismissed but had
abandoned their work.[9] In fact, private
respondent sent two letters to the last known
addresses of the petitioners advising them to
report for work. Private respondents manager even
talked to petitioner Virgilio Agabon by telephone
sometime in June 1999 to tell him about the new
assignment at Pacific Plaza Towers involving
40,000 square meters of cornice installation work.
However, petitioners did not report for work
because they had subcontracted to perform
installation work for another company. Petitioners
also demanded for an increase in their wage to
P280.00 per day. When this was not granted,
petitioners stopped reporting for work and filed the
illegal dismissal case.[10]
It is well-settled that findings of fact of quasijudicial agencies like the NLRC are accorded not
only respect but even finality if the findings are
supported by substantial evidence. This is
especially so when such findings were affirmed by
the Court of Appeals.[11] However, if the factual
findings of the NLRC and the Labor Arbiter are
conflicting, as in this case, the reviewing court may
delve into the records and examine for itself the
questioned findings.[12]
Accordingly, the Court of Appeals, after a careful
review of the facts, ruled that petitioners dismissal
was for a just cause. They had abandoned their
employment and were already working for another
employer.
To dismiss an employee, the law requires not only
the existence of a just and valid cause but also
enjoins the employer to give the employee the
opportunity to be heard and to defend himself.
[13] Article 282 of the Labor Code enumerates the
just causes for termination by the employer: (a)
serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
the latters representative in connection with the

28
employees work; (b) gross and habitual neglect by
the employee of his duties; (c) fraud or willful
breach by the employee of the trust reposed in
him by his employer or his duly authorized
representative; (d) commission of a crime or
offense by the employee against the person of his
employer or any immediate member of his family
or his duly authorized representative; and (e) other
causes analogous to the foregoing.
Abandonment is the deliberate and unjustified
refusal of an employee to resume his employment.
[14] It is a form of neglect of duty, hence, a just
cause for termination of employment by the
employer.[15] 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 employees has no more intention
to work. The intent to discontinue the employment
must be shown by clear proof that it was
deliberate and unjustified.[16]
In February 1999, petitioners were frequently
absent having subcontracted for an installation
work for another company. Subcontracting for
another company clearly showed the intention to
sever the employer-employee relationship with
private respondent. This was not the first time they
did this. In January 1996, they did not report for
work because they were working for another
company. Private respondent at that time warned
petitioners that they would be dismissed if this
happened again. Petitioners disregarded the
warning and exhibited a clear intention to sever
their employer-employee relationship. The record
of an employee is a relevant consideration in
determining the penalty that should be meted out
to him.[17]

also good conduct[19] and loyalty. The employer

may not be compelled to continue to employ such
persons whose continuance in the service will
patently be inimical to his interests.[20]

In Sandoval Shipyard v. Clave,[18] we held that an

employee who deliberately absented from work
without leave or permission from his employer, for
the purpose of looking for a job elsewhere, is
considered to have abandoned his job. We should
apply that rule with more reason here where
petitioners were absent because they were already
working in another company.
The law imposes many obligations on the
employer such as providing just compensation to
workers, observance of the procedural
requirements of notice and hearing in the
termination of employment. On the other hand, the
law also recognizes the right of the employer to
expect from its workers not only good
performance, adequate work and diligence, but

Dismissals based on just causes contemplate acts

or omissions attributable to the employee while
dismissals based on authorized causes involve
grounds under the Labor Code which allow the
employer to terminate employees. A termination
for an authorized cause requires payment of
separation pay. When the termination of
employment is declared illegal, reinstatement and
full backwages are mandated under Article 279. If
reinstatement is no longer possible where the
dismissal was unjust, separation pay may be
granted.

After establishing that the terminations were for a

just and valid cause, we now determine if the
procedures for dismissal were observed.
The procedure for terminating an employee is
found in Book VI, Rule I, Section 2(d) of
the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice.
In all cases of termination of employment, the
following standards of due process shall be
substantially observed:
I. For termination of employment based on just
causes as defined in Article 282 of the Code:
(a) A written notice served on the employee
specifying the ground or grounds for termination,
and giving to said employee reasonable
opportunity within which to explain his side;
(b) A hearing or conference during which the
employee concerned, with the assistance of
counsel if the employee so desires, is given
opportunity to respond to the charge, present his
evidence or rebut the evidence presented against
him; and
(c) A written notice of termination served on the
employee indicating that upon due consideration
of all the circumstances, grounds have been
established to justify his termination.
In case of termination, the foregoing notices shall
be served on the employees last known address.

Procedurally, (1) if the dismissal is based on a just

cause under Article 282, the employer must give
the employee two written notices and a hearing or

29
opportunity to be heard if requested by the
employee before terminating the employment: a
notice specifying the grounds for which dismissal is
sought a hearing or an opportunity to be heard and
after hearing or opportunity to be heard, a notice
of the decision to dismiss; and (2) if the dismissal
is based on authorized causes under Articles 283
and 284, the employer must give the employee
and the Department of Labor and Employment
written notices 30 days prior to the effectivity of
his separation.
From the foregoing rules four possible situations
may be derived: (1) the dismissal is for a just
cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health
reasons under Article 284, and due process was
observed; (2) the dismissal is without just or
authorized cause but due process was observed;
(3) the dismissal is without just or authorized
cause and there was no due process; and (4) the
dismissal is for just or authorized cause but due
process was not observed.
In the first situation, the dismissal is undoubtedly
valid and the employer will not suffer any liability.
In the second and third situations where the
dismissals are illegal, Article 279 mandates that
the employee is entitled to reinstatement without
loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other
benefits or their monetary equivalent computed
from the time the compensation was not paid up to
the time of actual reinstatement.
In the fourth situation, the dismissal should be
upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal.
However, the employer should be held liable for
non-compliance with the procedural requirements
of due process.
The present case squarely falls under the fourth
situation. The dismissal should be upheld because
it was established that the petitioners abandoned
their jobs to work for another company. Private
respondent, however, did not follow the notice
requirements and instead argued that sending
notices to the last known addresses would have
been useless because they did not reside there
anymore. Unfortunately for the private respondent,
this is not a valid excuse because the law
mandates the twin notice requirements to the
employees last known address.[21] Thus, it should
be held liable for non-compliance with the
procedural requirements of due process.

A review and re-examination of the relevant legal

principles is appropriate and timely to clarify the
various rulings on employment termination in the
light of Serrano v. National Labor Relations
Commission.[22]
Prior to 1989, the rule was that a dismissal or
termination is illegal if the employee was not given
any notice. In the 1989 case of Wenphil Corp. v.
National Labor Relations Commission,[23] we
reversed this long-standing rule and held that the
dismissed employee, although not given any
notice and hearing, was not entitled to
reinstatement and backwages because the
dismissal was for grave misconduct and
insubordination, a just ground for termination
under Article 282. The employee had a violent
temper and caused trouble during office hours,
defying superiors who tried to pacify him. We
concluded that reinstating the employee and
awarding backwages may encourage him to do
even worse and will render a mockery of the rules
of discipline that employees are required to
observe.[24] We further held that:
Under the circumstances, the dismissal of the
private respondent for just cause should be
maintained. He has no right to return to his former
employment.
However, the petitioner must nevertheless be held
to account for failure to extend to private
respondent his right to an investigation before
causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must
be for just or authorized cause and after due
process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and
conduct an investigation as required by law before
dismissing petitioner from employment.
Considering the circumstances of this case
petitioner must indemnify the private respondent
the amount of P1,000.00. The measure of this
award depends on the facts of each case and the
gravity of the omission committed by the
employer.[25]
The rule thus evolved: where the employer had a
valid reason to dismiss an employee but did not
follow the due process requirement, the dismissal
may be upheld but the employer will be penalized
to pay an indemnity to the employee. This became
known as the Wenphil or Belated Due Process Rule.

30
On January 27, 2000, in Serrano, the rule on the
extent of the sanction was changed. We held that
the violation by the employer of the notice
requirement in termination for just or authorized
causes was not a denial of due process that will
nullify the termination. However, the dismissal is
ineffectual and the employer must pay full
backwages from the time of termination until it is
judicially declared that the dismissal was for a just
or authorized cause.
The rationale for the re-examination of
the Wenphil doctrine in Serrano was the significant
number of cases involving dismissals without
requisite notices. We concluded that the imposition
of penalty by way of damages for violation of the
notice requirement was not serving as a deterrent.
Hence, we now required payment of full
backwages from the time of dismissal until the
time the Court finds the dismissal was for a just or
authorized cause.
Serrano was confronting the practice of employers
to dismiss now and pay later by imposing full
backwages.
We believe, however, that the ruling in Serrano did
not consider the full meaning of Article 279 of the
Labor Code which states:
ART. 279. Security of Tenure. In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or
when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time
his compensation was withheld from him up to the
time of his actual reinstatement.
This means that the termination is illegal only if it
is not for any of the justified or authorized causes
provided by law. Payment of backwages and other
benefits, including reinstatement, is justified only if
the employee was unjustly dismissed.
The fact that the Serrano ruling can cause
unfairness and injustice which elicited strong
dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III,
Section 1 of the Constitution embodies a system of
rights based on moral principles so deeply
imbedded in the traditions and feelings of our

people as to be deemed fundamental to a civilized

society as conceived by our entire history. Due
process is that which comports with the deepest
notions of what is fair and right and just.[26] It is a
constitutional restraint on the legislative as well as
on the executive and judicial powers of the
government provided by the Bill of Rights.
Due process under the Labor Code,
like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes
of employment termination under the Labor Code;
and procedural, i.e., the manner of dismissal.
Procedural due process requirements for dismissal
are found in the Implementing Rules of P.D. 442, as
amended, otherwise known as the Labor Code of
the Philippines in Book VI, Rule I, Sec. 2, as
amended by Department Order Nos. 9 and 10.
[27] Breaches of these due processrequirements
violate the Labor Code. Therefore statutory due
process should be differentiated from failure to
comply with constitutional due process.
Constitutional due process protects the individual
from the government and assures him of his rights
in criminal, civil or administrative proceedings;
while statutory due process found in the Labor
Code and Implementing Rules protects employees
from being unjustly terminated without just cause
after notice and hearing.
In Sebuguero v. National Labor Relations
Commission,[28] the dismissal was for a just and
valid cause but the employee was not accorded
due process. The dismissal was upheld by the
Court but the employer was sanctioned. The
sanction should be in the nature of indemnification
or penalty, and depends on the facts of each case
and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,
[29] it was ruled that even if the employee was not
given due process, the failure did not operate to
eradicate the just causes for dismissal. The
dismissal being for just cause, albeit without due
process, did not entitle the employee to
reinstatement, backwages, damages and attorneys
fees.
Mr. Justice Jose C. Vitug, in his separate opinion
in MGG Marine Services, Inc. v. National Labor
Relations Commission,[30] which opinion he
reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due
process has not been properly observed by an

31
employer, it would not be right to order either the
reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however,
to comply with the procedure prescribed by law in
terminating the services of the employee, the
employer must be deemed to have opted or, in
any case, should be made liable, for the payment
of separation pay. It might be pointed out that the
notice to be given and the hearing to be conducted
generally constitute the two-part due process
requirement of law to be accorded to the employee
by the employer. Nevertheless, peculiar
circumstances might obtain in certain situations
where to undertake the above steps would be no
more than a useless formality and where,
accordingly, it would not be imprudent to apply
the res ipsa loquitur rule and award, in lieu of
separation pay, nominal damages to the
employee. x x x.[31]
After carefully analyzing the consequences of the
divergent doctrines in the law on employment
termination, we believe that in cases involving
dismissals for cause but without observance of the
twin requirements of notice and hearing, the better
rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was
for just cause but imposing sanctions on the
employer. Such sanctions, however, must be stiffer
than that imposed in Wenphil. By doing so, this
Court would be able to achieve a fair result by
dispensing justice not just to employees, but to
employers as well.
The unfairness of declaring illegal or ineffectual
dismissals for valid or authorized causes but not
complying with statutory due process may have
far-reaching consequences.
This would encourage frivolous suits, where even
the most notorious violators of company policy are
rewarded by invoking due process. This also
creates absurd situations where there is a just or
authorized cause for dismissal but a procedural
infirmity invalidates the termination. Let us take
for example a case where the employee is caught
stealing or threatens the lives of his co-employees
or has become a criminal, who has fled and cannot
be found, or where serious business losses
demand that operations be ceased in less than a
month. Invalidating the dismissal would not serve
public interest. It could also discourage
investments that can generate employment in the
local economy.
The constitutional policy to provide full protection
to labor is not meant to be a sword to oppress

employers. The commitment of this Court to the

cause of labor does not prevent us from sustaining
the employer when it is in the right, as in this case.
[32] Certainly, an employer should not be
compelled to pay employees for work not actually
performed and in fact abandoned.
The employer should not be compelled to continue
employing a person who is admittedly guilty of
misfeasance or malfeasance and whose continued
employment is patently inimical to the employer.
The law protecting the rights of the laborer
authorizes neither oppression nor self-destruction
of the employer.[33]
It must be stressed that in the present case, the
petitioners committed a grave offense, i.e.,
abandonment, which, if the requirements of due
process were complied with, would undoubtedly
result in a valid dismissal.
An employee who is clearly guilty of conduct
violative of Article 282 should not be protected by
the Social Justice Clause of the Constitution. Social
justice, as the term suggests, should be used only
to correct an injustice. As the eminent Justice Jose
P. Laurel observed, social justice must be founded
on the recognition of the necessity of
interdependence among diverse units of a society
and of the protection that should be equally and
evenly extended to all groups as a combined force
in our social and economic life, consistent with the
fundamental and paramount objective of the state
of promoting the health, comfort, and quiet of all
persons, and of bringing about the greatest good
to the greatest number.[34]
This is not to say that the Court was wrong when it
ruled the way it did in Wenphil, Serrano and
related cases. Social justice is not based on rigid
formulas set in stone. It has to allow for changing
times and circumstances.
Justice Isagani Cruz strongly asserts the need to
apply a balanced approach to labor-management
relations and dispense justice with an even hand in
every case:
We have repeatedly stressed that social justice or
any justice for that matter is for the deserving,
whether he be a millionaire in his mansion or a
pauper in his hovel. It is true that, in case of
reasonable doubt, we are to tilt the balance in
favor of the poor to whom the Constitution fittingly
extends its sympathy and compassion. But never
is it justified to give preference to the poor simply
because they are poor, or reject the rich simply

32
because they are rich, for justice must always be
served for the poor and the rich alike, according to
the mandate of the law.[35]
Justice in every case should only be for the
deserving party. It should not be presumed that
every case of illegal dismissal would automatically
be decided in favor of labor, as management has
rights that should be fully respected and enforced
by this Court. As interdependent and indispensable
partners in nation-building, labor and management
need each other to foster productivity and
economic growth; hence, the need to weigh and
balance the rights and welfare of both the
employee and employer.
Where the dismissal is for a just cause, as in the
instant case, the lack of statutory due process
should not nullify the dismissal, or render it illegal,
or ineffectual. However, the employer should
indemnify the employee for the violation of his
statutory rights, as ruled in Reta v. National Labor
Relations Commission.[36] The indemnity to be
imposed should be stiffer to discourage the
abhorrent practice of dismiss now, pay later, which
we sought to deter in the Serrano ruling. The
sanction should be in the nature of indemnification
or penalty and should depend on the facts of each
case, taking into special consideration the gravity
of the due process violation of the employer.
Under the Civil Code, nominal damages is
adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the
defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for
any loss suffered by him.[37]
As enunciated by this Court in Viernes v. National
Labor Relations Commissions,[38] an employer is
liable to pay indemnity in the form of nominal
damages to an employee who has been dismissed
if, in effecting such dismissal, the employer fails to
comply with the requirements of due process. The
Court, after considering the circumstances therein,
fixed the indemnity at P2,590.50, which was
equivalent to the employees one month salary.
This indemnity is intended not to penalize the
employer but to vindicate or recognize the
employees right to statutory due process which
was violated by the employer.[39]
The violation of the petitioners right to statutory
due process by the private respondent warrants
the payment of indemnity in the form of nominal
damages. The amount of such damages is
addressed to the sound discretion of the court,

taking into account the relevant circumstances.

[40] Considering the prevailing circumstances in
the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages
would serve to deter employers from future
violations of the statutory due process rights of
employees. At the very least, it provides a
vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its
Implementing Rules.
Private respondent claims that the Court of
Appeals erred in holding that it failed to pay
petitioners holiday pay, service incentive leave pay
and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on
petitioners money claims. Private respondent is
liable for petitioners holiday pay, service incentive
leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the
burden of proving it. Even where the employee
must allege non-payment, the general rule is that
the burden rests on the employer to prove
payment, rather than on the employee to prove
non-payment. The reason for the rule is that the
pertinent personnel files, payrolls, records,
remittances and other similar documents which
will show that overtime, differentials, service
incentive leave and other claims of workers have
been paid are not in the possession of the worker
but in the custody and absolute control of the
employer.[41]
In the case at bar, if private respondent indeed
paid petitioners holiday pay and service incentive
leave pay, it could have easily presented
documentary proofs of such monetary benefits to
disprove the claims of the petitioners. But it did
not, except with respect to the 13th month pay
wherein it presented cash vouchers showing
payments of the benefit in the years disputed.
[42] Allegations by private respondent that it does
not operate during holidays and that it allows its
employees 10 days leave with pay, other than
being self-serving, do not constitute proof of
payment. Consequently, it failed to discharge
the onus probandi thereby making it liable for such
claims to the petitioners.
Anent the deduction of SSS loan and the value of
the shoes from petitioner Virgilio Agabons
13th month pay, we find the same to be
unauthorized. The evident intention of Presidential
Decree No. 851 is to grant an additional income in

33
the form of the 13th month pay to employees not
already receiving the same[43] so as to further
protect the level of real wages from the ravages of
world-wide inflation.[44] Clearly, as additional
income, the 13th month pay is included in the
definition of wage under Article 97(f) of the Labor
Code, to wit:

Home Improvements, Inc. is further ORDERED to

pay each of the petitioners the amount of
P30,000.00 as nominal damages for noncompliance with statutory due process.
No costs.
SO ORDERED.

(f) Wage paid to any employee shall mean the

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 services rendered or to be
rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily
furnished by the employer to the employee
from which an employer is prohibited under Article
113[45] of the same Code from making any
deductions without the employees knowledge and
consent. In the instant case, private respondent
failed to show that the deduction of the SSS loan
and the value of the shoes from petitioner Virgilio
Agabons 13th month pay was authorized by the
latter. The lack of authority to deduct is further
bolstered by the fact that petitioner Virgilio Agabon
included the same as one of his money claims
against private respondent.
The Court of Appeals properly reinstated the
monetary claims awarded by the Labor Arbiter
ordering the private respondent to pay each of the
petitioners holiday pay for four regular holidays
from 1996 to 1998, in the amount of P6,520.00,
service incentive leave pay for the same period in
the amount of P3,255.00 and the balance of
Virgilio Agabons thirteenth month pay for 1998 in
the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition
is DENIED. The decision of the Court of Appeals
dated January 23, 2003, in CA-G.R. SP No. 63017,
finding that petitioners Jenny and Virgilio Agabon
abandoned their work, and ordering private
respondent to pay each of the petitioners holiday
pay for four regular holidays from 1996 to 1998, in
the amount of P6,520.00, service incentive leave
pay for the same period in the amount of
P3,255.00 and the balance of Virgilio Agabons
thirteenth month pay for 1998 in the amount of
P2,150.00 is AFFIRMED with
the MODIFICATION that private respondent Riviera

10. G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO
MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E.
ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A.
Manuel.
Atienza, Tabora, Del Rosario & Castillo for private
respondent.
MEDIALDEA, J.:
This is a petition for certiorari seeking to modify
the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T
entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee" and NLRC Case No. RN- IV20855-78-T entitled, "Amancio Manuel,
Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal
of petitioners herein and in effect affirmed the
decision of the Labor Arbiter ordering private
respondent to pay petitioners separation pay
equivalent to their one month salary (exclusive of
commissions, allowances, etc.) for every year of
service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc.,
(hereinafter referred to as Zuellig) filed with the
Department of Labor (Regional Office No. 4) an
application seeking clearance to terminate the
services of petitioners Jose Songco, Romeo Cipres,
and Amancio Manuel (hereinafter referred to as
petitioners) allegedly on the ground of
retrenchment due to financial losses. This
application was seasonably opposed by petitioners
alleging that the company is not suffering from any
losses. They alleged further that they are being
dismissed because of their membership in the
union. At the last hearing of the case, however,
petitioners manifested that they are no longer
contesting their dismissal. The parties then agreed
that the sole issue to be resolved is the basis of
the separation pay due to petitioners. Petitioners,
who were in the sales force of Zuellig received

34
monthly salaries of at least P40,000. In addition,
they received commissions for every sale they
made.
The collective Bargaining Agreement entered into
between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members,
contains the following provision (p. 71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from
employment due to old age, sickness, death or
permanent lay-off not due to the fault of said
employee shall receive from the company a
retirement gratuity in an amount equivalent to one
(1) month's salary per year of service. One month
of salaryas used in this paragraph shall be deemed
equivalent to the salary at date of retirement;
years of service shall be deemed equivalent to
total service credits, a fraction of at least six
months being considered one year, including
probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code
then prevailing provides:
Art. 284. Reduction of personnel. The
termination of employment of any employee due
to the installation of labor saving-devices,
redundancy, retrenchment to prevent losses, and
other similar causes, shall entitle the employee
affected thereby to separation pay. In case of
termination due to the installation of labor-saving
devices or redundancy, the separation pay shall be
equivalent to one (1) month pay or to at least one
(1) month pay for every year of service, whichever
is higher. In case of retrenchment to prevent losses
and other similar causes, the separation pay shall
be equivalent to one (1) month pay or at least onehalf (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
(Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of
the Rules Implementing the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is
due to retrechment initiated by the employer to
prevent losses or other similar causes, or where
the employee suffers from a disease and his
continued employment is prohibited by law or is
prejudicial to his health or to the health of his coemployees, the employee shall be entitled to
termination pay equivalent at least to his one
month salary, or to one-half month pay for every
year of service, whichever is higher, a fraction of
at least six (6) months being considered as one
whole year.
xxx
Sec. 10. Basis of termination pay. The
computation of the termination pay of an

employee as provided herein shall be based on his

latest salary rate, unless the same was reduced by
the employer to defeat the intention of the Code,
in which case the basis of computation shall be the
rate before its deduction. (Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a
decision, the dispositive portion of which reads (p.
78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent
should be as it is hereby, ordered to pay the
complainants separation pay equivalent to their
one month salary (exclusive of commissions,
allowances, etc.) for every year of service that
they have worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor
Relations Commission was dismissed for lack of
merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified
"Notice of Voluntary Abandonment and Withdrawal
of Petition dated April 7, 1980 filed by petitioner
Romeo Cipres, based on the ground that he wants
"to abide by the decision appealed from" since he
had "received, to his full and complete satisfaction,
his separation pay," resolved to dismiss the
petition as to him.
The issue is whether or not earned sales
commissions and allowances should be included in
the monthly salary of petitioners for the purpose of
computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the
correct and legal amount of separation pay due
them, whether under the Labor Code or the CBA,
their basic salary, earned sales commissions and
allowances should be added together. They cited
Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the
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 services rendered or to be
rendered, and includes the fair and reasonable
value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily
furnished by the employer to the employee. 'Fair
reasonable value' shall not include any profit to the
employer or to any person affiliated with the
employer.
Zuellig argues that if it were really the intention of
the Labor Code as well as its implementing rules to

35
include commission in the computation of
separation pay, it could have explicitly said so in
clear and unequivocal terms. Furthermore, in the
definition of the term "wage", "commission" is
used only as one of the features or designations
attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances
should be included in the monthly salary of
petitioners for the purpose of computation of their
separation pay is concerned, this has been settled
in the case of Santos v. NLRC, et al., G.R. No.
76721, September 21, 1987, 154 SCRA 166, where
We ruled that "in the computation of backwages
and separation pay, account must be taken not
only of the basic salary of petitioner but also of her
transportation and emergency living allowances."
This ruling was reiterated in Soriano v. NLRC, et
al., G.R. No. 75510, October 27, 1987, 155 SCRA
124 and recently, in Planters Products, Inc. v.
NLRC, et al., G.R. No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of
whether or not earned sales commission should be
included in the monthly salary of petitioner for the
purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is
included in the definition of the term "wage". It has
been repeatedly declared by the courts that where
the law speaks in clear and categorical language,
there is no room for interpretation or construction;
there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos.
24116-17, August 22, 1968, 24 SCRA 708;
Gonzaga v. Court of Appeals, G.R.No. L-2 7455,
June 28,1973, 51 SCRA 381). A plain and
unambiguous statute speaks for itself, and any
attempt to make it clearer is vain labor and tends
only to obscurity. How ever, it may be argued that
if We correlate Article 97(f) with Article XIV of the
Collective Bargaining Agreement, Article 284 of the
Labor Code and Sections 9(b) and 10 of the
Implementing Rules, there appears to be an
ambiguity. In this regard, the Labor Arbiter
rationalized his decision in this manner (pp. 74-76,
Rollo):
The definition of 'wage' provided in Article 96 (sic)
of the Code can be correctly be (sic) stated as a
general definition. It is 'wage ' in its generic sense.
A careful perusal of the same does not show any
indication that commission is part of salary. We can
say that commission by itself may be considered a
wage. This is not something novel for it cannot be
gainsaid that certain types of employees like
agents, field personnel and salesmen do not earn
any regular daily, weekly or monthly salaries, but
rely mainly on commission earned.
Upon the other hand, the provisions of Section 10,
Rule 1, Book VI of the implementing rules in

conjunction with Articles 273 and 274 (sic) of the

Code specifically states that the basis of the
termination pay due to one who is sought to be
legally separated from the service is 'his latest
salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use
'monthly pay or monthly salary'.
The above terms found in those Articles and the
particular Rules were intentionally used to express
the intent of the framers of the law that for
purposes of separation pay they mean to be
specifically referring to salary only.
.... Each particular benefit provided in the Code
and other Decrees on Labor has its own
pecularities and nuances and should be
interpreted in that light. Thus, for a specific
provision, a specific meaning is attached to
simplify matters that may arise there from. The
general guidelines in (sic) the formation of specific
rules for particular purpose. Thus, that what should
be controlling in matters concerning termination
pay should be the specific provisions of both Book
VI of the Code and the Rules. At any rate, settled is
the rule that in matters of conflict between the
general provision of law and that of a particular- or
specific provision, the latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the
implementing rules, it could be deduced that wage
is used in its generic sense and obviously refers to
the basic wage rate to be ascertained on a time,
task, piece or commission basis or other method of
calculating the same. It does not, however, mean
that commission, allowances or analogous income
necessarily forms part of the employee's salary
because to do so would lead to anomalies (sic), if
not absurd, construction of the word "salary." For
what will prevent the employee from insisting that
emergency living allowance, 13th month pay,
overtime, and premium pay, and other fringe
benefits should be added to the computation of
their separation pay. This situation, to our mind, is
not the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article
97(f), which defines the term 'wage' and Article XIV
of the Collective Bargaining Agreement, Article 284
of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms
"pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or
consideration made to a person for his pains or
industry in another man's business. Whether it be
derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with
it the fundamental idea of compensation for
services rendered. Indeed, there is eminent

36
authority for holding that the words "wages" and
"salary" are in essence synonymous (Words and
Phrases, Vol. 38 Permanent Edition, p. 44 citing
Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App.
Div. 481; 38 Am. Jur. 496). "Salary," the etymology
of which is the Latin word "salarium," is often used
interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both
words generally refer to one and the same
meaning, that is, a reward or recompense for
services performed. Likewise, "pay" is the
synonym of "wages" and "salary" (Black's Law
Dictionary, 5th Ed.). Inasmuch as the words
"wages", "pay" and "salary" have the same
meaning, and commission is included in the
definition of "wage", the logical conclusion,
therefore, is, in the computation of the separation
pay of petitioners, their salary base should include
also their earned sales commissions.
The aforequoted provisions are not the only
consideration for deciding the petition in favor of
the petitioners.
We agree with the Solicitor General that
granting, in gratia argumenti, that the
commissions were in the form of incentives or
encouragement, so that the petitioners would be
inspired to put a little more industry on the jobs
particularly assigned to them, still these
commissions are direct remuneration services
rendered which contributed to the increase of
income of Zuellig . Commission is the recompense,
compensation or reward of an agent, salesman,
executor, trustees, receiver, factor, broker or
bailee, when the same is calculated as a
percentage on the amount of his transactions or on
the profit to the principal (Black's Law Dictionary,
5th Ed., citing Weiner v. Swales, 217 Md. 123, 141
A.2d 749, 750). The nature of the work of a
salesman and the reason for such type of
remuneration for services rendered demonstrate
clearly that commission are part of petitioners'
wage or salary. We take judicial notice of the fact
that some salesmen do not receive any basic
salary but depend on commissions and allowances
or commissions alone, are part of petitioners' wage
or salary. We take judicial notice of the fact that
some salesman do not received any basic salary
but depend on commissions and allowances or
commissions alone, although an employeremployee relationship exists. Bearing in mind the
preceeding dicussions, if we adopt the opposite
view that commissions, do not form part of wage
or salary, then, in effect, We will be saying that this
kind of salesmen do not receive any salary and
therefore, not entitled to separation pay in the
event of discharge from employment. Will this not
be absurd? This narrow interpretation is not in

accord with the liberal spirit of our labor laws and

considering the purpose of separation pay which
is, to alleviate the difficulties which confront a
dismissed employee thrown the the streets to face
the harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in
resolving the issue of the salary base that should
be used in computing the separation pay, We held
that:
The commissions also claimed by petitioner
('override commission' plus 'net deposit incentive')
are not properly includible in such base figure
since such commissions must be earned by actual
market transactions attributable to petitioner.
Applying this by analogy, since the commissions in
the present case were earned by actual market
transactions attributable to petitioners, these
should be included in their separation pay. In the
computation thereof, what should be taken into
account is the average commissions earned during
their last year of employment.
The final consideration is, in carrying out and
interpreting the Labor Code's provisions and its
implementing regulations, the workingman's
welfare should be the primordial and paramount
consideration. This kind of interpretation gives
meaning and substance to the liberal and
compassionate spirit of the law as provided for in
Article 4 of the Labor Code which states that "all
doubts in the implementation and interpretation of
the provisions of the Labor Code including its
implementing rules and regulations shall be
resolved in favor of labor" (Abella v. NLRC, G.R. No.
71812, July 30,1987,152 SCRA 140; Manila Electric
Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which
provides that "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.
ACCORDINGLY, the petition is hereby GRANTED.
The decision of the respondent National Labor
Relations Commission is MODIFIED by including
allowances and commissions in the separation pay
of petitioners Jose Songco and Amancio Manuel.
The case is remanded to the Labor Arbiter for the
proper computation of said separation pay.
SO ORDERED.
11. G.R. No. L-63915 April 24, 1985
LORENZO M. TAADA, ABRAHAM F. SARMIENTO,
and MOVEMENT OF ATTORNEYS FOR
BROTHERHOOD, INTEGRITY AND NATIONALISM,
INC. [MABINI], petitioners,
vs.
HON. JUAN C. TUVERA, in his capacity as Executive
Assistant to the President, HON. JOAQUIN VENUS,
in his capacity as Deputy Executive Assistant to
the President , MELQUIADES P. DE LA CRUZ, in his

37
capacity as Director, Malacaang Records Office,
and FLORENDO S. PABLO, in his capacity as
Director, Bureau of Printing, respondents.
ESCOLIN, J.:
Invoking the people's right to be informed on
matters of public concern, a right recognized in
Section 6, Article IV of the 1973 Philippine
Constitution, 1 as well as the principle that laws to
be valid and enforceable must be published in the
Official Gazette or otherwise effectively
promulgated, petitioners seek a writ of mandamus
to compel respondent public officials to publish,
and/or cause the publication in the Official Gazette
of various presidential decrees, letters of
instructions, general orders, proclamations,
executive orders, letter of implementation and
administrative orders.
Specifically, the publication of the following
presidential issuances is sought:
a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64,
103, 171, 179, 184, 197, 200, 234, 265, 286, 298,
303, 312, 324, 325, 326, 337, 355, 358, 359, 360,
361, 368, 404, 406, 415, 427, 429, 445, 447, 473,
486, 491, 503, 504, 521, 528, 551, 566, 573, 574,
594, 599, 644, 658, 661, 718, 731, 733, 793, 800,
802, 835, 836, 923, 935, 961, 1017-1030, 1050,
1060-1061, 1085, 1143, 1165, 1166, 1242, 1246,
1250, 1278, 1279, 1300, 1644, 1772, 1808, 1810,
1813-1817, 1819-1826, 1829-1840, 1842-1847.
b] Letter of Instructions Nos.: 10, 39, 49, 72, 107,
108, 116, 130, 136, 141, 150, 153, 155, 161, 173,
180, 187, 188, 192, 193, 199, 202, 204, 205, 209,
211-213, 215-224, 226-228, 231-239, 241-245,
248, 251, 253-261, 263-269, 271-273, 275-283,
285-289, 291, 293, 297-299, 301-303, 309, 312315, 325, 327, 343, 346, 349, 357, 358, 362, 367,
370, 382, 385, 386, 396-397, 405, 438-440, 444445, 473, 486, 488, 498, 501, 399, 527, 561, 576,
587, 594, 599, 600, 602, 609, 610, 611, 612, 615,
641, 642, 665, 702, 712-713, 726, 837-839, 878879, 881, 882, 939-940, 964,997,1149-1178,11801278.
c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63,
64 & 65.
d] Proclamation Nos.: 1126, 1144, 1147, 1151,
1196, 1270, 1281, 1319-1526, 1529, 1532, 1535,
1538, 1540-1547, 1550-1558, 1561-1588, 15901595, 1594-1600, 1606-1609, 1612-1628, 16301649, 1694-1695, 1697-1701, 1705-1723, 17311734, 1737-1742, 1744, 1746-1751, 1752, 1754,
1762, 1764-1787, 1789-1795, 1797, 1800, 18021804, 1806-1807, 1812-1814, 1816, 1825-1826,
1829, 1831-1832, 1835-1836, 1839-1840, 18431844, 1846-1847, 1849, 1853-1858, 1860, 1866,
1868, 1870, 1876-1889, 1892, 1900, 1918, 1923,
1933, 1952, 1963, 1965-1966, 1968-1984, 1986-

2028, 2030-2044, 2046-2145, 2147-2161, 21632244.

e] Executive Orders Nos.: 411, 413, 414, 427, 429454, 457- 471, 474-492, 494-507, 509-510, 522,
524-528, 531-532, 536, 538, 543-544, 549, 551553, 560, 563, 567-568, 570, 574, 593, 594, 598604, 609, 611- 647, 649-677, 679-703, 705-707,
712-786, 788-852, 854-857.
f] Letters of Implementation Nos.: 7, 8, 9, 10, 1122, 25-27, 39, 50, 51, 59, 76, 80-81, 92, 94, 95,
107, 120, 122, 123.
g] Administrative Orders Nos.: 347, 348, 352-354,
360- 378, 380-433, 436-439.
The respondents, through the Solicitor General,
would have this case dismissed outright on the
ground that petitioners have no legal personality
or standing to bring the instant petition. The view
is submitted that in the absence of any showing
that petitioners are personally and directly affected
or prejudiced by the alleged non-publication of the
presidential issuances in question 2 said
petitioners are without the requisite legal
personality to institute this mandamus proceeding,
they are not being "aggrieved parties" within the
meaning of Section 3, Rule 65 of the Rules of
Court, which we quote:
SEC. 3. Petition for Mandamus.When any
tribunal, corporation, board or person unlawfully
neglects the performance of an act which the law
specifically enjoins as a duty resulting from an
office, trust, or station, or unlawfully excludes
another from the use a rd enjoyment of a right or
office to which such other is entitled, and there is
no other plain, speedy and adequate remedy in the
ordinary course of law, the person aggrieved
thereby may file a verified petition in the proper
court alleging the facts with certainty and praying
that judgment be rendered commanding the
defendant, immediately or at some other specified
time, to do the act required to be done to Protect
the rights of the petitioner, and to pay the
damages sustained by the petitioner by reason of
the wrongful acts of the defendant.
Upon the other hand, petitioners maintain that
since the subject of the petition concerns a public
right and its object is to compel the performance of
a public duty, they need not show any specific
interest for their petition to be given due course.
The issue posed is not one of first impression. As
early as the 1910 case of Severino vs. Governor
General, 3 this Court held that while the general
rule is that "a writ of mandamus would be granted
to a private individual only in those cases where he
has some private or particular interest to be
subserved, or some particular right to be
protected, independent of that which he holds with
the public at large," and "it is for the public officers

38
exclusively to apply for the writ when public rights
are to be subserved [Mithchell vs. Boardmen, 79
M.e., 469]," nevertheless, "when the question is
one of public right and the object of the
mandamus is to procure the enforcement of a
public duty, the people are regarded as the real
party in interest and the relator at whose
instigation the proceedings are instituted need not
show that he has any legal or special interest in
the result, it being sufficient to show that he is a
citizen and as such interested in the execution of
the laws [High, Extraordinary Legal Remedies, 3rd
ed., sec. 431].
Thus, in said case, this Court recognized the
relator Lope Severino, a private individual, as a
proper party to the mandamus proceedings
brought to compel the Governor General to call a
special election for the position of municipal
president in the town of Silay, Negros Occidental.
Speaking for this Court, Mr. Justice Grant T. Trent
said:
We are therefore of the opinion that the weight of
authority supports the proposition that the relator
is a proper party to proceedings of this character
when a public right is sought to be enforced. If the
general rule in America were otherwise, we think
that it would not be applicable to the case at bar
for the reason 'that it is always dangerous to apply
a general rule to a particular case without keeping
in mind the reason for the rule, because, if under
the particular circumstances the reason for the
rule does not exist, the rule itself is not applicable
and reliance upon the rule may well lead to error'
No reason exists in the case at bar for applying the
general rule insisted upon by counsel for the
respondent. The circumstances which surround
this case are different from those in the United
States, inasmuch as if the relator is not a proper
party to these proceedings no other person could
be, as we have seen that it is not the duty of the
law officer of the Government to appear and
represent the people in cases of this character.
The reasons given by the Court in recognizing a
private citizen's legal personality in the
aforementioned case apply squarely to the present
petition. Clearly, the right sought to be enforced by
petitioners herein is a public right recognized by no
less than the fundamental law of the land. If
petitioners were not allowed to institute this
proceeding, it would indeed be difficult to conceive
of any other person to initiate the same,
considering that the Solicitor General, the
government officer generally empowered to
represent the people, has entered his appearance
for respondents in this case.
Respondents further contend that publication in
the Official Gazette is not a sine qua non

requirement for the effectivity of laws where the

laws themselves provide for their own effectivity
dates. It is thus submitted that since the
presidential issuances in question contain special
provisions as to the date they are to take effect,
publication in the Official Gazette is not
indispensable for their effectivity. The point
stressed is anchored on Article 2 of the Civil Code:
Art. 2. Laws shall take effect after fifteen days
following the completion of their publication in the
Official Gazette, unless it is otherwise provided, ...
The interpretation given by respondent is in accord
with this Court's construction of said article. In a
long line of decisions, 4 this Court has ruled that
publication in the Official Gazette is necessary in
those cases where the legislation itself does not
provide for its effectivity date-for then the date of
publication is material for determining its date of
effectivity, which is the fifteenth day following its
publication-but not when the law itself provides for
the date when it goes into effect.
Respondents' argument, however, is logically
correct only insofar as it equates the effectivity of
laws with the fact of publication. Considered in the
light of other statutes applicable to the issue at
hand, the conclusion is easily reached that said
Article 2 does not preclude the requirement of
publication in the Official Gazette, even if the law
itself provides for the date of its effectivity. Thus,
Section 1 of Commonwealth Act 638 provides as
follows:
Section 1. There shall be published in the Official
Gazette [1] all important legisiative acts and
resolutions of a public nature of the, Congress of
the Philippines; [2] all executive and administrative
orders and proclamations, except such as have no
general applicability; [3] decisions or abstracts of
decisions of the Supreme Court and the Court of
Appeals as may be deemed by said courts of
sufficient importance to be so published; [4] such
documents or classes of documents as may be
required so to be published by law; and [5] such
documents or classes of documents as the
President of the Philippines shall determine from
time to time to have general applicability and legal
effect, or which he may authorize so to be
published. ...
The clear object of the above-quoted provision is
to give the general public adequate notice of the
various laws which are to regulate their actions
and conduct as citizens. Without such notice and
publication, there would be no basis for the
application of the maxim "ignorantia legis non
excusat." It would be the height of injustice to
punish or otherwise burden a citizen for the
transgression of a law of which he had no notice
whatsoever, not even a constructive one.

39
Perhaps at no time since the establishment of the
Philippine Republic has the publication of laws
taken so vital significance that at this time when
the people have bestowed upon the President a
power heretofore enjoyed solely by the legislature.
While the people are kept abreast by the mass
media of the debates and deliberations in the
Batasan Pambansaand for the diligent ones,
ready access to the legislative recordsno such
publicity accompanies the law-making process of
the President. Thus, without publication, the
people have no means of knowing what
presidential decrees have actually been
promulgated, much less a definite way of
informing themselves of the specific contents and
texts of such decrees. As the Supreme Court of
Spain ruled: "Bajo la denominacion generica de
leyes, se comprenden tambien los reglamentos,
Reales decretos, Instrucciones, Circulares y Reales
ordines dictadas de conformidad con las mismas
por el Gobierno en uso de su potestad. 5
The very first clause of Section I of Commonwealth
Act 638 reads: "There shall be published in the
Official Gazette ... ." The word "shall" used therein
imposes upon respondent officials an imperative
duty. That duty must be enforced if the
Constitutional right of the people to be informed
on matters of public concern is to be given
substance and reality. The law itself makes a list of
what should be published in the Official Gazette.
Such listing, to our mind, leaves respondents with
no discretion whatsoever as to what must be
included or excluded from such publication.
The publication of all presidential issuances "of a
public nature" or "of general applicability" is
mandated by law. Obviously, presidential decrees
that provide for fines, forfeitures or penalties for
their violation or otherwise impose a burden or. the
people, such as tax and revenue measures, fall
within this category. Other presidential issuances
which apply only to particular persons or class of
persons such as administrative and executive
orders need not be published on the assumption
that they have been circularized to all
concerned. 6
It is needless to add that the publication of
presidential issuances "of a public nature" or "of
general applicability" is a requirement of due
process. It is a rule of law that before a person may
be bound by law, he must first be officially and
specifically informed of its contents. As Justice
Claudio Teehankee said in Peralta vs. COMELEC 7:
In a time of proliferating decrees, orders and
letters of instructions which all form part of the law
of the land, the requirement of due process and
the Rule of Law demand that the Official Gazette
as the official government repository promulgate

and publish the texts of all such decrees, orders

and instructions so that the people may know
where to obtain their official and specific contents.
The Court therefore declares that presidential
issuances of general application, which have not
been published, shall have no force and effect.
Some members of the Court, quite apprehensive
about the possible unsettling effect this decision
might have on acts done in reliance of the validity
of those presidential decrees which were published
only during the pendency of this petition, have put
the question as to whether the Court's declaration
of invalidity apply to P.D.s which had been
enforced or implemented prior to their publication.
The answer is all too familiar. In similar situations
in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage
District vs. Baxter Bank 8 to wit:
The courts below have proceeded on the theory
that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the
challenged decree. Norton v. Shelby County, 118
U.S. 425, 442; Chicago, 1. & L. Ry. Co. v. Hackett,
228 U.S. 559, 566. It is quite clear, however, that
such broad statements as to the effect of a
determination of unconstitutionality must be taken
with qualifications. The actual existence of a
statute, prior to such a determination, is an
operative fact and may have consequences which
cannot justly be ignored. The past cannot always
be erased by a new judicial declaration. The effect
of the subsequent ruling as to invalidity may have
to be considered in various aspects-with respect to
particular conduct, private and official. Questions
of rights claimed to have become vested, of status,
of prior determinations deemed to have finality
and acted upon accordingly, of public policy in the
light of the nature both of the statute and of its
previous application, demand examination. These
questions are among the most difficult of those
which have engaged the attention of courts, state
and federal and it is manifest from numerous
decisions that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot
be justified.
Consistently with the above principle, this Court
in Rutter vs. Esteban 9 sustained the right of a
party under the Moratorium Law, albeit said right
had accrued in his favor before said law was
declared unconstitutional by this Court.
Similarly, the implementation/enforcement of
presidential decrees prior to their publication in the
Official Gazette is "an operative fact which may
have consequences which cannot be justly
ignored. The past cannot always be erased by a

40
new judicial declaration ... that an all-inclusive
statement of a principle of absolute retroactive
invalidity cannot be justified."
From the report submitted to the Court by the
Clerk of Court, it appears that of the presidential
decrees sought by petitioners to be published in
the Official Gazette, only Presidential Decrees Nos.
1019 to 1030, inclusive, 1278, and 1937 to 1939,
inclusive, have not been so published. 10 Neither
the subject matters nor the texts of these PDs can
be ascertained since no copies thereof are
available. But whatever their subject matter may
be, it is undisputed that none of these unpublished
PDs has ever been implemented or enforced by
the government. In Pesigan vs. Angeles, 11 the
Court, through Justice Ramon Aquino, ruled that
"publication is necessary to apprise the public of
the contents of [penal] regulations and make the
said penalties binding on the persons affected
thereby. " The cogency of this holding is apparently
recognized by respondent officials considering the
manifestation in their comment that "the
government, as a matter of policy, refrains from
prosecuting violations of criminal laws until the
same shall have been published in the Official
Gazette or in some other publication, even though
some criminal laws provide that they shall take
effect immediately.
WHEREFORE, the Court hereby orders respondents
to publish in the Official Gazette all unpublished
presidential issuances which are of general
application, and unless so published, they shall
have no binding force and effect.
SO ORDERED.
Relova, J., concurs.
Aquino, J., took no part.
Concepcion, Jr., J., is on leave.
Separate Opinions
FERNANDO, C.J., concurring (with qualification):
There is on the whole acceptance on my part of
the views expressed in the ably written opinion of
Justice Escolin. I am unable, however, to concur
insofar as it would unqualifiedly impose the
requirement of publication in the Official Gazette
for unpublished "presidential issuances" to have
binding force and effect.
I shall explain why.
1. It is of course true that without the requisite
publication, a due process question would arise if
made to apply adversely to a party who is not
even aware of the existence of any legislative or
executive act having the force and effect of law.
My point is that such publication required need not
be confined to the Official Gazette. From the

pragmatic standpoint, there is an advantage to be

gained. It conduces to certainty. That is too be
admitted. It does not follow, however, that failure
to do so would in all cases and under all
circumstances result in a statute, presidential
decree or any other executive act of the same
category being bereft of any binding force and
effect. To so hold would, for me, raise a
constitutional question. Such a pronouncement
would lend itself to the interpretation that such a
legislative or presidential act is bereft of the
attribute of effectivity unless published in the
Official Gazette. There is no such requirement in
the Constitution as Justice Plana so aptly pointed
out. It is true that what is decided now applies only
to past "presidential issuances". Nonetheless, this
clarification is, to my mind, needed to avoid any
possible misconception as to what is required for
any statute or presidential act to be impressed
with binding force or effectivity.
2. It is quite understandable then why I concur in
the separate opinion of Justice Plana. Its first
paragraph sets forth what to me is the
constitutional doctrine applicable to this case.
Thus: "The Philippine Constitution does not require
the publication of laws as a prerequisite for their
effectivity, unlike some Constitutions elsewhere. It
may be said though that the guarantee of due
process requires notice of laws to affected Parties
before they can be bound thereby; but such notice
is not necessarily by publication in the Official
Gazette. The due process clause is not that
precise. 1 I am likewise in agreement with its
closing paragraph: "In fine, I concur in the majority
decision to the extent that it requires notice before
laws become effective, for no person should be
bound by a law without notice. This is elementary
fairness. However, I beg to disagree insofar as it
holds that such notice shall be by publication in
the Official Gazette. 2
3. It suffices, as was stated by Judge Learned
Hand, that law as the command of the government
"must be ascertainable in some form if it is to be
enforced at all. 3 It would indeed be to reduce it to
the level of mere futility, as pointed out by Justice
Cardozo, "if it is unknown and
unknowable. 4 Publication, to repeat, is thus
essential. What I am not prepared to subscribe to
is the doctrine that it must be in the Official
Gazette. To be sure once published therein there is
the ascertainable mode of determining the exact
date of its effectivity. Still for me that does not
dispose of the question of what is the jural effect of
past presidential decrees or executive acts not so
published. For prior thereto, it could be that parties
aware of their existence could have conducted
themselves in accordance with their provisions. If

41
no legal consequences could attach due to lack of
publication in the Official Gazette, then serious
problems could arise. Previous transactions based
on such "Presidential Issuances" could be open to
question. Matters deemed settled could still be
inquired into. I am not prepared to hold that such
an effect is contemplated by our decision. Where
such presidential decree or executive act is made
the basis of a criminal prosecution, then, of course,
its ex post facto character becomes evident. 5 In
civil cases though, retroactivity as such is not
conclusive on the due process aspect. There must
still be a showing of arbitrariness. Moreover, where
the challenged presidential decree or executive act
was issued under the police power, the nonimpairment clause of the Constitution may not
always be successfully invoked. There must still be
that process of balancing to determine whether or
not it could in such a case be tainted by
infirmity. 6 In traditional terminology, there could
arise then a question of unconstitutional
application. That is as far as it goes.
4. Let me make therefore that my qualified
concurrence goes no further than to affirm that
publication is essential to the effectivity of a
legislative or executive act of a general
application. I am not in agreement with the view
that such publication must be in the Official
Gazette. The Civil Code itself in its Article 2
expressly recognizes that the rule as to laws taking
effect after fifteen days following the completion of
their publication in the Official Gazette is subject to
this exception, "unless it is otherwise provided."
Moreover, the Civil Code is itself only a legislative
enactment, Republic Act No. 386. It does not and
cannot have the juridical force of a constitutional
command. A later legislative or executive act
which has the force and effect of law can legally
provide for a different rule.
5. Nor can I agree with the rather sweeping
conclusion in the opinion of Justice Escolin that
presidential decrees and executive acts not thus
previously published in the Official Gazette would
be devoid of any legal character. That would be, in
my opinion, to go too far. It may be fraught, as
earlier noted, with undesirable consequences. I
find myself therefore unable to yield assent to such
a pronouncement.
I am authorized to state that Justices Makasiar,
Abad Santos, Cuevas, and Alampay concur in this
separate opinion.
Makasiar, Abad Santos, Cuevas and Alampay, JJ.,
concur.
TEEHANKEE, J., concurring:
I concur with the main opinion of Mr. Justice Escolin
and the concurring opinion of Mme. Justice

Herrera. The Rule of Law connotes a body of norms

and laws published and ascertainable and of equal
application to all similarly circumstances and not
subject to arbitrary change but only under certain
set procedures. The Court has consistently
stressed that "it is an elementary rule of fair play
and justice that a reasonable opportunity to be
informed must be afforded to the people who are
commanded to obey before they can be punished
for its violation, 1 citing the settled principle based
on due process enunciated in earlier cases that
"before the public is bound by its contents,
especially its penal provisions, a law, regulation or
circular must first be published and the people
officially and specially informed of said contents
and its penalties.
Without official publication in the Official Gazette
as required by Article 2 of the Civil Code and the
Revised Administrative Code, there would be no
basis nor justification for the corollary rule of
Article 3 of the Civil Code (based on constructive
notice that the provisions of the law are
ascertainable from the public and official
repository where they are duly published) that
"Ignorance of the law excuses no one from
compliance therewith.
Respondents' contention based on a misreading of
Article 2 of the Civil Code that "only laws which are
silent as to their effectivity [date] need be
published in the Official Gazette for their
effectivity" is manifestly untenable. The plain text
and meaning of the Civil Code is that "laws shall
take effect after fifteen days following the
completion of their publication in the Official
Gazette, unless it is otherwise provided, " i.e. a
different effectivity date is provided by the law
itself. This proviso perforce refers to a law that has
been duly published pursuant to the basic
constitutional requirements of due process. The
best example of this is the Civil Code itself: the
same Article 2 provides otherwise that it "shall
take effect [only] one year [not 15 days] after such
publication. 2 To sustain respondents' misreading
that "most laws or decrees specify the date of their
effectivity and for this reason, publication in the
Official Gazette is not necessary for their
effectivity 3 would be to nullify and render
nugatory the Civil Code's indispensable and
essential requirement of prior publication in the
Official Gazette by the simple expedient of
providing for immediate effectivity or an earlier
effectivity date in the law itself before the
completion of 15 days following its publication
which is the period generally fixed by the Civil
Code for its proper dissemination.
MELENCIO-HERRERA, J., concurring:

42
I agree. There cannot be any question but that
even if a decree provides for a date of effectivity, it
has to be published. What I would like to state in
connection with that proposition is that when a
date of effectivity is mentioned in the decree but
the decree becomes effective only fifteen (15)
days after its publication in the Official Gazette, it
will not mean that the decree can have retroactive
effect to the date of effectivity mentioned in the
decree itself. There should be no retroactivity if the
retroactivity will run counter to constitutional
rights or shall destroy vested rights.
PLANA, J., concurring (with qualification):
The Philippine Constitution does not require the
publication of laws as a prerequisite for their
effectivity, unlike some Constitutions
elsewhere. * It may be said though that the
guarantee of due process requires notice of laws to
affected parties before they can be bound thereby;
but such notice is not necessarily by publication in
the Official Gazette. The due process clause is not
that precise. Neither is the publication of laws in
the Official Gazette required by any statute as a
prerequisite for their effectivity, if said laws
already provide for their effectivity date.
Article 2 of the Civil Code provides that "laws shall
take effect after fifteen days following the
completion of their publication in the Official
Gazette, unless it is otherwise provided " Two
things may be said of this provision: Firstly, it
obviously does not apply to a law with a built-in
provision as to when it will take effect. Secondly, it
clearly recognizes that each law may provide not
only a different period for reckoning its effectivity
date but also a different mode of notice. Thus, a
law may prescribe that it shall be published
elsewhere than in the Official Gazette.
Commonwealth Act No. 638, in my opinion, does
not support the proposition that for their
effectivity, laws must be published in the Official
Gazette. The said law is simply "An Act to Provide
for the Uniform Publication and Distribution of the
Official Gazette." Conformably therewith, it
authorizes the publication of the Official Gazette,
determines its frequency, provides for its sale and
distribution, and defines the authority of the
Director of Printing in relation thereto. It also
enumerates what shall be published in the Official
Gazette, among them, "important legislative acts
and resolutions of a public nature of the Congress
of the Philippines" and "all executive and
administrative orders and proclamations, except
such as have no general applicability." It is
noteworthy that not all legislative acts are required
to be published in the Official Gazette but only
"important" ones "of a public nature." Moreover,

the said law does not provide that publication in

the Official Gazette is essential for the effectivity of
laws. This is as it should be, for all statutes are
equal and stand on the same footing. A law,
especially an earlier one of general application
such as Commonwealth Act No. 638, cannot nullify
or restrict the operation of a subsequent statute
that has a provision of its own as to when and how
it will take effect. Only a higher law, which is the
Constitution, can assume that role.
In fine, I concur in the majority decision to the
extent that it requires notice before laws become
effective, for no person should be bound by a law
without notice. This is elementary fairness.
However, I beg to disagree insofar as it holds that
such notice shall be by publication in the Official
Gazette.
Cuevas and Alampay, JJ., concur.
GUTIERREZ, Jr., J., concurring:
I concur insofar as publication is necessary but
reserve my vote as to the necessity of such
publication being in the Official Gazette.
DE LA FUENTE, J., concurring:
I concur insofar as the opinion declares the
unpublished decrees and issuances of a public
nature or general applicability ineffective, until due
publication thereof.

Separate Opinions
FERNANDO, C.J., concurring (with qualification):
There is on the whole acceptance on my part of
the views expressed in the ably written opinion of
Justice Escolin. I am unable, however, to concur
insofar as it would unqualifiedly impose the
requirement of publication in the Official Gazette
for unpublished "presidential issuances" to have
binding force and effect.
I shall explain why.
1. It is of course true that without the requisite
publication, a due process question would arise if
made to apply adversely to a party who is not
even aware of the existence of any legislative or
executive act having the force and effect of law.
My point is that such publication required need not
be confined to the Official Gazette. From the
pragmatic standpoint, there is an advantage to be
gained. It conduces to certainty. That is too be
admitted. It does not follow, however, that failure
to do so would in all cases and under all
circumstances result in a statute, presidential
decree or any other executive act of the same
category being bereft of any binding force and
effect. To so hold would, for me, raise a

43
constitutional question. Such a pronouncement
would lend itself to the interpretation that such a
legislative or presidential act is bereft of the
attribute of effectivity unless published in the
Official Gazette. There is no such requirement in
the Constitution as Justice Plana so aptly pointed
out. It is true that what is decided now applies only
to past "presidential issuances". Nonetheless, this
clarification is, to my mind, needed to avoid any
possible misconception as to what is required for
any statute or presidential act to be impressed
with binding force or effectivity.
2. It is quite understandable then why I concur in
the separate opinion of Justice Plana. Its first
paragraph sets forth what to me is the
constitutional doctrine applicable to this case.
Thus: "The Philippine Constitution does not require
the publication of laws as a prerequisite for their
effectivity, unlike some Constitutions elsewhere. It
may be said though that the guarantee of due
process requires notice of laws to affected Parties
before they can be bound thereby; but such notice
is not necessarily by publication in the Official
Gazette. The due process clause is not that
precise. 1 I am likewise in agreement with its
closing paragraph: "In fine, I concur in the majority
decision to the extent that it requires notice before
laws become effective, for no person should be
bound by a law without notice. This is elementary
fairness. However, I beg to disagree insofar as it
holds that such notice shall be by publication in
the Official Gazette. 2
3. It suffices, as was stated by Judge Learned
Hand, that law as the command of the government
"must be ascertainable in some form if it is to be
enforced at all. 3 It would indeed be to reduce it to
the level of mere futility, as pointed out by Justice
Cardozo, "if it is unknown and
unknowable. 4 Publication, to repeat, is thus
essential. What I am not prepared to subscribe to
is the doctrine that it must be in the Official
Gazette. To be sure once published therein there is
the ascertainable mode of determining the exact
date of its effectivity. Still for me that does not
dispose of the question of what is the jural effect of
past presidential decrees or executive acts not so
published. For prior thereto, it could be that parties
aware of their existence could have conducted
themselves in accordance with their provisions. If
no legal consequences could attach due to lack of
publication in the Official Gazette, then serious
problems could arise. Previous transactions based
on such "Presidential Issuances" could be open to
question. Matters deemed settled could still be
inquired into. I am not prepared to hold that such
an effect is contemplated by our decision. Where
such presidential decree or executive act is made

the basis of a criminal prosecution, then, of course,

its ex post facto character becomes evident. 5 In
civil cases though, retroactivity as such is not
conclusive on the due process aspect. There must
still be a showing of arbitrariness. Moreover, where
the challenged presidential decree or executive act
was issued under the police power, the nonimpairment clause of the Constitution may not
always be successfully invoked. There must still be
that process of balancing to determine whether or
not it could in such a case be tainted by
infirmity. 6 In traditional terminology, there could
arise then a question of unconstitutional
application. That is as far as it goes.
4. Let me make therefore that my qualified
concurrence goes no further than to affirm that
publication is essential to the effectivity of a
legislative or executive act of a general
application. I am not in agreement with the view
that such publication must be in the Official
Gazette. The Civil Code itself in its Article 2
expressly recognizes that the rule as to laws taking
effect after fifteen days following the completion of
their publication in the Official Gazette is subject to
this exception, "unless it is otherwise provided."
Moreover, the Civil Code is itself only a legislative
enactment, Republic Act No. 386. It does not and
cannot have the juridical force of a constitutional
command. A later legislative or executive act
which has the force and effect of law can legally
provide for a different rule.
5. Nor can I agree with the rather sweeping
conclusion in the opinion of Justice Escolin that
presidential decrees and executive acts not thus
previously published in the Official Gazette would
be devoid of any legal character. That would be, in
my opinion, to go too far. It may be fraught, as
earlier noted, with undesirable consequences. I
find myself therefore unable to yield assent to such
a pronouncement.
I am authorized to state that Justices Makasiar,
Abad Santos, Cuevas, and Alampay concur in this
separate opinion.
Makasiar, Abad Santos, Cuevas and Alampay, JJ.,
concur.
TEEHANKEE, J., concurring:
I concur with the main opinion of Mr. Justice Escolin
and the concurring opinion of Mme. Justice
Herrera. The Rule of Law connotes a body of norms
and laws published and ascertainable and of equal
application to all similarly circumstances and not
subject to arbitrary change but only under certain
set procedures. The Court has consistently
stressed that "it is an elementary rule of fair play
and justice that a reasonable opportunity to be
informed must be afforded to the people who are

44
commanded to obey before they can be punished
for its violation, 1 citing the settled principle based
on due process enunciated in earlier cases that
"before the public is bound by its contents,
especially its penal provisions, a law, regulation or
circular must first be published and the people
officially and specially informed of said contents
and its penalties.
Without official publication in the Official Gazette
as required by Article 2 of the Civil Code and the
Revised Administrative Code, there would be no
basis nor justification for the corollary rule of
Article 3 of the Civil Code (based on constructive
notice that the provisions of the law are
ascertainable from the public and official
repository where they are duly published) that
"Ignorance of the law excuses no one from
compliance therewith.
Respondents' contention based on a misreading of
Article 2 of the Civil Code that "only laws which are
silent as to their effectivity [date] need be
published in the Official Gazette for their
effectivity" is manifestly untenable. The plain text
and meaning of the Civil Code is that "laws shall
take effect after fifteen days following the
completion of their publication in the Official
Gazette, unless it is otherwise provided, " i.e. a
different effectivity date is provided by the law
itself. This proviso perforce refers to a law that has
been duly published pursuant to the basic
constitutional requirements of due process. The
best example of this is the Civil Code itself: the
same Article 2 provides otherwise that it "shall
take effect [only] one year [not 15 days] after such
publication. 2 To sustain respondents' misreading
that "most laws or decrees specify the date of their
effectivity and for this reason, publication in the
Official Gazette is not necessary for their
effectivity 3 would be to nullify and render
nugatory the Civil Code's indispensable and
essential requirement of prior publication in the
Official Gazette by the simple expedient of
providing for immediate effectivity or an earlier
effectivity date in the law itself before the
completion of 15 days following its publication
which is the period generally fixed by the Civil
Code for its proper dissemination.
MELENCIO-HERRERA, J., concurring:
I agree. There cannot be any question but that
even if a decree provides for a date of effectivity, it
has to be published. What I would like to state in
connection with that proposition is that when a
date of effectivity is mentioned in the decree but
the decree becomes effective only fifteen (15)
days after its publication in the Official Gazette, it
will not mean that the decree can have retroactive

effect to the date of effectivity mentioned in the

decree itself. There should be no retroactivity if the
retroactivity will run counter to constitutional
rights or shall destroy vested rights.
PLANA, J., concurring (with qualification):
The Philippine Constitution does not require the
publication of laws as a prerequisite for their
effectivity, unlike some Constitutions
elsewhere. * It may be said though that the
guarantee of due process requires notice of laws to
affected parties before they can be bound thereby;
but such notice is not necessarily by publication in
the Official Gazette. The due process clause is not
that precise. Neither is the publication of laws in
the Official Gazette required by any statute as a
prerequisite for their effectivity, if said laws
already provide for their effectivity date.
Article 2 of the Civil Code provides that "laws shall
take effect after fifteen days following the
completion of their publication in the Official
Gazette, unless it is otherwise provided " Two
things may be said of this provision: Firstly, it
obviously does not apply to a law with a built-in
provision as to when it will take effect. Secondly, it
clearly recognizes that each law may provide not
only a different period for reckoning its effectivity
date but also a different mode of notice. Thus, a
law may prescribe that it shall be published
elsewhere than in the Official Gazette.
Commonwealth Act No. 638, in my opinion, does
not support the proposition that for their
effectivity, laws must be published in the Official
Gazette. The said law is simply "An Act to Provide
for the Uniform Publication and Distribution of the
Official Gazette." Conformably therewith, it
authorizes the publication of the Official Gazette,
determines its frequency, provides for its sale and
distribution, and defines the authority of the
Director of Printing in relation thereto. It also
enumerates what shall be published in the Official
Gazette, among them, "important legislative acts
and resolutions of a public nature of the Congress
of the Philippines" and "all executive and
administrative orders and proclamations, except
such as have no general applicability." It is
noteworthy that not all legislative acts are required
to be published in the Official Gazette but only
"important" ones "of a public nature." Moreover,
the said law does not provide that publication in
the Official Gazette is essential for the effectivity of
laws. This is as it should be, for all statutes are
equal and stand on the same footing. A law,
especially an earlier one of general application
such as Commonwealth Act No. 638, cannot nullify
or restrict the operation of a subsequent statute
that has a provision of its own as to when and how

45
it will take effect. Only a higher law, which is the
Constitution, can assume that role.
In fine, I concur in the majority decision to the
extent that it requires notice before laws become
effective, for no person should be bound by a law
without notice. This is elementary fairness.
However, I beg to disagree insofar as it holds that
such notice shall be by publication in the Official
Gazette.
Cuevas and Alampay, JJ., concur.
GUTIERREZ, Jr., J., concurring:
I concur insofar as publication is necessary but
reserve my vote as to the necessity of such
publication being in the Official Gazette.
DE LA FUENTE, J., concurring:
I concur insofar as the opinion declares the
unpublished decrees and issuances of a public
nature or general applicability ineffective, until due
publication thereof.
G.R. No. L-75038 August 23, 1993
12. ELIAS VILLUGA, RENATO ABISTADO, JILL
MENDOZA, ANDRES ABAD, BENJAMIN BRIZUELA,
NORLITO LADIA, MARCELO AGUILAN, DAVID ORO,
NELIA BRIZUELA, FLORA ESCOBIDO, JUSTILITA
CABANIG, and DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD
DIVISION) and BROAD STREET TAILORING and/or
RODOLFO ZAPANTA, respondents.
Balguma, Macasaet & Associates for petitioners.
Teresita Gandionco Oledan for private respondents.
NOCON, J.:
A basic factor underlying the exercise of rights and
the filing of claims for benefits under the Labor
Code and other presidential issuances or labor
legislations is the status and nature of one's
employment. Whether an employer-employee
relationship exist and whether such employment is
managerial in character or that of a rank and file
employee are primordial considerations before
extending labor benefits. Thus, petitioners in this
case seek a definitive ruling on the status and
nature of their employment with Broad Street
Tailoring and pray for the nullification of the
resolution dated May 12, 1986 of the National
Labor Relations Commissions in NLRC Case No. RBIV- 21558-78-T affirming the decision of Labor
Arbiter Ernilo V. Pealosa dated May 28, 1979,
which held eleven of them as independent
contractors and the remaining one as employee
but of managerial rank.
The facts of the case shows that petitioner Elias
Villuga was employed as cutter in the tailoring
shop owned by private respondent Rodolfo

Zapanta and known as Broad Street Tailoring

located at Shaw Boulevard, Mandaluyong, Metro
Manila. As cutter, he was paid a fixed monthly
salary of P840.00 and a monthly transportation
allowance of P40.00. In addition to his work as
cutter, Villuga was assigned the chore of
distributing work to the shop's tailors or sewers
when both the shop's manager and assistant
manager would be absent. He saw to it that their
work conformed with the pattern he had prepared
and if not, he had them redone, repaired or
resewn.
The other petitioners were either ironers,
repairmen and sewers. They were paid a fixed
amount for every item ironed, repaired or sewn,
regardless of the time consumed in accomplishing
the task. Petitioners did not fill up any time record
since they did not observe regular or fixed hours of
work. They were allowed to perform their work at
home especially when the volume of work, which
depended on the number of job orders, could no
longer be coped up with.
From February 17 to 22, 1978, petitioner Villuga
failed to report for work allegedly due to illness.
For not properly notifying his employer, he was
considered to have abandoned his work.
In a complaint dated March 27, 1978, filed with the
Regional Office of the Department of Labor, Villuga
claimed that he was refused admittance when he
reported for work after his absence, allegedly due
to his active participation in the union organized
by private respondent's tailors. He further claimed
that he was not paid overtime pay, holiday pay,
premium pay for work done on rest days and
holidays, service incentive leave pay and 13th
month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin
Brizuela and David Oro also claimed that they were
dismissed from their employment because they
joined the Philippine Social Security Labor Union
(PSSLU). Petitioners Andres Abad, Norlito Ladia,
Marcelo Aguilan, Nelia Brizuela, Flora Escobido,
Justilita Cabaneg and Domingo Saguit claimed that
they stopped working because private respondents
gave them few pieces of work to do after learning
of their membership with PSSLU. All the petitioners
laid claims under the different labor standard laws
which private respondent allegedly violated.
On May 28, 1979, Labor Arbiter Ernilo V. Pealosa
rendered a decision ordering the dismissal of the
complaint for unfair labor practices, illegal
dismissal and other money claims except
petitioner Villuga's claim for 13th month pay for
the years 1976, 1977 and 1980. The dispositive
portion of the decision states as follows:
WHEREFORE, premises considered, the respondent
Broad Street Tailoring and/or Rodolfo Zapanta are

46
hereby ordered to pay complainant Elias Villuga
the sum of ONE THOUSAND TWO HUNDRED FORTYEIGHT PESOS AND SIXTY-SIX CENTAVOS
(P1,248.66) representing his 13th month pay for
the years 1976, 1977 and 1978. His other claims in
this case are hereby denied for lack of merit.
The complaint insofar as the other eleven (11)
complainants are concerned should be, as it is
hereby dismissed for want of jurisdiction. 1
On appeal, the National Labor Relations
Commission affirmed the questioned decision in a
resolution dated May 12, 1986, the dispositive
portion of which states as follows:
WHEREFORE, premises considered, the decision
appealed from is, as it is hereby AFFIRMED, and
the appeal dismissed. 2
Presiding Commissioner Guillermo C. Medina
merely concurred in the result while Commissioner
Gabriel M. Gatchalian rendered a dissenting
opinion which states as follows:
I am for upholding employer-employee relationship
as argued by the complainants before the Labor
Arbiter and on appeal. The further fact that the
proposed decision recognizes complainant's status
as piece-rate worker all the more crystallizes
employer-employee relationship the benefits
prayed for must be granted. 3
Hence, petitioners filed this instant certiorari case
on the following grounds:
1. That the respondent National Labor Relations
Commission abused its discretion when it ruled
that petitioner/complainant, Elias Villuga falls
within the category of a managerial employee;
2. . . . when it ruled that the herein petitioners
were not dismissed by reason of their union
activities;
3. . . . when it ruled that petitioners Andres Abad,
Benjamin Brizuela, Norlito Ladia, Marcelo Aguilan,
David Oro, Nelia Brizuela, Flora Escobido, Justilita
Cabaneg and Domingo Saguit were not employees
of private respondents but were contractors.
4. . . . when it ruled that petitioner Elias Villuga is
not entitled to overtime pay and services for
Sundays and Legal Holidays; and
5. . . . when it failed to grant petitioners their
respective claims under the provisions of P.D. Nos.
925, 1123 and 851. 4
Under Rule 1, Section 2(c), Book III of the
Implementing Rules of Labor Code, to be a
member of a managerial staff, the following
elements must concur or co-exist, to wit: (1) that
his primary duty consists of the performance of
work directly related to management policies; (2)
that he customarily and regularly exercises
discretion and independent judgment in the
performance of his functions; (3) that he regularly
and directly assists in the management of the

establishment; and (4) that he does not devote his

twenty per cent of his time to work other than
those described above.
Applying the above criteria to petitioner Elias
Villuga's case, it is undisputed that his primary
work or duty is to cut or prepare patterns for items
to be sewn, not to lay down or implement any of
the management policies, as there is a manager
and an assistant manager who perform said
functions. It is true that in the absence of the
manager the assistant manager, he distributes and
assigns work to employees but such duty, though
involving discretion, is occasional and not regular
or customary. He had also the authority to order
the repair or resewing of defective item but such
authority is part and parcel of his function as cutter
to see to it that the items cut are sewn correctly
lest the defective nature of the workmanship be
attributed to his "poor cutting." Elias Villuga does
not participate in policy-making. Rather, the
functions of his position involve execution of
approved and established policies. InFranklin Baker
Company of the Philippines v. Trajano, 5 it was held
that employees who do not participate in policymaking but are given ready policies to execute and
standard practices to observe are not managerial
employees. The test of "supervisory or managerial
status" depends on whether a person possesses
authority that is not merely routinary or clerical in
nature but one that requires use of independent
judgment. In other words, the functions of the
position are not managerial in nature if they only
execute approved and established policies leaving
little or no discretion at all whether to implement
said policies or not. 6
Consequently, the exclusion of Villuga from the
benefits claimed under Article 87 (overtime pay
and premium pay for holiday and rest day work),
Article 94, (holiday pay), and Article 95 (service
incentive leave pay) of the Labor Code, on the
ground that he is a managerial employee is
unwarranted. He is definitely a rank and file
employee hired to perform the work of the cutter
and not hired to perform supervisory or managerial
functions. The fact that he is uniformly paid by the
month does not exclude him from the benefits of
holiday pay as held in the case ofInsular Bank of
America Employees Union v. Inciong. 7 He should
therefore be paid in addition to the 13th month
pay, his overtime pay, holiday pay, premium pay
for holiday and rest day, and service incentive
leave pay.
As to the dismissal of the charge for unfair labor
practices of private respondent consisting of
termination of employment of petitioners and acts
of discrimination against members of the labor
union, the respondent Commission correctly held

47
the absence of evidence that Mr. Zapanta was
aware of petitioners' alleged union membership on
February 22, 1978 as the notice of union existence
in the establishment with proposal for recognition
and collective bargaining negotiation was received
by management only an March 3, 1978. Indeed,
self-serving allegations without concrete proof that
the private respondent knew of their membership
in the union and accordingly reacted against their
membership do not suffice.
Nor is private respondent's claim that petitioner
Villuga abandoned his work acceptable. For
abandonment to constitute a valid cause for
dismissal, there must be a deliberate and
unjustified refusal of the employee to resume his
employment. Mere absence is not sufficient, it
must be accompanied by overt acts unerringly
pointing to the fact that the employee simply does
not want to work anymore. 8 At any rate, dismissal
of an employee due to his prolonged absence
without leave by reason of illness duly established
by the presentation of a medical certificate is not
justified. 9 In the case at bar, however, considering
that petitioner Villuga absented himself for four (4)
days without leave and without submitting a
medical certificate to support his claim of illness,
the imposition of a sanction is justified, but surely,
not dismissal, in the light of the fact that this is
petitioner's first offense. In lieu of reinstatement,
petitioner Villuga should be paid separation pay
where reinstatement can no longer be effected in
view of the long passage of time or because of the
realities of the situation. 10 But petitioner should
not be granted backwages in addition to
reinstatement as the same is not just and
equitable under the circumstances considering
that he was not entirely free from blame. 11
As to the other eleven petitioners, there is no clear
showing that they were dismissed because the
circumstances surrounding their dismissal were not
even alleged. However, we disagree with the
finding of respondent Commission that the eleven
petitioners are independent contractors.
For an employer-employee relationship to exist,
the following elements are generally considered:
"(1) the selection and engagement of the
employee;
(2) the payment of wages; (3) the power of
dismissal and (4) the power to control the
employee's conduct." 12
Noting that the herein petitioners were oftentimes
allowed to perform their work at home and were
paid wages on a piece-rate basis, the respondent
Commission apparently found the second and
fourth elements lacking and ruled that "there is no
employer-employee relationship, for it is clear that
respondents are interested only in the result and

not in the means and manner and how the result is

obtained."
Respondent Commission is in error. The mere fact
that petitioners were paid on a piece-rate basis is
no argument that herein petitioners were not
employees. The term "wage" has been broadly
defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being
expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission
basis. . . ." The facts of this case indicate that
payment by the piece is just a method of
compensation and does not define the essence of
the
relation. 13 The petitioners were allowed to
perform their work at home does not likewise
imply absence of control and supervision. The
control test calls merely for the existence of a right
to control the manner of doing the work, not the
actual exercise of the right. 14
In determining whether the relationship is that of
employer and employee or one of an independent
contractor, "each case must be determined on its
own facts and all the features of the relationship
are to be considered." 15Considering that
petitioners who are either sewers, repairmen or
ironer, have been in the employ of private
respondent as early as 1972 or at the latest in
1976, faithfully rendering services which are
desirable or necessary for the business of private
respondent, and observing management's
approved standards set for their respective lines of
work as well as the customers' specifications,
petitioners should be considered employees, not
independent contractors.
Independent contractors are those who exercise
independent employment, contracting to do a
piece of work according to their own methods and
without being subjected to control of their
employer except as to the result of their work. By
the nature of the different phases of work in a
tailoring shop where the customers' specifications
must be followed to the letter, it is inconceivable
that the workers therein would not be subjected to
control.
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled
that tailors and similar workers hired in the
tailoring department, although paid weekly wages
on piece work basis, are employees not
independent contractors. Accordingly, as regular
employees, paid on a piece-rate basis, petitioners
are not entitled to overtime pay, holiday pay,
premium pay for holiday/rest day and service
incentive leave pay. Their claim for separation pay
should also be defined for lack of evidence that
they were in fact dismissed by private respondent.
They should be paid, however, their 13th month

48
pay under P.D. 851, since they are employees not
independent contractors.
WHEREFORE, in view of the foregoing reasons, the
assailed decision of respondent National Labor
Relations Commission is hereby MODIFIED by
awarding
(a) in favor of petitioner Villuga, overtime pay,
holiday pay, premium pay for holiday and rest day,
service incentive leave pay and separation pay, in
addition to his 13th month pay; and
(b) in favor of the rest of the petitioners, their
respective 13th month pay.
The case is hereby REMANDED to the National
Labor Relations Commission for the computation of
the claims herein-above mentioned.
SO ORDERED.
13. G.R. No. L-59229 August 22, 1991
HIJOS DE F. ESCAO INC., and PIER 8 ARRASTRE
AND STEVEDORING SERVICES, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
NATIONAL ORGANIZATION OF WORKINGMEN
(NOWM) PSSLU-TUCP and ROLANDO
VILLALOBOS, respondents.
Beltran, Beltran & Beltran for petitioners.
Bautista, Santiago & Associates for private
respondents.
FELICIANO, J.:p
Petitioners seek to set aside the Decision of the
National Labor Relations Commission ("NLRC")
dated 11 November 1981, which affirmed the
Decision of the Labor Arbiter dated 28 February
1980.
Private respondent National Organization of
Workingmen ("NOWM") PSSLU-TUCP is a labor
organization that counts among its members a
majority of the laborers of petitioner Pier 8 Arrastre
& Stevedoring Services, Inc. ("PIER 8 A&S")
consisting, among others, of stevedores,
dockworkers, sweepers and forklift operators
(hereinafter collectively referred to as "the
stevedores"). On 31 July 1978, NOWM PSSLU-TUCP
and about 300 stevedores filed with the then
Ministry of Labor and Employment ("MOLE") a
complaint 1 for unfair labor practice ULP and illegal
dismissal against PIER 8 A&S.
On 8 September 1978, NOWM PSSLU-TUCP
amended its complaint to include the monetary
claims of the stevedores for overtime
compensation, legal holiday pay, emergency cost
of living allowance, 13th month pay, night shift
differential pay, and the difference between the
salaries they received and that prescribed under
the minimum wage law. The complaint was also
amended to implead petitioner Hijos de F. Escao,
Inc. (Escao) as respondent before the MOLE. 2

The MOLE Director in the National Capital Region

certified for compulsory arbitration only the claims
for illegal dismissal and ULP Considering that
NOWM PSSLU-TUCP wanted to include as well the
other issues it had raised in the amended
complaint, it filed a motion for reconsideration. The
motion was denied because money claims,
according to the MOLE Director, should be brought
against Escao and PIER 8 A&S in a separate
complaint.
On the basis of the position papers submitted by
the parties and the annexes attached thereto, the
case was considered submitted for resolution. On
28 February 1980, the Labor Arbiter rendered a
Decision 3 with the following dispositive portion:
WHEREFORE, consonant with the foregoing
premises, the respondents Hijos de F. Escao and
Pier 8 Arrastre and Stevedoring Services, Inc. are
hereby found guilty of committing acts of unfair
labor practice and are ordered to jointly and
severally reinstate all of the petitioners named in
the amended complaint, with payment of full
backwages counted from the time they were
illegally dismissed which was on August 10, 1978
up to March 27, 1979, inclusive, when the
petitioners admitted having received return to
work notice from the respondent but refused to
comply in view of the pendency of the present
case, based on their individual rate at the time of
their dismissal or on the minimum wage then
prevailing whichever is more beneficial to them.
For purposes of this decision, the Socio-Economic
Analyst of this branch is hereby directed to
compute the backwages of the individual
petitioners as mandated herein, and to submit his
report within ten 10 days from receipt hereof which
shall form part of this award.
SO ORDERED.
Petitioners appealed to the NLRC which, however,
affirmed the Decision of the Labor Arbiter.
The instant Petition for certiorari imputes grave
abuse of discretion to the NLRC in upholding the
finding of the Labor Arbiter that the stevedores are
employees not only of PIER 8 A&S but also of
Escao. Petitioners also assail that portion of the
Decision which directed them to reinstate the
dismissed stevedores with the obligation to pay
backwages from 10 August 1978 to 27 March
1979.
In his Decision, the Labor Arbiter took the view
that PIER 8 A&S was a labor only contractor and
held that Escao was the principal employer of the
stevedores. For that reason, the Labor Arbiter
adjudged the petitioners solidarily liable for
payment of backwages to the stevedores as well
as for reinstatement.

49
While petitioner PIER 8 A&S does not dispute that
the stevedores were its employees, petitioner
Escao denies the existence of an employeremployee relationship between it and the
stevedores. Escao therefore contends that
liability, if any, should attach only to PIER 8 A&S.
PIER 8 A&S is a corporation providing Arrastre and
stevedoring services to vessels docked at Pier 8 of
the Manila North Harbor. Prior to the incorporation
of PIER 8 A&S two (2) stevedoring companies had
been servicing vessels docking at Pier 8. One of
these was the Manila Integrated Services, Inc. MISI
which was servicing Escao vessels, then berthing
at Pier 8. The other was the San Nicolas
Stevedoring and Arrastre Services, Inc. (SNSASI)
which was servicing Compania Maritima vessels.
Aside, of course, from MISI and SNSASI there were
individual contractors known as the "cabos" who
were operating in Pier 8.
On 11 July 1974, the Philippine Port Authority
("PPA") was created pursuant to the policy of the
State to implement an integrated program of port
development for the entire country. 4 Towards this
end, the PPA issued Administrative Order No. 1377
specifically adopting the policy of "one pier, one
Arrastre and/or stevedoring company." MISI and
SNSASI merged to form the Pier 8 Arrastre and
Stevedoring Services, Inc.
Sometime in June 1978, Escao had transferred
berth to Pier 16 with the approval of the PPA. PIER
8 A&S then started to encounter problems; it found
its business severely reduced with only Compania
Maritima vessels to service. Even if it had wanted
to continue servicing the vessels of Escao at Pier
16, that was simply not possible as there was
another company exclusively authorized to handle
and render Arrastre and stevedoring services at
Pier 16.
Because of its resulting manpower surplus, PIER 8
A&S altered the work schedule of its stevedores by
rotating them. The rotation scheme was resisted
by the stevedores, especially those formerly
assigned to service Escao vessels. It appears that
the employees formerly belonging to MISI
continued to service Escao vessels in like manner
that those employees formerly belonging to
SNSASI continued to service Compania Maritima
vessels, although MISI and SNSASI had already
merged to form PIER 8 A&S The affected
stevedores boycotted Pier 8 leading to their
severance from employment by PIER 8 A&S on 10
August 1978. Their refusal to work continued even
after they were served with a return-to-work order.
The stevedores claim that since they had long
been servicing Escao vessels, i.e. from the time
Escao was exclusively serviced by MISI until the
time MISI was merged with SNSASI to form PIER 8

A&S they should also be considered as employees

of Escao. Escao disclaimed any employment
relationship with the stevedores. In its Position
Paper, Escao alleged that the stevedores are
included in the payroll of PIER 8 A&S and that the
SSS and Medicare contributions of the stevedores
are paid by PIER 8 A&S as well.
It is firmly settled that the existence or nonexistence of the employer-employee relationship is
commonly to be determined by examination of
certain factors or aspects of that relationship.
These include: (a) the manner of selection and
engagement of the putative employee; (b) the
mode of payment of wages; (c) the presence or
absence of the power of dismissal; and (d) the
presence or absence of a power to control the
putative employee's conduct. 5
The Court notes that in finding against PIER 8 A&S
and Escao the Labor Arbiter relied solely on the
position paper of the parties. The record of the
case is bare of evidence tending to support such
allegations; what is found in the record instead are
the self-serving statements from both parties. It is
not clear to the Court from examination of the
record which entity paid the salaries of the
stevedores. While the stevedores attached to their
amended complaint a list of their daily wages set
forth opposite their individual names under the
heading "Hijos de F. Escao Inc. and/or Pier 8
Arrastre and Stevedoring Services,
Inc. 6 apparently to show that they are paid for
their services by either or both of petitioners, they
did not submit direct evidence, e.g., copies of
payrolls and remittances to the SSS and Medicare,
establishing this fact. Further, the stevedores failed
to substantiate their allegation that the
supervisors of Escao had control over them while
discharging their (stevedores') duties. On the
contrary, their Position Paper submitted to the
Labor Arbiter disclosed that the supervisors of
Escao "merely supervised" them.
The record includes letters written by the National
President of NOWM PSSLU-TUC to which the
stevedores belong-relating to collective bargaining
and other operating matters, were all addressed to
the management of PIER 8 A&S indicating that
they recognized PIER 8 A&S as their employer.
Specifically, in the letter dated 21 May 1977, the
stevedores proposed that PIER 8 A&S recognize
their union as the sole and exclusive
representative of the stevedores for the purpose of
collective bargaining. They also sought to submit
for collective bargaining with PIER 8 A&S such
other labor standard issues as wage increases,
13th month pay and vacation and sick leave pay. 7
The stevedores, however, now contend that PIER 8
A&S is not an independent contract but a labor

50
only contractor. In their Amended Complaint and
Position Paper, the stevedores alleged that:
(1) They perform their duties or work assignments
under the close supervision of supervisors of
respondent Hijos de F. Escao Inc.;
(2) The machineries, equipment, tools and other
facilities complainants used, while in the
performance of their jobs, are owned by
respondent Hijos de F. Escao, Inc.;
(3) The jobs they were performing from the time
they were first employed, until their dismissals, are
principal phases of respondent's operations; and
(4) The so-called Pier 8 Arrastre & Stevedoring
Services, Inc. is a mere middleman; its vital role is
purely one of supplying workers to respondent
Hijos de F. Escao, Inc. in short, a mere recruiting
agent. Plainly, said contractor can be categorized
as an agent of respondent Hijos de F. Escao, Inc.
as it performs activities directly related to the
principal business of said Hijos de F. Escao, Inc.
Although the record does not show that the
stevedores had submitted any evidence to fortify
their claim that PIER 8 A&S is a labor only
contractor, the Labor Arbiter simply conceded that
claim to be factual. The Labor Arbiter added that
the business of PIER 8 A&S is "desirable and
indispensable in the business of Hijos de F. Escao
and without [the stevedores], its vessels could not
be operated."
The Court is unable to agree with the conclusion
reached by the Labor Arbiter, particularly that
portion where the Labor Arbiter supposed
stevedoring to be an indispensable part of the
business of Escao. Escao is a corporation
engaged in inter-island shipping business, being
the operator of the Escao Shipping Lines. It was
not alleged, nor has it been shown, that Escao
or any other shipping company is also engaged in
Arrastre and stevedoring services. Stevedoring is
not ordinarily included in the business of
transporting goods, it (stevedoring) being a special
kind of service which involves the loading
unloading of cargo on or from a vessel on port. It
consists of the handling of cargo from the hold of
the ship to the dock, in case of pier-side unloading,
or to a barge, in case of unloading at sea. The
loading on a ship of outgoing cargo is also part of
stevedoring work. 8Arrastre, upon the other hand,
involves the handling of cargo deposited on the
wharf or between the establishment of the
consignee or shipper and the ships
tackle. 9 Considering that a shipping company is
not normally or customarily engaged in
stevedoring and arrastre activities either for itself
or other vessels, it contracts with other companies
offering those services. The employees, however,
of the stevedoring and/or arrastre company should

not be deemed the employees of the shipping

company, in the absence of any showing, that the
arrastre and/or stevedoring company in fact acted
as an agent only of the shipping company. No such
showing was made in this case.
We turn next to the stevedores' contention that
PIER 8 A&S is guilty of ULP. In this respect, the
Labor Arbiter had found that:
Now comes the issue of unfair labor practice. This
Labor Arbiter believes that respondents are guilty
as charged. The unfair labor practice acts of the
respondents started when they came to know that
the petitioners have organized themselves and
affiliated with the NOWM Subsequent acts of the
respondents like requiring the petitioners to
disaffiliate with the NOWM and affiliate with the
General Maritime Stevedores Union and later on to
Independent Workers Union, requiring them to sign
applications for membership therein, they were
threatened and coerced, are all acts of unfair labor
practices. Thereafter, the petitioners' working
schedules were rotated when the respondent Hijos
de F. Escao transferred to Pier 16 through the
alleged approval of the Philippine Port Authority
and later on the said petitioners were left without
work, were all in furtherance of such unfair labor
practice acts. ... 10
Both the Constitution and the Labor Code
guarantee to the stevedores a right to selforganization. It was unlawful for PIER 8 A&S to
deprive them of that right by its undue
interference. The Constitution (Article III, Section 7)
expressly recognizes the right of employees,
whether of the public or the private sector, to form
unions. Article 248 of the Labor Code provides:
Art. 248. Unfair labor practices of employers. It
shall be unlawful for an employer to commit any of
the following unfair labor practice:
(a) To interfere with, restrain or coerce employees
in the exercise of their right to self- organization;
(b) To require as a condition of employment that a
person or an employee shall not join a labor
organization or shall withdraw from one to which
he belongs;
(c) To contract out services or functions being
performed by union members when such will
interfere with, restrain or coerce employees in the
exercise of their rights to self-organization;
(d) To initiate, dominate, assist or otherwise
interfere with the formation or administration of
any labor organization, including the giving of
financial or other support to it or its organizations
or supporters;
(e) To discriminate in regard to wages, hours of
work, and other terms and conditions of
employment in order to encourage or discourage
membership in any labor organization.

51
xxx xxx xxx
(Emphasis supplied.)
Not only was PIER 8 A&S guilty of ULP; it was also
liable for illegal dismissal. PIER 8 A&S did not
obtain prior clearance from the MOLE before it
dismissed the stevedores, as required by the law
then in force which read:
Section 1. Requirement for shutdown or dismissal.
No employer may shut down his establishment
or dismiss any of his employees with at least one
year of service during the last two years, whether
the service is broken or continuous, without prior
clearance issued therefor in accordance with this
Rule. Any provision in a collective bargaining
agreement dispensing with the clearance
requirement shall be null and void.
Section 2. Shutdown or dismissal without
clearance. Any shutdown or dismissal without
prior clearance shall be conclusively presumed to
be a termination of employment without a just
cause. The Regional Director shall, in such case,
order the immediate reinstatement of the
employee and the payment of his wages from the
time of the shutdown or dismissal until the time of
reinstatement.11
B.P. Blg. 130 amended the Labor Code on 4
September 1981 by abolishing the requirement of
prior clearance from the MOLE but since the
dismissal of the stevedores was effected prior to
the promulgation of B.P. Blg. 130, PIER 8 A&S was
then bound to comply with the old law. The Court,
interpreting Sections 1 and 2 above quoted, has
consistently held that a dismissal without said
clearance shall be conclusively presumed a
termination without just cause. 12 The record is
bare of any evidence that could compel the Court
to overturn the factual findings of the Labor Arbiter
on this point.
WHEREFORE, considering the absence of an
employer-employee relationship between Hijos de
F. Escao, Inc. and private respondents, the
Decision of the Labor Arbiter dated 28 February
1980 in NLRC Case No. RB-IV-2326-79 and the
Decision of the NLRC dated 11 November 1981 are
hereby MODIFIED so that only Pier 8 Arrastre &
Stevedoring Services, Inc. shall be liable for
reinstatement and payment of backwages. As so
modified, both Decisions are hereby AFFIRMED. No
costs.
SO ORDERED.
15. G.R. No. L-69870 November 29, 1988
NATIONAL SERVICE CORPORATION (NASECO) AND
ARTURO L. PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL
LABOR RELATIONS COMMISSION, MINISTRY OF

LABOR AND EMPLOYMENT, MANILA AND EUGENIA

C. CREDO, respondents.
G.R. No. 70295 November 29,1988
EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
NATIONAL SERVICES CORPORATION AND ARTURO
L. PEREZ, respondents.
The Chief Legal Counsel for respondents NASECO
and Arturo L. Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.
PADILLA, J.:
Consolidated special civil actions for certiorari
seeking to review the decision * of the Third
Division, National Labor Relations Commission in
Case No. 11-4944-83 dated 28 November 1984
and its resolution dated 16 January 1985 denying
motions for reconsideration of said decision.
Eugenia C. Credo was an employee of the National
Service Corporation (NASECO), a domestic
corporation which provides security guards as well
as messengerial, janitorial and other similar
manpower services to the Philippine National Bank
(PNB) and its agencies. She was first employed
with NASECO as a lady guard on 18 July 1975.
Through the years, she was promoted to Clerk
Typist, then Personnel Clerk until she became Chief
of Property and Records, on 10 March 1980. 1
Sometime before 7 November 1983, Credo was
administratively charged by Sisinio S. Lloren,
Manager of Finance and Special Project and
Evaluation Department of NASECO, stemming from
her non-compliance with Lloren's memorandum,
dated 11 October 1983, regarding certain entry
procedures in the company's Statement of Billings
Adjustment. Said charges alleged that Credo "did
not comply with Lloren's instructions to place some
corrections/additional remarks in the Statement of
Billings Adjustment; and when [Credo] was called
by Lloren to his office to explain further the said
instructions, [Credo] showed resentment and
behaved in a scandalous manner by shouting and
uttering remarks of disrespect in the presence of
her co-employees." 2
On 7 November 1983, Credo was called to meet
Arturo L. Perez, then Acting General Manager of
NASECO, to explain her side before Perez and
NASECO's Committee on Personnel Affairs in
connection with the administrative charges filed
against her. After said meeting, on the same date,
Credo was placed on "Forced Leave" status for 1 5
days, effective 8 November 1983. 3
Before the expiration of said 15-day leave, or on
18 November 1983, Credo filed a complaint,
docketed as Case No. 114944-83, with the
Arbitration Branch, National Capital Region,

52
Ministry of Labor and Employment, Manila, against
NASECO for placing her on forced leave, without
due process. 4
Likewise, while Credo was on forced leave, or on
22 November 1983, NASECO's Committee on
Personnel Affairs deliberated and evaluated a
number of past acts of misconduct or infractions
attributed to her. 5 As a result of this deliberation,
said committee resolved:
1. That, respondent [Credo] committed the
following offenses in the Code of Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer
and employee of client company or officer of the
Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course
of official duties or use of profane or insulting
language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or
any instructions of a superior officer.
2. That, Management has already given due
consideration to respondent's [Credo] scandalous
actuations for several times in the past. Records
also show that she was reprimanded for some
offense and did not question it. Management at
this juncture, has already met its maximum
tolerance point so it has decided to put an end to
respondent's [Credo] being an undesirable
employee. 6
The committee recommended Credo's termination,
with forfeiture of benefits. 7
On 1 December 1983, Credo was called age to the
office of Perez to be informed that she was being
charged with certain offenses. Notably, these
offenses were those which NASECO's Committee
on Personnel Affairs already resolved, on 22
November 1983 to have been committed by Credo.
In Perez's office, and in the presence of NASECO's
Committee on Personnel Affairs, Credo was made
to explain her side in connection with the charges
filed against her; however, due to her failure to do
so, 8 she was handed a Notice of Termination,
dated 24 November 1983, and made effective 1
December 1983. 9 Hence, on 6 December 1983,
Credo filed a supplemental complaint for illegal
dismissal in Case No. 11-4944-83, alleging absence
of just or authorized cause for her dismissal and
lack of opportunity to be heard. 10
After both parties had submitted their respective
position papers, affidavits and other documentary
evidence in support of their claims and defenses,
on 9 May 1984, the labor arbiter rendered a
decision: 1) dismissing Credo's complaint, and 2)
directing NASECO to pay Credo separation pay

equivalent to one half month's pay for every year

of service. 11
Both parties appealed to respondent National
Labor Relations Commission (NLRC) which, on 28
November 1984, rendered a decision: 1) directing
NASECO to reinstate Credo to her former position,
or substantially equivalent position, with six (6)
months' backwages and without loss of seniority
rights and other privileges appertaining thereto,
and 2) dismissing Credo's claim for attorney's fees,
moral and exemplary damages. As a consequence,
both parties filed their respective motions for
reconsideration, 12 which the NLRC denied in a
resolution of 16 January 1985. 13
Hence, the present recourse by both parties. In
G.R. No. 68970, petitioners challenge as grave
abuse of discretion the dispositive portion of the
28 November 1984 decision which ordered Credo's
reinstatement with backwages. 14 Petitioners
contend that in arriving at said questioned order,
the NLRC acted with grave abuse of discretion in
finding that: 1) petitioners violated the
requirements mandated by law on termination, 2)
petitioners failed in the burden of proving that the
termination of Credo was for a valid or authorized
cause, 3) the alleged infractions committed by
Credo were not proven or, even if proved, could be
considered to have been condoned by petitioners,
and 4) the termination of Credo was not for a valid
or authorized cause. 15
On the other hand, in G.R. No. 70295, petitioner
Credo challenges as grave abuse of discretion the
dispositive portion of the 28 November 1984
decision which dismissed her claim for attorney's
fees, moral and exemplary damages and limited
her right to backwages to only six (6) months. 16
As guidelines for employers in the exercise of their
power to dismiss employees for just causes, the
law provides that:
Section 2. Notice of dismissal. Any employer
who seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or
omission constituting the grounds for his dismissal.
xxx xxx xxx
Section 5. Answer and Hearing. The worker may
answer the allegations stated against him in the
notice of dismissal within a reasonable period from
receipt of such notice. The employer shall afford
the worker ample opportunity to be heard and to
defend himself with the assistance of his
representative, if he so desires.
Section 6. Decision to dismiss. The employer
shall immediately notify a worker in writing of a
decision to dismiss him stating clearly the reasons
therefor. 17
These guidelines mandate that the employer
furnish an employee sought to be dismissed two

53
(2) written notices of dismissal before a
termination of employment can be legally effected.
These are the notice which apprises the employee
of the particular acts or omissions for which his
dismissal is sought and the subsequent notice
which informs the employee of the employer's
decision to dismiss him.
Likewise, a reading of the guidelines in consonance
with the express provisions of law on protection to
labor 18(which encompasses the right to security
of tenure) and the broader dictates of procedural
due process necessarily mandate that notice of the
employer's decision to dismiss an employee, with
reasons therefor, can only be issued after the
employer has afforded the employee concerned
ample opportunity to be heard and to defend
himself.
In the case at bar, NASECO did not comply with
these guidelines in effecting Credo's dismissal.
Although she was apprised and "given the chance
to explain her side" of the charges filed against
her, this chance was given so perfunctorily, thus
rendering illusory Credo's right to security of
tenure. That Credo was not given ample
opportunity to be heard and to defend herself is
evident from the fact that the compliance with the
injunction to apprise her of the charges filed
against her and to afford her a chance to prepare
for her defense was dispensed in only a day. This is
not effective compliance with the legal
requirements aforementioned.
The fact also that the Notice of Termination of
Credo's employment (or the decision to dismiss
her) was dated 24 November 1983 and made
effective 1 December 1983 shows that NASECO
was already bent on terminating her services when
she was informed on 1 December 1983 of the
charges against her, and that any hearing which
NASECO thought of affording her after 24
November 1983 would merely be pro forma or an
exercise in futility.
Besides, Credo's mere non-compliance with Lorens
memorandum regarding the entry procedures in
the company's Statement of Billings Adjustment
did not warrant the severe penalty of dismissal of
the NLRC correctly held that:
... on the charge of gross discourtesy, the CPA
found in its Report, dated 22 November 1983 that,
"In the process of her testimony/explanations she
again exhibited a conduct unbecoming in front of
NASECO Officers and argued to Mr. S. S. Lloren in a
sarcastic and discourteous manner,
notwithstanding, the fact that she was inside the
office of the Acctg. General Manager." Let it be
noted, however, that the Report did not even
describe how the so called "conduct unbecoming"
or "discourteous manner" was done by

complainant. Anent the "sarcastic" argument of

complainant, the purported transcript 19 of the
meeting held on 7 November 1983 does not
indicate any sarcasm on the part of complainant.
At the most, complainant may have sounded
insistent or emphatic about her work being more
complete than the work of Ms. de Castro, yet, the
complaining officer signed the work of Ms. de
Castro and did not sign hers.
As to the charge of insubordination, it may be
conceded, albeit unclear, that complainant failed
to place same corrections/additional remarks in the
Statement of Billings Adjustments as instructed.
However, under the circumstances obtaining,
where complainant strongly felt that she was being
discriminated against by her superior in relation to
other employees, we are of the considered view
and so hold, that a reprimand would have sufficed
for the infraction, but certainly not termination
from services. 20
As this Court has ruled:
... where a penalty less punitive would suffice,
whatever missteps may be committed by labor
ought not to be visited with a consequence so
severe. It is not only because of the law's concern
for the working man. There is, in addition, his
family to consider. Unemployment brings untold
hardships and sorrows on those dependent on the
wage-earner. 21
Of course, in justifying Credo's termination of
employment, NASECO claims as additional lawful
causes for dismissal Credo's previous and repeated
acts of insubordination, discourtesy and sarcasm
towards her superior officers, alleged to have been
committed from 1980 to July 1983. 22
If such acts of misconduct were indeed committed
by Credo, they are deemed to have been
condoned by NASECO. For instance, sometime in
1980, when Credo allegedly "reacted in a
scandalous manner and raised her voice" in a
discussion with NASECO's Acting head of the
Personnel Administration 23 no disciplinary
measure was taken or meted against her. Nor was
she even reprimanded when she allegedly talked
'in a shouting or yelling manner" with the Acting
Manager of NASECO's Building Maintenance and
Services Department in 1980 24 or when she
allegedly "shouted" at NASECO's Corporate Auditor
"in front of his subordinates displaying arrogance
and unruly behavior" in 1980, or when she
allegedly shouted at NASECO's Internal Control
Consultant in 1981. 25 But then, in sharp contrast
to NASECO's penchant for ignoring the aforesaid
acts of misconduct, when Credo committed
frequent tardiness in August and September 1983,
she was reprimanded. 26

54
Even if the allegations of improper conduct
(discourtesy to superiors) were satisfactorily
proven, NASECO's condonation thereof is gleaned
from the fact that on 4 October 1983, Credo was
given a salary adjustment for having performed in
the job "at least [satisfactorily]" 27 and she was
then rated "Very Satisfactory" 28as regards job
performance, particularly in terms of quality of
work, quantity of work, dependability, cooperation,
resourcefulness and attendance.
Considering that the acts or omissions for which
Credo's employment was sought to be legally
terminated were insufficiently proved, as to justify
dismissal, reinstatement is proper. For "absent the
reason which gave rise to [the employee's]
separation from employment, there is no intention
on the part of the employer to dismiss the
employee concerned." 29 And, as a result of
having been wrongfully dismissed, Credo is
entitled to three (3) years of backwages without
deduction and qualification. 30
However, while Credo's dismissal was effected
without procedural fairness, an award of exemplary
damages in her favor can only be justified if her
dismissal was effected in a wanton, fraudulent,
oppressive or malevolent manner. 31 A judicious
examination of the record manifests no such
conduct on the part of management. However, in
view of the attendant circumstances in the case,
i.e., lack of due process in effecting her dismissal,
it is reasonable to award her moral damages. And,
for having been compelled to litigate because of
the unlawful actuations of NASECO, a reasonable
award for attorney's fees in her favor is in order.
In NASECO's comment 32 in G.R. No. 70295, it is
belatedly argued that the NLRC has no jurisdiction
to order Credo's reinstatement. NASECO claims
that, as a government corporation (by virtue of its
being a subsidiary of the National Investment and
Development Corporation (NIDC), a subsidiary
wholly owned by the Philippine National Bank
(PNB), which in turn is a government owned
corporation), the terms and conditions of
employment of its employees are governed by the
Civil Service Law, rules and regulations. In support
of this argument, NASECO cites National Housing
Corporation vs. JUCO, 33 where this Court held that
"There should no longer be any question at this
time that employees of government-owned or
controlled corporations are governed by the civil
service law and civil service rifles and regulations."
It would appear that, in the interest of justice, the
holding in said case should not be given
retroactive effect, that is, to cases that arose
before its promulgation on 17 January 1985. To do
otherwise would be oppressive to Credo and other
employees similarly situated, because under the

same 1973 Constitution ,but prior to the ruling

in National Housing Corporation vs. Juco, this Court
had recognized the applicability of the Labor Code
to, and the authority of the NLRC to exercise
jurisdiction over, disputes involving terms and
conditions of employment in government owned or
controlled corporations, among them, the National
Service Corporation (NASECO).<re||an1w> 34
Furthermore, in the matter of coverage by the civil
service of government-owned or controlled
corporations, the 1987 Constitution starkly varies
from the 1973 Constitution, upon which National
Housing Corporation vs. Juco is based. Under the
1973 Constitution, it was provided that:
The civil service embraces every branch, agency,
subdivision, and instrumentality of the
Government, including every government-owned
or controlled corporation. ... 35
On the other hand, the 1987 Constitution provides
that:
The civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the
Government, including government-owned or
controlled corporations with original
charter. 36(Emphasis supplied)
Thus, the situations sought to be avoided by the
1973 Constitution and expressed by the Court in
the National Housing . Corporation case in the
following manner
The infirmity of the respondents' position lies in its
permitting a circumvention or emasculation of
Section 1, Article XII-B of the constitution. It would
be possible for a regular ministry of government to
create a host of subsidiary corporations under the
Corporation Code funded by a willing legislature. A
government-owned corporation could create
several subsidiary corporations. These subsidiary
corporations would enjoy the best of two worlds.
Their officials and employees would be privileged
individuals, free from the strict accountability
required by the Civil Service Decree and the
regulations of the Commission on Audit. Their
incomes would not be subject to the competitive
restrains of the open market nor to the terms and
conditions of civil service employment.
Conceivably, all government-owned or controlled
corporations could be created, no longer by special
charters, but through incorporations under the
general law. The Constitutional amendment
including such corporations in the embrace of the
civil service would cease to have application.
Certainly, such a situation cannot be allowed to
exist. 37
appear relegated to relative insignificance by the
1987 Constitutional provision that the Civil Service
embraces government-owned or controlled
corporations with original charter; and, therefore,

55
by clear implication, the Civil Service does not
include government-owned or controlled
corporations which are organized as subsidiaries of
government-owned or controlled corporations
under the general corporation law.
The proceedings in the 1986 Constitutional
Commission also shed light on the Constitutional
intent and meaning in the use of the phrase "with
original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas)
Commissioner Romulo is recognized.
MR. ROMULO. I beg the indulgence of the
Committee. I was reading the wrong provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches,
subdivisions, instrumentalities, and agencies of the
government, including government-owned or
controlled corporations.
My query: Is Philippine Airlines covered by this
provision? MR. FOZ. Will the Commissioner please
state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1,
subparagraph 1, under the Civil Service
Commission, says: "including government-owned
or controlled corporations.' Does that include a
corporation, like the Philippine Airlines which is
government-owned or controlled?
MR. FOZ. I would like to throw a question to the
Commissioner. Is the Philippine Airlines controlled
by the government in the sense that the majority
of stocks are owned by the government?
MR. ROMULO. It is owned by the GSIS. So, this is
what we might call a tertiary corporation. The GSIS
is owned by the government. Would this be
covered because the provision says "including
government-owned or controlled corporations."
MR. FOZ. The Philippine Airlines was established as
a private corporation. Later on, the government,
through the GSIS, acquired the controlling stocks.
Is that not the correct situation?
MR. ROMULO. That is true as Commissioner Ople is
about to explain. There was apparently a Supreme
Court decision that destroyed that distinction
between a government-owned corporation created
under the Corporation Law and a governmentowned corporation created by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision
in the case of NHA vs. Juco to the effect that all
government corporations irrespective of the
manner of creation, whether by special charter or
by the private Corporation Law, are deemed to be
covered by the civil service because of the wideembracing definition made in this section of the
existing 1973 Constitution. But we recall the
response to the question of Commissioner Ople
that our intendment in this provision is just to give
a general description of the civil service. We are

not here to make any declaration as to whether

employees of government-owned or controlled
corporations are barred from the operation of laws,
such as the Labor Code of the Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding
Officer, since my name has been mentioned by
both sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER (Mr.Trenas).
Commissioner Ople is recognized.
MR. OPLE. In connection with the coverage of the
Civil Service Law in Section 1 (1), may I volunteer
some information that may be helpful both to the
interpellator and to the Committee. Following the
proclamation of martial law on September 21,
1972, this issue of the coverage of the Labor Code
of the Philippines and of the Civil Service Law
almost immediately arose. I am, in particular,
referring to the period following the coming into
force and effect of the Constitution of 1973, where
the Article on the Civil Service was supposed to
take immediate force and effect. In the case of
LUZTEVECO, there was a strike at the time. This
was a government-controlled and governmentowned corporation. I think it was owned by the
PNOC with just the minuscule private shares left.
So, the Secretary of Justice at that time, Secretary
Abad Santos, and myself sat down, and the result
of that meeting was an opinion of the Secretary of
Justice which 9 became binding immediately on
the government that government corporations
with original charters, such as the GSIS, were
covered by the Civil Service Law and corporations
spun off from the GSIS, which we called second
generation corporations functioning as private
subsidiaries, were covered by the Labor Code.
Samples of such second generation corporations
were the Philippine Airlines, the Manila
Hotel and the Hyatt. And that demarcation worked
very well. In fact, all of these companies I have
mentioned as examples, except for the Manila
Hotel, had collective bargaining agreements. In the
Philippine Airlines, there were, in fact, three
collective bargaining agreements; one, for the
ground people or the PALIA one, for the flight
attendants or the PASAC and one for the pilots of
the ALPAC How then could a corporation like that
be covered by the Civil Service law? But, as the
Chairman of the Committee pointed out, the
Supreme Court decision in the case of NHA vs. Juco
unrobed the whole thing. Accordingly, the
Philippine Airlines, the Manila Hotel and the Hyatt
are now considered under that decision covered by
the Civil Service Law. I also recall that in the
emergency meeting of the Cabinet convened for
this purpose at the initiative of the Chairman of the

56
Reorganization Commission, Armand Fabella, they
agreed to allow the CBA's to lapse before applying
the full force and effect of the Supreme Court
decision. So, we were in the awkward situation
when the new government took over. I can agree
with Commissioner Romulo when he said that this
is a problem which I am not exactly sure we should
address in the deliberations on the Civil Service
Law or whether we should be content with what
the Chairman said that Section 1 (1) of the Article
on the Civil Service is just a general description of
the coverage of the Civil Service and no more.
Thank you, Mr. Presiding Officer.
MR. ROMULO. Mr. Presiding Officer, for the
moment, I would be satisfied if the Committee puts
on records that it is not their intent by this
provision and the phrase "including governmentowned or controlled corporations" to cover such
companies as the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter
of fact, when this draft was made, my proposal
was really to eliminate, to drop from the provision,
the phrase "including government- owned or
controlled corporations."
MR. ROMULO. Would the Committee indicate that is
the intent of this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think
the Committee can make such a statement in the
face of an absolute exclusion of governmentowned or controlled corporations. However, this
does not preclude the Civil Service Law to
prescribe different rules and procedures, including
emoluments for employees of proprietary
corporations, taking into consideration the nature
of their operations. So, it is a general coverage but
it does not preclude a distinction of the rules
between the two types of enterprises.
MR. FOZ. In other words, it is something that
should be left to the legislature to decide. As I said
before, this is just a general description and we are
not making any declaration whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo
would like a definitive understanding of the
coverage and the Gentleman wants to exclude
government-owned or controlled corporations like
Philippine Airlines, then the recourse is to offer an
amendment as to the coverage, if the
Commissioner does not accept the explanation
that there could be a distinction of the rules,
including salaries and emoluments.
MR. ROMULO. So as not to delay the proceedings, I
will reserve my right to submit such an
amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner
Romulo is recognized.

MR. ROMULO. On page 2, line 5, I suggest the

following amendment after "corporations": Add a
comma (,) and the phrase EXCEPT THOSE
EXERCISING PROPRIETARY FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does
the Committee say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the
session?
THE PRESIDING OFFICER (Mr. Trenas). The session
is suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session
is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending
my original proposed amendment to now read as
follows: "including government-owned or
controlled corporations WITH ORIGINAL
CHARTERS." The purpose of this amendment is to
indicate that government corporations such as the
GSIS and SSS, which have original charters, fall
within the ambit of the civil service. However,
corporations which are subsidiaries of these
chartered agencies such as the Philippine Airlines,
Manila Hotel and Hyatt are excluded from the
coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does
the Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer.
By the term "original charters," what exactly do we
mean?
MR. ROMULO. We mean that they were created by
law, by an act of Congress, or by special law.
MR. FOZ. And not under the general corporation
law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification,
the Committee accepts the amendment.
MR. NATIVIDAD. Mr. Presiding officer, so those
created by the general corporation law are out.
MR. ROMULO. That is correct: 38
On the premise that it is the 1987 Constitution that
governs the instant case because it is the
Constitution in place at the time of decision
thereof, the NLRC has jurisdiction to accord relief
to the parties. As an admitted subsidiary of the
NIDC, in turn a subsidiary of the PNB, the NASECO
is a government-owned or controlled corporation
without original charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by
Mr. Justice Perfecto in his concurring opinion
in Gomez vs. Government Insurance Board (L-602,
March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694;
also published in 78 Phil. 221) on the effectivity of

57
the principle of social justice embodied in the 1935
Constitution, said:
Certainly, this principle of social justice in our
Constitution as generously conceived and so
tersely phrased, was not included in the
fundamental law as a mere popular gesture. It was
meant to (be) a vital, articulate, compelling
principle of public policy. It should be observed in
the interpretation not only of future legislation, but
also of all laws already existing on November 15,
1935. It was intended to change the spirit of our
laws, present and future. Thus, all the laws which
on the great historic event when the
Commonwealth of the Philippines was born, were
susceptible of two interpretations strict or liberal,
against or in favor of social justice, now have to be
construed broadly in order to promote and achieve
social justice. This may seem novel to our friends,
the advocates of legalism but it is the only way to
give life and significance to the above-quoted
principle of the Constitution. If it was not designed
to apply to these existing laws, then it would be
necessary to wait for generations until all our
codes and all our statutes shall have been
completely charred by removing every provision
inimical to social justice, before the policy of social
justice can become really effective. That would be
an absurd conclusion. It is more reasonable to hold

that this constitutional principle applies to all

legislation in force on November 15, 1935, and all
laws thereafter passed.
WHEREFORE, in view of the foregoing, the
challenged decision of the NLRC is AFFIRMED with
modifications. Petitioners in G.R. No. 69870, who
are the private respondents in G.R. No. 70295, are
ordered to: 1) reinstate Eugenia C. Credo to her
former position at the time of her termination, or if
such reinstatement is not possible, to place her in
a substantially equivalent position, with three (3)
years backwages, from 1 December 1983, without
qualification or deduction, and without loss of
seniority rights and other privileges appertaining
thereto, and 2) pay Eugenia C. Credo P5,000.00 for
moral damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible
because of supervening events, petitioners in G.R.
No. 69870, who are the private respondents in G.R.
No. 70295 are ordered to pay Eugenia C. Credo, in
addition to her backwages and damages as above
described, separation pay equivalent to one-half
month's salary for every year of service, to be
computed on her monthly salary at the time of her
termination on 1 December 1983.
SO ORDERED.